macro midterm

(Table: The Market for Taxi Rides) Look at the table The Market for Taxi Rides. If a government quota limit at 9 million rides is imposed, the quota rent that will accrue to the owner of a taxi medallion will be _____ per ride, but there will be a total missed opportunity (inefficiency) to consumers and producers of _____ million rides.

$1; 1

Reference: Ref 3-6 (Figure: The Demand and Supply of Wheat) Look at the figure The Demand and Supply of Wheat. What is the equilibrium price in this wheat market?

$6

Table: The Production Possibilities for Tractors and Crude Oil) Look at the table The Production Possibilities for Tractors and Crude Oil. Both the United States and Mexico will gain from trade if one tractor trades for _____ barrels of oil.

1,500

(Table: Market for Butter) Look at the figure Market for Butter. If the government imposes a price floor of $0.90 per pound of butter, the quantity of butter actually purchased will be _____ million pounds.

10.0

Table: The Demand for Chocolate-Covered Peanuts) Look at the table The Demand for Chocolate-Covered Peanuts. If the price of chocolate-covered peanuts is $0.60, the quantity demanded by George is _____ bags per month.

25

(Table: Supply of Lemonade) Look at the table Supply of Lemonade. When the price of lemonade is $1 per cup, the quantity of lemonade supplied by Eli will be:

40 cups

(Table: Market for Butter) Look at the table Market for Butter. If the government imposes a price ceiling of $0.90 per pound of butter, the quantity of butter actually purchased will be:

9 million pounds

Which of the following is FALSE about the circular-flow diagram?

Money flows from households to firms as households offer factors of production for sale.

(Table: Production Possibilities for the United States and Canada) Look at the table Production Possibilities for the United States and Canada. _____ has (have) an absolute advantage in producing cars.

The United States

Table: The Market for Hamburger Flippers) Look at the table The Market for Hamburger Flippers. If the minimum wage in this market is $8, what is the effect on the market? Who are the winners and losers?

There is 10 hours of surplus labor. Winners are those who can supply the 45 hours of work at the higher wage. Losers are the firms now paying a wage higher than equilibrium. Additional losers are workers who are trying unsuccessfully to offer 10 hours that would not have been supplied at the equilibrium wage. Hamburger consumers may also be losers if the minimum wage necessitates an increase in the price of a hamburger.

(Figure: The Market for Computers) Look at the figure The Market for Computers. Assume that PA is the autarky price and PW is the world price. Producer surplus without international trade would be area:

Y.

Producers may simply a good with inefficiently high quality if the government imposes:

a binding price floor

If chicken and beef are substitutes, then a fall in the price of chicken will bring about:

a decrease in the demand for beef.

A price control is:

a legal restriction on how high or low a price in a market may go

The main difference between a tariff and an import quota is that:

a tariff generates tax revenue, while an import quota generates rents to the license holders.

In the circular-flow diagram, a firm is:

an organization that produces goods or services for sale.

(Figure: Strawberries and Submarines II) Look at the figure Strawberries and Submarines II. The downward slope of the production possibility frontier implies that resources:

are scarce

An economy is said to have a comparative advantage in the production of a good if it can produce that good:

at a lower opportunity cost than another economy.

An incentive allows people to be what?

better off

(Figure: A Tariff on Oranges in South Africa) Look at the figure A Tariff on Oranges in South Africa. When the government imposes a tariff on imported oranges, the price of oranges in South Africa rises from PW to PT and the volume of imports falls to:

c2-q2

Price controls:

can result in inequitable outcomes

A principle of economics is that people need to make what?

choice

Which of the following is NOT a determinant of supply?

consumer tastes

(Scenario: The Production of Wheat and Toys) Look at the scenario Production of Wheat and Toys. If each country specializes in the good for which it has the comparative advantage:

country A will produce wheat, and country B will produce toys.

