Summer Exam 1

Question 1

If sunflower butter and strawberry jelly are complements and the price of sunflower butter doubles, what will happen in the market for strawberry jelly?
Price increases, quantity decreases.
Price decreases, quantity increases.
Price increases, quantity increases.
Price decreases, quantity decreases.

Answer 1

Price decreases, quantity decreases.

Question 2

Supply curves slope upward because:
Firms make more money when they offer a bulk discount.
increasingly-valuable alternatives are foregone as production expands.
producing additional units of output always lowers costs.
consumers are willing to pay more when they consume more.

Answer 2

increasingly-valuable alternatives are foregone as production expands.

Question 3

Mad cow disease is eradicated and the population of healthy dairy cows increases, making cheese cheaper. What will happen to the equilibrium price and quantity of pizza as a result?
Price decreases; quantity decreases
Price increases; quantity decreases
Price decreases; quantity increases
Price increases; quantity increases

Answer 3

Price decreases; quantity increases

Question 4

With respect to Uber implementing surge pricing at certain times, all of the following are true except:

The higher price in times of peak demand increases the number of rides that take place.
Without surge pricing, there would be a surplus of rides available.
The number of “unfulfilled requests” falls.
If the market clears, then every consumer willing to pay the higher price will be able to find a ride.

Answer 4

Without surge pricing, there would be a surplus of rides available.

Question 5

Which of the following changes will cause the supply of wheat to decrease? CHOOSE EACH THAT APPLIES!
Consumer income decreases.
A decrease in the number of wheat farms.
A flood destroys this years crop of wheat.
An FDA study finds that wheat products reduces the probability of developing skin cancer.
An improvement in wheat fertilizers.

Answer 5

A decrease in the number of wheat farms.
A flood destroys this years crop of wheat.

Question 6

Postage stamps are inferior goods. If income rises, then: (CHOOSE EACH OF THE CORRECT OPTIONS)

total spending on stamps will increase.
stamp prices will rise.
stamp quantities will rise.
stamp quantities will fall.
stamp prices will fall.
total spending on stamps will decrease.

Answer 6

stamp quantities will fall.
stamp prices will fall.
total spending on stamps will decrease.

Question 7

In terms of the market for books, the development of the printing press caused the equilibrium price to ________ and the equilibrium quantity to ________.
Decrease; decrease
Decrease; increase
Increase; decrease
Increase; increase

Answer 7

Decrease; increase

Question 8

The US economy produces cars and milk and its PPF is show below.

Cars per year Gallons of milk per year
0 90
1 70
2 40
3 0
Which of the following statements about the PPF is true?

The opportunity cost of increasing milk production from 0 gallons to 40 gallons is the three foregone cars.
The opportunity cost of the second car is higher than the opportunity cost of the first car.
Producing two cars and forty gallons of milk would be classified as inefficient.
The opportunity cost of each car is the same.

Answer 8

The opportunity cost of the second car is higher than the opportunity cost of the first car.

Question 9

Rockingham County specializes economically in raising cows and hens, as does nearby Augusta County. However, the Rockingham PPF is further out from the origin than the Augusta PPF. Which of the following must be true given this information? Choose each correct option.

Rockingham County has more potential workers than Augusta County.
Augusta County cannot produce at any point on the Rockingham County PPF.
Each worker in Augusta County is less productive than each worker in Rockingham County.
Augusta County has higher opportunity cost raising both goods than Rockingham County.

Answer 9

Augusta County cannot produce at any point on the Rockingham County PPF.

Question 10

Suppose JMU wins the NCAA College Football Playoff in January 2025. School spirit surges in the wake of the victory. Select each of the following options that would occur in the market for JMU merchandise after this “economic shock”, according to the supply and demand model.

The new equilibrium quantity would exceed the old one.
The new equilibrium price would exceed the old one.
Supply would fall.
The new equilibrium price would be less than the old one.
The new equilibrium quantity and price would be determined by where the market “clears”
Demand would rise.
Demand would fall.
The new equilibrium quantity would be lower than the old one.
Supply would rise.

Answer 10

The new equilibrium quantity would exceed the old one.
The new equilibrium price would exceed the old one.
The new equilibrium quantity and price would be determined by where the market “clears”
Demand would rise.

Question 11

The following table presents information about the different quantities of football games that Diar can watch and homework assignments he can complete over the course of the semester.

Football Games Homework Assignments
80 0
75 1
70 2
65 3
60 4
….. …..
40 8
What is the opportunity cost, measured in homework assignments that go incomplete, for Diar to watch one additional football game?

