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Homework Chp 1-11

Terms in this set (60)

When the price of candy bars is $1.00, the quantity demanded is 500 per day. When the price falls to $0.80, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for candy bars is
a. inelastic.
b. perfectly inelastic.
c. unit elastic.
d. elastic.
a. inelastic
Suppose that when the price of a 16 oz. to-go cup of gourmet coffee is $4.25, students purchase 750 cups per day. If the price decreases to $3.75 per cup, which of the following is the most likely outcome?
a. Student would continue to purchase 750 cups per day.
b. Students would purchase fewer than 750 cups per day.
c. Students would purchase more than 750 cups per day.
d. We do not have enough information to answer this question.
c. Students would purchase more than 750 cups per day
The imposition of a binding price ceiling on a market causes
a. quantity demanded to be greater than quantity supplied.
b. quantity demanded to be less than quantity supplied.
c. quantity demanded to be equal to quantity supplied.
d. the price of the good to be greater than its equilibrium price.
a. quantity demanded to be greater than quantity supplied
What must be given up to obtain an item is called
a. out-of-pocket cost.
b. absolute value.
c. comparative worth.
d. opportunity cost.
d. opportunity cost.
Price elasticity of demand along a linear, downward-sloping demand curve decreases as price falls.
a. True b. False
True
Suppose buyers of fountain drinks are required to send $0.50 to the government for every fountain drink they buy. Further, suppose this tax causes the effective price received by sellers of fountain drinks to fall by $0.20 per drink. Which of the following statements is correct?
a. Forty percent of the burden of the tax falls on buyers.
b. This tax causes the demand curve for fountain drinks to shift downward by $0.50 at each quantity.
c. The price paid by buyers is $0.20 per drink more than it was before the tax.
d. This tax causes the supply curve for fountain drinks to shift downward by $0.50 at each quantity.
b. This tax causes the demand curve for fountain drinks to shift downward by $0.50 at each quantity.
Which of the following combinations of toothbrushes and hairbrushes could Zimbabwe not produce in 120 minutes?
a. 30 toothbrushes and 3 hairbrushes
b. 10 toothbrushes and 9 hairbrushes
c. 5 toothbrushes and 11 hairbrushes
d. 20 toothbrushes and 6 hairbrushes
c. 5 toothbrushes and 11 hairbrushes
At which of the following prices would both Jamaica and Norway gain from trade with each other?
a. 1 radio for 4 coolers
b. 1 radio for 1 cooler
c. 1 radio for 10 coolers
d. 1 radio for 15 coolers
a. 1 radio for 4 coolers
A price ceiling set above the equilibrium price causes quantity demanded to exceed quantity supplied.
a. True b. False
False
Which of the following movements would illustrate the effect in the market for chocolate chip cookies of an improved high-speed mixer that allows bakers to produce cookies in less time?
a. Point C to Point D
b. Point A to Point B
c. Point A to Point D
d. Point C to Point B
b. Point A to Point B
Goods produced abroad and sold domestically are called exports and goods produced domestically and sold abroad are called imports.
a. True b. False
False
If the production possibilities frontier is bowed outward, then which of the following could represent the number of coats produced when 12 blankets are produced?
a. 300
b. 200
c. 400
d. 500
d. 500
Price cannot fall so low that some sellers choose to supply a quantity of zero.
a. True b. False
false
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If something happens to alter the quantity supplied at any given price, then
a. the supply curve shifts.
b. the supply curve becomes steeper.
c. we move along the supply curve.
d. the supply curve becomes flatter.
a. the supply curve shifts.
Ryan produces hair clips and earrings. Celia also produces hair clips and earrings, but Ryan is better at producing both goods. In this case, trade could
a. benefit Celia, but not Ryan.
b. benefit neither Celia nor Ryan.
c. benefit both Celia and Ryan.
d. benefit Ryan, but not Celia.
c. benefit both Celia and Ryan.
To say that a price ceiling is nonbinding is to say that the price ceiling
a. is set below the equilibrium price.
b. causes quantity demanded to exceed quantity supplied.
c. is set above the equilibrium price.
d. results in a surplus.
c. is set above the equilibrium price
Which of the following statements is not correct?
a. A government-imposed price of $10 would be a binding price floor if market demand is Demand A and a nonbinding price ceiling if market demand is Demand B.
b. A government-imposed price of $8 would be a binding price floor if market demand is Demand A and a binding price ceiling if market demand is Demand B.
c. A government-imposed price of $4 would be a binding price ceiling if market demand is either Demand A or Demand B.
d. A government-imposed price of $10 would be a binding price ceiling if market demand is either Demand A or Demand B.
d. A government-imposed price of $10 would be a binding price ceiling if market demand is either Demand A or Demand B.
