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ECO 2023: Principles of Microeconomics Final Exam Review Multiple Choice Questions 1.
The table below shows the amount of pizza and Stromboli two roommates can make in a day. Pizza Stromboli Mario 25 20 Luigi 30 50 Which of the following statements is true? a.
Mario has an absolute advantage in pizza making. b.
Mario has a comparative advantage in pizza making. c.
Luigi has the higher opportunity cost for Stromboli. d.
Luigi has comparative advantage in pizza making. 2.
Which of the following would cause the demand curve for a normal good to shift to the left? a.
Income decreases. b. The price decreases. c. Income increases. d. The input prices increase. e. The price increases 3.
Which of the following could cause the supply curve for the market for oranges to shift to the left? a.
an increase in the income of consumers of oranges b.
a decrease in the cost of workers c.
an increase in the price of orange juice d.
a new study saying that eating oranges will give one heart disease. e.
a severe hurricane in Florida 4.
A new wonder diet that results in a dramatic loss of weight sweeps through America. The key to the diet is to eat unlimited amounts of red meat (beef) but no poultry (chicken) or carbohydrate-rich foods. As millions of Americans switch to the new diet, we can expect:
a.
an increase in the demand for beef, leading to a shift to the right in the demand curve for beef and higher beef prices. b.
an increase in the demand for beef, leading to a shift to the right in the demand curve for beef and lower beef prices. c.
a decrease in the supply of beef, leading to a shift to the left in the supply curve for beef and higher beef prices. d.
a decrease in the demand for beef, leading to a shift to the left in the demand curve for beef and higher beef prices. e.
a decrease in the demand for chicken, leading to a shift to the left in the demand curve for chicken and higher chicken prices. 5.
Sylvia is a devoted Coca-Cola consumer, whereas Antonia can drink either Coca-Cola or Pepsi products. Sylvia’s demand for Coca
-Cola will be relatively more ________, while Antonia’s demand will be relatively more ________.
a.
elastic; inelastic b.
inelastic; elastic c.
unrelated to price; elastic d.
unitary elastic; inelastic e.
perfectly elastic; elastic
6.
Suppose that when the price of cereal rises 10 percent, the quantity demanded of cereal falls by 5 percent. Based on this information, what is the approximate price elasticity of demand for cereal? a.
0.5 b.
-2.0 c.
−
0.5 d.
0 e.
2.0 7.
Each month a local ice cream shop makes revenues of exactly $500 on ice cream sales regardless of the price. Based on this information we can conclude that the price elasticity of demand for ice cream is a.
0 b.
1 c.
greater than 1, but less than 5 d.
less than 1, but greater than 0 e.
greater than 5 8.
If a commodity has an income elasticity coefficient of 2.5 which of the following is true? a.
Consumers will purchase more of it as the price increases. b.
The commodity has no substitutes. c.
The commodity is a luxury. d.
Consumers will purchase more of it as their incomes decrease. 9.
The cross-price elasticity of demand between shoes and shoe polish will be. a.
Negative b.
Positive c.
Zero d.
less than 1 10.
Which of the following commodities will have a smaller price elasticity of demand coefficient? a.
Cigarettes b.
A Ford Mustang c.
Coca cola d.
Reebok shoes 11.
Which of the following does not determine the price elasticity of supply? a.
Tastes and preferences of consumers b.
The ease with which inputs can be substituted for alternative uses. c.
Availability of inputs d.
Time 12.
Price elasticity of demand is affected by the following except. a.
The number of close substitutes the item has b.
Input prices. c.
Consumer Income d.
The price of substitute goods
13.
The following are effects of price controls except a.
Loss of producers and/or consumers surplus b.
Deadweight loss c.
Shortage/over supply d.
None of the above 14.
The minimum wage is an example of a.
Price ceiling b.
Price floor c.
Quantity control d.
None of the above 15.
A price floor always causes. a.
Shortage b.
Over supply c.
Decrease in tax revenue. d.
All the above 16.
Jung is willing to pay $85 for a new jacket that sells for $70. Eddie is willing to pay $65 for that same jacket. What is the total consumer surplus for Jung and Eddie? a.
$30 b.
$25 c.
$15 d.
$155 e.
$20 17.
Which of the following markets is the best example of a monopolistically competitive market? a.
casual shoes b.
automobiles c.
lemons d.
retail clothing stores e.
water utilities 18.
Lynn has to choose between eating Chinese food or Indian food. Which of the following equations, where MU is marginal utility, TU is total utility, and P is price, will lead her to achieve her consumer optimum? a.
