Final Exam - Chapters 6, 7, 8, 9

Which of the following observations would be consistent with the imposition of binding price ceiling on a market? After the price ceiling becomes effective, a. A smaller quantity of the good is bought and sold. b. A smaller quantity of the good is demanded. c. A large quantity of the good is supplied. d. The price rises above the previous equilibrium.

a. A smaller quantity of the good is bought and sold.

For any country, if the world price of zinc is higher than the domestic price of zinc without trade, that country should a. Export zinc, since that country has a comparative advantage in zinc. b. Import zinc, since that country has a comparative advantage in zinc. c. Neither export nor import zinc, since that country cannot gain from trade. d. Neither export nor import zinc, since that country already produces zinc at a low cost compared to other countries.

a. Export zinc, since that country has a comparative advantage in zinc.

if the government removes a tax on a good, then the quantity of the good sold will a. Increase. b. Decrease. c. Not change. d. All of the above are possible.

a. Increase.

As a result of a decrease in price, a. New buyers enter the market, increasing consumer surplus. b. New buyers enter the market, decreasing consumer surplus. c. Existing buyers exit the market, increasing consumer surplus. d. Existing buyers exit the market, decreasing consumer surplus.

a. New buyers enter the market, increasing consumer surplus.

Assume, for the U.S., that the domestic price of beef without international trade is lower than the world price of beef. This suggests that, in the production of beef, a. The U.S. has a comparative advantage over other countries and the U.S. will export beef. b. The U.S. has a comparative advantage over other countries and the U.S. will import beef. c. Other countries have a comparative advantage over the U.S. and the U.S. will export beef. d. Other countries have a comparative advantage over the U.S. and the U.S. will import beef.

a. The U.S. has a comparative advantage over other countries and the U.S. will export beef.

Suppose a country begins to allow international trade in steel. Which of the following outcomes will be observed regardless of whether the country finds itself importing steel or exporting steel? a. The sum of consumer surplus and producer surplus for domestic traders of steel increases. b. The quantity of steel demanded by a domestic consumer's increases. c. Domestic producers of steel receive a higher price for steel. d. The losses of the losers exceed the gains of the winners.

a. The sum of consumer surplus and producer surplus for domestic traders of steel increases.

Which of the following will cause a decrease in producer surplus? a. the imposition of a binding price ceiling in the market b. an increase in the number of buyers of the good c. income increases and buyers consider the good to be normal d. the price of a complement decreases

a. the imposition of a binding price ceiling in the market

Jeff decides that he would pay as much as $3,000 for a new laptop computer. He buys the computer and realizes consumer surplus of $700. How much did Jeff pay for his computer? a. $700. b. $2,300. c. $3,000. d. $3,700.

b. $2,300.

When a tax is placed on the sellers of a product, a. Buyers pay more and sellers receive more than they did before the tax. b. Buyers pay more and sellers receive less than they did before the tax. c. Buyers pay less and sellers receive more than they did before the tax. d. Buyers pay less and sellers receive less than they did before the tax.

b. Buyers pay more and sellers receive less than they did before the tax.

Dallas buys strawberries and he would be willing to pay more than he now pays. Suppose that Dallas has a change in his tastes such that he values strawberries more than before. If the market price is the same as before, then a. Dallas's consumer surplus would be unaffected. b. Dallas's consumer surplus would increase. c. Dallas's consumer surplus would decrease. d. Dallas would be wise to buy fewer strawberries than before.

b. Dallas's consumer surplus would increase.

Suppose the demand for nachos decreases. What will happen to producer surplus in the market for nachos? a. It increases. b. It decreases. c. It remains unchanged. d. It may increase, decrease, or remain unchanged.

b. It decreases.

When a country that imported a particular good abandons a free-trade policy and adopts a no-trade policy, a. Producer surplus increases and total surplus increases in the market for that good. b. Producer surplus increases and total surplus decreases in the market for that good. c. Producer surplus decreases and total surplus increases in the market for that good. d. Producer surplus decreases and total surplus decreases in the market for that good.

b. Producer surplus increases and total surplus decreases in the market for that good.