The change in equilibrium quantity will be
a. greater in the aged cheddar cheese market than in the bread market.
b. unknown without more information.
c. greater in the bread market than in the aged cheddar cheese market.
d. the same in the aged cheddar cheese and bread markets.
c. greater in the bread market than in the aged cheddar cheese market.
If we observe that when the price of chocolate increases by 10%, quantity demanded falls by 5%, then the demand for chocolate is price inelastic.
a. True b. False
True
If these are the only four buyers in the market, then when the price increases from $1.00 to $1.50, the market quantity demanded
a. decreases by 24 units.
b. increases by 2 units.
c. decreases by 1.75 units.
d. decreases by 7 units.
d. decreases by 7 units.
The more elastic the supply, the larger the deadweight loss from a tax, all else equal.
a. True b. False
True
When a tax is imposed on the buyers of a good, the demand curve shifts
a. upward by more than the amount of the tax.
b. upward by the amount of the tax.
c. downward by less than the amount of the tax.
d. downward by the amount of the tax.
d. downward by the amount of the tax.
The deadweight loss of a tax rises even more rapidly than the size of the tax.
a. True b. False
True
You are offered a free ticket to see the Chicago Cubs play the Chicago White Sox at Wrigley Field. Assume the ticket has no resale value. Willie Nelson is performing on the same night, and his concert is your next-best alternative activity. Tickets to see Willie Nelson cost $40. On any given day, you would be willing to pay up to $50 to see and hear Willie Nelson perform. Assume there are no other costs of seeing either event. Based on this information, at a minimum, how much would you have to value seeing the Cubs play the White Sox to accept the ticket and go to the game?
a. $10
b. $50
c. $0
d. $40
$10
When the price is P2, producer surplus is
a. A+C.
b. A.
c. A+B+C.
d. D+G.
c. A+B+C.
Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units are bought and sold, producer surplus will be
a. $24.
b. $18.
c. $26.
d. $16.
$18
Which of the following statements is correct?
a. The loss of producer surplus that is associated with some sellers dropping out of the market as a result of the tax is $60.
b. The loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is $120.
c. This tax produces $320 in tax revenue for the government.
d. The loss of consumer surplus caused by this tax exceeds the loss of producer surplus caused by this tax.
b. The loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is $120.
The amount of deadweight loss as a result of the tax is
a. $10.
b. $2.50.
c. $5.
d. $7.50.
b. $2.50.
A buyer is willing to buy a product at a price greater than or equal to his willingness to pay, but would refuse to buy a product at a price less than his willingness to pay.
a. True b. False
False
The Social Security tax is a tax on
a. savings.
b. capital.
c. labor.
d. land.
labor
The amount of tax revenue received by the government is
a. $5.
b. $2.50.
c. $4.
d. $9.
$5
If the labor supply curve is very elastic, a tax on labor
a. has a large deadweight loss.
b. raises enough tax revenue to offset the loss in welfare.
c. has a relatively small impact on the number of hours that workers choose to work.
d. results in a large tax burden on the firms that hire labor.
a. has a large deadweight loss.
When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic.
a. True b. False
True
The amount of the tax on each unit of the good is
a. $5.
b. $1.
c. $9.
d. $4.
$5
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If the tax on a good is increased from $1 per unit to $4 per unit, the deadweight loss from the tax increases by a factor of
a. 9.
b. 5.
c. 16.
d. 24.
16
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 would be wise to buy fewer strawberries than before.
d. Dallas's consumer surplus would decrease.
b. Dallas's consumer surplus would increase.
Total surplus can be measured as the area
a. JRL.
b. JNML.
c. JNK.
d. JNL.
JNL
If the price of the product is $110, then who would be willing to purchase the product?
a. Calvin, Sam, and Andrew
b. Calvin, Sam, Andrew, and Lori
c. Calvin
d. Calvin and Sam
a. Calvin, Sam, and Andrew
Bob purchases a book for $6, and his consumer surplus is $2. How much is Bob willing to pay for the book?
a. $4
b. $8
c. $6
d. $2
$8
Wendy is willing to pay $50 for a concert ticket and Bruce would like to receive $25. If the market price is $40 for this transaction, then the total surplus would be $15.
a. True b. False
False
Suppose the cost to build the park is $24 per acre and that the residents have agreed to split the cost of building the park equally. To maximize his own surplus, how many acres would Cedric like Springfield to build?
a. 1 acre
b. 0 acres
c. 2 acres
d. 3 acres
0 acres
Flu shots provide a positive externality. Suppose that the market for vaccinations is perfectly competitive. Without government intervention in the vaccination market, which of the following statements is correct?
a. At the current output level, the marginal social benefit exceeds the marginal private benefit.
b. At the current output level, the marginal social cost exceeds the marginal private cost.
c. A per-shot tax could turn an inefficient situation into an efficient one.
d. The current output level is inefficiently high.
a. At the current output level, the marginal social benefit exceeds the marginal private benefit.
