econ 100 exam 1

The concept of scarcity as used by economists refers to a situation in which

there is a shortage

In the 1800s, the federal government paid railroad companies for each mile of track built. This payment scheme created incentives for railroad companies to lay track:

between points A and B using the most indirect route

Dinah quits her administrative job, which pays $50,000 a year, to finish her 4-year college degree. Her annual college expenses are $15,000 in total. The opportunity cost of attending college for the year is:

$65,000.

In January 2023, U.S. inflation was at 6.4% per year. Which government policy is the most effective in reducing inflation?

The Federal Reserve decreases the supply of money.

Suppose that the cost of a Lithium battery - an input in iPhone - increases. We would expect that

the marginal cost (MC) for iPhones would increase thus shifting the supply curve of iPhones to the left.

Suppose that the cost of a Samsung Galaxy - a substitute for an iPhone - increases. We would expect that

the willingness to pay (WTP) for iPhones would increase thus shifting the demand curve for iPhones to the right

France
Breads Cake
4,0
2,4
0,8

Germany
Breads Cakes
12,0
6,5
0,10

Suppose that there is no trade between the France and Germany. Each country decides to produce half bread and half cake. What would be production under no trade?

France produces 2 breads and 4 cakes, while Germany produces 6 breads and 5 cakes

France
Breads Cake
4,0
2,4
0,8

Germany
Breads Cakes
12,0
6,5
0,10

In Table 1, the French opportunity of producing one more cake is ________ breads

1/2

France
Breads Cake
4,0
2,4
0,8

Germany
Breads Cakes
12,0
6,5
0,10

In Table 1, the German opportunity of producing one more cake is ________ breads.

6/5

France
Breads Cake
4,0
2,4
0,8

Germany
Breads Cakes
12,0
6,5
0,10

Suppose that each country completely specializes in only that good in which it has a comparative advantage. The production of each country would be

France produces 0 breads and 8 cakes, while Germany produces 12 breads and 0 cakes.

Using question 10, France offers to sell 4 cakes for 4 breads from Germany. What would happen?

a. Germany would accept since she receives a higher price for her bread than her opportunity cost. b. Germany would accept since her consumption under trade would be higher than under no trade. c. Germany would not accept since she receives a lower price for her bread than her opportunity cost. d. Germany would not accept since she receives a lower price for her cake than her opportunity cost. e. Answers a and b are both correct.

Answers a and b are both correct.

Using question 10, France offers to sell 4 cakes for 4 breads from Germany and Germany accepts. The consumption of each country would be

France consumes 4 breads and 4 cakes, while Germany consumes 8 breads and 4 cakes.

Suppose that Jane is willing to pay (WTP) $2.50 for a donut and Jack is willing to pay $1.50 for a donut. If the market price of donut is $2.00, then what happens?

Jane buys a donut, but Jack does not since Jane has a willingness to pay (WTP) greater than the price.

Suppose that the marginal cost (MC) of making donuts is $1.00 for Dunkin', $2.00 for Christy's Donuts and $3.00 for M&M. If the market price for donuts is $2.00, then what happens?

Dunkin and Christy's sell donuts since P ≥ MC, but M&M Donuts does not.

Suppose that Los Angeles mandates that donuts must sell for $3.00 to support the small business owners. Using the information from questions 13 and 14, what would happen?

All three donut makers want to produce donuts, but Jack and Jill are not willing to buy them at $3.00.

In an economic equilibrium, which of the following is maximized?

The total surplus.

Before 1980, the U.S. government regulated the domestic airline industry so that a price floor above the equilibrium (or market-clearing) was imposed. During this time, the price floor

encouraged the "production" of airline flights and thus led to many empty seats on those flights.

Before 1980, the U.S. government regulated the domestic airline industry so that a price floor above the equilibrium (or market-clearing) was imposed. During this time, the price floor forced U.S. air carriers (firms) to

compete on 'quality' and thus offer higher 'quality' flights with free baggage, meals, and drinks

In 1980, the U.S. government de-regulated the domestic airline industry so that an equilibrium (or marketclearing) price was allowed. The de-regulation of the U.S. airline industry led U.S. air carriers (firms) to

compete on price and thus offer lower priced flights.

Us Demand (0,9.00) (90,0)
Equilibrium (40,5.00)
Us Supply (0,1.00) (90,10.00)

Suppose the U.S. wheat market is closed to international trade. The equilibrium price is

$5.00 per bushel

Us Demand (0,9.00) (90,0)
Equilibrium (40,5.00)
Us Supply (0,1.00) (90,10.00)

Suppose the U.S. wheat market is closed to international trade. The U.S. will be producing ______, consuming ______ and importing ________

40 million bushels; 40 million bushels; 0 million bushels

Suppose the U.S. wheat market is closed to international trade. The consumer surplus (CS) is _____ and the producer surplus (PS) is ______.

$80 million; $80 million

Suppose that the U.S. wheat market is open to international trade at a world price is $3.00 per bushel. The U.S. will be producing ______, consuming ______ and importing ________ .

20 million bushels; 60 million bushels; 40 million bushels

Suppose that the U.S. wheat market is open to international trade at a world price is $3.00 per bushel. The consumer surplus (CS) is _____ and the producer surplus (PS) is ______.

$180 million; $20 million

Suppose that the U.S. wheat market is open to international trade at a world price is $3.00 per bushel. The increase in total surplus or gains from trade are.

a. $0 million b. $100 million c. $200 million d. $300 million e. $400 million

ALL ARE CORRECT

The concept of scarcity as used by economists refers to a situation in which

available resources are not enough to satisfy the wants of the people.