(Figure: Price Control) Look at the figure Price Control. One effective price ceiling would be the price indicated at point _____, and there would be a _____ equal to the difference between points _____.

d; shortage; i and h

The government might impose a price ceiling if _____ can make a strong moral or political argument for _____ prices.

demanders; lower

The law of demand is illustrated by a demand curve that is:

downward-sloping

What economic situation has occurred when no individual would be better off doing something different.

equilibrium

(Figure: The Domestic Supply and Demand for SUVs in the United States) Look at the figure The Domestic Supply and Demand for SUVs in the United States. Suppose the world price equals $50,000 and there is free trade. The United States would _____ SUVs.

export 6 million

Figure: The Market for Tea in Sri Lanka) Look at the figure The Market for Tea in Sri Lanka. In autarky, the price is P1. When the economy is opened to trade, the price rises to PW and consumer surplus _____ to _____.

falls; F

French fries and hamburgers are complements in consumption. Suppose the cost of the ingredients used to make hamburgers rises, so that the price of a hamburger rises. Then the equilibrium relative price of french fries _____ and the equilibrium quantity _____.

falls; decreases

If the demand curve for clams is downward-sloping and the supply curve is upward-sloping, a quota that is set below the equilibrium quantity will result in a supply price higher than the demand price.

false

Figure: Production Possibility Frontier) Look at the figure Production Possibilities Frontier. A movement from point C producing 12 cars and 16 computers per period to point B means a _____of _____ cars and a _____ of _____ computers per period.

gain; 4; loss; 4

What can happen if a market fails?

government intervention

Compared with autarky, international trade leads to _____ domestic production in exporting industries and _____ domestic production in import-competing industries.

higher; lower

What decision is made at the margin?

how much?

One person's spending is another person's _______________

income

A tariff is most likely to _____ prices and _____ domestic consumption of the good or service being protected.

increase; decrease

After graduation from college, you might have an increase in your income from a new job. If as a result you decide that you will purchase more T-bone steak and less hamburger, then for you hamburger is a(n) _____ good.

inferior

In movement along a production possibility frontier, the opportunity cost to society of getting more of one good:

is measured by the amount of the other good that must be given up

(Blank) usually lead to efficiency

markets

If the executives of the U.S. silicon chip industry lobby Congress for protection from imports on the grounds that the military should have an unrestricted domestic supply of silicon chips, they are using the _____ argument.

national security

"Understanding the principles of economics, the true cost of something is?"

opportunity cost`

The World Trade Organization:

oversees trade agreements

Figure: Supply and Demand) Look at the figure Supply and Demand. A binding price floor is represented by:

p1

Who usually responds to incentives?

people

In the rental housing market with price controls, the quantity of rental houses demanded exceeds the quantity of rental housing supplied. This price control must be a:

price ceiling.

Inefficient allocations of goods to consumers often result from:

price ceilings

Rent controls are set a price ceiling below the equilibrium price, and therefore:

quantity demand exceeds the quantity supplied

Figure: Rent Controls) Look at the figure Rent Controls. Suppose that rent controls are imposed. If the government wanted a rent control ceiling to be effective immediately, what is one possible price to set?

rent1

What is something that can be used to produce something else?

resource

What must be used as efficiently as possible for society's goals?

resources

An economy moves from autarky to free international trade. In the import sector consumer surplus _____, producer surplus _____, and the economy as a whole _____.

rises; falls; gains

Resources should be used to efficiently to achieve _______ goals.

society's

"From an economic perspective, what term is used to define that each person is proficient in a certain task?"

specialization

a decrease in supply is caused by:

suppliers' expectations of higher prices in the future

Figure: The Market for Butter) Look at the figure The Market for Butter. If a government price floor at $1.30 is imposed on this market, an inefficiency will result in the form of a _____ of _____ million pounds of butter.

surplus; 6.0

Figure: The Demand and Supply of Wheat) Look at the figure The Demand and Supply of Wheat. If a price of $10 temporarily exists in this market, a _____ of _____ bushels will result.

surplus; 8,000

The belief that trade must be bad for exporting countries because the foreign workers are paid very low wages by our standards is the:

sweatshop labor fallacy

The quota rent is:

the difference between the demand price and the supply price at the quota limit

Gains from trade will result if a country specializes in:

the goods in which it has a comparative advantage

Suppose that a binding price floor is in place in a particular market. If the market is deregulated and the price floor is removed:

the quality of the good supplied will decrease

"Phillip Seafood provides Red Snapper to Outback Steak House, what interaction occurred?"

trade

According to the law of demand, if the price of steak increases in Rhode Island, the demand for steak will decrease in Rhode Island.

true

An economic model is a simplified version of reality that is used to analyze real-world economic situations.

true

Government policies can change spending

true

The quota rent for a New York taxicab owner is equal to the market price of the license that allows him to drive the cab.

true

When transatlantic airfares were set artificially high by an international treaty, airlines offered customers an inefficiently high quality of service.

true

The models that economists construct:

usually make simplifying assumptions

Economic models often:

vary greatly in assumptions and simplifications.