LSU ECON 2030 Final Exam | Questions with complete solutions

LSU ECON 2030 Final Exam | Questions with complete solutions Suppose that mac and cheese is an inferior good and national income is decreasing, Everything else held constant, the equilibrium price of mac and cheese will _____ and the equilibrium quantity transacted will _____. a) Decrease; decrease b) Decrease; increase c) Increase; ambiguous d) Increase; decrease e) Increase; increase Suppose the price of pumpkin increase. Everything else held constant, this will cause _____ in the demand for pumpkins. a) A decrease b) An increase c) No change Change in price is movement along the curve, so quantity demanded goes down but demand stays the same. Suppose a customer offered Tony, a rational painter, $500 for his painting 'Banana Head' and he sold it. It can be concluded with certainty that Tony's reservation price for his painting was _____ $500. a) Less than b) Greater than c) Equal to d) Greater than or equal to e) Less than or equal to Suppose that worker productivity _____ in the bubble bath industry. Everything else held constant, the equilibrium price of bubble bath liquid will _____ and the equilibrium quantity transacted will decrease. a) increases; increase b) Increases; decrease c) Decreases; increase d) Decreases; decrease Which of the following concepts is depicted by the numerical slope of the production possibilities frontier (PPF) at a particular point on the PPF? a) The opportunity cost of the good measured on the horizontal axis. b) The degree of attainability of the combination of goods. c) The rate of economic growth in the country. d) The degree of efficiency of the combination of goods. Canada: 25 coal/hr, 100 potatoes/hr Wales: 20 coal/hr, 60 potatoes/hr In the situation above, the move from trade to autarky will benefit coal consumers in which country? a) Neither Canada nor Wales. b) Both Canada and Wales c) Only Canada. d) Only Wales. Canada: 25 coal/hr, 100 potatoes/hr Wales: 20 coal/hr, 60 potatoes/hr In the situation above, the move from trade to autarky will cause employment of Canadian farmers to a) Remain unchanged. b) Increase c) Decrease Suppose a store sells pairs of shoes for $30 each and is running a "buy one, and get one %50 off" sale. Suppose further that you buy four pairs of shoes. The marginal cost of the third pair of shoes purchased is a) $15 b) $30 c) $45 d) $75 e) $90 The price of goods that are substitutes in consumption move a) Opposite of one another b) Together Suppose that apples are the main input in the production of apple cider. Suppose further that the wage paid to apple harvesters decreases. In the situation above, the equilibrium price of apple cider will _____ and the equilibrium quantity of apple cider transacted will _____, everything else held constant. a) Decrease; increase b) Decrease; decrease c) Increase; increase d) Increase; decrease Suppose that apples are the main input in the production of apple cider. Suppose further that the wage paid to apple harvesters decreases. In the situation above, the wage change will cause the _____ apples to _____. a) Demand for; decrease b) Supply of; increase c) Demand for; increase d) Supply of; decrease Mark: 16 cookies/hr, 4 brownies/hr Howie: 14 cookies/hr, 2 brownies/hr In the situation above, ____ has the absolute advantage in baking cookies and _____ has the comparative advantage in baking brownies. a) Howie; Mark b) Mark; Howie c) Howie; Howie d) Mark; Mark Mark: 16 cookies/hr, 4 brownies/hr Howie: 14 cookies/hr, 2 brownies/hr In the situation above, Howie's opportunity cost of baking one cookie is _____ brownies. a) 1/7 b) 7/8 c) 8/7 d) 2 e) 7 Mark: 16 cookies/hr, 4 brownies/hr Howie: 14 cookies/hr, 2 brownies/hr In the situation above, can mutually beneficial trade occur? a) No, because Mark is more productive than Howie at both activities. b) Yes, if Mark specializes in baking brownies and Howie specializes in baking cookies. c) No, because Howie is more productive than Mark at both activities. d) Yes, if Mark specializes in baking cookies and Howie specializes in baking brownies. Answer true or false to the following statement. An extraordinary talented person could have the comparative advantage in everything she does. a) True b) False "Most economists believe that federal government budget deficits are helpful when economies are in recession, but some say that when they are near full employment, as the United States is now, deficits should be kept below 3% of the economy to avoid a drag on investment-or worse, a financial crisis." The preceding is an example of a statement about a _____ issue. a) Microeconomic b) Macroeconomic Suppose rational decision-maker Christine has decided to go to a concert, but she faces a choice: she can see either Zoe Boekbinder or Beth Patterson. Suppose further that tickets to see Zoe are $15 each while tickets to see Beth are $10 each, and she has not yet obtained a ticket to see either performer. In the situation above, what is Christine's sunk cost in making her decision? a) $0 b) $5 c) $10 d) $15 e) $25 Suppose rational decision-maker Christine has decided to go to a concert, but she faces a choice: she can see either Zoe Boekbinder