The logical implication of scarcity is that

choices must be made

Amy is considering seeing the movie Elvis. A movie ticket costs $15 and she will have to cancel her dog-sitting job that pays $30. The opportunity cost for Amy of going to the movie Elvis is

$45

Currently, U.S. inflation is at 8.2% per year - the highest in 40 years. Which government policy is the most effective in reducing inflation?

The Federal Reserve decreases the supply of money.

Suppose that Tom is willing to pay (WTP) $3.00 for coffee, Dick is willing to pay $2.00 for coffee, and Harry is willing to pay $1.00 for coffee. If the market price for coffee (P) is $1.50, then what happens?

Tom and Dick buy coffee since their WTP ≥ P, but Harry does not since his WTP < P.

Suppose that the marginal cost (MC) of producing coffee is $3.00 for Starbucks, $2.00 for Peet's and $1.00 for Coffee Bean. If the market price for coffee is $1.50, then what happens?

Coffee Bean sells coffee since its P ≥ MC, but Starbucks and Peet's do not since P < MC.

France
Breads Cake
4,0
2,4
0,8

Germany
Breads Cakes
12,0
6,5
0,10

Suppose that there is no trade between the France and Germany. Each country decides to produce half bread and half cake. What would be production under no trade?

France produces 2 breads and 4 cakes, while Germany produces 6 breads and 5 cakes

France
Breads Cake
4,0
2,4
0,8

Germany
Breads Cakes
12,0
6,5
0,10

In Table 1, the French opportunity of producing one more cake is ________ breads.

1/2

France
Breads Cake
4,0
2,4
0,8

Germany
Breads Cakes
12,0
6,5
0,10

In Table 1, the German opportunity of producing one more cake is ________ breads.

6/5

Suppose that each country completely specializes in only that good in which it has a comparative advantage. The production of each country would be

France produces 0 breads and 8 cakes, while Germany produces 12 breads and 0 cakes.

Using question 9, France offers to sell 4 cakes for 4 breads from Germany. What would happen?

a. Germany would accept since she receives a higher price for her bread than her opportunity cost. b. Germany would accept since her consumption under trade would be higher than under no trade. c. Germany would not accept since she receives a lower price for her bread than her opportunity cost. d. Germany would not accept since she receives a lower price for her cake than her opportunity cost

Answers a and b are both correct.

Using question 9, France offers to sell 2 cakes for 4 breads from Germany. What would happen?

Germany would not accept since she receives a lower price for her bread than her opportunity cost.

13. Suppose that the price of a Wii console is below the equilibrium price. Which of the following will occur?

a. A shortage will lead Nintendo - the manufacturer of Wii - to raise the price of a Wii.

14. In an economic equilibrium, there are no more potential gains from trade because

b. The willingness to pay (WTP) is equal to the marginal cost (MC) on the last unit bought and sold.

15. Suppose that that eating cookies decreases your chances of getting cancer. We would expect that

b. the willingness to pay for cookies would increase thus shifting the demand curve for cookies to the right.

16. Suppose that the price of sugar - the main ingredient in cookies - increases. We would expect that

d. the marginal cost for cookies would increase thus shifting the supply curve of cookies to the left.

Before 1980, the U.S. government regulated the domestic airline industry so that a price floor above the equilibrium (or market-clearing) was imposed. During this time, the price floor

encouraged the "production" of airline flights and thus led to many empty seats on those flights.

Before 1980, the U.S. government regulated the domestic airline industry so that a price floor above the equilibrium (or market-clearing) was imposed. During this time, the price floor forced U.S. air carriers (firms) to

compete on 'quality' and thus offer higher 'quality' flights with free baggage, meals, and drinks.

In 1980, the U.S. government de-regulated the domestic airline industry so that an equilibrium (or market-clearing) price was allowed. The de-regulation of the U.S. airline industry led U.S. air carriers (firms) to

compete on price and thus offer lower priced flights.

With regards to U.S. employment, international trade

has little impact on overall employment; but creates more jobs for high-educated, skilled workers in the U.S.

Demand: (0,100) (10,0)
equilibrium: (40,60)
Supply: (0,20) (90,110)

Suppose the iPod market is closed to international trade. At the "closed-economy" or "equilibrium" price, the U.S. will be producing ______, consuming ______ and importing ________ .

40 million; 40 million; 0 million

Demand: (0,100) (10,0)
equilibrium: (40,60)
Supply: (0,20) (90,110)

Suppose the iPod market is closed to international trade. At the "closed-economy" or "equilibrium" price, the U.S. consumer surplus (CS) is _____ and the producer surplus (PS) is ______.

$800 million; $800 million

Demand: (0,100) (10,0)
equilibrium: (40,60)
Supply: (0,20) (90,110)

Suppose the world price is $40. The U.S. will be producing ______, consuming ______ and importing ________ .

20 million; 60 million; 40 million

Demand: (0,100) (10,0)
equilibrium: (40,60)
Supply: (0,20) (90,110)

Suppose the world price is $40. The U.S. consumer surplus (CS) is _____ and the producer surplus (PS) is ______.

$1,800 million; $200 million

Demand: (0,100) (10,0)
equilibrium: (40,60)
Supply: (0,20) (90,110)

The increase in total surplus (gains from trade) for the U.S. at a world price of $40 is ______.

$400 million