ECON 213 Quiz 6 Liberty University

Question 1 Refer to the accompanying figure, which shows the market for fish, to answer the questions that follow. If the government sets a quota of 300 pounds of fish caught per day, then fish will sell for __________ more per pound than the cost of catching the fish.

Question 2 The tragedy of the commons occurs because the good being produced is:

Question 3 The government has identified a situation where the production of a good is creating a negative externality. The government should enact legislation to require firms to internalize the externality:

Question 4 Which of the following characteristics best defines a public good?

Question 5 The market works efficiently in the absence of externalities if the good is:

Question 6 Visiting the public beach during summer is an example of an activity that is:

Question 7 Copyright laws exist to:

Question 8 The market overproduces common­resource goods because private decision­makers consider __________ costs but society experiences __________ costs.

Question 9 Which of the following characteristics best defines a private good?

Question 10 Your neighbor is an avid gardener who changes his flower displays four times per year and who was given the “best yard on the block” award last year. While you personally enjoy these changing flower displays, some of your neighbors have said they do not like some of the flowers your neighbor chooses to plant. For you, this is an example of:

Question 11 The ability to download music and movies from the Internet without paying is:

Question 12 Consider the following scenario when answering the questions that follow: Jones owns a factory that is dumping toxic waste into a river where Smith owns a resort. At present, Jones is not filtering the water that he dumps into the river. There is a filter he could install that would remove a significant amount of the toxic elements from the water before it is dumped in the river. Jones and Smith have each assessed the situation and come up with the following data: If property rights over the river are assigned to Jones, then:

Question 13 Refer to the accompanying figure. When a negative externality exists and the government does not intervene, which point best identifies the market equilibrium?

Question 14 It is best to reduce the level of pollution:

Question 15 To reduce the level of pollution emitted by firms in an industry, the government could use a cap­and­trade policy or a carbon tax. Which of the following is true?

Question 16 Which rule would not protect fish populations?

Question 17 The costs of a market activity paid for by an individual NOT engaged in the market activity are:

Question 18 The city decides to offer a subsidy to each homeowner’s association that plants more flowers in their common areas. In the market for flowers, this will cause the:

Question 19 Which good has well­defined property rights?

Question 20 If the government decides to adopt a carbon tax, the price of goods whose production generates carbon emissions will __________ and the quantity produced will __________.

Version 2

Question 1 Refer to the following scenario to answer the questions that follow. Five fishermen live in a village and have no other employment or income­earning possibilities besides fishing. They each own a boat that is suitable for fishing but does not have any resale value. Fish are worth $5 per pound, and the marginal cost of operating the boat is $500 per month. They all fish a river next to the village. According to the following schedule, they have determined that, when there are more of them out on the river fishing, they each catch fewer fish per month. If four boats operate, then each boat will make a profit of:

Question 2 Refer to the accompanying figure, which shows the market for fish, to answer the questions that follow. If the government sets a quota of 300 pounds of fish caught per day and issues a license that entitles the holder to catch 20 pounds of fish per day, then the value of the license is:

Question 3 If government regulation forces firms in an industry to internalize the externality, then the:

Question 4 Consider the following scenario when answering the questions that follow: Jones owns a factory that is dumping toxic waste into a river where Smith owns a resort. At present, Jones is not filtering the water that he dumps into the river. There is a filter he could install that would remove a significant amount of the toxic elements from the water before it is dumped in the river. Jones and Smith have each assessed the situation and come up with the following data: If property rights over the river are assigned to Jones, then:

Question 5 Refer to the accompanying figure, which shows the market for fish, to answer the questions that follow. If the government sets a quota of 300 pounds of fish caught per day, then fish will sell for __________ more per pound than the cost of catching the fish.

Question 6 Copyright laws exist to:

Question 7 A good that is nonrival and excludable is defined as a:

Question 8 Which of the following is the best definition of a cap­and­trade policy for pollution?

Question 9 __________ can be jointly consumed by more than one person, and nonpayers are difficult to exclude.

