Econ Midterm 1
The accompanying table below shows the relationship between the number of times you get your car washed each month and your total monthly benefit from car washes. Each car wash costs $15. Number of Car Washes Per Month: 0 1 2 3 4 5 Total Monthly Benefit from Car Washes: $0 $20 $36 $48 $56 $60 What is the marginal cost of the 5th car wash each month? A) $15 B) $12 C) $14 D) $4
A) $15
Julia is willing to pay $50 for a pajamas. The actual price of the pajamas is $30. Her consumer surplus on this pajamas is: A) $20. B) $80. C) $50. D) $30.
A) $20.
Assume that the market price of wheat is $100 per ton in the above figure. The producer surplus on the second ton of wheat is A) $25. B) $50. C) $100. D) $75.
A) $25.
Refer to the accompanying figure. The equilibrium price is ________, and the equilibrium quantity is ________. A) $35; 20 B) $25; 5 C) $30; 15 D) $25; 20
A) $35; 20
The four producers are willing to sell one unit of a good. Each producer has a different minimum price that they are willing to sell for: Producer A $6, Producer B $7, Producer C $10, and Producer D $12. Assume that the market price is $11, then the total producer surplus is A) $9. B) $10. C) $33. D) $11.
B) $10.
In the figure above, when production is 3 units with a price of $3, the producer surplus in this market equals A) f + g. B) a + b + f + g + h + i. C) b + g. D) a + b + f + g.
A) f + g.
During the summer you have made the decision to attend summer school, which prevents you from working at your usual summer job in which you normally earn $6,000 for the summer. Your tuition cost is $3,000 and books and supplies cost $1,300. The implicit cost of attending summer school is A) $6,000. B) $10,300. C) $4,300. D) $3,000.
A) $6,000.
In the above figure, the lowest price for which the firm will sell its second ton of wheat is A) $75. B) $25. C) $50. D) $100.
A) $75.
Local car dealership employs 3 salesmen. Data for their sales last month are shown in this table: SUVs Sold Kim : 10 Jillian : 9 Monica : 3 Trucks Sold Kim : 5 Jillian : 9 Monica : 12 Based on last month's data, Monica's opportunity cost of selling a truck is selling: A) 1/4 SUVs. B) 1/3 SUVs. C) 4 SUVs. D) 3 SUVs.
A) 1/4 SUVs.
You are the Minister of Trade for a small island country with the following annual PPC: You are negotiating a trade agreement with a neighboring island with the following annual PPC: What's the minimum number of fish you would be willing to accept in exchange for a coconut? A) 3 B) 2 C) 5 D) 4
A) 3
4) Which of the following questions is NOT a microeconomic question? A) Can the Federal Reserve keep income growing by cutting interest rates? B) What is Britney's opportunity cost of having another baby? C) Does the United States have a comparative advantage in information technology services? D) How would a tax on e-commerce affect eBay?
A) Can the Federal Reserve keep income growing by cutting interest rates?
Refer to the accompanying table. ________ has the comparative advantage in making pizza, and ________ has the comparative advantage in delivering pizza. Pizzas Made Per Hour Corey : 12 Patt : 10 Pizzas Delivered Per Hour Corey : 6 Patt: 15 A) Corey; Pat B) Corey; Corey C) Pat; Corey D) Pat; Pat
A) Corey; Pat
Local car dealership employs 3 salesmen. Data for their sales last month are shown in this table: SUVs Sold Kim : 10 Jillian : 9 Monica : 3 Trucks Sold Kim : 5 Jillian : 9 Monica : 12 Based on last month's data, ________ has an absolute advantage in selling SUVs and ________ has an absolute advantage in selling trucks. A) Kim; Monica B) Kim; Jillian C) Monica; Kim D) Jillian; Jillian
A) Kim; Monica
Suppose the market demand curve is given by Qd = 80 - 10P, and the market supply curve is given by Qs = 10 + 15P. What is the equilibrium price and quantity? A) P* = $2.80 and Q* = 52 B) P* = $2.60 and Q* = 54 C) P* = $2.80 and Q* = 54 D) P* = $3.00 and Q* = 55
A) P* = $2.80 and Q* = 52
What happens to the demand for Xbox games if the price of an Xbox falls? A) The demand for Xboxes increases because the price of a complement falls. B) The demand for Xboxes remains unchanged. C) The demand for Xboxes decreases because the price of a substitute falls. D) The demand for Xboxes decreases because the price of a complement falls.
A) The demand for Xboxes increases because the price of a complement falls.
Tom and Jerry are roommates and share tasks. The following table shows the number of rooms they can each clean and the number of meals they can each cook in two hours. Rooms Cleaned Per Hour Tom : 5 Jerry : 3 Meals Cooked Per Hour Tom : 4 Jerry : 3 Which of the following is true? A) Tom has a comparative advantage over Jerry in cleaning. B) Tom has both an absolute advantage and a comparative advantage over Jerry in both tasks. C) Jerry has both an absolute advantage and a comparative advantage over Tom in both tasks. D) Jerry has a comparative advantage over Tom in cleaning.