Suppose Puerto Rico has a comparative advantage over other countries in producing sugar, but other countries have an absolute advantage over Puerto Rico in producing sugar. If trade in sugar is allowed, Puerto Rico a. Will import sugar. b. Will export sugar. c. Will export sugar, but it is not clear from the given information. d. Would have nothing to gain either from exporting or importing sugar.

b. Will export sugar.

Suppose Raymond and Victoria attend a charity benefit and participate in a silent auction. Each has in mind a maximum amount that he or she will bed for an oil painting by a locally famous artist. This maximum is called a. Deadweight loss. b. Willingness to pay. c. Consumer surplus. d. Producer surplus.

b. Willingness to pay.

When a country allows trade and becomes an importer of a good, a. Consumer surplus and producer surplus both increase. b. Consumer surplus and producer surplus both decrease. c. Consumer surplus increases and producer surplus decreases. d. Consumer surplus decreases and producer surplus increases.

c. Consumer surplus increases and producer surplus decreases.

The deadweight loss from a $3 will be largest in a market with a. Inelastic supply and elastic demand. b. Inelastic supply and inelastic demand. c. Elastic supply and elastic demand. d. Elastic supply and inelastic demand.

c. Elastic supply and elastic demand.

A consumer's willingness to pay directly measures a. The extent to which advertising and other external forces have influenced the consumer's preferences. b. The cost of a good to the buyer. c. How much a buyer values a good. d. Consumer surplus.

c. How much a buyer values a good.

If the government levies a $500 tax per car on sellers of cars, then the price paid by buyers of cars would a. Increase by more than $500. b. Increase by exactly $500. c. Increase by less than $500. d. Decrease by an indeterminate amount.

c. Increase by less than $500.

Minimum-wage laws dictate the a. Average price employers must pay for labor. b. Highest price employers may pay for labor. c. Lowest price employers may pay for labor. d. The highest and lowest prices employers may pay for labor.

c. Lowest price employers may pay for labor.

The North American Free Trade Agreement a. Is an example of the unilateral approach to free trade. b. Eliminated tariffs on imports to North America from the rest of the world. c. Reduced trade restrictions among Canada, Mexico and the United States. d. All of the above are correct.

c. Reduced trade restrictions among Canada, Mexico and the United States.

Congressman Smith cites the "jobs argument" when he argues in favor of restrictions on trade; he argues that everything can be produced at a lower cost in other countries. The likely flaw in Congressman Smith's reasoning is that he ignores the fact that a. There is no evidence that any worker ever lost his or her job because of free trade. b. Unemployment of labor is not a serious problem relative to other economic problems. c. The gains from trade are based on comparative advantage. d. The gains from trade are based on absolute advantage.

c. The gains from trade are based on comparative advantage.

Suppose the equilibrium price of a physical examination ("physical") by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling, a. The demand curve for physicals shifts to the right. b. The supply curve for physicals shifts to the left. c. The quantity demanded of physicals increases and the quantity supplied of physicals decreases. d. The number of physicals performed stays the same.

c. The quantity demanded of physicals increases and the quantity supplied of physicals decreases.

If the United States imports televisions and the U.S. government imposes a tariff on televisions, then a. Total surplus in the American television market decreases. b. Producer surplus in the American television market increases. c. U.S. imports of foreign televisions decreases. d. All of the above are correct.

d. All of the above are correct.

Suppose France subsidizes French wheat farmers, while Germany offers no subsidy to German wheat farmers. As a result of the French subsidy, sales of French wheat to Germany a. May prompt German farmers to invoke the unfair-competition argument. b. Increase the consumer surplus of German buyers. c. Increase the total surplus of German people. d. All of the above are correct.

d. All of the above are correct.