Question 10 Refer to the following scenario to answer the questions that follow. Five fishermen live in a village and have no other employment or income­earning possibilities besides fishing. They each own a boat that is suitable for fishing but does not have any resale value. Fish are worth $5 per pound, and the marginal cost of operating the boat is $500 per month. They all fish a river next to the village. According to the following schedule, they have determined that, when there are more of them out on the river fishing, they each catch fewer fish per month. How many fishermen will choose to operate their boats?

Question 11 For a market to work efficiently:

Question 12 A major reason why public goods are not supplied by the market is the:

Question 13 Which of the following is true?

Question 14 The ability to download music and movies from the Internet without paying is:

Question 15 Externalities exist because:

Question 16 Refer to the accompanying figure. When a negative externality exists and the government does not intervene, which point best identifies the market equilibrium?

Question 17 Refer to the accompanying figure to answer the questions that follow. At the market equilibrium, price is equal to __________ units of the good are produced.

Question 18 Two policy options for reducing emissions are cap­and­trade and the carbon tax. Which of the following is true?

Question 19 The personal decisions of consumers and firms are based on:

Question 20 Which of the following is the best example of a common­resource good?

ECON 213 Quiz 5 Liberty University

Question 1 If a tax is imposed on a good with a perfectly elastic demand, the burden of the tax will be borne:

Question 2 In a market where supply and demand are equally elastic, producers and consumers will share equally the burden of a tax because:

Question 3 The difference between the willingness to sell a good and the price a producer receives is also known as:

Question 4 The difference between the price consumers pay and the price sellers receive after a tax is imposed is equal to the:

Question 5 Use the following information to answer the questions that follow. The following graph depicts a market where a tax has been imposed. Pe was the equilibrium price before the tax was imposed, and Qe was the equilibrium quantity. After the tax, PC is the price that consumers pay, and PS is the price that producers receive. QT units are sold after the tax is imposed. NOTE: The areas B and C are rectangles that are divided by the supply curve ST. Include both sections of those rectangles when choosing your answers. Which areas represent producer surplus before the tax is imposed?

Question 6 Taxes will almost always cause consumer prices to increase. How much they increase depends on:

Question 7 As a tax rate grows larger and larger, eventually:

Question 8 Holding all else constant, when the price of a good increases:

Question 9 At very low tax rates:

Question 10 Excise taxes are taxes that are:

Question 11 Assume that a $0.25/gallon tax on milk causes a loss of $250 million in consumer and producer surplus and creates a deadweight loss of $45 million. From this information, we know that the tax revenue from the tax is:

Question 12 The difference between the willingness to pay for a good and the amount that is paid to get it is also known as:

Question 13 When a tax is imposed, consumer surplus and producer surplus are reallocated to:

Question 14 When looking at a graph, the area above the supply curve and below market price is defined as:

Question 15 The incidence of a tax reflects:

Question 16 A tax on apples would cause the price paid by consumers to __________ and the price received by producers to __________.

Question 17 The cost to society created by distortions in the market as a result of a tax is also known as:

Question 18 The elasticities of supply and demand are important in determining the distribution of tax burden because they:

Question 19 Producers will lose no producer surplus due to a tax if supply in their market is perfectly elastic because:

Question 20 Which of the following statements is concerned with equity rather than efficiency?

Version 2

Question 1 Consumers will lose no consumer surplus due to a tax if:

Question 2 A tax on apples would cause consumers to suffer because:

Question 3 Holding all else constant, when the price of a good increases:

Question 4 Producer surplus is depicted by the area:

Question 5 The deadweight loss from a tax is likely to be greater with a good that has:

Question 6 In a market where supply and demand are both somewhat elastic, but supply is more elastic than demand, producers will bear less of the burden of a tax because:

Question 7 Use the following information to answer the questions that follow. The following graph depicts a market where a tax has been imposed. Pe was the equilibrium price before the tax was imposed, and Qe was the equilibrium quantity. After the tax, PC is the price that consumers pay, and PS is the price that producers receive. QT units are sold after the tax is imposed. NOTE: The areas B and C are rectangles that are divided by the supply curve ST. Include both sections of those rectangles when choosing your answers. What is the amount of the tax, as measured along the y axis?

Question 8 Compared to consumers, producers will lose the lesser amount of surplus from a tax if:

Question 9 When a tax is imposed on some good, what usually happens to consumer and producer surplus?

