Econ 102 Review.docx

29 Pages
Unlock Document

ECON 102
Rahul Sirohi

Econ 102 Review 10/01/2013 Inferior Good: is a good that decreases in demand when consumer income rises, unlike normal goods, for  which the opposite is observed. Normal goods are those for which consumers' demand increases when  their income increases. .. The going rent in the market for I­bedroom apartments in your neighborhood is $800. If the government  imposes a price ceiling of $400 in the market: A) More people will be willing to rent apartments at every price B) Less people will rent apartments. C) The same number of apartments will be rented D) More people will rent apartments Answer is B. Less people will supply apartments at this price Equilibrium in the market for peanut butter is disturbed by an increase in the price of peanuts. Producer  surplus in the peanut butter market: A) will decrease B) will increase C) May change, but we cannot determine the change without more information D) Will not change Prices increase because either demand increases (which would increase producer surplus) or supply  decreases (which would raise price but lower overall surplus) What determines whether there is an increase in total surplus is if the sales increase. The more quantity the  more surplus If total surplus falls, which of the following must have occurred? A) There was an increase in demand and an increase in supply B) There was an increase in demand or a decrease in supply C) There was a decrease in demand or a decrease in supply D) There was a decrease in demand and an increase in supply If both supply and demand decrease, quantity decreases, thus C is correct answer! 1.Mountain River Adventures offers whitewater­rafting trips down the Colorado River. IT costs the firm $100  for the first raft trip per day, $120 for the second, $140 for the third, and $160 for the fourth. If the market  price for a raft trop was $120 but has now increased to $150, the gain in producer surplus is equal to answer is 70 The market for apples in in equilibrium at a price of $.50 per pound. If the government imposes a price  ceiling in the market at a price of $.80 per pound then: A) quantity supplied will increase. B) the price ceiling will not affect the market price or output C) There will be a shortage of the good D) quantity demanded will decrease Answer is B. when ceiling is above equilibrium or floor below equilibrium, there is no effect. Sellers already  charging at equilibrium price.  If the price is above the equilibrium price in the market for grapefruit, total surplus: A) Will increase B) May change, but we cannot determine the change without more information C) Will decrease D) Will not change A lot of people who can’t buy good and a suppliers have a larger inventory that they can’t sell. Answer is C  because suppliers will be sitting on less goods. Inefficient market.  The current price in the market for milk is $2.00. If the government imposed a price floor of $4.00 in this  market total surplus would: A) decrease first, and then increase B) increase C) decrease D) not change The student center on campus has burritos, bagels, or burgers for lunch, and they all cost the same. You  decide to have a burger today, but if they were out of burgers, you would have bought a bagel. Your  opportunity cost is: A) Your enjoyment of the bagel and burrito B) Your enjoyment of the bagel C) Your enjoyment of the burger D) Your enjoyment of the burrito Next best alternative is opportunity cost.  Alex is willing to buy the last ticket to the Billy Bragg concert for $15, while Jake is willing to pay $25. Alex is  first in line and buys a ticket for $15. He then resells his ticket to Jake for $20. By reselling the ticket instead  of going to the concert himself, Alex caused: A) total surplus to increase. B) a deadweight loss of $5 C) Total surplus to decrease D) Consumer surplus to decrease and producer surplus to increase Answer is C. Alex makes money by selling ticket, Jake buys ticket for $5 less than he would have paid.  Say Sarah was choosing between three alternatives: working on her job that pays her $50; writing a term  paper which she values at $40; or going out with a friend, which she values at $20. The opportunity cost of  writing the term paper is: Select one: a. $30 b. $70 c. $20 d. $50  Lena and Jess are roommates. Lena hates to clean the bathroom. Jess will agree to clean the bathroom  only if Lena vacuums the living room. This statement best represents this economic concept: Select one: a. There are gains from trade.  b. The real cost of something is what you must give up to get it. c. "How much" is a decision at the margin. d. People usually exploit opportunities to make themselves better off. Say Sarah was choosing between 3 alternatives: working on her job that pays her $50; writing a term paper  which she values at $60; or going out with a friend, which she values at $80. The opportunity cost of writing  the term paper is: Select one: a. $80  b. $50 c. $130 d. $30 Specialization and trade usually lead to: Select one: a. higher prices. b. lower living standards. c. lower economic growth. d. the exchange of goods and services in markets.  Say you took an average of 5 minutes to answer an ECON problem, and 2 minutes to answer a MATH  problem. If you had a limited time left to study, your best strategy would be to solve: Select one: a. only ECON problems b. It depends  c. only MATH problems Margo spends $10,000 on one year's college tuition. The opportunity cost of spending one year in college  for Margo is: Select one: a. whatever she would have purchased with the $10,000 instead. b. whatever she would have earned had she not been in college. c. $10,000. d. whatever she would have purchased with the $10,000 and whatever she would  have earned had she not been in college.  