What is Economics? &
The Economic Problem
The Economic Problem
A ___________ is an example of a capital resource, while ____________ is an example of a land (or natural) resource.
a. loan at a bank; coal
b. hammer; farmer
c. factory building; gold
d. bond; forest
c. factory building; gold
A decrease in the demand for flowers is depicted graphically by which of the following?
a. A movement along the demand curve to the rig
b. A movement along the demand curve to the left
c. A shift of the demand curve to the right
d. A shift of the demand curve to the left
d. A shift of the demand curve to the left
When the price of knick-knacks increases by 25%, the quantity demanded of paddywhacks increases by 50%
The cross-price elasticity between knickknacks and paddy-whacks is equal to....
2
[IMAGE D100]
What is consumer surplus in the market for apples when the market reaches equilibrium?
a. $80
b. $40
c. $90
d. $120
b. $40
In general, what is the connection between tax revenue and the deadweight loss of taxation?
a. They are equal
b. The difference between tax revenues and deadweight loss is equal to the loss in total surplus as a result of taxation
c. The ratio of tax revenues to deadweight loss is equal to the ratio of the price elasticity of demand to the price elasticity of supply
d. The sum of deadweight loss and tax revenues is equal to the loss in total surplus as a result of taxation
d. The sum of deadweight loss and tax revenues is equal to the loss in total surplus as a result of taxation
Pete has three options to choose how to spend his day off. He could spend the day doing yoga which he values at $100. Alternatively, he could spend the day playing video games, which he values at $50. His third option is to spend the day reading, which he values at $75. Regardless of which activity he chooses, he’ll have to spend $10 for lunch. Based on this information, what is the opportunity cost for Pete of doing yoga?
$75, the value of reading
Which of the following would increase the equilibrium price of bacon?
a. An increase in the supply of bacon
b. An increase in the cost of pigs used to produce bacon
c. A decrease in the demand for bacon
d. All of the above would increase the equilibrium price of bacon
b. An increase in the cost of pigs used to produce bacon
When the market price of coal changes from $6 to $ 10, the market quantity demanded of coal changes from 5 tons to 3 tons. The price elasticity of demand for coal is equal to ____, implying that demand for coal is _____ in this price range.
1; unit elastic
If the marginal benefit to consumers of one more cup of coffee is greater than the marginal cost to producers of one more cup of coffee, allocative efficiency would require that
a. Fewer resources be devoted to coffee production
b. More resources be devoted to coffee production
c. Consumers drink less coffee to increase the marginal benefit
d. Producers produce less coffee to reduce the marginal cost
b. More resources be devoted to coffee production
In the market for soda, demand is perfectly elastic, and supply is perfectly inelastic. If the government introduces a $0.50 excise tax on the sellers of soda, how is the burden of this tax divided?
a. Consumers bear 100% of the burden of the tax.
b. Producers bear 100% of the burden of the tax.
c. Consumers and producers share the tax burden equally.
d. The tax burden will be determined by whether the government taxes production or consumption of soda
b. Producers bear 100% of the burden of the tax.
Martin can make 10 bracelets or 4 necklaces in one hour. Navin can make 7 bracelets or 3 necklaces in one hour.
_________ has the comparative advantage in making necklaces, and ____________ has the comparative advantage in making bracelets.
Navin; Martin
Assume that international plane tickets and domestic plane tickets are substitutes in consumption. If the price of a domestic plane ticket increases, what will happen to the equilibrium price and quantity for international plane tickets?
a. Price will decrease and quantity will increase
b. Price will decrease and quantity will decrease
c. Price will increase and quantity will degrease
d. Price will increase and quantity will increase
d. Price will increase and quantity will increase
When the market price of coal changes from $6 to $ 10, the market quantity demanded of firewood changes from 3 tons to 5 tons. The cross-price elasticity of demand for firewood with respect to coal is equal to ______ in this price range, implying that firewood and coal are ______.
a. -1; substitutes in production
b. -½ ; complements in consumption
c. ½; substitutes in consumption
d. 1; substitutes in consumption
d. 1; substitutes in consumption
The table below gives the demand schedule and the supply schedule for housing in LollyVille
[IMAGE D300]
What quantity of apartments satisfies allocative efficiency?
55
[IMAGE E300]
Consider the market for packs of gum, which is characterized by the following demand and supply schedules.
If the government imposes a price ceiling of $1 in the market for gum above, which of the following is a result of that price ceiling?
a. There will be a shortage of 250 packs of gum
b. There will be a shortage of 350 packs of gum
c. There will be a shortage of 100 packs of gum
d. There will be a surplus of 100 packs of gum
b. There will be a shortage of 350 packs of gum
Jeff and Tom own a small factory. Jeff can make 12 pairs of shoes in an hour or 24 hats in an hour. Tom can make 16 pairs of shoes in an hour or 28 hats in an hour.
If Tom and Jeff work together to produce hats and shoes, if they produce 12 pairs of shoes, what is the maximum number of hats they can make?
31
Yoga mats and yoga classes are complements in consumption, while yoga classes and tai chi classes are substitutes in production. If the price of yoga mats increases, and the price of tai chi classes increases, what happens in the market for yoga classes?
a. The equilibrium quantity of yoga classes increases, and the price change is indeterminate.
b. The equilibrium quantity of yoga classes decreases, and the price change is indeterminate.
c. The equilibrium price of yoga classes increases, and the quantity change is indeterminate.
d. Both the equilibrium quantity of yoga classes and the equilibrium price decrease.
b. The equilibrium quantity of yoga classes decreases, and the price change is indeterminate.
Demand and supply in the market for cameras are given by the following equations:
Qd=25-(1/10)P
Qs=(1/5)P-20
If the government imposes an excise tax of $15 per camera sold on the sellers of cameras, which of the following will occur?
a. Quantity sold will fall to
b. The price consumers pay will rise by $10
c. The price sellers receive will fall by $15
d. All of the above
b. The price consumers pay will rise by $10
Demand in the market for bicycles is given by the following equations:
Qd=150-(1/2)P
Qs=2P
Maximum total surplus in the market for bicycles is equal to
$18,000
Use the following supply and demand equations for the market for root beer to answer the question.
Qd = 12 - P and Qs = 2P
Suppose the government imposes a $1.50 excise tax on beer. With the tax in the market, consumers pay ____ and producers receive _____ after the tax.
a. $5; $5
b. $5.50; $4
c. $5; $3.50
d. $4.50; $3
c. $5; $3.50