Answer 11

0.2

Question 12

The price of gasoline rises. What happens to the equilibrium price and quantity in the market for traditional automobiles (as opposed to electric-powered vehicles)?
Price decreases; quantity decreases
Price decreases; quantity increases
Price increases; quantity decreases
Price increases; quantity increases

Answer 12

Price decreases; quantity decreases

Question 13

The Germany economy produces pretzels and soccer stadiums. Select each of the following options that is correct.

Any point within the PPF is unattainable given the current stock of economic resources and available technology in the German economy.
Any point on the PPF represents an efficient use of German economic resources.
Any point within the PPF represents an efficient use of German economic resources.
The Germany economy would be capable of producing more with the introduction of modular production technology, allowing stadiums to be built more flexibly.

Answer 13

Any point on the PPF represents an efficient use of German economic resources.
The Germany economy would be capable of producing more with the introduction of modular production technology, allowing stadiums to be built more flexibly.

Question 14

The following table contains information on the demand for CDs. Given the information presented, what is the equilibrium price of CDs?

Price Quantity
$20 0
$18 5
$16 10
$14 15
$12 20
$10 25
$8 30
$6 35
$4 40
$2 45
$0 50

$8
$0
$2
$10
$12
$16
There is not enough information to determine.
$20
$4
$6
$14
$18

Answer 14

There is not enough information to determine.

Question 15

For spring break, you’re considering the following three options:

1) Walking 100 miles on the Appalachian Trail, which you value at $1,250.

2) Time at home with your family, which you value at $500.

3) Going to Cancun with your best friends, which you value $800

All of these values are net of the expenses.

Regarding opportunity costs, CHOOSE EACH OF THE FOLLOWING OPTIONS THAT ARE CORRECT.

The opportunity cost of walking on the AT is $800
The opportunity cost of going to Cancun is $1,250.
The opportunity cost of spending time with your family is $800
The opportunity cost of walking on the AT is $1,300
The opportunity cost of walking on the AT is $0 since it’s the highest-valued option.

Answer 15

The opportunity cost of walking on the AT is $800
The opportunity cost of going to Cancun is $1,250.

Question 16

Which of the following is a positive statement?
An increase in the gas tax decreases demand for cars.
The $0.40/gallon tax on gasoline should be removed.
Tax policy and minimum wage policy address equally important problems in economic life today.
Imposing a $0.40/gallon tax on gasoline is a disgrace.

Answer 16

An increase in the gas tax decreases demand for cars.

Question 17

PPFs can shift outwards (away from the origin) and inwards (towards the origin). Which of the following would cause a PPF to shift inward? Choose each correct option.

Exhaustion of natural resources, such as fields suffering from overuse.
A hurricane destroys a local automobile manufacturing plant.
Technological improvements that automate production processes.
Households spending less on leisure experiences such as going to the movies.
Baby Boomers exiting the work force as they reach retirement age.

Answer 17

Exhaustion of natural resources, such as fields suffering from overuse.
A hurricane destroys a local automobile manufacturing plant.
Baby Boomers exiting the work force as they reach retirement age.

Question 18

Consider and evaluate the following statements:

1) If a person has comparative advantage producing smartphones, they will also have absolute advantage producing smartphones.

2) If a person has absolute advantage producing smartphones, they will also have comparative advantage producing smartphones.

For each, identify whether the statement is correct or incorrect. You should check two boxes.

Statement 2 is correct.
Statement 1 is incorrect.
Statement 1 is correct.
Statement 2 is incorrect.

Answer 18

Statement 1 is incorrect.
Statement 2 is incorrect.

Question 19

Demand for a normal good decreases when income ______________ and decreases when consumers expect future prices to ___________________.

Decrease; decrease
Increase; decrease
Decreases; increase
Increase; increase

Answer 19

Decrease; decrease

Question 20

An American worker works 100 hours per month, and in each hour can produce four pairs of shoes or one toboggan. The worker’s production possibilities frontier can be drawn as:

If toboggan technology improves and workers can now produce two per hour, then CHOOSE EACH OF THE CORRECT OPTIONS BELOW:

The opportunity cost of toboggans increases.
The vertical intercept will increase.
The horizontal intercept will increase.
The PPF will become flatter.

Answer 20

The horizontal intercept will increase.
The PPF will become flatter.

Question 21

Kendrick Lamar writes rap songs and gives public speeches. He can write a song in forty minutes, whereas he needs an entire hour to deliver a speech. What is the opportunity cost for Kendrick of writing one more song? That it, how many additional delivered speeches would he no longer give? Simply type in a number, no units are needed. Round to the nearest tenth if necessary.

Answer 21

0.7

Question 22

Kendrick Lamar writes rap songs and gives public speeches. He can write a song in forty minutes, whereas he needs an entire hour to deliver a speech. What is the opportunity cost for Kendrick delivering one more speech? That it, how many additional songs would he no longer write? Simply type in a number, no units are needed. Round to the nearest tenth if necessary.