A) Tom has a comparative advantage over Jerry in cleaning.
The accompanying figure shows Becky's daily production possibilities curve for dresses and skirts. The maximum number of dresses that Becky can make in a day is represented by point: A) W B) V C) T D) U
A) W
The accompanying figure shows Becky's daily production possibilities curve for dresses and skirts. Of the labeled points, only ________ are efficient. A) W, X, Y, Z, and V B) W, X, Y, Z, V, and T C) T and U D) X, Y, and Z
A) W, X, Y, Z, and V
A decrease in both the equilibrium price and the equilibrium quantity of rice is best explained by: A) a decrease in the demand for rice. B) an increase in the demand for rice. C) a decrease in the supply of rice. D) an increase in the supply of rice.
A) a decrease in the demand for rice.
Refer to the accompanying figure. At a price of $9, there will be: A) an excess supply of 5 units. B) an excess demand of 1 unit. C) an excess demand of 5 units. D) an excess supply of 6 units.
A) an excess supply of 5 units.
Suppose a new study highlights the health benefits of eating bacon. At the same time, suppose the cost of producing bacon falls. Given these changes, you should expect to see: A) an increase in the equilibrium quantity of bacon, but it's hard to say what will happen to the equilibrium price. B) a decrease in the equilibrium price of bacon, but it's hard to say what will happen to the equilibrium quantity. C) an increase in both the equilibrium price and quantity of bacon. D) an increase in the equilibrium price of bacon, but it's hard to say what will happen to the equilibrium quantity.
A) an increase in the equilibrium quantity of bacon, but it's hard to say what will happen to the equilibrium price.
In a free market, if the price of a good is below the equilibrium price, then; A) buyers, hoping to ensure they acquire the good, will bid the price higher. B) the government will set a higher price to reestablish the market equilibrium. C) sellers, dissatisfied with growing inventories, will lower their prices. D) sellers, dissatisfied with growing inventories, will raise their prices.
A) buyers, hoping to ensure they acquire the good, will bid the price higher.
An individual has an absolute advantage in baking cookies if that individual: _______ A) can bake more cookies in a given amount of time than anyone else. B) has a lower opportunity cost of baking cookies than anyone else. C) has a higher opportunity cost of baking cookies than anyone else. D) charges the lowest price for cookies.
A) can bake more cookies in a given amount of time than anyone else.
If the demand for good A increases as a result of a decrease in the price of good B, the good A and good B are: A) complementary goods. B) substitute goods. C) elastically demanded. D) normal goods.
A) complementary goods.
As the price of flour (an input in the production of cookies) increases, firms that produce cookies will: A) decrease the supply of cookies. B) decrease the quantity of cookies supplied. C) increase the quantity of cookies supplied. D) increase the supply of cookies.
A) decrease the supply of cookies.
Suppose that recent studies conclude that high-fiber diets do not reduce the risk of developing colon cancer as was previously thought. The likely result will be that the: A) demand for high-fiber foods will decrease. B) price of high-fiber foods will rise. C) quantity demanded of high-fiber foods will fall. D) supply of high-fiber foods will increase.
A) demand for high-fiber foods will decrease.
Good A and good B are substitutes in production. The demand for good A decreases, which lowers the price of good A. The decrease in the price of good A A) increases the supply of good B. B) increases the demand for good B. C) decreases the demand for good B. D) decreases the supply of good B.
A) increases the supply of good B.
The value of a good is equal to the: A) maximum price you are willing to pay for it. B) price that you actually pay for it. C) maximum you are willing to pay for it minus the price you actually pay for it. D) price you actually pay for it minus the maximum you are willing to pay for it.
A) maximum price you are willing to pay for it.
Studying the determination of prices in individual markets is primarily a concern of A) microeconomics. B) macroeconomics. C) positive economics. D) negative economics.
A) microeconomics.
What will happen if the price of a good is above the equilibrium price in a competitive market? A) sellers, dissatisfied with growing inventories, will lower their prices. B) buyers, hoping to ensure they acquire the good, will bid the price lower. C) sellers, dissatisfied with growing inventories, will raise their prices. D) the government will set a lower price to reestablish the market equilibrium.
A) sellers, dissatisfied with growing inventories, will lower their prices.
Refer to the accompanying figure. Suppose the solid line represents the current supply of Star Wars action figures. If the price of the plastic used to make action figures rises, current supply will: A) shift to S(A). B) not change; only the quantity supplied will change. C) shift to S(B). D) not change because a change in the price of plastic will not affect the demand for action figures.
A) shift to S(A).
If the demand for good A falls when the price of good B falls, then we know that good A and good B are: A) substitutes. B) inferior goods. C) normal goods. D) complements.
A) substitutes.
The production possibilities curve shows: A) the maximum amount of one good that can be produced for every possible production level of the other good. B) how increasing the production of one good allows production of the other good to also rise. C) the minimum amount of one good that can be produced for every possible production level of the other good. D) how increasing the resources used to produce one good increases the production of the other good.
