Module 1: Chapter 1, Chapter 8, Chapter 11
Which of the following transfers are classified as markets?
"Buy-now-pay-later" deals.
The GDP per capita of Greece was $22,494 in 2012 and $21,966 in 2013. Based on these figures, the growth rate of GDP between 2012 and 2013 (to two decimal places) was:
-2.35%
Figure 11.6 shows the market for bread in the short run, with 50 bakeries, and in the long run when more bakeries can enter. All bakeries are identical. Which of the following statements is correct?
A and B cannot be long-run equilibria, as the bakeries are making a positive economic rent.
The diagram shows the market demand and supply curves for the bread market. You know that there are 250 identical bakeries operating in the market, but you do not know their cost structure (i.e. their average cost and marginal cost curves). Based on this information, which of the following statements is correct?
A bakery's marginal cost of producing the 21st loaf is €2.
Which of the following statements about asset prices are correct?
A bubble occurs when beliefs about future prices amplify a price rise. When beliefs dampen price rises, the market equilibrium is stable.
Which of the following statements are correct?
A fall in the mortgage interest rate would shift up the demand curve for new houses. A fall in the oil price would shift down the supply curve for plastics.
The figure shows an order book for News Corp shares. Which of the following statements about this order book is correct?
A limit sell order for 100 shares at $16.58 will be unfilled.
Which of the following statements are correct?
A market is in equilibrium if the actions of buyers and sellers have no tendency to change the price or the quantities bought and sold.
The diagram shows the demand and the supply curves for textbooks. Based on this figure, which of the following statements is correct?
At a price of $12, there is an excess supply of 24 books.
As a student representative, one of your roles is to organize a second-hand textbook market between the current and former first-year students. After a survey, you estimate the demand and supply curves to be the ones shown in Figures 8.1 and 8.2. For example, you estimate that pricing the book at $7 would lead to a supply of 20 books and a demand of 26 books. Which of the following statements is correct?
A rumour that the textbook may be required again in Year 2 would change the supply curve, shifting it upwards.
The diagram shows the demand and the supply curves for textbooks. Based on this figure, which of the following statements is correct?
At a price of $6, there is an excess demand of 12 books.
According to the Great Economists box in Section 1.3 of The Economy, which of the following statements regarding Adam Smith is correct?
Adam Smith claimed that coordination among large number of economic actors (producers, transporters, sellers, consumers), often unknown to each other, might spontaneously arise without any person or institution consciously attempting to create or maintain it.
This figure shows the demand and supply curves for salt, and the shift in the supply curve due to the implementation of a 30% tax on the price of salt. Which of the following statements are correct?
As a result of the tax, the consumer surplus is reduced by (1/2)(Q1 + Q*)(P1 - P*).
The diagram shows the demand and the supply curves for a textbook. The curves intersect at (Q, P) = (24, 8). Which of the following is correct?
At $8, the market clears.
The diagram shows the market demand and supply curves for the bread market. You know that there are 250 identical bakeries operating in the market, but you do not know their cost structure (i.e. their average cost and marginal cost curves). Based on this information, which of the following statements is correct?
At a price of €2.50, each bakery will be willing to sell 26 loaves each.
The figure shows the demand and supply curves in the salt market. The government now decides to impose a sales tax of 30% on the price of salt, to be paid by the suppliers. Which of the following statements is correct?
Both consumer surplus and producer surplus decrease.
Consider a world of just two individuals, Greta and Carlos, who each need both of two goods, apples and wheat, to survive. They differ in how productive they are in growing apples and wheat. If Greta spends 100% of her labour time producing one good, she could produce 2000 apples or 60 tonnes of wheat. If Carlos spends 100% of his labour time producing one good, he could produce 1000 apples or 50 tonnes of wheat. Based on this information, which of the following statements is correct?
Carlos has a comparative disadvantage in producing apples.
(The Economy Question 11.11, modified) Which of the following are stationary rents?
Employment rent where the wage is set high to induce workers to work hard. Monopoly rent where firms make excess profits due to limited competition.
Which of the following statements is correct?
GDP per capita is a better (more holistic) measure of living standards than disposable income.
An individual's well-being can be partly measured by:
Goods and services that are produced within the household, such as meals and childcare. b) Goods and services that are provided by the government, such as healthcare and education. c) Her disposable income. d) all of the other answers are correct.
The diagram shows the market demand and supply curves for the bread market. You know that there are 250 identical bakeries operating in the market, but you do not know their cost structure (i.e. their average cost and marginal cost curves). Based on this information, which of the following statements is correct?
In equilibrium, each bakery supplies 20 loaves each.
