ECON 1001 Midterm

Diane is a student studying economics and currently working on her class schedule for next semester. When she considers taking another economics course and how to meet prerequisites for future economics courses, she is acknowledging dependencies that exist

Through time

The building contractor Wise Choice Construction is initially at point E in the multi-family apartment building market. When prices of single-family homes rise, Wise Choice starts to build more single-family homes and fewer multi-family apartment buildings. Which point represents a plausible supply choice for the company in the multi-family apartment building market?

C

Why is the market for cucumbers more likely to be in equilibrium than the market for smartphones?

Cucumber sellers can continuously adjust their price as market conditions change, whereas smartphone sellers adjust their prices only periodically

A demand curve with a constant price elasticity of demand:

is vertical

Supply curves tend to be _____ the more time producers have to adjust to price changes.

Flatter

(Table: The Market for Kombucha) The table shows the quantity demanded and quantity supplied of kombucha at various prices. If the government imposes a price ceiling of $3 per bottle of kombucha, the quantity of soda demanded will be _____ bottles.

8

The statutory burden of a tax is the:

government-designated burden of a tax payment.

On a market graph, producer surplus is the area that is:

above the supply curve and below the price.

Consumer surplus equals:

marginal benefit minus price.

The cost of attending university has risen significantly in recent years, much to the dismay of prospective university students and their families. If the government were to set a maximum cost of a four-year university education at $20,000—a cost that is below the average cost of attending a four-year university—what would most likely be the result?

Universities will have more applicants but would admit fewer students.

For a medical procedure that has a highly inelastic demand and an upward-sloping supply curve:

consumers will bear most of the burden of a tax

Two ways to calculate economic surplus are _____ and _____.

marginal benefit minus marginal cost; consumer surplus plus producer surplus

Which of these is NOT a common criticism of the use of economic efficiency as a measure of social welfare?

Using monetary values to measure welfare ignores feelings and perceptions.

Following the Rational Rule, the maximum economic surplus occurs when:

marginal benefits equal marginal costs.

In the market for fresh coffee, a normal good, which event will shift the demand curve to the right?

a rise in incomes

Suppose that the cross-price elasticity of demand between orange juice and lemonade is 0.7. This implies that the two goods are:

substitutes 

Sellers bear a smaller incidence of a tax when:

supply is more elastic than demand.

Positive analysis in economics:

is the branch of economic analysis that describes how the economy actually works.

Which of these can a government use to change the quantity traded in a market? (i) quotas; (ii) binding price floors; (iii) binding price ceilings; (iv) taxes.

(i), (ii), (iii), and (iv)

Which of these is caused by a subsidy for buyers of a particular item? (i) a leftward shift of the demand curve; (ii) an increase in quantity sold; (iii) a rightward shift of the demand curve.

(ii) and (iii)

Deadweight loss is calculated as:

economic surplus at the efficient quantity minus economic surplus at the actual quantity.

You are reading an editorial in the Globe and Mail. The editorial says, "Canada had a trade deficit of $137 million in February 2022. This is a clear indication to our leaders that we must renegotiate our trade agreements with Europe to make them fairer for the Canadian worker." What part of this editorial is positive, and what part is normative?

Positive: “trade deficit of $137 million”

Normative: “our leaders must renegotiate”

The interdependence principle:

implies that buyers' decisions are affected by many factors other than the price of an item.

An increase in the price of processing chips used in mobile phones would lead to:

a movement up and to the left along your individual demand curve for mobile phones.

Suppose the cross-price elasticity of demand for apple sauce and avocados is 0.96, but the cross-price elasticity for soda and oranges is -0.80. This means that apple sauce and avocados are _____, whereas soda and oranges are _____.

substitutes; complements

Normative analysis concerns:

what should be.

A rational buyer will:

keep buying a product until the marginal benefit equals the price.

Which statement is TRUE if you live in a planned economy?

You will not get much useful information from prices.

Much like toilet paper, toothpaste is a necessity. The income elasticity of demand for toothpaste is likely to be _____ and _____.

positive; close to 0

Your aunt enjoys woodworking and recently started selling her handmade pieces. She works a full-time job then works on her creations in a small space in her garage in the evenings. She normally works 1 hour per evening, but when orders increased, she chooses to work 1.5 hours per evening. She currently doesn't know another skilled woodworker she could employ to meet increased demand) Her workspace cannot expand beyond her garage. Your aunt's elasticity of supply in the short run is:

inelastic.

Which of these is caused by a subsidy for sellers of a particular item? (i) an increase in supply; (ii) an increase in quantity sold; (iii) a leftward shift of demand curve.

(i) and (ii)

The consumer surplus a buyer receives in purchasing a good is found by computing the area _____ the _____ curve and _____ the price paid for the good.

above; demand; below

Health Armor Health Insurance requires prospective clients to complete a long questionnaire about their health and provide a report on their most recent physical exam. Which potential market failure is Health Armor seeking to avoid?

information problems

When a firm experiences diminishing marginal product, its:

marginal product is falling but is likely still positive.

If raising taxes through Policy A yields more economic surplus than raising taxes through Policy B, then:

Policy A is more efficient than Policy B but may not be more equitable than Policy B.

Lexi owns coffee wholesaling business. When she installs more efficient coffee-bean roasters, the result will be a:

movement along Lexi's market demand curve to the right.

Opportunity cost arises from the fundamental economic problem of:

scarcity.

Last year, tacos were all the rage in the city park, and more taco trucks kept appearing. This year, however, gyros are the new favorite, but the number of taco trucks has remained the same as last year. How will these changes impact the market for tacos?

The equilibrium price will fall

A benefit of markets is that they:

allocate resources to their best uses.

In the immediate aftermath of a hurricane, a surge in demand for drinking water caused the price of bottled water to rise above $5 per bottle. Supporters of price ceilings on bottled water after a natural disaster argue that:

bottled water is inelastically supplied.

If a firm produces a product that has easily available variable inputs, its supply curve will be:

relatively flat.

Which of these is NOT an important function of an efficient market?

ensuring that every buyer who purchases the good values it less than every seller who sells it

Suppose the government sets a minimum wage that is below the equilibrium price of labor. This price floor will:

have no immediate effect on the price of the labor.

There are many freshwater lakes in Canada. However, freshwater is scarce because:

there is not enough of it to meet all needs.