or Beth Patterson. Suppose further that tickets to see Zoe are $15 each while tickets to see Beth are $10 each, and she has not yet obtained a ticket to see either performer. In the situation above, what is Christine's benefit from seeing Zoe perform? a) The expected pleasure of seeing Zoe minus $15. b) The expected pleasure of seeing Zoe minus $5. c) The expected pleasure of seeing Zoe plus $10. d) The expected pleasure of seeing Zoe. e) $10. Suppose cheese and eggs are complements in consumption. An increase in the supply of cheese, everything else held constant, will cause the demand for eggs to _____ and the equilibrium quantity of eggs transacted to _____. a) decrease; increase b) Increase; increase c) Increase; decrease d) Decrease; decrease Suppose your friend Martha has a host stock tip: she tells you that the price of Google stock will be $10 higher tomorrow than it is right now. If you believe her, then what is the most profitable action to take TODAY? a) Wait and take no action today. b) See Google stock immediately. c) Buy Google stock immediately. "The average cost of a 30-second ad for the Super Bowl crept up to $5 million this year, according to ad buyers, from an estimated $4.8 million last year." The preceding is an example of a statement about a _____ issue. a) Microeconomic b) Macroeconomic Suppose Nathalie, a rational French major and tutor, is considering going to the movies tonight to see My Father's Glory, tickets to which cost $8 each. To do this, she would have to cancel her weekly French tutoring session for which she would have been paid $35. If Nathalie has not purchased her movie ticket yet and she estimates the pleasure from seeing the film is $45, then what will she decide to do tonight? a) Definitely go to the movie. b) Definitely hold her tutoring session. c) Do neither, as both options would be rational. Beth: $25 Robin: $20 Carla chooses Robin. Carla's sunk cost was a) $0 b) $5 c) $20 d) $25 e) $45 Beth: $25 Robin: $20 Carla chooses Robin. Can it be concluded with certainty that Carla's expected pleasure of seeing Robin was greater than or equal to her expected pleasure from seeing Beth? a) Yes b) No Beth: $25 Robin: $20 Carla chooses Robin. What was Carla's benefit from seeing Beth? a) The expected pleasure of seeing Beth perform plus $20 b) The expected pleasure of seeing Beth perform minus $5 c) The expected pleasure of seeing Beth perform plus $5 d) The expected pleasure of seeing Beth perform minus $25 e) The expected pleasure of seeing Beth perform Suppose both buyers and sellers expect the price of gold to decrease next week. Everything else constant, the equilibrium price of gold will ___ today. a) increase b) decrease c) remain unchanged News about the Euro Zone is a) macroeconomic b) microeconomic On a production possibilities frontier (PPF) graph, a specific combination of goods is said to be inefficient at a particular point in time if it likes ___ the PPF a) on or outside b) outside c) on d) inside e) on or inside Suppose pens and pencils are substitutes in consumption. Suppose further that demand for pens increases. In the situation above, the ___ pencils will ___ everything else constant. a) supply of; decrease b) demand for; decrease c) supply of; increase d) demand for; increase Suppose pens and pencils are substitutes in consumption. Suppose further that demand for pens increases. In the situation above, the equilibrium quantity of pencils transacted will ___, everything else constant a) remain unchanged b) increase c) decrease Suppose pens and pencils are substitutes in consumption. Suppose further that demand for pens increases. In the situation above, the equilibrium price of pens transacted will ___, everything else constant a) decrease b) remain unchanged c) increase Suppose books are a normal good. A decrease in national income will cause the ___ to ___ everything else constant a) quantity of books supplied; increase b) supply of books; decrease c) supply of books; increase d) quantity of books supplied; decrease Bertha sold a painting for $300. It is certain that Bertha's reservation price for the painting was ___ $300. a) greater than or equal to b) equal to c) less than d) less than or equal to e) greater than Market is in equilibrium. Decrease in the number of consumers in the market causes the market demand to ___ resulting in a ___ that will be eliminated as the market price of the good ___ everything else constant. a) increase; shortage; decreases b) decrease; surplus; decreases c) increase; surplus; decrases d) increase; shortage; increases e) decrease; surplus; increases Suppose worker productivity in the steel industry ___. Everything else held constant, this will cause the equilibrium price of steel to ___ and the equilibrium quantity transacted to increase a) increase; increase b) decreases; decrease c) decreases; increase d) increases; decrease News about Samsung is a) macroeconomic b) microeconomic Suppose labor costs in the jewelry industry ___. Everything else constant, this will cause the ___ jewelry to increase. a) increase; demand for b) decrease; demand for c) decrease; supply of d) increase; supply of Following sale on 12-packs of Pepsi: $5 each or three for $12 Anna's reservation price is $5.50 for the first 12-pack, $3.50 for the second, and $2.50 for the third. How many 12-packs will Anna buy? a) 0 b) 1 c) 2 d) 3 Following sale on 12-packs of Pepsi: $5 each or three for $12 Anna's reservation price is $5.50 for the first 12-pack, $3.50 for the second, and $2.50 for the third. What is the marginal cost of the third 12-pack? a) $0.50 b) $1.00 c) $2.00 d) $3.00 e) $4.00 Amber: 3 Croissants/hr, 21 Oranges/hr Jade: 9 Croissants/hr, 27 Oranges/hr In the situation above, 1/3 ___ is ___ opportunity cost of producing one ___. a) oranges; Jade's; croissant b) oranges; Amber's; croissant c) croissants; Amber's; croissant d) croissants; Jade's; croissant e) croissant; Jade's; orange Amber: 3 Croissants/hr, 21 Oranges/hr Jade: 9 Croissants/hr, 27 Oranges/hr In the situation above, ___ has the absolute advantage in picking oranges and ___ has the comparative advantage in making croissants. a) Amber; Amber b) Amber; Jade c) Jade; Jade d) Jade; Amber Amber: 3 Croissants/hr, 21 Oranges/hr Jade: 9 Croissants/hr, 27 Oranges/hr In the situation above, can mutually beneficial trade occur? a) No, because Jade is more productive at both activities b) Yes, if Amber specializes in oranges and trades Jade for her croissants c) Yes, if Amber specializes in croissants and trades Jade for her orangers d) No, because Amber is more productive than Jade at both activities England: 72 Wine/hr, 8 Cloth/hr Portugal: 49 Wine/hr, 7 Cloth/hr In the situation above, suppose the two countries move from autarky to mutually beneficial trade. Everything else constant, this will cause the number of workers in the English wine industry to a) increase b) decrease c) remain unchanged England: 72 Wine/hr, 8 Cloth/hr Portugal: 49 Wine/hr, 7 Cloth/hr This depicts England and Portugal's ___ each good a) production of b) efficiency at c) opportunity cost of d) productivity at Suppose a decrease in the price of good X causes the demand for good Y to increase, everything else held constant. Therefore, the goods are _____ and the cross-price elasticity of them is _____. a) Complements; positive b) Complements; negative c) Substitutes; positive d) Substitutes; negative In the case of a good that generates negative externalities in its production, the marginal _____ cost is less than the marginal _____ cost. a) social; private b) Private; social Suppose Rob, a rational decision maker, faces a choice: he can buy a ticket to see Beth Patterson in concert, he can buy a ticket to see Zoe Boekbinder in concert, or he could do neither. The price of a ticket to see Beth is $15 and the price of a ticket to see Zoe is $25. Suppose further that Rob's reservation price for seeing Beth is $5 and his reservation price for seeing Zoe is $20. In the situation above, which concert will Rob choose to attend? a) He will definitely see Zoe Boekbinder. b) He will definitely see Beth Patterson. c) He will see either one, as he is indifferent between the two choices. d) He will not go to either concert, as he is rational. Suppose Rob, a rational decision maker, faces a choice: he can buy a ticket to see Beth Patterson in concert, he can buy a ticket to see Zoe Boekbinder in concert, or he could do neither. The price of a ticket to see Beth is $15 and the price of a ticket to see Zoe is $25. Suppose further that Rob's reservation price for seeing Beth is $5 and his reservation price for seeing Zoe is $20. In the situation above, what would Rob's consumer surplus be if he were to see Beth? a) -$15 b) -$10 c) $5 d) $10 e) $15 Suppose Jeff the Gourmet's price elasticity of demand for restaurant meals is 2. If the price of restaurant meals increased by 8%, everything else constant, then the quantity of restaurant meals Jeff demanded must have _____ by _____. a) decreased; 4 b) decreased; 6 c) increased; 16 d) decreased; 16 e) increased; 4 _____ will bear none of an excise tax if _____ is perfectly _____. a) Sellers; supply; inelastic b) buyers; demand; elastic c) Sellers; demand; elastic d) buyers; supply; elastic Suppose a hotel is offering a 25% discount on room rates to senior citizens. For this pricing scheme to benefit the hotel, the demand of seniors must be relatively more price ____ than the demand of younger guests, everything else held constant. a) elastic b) inelastic For a common resource, the marginal social cost of the resource is greater than the marginal private cost. In the absence of regulation, too ____ of the common resource will be ____ than is social optimal. a) much; consumed b) Much; produced c) Little; produced d) Little consumed The _____ the period of time that a buyer has to make a purchasing decision, everything else held constant, the more price elastic demand will be for the good. a) Longer b) Shorter Suppose Wanda purchases two wigs each and every month, no matter what the price of wigs is in a particular month. From this is can be concluded with certainty that Wanda's price elasticity of demand for wigs is a) Perfectly elastic b) Unit elastic c) Perfectly inelastic In the case of a good that generates positive externalities in its consumption, the equilibrium quantity transacted in the market is ____ the socially optimal quantity. a) Less