Consider a world of just two individuals, Greta and Carlos, who each need both of two goods, apples and wheat, to survive. They differ in how productive they are in growing apples and wheat. If Greta spends 100% of her labour time producing one good, she could produce 2000 apples or 60 tonnes of wheat. If Carlos spends 100% of his labour time producing one good, he could produce 1000 apples or 50 tonnes of wheat. In period 1, Carlos and Greta are not able to trade with each other, and they each consume exactly what they produce. They both choose to use 60% of their time in apple production and the rest producing wheat. In period 2, they can trade at the price of 30 apples for 1 tonne of wheat, and Greta consumes 1250 apples. Based on this information, which of the following statements is correct?
In period 1, Greta produces 1200 apples and 24 tonnes of wheat, while Carlos produces 600 apples and 20 tonnes of wheat.
In the market for a particular identical good there are initially a large number of each of two types of producers: Type A and Type B. Type A producers use a better production technology than Type B producers, so Type A's average cost curve is lower than Type B's. Both types have upward-sloping marginal cost curves and U-shaped average cost curves. Which of the following statements is correct regarding the short-run and the long-run equilibria of this market?
In the long-run equilibrium, MC = AC for Type A firms, so their economic profits are zero.
The following table shows the nominal GDP (in 2015 US dollars) and the population of Japan in 2013 and 2014 (source: The World Bank). Based on this information, which of the following statements regarding GDP per capita is correct? GDP: $4,919,563,108,372.50 (2013); $4,601,461,206,888.10 (2014)Population: 127,338,621 (2013); 127,131,800 (2014)
Japan's GDP per capita fell by 6.31% between 2013 and 2014.
The following table shows the nominal GDP (in current millions of US dollars) and the population (in thousands) of the US, China, and Luxembourg in 2015 (source: The World Bank). Based on this information which of the following statements is correct? US: 18,036,648.00 (GDP), 321,418.82 (Population)China: 11,007,720.59 (GDP), 1,371,220.00 (Population)Luxembourg: 57,793.61 (GDP), 569.68 (Population)
Luxembourg's GDP per capita was 12.6 times that of China's.
The following table shows the nominal GDP (in millions of current US dollars) and the population (in thousands) of the US, China, and Luxembourg in 2015 (source: The World Bank). Based on this information which of the following statements is correct? US: $18,036,648.00 (GDP); 321,418.82 (Population)China: $11,007,720.59 (GDP); 1,371,220.00 (Population)Luxembourg: $57,793.61 (GDP); 569.68 (Population)
Luxembourg's GDP per capita was more than 10 times that of China's.
Which of the following statements about bubbles is correct?
Momentum trading strategies make bubbles more likely to occur.
The diagram shows the demand and the supply curves for textbooks. Based on this figure, which of the following statements is correct?
The Nash equilibrium price is $8.
Which of the following statements about a competitive equilibrium allocation are correct?
No buyer's or seller's surplus can be increased without reducing someone else's surplus. The total surplus from trade is maximized.
Imagine that the GDP per capita of a country had doubled every 100 years. You are asked to draw both linear and ratio scale graphs that plot GDP on the vertical axis, and the year on the horizontal axis. What will be the shapes of the curves?
On a linear scale graph, an upward-sloping curve with increasing slope (called convex shape); on a ratio scale graph, an upward-sloping straight line.
Which term can be defined as "An allocation with the property that there is no alternative technically feasible allocation in which at least one person would be better off, and nobody worse off"?
Pareto efficient
The figure shows the demand and supply curves in the salt market. Introduction of a price cap (P') or a price floor (P'') leads to quantity Q' below the Pareto efficient quantity Q*. Ceteris paribus, which of the following would not affect the distribution of gains from trade between consumers and producers?
Quantity traded
Which of the following statements about short selling (shorting) is correct?
Shorting is used to benefit from a price fall.
Look again at Figure 1.10, which shows a graph of GDP per capita for West and East Germany, Japan and Spain between 1950 and 1990. Which of the following statements is correct?
Spain was able to grow at a higher growth rate than Germany between 1950 and 1990.
Figure 11.2 shows the hat market before and after a demand shift. Based on this information, which of the following statements are correct?
The adjustment to the new equilibrium is driven by the rent-seeking behaviour of the buyers and the sellers. While the market adjusts, some buyers may pay more for a hat than others.
Which of the following statements is correct? According to Friedrich Hayek:
The advantage of capitalism is that it provides the right information to the right people.
A bakery is one of many that operate in the bread industry. The market demand curve for bread is downward-sloping. The bakery incurs fixed costs and has an upward-sloping marginal cost curve. Which of the following statements is correct?
The bakery faces a flat demand curve.
In the Figure, the market equilibrium output and price of the bread market is shown to be at (Q*, P*) = (5,000, €2). Suppose that the mayor decrees that bakeries must sell as much bread as consumers want, at a price of €1.50. Which of the following statements are correct?
