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Scenario BST. Suppose farmers begin to treat cows
with the hormone BST, which causes the cows to
produce a lot more milk. Moreover, many people
believe that milk from BST-treated cows improves
health and increase life expectancy.
[You may draw in the space below to help you
answer. The drawing will NOT be graded.]
1. See Scenario BST. The supply curve for milk will
a. shift right.
b. shift left.
d. be unaffected.
2. See Scenario BST. The demand curve for milk will
a. shift left.
c. shift right.
d. be unaffected.
3. See Scenario BST. The equilibrium quantity of milk
a. will decrease.
b. could increase or decrease.
c. will increase.
d. will not change.
4. International trade raises the economic well-being of a
nation in the sense that
a. governments choose to trade the products that
are most beneficial to the nation.
b. everyone in an economy gains from trade.
c. the value of the nation’s currency rises when it
begins to trade.
d. the gains of the winners exceed the losses of
5. Economists use models, because
a. computers are able to process even unimportant
b. exceptions to the model prove that people are
c. every economic situation is essentially the
same, so specific details are unnecessary.
d. the omission of unimportant details makes
6. In competitive economies, many workers are often
paid more than would be required to make them
willing to do their jobs, because
a. a fair wage maximizes profits.
b. firms cannot receive economic rents under
c. good workers receive economic rents when
firms compete with each other for labor.
d. firms will not pay economic rents to workers
Table STX. The table below displays the willingness
to pay of each consumer for his first three oranges (no
one wants to eat more than three). Alex, Barb, and
Carlos are the only buyers of oranges.
1st Orange 2nd Orange 3rd Orange
Alex $2.00 $1.50 $0.75
Barb $1.50 $1.00 $0.80
Carlos $0.75 $0.25 $0
7. See Table STX. If the market price of an orange is
$1.20, consumer surplus amounts to
8. See Table STX. The market quantity of oranges
demanded is exactly 5 if the price of an orange P
a. $1.00 < P < $1.50.
b. $0.80 < P < $1.50.
c. $0.75 < P < $0.80.
d. $0.80 < P < $1.00.
9. Which of the following does NOT affect a consumer's
demand curve for cashmere sweaters?
a. expectations about future clothing prices
b. manufacturing costs
c. current fashion
d. the consumer’s income