ECONOMICS EXAM
Arguments for free trade are sometimes disregarded by politicians because: (a) Maximizing domestic efficiency is not considered important. (b) Maximizing consumer welfare may not be a chief priority. (c) There exist sound economic reasons for keeping ones economy isolated from other economies. (d) Economists tend to favor highly protected domestic markets over free trade.
(a) Maximizing domestic efficiency is not considered important.
The policy of subsidizing domestic production is said to be preferred by economists over the use of tariffs and/or quotas because (a) social surplus is greater with domestic subsidies than under free trade. (b) there exists only a small amount of dead weight loss. (c) imports increase more under subsidization than under tariffs and quotas. (d) All of the above.
(a) social surplus is greater with domestic subsidies than under free trade.
Producer surplus is the (a) area under the supply curve to the left of the amount sold. (b) amount a seller is paid minus the cost of production. (c) area between the supply and demand curves, above the equilibrium price. (d) cost to sellers of participating in a market.
(b) amount a seller is paid minus the cost of production.
A sudden shift from import tariffs to free trade will most likely induce short-term unemployment in: (a) Import-competing industries. (b) Industries that are only exporters. (c) Industries that sell domestically as well as export. (d) Industries that neither import nor export.
(c) Industries that sell domestically as well as export.
Which is NOT a result of applying a price ceiling to the market for milk? (a) Consumer Surplus decreases. (b) Producer Surplus decreases. (c) The quantity supplied of domestically produced milk decreases. (d) Producers must spend much of their surplus on Search Time Costs.
(c) The quantity supplied of domestically produced milk decreases.
Which is NOT a result of applying a price ceiling to the market for milk? (a) Consumer Surplus decreases. (b) Producer Surplus decreases. (c) The quantity supplied of domestically produced milk decreases. (d) Producers must spend much of their surplus on Search Time Costs.
(c) The quantity supplied of domestically produced milk decreases. \
25. Rent control applies to about two-thirds of the private rental housing in New York City. Economic theory suggests that the below-equilibrium prices established by rent controls would (a) redistribute income from tenants to landlords. (b) promote a rapid increase in the future supply of housing. (c) result in poor service and quality deterioration of many rental units. ( d) lead to a reduction in housing discrimination against minorities.
(c) result in poor service and quality deterioration of many rental units. (
If Marv makes a total revenue of $1, 530, 000 a year, his normal profit and economic profit are, respec- tively: (a) both are the same at $790, 000. (b) $1,315,000;$1,840,000. (c) $790,000;$1,840,000. (d) $1,315,000;$790,000.
(d) $1,315,000;$790,000.
Which of the following is the most likely result of an initial increase in the minimum wage? (a) an increase in the employment of unskilled workers (b) a decrease in the unemployment rate of unskilled workers (c) an increase in the demand for unskilled workers (d) a decrease in the employment of unskilled workers
(d) a decrease in the employment of unskilled workers
The big difference between a tariff and a quota is that a tariff (a) maximizes the possible consumer surplus. (b) decreases Dead Weight Loss. (c) supports foreign production and increases imports. (d) increases domestic government revenue.
(d) increases domestic government revenue.
The government policy of setting a price floor on the price of domestic agricultural products is said to be successful because (a) there exists search time costs. (b) the existence of the imports eliminates the shortage of domestic goods and services. (c) the increase in producer surplus far exceeds the decrease in consumer surplus. (d) the government purchases the excess/surplus production.
(d) the government purchases the excess/surplus production.
difference between arc and midpoint
.22
midpoint method
.54
a price elasticity of demand of .03 means
10 percent increase in the price and a 3 percent decrease in QD
arc method
2.33
. A old lagoon front property was recently priced at $200, 000. Seeing the property, the Creature from the Black Lagoon thought, "It's nice, but if I have to pay more than $195, 000 for this property, then I would rather do without it". After negotiations, the Creature from the Black Lagoon bought the property for $192, 500. His CONSUMER SURPLUS was equal to (a) $7,500 (b) $2,500 (c) $5,000 (d) can't give a decisive answer with the limited information given.
2500
surplus is (a) $38. (b) $42. (c) $46. (d) $72.
46
in the market for iphone
50 per month
One benefit of applying a quota to a market is the increase in government revenue
False
Assume that the equilibrium price for an apartment in Gotham City is $1,000 and the equilibrium quantity 10,000. Now, assume government steps in and creates a price ceiling at $850. Which of the following is not likely to occur? I Quantity Demanded increases. II Quantity Supplied increases. III A price floor will likely be set. (a) I only. (b) II only. (c) I and III. (d) II and III. (e) All of the above.
II and III
if T represents the size of the taz
T x Q
12. Which is an argument for the application of a minimum wage within the U.S. labor market? (a) The shortage of jobs available will cause search time costs for willing workers to increase. (b) The supply curve within the market eventually changes and the price floor becomes institution- alized. (c) The number of total jobs demanded by firms decreases while the number of willing workers increases. (d) Dragons and spiders are afraid of price ceilings and will, therefore, leave the market.
The supply curve within the market eventually changes and the price floor becomes institution- alized
The "Long-Term" view's of the positive effects of a minimum wage policy is dependent upon (a) the assumption that the policy has become institutionalized within the labor market. (b) the existence of search time costs. (c) the government employing the surplus of labor supplied through public sector jobs. (d) the assumption that unskilled workers never increase their skill level set.
a) the assumption that the policy has become institutionalized within the labor market.