Question 10 A tax that is applied to one specific good or service is a(n):

Question 11 Consumers will lose no consumer surplus due to a tax if demand in their market is perfectly elastic because:

Question 12 When a tax is imposed on some good, what happens to the amount of the good bought and sold?

Question 13 Use the following information to answer the questions that follow. The following graph depicts a market where a tax has been imposed. Pe was the equilibrium price before the tax was imposed, and Qe was the equilibrium quantity. After the tax, PC is the price that consumers pay, and PS is the price that producers receive. QT units are sold after the tax is imposed. NOTE: The areas B and C are rectangles that are divided by the supply curve ST. Include both sections of those rectangles when choosing your answers. Which areas represent the revenue collected from this tax?

Question 14 Consumer surplus plus producer surplus equals:

Question 15 Social welfare is measured as the sum of:

Question 16 In most cases, taxes reduce economic efficiency because:

Question 17 Which of the following statements is concerned with equity rather than efficiency?

Question 18 If a tax is imposed on a good where both supply and demand are somewhat elastic, but supply is more elastic than demand, the burden of the tax will be borne:

Question 19 The cost to society created by distortions in the market as a result of a tax is also known as:

Question 20 Of the following items, which is (are) most important in determining the distribution of tax burden?

ECON 213 Quiz 4 Liberty University

Question 1 Why does a shortage that occurs under a binding price ceiling decrease over time?

Question 2 ____________ is a real­life example of a price floor.

Question 3 You are the president of the United States. In an attempt to make gasoline prices cheaper, you have imposed a binding price ceiling on gas. What would you expect your critics to say?

Question 4 Use the following information to answer the questions that follow. Market for used cars: Demand: ,000 – 86 P Supply: Qs = –100 + 14 P What would be the quantity demanded if a price ceiling is set at $2,000?

Question 5 What is the incentive to create a black market when a binding price ceiling exists?

Question 6 Suppose you live in a community with no price controls. What do you expect to happen if your town borders a community where there is a binding price floor on most products? 

Question 7 Use the following information to answer the questions that follow. Market for used cars: Demand: ,000 – 86 P Supply: Qs = –100 + 14 P What would be the quantity demanded if a price ceiling is set at $1,000?

Question 8 A real­life example of a binding price ceiling is:

Question 9 Apartment rent control in New York City is an example of:

Question 10 What will happen in a market where a binding price floor is removed?

Question 11 Use the following information to answer the questions that follow. Market for flat­screen TVs: Demand: ,600 – 5 P Supply: Qs = –1,000 + 10 P What would be the quantity demanded if a price ceiling is set at $150?

Question 12 Refer to the accompanying figure. At the price of the binding price floor, by how much would the quantity supplied change from the market equilibrium?

Question 13 What is a black market?

Question 14 You would expect there to be many customers for a black market good when the opportunity cost of finding the good under a:

Question 15 Tina, an economics student, was just named Miss Florida, based in part on her answer to the question of why price gouging laws should be relaxed in that state. Tina won because she gave which of the following answers?

Question 16 Use the following table to answer the questions that follow. What is the equilibrium quantity in the market for public transportation?

Question 17 Use the following table to answer the questions that follow. What will be the amount of government expenditure required if a price floor for corn is set at $4.50 and the government agrees to purchase the amount of disequilibrium?

Question 18 What is the amount of the shortage or surplus in the market for public transportation when the price ceiling is $1.75?

Question 19 As the time frame shifts from the short run to the long run, what happens to producers who are subject to a binding price floor?

Question 20 Refer to the accompanying table to answer the questions that follow. If rent control is established at $1,550, what would be the amount of disequilibrium in the apartment market?

Version 2

Question 1 Refer to the accompanying figure. At what price would there be the least pressure to form a black market?

Question 2 Do all buyers benefit from a binding price ceiling?

Question 3 Refer to the accompanying table to answer the questions that follow. At what price level does the apartment market reach equilibrium?

Question 4 Why are binding price floor laws passed?

Question 5 Why is raising the minimum wage generally ineffective?

Question 6 Refer to the accompanying figure to answer the questions that follow. The market is currently at market equilibrium. If a binding price ceiling of P1 is imposed, by how much would the quantity demanded change?

