ECON EXAM 1 with 100% correct answers 2024.

You are looking at the market (supply and demand) for hot dog buns. You see in the paper that the price of hot dogs has increased significantly. As a result, in the market for hot dog buns we would expect to see... - answer-Demand shift left, producing a lower equilibrium price, and higher equilibrium quantity Consider these three headlines... I. Microsoft Lowers the Price of Windows 10 II. U.S. Economy Enters Recession III. Mergers in the Banking Industry Limit Choices for Customers Macroeconomics v. Microeconomics - answer- Consider these two statements... I. The current unemployment rate is 4.3 % II. The current unemployment rate would be lower if we did not pay unemployment benefits Normative v. Positive - answer-Both are positive statements You are looking at a country's production possibilities frontier (PPF). The PPF is a straight-line (as opposed to a curve. If the PPF shifts outward what does the outward shift represent? (assume the slope of the PPF does not change as it shifts). - answer-Economic Growth Which of the following is correct? a) change in tech could either shift the demand or the supply curve b) change in income could shift either the demand curve or the supply curve c) a change in the price of inputs could shift either the demand curve or the supply curve d) a change in expectations could shift either the demand cure or the supply curve - answer-d) a change in expectations could shift either the demand cure or the supply curve SEE GRAPH UNDER EXAM 1 Which of the following would cause a movement from point J to point K? - answer-This is a normal good and buyer's incomes increased (demand shift right) SEE GRAPH UNDER EXAM 1 Which of the following could cause a movement from point K to point J? - answer-This is the demand for gasoline and buyers expect the price of gasoline to decrease in the near future (demand shift left) Which of the following could cause a movement from point point H to point J? - answer-The price of the good decreased (price change) Imagine a normal, upward sloping supply curve passing through point J. Which of the following would cause the supply curve to shift in such a way that we'd end up at pint H? - answer-The number of sellers of this product decreased This graph essential depicts the Law of Demand. Write down the Law of Demand. - answer-IF the price of a good or service increases, the demand will decrease. If the price of a good or service decreases, the demand will increase. Assume that the government places a price ceiling of 0.90 per pound on butter. As a result of this price ceiling we see a _________ of ________ pounds in this market. - answer-Storage, 3.0 Million Following directly from the question above, which of the following was NOT listed as an example of how price ceilings (like the one above) cause inefficiency? a) increased opportunity cost b) wasted resources c) inefficient low quantity d) black markets - answer-Increased Opportunity Cost Now, instead of a price ceiling, assume the government imposes a price floor of $1.20 per pound on butter. As a result of this price floor we will see a ________ of _______ pounds in the market. - answer-Surplus; 1.5 Million Country A can, using all its resources and using them efficiently, produce 100 tons of wheat or 200 tons of corn. (Imagine these as the two -end points of Country A's production possibilities frontier). Country B can, using all its resources and using them efficiently, produce 100 tons of wheat or 100 tons of corn. (Again, imagine these as the two end-pints of Country B's production possibilities frontier.) Which of the following is correct? a) Country A has a comparative advantage in producing wheat B) Country B has a comparative advantage in producing wheat C) Country A has a comparative advantage in producing BOTH wheat and corn d) none of the above - answer-Country B has a comparative advantage in producing wheat In your textbook, your author listed 4 different ways that a price floor causes inefficiency. List 2 of the four below... - answer-Illegal Markets and Inefficient Low Quantity SEE GRAPH Which of the following would cause a movement from point X to point W? a) the price of input to this good decreased b) the price of this good increased c) the technology used to produced this good improved d) none of the above - answer-none of the above: (supply decrease) FIND A POTENTIAL ANSWER Which of the following could cause a movement from point X to point Y? - answer-this is the supply of corn flakes and the price of corn flakes decreased (price change) Which of the following would NOT cause a movement from point Z to point Y? - answer-this is the supply of but jeans and the price of cotton (an input to blue jeans) decreased (supply decrease) Imagine a normal, downward-sloping demand curve passing through point X. Which of the following would cause the demand curve to shift in such a way that we'd end up at point Y? - answer-the number of buyers (consumers) of this product decreased (demand decrease) This graph depicts the supply of bread; bakers of bread can also make cakes. Assume bakers are supplying ONLY bread and the price of cakes increases. Which would we see on this graph? - answer-NEED ANSWER You are looking at the market (supply and demand) for potato chips. You