EC 251 Final 1 Exam Fall 2022 PDF

## Exam 1 - Fall 2022 ### Instructions Indicate the answer choice that best completes the statement or answers the question. ### Questions 1. For a normal good, higher income results in: > a. an increase in demand. 2. Producer surplus can be defined as the revenue producers make from selling go...

## Exam 1 - Fall 2022 ### Instructions Indicate the answer choice that best completes the statement or answers the question. ### Questions 1. For a normal good, higher income results in: > a. an increase in demand. 2. Producer surplus can be defined as the revenue producers make from selling goods in a market. > a. False 3. The demand for oil has a negative slope because: > b. oil is not equally valuable in all of its uses. 4. The key condition for equilibrium to occur in a market is: > a. quantity demanded equals quantity supplied. 5. On June 13, 2011, writer Sebastian Anthony at Extreme Tech wrote, “During the two days that the Les Paul [Google] doodle was online, those 740 million visitors spent 26 seconds more on the Google home page than normal. That's a total of almost 10.7 million work hours spent playing with the Les Paul Google Doodle. Assuming the average Google user earns $25/hour, the doodle cost companies around the world $268 million in lost productivity.” Mr. Anthony's mistake is overestimating opportunity costs. He is doing this by assuming that: > a. all those work hours would have been spent working if not for the doodle. 6. The total consumer surplus from trade at the free market equilibrium is represented by: > D. triangle AEG 7. Some people take jobs that are dangerous, but such jobs pay well. For example, oil rig workers make $78,000 per year on average. Why? > a. Oil rig workers are accepting of the danger in trade for higher salaries. 8. The demand curve for a product is shown. What is the maximum number of books that buyers are willing and able to buy at a price of $45 per book? > a. 100 <start_of_image> Amount in the image: A graph with a straight line sloping down from left to right, starting at a price of $50 when the quantity is 100, and ending at 300 with the price down to $25. <start_of_image> Amount in the image: **Figure: Demand Curve** **P** **$50** **45** **40** **35** **30** **25** **Demand** **100 150 200 250 300** **Q (units)** **What is the maximum number of books that buyers are willing and able to buy at a price of $45 per book? a. 100** 9. In an episode of DuckTales (a Disney cartoon starring Scrooge McDuck) entitled “Dough Ray Me,” one of the characters invented a duplicating machine. Other characters used the machine to start duplicating money at a phenomenal rate. What would you expect to happen? (And indeed, the episode does show this happening.) > It would create massive inflation. 10. The total gains from trade at the free market equilibrium are: > $1,000 11. Technological advances have increased the supply of digital cameras. As a result, the: > a. quantity demanded for digital cameras will increase 12. The economics of trade depends on whether the trading partners live in the same country and share the same language and religion. > b. False 13. Trade tends to: > d. increase wages in all countries. 14. A marginal change is a small incremental adjustment to an existing plan of action. > b. True 15. A country has 3 units of labor, and it takes 1 unit of labor to produce 3 drums and 1 unit of labor to produce 3 1/3 pairs of shoes. > a. True 16. The price of gasoline decreased dramatically in the summer of 2009. One likely reason for this change was: > b. a decrease in the demand for gasoline brought on by the recession. 17. Evidence from history shows that when the extent of trade expands, the result is prosperity. > a. True 18. The maximum price that consumers are willing to pay for _____ units of good X is _____ per unit. > a. 36; $4 19. The market price of the product is $20 per unit. Calculate the dollar amount of consumer surplus being earned in this market. > a. $60,000 20. Without _____ specialization is impossible. > a. trade 21. According to the theory of comparative advantage, a country should specialize in producing a good that involves: > a. a lower opportunity cost than that of other countries. 22. The value of the unexploited gains from trade is represented by areas: > a. E + F. 23. There are 100 consumers, each of whom values a concert ticket at a unique whole number dollar amount between $1 and $100. One customer is willing to pay $1, a second is willing to pay $2, a third is willing to pay $3, and so on. An unlimited number of concert tickets are on sale for $15 each. What is the total consumer surplus in this market? > a. $3,612.50 24. An increase in the quantity supplied results in: > a. a movement upward and to the right along the supply curve. 25. When there is a recession, the price of oil tends to fall because: > a. incomes fall during a recession, and oil is a normal good. 26. Dante is an artist who produces custom-made greeting cards and artistic posters. Helena is an equally talented artist who can produce these items as well. Dante's opportunity cost of producing artistic posters is _____, and Helena's opportunity cost of producing artistic posters is _____. > a. 4 greeting cards; 6 greeting cards 27. The yearly shortage of Super Bowl tickets implies that the price of Super Bowl tickets is: > a. above the equilibrium price. 28. Specializing in its comparative advantage and trading with other nations benefit a country in terms of its total output but not individuals when it comes to their wages. > b. False 29. In free markets, shortages lead to: > a. higher prices 30. Imagine a free market in equilibrium. After a sudden increase in demand (but before the price can adjust), the market experiences: > a. a shortage 31. The law of supply states that there is a _____ relationship between price and quantity > *positive; supplied* 32. The minimum price per unit that producers in the diagram require to produce 30 million barrels of oil per day is: > a. $60. 33. What is the “invisible hand"? > a. the idea that people pursuing their own self-interest actually benefit the public at large 34. At a price of $3, quantity supplied is _____, and quantity demanded is _____, leading to a _____ . > 6; 2; surplus of 4 units 35. If the government decided to heavily regulate small farmers who grow organic and free-range food, the supply of that food: > a. would decrease because the regulations are like a tax on the food; they make it more expensive to produce. 36. Why do people specialize? > a. Specialization increases productivity. 37. If the price of potatoes is $8 a pound, the consumer surplus received is: > b. $240,000 38. Nigeria receives $53 of producer surplus from each barrel of oil sold at $60. At that level of production, Nigeria's cost to produce a barrel of oil is: > a. $7. 39. One of the ways trade increases wealth is by taking advantage of differences in preferences. > a. True 40. At low prices, only low-cost producers serve the market, but as market prices rise, higher-cost producers begin to serve the market. > a. True 41. In addition to monetary incentives, economists believe people respond to incentives like fame, power, reputation, and love. > b. True 42. Economists want to understand the determinants of economic wealth because: > a. Higher levels of wealth tend to generate better health and human rights outcomes across countries. 43. The new equilibrium price is: > b. $16 44. The law of demand states that: > a. the lower the price, the greater the quantity demanded 45. In a free market, gains from trade are maximized when people act in their own self-interest. > b. True 46. David sells his car, which he considers worthless, to Cameron for $200. > a. David and Cameron must have different preferences for the car. 47. An economy in which entrepreneurs are free to experiment with new ideas and bring innovative products to the market will: > a. lead to improved living standards and increased economic growth 48. The demand and supply model predicts which of the following events in the airline travel market? > a. The demand for airline travel would decrease, resulting in a lower equilibrium price and a lower equilibrium quantity 49. The basic postulate of economics indicates that changes in incentives influence the: > a. choices of individuals with regard to a wide range of activities, including those generally perceived as social or political. 50. If the price of bananas is $10 a pound, the number of pounds that suppliers will supply is closest to: > b. 80,000