Economics Final Exam

We do not see Complete Specialization in the Real World because:

-Not all goods and services are traded internationally -Production of most goods involves increasing opportunity costs -Tastes for products differ

If a consumer receives 22 units of marginal utility for consuming the first can of soda, 20 units from consuming the second, and 15 from the third, the total utility of consuming the three units is

57 utility utils

A numerical limit a government imposes on the quantity of a good that can be imported into the country. It has an effect similar to that of a tariff. A. Quota B. Tarriff C. Quantity Floor D. Barricade

A

Next, suppose a consumer prefers a fish fillet to a taco and a taco to a hamburger. If the consumer's preferences are transitive, then: A.the consumer will prefer a to a hamburger to a fish filet B.the consumer will prefer a to a fish filet to a hamburger C. the consumer will receive equal utility from a fish filet and a hamburger D. both a and b are possible E. a, b, and c are possible.

B (look at it - if the consumer prefers a fish fillet to a taco, but a taco to a hamburger than there is really only one answer - the consumer prefers that fish fillet over a hamburger. Transitive means

Which of the following is the best example of a quota? A. A tax placed on all sport utility vehicles sold in the market. B. a limit imposed on the number of men's suits that can be imported from a foreign country C. a subsidy from the American government to domestic manufacturers of men's suits so they can compete more effectively with foreign producers of men's suits D. a $100-per-car fee imposed on all small cars imported

B - (a quota is a limit)

Dumping A. Is selling a product for a price the same as itscost of production B. is selling a product for a price above its cost of production C. is selling a product for a price below its cost of production D. None of the above

C C. is selling a product for a price below its cost of production (your dumping it- trying to get rid of it- making it cheap.)

A tariff is A. a health and safety restriction imposed on an imported product B. a subsidy granted to importers of vital input C. A limit placed on the quantity of goods that can be imported into a country D. a tax imposed by a government on goods imported into a country.

D. A tax imposed by a government on goods imported into a country.

By trading, countries are able to consume more than they could without trade. this outcome is possible because A. world production of both goods increases after trade B. shifting production to the more efficient country- the one with the comparative advantage- increases total production C. inefficiencies in resource allocation are reduced D. All of the Above

D. All of the above - we trade because world production of both goods increases after trade, there is a shifting production to the more efficient country- the one with the comparative advantage- increases total production, inefficiencies in resource allocation are reduced

Which of the following is NOT an example of a trade restriction? A. quotas and voluntary export restraints B. tariffs c. legislation requiring cars sold in a countryhave a 50 percent domestic content D. Consumer preferences for goods produced domestically

D. Consumer preferences for goods produced domestically

Suppose bundle A contains 5 CDs and 5 DVDs and bundle B contains 4 CDs and 7 DVDs.If a consumer is able to rank different combinations of goods and services in terms of how much utility they provide, then A.the consumer will prefer bundle A to bundle B. B.the consumer will prefer bundle B to bundle A. C..the consumer will be indifferent between bundle A and bundle B D.both a and b are possible. E.a, b, and c are possible.

E. a, b, and c are possible.

What is Income Effect?

Income effect: The change in the quantity demanded of a good that results from the effect of a change in price on consumer purchasing power, holding all other factors constant. Example:

The Unisted States is ____________ in the world. International trade remains _________________ to the United States than to most other countries.

One of the largest exporters; less important

What is Substitution Effect?

Substitution effect: The change in the quantity demanded of a good that results from a change in price making the good more or less expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power. Example: people will buy less if something

suppose a professional basketball game is to be played at a downtown urban area, which increases demand for parking on the night of the game. If the urban area has limited ability to crate additional parking during periods of peak demand, then

The supply of parking will be more inelastic and the price of parking will increase by a relatively large amount the night of the game.

When demand is elastic, how will an increase in price affect total revenue?

Total revenue will fall.

What is Utility?

Utility: The enjoyment or satisfaction people receive from consuming goods and services.

___is a situation in which a country does not trade with other countries.

autasky

____is a situation in which a country does not trade with other countries. The___is the ratio at which a country can trade its exports for imports from other countries.

autasky, terms of trade

A perfectly elastic demand curve is

horizontal

comparative advantage

is the ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors

If the price elasticity of demand is zero, then the demand for this good is

perfectly inelastic with respect to price.

free trade

trade between countried without restriction is

A perfectly inelastic demand curve is

vertical