Answer 22

1.5

Question 23

Complete the following sentence: According to the law of demand, ___________________________.

Select each of the correct answers.

increases in quantity demanded lower prices.
decreasing prices increase demand.
increasing prices lower demand.
increasing prices lower quantities demanded.
decreasing prices increase quantities demanded.

Answer 23

increasing prices lower quantities demanded.
decreasing prices increase quantities demanded.

Question 24

Consider the different types of economic systems discussed in class. Select each of the following options that are correct. MORE THAN ONE IS CORRECT.

Traditional economies rely on customs, traditions, and beliefs to make economic decisions, traditionally focusing on agriculture and bartering.

In a market economy, resources are allocated based on supply and demand with minimal government intervention.
Market economies rely on prices determined by government to ensure a fair and efficient use of resources.

In a command (centrally planned) economy, the government officials make all of the decisions about the production and distribution of different goods and services.

Answer 24

Traditional economies rely on customs, traditions, and beliefs to make economic decisions, traditionally focusing on agriculture and bartering.

In a market economy, resources are allocated based on supply and demand with minimal government intervention.

In a command (centrally planned) economy, the government officials make all of the decisions about the production and distribution of different goods and services.

Question 25

Which of the following is an example of a positive statement?
Econ 201 shouldn’t be so boring.
There should be more computer science majors at JMU than classics majors.
NFL referees ought to throw more penalty flags.
It’s raining outside right now.

Answer 25

It’s raining outside right now.
–> only one stating a fact not an opinion or a want

Question 26

What are the three questions every economy must answer?
1) What will be produced, 2) why will it be produced, and 3) when will it be produced?
1) What will be produced, 2) how will it be produced, and 3) for whom will it be produced?
1) What will be produced, 2) when will it be produced, and 3) why will it be produced?
1) What will be produced, 2) how will it be produced, and 3) when will it be produced?

Answer 26

1) What will be produced, 2) how will it be produced, and 3) for whom will it be produced?

Question 27

Consider the information in the following table regarding the productivity of Deshaun and Sarah when they make haircuts and pizza.
Haircuts Pizza
Deshaun 4 8
Sarah 2 3

Which individual has absolute advantage producing haircuts? Which individual has absolute advantage producing pizza?

Sarah; Sarah
Sarah; Deshaun
Deshaun; Sarah

Deshaun; Deshaun

Answer 27

Deshaun; Deshaun

Question 28

ere’s the same table of data:

              Haircutts    Pizza Deshaun	4	          8 Sarah	        2	          3

Which individual has comparative advantage producing haircuts? Which individual has comparative advantage producing pizza?

Sarah; Deshaun
Deshaun; Sarah
Sarah; Sarah
Deshaun; Deshaun

Answer 28

Sarah; Deshaun

Question 29

If the US economy decreases production of blue jeans by 120,000 units and increases production of burritos by 100,000 units, what is the opportunity cost (in terms of jeans) of each burrito? Just type a number, no words needed.

Answer 29

1.2

Question 30

Which of the following would not affect the supply of oranges during the next harvest season?

A season of extraordinary weather conditions.
An increase in consumer income.
A tax on orange production.
An improvement in tractor technology.

Answer 30

An increase in consumer income.

Question 31

Which of the following does not affect demand for a product?
The prices of complementary goods.
The technology used to produce that product.
A new subsidy for consuming that product implemented by the government.
Consumer expectations about future prices.

Answer 31

The technology used to produce that product.

Question 32

Which of the following best describes the difference between a decrease in quantity demanded and a decrease in demand?
A decrease in demand is caused by an increase in price, whereas a decrease in quantity demanded is caused by a number of factors, such as an increase in the price of a complement
A decrease in quantity demanded is caused by an increase in price, whereas a decrease in demand is caused by a number of factors, such as a complement becoming more expensive.
There is only ever a decrease in demand when supply also decreases.
There is no difference; both events have the same underlying causes.

Answer 32

A decrease in quantity demanded is caused by an increase in price, whereas a decrease in demand is caused by a number of factors, such as a complement becoming more expensive.

Question 33

‘I, Pencil’ illustrates that:
pencils are superior writing instruments to pens.
pencils are produced effectively with one group in charge of production.
centrally-planned economies are able to produce pencils well.
the market system mobilizes individual creativity in a way that other systems of economic organization do not.

Answer 33

the market system mobilizes individual creativity in a way that other systems of economic organization do not.