The consumer surplus increases but the producer surplus decreases.
Which term can be defined as "The equipment, buildings, and other durable inputs used in producing goods and services"?
capitol goods
In Figure 8.9a, the market equilibrium output and price of the bread market is shown to be at (Q*, P*) = (5,000, €2). Suppose that the mayor decrees that bakeries must sell as much bread as consumers want, at a price of €1.50. Which of the following statements are correct?
The consumer surplus increases but the producer surplus decreases. The total surplus is lower than at the market equilibrium.
Look again at Figure 1.11. Which of these conclusions is suggested by the graph?
The contrasting performances of Botswana and Nigeria illustrate that rich natural resources alone do not guarantee higher economic growth, but that higher quality institutions (government, markets and firms) may also be necessary.
Figure 11.1 shows how bargaining power affected prices in Kerala beach markets on 14 January 1997. Based on this information, what can we conclude?
The data demonstrate that buyers have bargaining power when there is excess supply.
Figure 8.14 shows the demand and supply curves for salt, and the shift in the supply curve due to the implementation of a 30% tax on the price of salt. Which of the following statements are correct?
The deadweight loss is given by (1/2)(P1 - P0)(Q* - Q1). As a result of the tax, the consumer surplus is reduced by (1/2)(Q1 + Q*)(P1 - P*).
The diagram shows the market demand and supply curves for the bread market. You know that there are 250 identical bakeries operating in the market, but you do not know their cost structure (i.e. their average cost and marginal cost curves). Based on this information, which of the following statements is correct?
The deadweight loss is minimized at price €2.
The country of Eden produces just two output goods: apples and snakeskin handbags. In 2014 the prices of apples and handbags were $10 and $24, respectively. In 2015, the prices increased to $12 and $25. The quantities produced of the two goods were 100 and 20, respectively, in both 2014 and 2015. Based on this information, which of the following is incorrect?
The economy of Eden grew between 2014 and 2015 in real terms.
The figure shows the equilibrium of the bread market to be 5,000 loaves per day at price €2. A year later, we find that the market equilibrium price has fallen to €1.50. What can we conclude?
The fall in price could have been caused by a shift in either curve.
Which of the following statements is correct regarding a price-taking firm producing that good?
The firm chooses its output such that the marginal cost equals the price.
The figure shows the hat market before and after a demand shift. Based on the figure, which of the following statements is correct regarding the initial disequilibrium when the demand shifts?
The firms become price-makers and maximise their profits.
Which of the following statements is correct?
The fundamental value of the shares in a firm is determined by expected future profits and systematic risk.
The following table shows the productivity of labour in producing light, measured in lumen-hours per hour of labour, using different technologies. Based on this information, which of the following statements is correct?
The labour productivity of producing light increased by a factor of 1.5 or more in every decade between 1930 and 1970.
The figure shows a price-taking bakery's marginal and average cost curves, and its isoprofit curves. The market price for bread is P*= €2.35. Which of the following statements is correct?
The marginal cost curve is the firm's supply curve.
Look again at Figure 8.18, which shows the market for Choccos and for all chocolate bars. Based on the two diagrams, which of the following statements is correct?
The market marginal cost (MC) curve is approximately the sum of the MC curves of all the producers of the chocolate bars.
There are two different types of producers of a good in an industry where firms are price-takers. The marginal cost curves of the two types are given below: Type A is more efficient than Type B: for example, as shown, at the output of 20 units, the Type A firms have a marginal cost of $2, as opposed to a marginal cost of $3 for the Type B firms. There are 10 Type A firms and 8 Type B firms in the market. Which of the following statements is correct?
The market will supply 510 units at price $3.
Figure 11.21 is a stylized representation of the market for an event at the 2012 London Olympic Games. 40,000 tickets were allocated by lottery, at £100 each. Assume that buyers could resell their tickets in the secondary market. Which of the following statements is correct?
The probability of obtaining a ticket was 4/7.
The figure shows the demand and supply curves in the salt market. The government now decides to impose a specific (fixed) tax of T per kg of salt, to be paid by the suppliers. Which of the following statements is correct?
The supply curve shifts up in a parallel manner.
The figure shows the demand and supply curves in the salt market. The government now decides to impose a sales tax of 30% on the price of salt, to be paid by the suppliers. Which of the following statements is correct?
The tax causes a fall in the quantity traded.
Figure 8.17 shows the effect of a tax intended to reduce the consumption of butter. The before-tax equilibrium is at A = (2.0 kg, 45 kr) and the after-tax equilibrium is at B = (1.6 kg, 54 kr). The tax imposed is 10 kr per kg of butter. Which of the following statements is correct?
The very elastic supply curve implies that the incidence of the tax falls mainly on consumers.