A) the maximum amount of one good that can be produced for every possible production level of the other good.
In the figure above, if the price is $8 a unit, is there a shortage or surplus and what is the amount of any shortage or surplus? What is the equilibrium price and quantity?
At a price of $8 there is a surplus because the quantity supplied exceeds the quantity demanded. The amount of the surplus is 4 units per month. The equilibrium price is $4 a unit and the equilibrium quantity is 3 units per month.
A used RV was recently priced at $20,000.00. Seeing the car, Tommy thought, "It's nice, but if I have to pay more than $19,500 for this RV, then I would rather do without it." After negotiations, Tommy purchased the RV for $19,250.00. His consumer surplus was equal to: A) $0.00. B) $250.00. C) $19,500.00. D) $1,750.00.
B) $250.00.
During the summer you have made the decision to attend summer school, which prevents you from working at your usual summer job in which you normally earn $6,000 for the summer. Your tuition cost is $3,000 and books and supplies cost $1,300. The explicit cost of attending summer school is A) $10,300. B) $4,300. C) $6,000. D) $3,000.
B) $4,300.
The figure illustrates the market for hot dogs at a Hot Dog King. At the price of $1.20 the producer surplus is ________. A) $180 an hour B) $60 an hour C) $240 an hour D) $1.20 a hot dog
B) $60 an hour
Assume point A on a linear production possibilities frontier represents the combination of 12 coffees and 3 cappuccinos, and point B represents 3 coffees and 6 cappuccinos. Suppose coffees are on the vertical axis and cappuccinos are on the horizontal axis. The opportunity cost of a cup of coffee is: A) 6 cappuccinos. B) 1/3 of a cappuccino. C) 3 cappuccinos. D) 9 cappuccinos.
B) 1/3 of a cappuccino.
The accompanying table below shows the relationship between the number of times you get your car washed each month and your total monthly benefit from car washes. Each car wash costs $15. Number of Car Washes Per Month: 0 1 2 3 4 5 Total Monthly Benefit from Car Washes: $0 $20 $36 $48 $56 $60 How many times a month should you get your car washed? A) 4 B) 2 C) 1 D) 3
B) 2
The four producers are willing to sell one unit of a good. Each producer has a different minimum price that they are willing to sell for: Producer A $6, Producer B $7, Producer C $10, and Producer D $12. Assume that the market price is $11, then the market supply for this good will be A) 4 units. B) 3 units. C) 1 unit. D) 2 units.
B) 3 units.
If Paula devotes all her time to making fudge, she can make 3 pounds of fudge an hour, and if she devotes all her time to making toffee, she can make 2 pounds of toffee an hour. If Sally devotes all his time to making fudge, he can make 4 pounds of fudge an hour, and if he devotes all his time to making toffee, he can make 5 pounds of toffee an hour. Suppose that Paula and Sally decide to work together as a team. The opportunity cost of making one pound of tofee for Sally is _____ pound(s) of fudge. A) 5/4 B) 4/5 C) 2/3 D) 3/2
B) 4/5
The accompanying figure shows the production possibilities frontier for Seychelles: The opportunity cost of producing one unit of car in Seychelles is: A) 5,000 tons of agricultural products. B) 50 tons of agricultural products. C) 500 tons of agricultural products. D) 5 tons of agricultural products.
B) 50 tons of agricultural products.
Which of the following factors will cause a demand curve to shift rightward? A) A decrease in the price of a substitute B) An increase in the price of a substitute C) An increase in the price of a complement D) An increase in the product's own price
B) An increase in the price of a substitute
Refer to the accompanying figure. Suppose that the government requires that resources be used efficiently. Which of the following would the government definitely not allow? A) Specialization in medical care production. B) Production at point D. C) Production at any point other than C. D) Specialization in warhead production.
B) Production at point D.
Suppose that Nepal invests less in new factories and equipment than does the United States. This will likely cause: A) Nepal's production possibilities curve to shift inward faster than the U.S.'s. B) The U.S.'s production possibilities curve to shift outward faster than Nepal's. C) Nepal's production possibilities curve to shift outward faster than the U.S.'s. D) The U.S.'s production possibilities curve to shift inward faster than Nepal's.
B) The U.S.'s production possibilities curve to shift outward faster than Nepal's.
Suppose you bought Pittsburgh Penguins' game ticket from StubHub for $80, but when you get to the game, there are a large number of people waiting outside who offer to pay you more than $80 for your ticket. What is probably true? A) There is an excess supply of tickets at the StubHub price. B) There is an excess demand for tickets at the StubHub price. C) The StubHub price was above the equilibrium price. D) The StubHub price is the equilibrium price.
B) There is an excess demand for tickets at the StubHub price.