The local Taco Hut charges the same price for everything on its menu: $3 will buy a taco, a burrito, or  nachos. You buy the taco and think that if you had not purchased the taco, you would have purchased the  burrito. The opportunity cost of the taco is: Select one: a. the $3. b. the $3, your enjoyment of the burrito, and your enjoyment of the nachos. c. the $3 and your enjoyment of the burrito. d. your enjoyment of the burrito.  When the United States and Mexico trade: Select one: a. both Mexico and the United States will be better off.  b. the United States will be worse off because wages in Mexico are so low. c. both Mexico and the United States will be worse off. d. Mexico will be worse off because the United States is a stronger economic  power. The student center on campus has burritos, bagels, or burgers for lunch, and they all cost the same. You  decide to have a burger today, but if they were out of burgers, you would have bought a bagel. Your  opportunity cost is: Select one: a. your enjoyment of the burrito. b. your enjoyment of the bagel.  c. your enjoyment of the bagel and burrito. d. your enjoyment of the burger. Suppose you and your roommate have the following agreement when it comes to cleaning your apartment:  each person washes her or his own dishes after each meal. The principle of trade you just learned tells you  that it would be more efficient if: Select one: a. each of you wash half of all the dirty dishes. b. one of you wash all the dishes while the other did a different chore.  c. both of you wash your own dishes after each meal. d. none of you wash the dishes after eating. If the state government allocates additional spending on education, the opportunity cost is: Select one: a. measured in terms of the best alternative uses for that money.  b. zero c. the dollar amount of the additional spending. d. considered only if additional taxes need to be raised to fund the spending. The University recently inherited a large mansion from a wealthy alumnus. The University plans to use the  mansion to host faculty parties and to house distinguished guests. The opportunity cost of the mansion to  the University is: Select one: a. the amount the university would receive if it sold the mansion.  b. zero, because it was a gift. c. the original cost of building the mansion d. the cost of catering the parties at the mansion As long as people have different ________, everyone has a comparative advantage in something. Select one: A. utility B. opportunity costs  C. benefits D. direct costs A decrease in the price of gasoline will cause the demand for cars, a complement of gasoline, to: Select one: a. Shift to the left b. Not change c. We can’t say d. Shift to the right  A decrease in buyers’ income will cause the demand for public transportation, an inferior good, to: Select one: a. Not change b. Shift to the left c. Shift to the right  d. We can’t say A decrease in the price of butter will cause the demand for margarine, a substitute for butter, to: Select one: a. We can’t say b. Shift to the left  c. Shift to the right d. Not change A binding price floor causes: Select one: a. a shortage in the market. b. a surplus in the market. c. wasted resources. d. a surplus in the market and wasted resources.  Each of the following is a source of inefficiency  from a rent­control price ceiling except: Select one: a. inefficiently low quantity of the good exchanged. b. wasted resources of consumers searching for the good. c. inefficient allocation of the good to consumers. d. inefficiently high quality of the good being sold.  Suppliers have power because more demand then supply In Europe the minimum wage has led to: Select one: a. lower unemployment, especially among young workers. b. a proliferation of large companies in Italy. c. widespread evasion of the minimum wage law in the black market for labor.  d. European governments hiring the surplus of workers. In Europe, the minimum wage has led to all of the following except: Select one: a. high unemployment, especially among young workers. b. a proliferation of tiny companies in Italy. c. widespread evasion of the minimum wage law in the black market for labor. d. European governments hiring the surplus of workers.  If a frost destroys much of the grapefruit crop, total surplus: Select one: a. will increase. b. may change, but we cannot determine the change without more information. c. will not change. d. will decrease.  Producer surplus for an individual seller is equal to: Select one: a. the marginal cost of the good minus the price of the good. b. the willingness to pay for the good minus the price of the good. c. the marginal cost of the good minus the willingness to pay for the good. d. the price of the good minus the marginal cost of producing the good.  Economists in general agree that rent controls are: Select one: a. an efficient and equitable way to help low­income families. b. an inefficient and ineffective way to help low­income families.  