The market equilibrium quantity of output is
a. 3 units.
b. 6 units.
c. 4 units.
d. 5 units.
3 units
The infant-industry argument
a. is based on the belief that protecting industries producing goods and services for infants is necessary if a country is to have healthy children.
b. has the support of most economists.
c. is based on the belief that protecting industries when they are young will pay off later.
d. is an argument that is advanced by advocates of free trade.
c. is based on the belief that protecting industries when they are young will pay off later.
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If the Korean steel industry subsidizes the steel that it sells to the United States, the
a. harm done to U.S. steel producers from this unfair competition exceeds the gain to U.S. consumers of cheap Korean steel.
b. harm done to U.S. steel producers is less than the benefit that accrues to U.S. consumers of steel.
c. United States should subsidize the products it sells to Korea.
d. United States should protect its domestic steel industry from this unfair competition.
b. harm done to U.S. steel producers is less than the benefit that accrues to U.S. consumers of steel.
Relative to the no-trade situation, trade with the rest of the world results in
a. Guatemalan consumers paying a higher price for coffee.
b. a decrease in total surplus in Guatemala.
c. an increase in consumer surplus.
d. a decrease in producer surplus in Guatemala.
a. Guatemalan consumers paying a higher price for coffee.
The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack. Therefore, a government policy that internalized the externality would move the quantity of smokestack scrubbers installed from point
a. Q2 to point Q3.
b. Q5 to point Q4.
c. Q3 to point Q2.
d. Q4 to point Q5.
d. Q4 to point Q5
When a country that imports a particular good imposes an import quota on that good,
a. consumer surplus increases and total surplus increases in the market for that good.
b. consumer surplus increases and total surplus decreases in the market for that good.
c. consumer surplus decreases and total surplus decreases in the market for that good.
d. consumer surplus decreases and total surplus increases in the market for that good.
c. consumer surplus decreases and total surplus decreases in the market for that good.
What is the socially optimal quantity of output in this market?
a. More than 10 units
b. 8 units
c. Between 8 and 10 units
d. 10 units
10 units
In analyzing the gains and losses from international trade, to say that Moldova is a small country is to say that
a. only the domestic price of a good is relevant for Moldova; the world price of a good is irrelevant.
b. Moldova's choice of which goods to export and which goods to import is not based on the principle of comparative advantage.
c. Moldova is a price taker.
d. Moldova can only import goods; it cannot export goods.
d. Moldova can only import goods; it cannot export goods.
For a given country, comparing the world price of aluminum and the domestic price of aluminum before trade indicates whether that country's demand for aluminum exceeds the demand for aluminum in other countries.
a. True b. False
False
Goods that are rival in consumption but not excludable would be considered
a. private goods.
b. public goods.
c. club goods.
d. common resources.
d. common resources.
Concerts in arenas are not excludable because it is virtually impossible to prevent someone from seeing the show.
a. True b. False
False
Some goods can be classified as either public goods or private goods depending on the circumstances.
a. True b. False
True
Tolls are not effective in altering people's incentives to drive during rush hour.
a. True b. False
False
The profit motive that stems from private ownership means that elephant populations are best protected as common resources.
a. True b. False
False
The world price of a pound of almonds is $4.50. Before Uruguay allowed trade in almonds, the price of a pound of almonds there was $3.00. Once Uruguay began allowing trade in almonds with other countries, Uruguay began
a. importing almonds and the price per pound in Uruguay increased to $4.50.
b. exporting almonds and the price per pound in Uruguay remained at $3.00.
c. importing almonds and the price per pound in Uruguay remained at $3.00.
d. exporting almonds and the price per pound in Uruguay increased to $4.50.
d. exporting almonds and the price per pound in Uruguay increased to $4.50.
The socially optimal quantity of output is
a. 240 units, since the value to the buyer of the 240th unit is equal to the cost incurred by the seller of the 240th unit.
b. 240 units, since the value to society of the 240th unit is equal to the cost incurred by the seller of the 240th unit.
c. 420 units, since the value to society of the 420th unit is equal to the cost incurred by the seller of the 420th unit.
d. 420 units, since the value to the buyer of the 420th unit is equal to the cost incurred by the seller of the 420th unit.
c. 420 units, since the value to society of the 420th unit is equal to the cost incurred by the seller of the 420th unit.
The "unfair-competition" argument might be cited by an American who believes that
a. young industries should be protected against foreign competition until they become profitable.
b. the American automobile industry should be protected against Japanese firms that are able to produce automobiles at relatively low cost.
c. the French government's subsidies to French farmers justify restrictions on American imports of French agricultural products.
d. almost every country has a comparative advantage, relative to the United States, in producing almost all goods.
c. the French government's subsidies to French farmers justify restrictions on American imports of French agricultural products.
What is the equilibrium quantity of output in this market?
a. 3 units
b. 5 units
c. 6 units
d. 4 units
4 units
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