If Paula devotes all her time to making fudge, she can make 3 pounds of fudge an hour, and if she devotes all her time to making toffee, she can make 2 pounds of toffee an hour. If Sally devotes all his time to making fudge, he can make 4 pounds of fudge an hour, and if he devotes all his time to making toffee, he can make 5 pounds of toffee an hour. Suppose that Paula and Sally decide to work together as a team. Can they produce 2 pounds of fudge and 4.5 pounds of toffee each hour? A) No, this point is not attainable and inefficient. B) Yes, this point is attainable, but inefficient. C) Yes, this point is both attainable and efficient. D) No, this point is not attainable.
B) Yes, this point is attainable, but inefficient.
The United States generally has a comparative advantage in the development of technology because it has: A) large amounts of natural resources. B) a disproportionate share of the world's best research universities. C) patent laws, which no other country has. D) the greatest need for new technology.
B) a disproportionate share of the world's best research universities.
Answer the question using the following diagram. At a price of $9, there will be: A) an excess supply of 6 units. B) an excess supply of 5 units. C) an excess demand of 5 units. D) an excess demand of 1 unit.
B) an excess supply of 5 units.
Oatmeal is a normal good and cold cereal is a substitute for oatmeal. Raisins are a complement for oatmeal. Which of the following increases the demand for oatmeal? A) a decrease in population B) an increase in the price of cold cereal C) a decrease in income D) an increase in the price of raisins
B) an increase in the price of cold cereal
Suppose that the equilibrium price of apples decreases and the equilibrium quantity of apples increases. This is best explained by: A) a decrease in the demand for apples. B) an increase in the supply of apples. C) an increase in the demand for apples. D) a decrease in the supply of apples.
B) an increase in the supply of apples.
Points that lie beneath the production possibilities curve are: A) unattainable and inefficient. B) attainable but inefficient. C) unattainable but efficient. D) attainable and efficient.
B) attainable but inefficient.
The emergence of English as the de facto world language ________ a comparative advantage in the production of books, movies and popular music. A) has given all countries B) has given English-speaking countries C) has no effect on which country has D) has given non-English-speaking countries
B) has given English-speaking countries
1) Economics is best defined as the study of: A) the financial concerns of businesses and individuals. B) how people make choices in the face of scarcity and the implications of those choices for society as a whole. C) inflation, interest rates and the stock market. D) supply and demand.
B) how people make choices in the face of scarcity and the implications of those choices for society as a whole.
15) Suppose Ali bakes bread and makes cheese. If Ali can increase his production of bread without decreasing his production of cheese, then he is producing at an: A) ideal point. B) inefficient point. C) unattainable point. D) efficient point.
B) inefficient point.
The minimum supply-price is the same as A) market price. B) marginal cost. C) producer surplus. D) profit.
B) marginal cost.
In the above figure, if D2 is the original demand curve and the population falls, which price and quantity might result? A) point a, with price P2 and quantity Q2 B) point b, with price P1 and quantity Q1 C) point c, with price P3 and quantity Q3 D) point d, with price P1 and quantity Q3
B) point b, with price P1 and quantity Q1
The figure above shows Clara's demand for CDs. If the price for a CD is $15, then Clara A) receives a total of $40 of consumer surplus. B) receives no consumer surplus on the 6th CD she buys. C) will buy no CDs. D) receives a total of $10 of consumer surplus.
B) receives no consumer surplus on the 6th CD she buys.
Answer the question using the figure below. Suppose the solid line shows the current demand for coffee. In response to news that next year's coffee harvest will be extremely good due to favorable weather conditions, you should expect: A) the demand curve to shift to D(B) in anticipation of lower future prices. B) the demand curve to shift to D(A) in anticipation of lower future prices. C) the quantity of coffee demanded to decrease, but no shift in the demand curve. D) neither a change in quantity demanded nor a shift in demand because it will be a long time before next year's coffee crop is harvested.
B) the demand curve to shift to D(A) in anticipation of lower future prices.
Suppose Pepsi and Coke are substitute goods.. An increase in the quantity of Pepsi demanded occurs if: A) the price of Coke rises. B) the price of the Pepsi falls. C) the income of Pepsi drinkers increases. D) the population of Pepsi drinkers grows.
B) the price of the Pepsi falls.
Refer to the given table. Suppose the columns in this table reflect demand and supply. At a price of $30: Price Per Unit $20 $30 $40 $50 $60 Column A Units Per Year 100 95 80 65 50 Column B Units Per Year 40 50 60 70 80 A) there will be an excess supply of 45 units. B) there will be an excess demand of 45 units. C) there will be an excess demand of 95 units. D) the market will be in equilibrium.
B) there will be an excess demand of 45 units.
All economic questions arise because we A) have an abundance of resources. B) want more than we can get. C) have limited wants that need to be satisfied. D) want more than we need.
B) want more than we can get.
When does excess demand occur? A) whenever the market is not in equilibrium. B) when price is below the equilibrium price. C) when price is above the equilibrium price. D) whenever the market is in equilibrium.
B) when price is below the equilibrium price.
In the figure above, when the price of a CD is $8.00, total producer surplus from all the CDs will be A) greater than at $10.00 per CD. B) $20 million. C) $10 million. D) zero.
C) $10 million.