Question 7 Refer to the accompanying figure, which shows both short-­run and long-­run demand and supply curves. If there is a $4 binding price ceiling imposed on a pharmaceutical drug, what will be the amount of the disequilibrium in the short run?

Question 8 Use the following information to answer the questions that follow. Market for a new hardcover book: Demand: – 8 P Supply: Qs = –60 + 3 P What would be the equilibrium price for hardcover books?

Question 9 What would you expect the consequences to size and quality would be for a product sold under a binding price ceiling?

Question 10 Use the following figure to answer the questions that follow. The accompanying figure describes the market for gasoline in a local community. If the government were to place a price floor at P1, predict the resulting surplus or shortage.

Question 11 What is the long­run consequence of a price ceiling law?

Question 12 Let’s say that you have a friend who was caught illegally buying a good on the black market. When the judge asks you to describe your friend’s motivation as a buyer, which of the following would most likely be your reply?

Question 13 Refer to the accompanying figure. At the price of the binding price floor, by how much would the quantity supplied change from the market equilibrium?

Question 14 A nonbinding price floor has the following consequences:

Question 15 How do producers who are subject to a binding price ceiling respond as the time frame shifts from the short run to the long run?

Question 16 Let’s say that you have a friend who was caught illegally selling a good on the black market. When the judge asks you to describe your friend’s motivation as a seller, which of the following would most likely be your reply?

Question 17 If a good is subject to a binding price ceiling and you purchase it on the black market, what do you expect to happen to the availability of the good over time?

Question 18 Refer to the accompanying figure to answer the questions that follow. The market is currently at market equilibrium. If a binding price ceiling of P1 is imposed, by how much would the quantity supplied change?

Question 19 You are the president of the United States. In an attempt to make prescription drug prices cheaper, you have imposed a binding price ceiling on drugs. What would you expect your critics to say?

Question 20 Which of the following is true, holding all other things constant, when comparing regions that impose a higher minimum wage to regions that impose a lower minimum wage?

ECON 213 Quiz 3 Liberty University

Question 1 In agriculture, a “bumper crop” refers to a particularly productive harvest. If there is a bumper crop for wheat at the same time that more people become allergic to wheat and all else is held constant, what will happen to the equilibrium price and quantity for wheat?

Question 2 Something is a normal good if the demand for the good:

Question 3 During the winter months, many elderly persons leave their homes in northern New York and travel south to Florida or Arizona. What would you expect to happen to the equilibrium price and quantity of items most used by the elderly in northern New York?

Question 4 If the price of Gatorade increases, the

Question 5 The change in equilibrium shown in the accompanying figure would be explained by a(n):

Question 6 Oil is a main component in the manufacture of plastic bags. If the price of oil were to increase, the price of plastics bags would:

Question 7 Refer to the accompanying figure. What event would cause the supply curve to shift out?

Question 8 Changes in population can:

Question 9 Refer to the table below: Assume that the market for iPods has only two consumers: Chuck and Ryan. According the table above, if the price of an iPod is $85, the market will demand:

Question 10 Shoes are considered to be a normal good. What would happen to the equilibrium price and equilibrium quantity of shoes if income increases and the cost of labor to produce shoes increases?

Question 11 Which of the following scenarios would explain the change in equilibrium shown in the accompanying figure?

Question 12 If the price of rubber were to increase by 20% over the fiscal year and if all else were held constant, what would you expect to happen to the supply curve of tires that are sold separately from automobiles?

Question 13 The demand curve for a good will shift to the right if, holding all else constant,

Question 14 If the number of buyers in a market increases from 50 to 100, you would expect the equilibrium price to _________ and the equilibrium quantity to _________, holding all else constant.

Question 15 The equilibrium price of teddy bears is $5. A study comes out that says owning a teddy bear causes you to earn a lower salary. If all other factors are held constant, which of the following scenarios could happen?

Question 16 A monopoly:

Question 17 Kim attends the farmer’s market in her hometown of Bakersfield every Sunday. She notices that all of the oranges sold by the many different farmers at the market have roughly the same price, as do most other products that are alike. Which statement best explains why the prices are so similar?