Search Time Costs could refer to (a) the time, money and resources needed to find a job when there is a surplus within the labor market. (b) the time, money and resources needed to find a good/service when a price floor is applied. (c) the time, money and resources needed to find a good/service when a price ceiling is applied. (d) Both (b) and (c). (e) All of the above.
all of the above
in response to a shortage caused by the imposition of a binding price ceiling on a market (a) the market price will no longer be the mechanism that rations scarce resources. (b) long lines of buyers may develop. (c) sellers could ration the good or service according to their own personal biases. (d) All of the above are correct.
all of the above
5. Suppose the U.S. government puts a quota on the world price for coconuts. Which of the following events would happen? (a) The U.S. government would receive tax revenue from the sale of coconuts. (b) Consumer surplus will decrease. (c) Dead weight loss exists. (d) both (b) and (c)
both b and c
At present, the maximum legal price - not necessarily the market price - for a human kidney is $0. The price of $0 maximizes (a) consumer surplus but not producer surplus. (b) producer surplus but not consumer surplus. (c) both consumer and producer surplus. (d) neither consumer nor producer surplus.
consumer suprlus but not producer surplus
For any quantity, the supply curve shows the minimum supply price of the product. Why? For any quantity, (a) the supply curve shows the maximum price suppliers must receive in order to produce the last unit of the good. (b) the increasing slope of the supply curve reflects the increase in suppliers' fixed costs. (c) the increasing slope of the supply curve reflects the decrease in suppliers' fixed costs. (d) the supply curve shows the minimum price suppliers must receive in order to produce the last unit of the good.
d) the supply curve shows the minimum price suppliers must receive in order to produce the last unit of the good.
prices higher then the unit elastic point (____) and prices lowe then the unit elastic point
decrease in total revenue and decrease in total revenue
as a consumer increases her consumption of a good or service, her willingness to buy more increases
false
both consumers and producers benefit from a price floor
false
economic profit is always greater then accounting profit
false
if the demand curve is vertical , the economic incidence
false
social surplus is maximized at the domestic market equilibrium when no international trade is allowed
false
all of the following statements about price floors are true except: (a) There will be a surplus of a commodity when a price floor is set above the equilibrium price. (b) The government may have to set up a system of storage to handle the excess supply when a price floor is set above the equilibrium price. (c) If the price floor is set below the equilibrium price, the intervention will have no effect on the market. (d) If the price floor is set below the equilibrium price, the price must be reduced.
if the price floor is set below the equilibrium price, the price must be reduced
4. Consider the market for labor where the wage rate is the price of labor. Assume initially that the federal minimum wage equals the market equilibrium wage rate. Now assume the government increases its minimum wage to $1 above the market equilibrium wage rate. One would not expect: (a) unemployment rates for teenagers and other unskilled workers to rise. (b) an increase in the quantity of workers supplied. (c) a decrease in the quantity of workers demanded. (d) incomes from wages to rise for all working-class families.
incomes from wages to rise for all working class families
the fact that the expenditure on fodd as a percebtage of income has decline as income has increase
inferior good
Dead Weight Loss refers to (a) the amount of time, money and resources spent on acquiring a good or service. (b) the loss in surplus value do to a price control measure. (c) the total loss of consumer surplus from the application of a tariff on a prevailing world price. (d) the social cost incurred by the production of a good or service that is not reflected in the standard market price.
loss in surplus
11. Which of the following is an example of a price floor? (a) A world price set by foreign competition. (b) A minimum wage within a labor market. (c) Rent Control within a housing market. (d) Both (a) and (c).
minimum wage within a labor market
the cross elasticity of demand bw Frank and Count Chocula
percent change in frank QD and percent change in chocula in price
The policy of subsidizing domestic production is said to be preferred by economists over the use of tariffs and/or quotas because (a) social surplus is greater with domestic subsidies than under free trade. (b) there exists only a small amount of dead weight loss. (c) imports increase more under subsidization than under tariffs and quotas. (d) All of the above.
social surplus is greater with domestic subsidies
Which Government policy to battle low world prices both increases the social surplus within the domestic economy and decreases the number imports? (a) Subsidies. (b) Tariffs. (c) Quotas. (d) Free Trade.
subsidies
a price completely stabilized by the government buying surpluses means that... (a) suppliers will benefit the most. (b) the government receives tax revenue from the per unit sale of the commodity. (c) consumers will have to expel their resources through search time costs. (d) none of the above.
suppliers will benefit the most
6. A "gasoline price cap" can possibly be efficient as long as: (a) the government fixes a price floor and purchases the surplus. (b) the government places a tariff on imported gasoline. (c) the government enforces a quota on imported gasoline. (d) the government fixes a price ceiling and supplies the shortage.
the government fixes a price ceiling and supplies the shortage
The price elasticity of demand is a measure of
the percentage in sales associated with the percent change in price
according to walmart ....
the power to force manufacturers to see the lowest costs
the US governemnt is planning on putting a domestic tax on georgia peaches
the producers will pay the majority of the tax burden
Economists prefer "free trade" over "protectionism" due to the increase in social surplus
true
an "externality" in economics refers to the social cost or benefit incurred by the production or consumption of a good or service that is not reflected within the free market price
true
an inelastic supply curve is found when a producer has a short time frame to produce
true
the legal incidence
true
the price elasticity is always negative
true