13) Suppose that the market is in equilibrium in the figure above. Total consumer surplus on all the goods bought equals to A) less than at any other price. B) less than $15 million. C) $20 million. D) greater than $30 million.
C) $20 million.
Masha's demand for audio book compact discs is given in the figure above. At the market price of $20 for a compact disc, the value of Masha's total consumer surplus for all the discs she buys equals to: A) $30. B) $4. C) $20. D) $40.
C) $20.
In the figure above, when the market price of red roses is $20, the consumer surplus equals to A) $1,000 B) $20 C) $200 D) $800
C) $200
Tammy can purchase each hot dog for $2. For the first hot dog purchased Tammy is willing to pay $4, for the second hot dog $3, for the third hot dog $2 and for the fourth hot dog $1. What is the value of Tammy's consumer surplus for the hot dogs she buys? A) $10 B) $2 C) $3 D) $9
C) $3
The severe wildfires in the western states over the summer has decreased the supply of potatoes and, as a result, brought a sharp increase in the price of potato. The increase in the price of potatoes: A) always increases consumer surplus. B) does not affect consumer surplus because this change reflects only a movement along the demand curve. C) always decreases consumer surplus. D) always decreases producer surplus
C) always decreases consumer surplus.
If Paula devotes all her time to making fudge, she can make 3 pounds of fudge an hour, and if she devotes all her time to making toffee, she can make 2 pounds of toffee an hour. If Sally devotes all his time to making fudge, he can make 4 pounds of fudge an hour, and if he devotes all his time to making toffee, he can make 5 pounds of toffee an hour. Suppose that Paula and Sally decide to work together as a team. The opportunity cost of making one pound of fudge for Paula is _____ pound(s) of toffee. A) 3/2 B) 5/4 C) 2/3 D) 4/5
C) 2/3
Refer to the accompanying table. Pat's opportunity cost of delivering a pizza is making: Pizzas Made Per Hour Corey : 12 Patt : 10 Pizzas Delivered Per Hour Corey : 6 Patt: 15 A) 12 pizzas. B) 10 pizzas. C) 2/3 of a pizza. D) 3/2 of a pizza.
C) 2/3 of a pizza.
Four siblings have a different willingness to pay for a camping tent: John will pay $15, Amanda will pay $12, Kurt will pay $10, and Pam will pay $8. If price of the camping tent is equal to $9 per unit then the quantity demanded in the market will be ________ and the consumer surplus for this unit will be ________. A) 3; $36 B) 3; $37 C) 3; $10 D) 4; $8
C) 3; $10
Refer to the accompanying figure. If this economy is currently producing at point C, then the opportunity cost of providing 100 additional units of medical care would be: A) 200 warheads. B) 100 warheads. C) 400 warheads. D) 800 warheads.
C) 400 warheads.
Refer to the accompanying figure. If Pat and Chris were to specialize in the task in which each has a comparative advantage: A) Chris would plant bulbs and Pat would remove trash. B) both Pat and Chris would plant bulbs because they both have an absolute advantage in that task. C) Chris would remove trash and Pat would plant bulbs. D) Pat and Chris would each spend half of their time each task.
C) Chris would remove trash and Pat would plant bulbs.
Suppose the market demand curve is given by Qd = 80 - 10P, and the market supply curve is given by Qs = 10 + 15P. What is the equilibrium price and quantity? A) P* = $3.00 and Q* = 55 B) P* = $2.60 and Q* = 54 C) P* = $2.80 and Q* = 52 D) P* = $2.80 and Q* = 54
C) P* = $2.80 and Q* = 52
Which of the following would cause an increase in quantity of wheat supplied? A) New, better technology for farming is introduced B) The price firms pay for liability insurance falls C) The price farmers receive for their wheat rises D) The price of fertilizer farmers use in their fields falls
C) The price farmers receive for their wheat rises
Which of the following would NOT shift the demand curve for turkey? A) an increase in income B) a change in people's preferences for turkey C) a change in the price of a turkey D) a decrease in the price of ham
C) a change in the price of a turkey
A movement along a demand curve from one price-quantity combination to another is called a: A) change in quantity supplied. B) shift in the demand curve. C) change in quantity demanded. D) change in demand
C) change in quantity demanded.
If a nation has the lowest opportunity cost of producing a good, that nation has a (an) ________ in the production of that good. A) absolute advantage B) absolute advantage and possibly a comparative advantage C) comparative advantage D) comparative advantage and an absolute advantage
C) comparative advantage
In general, individuals and nations should specialize in producing those goods for which they have a (an): A) absolutely comparative advantage. B) absolute advantage. C) comparative advantage. D) absolute advantage and a comparative advantage.
C) comparative advantage.
Masha's demand for audio book compact discs is given in the figure above. If the price of a disc increases from $15 to $25, Masha's total consumer surplus for all the discs she buys would A) remain unchanged. B) increase by $80. C) decrease by $40. D) decrease by $90.
C) decrease by $40.