Question 18 The law of supply states that, all other things being equal,

Question 19 When the number of firms in a market decreases,

Question 20 Firm A notices that Firm B is making a profit by producing footballs. There is nothing stopping Firm A from entering the football market, so it does. Holding all else constant, the number of firms in the market will:

Question 1 In the first few months of 2012, the price of gasoline increased by approximately 15%. Because of this increase, we would expect the _________ curve in the market for hybrid cars to _________.

Question 2 When the number of firms in a market decreases,

Question 3 A shortage occurs whenever:

Question 4 Companies use advertising to shift consumer demand. Which of the following demand shifters do you think advertisers most often rely on?

Question 5 A subsidy:

Question 6 When firms in a market expect the price of their product to rise, the supply curve of their good:

Question 7 Old Navy stocks more Bermuda shorts during the summer months than in the winter months. The resulting shift in supply explains:

Question 8 If the price of rubber were to increase by 20% over the fiscal year and if all else were held constant, what would you expect to happen to the supply curve of tires that are sold separately from automobiles?

Question 9 The market for footballs is perfectly competitive. If all else is held constant and the price of leather decreases, we would expect that the equilibrium quantity of footballs would:

Question 10 As more people migrated West during the gold rush, what do you think happened to the demand curve in most Western markets, holding all else constant?

Question 11 As the life expectancy in the United States increases, which of the following could likely happen to the demand curve for items such as health care, cancer treatments, and nursing facilities, holding all else constant, and why?

Question 12 Something is a normal good if the demand for the good:

Question 13 Which of the following would cause the demand curve to shift to the right?

Question 14 According to the law of demand, all other things being equal,

Question 15 Which of the quantity (Q) and price (P) combinations in the accompanying figure represents the market at competitive equilibrium?

Question 16 The law of supply states that, all other things being equal,

Question 17 When both curves shift:

Question 18 Assume that the market for nachos has only two suppliers: Firm 1 and Firm 2. According to this table, if the price of nachos is $6, the market will supply:

Question 19 The demand curve for a good will shift to the right if, holding all else constant,

Question 20 The change in equilibrium shown in the accompanying figure would be explained by a(n):

ECON 213 Quiz 2 Liberty University

Question 1 When one producer has a comparative advantage in production, she:

Question 2 The process of using current resources to create or buy new capital is called:

Question 3 A positive statement:

Question 4 An increase in general resources that affects the production of both goods on a production possibilities frontier (PPF) would cause an:

Question 5 Refer to the following table to answer the questions that follow. Given the same quantity of resources, what is Jay­Z’s opportunity cost of producing a New York pizza?

Question 6 Refer to the following figure for the questions that follow. According to the figure, a new technology that makes it easier to peel, core, and prepare apples will cause:

Question 7 To determine which of two producers has a comparative advantage, you would need to know their:

Question 8 Consider the following scenario. Two friends, Rachel and Joey, enjoy baking bread and making apple pies. Rachel takes two hours to bake one loaf of bread and one hour to make one pie. Joey takes four hours to bake one loaf of bread and four hours to make one pie. If Rachel and Joey decide to specialize in order to maximize their combined output, who should produce what?

Question 9 Refer to the accompanying figure to answer the questions that follow. Unemployed resources are evident at:

Question 10 Refer to the following table to answer the questions that follow. Suppose that Alicia Keys and Jay­Z could each make either New York–style pizza or Philly cheesesteaks. Given an eight­hour workday, which of the following would permit them to consume outside their respective production possibilities frontiers (PPFs)?

Question 11 When the opportunity cost of producing a good rises as you produce more of it, you experience:

Question 12 The figures below depict the production possibilities frontiers (PPFs) for two people who can allocate the same amount of time between making pizzas and making stromboli. Refer to these figures to answer the questions that follow. What is Jim’s opportunity cost of making 1 stromboli?

Question 13 Ceteris paribus means:

Question 14 The ability of one producer to create more of a good than another producer using the same quantity of resources is called:

Question 15 Which of the following is a positive statement?

Question 16 Refer to the following table to answer the questions that follow. Given an eight­hour workday, and to experience gains from trade,

Question 17 Consider the production possibilities frontier (PPF) shown in the figure below to answer the questions that follow. Given current resources and technology, the attainable range is best described as:

Question 18 Which of the following is a normative statement?

