Exam 1 Flashcards
Who has the comparative advantage in the production of good X?
Maria
Good X Good Y
90 0
60 30
30 60
0 90
Maya
Good X Good Y
60 0
40 10
20 20
0 30
a) Maria
b) Maya
c) Both Maria and Maya
d) Neither Maria nor Maya
B (Maya)
Michael can produce the following combinations of X and Y: 10X and 10Y, 5X and 15Y, and 0X and
20Y. Vernon can produce the following combinations of X and Y: 100X and 20Y, 50X and 30Y, or 0X
and 40Y. It follows that
a) Michael has the comparative advantage in producing X and Vernon has the comparative advantage in
producing Y.
b) Michael has the comparative advantage in producing Y and Vernon has the comparative advantage in
producing X.
c) Neither Michael nor Vernon has a comparative advantage in producing X.
d) Neither Michael nor Vernon has a comparative advantage in producing Y.
e) There is not enough information to answer the question.
B
Consider a good with a downward sloping demand curve. Which of the following changes
will cause the demand curve to shift to the right?
a) Incomes increase and the good is an inferior good.
b) The price of labor, an input in the production of the good, decreases.
c) The price of the good decreases.
d) The price of a substitute good in consumption increases.
D
If Max’s demand for hot dogs falls as his income rises, then for Max hot dogs are
a) a bad good.
b) an inferior good.
c) a preferential good.
d) a normal good.
e) a neutral good.
B
At a price for which quantity demanded exceeds quantity supplied, a __________ is
experienced, which pushes the price __________ toward its equilibrium value.
a) surplus; downward
b) surplus; upward
c) shortage; downward
d) shortage; upward
D
For each additional lamp produced, a constant opportunity cost is incurred in terms of bookshelves.
This means:
a) that it takes more resources to produce a lamp than a bookshelf.
b) that it takes fewer resources to produce a lamp than a bookshelf.
c) that for every lamp produced, a constant number of bookshelves is forfeited.
d) that for every lamp produced, a different number of bookshelves is forfeited.
C
Which of the following will not shift a supply curve?
a) a change in the price of relevant resources
b) a change in the good’s own price
c) a change in the number of sellers
d) a change in per-unit costs brought about by a change in taxes
B
Module 4 Worksheet questions 13 & 14 go look at them
13 & 14
A price ceiling is a government-mandated
a) minimum price below which legal trades cannot be made.
b) maximum price above which legal trades cannot be made.
c) minimum price above which legal trades cannot be made.
d) maximum price below which legal trades cannot be made.
B
If consumers view cappuccinos and lattés as substitutes, what would happen to the
equilibrium price and quantity of lattés if the price of cappuccinos rises?
a) Both the equilibrium price and quantity would increase.
b) Both the equilibrium price and quantity would decrease.
c) The equilibrium price would increase, and the equilibrium quantity would decrease.
d) The equilibrium price would decrease, and the equilibrium quantity would increase.
A
What happens to demand if the substitutes price is changing. In change what going to happen to eq price and quantity.
When the price of a substitute good increases, the demand for the original good will also increase, leading to a shift in the demand curve to the right, resulting in a higher equilibrium price and quantity for the original good.
Suppose two cities are producing the same two goods remember that the cities can’t have a comparative advantage in producing both goods.
Suppose two cities are producing the same two goods remember that the cities can’t have a comparative advantage in producing both goods.
Supply curve equation you need to be able to figure out quantity and price and the consumer and producer surplus.
put them equal to each other solve for Q then plug Q into one of the equations and solve for P then use those to find the surpluses.
Area of a tringle B x H x 1/2 to find the surpluses
What does it take for a price control to be binding or non-binding.
For a price control to be binding
price ceiling: below equilibrium
price floor: above equilibrium
For a price control to be non-binding
price ceiling: above equilibrium
price floor: below equilibrium
The difference between a positive and normative economic statement.
A positive statement states how the economy actually works. A normative statement is an opinion on how the economy should work.
With given combinations of goods being produced by two individuals be able to figure out who has the comparative advantage producing the good(s).
With given combinations of goods being produced by two individuals be able to figure out who has the comparative advantage producing the good(s).
With given eq price be able to recognize a shortage or surplus based on where the current price is.
Shortage below equilibrium
Surplus above equilibrium
Supply and demand curves both shift what happens to quantity and price.
(one will be ambiguous and the other will increase or decrease)
With a given ppf make sure you can determine which points are with production inefficiency.
(it will be the point within the ppf)
Suppose ppf shift in or out why would that be the case or what would lead to that being the case.
shifting outwards from increase in resources such as labor, capital, advancements in technology, and improved production efficiency.
Shifting inwards literally the opposite of these things happening.
Understand the term quantity exchanged.
the amount of a good or service that is exchanged between buyers and sellers at a certain price level
Understand that just because two events are correlated one did not cause the other.
Understand that just because two events are correlated one did not cause the other.
True or false: when the price of Toyota corolla rises ceteris peribis the demand for corollas falls.
true
