Economics Exam 1 - Fall 2022 Study Notes

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Questions and Answers

What is the effect on demand for a normal good when income increases?

Demand fluctuates unpredictably.

Demand stays the same.

Demand decreases.

Demand increases. (correct)

Producer surplus can best be defined as which of the following?

The difference between the market price and the minimum price producers are willing to accept. (correct)

The profit made from selling goods above production costs.

The amount of goods producers are willing to sell.

The total revenue minus the total costs of production.

Why does the demand curve for oil slope downward?

Oil is significantly cheaper than alternatives.

Oil can be used for multiple valuable purposes. (correct)

The production of oil is limited.

Oil is a luxury good.

Which condition is necessary for market equilibrium to be reached?

Quantity demanded equals quantity supplied. Signup and view all the answers

What assumption does Sebastian Anthony make regarding opportunity costs in relation to the Google Doodle?

All time spent on the doodle would not be productive. Signup and view all the answers

What shape represents the total consumer surplus in a free market equilibrium?

Triangle AEG. Signup and view all the answers

Why do oil rig workers tend to accept dangerous jobs that pay well?

They prioritize salary over safety. Signup and view all the answers

At a price of $45 per book, what is the maximum quantity of books buyers are willing to purchase?

100 books. Signup and view all the answers

What is the total gains from trade at the free market equilibrium?

$1,000 Signup and view all the answers

Which of the following statements is false regarding the economics of trade?

It is not influenced by geopolitical factors. Signup and view all the answers

What is likely to occur when trade expands according to historical evidence?

Prosperity among nations involved in trade. Signup and view all the answers

According to the theory of comparative advantage, what should a country focus on producing?

Goods that involve a lower opportunity cost. Signup and view all the answers

What is the consumer surplus if each of the 100 consumers is willing to pay a unique dollar amount for a concert ticket priced at $15?

$3,612.50 Signup and view all the answers

What happens to the price of oil during a recession?

It falls due to decreased incomes and oil being a normal good. Signup and view all the answers

How does an increase in the quantity supplied affect the supply curve?

It results in a movement upward and to the right. Signup and view all the answers

What is Dante's opportunity cost for producing artistic posters compared to Helena's?

4 greeting cards and 6 greeting cards respectively. Signup and view all the answers

What does the yearly shortage of Super Bowl tickets imply about their pricing?

They are above the equilibrium price. Signup and view all the answers

In free markets, what happens as a result of a shortage?

Prices rise. Signup and view all the answers

What is the expected market condition following a sudden increase in demand?

A temporary shortage. Signup and view all the answers

What does the law of supply state regarding price and quantity?

There is a positive relationship. Signup and view all the answers

What effect do heavy regulations on small farmers have on the supply of organic food?

Decrease as regulations act like a tax. Signup and view all the answers

What does it mean when economists say specialization increases productivity?

Workers focus on specific tasks, becoming more efficient. Signup and view all the answers

What is the relationship between wealth levels and health outcomes according to economists?

Higher wealth levels are linked to improved health outcomes. Signup and view all the answers

What does the law of demand state about pricing and quantity demanded?

The lower the price, the greater the quantity demanded. Signup and view all the answers

Study Notes

Exam 1 - Fall 2022 Study Notes

Normal Goods: Higher income leads to increased demand.
Producer Surplus: False, it is the revenue producers receive from selling goods minus their costs.
Demand for Oil (Negative Slope): Demand for oil decreases as its price rises due to having multiple uses, making different quantities of oil valuable in alternate ways.
Equilibrium in a Market: Quantity demanded equals quantity supplied.
Google Doodle (2011): Sebastian Anthony's article overestimated the opportunity cost of the Google doodle, potentially miscalculating the productivity loss it caused.
Consumer and Producer Surplus (Figure): The total consumer surplus in a free market is represented by the triangle with vertices D, A,E .
Dangerous Jobs (High Pay): Workers accept dangerous jobs for higher pay.
Maximum Number of Books (at $45): The maximum number of books buyers are willing to buy at $45 each is 100.
DuckTales Episode (Duplicating Machine): The episode's depiction of a duplicating machine would lead to runaway inflation, as money supply increases faster than the amount of goods and services available.
Total Gains from Trade (Figure): $1000.
Technology and Digital Cameras: Increased supply of digital cameras increases the quantity demanded.
Economics of Trade: Whether trading partners share the same language or religion does not determine the economics of trade, which can be influenced by differing currencies trading.
Trade and Wages: Trade tends to increase wages in all countries.
Marginal Change: A small incremental adjustment to an existing plan.
Maximum Price Consumers Pay for Good X: $36.
Consumer Surplus (Dollar Amount): $60,000.
Comparative Advantage: A country should specialize in producing a good that involves a lower opportunity cost in comparison to other countries.
Production Possibilities Frontier (Graph): The graph shows a possible production of drums and shoes, which would include labor, and the country's maximum production limit.
Gasoline Price Decrease (2009): The decrease in gasoline price was likely due to a reduction in demand caused by the recession.
Trade and Prosperity: Evidence from history shows that increased trade leads to prosperity.
Price per unit of Good X: $20 per unit
Exploited Gains from Trade: E + F
Concert Tickets (Consumer Surplus): $3,612.50 .
Recession and Oil Price: During recessions, oil prices tend to fall due to lower incomes and oil being a normal good.
Opportunity Cost: Dante's opportunity cost to produce artistic posters is 4 greeting cards and Helena's is six greeting cards.
Super Bowl Tickets: Super Bowl ticket prices are above the equilibrium price.
Trade and Specialization: Trade benefits countries with comparative advantages as countries specialize in goods involving the lower opportunity costs.
Economic Wealth and Determinants: Higher levels of wealth are often associated with better health and human rights outcomes.
Equilibrium Price (Table): $16.
Demand and Price (Law of Demand): The law of demand implies that quantity demanded increases as the price decreases.
Consumer Surplus Calculation Given Price and Quantity: $240,000.
Free Market Equilibrium and Shortages: A sudden increase in demand can lead to a shortage, resulting in higher prices.
Supply and Price relationship (Law of Supply): There is a relationship between price and quantity supplied.
Minimum Price to Produce (Figure): $60.
Public Benefit (Invisible Hand): The idea that self-interest can benefit public interest or the public is true, also known as the invisible hand.
Market Equilibrium (Figure): At $3, quantity supplied is 6.
Government Regulation and Supply: Government regulation like taxes can reduce supply.
Specialization and Productivity: Specialization increases productivity.
Price and Potatoes Consumer Surplus: 240,000at240,000 at 240,000at8 a pound
Nigeria's Oil Surplus: The cost to produce each barrel is $7.
Trade and Preferences: Trade increases wealth through the advantages of differences in preferences.
Monetary Incentives: People respond to various incentives such as fame, power, reputation, and love, which differ from just monetary incentives.
Exam Questions (Page 20): Original questions numbers for each question,
Additional exam information (page 20): Specific data for Exam Question 37 through Exam Question 43.

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Description

Prepare for your Economics Exam 1 with these study notes from Fall 2022. Key concepts include normal goods, producer surplus, market equilibrium, and consumer surplus. Understand the dynamics of demand and the implications of market changes for better exam performance.