Question 19 Consider the following scenario to answer the questions that follow: Two friends, Rachel and Joey, enjoy baking bread and making apple pies. Rachel takes two hours to bake 1 loaf of bread and one hour to make 1 pie. Joey takes four hours to bake 1 loaf of bread and four hours to make 1 pie. What is Joey’s opportunity cost of baking 1 pie?

Question 20 Suppose you are studying a production possibilities frontier (PPF) that has a bowed­out shape relative to the origin. What causes this shape?

Question 1 The area inside (within) the production possibilities frontier (PPF) contains:

Question 2 Michael and Angelo are both artists who can create sculptures or paint paintings each day. The following table describes their maximum outputs per day. Does either person have an absolute advantage?

Question 3 The figures below depict the production possibilities frontiers (PPFs) for two people who can allocate the same amount of time between building wooden boats and solving crimes. Refer to these figures to answer the questions that follow. What is Gibbs’s opportunity cost of making a wooden boat?

Question 4 The ability of one producer to create more of a good than another producer using the same quantity of resources is called:

Question 5 The figures below depict the production possibilities frontiers (PPFs) for two people who can allocate the same amount of time between building wooden boats and solving crimes. Refer to these figures to answer the questions that follow. Which statement best describes absolute advantage?

Question 6 You have a comparative advantage in producing a good whenever:

Question 7 Mrs. Abel has a comparative advantage in producing cabbage if, in comparison to Mrs. Bee, Mrs. Abel can grow cabbage:

Question 8 The important act of holding all other variables constant while examining a particular variable is known as:

Question 9 An increase in general resources that affects the production of both goods on a production possibilities frontier (PPF) would cause an:

Question 10 Use these production possibilities frontier (PPF) curves, which compare the ancient production of agricultural products to art and literature, to answer the questions that follow. Suppose the plow is invented and agricultural productivity greatly increases. Which of the following graphs best depicts how this would affect the PPF?

Question 11 Suppose you find a production possibilities frontier (PPF) that is shaped like a straight line. What can you determine about the production of the two goods?

Question 12 A town on the Gulf Coast is battered by a massive hurricane that destroys most of its productive resources. The community’s production possibilities frontier (PPF) would show an:

Question 13 Think of the production possibilities frontier (PPF) model. When society is producing the largest possible output from its resources, it is operating:

Question 14 Which of the following is a positive statement?

Question 15 When the opportunity cost of producing a good rises as you produce more of it, you experience:

Question 16 Which of the following is a normative statement?

Question 17 Refer to the following figure to answer the questions that follow. In the figure, point E is:

Question 18 An economist’s use of experiments and real­world data to test a theory is an example of:

Question 19 Consider the production possibilities frontier (PPF) shown in the figure below to answer the questions that follow. Given current resources and technology, the unattainable range is best described as:

Question 20 Refer to the following figure to answer the questions that follow. Which point in the corresponding figure represents a combination of smoothies and milk shakes that society cannot currently produce?

ECON 213 Quiz 1 Liberty University

Question 1 Microeconomics is the branch of economics that focuses on the:

Question 2 The cost of a trade­off is known as the ________ of that decision.

Question 3 The U.S. federal government offers homeowners a tax deduction for their home loan interest payments. This reduction in taxes may have encouraged too many people to own a home. If the tax deduction caused people who otherwise would have rented to own, the tax deduction serves as a(n):

Question 4 In a growing number of cities, stores are required either not to make available plastic or paper bags or to do so only for an additional fee. If this fee can be refunded when you recycle the bag, the refund acts as a(n):

Question 5 More oranges are grown in Florida than North Dakota because Florida’s warm climate gives it a ________ in growing oranges.

Question 6 Because of scarcity:

Question 7 Economists believe that optimal decisions are made up to the point where:

Question 8 Why would economists find it surprising if the CEO of a large company does his or her own housework?

Question 9 When consumers discard their gasoline­powered automobiles for electric­powered ones, this partially reflects the ________ of gasoline:

Question 10 Opportunity cost is the ________ alternative forfeited when a choice is made.

Question 11 Economists believe that individuals compare the benefits and costs of various options when making a decision and in so doing act ________.

