Econ Practice Final Exam
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If a good is normal, then an increase in income will result in a shift in the demand curve which way?
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Shift of demand curve to right
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In a complex economy, selling and buying is a more effective procedure for exchange than barter is, because...?
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easier to find trading partners.
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An outward shift (away from the vertical axis) of the supply of lettuce could be caused by...?
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Good weather in lettuce growing areas
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Relative to a person who earns $15 per hour, a person who earns $30 per hour has a _________ opportunity cost.
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Higher opportunity cost of taking a day off
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A consumer is willing to pay $12 for his first beer, $8 for his second beer, $5 for his third beer, $3 for his fourth beer, and $1 for his fifth beer. If the price is $2, how much consumer surplus can he obtain?
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$20
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In competitive economies, workers are often paid much more than would be required to make them willing to do their jobs, mainly because...?
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good workers receive economic rents when firms compete with each other for labor.
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If a consumer places a value of $15 on a good and the price is $17, then...?
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Consumer will not purchase good
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Under rent control, bribery would...?
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bring the total price of an apartment (including the bribe) closer to the equilibrium price.
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If a social planner were running a nondisciminating monopoly, the planner could achieve an efficient outcome by charging a price at the...?
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intersection of the marginal cost curve and the demand curve.
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A student asks a professor to raise his grade in economics, because he is in danger of losing his financial-aid package is an example of what?
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Rent-seeking
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When the government creates a monopoly, the social loss may include
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the cost of lawyers and lobbyists hired to convince lawmakers to continue the monopoly.
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If both firms charge per unit, then
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Both firms will want to deviate
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In order to create capital goods, members of society must
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sacrifice current consumption
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If the price elasticity of demand for a good is 4.0, then a 10 percent increase in price results in a
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40 percent decrease in the quantity demanded.
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Honda announces that it will offer $3,000 discounts on Honda Civics starting next month. Then today's demand curve for Civics
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shifts to left
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When does a natural monopoly occur?
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there are economies of scale over the relevant range of output.
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Suppose the Surgeon General announces that eating chocolate causes liver cancer. As a result, the equilibrium price of chocolate will ______, and producer surplus will ________.
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decrease, and producer surplus will decrease.
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The value of the price elasticity of demand for a good will be relatively large when...?
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expenditures on the good are a large part of a person's income.
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Drug companies are allowed to be monopolists in the drugs they discover in order to
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encourage research
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You paid $9 to see a movie. Half an hour into the movie, you realize that it is a terrible movie and is not going to get any better. If you are rational in the economic sense, you should...?
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Leave immediately and do something more enjoyable
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Which is a likely outcome inside the United States of increased exports of manufactured goods?
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Consumers of manufactured products lose surplus
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A tax placed on a good causes...?
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causes an increase in the effective price paid by buyers.
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For markets to work well, there must be
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Voluntary exchange
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Suppose that demand decreases and supply decreases. What would you expect to occur in the market for the good?
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Equilibrium quantity would decrease, but the equilibrium price could change in either direction.
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What is NOT a social cost of bicycle theft?
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Value of stolen bicycles
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In markets without rent-seeking, the payment of economic rents increases economic efficiency, because economic rents
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direct resources to most productive use
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A monopolist can sell 200 units of output for $36.00 per unit. Alternatively, it can sell 201 units of output for $35.80 per unit. The marginal revenue of the 201st unit of output is...?
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-4.20
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If an externality is present in a market, economic efficiency may be enhanced by...?
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government intervention
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Farmer Jones is a peanut farmer who owns land of unusually high quality. In a perfectly competitive equilibrium, Farmer Jones would be likely to have
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higher income than similar farmers with average land
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Governments are usually involved in cleaning city streets, because
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anyone can enjoy clean streets without having to pay for them.
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In two price-taking firms compete by setting quantities of output, then
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market price > marginal cost
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If price of salt increases, then...?
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the income effect will be small, because salt is a small part of the consumer budget.
