ECON TEST 1: CHAPTER FOUR

Suppose you search for a used bicycle online, and are willing to pay at most $100. However, you successfully find one for sale priced at $80. What is the value of consumer surplus?

$20

If Avery is willing to pay $10 for a pizza, Pia is willing to pay $13, and Sylvio is willing to pay $15, how much consumer surplus is achieved when the price of pizza is $12?

$4

Suppose the hot dog market is made up of three potential buyers: Ana, who is willing to pay $10 for a hot dog, William, who is willing to pay $8, and Mara, who is willing to pay $6. If hot dogs sell for $7, then consumer surplus in this market would be:

$4

Sam's willingness to pay for a pizza is $15. If the price of pizza is $10, Sam's consumer surplus after buying the pizza is:

$5

Suppose the market for t-shirts has three potential sellers: Martin, whose willingness to sell is $6, Adam, whose willingness to sell is $10, and Clara, whose willingness to sell is $12. If t-shirts sell for $11 each, then producer surplus in this market is:

$6

In what year was OPEC, the Organization of the Petroleum Exporting Countries, formed?

1960

The U.S. government has subsidized ethanol production since 1978. With the advent of affordable electric cars, policymakers are considering whether to allow the subsidy to expire. The accompanying graph represents the market for ethanol. Move the supply and/or demand curves to show how reducing the subsidy will affect the ethanol market. Equilibrium price ___________. Equilibrium quantity ____________.

increases. decreases.

If the supply of oil decreased:

quantity demanded would decrease.

If the free market maximizes gains from trade:

the sum of producer surplus and consumer surplus is maximized.

Which of the following illustrates an increase in quantity demanded?

a movement along a fixed demand curve

Assume the market for DVD movies is initially at equilibrium. A decrease in the price of streamed movies, a substitute for DVD movies, will __________ the equilibrium price and ___________ the equilibrium quantity of DVD movies.

decrease; decrease

In Vernon Smith's classroom experiments, prices, quantities, and gains from trade all converged quickly to those predicted by economic theory:

despite the fact that students knew only their own willingness to buy or sell.

Many Super Bowl football tickets are resold online for several times their face value. As game day approaches, unsold tickets will likely

fall in price to avoid letting the ticket go unsold.

A shortage in the market for economics textbooks will ___________ the price of textbooks.

increase

Grapes are used as an input in the production of wine, and wine and red meat are complements. A decrease in the price of grapes will _________ the total surplus in the market for red meat.

increase

A movement along a fixed supply curve caused by a rightward shift in the demand curve is best described as a(n):

increase in quantity supplied.

Holding supply constant, if the demand curve shifts to the right, there will be a(n) _____ in the equilibrium price and a(n) _____ in the equilibrium quantity.

increase; increase

Suppose the following two events occur at the same time: the Chicago Cubs win the World Series, and the workers who make Cubs merchandise overseas go on strike. Holding everything else constant, we would expect the price of Cubs' merchandise next season to _____ and the quantity of merchandise sold to _______.

increase; increase or decrease

Many people are buying bigger houses, and lamps sales increase.

Change in demand

The price of lamps increases, and lamp sales in Urtown drop.

Change in quantity demanded

The price of lamps increases, so lamp producers increase then umber of lamps they produce.

Change in quantity supplied

Lamps become much more profitable to make, so furniture makers make fewer tables and more lamps.

Change in supply

Carolina is trying to sell her car and the lowest amount she is willing to accept for it is $2,000. Abdul is interested in buying the car, and although he is willing to pay $2,500, he negotiates a price of $2,100. How much consumer surplus does Abdul achieve, and what is total surplus?

Consumer surplus = $400; Total surplus = $500

Since nearly all smartphones have built-in cameras, what will happen to the market for traditional cameras?

Demand for traditional cameras will fall, pushing prices lower.

An outbreak of mad cow disease causes Americans to abstain from eating beef.

Downward pressure on price

Sub-zero weather in New York, where the Super Bowl is being played, causes people to become disinterested in watching the Super Bowl live. What happens to ticket price in the scalping market?

Downward pressure on price

The Nile River floods this year add an exceptional amount of silt to the soil, resulting in increased crops of cotton.

Downward pressure on price

Miranda and Jason are in the tutoring business. Miranda is willing to tutor as long as she gets $20, while Jason will not tutor unless he gets $35. If the most that someone would pay for tutoring is $30, how much producer surplus is earned?

Miranda = $10; Jason = $0

If the price of beef rises significantly, what will happen in the market for fast-food hamburgers assuming nothing else happens in the market?

Supply decreases, pushing prices higher.

What would happen if the demand for oil increased?

The market price would rise.

If the price of foam blanks used in surfboard production falls, what will happen in the market for surfboards?

The supply of surfboards will rise, putting downward pressure on price.

An impending nuclear war causes people to stock up on twonkies, a popular snack cake provided by many companies.

Upward pressure on price