The figure shows the effect of a tax intended to reduce the consumption of butter. The before-tax equilibrium is at A = (2.0 kg, 45 kr) and the after-tax equilibrium is at B = (1.6 kg, 54 kr). The tax imposed is 10 kr per kg of butter. Which of the following statements is correct?
The very elastic supply curve implies that the incidence of the tax falls mainly on consumers.
Figure 11.22 illustrates the rental housing market. Initially, the market clears at €500 with 8,000 tenancies. Then, there is an outward shift in the demand curve, as shown in the diagram. In response, the city authority imposes a rent ceiling of €500 and prohibits subletting. Based on this information, which of the following statements are correct?
There are 4,000 potential tenants who are left unhoused. Excess demand could be eliminated in the long run by building more houses.
The diagram shows the demand and the supply curves for textbooks. Based on this figure, which of the following statements is correct?
There are no sellers willing to give away their textbooks for free.
Which of the following is not a result of an increase in demand?
There is an increase in supply
There are five students who are looking to buy one second-hand textbook each. Their willingness-to-pay are $50, $60, $80, $120, and $150, respectively. Based on this information, which of the following statements is correct?
To sell three books, the maximum price that can be charged is $80.
The diagram shows the market demand and supply curves for the bread market. You know that there are 250 identical bakeries operating in the market, but you do not know their cost structure (i.e. their average cost and marginal cost curves). Based on this information, which of the following statements is correct?
Total surplus is maximized at the equilibrium.
Which of the following is not true when considering competitive equilibrium?
Total surplus is not maximized
Which of the following statements regarding the labour market are correct?
Wages are the prices in the labour market that determine the level of demand and supply.
Which of the following will not lead to higher GDP?
Wealth transfers from the rich to the poor, which lead to higher income equality.
Which of the following is not an example of private property?
a farmer's land in Soviet Russia
Economics is about:
a) all of the answers are correct b) How we interact with our natural environment c) How we come to acquire the things that make up our livelihood d) How we interact with each other
Which term can be defined as "the property that the inputs a person or country uses to produce a good are less than in some other person or country"?
absolute advantage
Which of the following are examples of markets?
auction websites such as eBay touts selling tickets outside concert halls sale of illegal arms
Which term can be defined as "the property that the cost of producing an additional unit of a good relative to the cost of producing another good is lower than another person or country's cost to produce the same two goods"?
comparative advantage
Which term can be defined as "A market outcome in which all buyers and sellers are price-takers, and at the prevailing market price, the quantity supplied is equal to the quantity demanded"?
competitive equilibrium
Which of the following are examples of private property?
computers belonging to your college, shares in a company
Which term can be defined as "The curve that gives the quantity consumers will buy at each possible price"?
demand curve
Which term can be defined as "a property that occurs when doubling all of the inputs to a production process more than doubles the output"?
economies of scale
Which term can be defined as "A state of a market in which there is no tendency for the quantities bought and sold, or the market price, to change, unless there is some change in the underlying costs, preferences, or other determinants of the behavior of market actors"?
equilibrium (of a market)
Which term can be defined as "A situation in which the quantity of a good demanded is greater than the quantity supplied at the current price"?
excess demand
Which term can be defined as "A measure of the market value of the output of the economy in a given period"?
gross domestic product (GDP)
Which of the following variables has not followed the so-called 'hockey-stick' trajectory—that is, little to no growth for most of history followed by a sudden and sharp change to a positive growth rate?
inequality
Which term can be defined as "The laws and social customs governing the way people interact in society"?
institution
The figure shows the demand and supply curves in the salt market, both under competitive equilibrium (quantity Q*) and under a 30% sales tax on the price of salt (quantity Q'), paid by the suppliers. The government now considers different tax rates. Which of the following statements will always be true for a higher tax rate?
quantity traded is lower
Shifts in supply and demand are often referred to as
shocks
Which of the following is not a reason we become better at producing things when we each focus on a limited range of activities?
small, limited markets
Which term can be defined as "Buying and selling assets in order to profit from an anticipated change in their price"?
speculation
Which term can be defined as "A part of the assets of a firm that may be traded"?
stocks
Which term can be defined as "The curve that shows the number of units of output that would be produced at any given price"?
supply curve
When a market is in competitive equilibrium, which of the following properties will hold?
the good is traded at the same price across all buyers and sellers
Which term can be defined as "A market in which employers offer wages to individuals who may agree to work under their direction "?
the labour market
In general, the distribution of the total surplus between consumers and producers depends on
the relative elasticities of demand and supply.
What does UK GDP per capita measure?
the total output of the UK's economy, divided by the country's population
Which of the following is not an example of a market?
wartime food rationing
Which term can be defined as "An indicator of how much a person values a good, measured by the maximum amount he or she would pay to acquire a unit of the good"?
willingness to pay