Question 12 The basic goal of economics is:

Question 13 The patent system:

Question 14 Who benefits from voluntary trade?

Question 15 As a new firm in the apple­picking business, you have considered adding an economist to your management team. What would this economist be unable to help your managerial team with?

Question 16 Public buildings in the United States are required to be accessible to the disabled and, as a result, almost all have an elevator. What would be an example of a positive direct incentive for those who can use stairs?

Question 17 A person has a comparative advantage in the production of a good when she or he can produce the product at a(n) ________ opportunity cost compared to another person.

Question 18 In economics, choices are necessary because of the presence of:

Question 19 Macroeconomics is the study of:

Question 20 Many stores are open 24 hours a day. When store managers make the decision to stay open 24 hours, it must be the case that:

Version B Quiz

Question 1 Economics professors are well aware of the importance of incentives. Which of the following situations shows the use of a positive incentive?

Question 2 Some public transit systems use an “honor system” whereby patrons have to show that they have paid their fare only when asked for it by an enforcement officer. With what population would such a system be successful?

Question 3 As a new firm in the apple­picking business, you have considered adding an economist to your management team. What would this economist be unable to help your managerial team with?

Question 4 Indirect incentives create:

Question 5 What is the opportunity cost of taking this exam?

Question 6 When most economists wake up in the morning, their first decision is whether or not to hit the snooze bar on the alarm clock. What statement best represents their thought process as a rational decision­maker?

Question 7 Who benefits from voluntary trade?

Question 8 Opportunity cost is the ________ alternative forfeited when a choice is made.

Question 9 The opportunity cost of a purchase is:

Question 10 Why would economists find it surprising if the CEO of a large company does his or her own housework?

Question 11 The U.S. federal government offers homeowners a tax deduction for their home loan interest payments. This reduction in taxes serves as a(n) ________ to buy a house.

Question 12 Many stores are open 24 hours a day. When store managers make the decision to stay open 24 hours, it must be the case that:

Question 13 What is the strongest argument for why we need more economists today than ever before?

Question 14 An opportunity cost is the:

Question 15 Economics is concerned with the trade­offs that emerge because of scarcity. The term “trade­offs” refers to:

Question 16 The government controls for many indirect incentives in safety net social programs by:

Question 17 Which of the following is a microeconomic question?

Question 18 Microeconomics is the study of:

Question 19 While generous disability insurance can help those who have been permanently injured, it can also increase the likelihood that individuals will falsely claim to be disabled. This likelihood is a(n):

Question 20 When consumers discard their gasoline­powered automobiles for electric­powered ones, this partially reflects the ________ of gasoline:

ECON 213 Problem Set 3 Liberty University

Problem Set 3

Name: ________________________________________

Problem Set 3 is due by 11:59 p.m. (ET) on Monday of Module/Week 6.

1. Data for the market for graham crackers is shown below. Calculate the elasticity of demand between the following prices.

Price of crackers

Quantity Demanded (per month)

$1.00–$1.50: ___________________________________

$1.50–$2.00: ___________________________________

$2.00–$2.50: ___________________________________

$2.50–$3.00: ___________________________________

Now, assume the price of graham crackers is $2.75. Should firms raise or lower their prices if they want to increase revenue? Explain this in terms of elasticity.

2. Assume the competitive market shown below faces a short run price of $10. Using the graph below, identify the following:

Profit-maximizing output: _______________________

In the long run, the price falls to $7.50. Why does this happen?

What is the new profit-maximizing output? _______________________

3. A local hardware store is trying to decide whether to stay open. They have found that their industry is extremely competitive and profits have shrunk considerably. Knowing that you have taken an economics course, the owners have asked for your opinion. Draw 2 completely labeled graphs to help you explain the shutdown decision. One graph must be for the market as a whole, and the other must be for this store in particular. Assume that the store is losing money; however, explain why they may want to stay open for a little while longer. (Note: Your answer should include a written explanation of your graph.)

4. Use the production function below to answer the following questions:

Units of Labor

Total Output

MP

a.) Calculate marginal productivity (MP) and put this in the table.

b.) At what level of employment does diminishing marginal productivity begin?

c.) At what level of employment does marginal productivity become negative?

d.) Why does marginal product become negative?