The benefits of trade include:
I. higher output due to specialization.
II. higher output due to comparative advantage.
III. increased welfare when preferences differ.
Knowledge increases ____________ and specialization __________ total output.
education; increases
productivity; increases
perception; increases
economies of scale; decreases
A country has an absolute advantage in production if:
it can produce the same good using fewer inputs than another country.
it can produce a good using fewer inputs than it takes another country to produce a different good.
other countries can produce the same good using fewer inputs.
it has the lowest opportunity cost of producing a good.
If a country has an absolute advantage in both items when compared to another country, there can never be any benefit for them to trade.
True
False
Which of the following is TRUE about demand curves?
Demand curves are negatively sloped.
Demand curves reflect the law of demand.
Demand curves are plots of quantities demanded at various prices.
All of the answers are correct.
Quantity demanded is:
the amount of a good or service that a buyer is able and willing to purchase at a given price.
the amount of a good or service that a buyer is able and willing to sell at a given price.
the amount of a good or service that a seller is able and willing to sell at a given price.
the amount of a good or service that a buyer is able and willing to purchase at various given prices.
Which of the following statements about consumer surplus is incorrect?
Consumer surplus is the net benefit to consumers from the exchange that occurs in a market.
Consumer surplus is the gains from trade on the part of the consumer that result from a market transaction.
Total consumer surplus is the area beneath the demand curve and above the market price.
Consumer surplus is the difference between the minimum price the consumer is willing to pay and the market price.
Which of the following does NOT shift the demand curve?
changes in the product's price
changes in income
changes in population
changes in tastes and preferences
For a normal good, higher income results in:
an increase in demand.
a decrease in demand.
an increase in the quantity demanded.
a decrease in the quantity demanded.
If Romaine lettuce and Iceberg lettuce are substitutes, an increase in the price of Romaine lettuce will ______ the demand for Iceberg lettuce.
reduce
increase
not shift
decrease
The quantity supplied is the:
amount of inputs that a firm earns profit on.
change in the sellers' output multiplied by the change in price.
incremental cost of producing one more unit of output, holding all other things constant.
amount of a good that firms are willing and able to sell at a particular price during a given period of time.
A farmer can grow either apples or oranges. An increase in the price of apples ______ the opportunity cost of growing oranges so that the supply curve of oranges shifts ______.
decreases; down and to the right
increases; down and to the right
decreases; up and to the left
increases; up and to the left
In a market, the equilibrium condition is given by the following:
quantity demanded = quantity supplied
quantity demanded × quantity supplied
quantity demanded/quantity supplied
price × quantity demanded = quantity supplied
A market can be described by the equations Qd = 50 – 3P and Qs = 2P. What are the equilibrium price and quantity in this market?
The equilibrium price is $20 and the equilibrium quantity is 10 units.
The equilibrium price is $50 and the equilibrium quantity is 100 units.
The equilibrium price is $30 and the equilibrium quantity is 10 units.
The equilibrium price is $10 and the equilibrium quantity is 20 units.
Gains from trade are maximized at the:
equilibrium price and quantity.
midpoint on the demand curve.
point where output is maximized.
vertical intercept on the supply curve.
Surpluses drive price up while shortages drive price down.
True
False
The demand curve for physician office visits is quite inelastic; therefore, a:
large increase in price causes quantity demanded to decrease by very little.
large decrease in price causes quantity demanded to decrease by a lot.
small increase in price causes quantity demanded to decrease by a lot.
small decrease in price causes quantity demanded to decrease by very little.
The elasticity of demand:
equals the inverse of price to quantity demanded.
measures how far the demand curve shifts from a change in price.
tells us how responsive consumer purchases are to price changes.
estimates the relationship between quantity demand and
production costs.
The elasticity of demand measures how sensitive the:
price is to a change in quantity demanded.
quantity demanded is to a change in price.
price is to a change in the quantity supplied.
demand is to a change in the number of suppliers.
The elasticity of demand for a good is –0.75. A 4 percent increase in price will cause a:
3 percent decrease in quantity demanded.
5.33 percent increase in quantity demanded.
5.33 percent decrease in quantity demanded.
0.19 percent decrease in quantity demanded.
If the price of Good X rises from $4 to $5, and the quantity demanded of Good X falls from 200 units to 180 units, the price elasticity of demand is:
2.1.
0.47.
1.4.
0.4.
What happens to revenues when the demand curve is unit elastic and the price changes?
Revenues increase when the price increases.
Revenues remain unchanged.
Revenues decrease when the price increases.
The change in revenues cannot be estimated.
If the demand for a good is elastic, then firms producing the good should ________ price in order to increase revenue.
increase
decrease
hold constant
either increase or decrease
Which of the following statements is FALSE?
A perfectly inelastic supply curve is vertical.
The supply curve is more elastic in the long run than in the short run.
Products that take a long time to produce, such as decades-aged Scotch whiskey, have supply curves that are less responsive to price changes.
The supply curve of oil is more inelastic in Texas than it is globally.
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