ECON 2030 Test 1 | Answered with complete solutions

ECON 2030 Test 1 | Answered with complete solutions Use the following for questions 1-2: Suppose Joel decides to go fishing at Lake Veronica, but he faces a choice: he can fish on the north, south, east, or west side of the lake. His expected catch for the day is as follows: 1 fish on the north side, 4 fish on the south side, 7 fish on the east side, 2 fish on the west side. 1. In the situation above, what is Joel's benefit of fishing on the south side of the lake? 2. In the situation above, what is Joel's opportunity cost of fishing on the west side of the lake? 4,7 If a 6 percent ____ in price results in a 9 percent increase in quantity demanded, it can be concluded with certainty that demand is price _______. decrease, elastic Suppose, at a given point in time, a market is in equilibrium. An increase in the number of sellers in the market causes market supply to _____, resulting in a _____ that will be eliminated as the market price of the good ____, everything else held constant. A. Decrease; surplus; decreases B. Decreases; shortage; increases C. Increase; surplus; increases D. Increase; surplus; decreases E. Increase; shortage; decreases Suppose both buyers and sellers expect the world price of oil to increase next week. Everything else held constant, the demand for oil will _____ and the equilibrium price of oil will ______ TODAY. A. Decrease; increase B. Increase; decrease C. Decrease; decrease D. Increase; increase "On Friday, February 2, the latest monthly snapshot of the American labor market revealed that wages had climbed 2.9% in January compared with a year earlier. The tight job market was forcing employers to pay more." This is an example of a news item about a _____ issue. A. Macroeconomic B. Microeconomic Suppose ramen is an inferior good. ______ in national income will cause _______ in the demand for ramen and an increase in its equilibrium price, everything else held constant. A. A decrease; a decrease B. An increase; a decrease C. An increase; an increase D. A decrease; an increase Suppose Agnes is a rational decision maker with a reservation price of $400 for a good. Suppose further that the actual price of the good is $500 and a transaction took place. It can be concluded with certainty that Agnes was the _____ of the good. A. Seller B. Buyer Suppose that goods x and y are substitutes in consumption. Suppose further that the supply of good x decreases. Everything else held constant, this will cause the ______ good y to _____. A. Supply of; decrease B. Supply of; increase C. Demand for; increase D. Demand for; decrease Suppose rational decision-maker Gus has received a voucher for a free concert ticket that he can use to see either Zoe or Helen. Suppose further that his reservation price for seeing Zoe is $17 and his reservation price for seeing Helen is $12. Everything else held constant, which concert will Gus choose to attend? A. Since the ticket is free, seeing either concert would be rational B. Definitely see Helen C. Definitely see Zoe In a small, college town one February, suppose the equilibrium price of an espresso romano increased and the equilibrium quantity of espresso romanos transacted decreased. Which of the following alone can explain the change in the espresso romano market? A. The supply of espresso romanos increased B. The demand for espresso romanos decreased C. The demand for espresso romanos increased D. The supply of espresso romanos decreased Use the following to answer questions 14-15: Suppose Hungary has the comparative advantage in producing paprika, Bulgaria has the comparative advantage in producing rose oil, and the countries engage in mutually beneficial trade. 14. In the situation above, paprika consumer in Hungary will pay a _____ price for paprika when the countries trade than when they are operating in autarky. A. Lower B. higher 15. In the situation above, ______ workers in Bulgaria will be employed in rose oil possessing planets when the countries trade than when they were operating in autarky. A. Fewer B. more On a production possibilities frontier (PPF) graph, a specific combination of goods is said to be attainable at a particular point in time if it lies ______ the PPF. A. Inside B. On C. Outside D. On or outside E. On our inside "Europe is home to some extraordinary wealth creators who often try to hide their success... Then there is the reclusive Reimann family of Germany, members of which reportedly take a vow at the age of 18 not to talk publicly about their business, JAB Holding, a Luxembourg-based investment group. Yet JAB's habit of gulping down big, famous firms at a frenetic pace is making it hard for it to stay in the shadows. On January 29th it said it will bay $18.7b in cash (plus some shares) to buy Dr. Pepper Snapple, the world's fifth-biggest maker of soft drinks, which has roots dating back to 1885. It will be combined with Keurig Green Mountain, an American coffee producer that JAB bought in 2016 for $14b." This quote is an example of a news item about a _____ issue. A. Macroeconomic B. microeconomic Suppose ______ in the furniture industry decreases. Everything else held constant, this will cause the equilibrium price of furniture to ____ and the equilibrium quantity of furniture transacted to increase. A. Worker productivity; increase B. The cost of labor; decrease C. Worker productivity; decrease D. The cost of labor; increase "In France, it seems, 70% off Nutella spread can also do the trick. When a supermarket chain slashed the price of 33oz. Jars of the spread on Thursday, scenes grew so heated in one store in Ostricourt, in the north of France, that the police had to be called. Videos on social media showed shoppers stamping on each other and shouting as they tried to snag the jars at the discounted price of 1.41 euros, or about $1.75." This question depicts an extreme example of... A. An increase in demand B. A decrease in demand C. A decrease in quantity demanded D. An increase in quantity demanded Suppose Violet spends $60 every month on roses, no matter what the price of roses is in a particular month. From this it can be concluded