MU/P
Chinese
< MU/P
Indian
b.
TU/P
Chinese
= TU/P
Indian
c.
MU/P
Chinese
= MU/P
Indian
d.
TU
Chinese
= TU
Indian
e.
MU
Chinese
> MU
Indian
19.
A city’s water company is able to
gain monopoly power in its market due to a.
low barriers to entry. b.
Good luck. c.
control of an essential resource. d.
a product with close substitutes. e.
private investors.
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2. Calculate the comparative advantage for both Natalie and Grace for plums and mushrooms
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2. Comparative and absolute advantage
Gilberto and Juanita are farmers. Each one owns a 12-acre plot of land. The following table shows the amount of rye and corn each farmer can
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Rye
Corn
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Gilberto
12
Juanita
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On the following graph, use the blue line (circle symbol) to plot Gilberto's production possibilities frontier (PPF), and use the purple line (diamond
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120
108
Gilberto's PPF
96
84
72
Juanita's PPF
60
48
36
24
12
60
120
180 240 300 360 420
480
540 600
RYE (Bushels)
- has an absolute advantage in the production of rye, and
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Gilberto's opportunity cost of producing 1 bushel of corn is
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is
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Table 1
Minnie
Hats
Umbrellas
Mickey
50
40
10
5
Table 1 shows the output per week of two people, Minnie and Mickey. They can either devote
their time to making hats or making umbrellas.
1) Refer to Table 1. Which of the following statements is true?
A) Mickey has an absolute advantage in making both products.
B) Minnie has an absolute advantage in making both products.
C) Minnie has an absolute advantage in making hats and Mickey in making umbrellas.
D) Minnie has an absolute advantage in making umbrellas and Mickey in making hats.
2) Refer to Table 1. What is Minnie's opportunity cost of making a hat?
A) 1/5 of an umbrella
B) 1/4 of an umbrella
C) 4 umbrellas
D) 10 umbrellas
3) Refer to Table 1. What is Mickey's opportunity cost of making a hat?
A) 1/10 of an umbrella
B) 1/5 of an umbrella
C) 5 umbrellas
D) 10 umbrellas
4) Refer to Table 1. Which of the following statements is true?
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2. Comparative and absolute advantage
Felix and Janet are farmers. Each one owns a 20-acre plot of land. The following table shows the amount of rye and corn each farmer can produce per
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Rye
Corn
(Bushels per acre) (Bushels per acre)
Felix
40
8
Janet
28
7
On the following graph, use the blue line (circle symbol) to plot Felix's production possibilities frontier (PPF), and use the purple line (diamond symbol)
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(?)
200
180
160
140
120
100
80
60
40
20
0
0 100 200 300
400 500 600 700 800 900 1000
RYE (Bushels)
Felix has an absolute advantage in the production of rye, and Felix has an absolute advantage in the production of corn.
Felix's opportunity cost of producing 1 bushel of corn is
bushels of rye, whereas Janet's opportunity cost of producing 1 bushel of corn is
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个
The table shows Frigidia's production possibilities.
Fish
(pounds per month)
300
200
100
0
Draw the four points defined in the table.
Use the four-point line tool to draw the PPF. Label it.
and
and
and
and
Skis
(pairs per month)
0
50
100
150
If Frigidia produces 200 pounds of fish per month, how many pairs of skis must it produce to achieve
production efficiency?
Frigidia must produce pairs of skis to achieve production efficiency.
What is Frigidia's opportunity cost of producing 1 pound of fish and 1 pair of skis?
pairs of
The opportunity cost of 1 pound of fish is
skis
300-
250
200-
Fish (pounds per month)
150-
100-
50-
25
50
75 100 125
Skis (pairs per month)
150
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two.
Coconuts
Fish
25
3
15
4
12
5
a) Draw PPF using the information from this table;
b) Calculate opportunity cost of coconuts if you decide to increase their harvest from 3 to 5;
c) Calculate the slope of the PPF if you increase their harvest from 3 to 5;
d) Will you harvest 5 coconuts and 12 fish on any day of the week? Why?
e) Will you harvest 5 coconuts and 4 fish on any day of the week? Why?
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day on either activity, the result is given in the following table:
You
Your Friend
Fish
7
8
Firewood
6 bundles
3 bundles
You and your friend decide that you should each specialize so that one person catches fish while the other gathers firewood. But who should do which task?
a. What is the opportunity cost for you to gather an additional bundle of firewood?
fish.
The opportunity cost for you to gather an additional bundle of firewood is
(Round your answer to two decimal places.)
