Canada’s opportunity cost of producing tomatoes is 1.2; USA’s opportunity cost of producing tomatoes is 1.1 – which country has the comparative advantage in tomato production?

USA’s opportunity cost of producing tomatoes

Quiz #2 – Chapter 6, 7, 8, 9, 10

1. Elasticity is a measure of:

A. efficiency

B. cost-effectiveness

C. sensitivity

D. stretchy-pants

2. Given the following information, calculate the price elasticity of demand:

“The price of nachos is $10 and QD is 35 units. When the price increases to $12, you observe QD fall to 25 units.”

A. 0.55

B. 0.2

C. 5

D. 1.83

3. Based on the elasticity value calculated in the previous question, demand for nachos is:

A. perfectly elastic

B. elastic (relatively)

C. unit elastic

D. inelastic (relatively)

E. perfectly inelastic

4. In the market for “White Russian” mixed-drinks, you observe price decrease by 50% and quantity demanded increase by 20%. The elasticity of demand in this case is:

A. perfectly elastic

B. elastic (relatively)

C. unit elastic

D. inelastic (relatively)

E. perfectly inelastic

5. The cross-price elasticity of demand between good A and good B is -1.4. These goods are:

A. Complements

B. Substitutes

C. Unrelated Goods

D. Inelastic Goods

6. Income elasticity of demand for streaming video is 0.5, which indicates that streaming video is a:

A. Normal good

B. Inferior good

C. Not good

D. Can’t say for sure

7. When the price of sriracha increases by 15%, you observe quantity supplied increase by 25%. Elasticity of supply is:

A. 0.6

B. 0.2

C. 1.7

D. 1.3

8. The elasticity value calculated in the previous question indicated that supply is:

A. perfectly elastic

B. elastic (relatively)

C. unit elastic

D. inelastic (relatively)

E. perfectly inelastic

9. When producers find it easy to acquire inputs for the production process, supply is likely to be more:

A. Elastic

B. Inelastic

C. Unit elastic

D. Can’t say for sure

10. When consumers have fewer close substitutes for a good, demand is likely to be more:

A. Elastic

B. Inelastic

C. Unit elastic

D. Can’t say for sure

FIGURE #2

11. {Refer to Figure 2 above}. As shown, demand is likely to be:

A. Perfectly elastic

B. Inelastic

C. Elastic

D. Perfectly Inelastic

CHAPTER 7 QUESTIONS

FIGURE #3

12. {Refer to Figure 3 above}. In the market shown, S’ represents the market supply curve after an excise tax is levied. The portion of the excise tax paid by producers is:

A. $7

B. $2

C. $5

D. $3

FIGURE #4

13. {Refer to Figure 4 above}. In the market shown, consumers pay _____ of the excise tax.

A. $4

B. $2

C. $1

D. $7

14. {Refer to Figure 4 above}. In the market shown, deadweight loss is:

A. $20

B. $50

C. $100

D. $80

15. {Refer to Figure 4 above}. In the market shown, tax revenue is:

A. $80

B. $200

C. $100

D. $50

16. When supply and demand both become more inelastic, deadweight loss tends to:

A. Decrease

B. Increase

17. When supply and demand both become more inelastic, tax revenue tends to:

A. Decrease

B. Increase

CHAPTER 8 QUESTIONS

18. Which of the following is not a source of comparative advantage?

A. Differences in factor endowments

B. Difference is climate

C. Differences in technology

D. Differences in political system

19. Canada’s opportunity cost of producing tomatoes is 1.2; USA’s opportunity cost of producing tomatoes is 1.1 – which country has the comparative advantage in tomato production?

A. USA

B. Canada

C. Neither

D. Not enough information to determine

FIGURE #5

20. In Figure #5 above, the autarky price is PA and the world price is PW. After the domestic market is opened to world trade, consumer surplus is the area:

A. B + D

B. A + B + D

C. A + B

D. A

21. In Figure #5 above, the world price of walnuts will cause ________ in the domestic market:

A. Exports

B. Imports

C. Neither imports nor exports

D. Not enough information to determine

22. Colombia has the comparative advantage in production of coffee beans, which is factor intense in labor. Recently, the country has begun to specialize in production of that good. The Heckscher-Ohlin Model tells us that the wages received by labor should:

A. Increase

B. Decrease

C. Remain the same

D. Not enough information to determine

23. Which of the following is not a common argument for trade protection?

A. To protect domestic jobs

B. To protect infant industries

C. To protect against civil unrest

D. To ensure national security

CHAPTER 9 QUESTIONS

24. Jacquelyn is a student at a major state university. Which of the following is not an example of an explicit cost of her attending college?

A. The salary that she could have earned working full-time

B. textbooks

C. tuition

D. computer lab fees

25. Sarah’s accountant tells her that she made a profit of $43,002 running a pottery studio in Orlando. Sarah’s husband, an economist, claims Sarah lost $43,002 running her pottery studio. This means her husband is claiming that she incurred ________ in ________ costs.

A. $86,004; explicit

B. $43,002; implicit

C. $43,002; explicit

D. $86,004; implicit

26. You decide to quit your $60,000 per year job as an information technology specialist and illustrate children’s books. At the end of the first year of illustrating, you have earned $20,000. You also spent $5,000 for paint and paper. Your economic profit in the first year as an illustrator is:

A. $15,000.

B. $20,000.

C. –$40,000.

D. –$45,000.

CHAPTER 10 QUESTIONS

Use the following diagram to answer the appropriate questions:

27. (Table: Marginal Cost of Sweatshirts) Look at the table

Marginal Cost of Sweatshirts. The marginal cost of the second sweatshirt is:

A. $9.

B. $20.

C. $11.

D. $29.

28. According to the marginal decision rule, if the marginal benefit is:

A. more than marginal cost, an activity should be reduced.

B. equal to marginal cost, an activity should be reduced.

C. more than marginal cost, net benefit is maximized.

D. less than marginal cost, an activity should be reduced

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