with certainty that Violet's price elasticity of demand for roses is: a) Unit elastic b) Perfectly inelastic c) Perfectly elastic Suppose Barbara, a rational mixed media artist, received an offer of $600 for her latest work, Chalmette Cemetery, and she sold it. We know with certainty that Barbara's reservation price for her piece was ____ $500. a) Less than b) Less than or equal to c) Greater than or equal to d) Equal to e) Greater than An increase in the number of consumers in the lettuce market will cause the ____ to _____, everything else constant. a) Supply of lettuce; increase b) Quantity of lettuce supplied; decrease c) Supply of lettuce; decrease d) Quantity of lettuce supplied; increase In which of the following situations MUST the demand for soap be inelastic? a) Total revenue increases when the price of soap decreases b) An 8 percent decrease in the price of soap leads to a 6 percent increase in the quantity of soap demanded c) The price of soap increases by 25 cents per bar and the quantity of soap demanded decreases by 50 bars. d) The price of soap decreases by 50 cents per bar and the quantity of soap demanded increases by 25 bars. Suppose that Sabine produces rings and discovers that the price elasticity for her rings is equal to 1.4. In order to increase her total revenue, Sabine should produce ____ rings and charge a _____ price for them, everything else held constant. a) Fewer; lower b) Fewer; higher c) More; lower d) More; higher Suppose Ivan decides to go fishing at Lake Saint John on his day off from work, but he faces a choice: he can fish the west, south or north side of the lake. His expected catch for the day is as follows: 5 fish on the west side, 7 fish on the south side, or 9 fish on the north side. Everything else held constant, Ivan's benefit of fishing the south side of the lake is ____ fish. a) -7 b) -2 c) 2 d) 7 e) 9 On a production possibilities frontier (PPF) graph, a specific combination of goods being produced at a particular point in time is said to be inefficient if it lies _____ the PPF. a) Outside b) On or outside c) Inside d) On e) On or outside Suppose rational decision-maker Vitrice faces a choice: she can buy a ticket to see either Allison Weiss or Bess Rogers in concert. The price of a ticket to see Allison is $10 and the price of a ticket to see Bess is $20. Suppose further that Vitrice's reservation price for seeing Allison is $15 and her reservation price for seeing Bess is $25. Everything else held constant, which concert will Vitrice choose to attend? a) She will see either one as she is indifferent between the two choices. b) She will definitely see Allison Weiss. c) She will definitely see Bess Rogers. d) She will not go to either concert as she is rational. Suppose, as hard as it may be, that parsnips and leeks are complements in consumption. Everything else held constant, an increase in the demand for parsnips will cause ____ in the equilibrium price of leeks. a) A decrease b) No change c) An increase Suppose brussel sprouts are ____ good. A decrease in national income will cause ____ in the demand for brussel sprouts and an increase in its equilibrium price, everything else held constant. a) An inferior; a decrease b) An inferior; an increase c) A normal; an increase d) A normal; a decrease "Workers at South Africa's Marikana platinum mine have rejected a pay offer from the management, dashing hopes for an end to their weeks-long strike" is an example of ____ statement about a _____ issue. a) Normative; macroeconomic b) Positive; macroeconomic c) Normative; microeconomic d) Positive; microeconomic Suppose that worker productivity is ____ in the collard green industry. Everything else held constant, the equilibrium price of collard greens will _____ and the equilibrium quantity transacted will increase. a) Increasing; increase b) Decreasing; decrease c) Increasing; decrease d) Decreasing; increase Suppose Ireland has the comparative advantage in producing potatoes, England has the comparative advantage in producing mutton, and the countries engage in mutually beneficial trade. Moving from autarky to trade will make potato consumers in Ireland ____ and mutton producers in England, everything else held constant. a) Worse off; better off b) Worse off; worse off c) Better off; better off d) Better off; worse off The more a good is perceived as a _____, everything else held constant, the more price of inelastic demand will be for it. The ____ the portion of a consumer's budget a good makes up, everything else held constant, the most price elastic demand will be for it. a) Luxury; larger b) Luxury; smaller c) Necessity; larger d) Necessity; smaller Suppose that cauliflower and broccoli are substitutes in production. Suppose further that the supply of cauliflower decreases. Everything else held constant, the equilibrium price of broccoli will _____ and the equilibrium quantity of broccoli transacted will _____. a) Increase; increase b) Decrease; increase c) Decrease; decrease d) Increase; decrease Suppose a binding price ceiling is imposed on a market that was in equilibrium when the ceiling was imposed. Everything else held constant, the ceiling will _____ the quantity demanded of the good and ____ the market price of the good. a) Increase; increase b) Decrease; increase c) Increase; decrease d) Not change; increase e) Decrease; decrease Suppose that bananas and apples are substitutes in consumption. Suppose further that the price of bananas increases while, at the same time, workers in the apple industry receive wage increases. In the above scenario, the equilibrium price of apples will _____ and the equilibrium quantity of apples transacted will ____, everything else held constant. a) Increase; decrease b) Be ambiguous; decrease c) Increase; be ambiguous d) Be ambiguous; increase e) Decrease; be ambiguous In the above scenario, the supply of apples will ______, everything else held constant a) Decrease b) Increase c) Be ambiguous d) Remain unchanged Suppose a binding price floor is imposed on the market for horseradish. At the floor price, everything else held constant, the quantity of horseradish transacted is____ the