Question 34

If oil consumers anticipate that the price of gasoline is going to increase next week, then:
nothing will happen to demand for gas today because the price isn’t expected to change until next week.
the demand for gasoline today will increase.
nothing will happen to demand today, but quantity demanded will decrease due to the higher price.
the demand for gasoline today will decrease.

Answer 34

the demand for gasoline today will increase.

Question 35

The price of gasoline falls. What happens to the equilibrium price and quantity in the market for traditional automobiles (as opposed to electric-powered vehicles)?

Price increases; quantity increases
Price decreases; quantity decreases
Price increases; quantity decreases
Price decreases; quantity increases

Answer 35

Price increases; quantity increases

Question 36

After your most recent few trips to the grocery store, you notice that the equilibrium price of oranges has increased and that fewer are being sold. Which of the following events could account for these changes?
An increase in consumer income.
A decrease in the number of orange suppliers.
An improvement in the efficiency of orange-harvesting tractors.
An increase in the price of apples.

Answer 36

A decrease in the number of orange suppliers.

Question 37

If there is a shortage of a good, then:

price will increase; quantity demanded will decrease; quantity supplied will increase.
price will increase; quantity demanded will increase; quantity supplied will increase.
price will decrease; quantity demanded will increase; quantity supplied will increase
price will decrease; quantity demanded will decrease; quantity supplied will increase

Answer 37

price will increase; quantity demanded will decrease; quantity supplied will increase.

Question 38

After a year of great growing weather, the price of coffee beans decreases. According to the supply and demand model, what will happen to the equilibrium price and quantity of cups of brewed coffee?
Price increases; quantity increases
Price increases; quantity decreases
Price decreases; quantity increases
Price decreases; quantity decreases

Answer 38

Price decreases; quantity increases

Question 39

The price of milk falls. Which of the following events could cause this decrease?
A drought causes the price of grain that is used to feed cows to increase
A decrease in the price of oatmeal (if milk an oatmeal are complements)
An announcement by the FDA that milk has been linked to diabetes
An increase in household income (if milk is a normal good)

Answer 39

An announcement by the FDA that milk has been linked to diabetes

Question 40

Which of the following statements about production possibility frontiers is not correct?

An increase in resources will expand the PPF.
Using more of society’s resources to produce guns instead of butter will cause the PPF to contract.
Along the frontier, getting more of one good requires giving up some of the other.
Points outside the PPF are unobtainable in autarky.

Answer 40

Using more of society’s resources to produce guns instead of butter will cause the PPF to contract.

Question 41

For this question, remember that the value of an activity is equal to the benefits minus the costs.

You’ve won a free ticket to see Taylor Swift from a local radio giveaway, which has no resale value. Not the biggest Swiftie, you would get $20 of enjoyment from going to the show. Believe it or not, Beyonce is also performing on the same night nearby. These are the only activities you are deciding between. Tickets to see Beyonce are currently on sale, and you’re willing to pay as much as $50 to see Beyonce. Assume there are no other costs of seeing either performer.

What is the threshold price of Beyonce tickets, above which you would go to the Swift show and below which you would go to see Beyonce?

Answer 41

30

Question 42

Due to potential supply chain disruptions, consumers expect the price of gasoline to rise next week. Using the supply and demand model, what do you predict will happen to the equilibrium price and quantity today?

Price increases; quantity increases.
Price increases; quantity decreases.
Price decreases; quantity decreases.
Price decreases; quantity increases.

Answer 42

Price increases; quantity increases.

Question 43

Using the information about productivity in the table below, what is the opportunity cost of producing T-shirts in both the US and China?

      Computers	    T-shirts US	       15	              5 China	4	              2

3 computers in the US and 2 computers in China
3 t-shirts in the US and 2 t-shirts in China
1/3 of a computer in the US and 1/2 of a computer in China
1/3 of a t-shirt in the US and 1/2 of a t-shirt in China

Answer 43

3 computers in the US and 2 computers in China

Question 44

To decompress after this test, you consider the options available to you.

Listen to a production from the London Philharmonic Orchestra, which you value at $5
Get dinner to go from D-Hall and sit outside with your roommate, which you value at $10
Speak with your family/friends on Google Hangout from your dorm room/apartment, which you value at $15
Go for a walk at Hillendale Park, which you value at $20
Which the following statements concerning opportunity costs are correct? Select multiple choices if more than one is correct.

None of the other options are correct.

The opportunity cost of listening to the London Philharmonic Orchestra is $20

The opportunity cost listening to the orchestra is the $10 of value from not spending time with your roommate.

The opportunity cost of going to the Google Hangout is $20

The opportunity cost of going to Hillendale is the combined $30 of value lost from not pursuing the other three options.

Answer 44

The opportunity cost of listening to the London Philharmonic Orchestra is $20

The opportunity cost of going to the Google Hangout is $20