Refer to the accompanying table. Based on their comparative advantages, Pat should specialize in ________, and Corey should specialize in ________. Pizzas Made Per Hour Corey : 12 Patt : 10 Pizzas Delivered Per Hour Corey : 6 Patt: 15 A) neither making pizza nor delivering pizza; both making pizza and delivering pizza B) both making pizza and delivering pizza; neither making pizza nor delivering pizza C) delivering pizza; making pizza D) making pizza; delivering pizza
C) delivering pizza; making pizza
Suppose that both the supply of iPads and the demand for iPads decrease. One can predict that the: A) equilibrium price and quantity will fall. B) equilibrium price and quantity will rise. C) equilibrium quantity will fall, but the change in equilibrium price is uncertain. D) equilibrium price will rise, but the change in equilibrium quantity is uncertain.
C) equilibrium quantity will fall, but the change in equilibrium price is uncertain.
Tom has a comparative advantage over his classmates in writing essays if he: A) always earns an A on his essays. B) has an absolute advantage in writing essays. C) has a lower opportunity cost of writing essays than his classmates. D) can write essays faster than his classmates.
C) has a lower opportunity cost of writing essays than his classmates.
Suppose that the demand for a certain good decreases as income of the consumer decreases, then the good is a (an): A) inferior good. B) complementary good. C) normal good. D) substitute good.
C) normal good.
Refer to the accompanying figure. Assume demand remains unchanged at D1. If supply shifts from S2 to S1, then the equilibrium price will ________ and the equilibrium quantity will ________. A) fall; rise B) fall; fall C) rise; fall D) rise; rise
C) rise; fall
Refer to the accompanying figure. Suppose the solid line represents the current supply of Star Wars action figures. If the price of the plastic used to make action figures rises, current supply will: A) not change because a change in the price of plastic will not affect the demand for action figures. B) not change; only the quantity supplied will change. C) shift to S(A). D) shift to S(B).
C) shift to S(A).
Refer to the accompanying figure. Suppose the solid line shows the current demand for coffee. In response to a news story explaining that coffee causes heart disease, you should expect: A) neither a change in quantity demanded nor a shift in demand. B) the demand curve to shift to D(B) in anticipation of higher future prices. C) the demand curve to shift to D(A) because some people will stop drinking coffee. D) the quantity of coffee demanded to decrease, but no shift in the demand curve.
C) the demand curve to shift to D(A) because some people will stop drinking coffee.
Answer the question using the figure below. Suppose the solid line shows the demand for coffee. If coffee and tea are substitutes, and the price of tea falls, then you would expect: A) an increase in the quantity of coffee demanded, but no shift in the demand curve. B) the demand curve to shift to D(B) C) the demand curve to shift to D(A). D) a decrease in the quantity of coffee demanded, but no shift in the demand curve.
C) the demand curve to shift to D(A).
If pencils and paper are complements for most consumers, then if the price of paper increases, you would expect: A) the equilibrium price and quantity of pencils to rise. B) the equilibrium price of pencils to rise and the equilibrium quantity of pencils to fall. C) the equilibrium price and quantity of pencils to fall. D) the equilibrium price of pencils to fall and the equilibrium quantity of pencils to rise.
C) the equilibrium price and quantity of pencils to fall.
Refer to the given table. Price Per Unit $40 $45 $50 $55 $60 Column A Units Per Year 110 95 80 65 50 Column B Units Per Year 40 50 60 70 80 Suppose the columns in this table reflect demand and supply. If the current market price is $50, then you would expect: A) the market price to fall. B) supply to decrease. C) the market price to rise. D) demand to decrease and supply to decrease.
C) the market price to rise.
In the market for cars, the producer surplus will decrease if ________. A) the price of a car increases B) the supply of cars increases C) the price of a car decreases D) the marginal cost of a car decreases
C) the price of a car decreases
When a market is in equilibrium: A) both excess demand and excess supply are positive and equal to each other. B) there is either excess demand or excess supply. C) there is neither excess demand nor excess supply. D) both excess demand and excess supply are positive.
C) there is neither excess demand nor excess supply.
The accompanying figure shows Tim's daily production possibilities frontier for dresses and skirts. Point U is: A) efficient. B) inefficient. C) unattainable. D) attainable.
C) unattainable.
Alice is willing to pay $3 for the second slice of pizza she eats. The price she pays is $2. Alice's consumer surplus for this slice of pizza equals A) $2. B) $3. C) $0. D) $1.
D) $1.
14) If a country is producing at point where an increase in the production of one good requires a reduction in the production of another good, then it must be producing at an: A) undesirable point. B) inefficient point. C) unattainable point. D) efficient point.
D) efficient point.
During the summer you have made the decision to attend summer school, which prevents you from working at your usual summer job in which you normally earn $6,000 for the summer. Your tuition cost is $3,000 and books and supplies cost $1,300. In terms of dollars, the opportunity cost of attending summer school is A) $3,300. B) $4,300. C) $6,000. D) $10,300.
D) $10,300.