What is your friend's opportunity cost of gathering an extra bundle of firewood?
Your friend's opportunity cost of gathering an extra bundle of firewood is fish.
(Round your answer to two decimal places.)
b. Assuming that you and your friend specialize, what allocation of tasks maximizes total output for your one day of joint effort?
To…
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4. Shifts in production possibilities
Suppose the United States produces two types of goods: agricultural and capital. The following diagram shows its current production possibilities
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Drag the production possibilities frontier (PPF) on the graph to show the effects of a time-saving innovation in the manufacturing of cars.
Note: Select either end of the curve on the graph to make the endpoints appear. Then drag one or both endpoints to the desired position. Points will
snap into position, so if you try to move a point and it snaps back to its original position, just drag it a little farther.
480
PPF
400
320
240
160
80
PPF
0.
90
180
270
360
450
540
WHEAT (Millions of bushels)
CARS (Thousands)
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per year on a given acre. Each farmer chooses whether to devote all acres to producing corn or rye or to produce corn on some of the land and rye on
the rest.
Corn
Rye
(Bushels per acre)
(Bushels per acre)
Sam
40
8
Тeresa
28
7
On the following graph, use the blue line (circle symbol) to plot Sam's production possibilities frontier (PPF), and use the purple line (diamond symbol)
to plot Teresa's PPF.
200
180
Sam's PPF
160
140
Teresa's PPF
120
100
80
60
40
20
100
200 300
400
500 600
700
B00
900 1000
CORN (Bushels)
has an absolute advantage in the production of corn, and
has an absolute advantage in the production of rye.
Sam's opportunity cost of producing 1 bushel of rye is
bushels of corn, whereas Teresa's opportunity cost of producing 1 bushel of rye is
v opportunity cost of producing rye than Teresa,
v has…
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resources and the trade-off between good A and good B remains constant as resources are shifted
from one good to another. (30 points)
I MICROECONOMICS
YORKVILLE
UNIVERSITY
www.YORKVILLEU.CA
Canada
India
300
500
Good A
400
Good B
950
a. Which country has the absolute advantage in good A? In good B?
b. What is Canada's marginal opportunity cost of producing good A? good B?
c. What is India's marginal opportunity cost of producing good A? good B?
d. Which country has the comparative advantage in good A? In good B?
e. Based on the data given, what is the terms of trade range for good A in terms of units of
good B?
||
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2. Comparative and absolute advantage
Larry and Megan are farmers. Each one owns a 20-acre plot of land. The following table shows the amount of corn and rye each farmer can produce
per year on a given acre. Each farmer chooses whether to devote all acres to producing corn or rye or to produce corn on some of the land and rye on
the rest.
Corn
Rye
(Bushels per acre) (Bushels per acre)
Larry
40
8
Megan
28
7
On the following graph, use the blue line (circle symbol) to plot Larry's production possibilities frontier (PPF), and use the purple line (diamond
symbol) to plot Megan's PPF.
(?)
200
180
160
140
120
100
80
60
40
20
0
has an absolute advantage in the production of rye.
bushels of corn, whereas Megan's opportunity cost of producing 1 bushel of rye is
opportunity cost of producing rye than Megan,
has a comparative
has a comparative advantage in the production of corn.
RYE (Bushels)
0
100 200 300
400 500 600 700 800 900 1000
CORN (Bushels)
has an absolute advantage in the production of…
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Carmen and Dennis live on a desolate island. They spend their days fishing or climbing trees to collect coconuts. The following table shows how much of each activity Carmen and Dennis can produce for each hour of work. They each can work up to 12 hours a day.
Fish per hour
Coconuts per hour
Carmen
40
8
Dennis
28
7
On a piece of paper, draw Carmen's PPF with fish on the horizontal (x) axis and coconuts on the vertical (y) axis. Carment's PPF extends from Question Blank 1 of 9 to Question Blank 2 of 9. (Hint: your answer should be in the form of a point (x,y).)
Question Blank 3 of 9
has an absolute advantage in the production of fish, and
Question Blank 4 of 9
has an absolute advantage in the production of coconuts.
Carmen's opportunity cost of producing 1 coconut is Question Blank 5 of 9 fish, while Dennis' opportunity cost of producing 1 coconut is Question Blank 6 of 9 fish. Because Carmen has a
Question Blank 7 of 9
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Essentials of Economics (MindTap Course List)
Economics
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Economics Today and Tomorrow, Student Edition
Economics
ISBN:9780078747663
Author:McGraw-Hill
Publisher:Glencoe/McGraw-Hill School Pub Co