than b) Greater than c) Equal to If a 5% _____ in price results in a _____ percent decrease in quantity demanded, it can be concluded with certainty that demand is unit elastic. a) Increase; 1 b) Decrease; 1 c) Decrease; 10 d) Increase; 10 e) Increase; 5 Suppose tea and coffee are substitutes in consumption. Suppose further that the price of tea decreases. In the situation above, producer surplus in the coffee market will _____, everything else held constant. a) Increase b) Decrease c) Remain unchanged d) Be ambiguous Suppose tea and coffee are substitutes in consumption. Suppose further that the price of tea decreases. In the situation above, consumer surplus in the coffee market will _____, everything else held constant. a) Remain unchanged b) Decrease c) Be ambiguous d) Increase Suppose the government imposes an excise tax of $10 on a market. Suppose further that the price elasticity of demand for the good is 1.0 and the price elasticity of supply is 3.0. In the situation above, the amount of tax borne by the buyers will be ____ percent. a) 25 b) 33 c) 67 d) 75 e) 100 Suppose the government imposes an excise tax of $10 on a market. Suppose further that the price elasticity of demand for the good is 1.0 and the price elasticity of supply is 3.0. In the situation above, the price the sellers receive for the good will _____ by _____ everything else held constant. a) Increase; $3.00 b) Decrease; $3.00 c) Decrease; $2.50 d) Decrease; $7.50 e) Increase; $7.50 In which of the following situations MUST the demand for milk be price inelastic. a) A 7% increase in the price of milk causes the quantity of milk demanded to decrease by 4%. b) The price of milk decreases by 50 cents per gallon and the quantity of milk demanded increases by 30 gallons. c) The price of milk increases by 1 dollar per gallon and the quantity of milk demanded decreases by 30 gallons. d) A decrease in the price of milk causes the total revenue from selling it to increase. Suppose the number of pottery sellers increases. Everything else held constant, producer surplus in the pottery market will _____. a) Be ambiguous b) Remain unchanged c) Decrease d) Increase If a 7% decrease in price results in a ____ 7% ____ in quantity supplied, it can be concluded with certainty that supply is price inelastic. a) Less than; increase b) Greater than; increase c) Less than; decrease d) Greater than; decrease A good that is excludable and _____ in consumption is _____. a) non-rival; a common resource b) Rival; a private good c) Non-rival; a public good d) Rival; an artificially scares good A decrease in the federal excise tax on wine will cause _____ in the economic surplus generated in the wine market, everything else held constant. a) An increase b) No change c) A decrease Last month Gene increased the price on all the jeans he sells at his local boutique by 15%. If the number of jeans that he sold decreases by 20%, it can be concluded with certainty that the demand for Gene's jeans is price _____ and his revenues for the month _____, everything else held constant. a) Elastic; decreased b) Elastic; increased c) Inelastic; increased d) Inelastic; decreased In which of the following situation would it be MOST advantageous to be saving? a) The nominal interest rate is 13% and the real interest rate is 6%. b) The nominal interest rate is 4% and the real interest rate is -2%. c) The nominal interest rate is 7% and the real interest rate is 4%. d) The nominal interest rate is 1% and the real interest rate is 0%. e) The nominal interest rate is 10% and the real interest rate is 8%. An increase in the salaries paid to members of the U.S. Congress (i.e., representatives and senators), everything else held constant, will cause _____ in the government spending component of the U.S. GDP. a) No change b) An increase c) A decrease The Kapauku people of the mountains of New Guinea used shells in a number of different economic activities, one being that payment in shells was made as an expression of sympathy at the death of a distant relative. Used in this way, shells were performing which of the following functions of money? a) Standard of deferred payment. b) Standard of value. c) Medium of exchange. d) Unit of Account. e) Means of unilateral payment. Suppose 37-year-old Chris is a mom who has become bored with staying at home and raising her two-year-old daughter. As a result, she has placed her child in day care, is available to begin a job immediately, and has been actively seeking employment for the last seven weeks. In this situation Chris would be considered a) Not in the labor force. b) Structurally unemployed. c) Cyclically unemployed. d) Frictionally unemployed. e) Seasonally unemployed. When a government declares a money to be "legal tender for all debts, _____" it is guaranteeing that the money will function as a _____. a) private; standard of deferred payment b) Public; store of value c) Private; means of unilateral payment d) Private; medium of exchange e) Public; medium of exchange In the press release following its last policy meeting (14-15 March 2017), the Federal Open Market Committee stated that "the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and _____ percent inflation.