The accompanying table below shows the relationship between the number of times you get your car washed each month and your total monthly benefit from car washes. Each car wash costs $15. Number of Car Washes Per Month: 0 1 2 3 4 5 Total Monthly Benefit from Car Washes: $0 $20 $36 $48 $56 $60 What is the marginal benefit of the 3rd car wash each month? A) $16 B) $4 C) $48 D) $12
D) $12
Evan's demand for an ice cream is given in the figure above. Suppose that the price of the ice cream is $2 per gallon, then the maximum price that Evan is willing to pay for the 8th gallon is A) $1. B) $5. C) $2. D) $3.
D) $3.
In the figure above, if the quantity of yogurt produced increases from 2 gallons an hour to 3 gallons an hour, the opportunity cost of a gallon of yogurt in terms of ice cream is A) 4 gallons. B) half a gallon. C) 3 gallons. D) 1 gallon.
D) 1 gallon.
Refer to the accompanying table. Corey's opportunity cost of making of a pizza is delivering: Pizzas Made Per Hour Corey : 12 Patt : 10 Pizzas Delivered Per Hour Corey : 6 Patt: 15 A) 2/3 of a pizza. B) 2 pizzas. C) 3/2 of a pizza. D) 1/2 of a pizza.
D) 1/2 of a pizza.
The accompanying figure shows the production possibilities curve for Seychelles: The opportunity cost of producing one ton of agricultural products in Seychelles is: A) 1/5 of a car. B) 1 car. C) 1,000 cars. D) 1/50 of a car.
D) 1/50 of a car.
Tom and Jerry are roommates and share tasks. The following table shows the number of rooms they can each clean and the number of meals they can each cook in two hours. Rooms Cleaned Per Hour Tom : 5 Jerry : 3 Meals Cooked Per Hour Tom : 4 Jerry : 3 For Jerry, the opportunity cost of cleaning one room is making ________ meal(s); for Tom the opportunity cost of cleaning one room is making ________ meal(s). A) 4; 4 B) 1; 5/4 C) 3; 5 D) 1; 4/5
D) 1; 4/5
Refer to the accompanying figure. If this economy is currently providing 600 units of medical care, then the maximum number of produced warheads would be: A) 100 warheads. B) 800 warheads. C) 200 warheads. D) 400 warheads.
D) 400 warheads.
If Al has an absolute advantage over Beth in preparing meals, then: A) the problem of scarcity applies to Beth but not to Al. B) it takes Al more time to prepare a meal than Beth. C) Al's opportunity cost of preparing a meal is lower than is Beth's. D) Al can prepare more meals in a given time period than Beth.
D) Al can prepare more meals in a given time period than Beth.
Which of the following is likely to lead to a decrease in the demand for tennis balls? A) An increase in the price of the rubber used to make tennis balls. B) An increase in the expected future price of tennis balls. C) An increase in the price of tennis balls. D) An increase in the price of tennis racquets.
D) An increase in the price of tennis racquets.
Tom and Jerry are roommates and share tasks. The following table shows the number of rooms they can each clean and the number of meals they can each cook in two hours. Rooms Cleaned Per Hour Tom : 5 Jerry : 3 Meals Cooked Per Hour Tom : 4 Jerry : 3 If Jerry and Tom work out an efficient arrangement for these two chores, then under that arrangement: A) Jerry and Tom each would do half of the cooking and half of the cleaning. B) Tom would do all of the cleaning and all of the cooking. C) Jerry would do all of the cleaning, while Tom would do all the cooking. D) Tom would do all of the cleaning, while Jerry would do all of the cooking.
D) Tom would do all of the cleaning, while Jerry would do all of the cooking.
The accompanying figure shows Tim's daily production possibilities curve for dresses and skirts. Of the labeled points, only ________ are efficient. A) X, Y, and Z B) W, X, Y, Z, V, and T C) T and U D) W, X, Y, Z, and V
D) W, X, Y, Z, and V
The figure above tells us about the market for toy cars. When production is 3 units with a price of $3, the consumer surplus equals to A) a + b + f + g + h + l. B) a + b + f + g + h + l + i + m. C) a + b + f + g. D) a + b.
D) a + b.
Answer the question using the following diagram. At a price of $3, there will be: A) an excess supply of 2 units. B) an excess supply of 7 units. C) an excess demand of 7 units. D) an excess demand of 5 units.
D) an excess demand of 5 units.
Suppose that when the price of lemons is $2 per pound, the quantity demanded is 12 tons per day and the quantity supplied is 10 tons. In this case: A) excess supply will lead the price of lemons to rise. B) excess supply will lead the price of lemons to fall. C) excess demand will lead the price of lemons to fall. D) excess demand will lead the price of lemons to rise.
D) excess demand will lead the price of lemons to rise.
A decrease in the price of tea will lead to a (an): A) decrease in the number of consumers. B) increase in the demand for tea. C) decrease in the quantity of tea demanded. D) increase in the quantity of tea demanded.
D) increase in the quantity of tea demanded.