see in the paper that the price of potatoes (obviously an input to potato chips) has decreased. As a result, in the market for potato chips we would expect to see a) supply shift left, producing a higher equilibrium price and lower equilibrium quantity b) demand shift left, producing a higher equilibrium price and higher equilibrium quantity c) supply shift right, producing a higher equilibrium price and lower equilibrium quantity d) none of the above - answer-none of the above FIND A POTENTIAL ANSWER You re looking at the market (supply and demand) for potato chips You see in the paper that the price of corn chips (a demand substitute for potato chips) has decreased significantly. As a result, int he market for potato chips we would expect to see... - answer-Demand shift left, producing a lower equilibrium price, and lower equilibrium quantity In the definition of economics that we discussed in class, and is in your lecture, we said that people have to make choices because something is limited (or scarce). What is that something? - answer-Resources You are looking at the market (supply and demand) for blue jeans. You see in the paper 2 things: All the factories making blue jeans introduce new improved technology AND overall incomes have increased and blue jeans are a normal good. In the market for but jeans we would see (after any/all curves have shifted)... - answer-Higher equilibrium quantity and we cannot say anything about equilibrium price You are looking at the market (supply and demand) for blue jeans. Assume both the buyers AND the sellers of blue jeans expect prices to fall in the near future. Knowing what we discussed in class, this will make demand _________ today and supply today________ today. - answer-Shift left; shift right Use the concept of "opportunity cost". Convenience stores, which have higher prices than super market, cater to busy people cause the opportunity cost of time is _______. - answer-Higher for busy people What is the complete definition, ether from the book or from the video or slides you saw in class, of "gains from trade"? - answer-What you gained from a trade minus what you gave up in the trade. Consider these 4 statements: I. The unemployment rate is lower today than it was in 2015. II. The unemployment rate is currently 4.3% III. We should stop paying unemployment insurance so the unemployment rate will be even lower. IV. A lower unemployment rate is associated with higher levels of output. Normative vs. Positive - answer-Only statement III. Is a normative statement. SEE TABLE Assume the government imposes a price ceiling of $11 in this market. What will we see as a result of this ceiling? - answer-The equilibrium quantity Consider these two statements: I. In the circular flow-diagram, goods and services are demanded by households II. In the circular flow diagram, factors of production are demanded by firms and businesses. What is most accurate? - answer-Both are correct. Consider these two situations happening independently. (Not at the same time) I. Prices of blueberries increases II. The price of corn muffins, a demand substitute for blueberry muffin, increases. Assume you are looking at the market for blueberry muffins. Which is the most accurate? - answer-Both I and II will produce a higher equilibrium price in the market for blueberry muffins (after any/all curves have shifted) IN lecture, when discussing ch. 4 in Krugman, we discussed minimum wage as an example of a type of ... - answer-Price floor A country has a "comparative advantage" in producing a good if.... - answer-If the opportunity cost of producing that good is lower than other countries' opportunity costs SEE TABLE and questions in exam 1 for #34-36 34) What is the equilibrium price in this market? 35) IF a price ceiling of $5.50 is imposed in this market, tell me: Will we see a surplus or a shortage AND how many units will the surplus or shortage be? (If you think we will see a equilibrium quantity, just tell me that.) 36) If a price floor of $7.50 is imposed in this market, tell me: Will we see a surplus or a shortage AND how many units will the surplus or shortage be? (If you think we will see the equilibrium quantity, just tell me that.) - answer-34) $6.00 35) Shortage of 10 units 36) Surplus of 30 units 37) Richard is having a dinner at a "pizza-by-the slice" restaurant. Each slice of pizza costs $3.00. According to economic reasoning, which of the following is correct? a) Richard should stop eating if the benefit of an additional slice is greater than $3 b) Richard should continue eating if the benefit of an additional slice is less than $3 c) Richard should only continue eating if the benefit of an additional slice is exactly $3. d) none - answer-NEED ANSWER - I think it is C it is not A 38) As discussed in class, a production possibilities frontier is actually a representation of which economic concepts? a) opportunity cost b) equilibrium c) trade offs - answer-Opportunity costs and trade offs NOT equilibrium 39) Which of the following will NOT cause the demand curve to shift left in each of the following markets? a) buyers income decreases b)the price increases c) expectation of the price to decrease in near future d) looking at market for sbux lattes and dunn brothers latte price decreases - answer-b) the price increases