EXAMINED ECONOMIC 1002 FINAL EXAM

EXAMINED ECONOMIC 1002 FINAL EXAM The law of demand states that: - CORRECT ANSWER -The lower the price, the greater the quantity demanded. Which of the following is TRUE about demand curves? A. Demand curves are negatively sloped. B. Demand curves reflect the law of demand. C.Demand curves are plots of quantities demanded at various prices. - CORRECT ANSWER -All of the answers are correct. (Figure: Willingness to Pay) Refer to the figure. What is the maximum amount that buyers are willing to buy at a price of $45 per book? - CORRECT ANSWER -100 books If Maria is willing to pay $50 for a sweatshirt, how much consumer surplus does she earn if the market price for sweatshirts is $27.50 each? - CORRECT ANSWER -$22.50 Mario buys eight units of good X when his income is $2,000 a month. When his income increases to $2,700 per month, he buys only six units of good X. For Mario, good X is: - CORRECT ANSWER -An inferior good. The quantity supplied of oil is the amount that: - CORRECT ANSWER -producers plan to sell during a given time period at a given price. Weather forecasters predict that a major winter storm will strike your town within the next few days. Which of the following would NOT occur based upon the expected storm? - CORRECT ANSWER -a decrease in the supply of winter clothing The movie trilogy The Lord of the Rings was hugely successful, and, as a result, the demand for fantasy novels, action figures, and online role-playing games surged. The increase in demand can be explained by a(n): - CORRECT ANSWER -change in tastes A change in quantity supplied is reflected by a movement along the same supply curve while a change in supply refers to a shift in the entire supply curve. - CORRECT ANSWER -True Producer surplus can be defined as the revenue producers make from selling goods in a market. - CORRECT ANSWER -False Suppose it is widely believed that the price of flat-screen, high-definition televisions will be lower next year. What will happen as a result of such beliefs? - CORRECT ANSWER -The demand for flat-screen TVs will decrease now. Which of the following statements is TRUE? I. Consumer surplus is the difference between the maximum price a consumer is willing to pay for a good or service and its market price. II. Mr. Bill is willing to pay $10 for two pounds of clay. If the market price per pound of clay is $2.50, his consumer surplus is $7.50. III. Total consumer surplus is represented graphically by the area beneath the demand curve and above the market price. - CORRECT ANSWER -I and III only The quantity of cell phones that firms plan to sell this month depends on all of the following EXCEPT the: - CORRECT ANSWER -All of these choices affect market conditions. Assume that spaghetti is an inferior good for most people. As their incomes increase, all other things held constant, the: - CORRECT ANSWER -demand for spaghetti will decrease shifting the demand curve to the left Recall the discussion in your textbook about the supply curve for oil. What explains why the supply curve for oil is positively sloped? - CORRECT ANSWER -As the price of oil rises, more producers enter the market Suppose that consumers begin to believe that the price of housing will be lower next period. What will happen in the market for housing as a result of these expectations? - CORRECT ANSWER -Demand for housing will begin to fall, and the price of housing will decrease New research indicates that running marathons is actually bad for the heart (it increases inflammatory markers associated with heart attacks). This news will: - CORRECT ANSWER -lead to a decrease in the demand for running shoes. Recall the discussion about the demand for oil in your textbook. Which of the following correctly explains why the demand curve for oil is negatively sloped? As the price of oil rises: - CORRECT ANSWER -consumers increasingly use oil only for those purposes without good substitutes. Table: Excel Company) The table shows the results of Excel Company's market survey. If the market price of Excel computers is $1,200 each, how much total consumer surplus (in $) are the four consumers earning? - CORRECT ANSWER -$380 Which of the following are factors that shift the demand curve? - CORRECT ANSWER -price of substitutes, tastes, price of complements If producers form expectations that copper prices will be higher in the future, then this will shift the: - CORRECT ANSWER -supply curve of copper to the left. Which of the following could cause an increase in the demand for gasoline? - CORRECT ANSWER -an approaching hurricane that threatens a major oil refinery in Texas Suppose that Country X is a high-cost producer of oil and Country Y is a low-cost producer of oil. The citizens of Country X use both oil produced in their own country as well as oil produced in Country Y. If the market price of oil decreases, oil production in Country X will _______, and the citizens of Country X will _________________. - CORRECT ANSWER -decrease; purchase a larger fraction of their oil from Country Y (Figure: Producer Surplus) Refer to the figure. What is the change in producer surplus if the price rises from $2 to $3 per unit? - CORRECT ANSWER -$15 (Table: Barrels of Oil) Refer to the table. What is the total amount of producer surplus (per barrel of oil) earned by all four producers if the market price per barrel of oil is $51? - CORRECT ANSWER -$87.75 Potato chips and popcorn are substitutes. A subsidy for potato chips will ______the demand for popcorn and the quantity of popcorn sold will ______. - CORRECT ANSWER -decrease; decrease (Figure A: Supply Right Shift) (Figure B: Supply Left Shift) Refer to the two figures. Which of the following statements is TRUE? - CORRECT ANSWER -I and II only Which of the following choices correctly illustrates how changes in opportunity costs affect supply? - CORRECT ANSWER -A farmer produces corn and wheat. The price of wheat rises; so he shifts his resources towards wheat and the supply of wheat rises. An increase in the use of labor-saving technologies will shift the supply curve to the right. - CORRECT ANSWER -True A change in quantity supplied is reflected by a movement along the same supply curve while a change in supply refers to a shift in the entire supply curve. - CORRECT ANSWER -True (Figure: Market Equilibrium) Refer to the figure. At a price of $3, quantity supplied is ______ and quantity demanded is ______, leading to a _______. - CORRECT ANSWER -6; 2; surplus of 4 units