c. an efficient method of dealing with the shortages created during price ceilings. d. the only way to solve the problem of poverty. Suppose Sarah was considering between buying a burger or a pizza. She would be willing to pay $10 for the pizza, which costs around $5. The opportunity costs of buying a burger would be: Select one: a. $10 b. $0 c. $15 d. $5 If countries engage in international trade: Select one: a. they will be consuming inside their production possibility frontiers. b. they give up the ability to specialize in production. c. they will be consuming outside their production possibility frontiers. d. worldwide levels of production are lower. The U.S. production possibility frontier will ________ if there is a large influx of immigrants. Select one: a. cannot be determined from the information provided b. not change c. shift in d. shift out The production possibility frontier is bowed out from the origin because: Select one: a. economic growth leads to inefficiency. b. resources are inefficiently used. c. resources are not equally suited for the production of both goods. d. resources are scarce. Which of the following best describes the law of demand? Select one: A.As income taxes rise, fewer new cars are purchased. B.As the population rises, more electricity is consumed. C.As the price of a DVD rental rises, fewer DVDs are rented. D.As the price of corn rises, more acres of corn are planted. Say the following two events occur at the same time: 1) an increase in the price of milk of cheese; 2) a decrease in the price of bagels, a complement of cheese. The following two events would lead to a(n) _________ in the market price and a(n) __________ in the market quantity of cheese. Select one: a. indefinite change; increase b. decrease; indefinite change c. indefinite change; indefinite change d. indefinite change; decrease e. increase; indefinite change A decrease in the price of bagels will _______ the market price and ________ the market quantity of cream cheese, a complement of bagels. Select one: a. Increase; decrease b. None of the other choices is correct. c. Decrease; increase d. Increase; increase e. Decrease; decrease If the government imposes rent control: Select one: a. rent will be set at a price above the equilibrium price. b. it may result in some landlords leaving the business because they cannot cover costs. c. it will lead to rental units being higher in quality because landlords are guaranteed a high price. d. it will create a surplus of housing. If the minimum wage is a binding price floor, then: Select one: a. the number of workers who want to work will be greater than the number of jobs available. b. the equilibrium wage will increase. c. there will be a job for everyone who is willing to work. d. business owners will hire more workers. Say the following two events occur at the same time: 1) a decrease in the price of milk, an input in the production of cheese; 2) a decrease in the price of bagels, a complement of cheese. The following two events would lead to a(n) _________ in the market price and a(n) __________ in the market quantity of cheese. Select one: a. indefinite change; increase b. increase; indefinite change c. indefinite change; indefinite change d. decrease; indefinite change An increase in the price of bagels will _______ the market price and ________ the market quantity of cream cheese, a complement of bagels. Select one: a. None of the other choices is correct. b. Increase; increase c. Decrease; decrease d. Increase; decrease e. Decrease; increase -Market price is where supply and demand meet. Supply stays same but demand shifts left, thus decrease in market price. The cost of sensors used in making digital cameras falls, while a successful ad campaign makes digital cameras more fashionable.As a result, the equilibrium relative price of digital cameras ________ and the equilibrium quantity ________. Select one: A. increases; may increase, decrease, or stay the same B. increases; increases C. decreases; increases D. may increase, decrease, or stay the same; increases Suppose the market for gasoline is in equilibrium. You have heard that the price of crude oil is falling because of new oil discoveries. You are also aware that the number of car and truck drivers is steadily rising. Knowing this, you predict that the price of gasoline will ________ and the quantity of gasoline bought and sold will ________. Select one: A. rise; fall B. rise; rise C. rise or fall; rise D. rise or fall; fall Say the following two events occur at the same time: 1) an increase in the price of steel, an input in the production of cars; 2) a decrease in the price of gasoline, a complement of cars. The following two events would lead to a(n) _________ in the market price and a(n) __________ in the market quantity of cars. Select one: a. indefinite change; decrease b. indefinite change; increase c. decrease; indefinite change d. increase; indefinite change e. indefinite change; indefinite change -supply decreases because of price of steel, demand increases because of gasoline In the market for local coffee, the price will ________ and the quantity will ________ if new coffee shops open and consumers' incomes decrease due to a recession. Select one: A. be indeterminate; increase B. decrease; be indeterminate C. increase; be indeterminate D. be indeterminate; decrease A shift of a demand curve to the right, all other things unchanged, will: Select one: A. decrease equilibrium quantity and increase equilibrium price. B. increase equilibrium price and quantity. C. decrease equilibrium price and quantity. D. increase equilibrium quantity and decrease equilibrium price. Government intervention in the form of price floors or price ceilings will: Select one: a. always enhance the efficiency of the market. b. result in either surpluses or shortages. c. move the market toward its equilibrium quantity more quickly. d. often be seen as necessary to decrease the existence of black markets. The persistent unwanted surplus that results from a price floor creates inefficiencies that include all of the following except: Select one: a. inefficiently low quality. b. inefficient allocation of sales among sellers. c. wasted resources. d. the temptation to break the law by selling below the legal price. If the price of a good rises, then produ
More Less

Related notes for ECON 102

Log In


Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.