Traditionally, most models in Economics analyze policies and offer suggestions that maximize efficiency in the economy (as opposed to maximizing equity). Which statement best explains why this happens:
Efficiency is really the only outcome that matters in society in terms of well-being
Maximizing equity requires normative evaluation, while maximizing efficiency does not
Economists are not concerned about the level of equity in society
. All of the above
Suppose that college tuition is higher this year than last year and that more students are enrolled in college this year than last year. Based on this information, we can best conclude that:
The demand curve for a college education must be positively sloped
Everything you have ever believed in has been a lie
The law of demand is invalid
Despite the increase in price, enrollment increased due to some other factor(s) changing in the market
Suppose the market for ice cream is in equilibrium. Then a change occurs, and the equilibrium price decreases while the equilibrium quantity also decreases. According to economic theory, what change could have occurred in the market to cause these changes to price and quantity?
Decrease in demand
Decrease in supply
Increase in demand
Increase in supply
Which of the following is the best example of the opportunity cost of the (approximately) one hour spent taking this exam?
The stress/anxiety you experience while taking the exam
The tuition money spent to enroll in ECON 202
The wages you could be earning if you spent this hour working at a job
The time spent studying for this exam
According to economic theory, if a country decides to reduce restrictions and increases its level of trade with the rest of the world, we predict:
Social surplus in that country to increase
Social surplus in that country to remain the same
Social surplus in that country to decrease
Any of the above is equally likely to occur when a country increases its level of trade
Which of the following is true regarding the federal minimum wage in the United States?
The federal minimum wage has been adjusted regularly to account for the increased cost of living over the past 20 years.
A full-time worker earning the current federal minimum wage will earn enough income to be above the official poverty line.
None of the statements about the federal minimum wage are true.
All of the statements about the federal minimum wage are true
The majority of workers that earn the minimum wage are teenagers
Suppose the market for bananas is in equilibrium. What are the predicted market outcomes if a natural disaster destroys a large percentage of the banana crop in a particular year?
Price will increase, quantity will increase
Price will decrease, quantity will decrease
Price will decrease, quantity will increase
Sad monkeys
Price will increase, quantity will decrease
Suppose that the market for a good is in equilibrium, then two major factors change. The first change causes the demand to increase. The second change causes the supply to increase. Based on this information, what outcomes do you predict in this market?
The price will decrease, the quantity may increase or decrease
The quantity will increase, the price may increase or decrease
The quantity will decrease, the price may increase or decrease
The price and quantity will both increase
The price will increase, the quantity may increase or decrease
Which of the following best describes the marginal cost to a company from hiring an additional worker?
The increase in total output (amount produced) of the company after the new worker is hired
The total amount paid towards worker wages after the new worker is hired
The total output (amount produced) of the company after the new worker is hired
The increase in the total amount paid towards worker wages after the new worker is hired
In Economics, the definition of an “inferior” good, (for example, Top Ramen) is a good for which people will actually buy more as the price increases.
According to economists, efficiency in the market occurs when:
Producer surplus is maximized
Social surplus is maximized
Consumer surplus is maximized
Suppose the supply curve in the market for milk shifts to the right. Which of the following best describes how the supply and demand model predicts consumers will respond?
The demand curve will shift to the left
The demand curve will shift to the right
The demand curve remains the same, quantity demanded will decrease
The demand curve remains the same, quantity demanded will increase
If the price in the market is initially set at $5, what is the result in the market, and what will eventually happen to move the market to equilibrium?
Shortage, price increase
Surplus, price decrease
Shortage, price decrease
Surplus, price increase
Suppose the government sets a binding price floor in the market for milk. Based on this, we would expect the outcome to be a surplus shortage( surplus, shortage ) in the market for milk. If a black market for milk develops, then the price in that market will be lower higher( lower, higher ) than the price floor.
In economic terms “producer surplus” is :
A terrible name for a band
The opportunity cost of purchasing one particular good
The value a buyer receives from purchasing a good minus the price they had to pay for it
The amount of money a seller receives from the buyer minus the minimum amount they would have accepted to sell the product
The number of units by which supply is greater than demand
Suppose the market for a particular good is in equilibrium. Then the demand in the market increases (the demand curve shifts to the right). What do we expect will happen to our welfare calculations?
Producer surplus will increase, consumer surplus may increase or decrease
Producer surplus will decrease, consumer surplus may increase or decrease
Consumer surplus will increase, producer surplus may increase or decrease
Consumer surplus will decrease, producer surplus may increase or decrease
According to the graph, what labeled area(s) represent producer surplus before the price floor is put into place?
A only
A, B, and C
B and D
C and E
D and E
According to the graph, what labeled area(s) represent producer surplus after the price floor is put into place?
If the government’s primary goal in setting tax policy is to minimize the amount of deadweight loss that is created, they should impose the highest amount of sales tax on:
Restaurant meals
Groceries
Breakfast cereal, specifically
The deadweight loss caused will be the same no matter which of these goods is taxed at the highest rate (it does not matter which goods you tax)
Suppose the information in the table above reveals the actual willingness to pay for a ticket to watch Dan perform close-up magic and juggle various household items. If there is only 1 ticket left and buyers bid against each other in an auction to purchase it, which of the following is the most likely price?
$101
$99
$61
$59
$35
Based on the graph , what is the producer surplus when the market depicted is in equilibrium?
800
300
250
150
30
According to the economic concept of thinking incrementally, in general, the efficient level of an activity occurs at the point at which:
There are no opportunity costs
The total costs equal the total benefits
The marginal costs equal the marginal benefits
All of these are true
Which of the following would be expected to cause an increase in the supply for a certain good?
An increase in the price of the good
A decrease in the price of the good
An increase in the cost of raw materials used to produce this good
A decrease in the cost of raw materials used to produce this good
Suppose that at a price $6 the quantity demanded in a market is 22, and at a price of $8 the quantity demanded in the market is 21. If we use this information to create a linear demand equation, what will that equation be?
P = -5 + (1/2)QD
P = -38 + 2QD
P = 50 - 2QD
P = 17 – (1/2)QD
Consider our discussion of the impact of the Coronavirus on the market for respirator masks. The prices of masks are rapidly increasing, and shortages are happening in some countries. If the governments of these countries begin to enforce binding price ceilings for these masks, this is likely to:
Have no measurable impact on the number of people that are able to actually purchase masks
Increase the number of people that are able to actually purchase masks
Decrease the number of people that are able to actually purchase masks
As discussed in class, one main reason a government might impose a non-binding price floor policy is that:
Policymakers want to prevent price-gouging in the case of emergency situations, such as natural disasters
Policymakers want to promote competition and protect the interests of producers in the market in case market conditions change
Policymakers want to lower the price below current levels to ensure that consumers can afford the good or service
Policymakers want to assert their dominance over the citizens in their district
Suppose the market in the graph is originally in equilibrium at a price of P2. If the government implements a price ceiling at price P1, what will be the new market outcome?
Surplus of 62
Shortage of 62
Surplus of 30
Shortage of 30
No impact on market outcomes from the price ceiling (remain in equilibrium)
If the government decides to set a price floor at price P1 in this market, how much of this good do you expect will be sold (legally)?
38
50
68
80
100
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