The quantity that sellers wish to sell tends to ________ as price increases, and so the supply curve is ________ sloping. A) decrease; downward B) increase; downward C) decrease; upward D) increase; upward
D) increase; upward
Last year a severe drought raised the price of oranges. For a farmer in Florida who harvested a normal crop because the farm was not affected directly by the drought, the increase in the price of oranges A) decreases the farmer's producer surplus. B) does not affect the producer surplus because this change is a movement along the farmer's supply curve and not a shift of the farmer's supply curve. C) increases producer surplus only if the farmer's supply is completely inelastic. D) increases the farmer's producer surplus.
D) increases the farmer's producer surplus.
Refer to the accompanying table. According to the table, Corey has the absolute advantage in: Pizzas Made Per Hour Corey : 12 Patt : 10 Pizzas Delivered Per Hour Corey : 6 Patt: 15 A) neither making nor delivering pizza. B) making and delivering pizza. C) delivering pizza. D) making pizza.
D) making pizza.
In broad terms the difference between microeconomics and macroeconomics is that A) they use different sets of tools and ideas. B) macroeconomics studies the effects of government regulation and taxes on the price of individual goods and services whereas microeconomics does not. C) microeconomics studies the effects of government taxes on the national unemployment rate. D) microeconomics studies decisions of individual people and firms and macroeconomics studies the entire national economy.
D) microeconomics studies decisions of individual people and firms and macroeconomics studies the entire national economy.
The supply curve for baby cribs shows the A) maximum price that consumers are willing to pay if a given quantity of baby cribs is available. B) minimum price that consumers are willing to pay if a given quantity of baby cribs is available. C) maximum price that producers must be offered to get them to produce a given quantity of baby cribs. D) minimum price that producers must be offered to get them to produce a given quantity of baby cribs.
D) minimum price that producers must be offered to get them to produce a given quantity of baby cribs
If the price of bananas decreases, then one would expect the: A) quantity of bananas supplied to increase. B) supply of bananas to increase. C) supply of bananas to decrease. D) quantity of bananas supplied to decrease.
D) quantity of bananas supplied to decrease.
If the supply curve and the demand curve both shift to the left, then the new equilibrium: A) price will be lower, but the direction of the change in quantity is uncertain. B) quantity will be higher, but the direction of the price change is uncertain. C) price will be higher, but the direction of the change in quantity is uncertain. D) quantity will be lower, but the direction of the price change is uncertain.
D) quantity will be lower, but the direction of the price change is uncertain.
Evan's demand for an ice cream is given in the figure above. Suppose that the price of the ice cream is $2 per gallon, then the gallon that gives Evan exactly zero consumer surplus is: A) the 20th gallon. B) the 16th gallon. C) the 8th gallon. D) the 12th gallon.
D) the 12th gallon.
Answer the question using the figure below. Suppose the solid line shows the current demand curve for coffee. In response to an announcement that much of next year's coffee crop has been destroyed by a storm, you should expect: A) an increase in the quantity of coffee demanded, but no shift in the demand curve. B) neither a change in quantity demanded nor a shift in demand because next year's coffee crop will not affect the current demand for coffee. C) the demand curve to shift to D(A) in anticipation of higher future prices. D) the demand curve to shift to D(B) in anticipation of higher future prices.
D) the demand curve to shift to D(B) in anticipation of higher future prices.
People in a Big City travel to work either by bus or subway. If the price of subway tickets increases, then: A) the demand for bus tickets will decrease. B) the demand for subway tickets will increase. C) the demand for subway tickets will decrease. D) the demand for bus tickets will increase.
D) the demand for bus tickets will increase.
Over the past decade technological improvements that have lowered the cost of producing an automobile have increased A) both the supply and the demand for automobiles. B) neither the supply nor the demand for automobiles. C) the demand but not the supply of automobiles. D) the supply but not the demand for automobiles.
D) the supply but not the demand for automobiles.
Refer to the given table. Suppose the columns in this table reflect demand and supply. At a price of $30: Price Per Unit $20 $30 $40 $50 $60 Column A Units Per Year 100 95 80 65 50 Column B Units Per Year 40 50 60 70 80 A) the market will be in equilibrium. B) there will be an excess supply of 45 units. C) there will be an excess demand of 95 units. D) there will be an excess demand of 45 units.
D) there will be an excess demand of 45 units.
Why was Adam Smith critical of Mercantilism? Why did he think Capitalism was preferable to Mercantilism?
Smith was opposed to Mercantilism because he saw it as a system in which the kings and merchants structured the economy for their benefit. Smith thought government was too often allied with large commercial interests to the detriment of small firms and society as a whole. Smith was particularly critically of Mercantilist policies which guaranteed firms a monopoly in goods markets. This allowed them to charge high prices, stop innovating, and create a monopsony in labor markets to exploit workers. Capitalism, Smith hoped, would be much better for the typical person. Competition in goods markets would keep prices low and foster innovation, and competition for workers would improve their wages and working conditions. Limited government, laws preventing oppression, and moral sentiments would result in improved conditions for workers.
