THE UNIVERSITY OF WESTERN ONTARIO LONDON CANADA M ...
M. Parkin
THE UNIVERSITY OF WESTERN ONTARIO LONDON CANADA Economics 1021A-002/004 Review 3
December 5, 2011
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Sally has to decide whether to study for her economics test or her accounting test. If she chooses to study for accounting, her opportunity cost of studying accounting is A) not comparable to the value of studying economics. B) equal to the value of studying economics. C) studying economics. D) the future lost wages that will occur if she fails her accounting exam. E) less than the value of studying economics. 2) Consider the following household. In 5 hours, Bob can cook 5 meals or clean 6 rooms. In 5 hours, Mary can cook 30 meals or clean 10 rooms. Select the best statement. A) Bob has a comparative advantage in cooking. B) Since Mary is better at producing both goods, she should produce both. C) Bob has an absolute advantage in the production of both goods. D) Mary should specialize in cooking. E) none of the above Use the table below to answer the following question. Table 1 Production for one week by Sheila and Bruce Sheila Good X 8 6 4 2 0
Bruce Good X Good Y 20 0 15 2 10 4 5 6 0 8
Good Y 0 1 2 3 4
3) Given the information in Table 1, can Sheila and Bruce gain by specialization? A) No, not under the given circumstances. B) It depends on the wages each earns . C) Yes, if each specializes in the good in which he has a comparative advantage. D) Only if they are married to each other. E) Yes, but only if Bruce gets paid more than Sheila.
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4) Suppose John and Joe each have different production possibility frontiers; John specializes in cloth and Joe specializes in corn. John's island unexpectedly has exceptionally good weather, and suddenly he is twice as productive in the production of both corn and cloth. Select the best statement. A) There will be no change in what John and Joe specialize in, because John's comparative advantage has not changed. B) As a result, John will have an absolute advantage in both corn and cloth. C) As a result, it is possible that John and Joe will switch what they specialize in. D) This is an example of unemployed resources becoming employed. E) There will be a change in what John and Joe specialize in, because John's opportunity cost of production will have risen. 5) A technological improvement in the production of good A A) increases the supply of A. B) increases the demand for A. C) decreases the quantity demanded of A. D) decreases the equilibrium price of A and decreases the equilibrium quantity. E) decreases the supply of A. 6) If A and B are complements and the cost of a factor of production used in the production of A decreases, then the price of A) both A and B will rise. B) A will fall and the price of B will rise. C) A will rise and the price of B will fall. D) both A and B will fall. E) A will fall and the price of B will remain unchanged.
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Use the table below to answer the following question. Table 2 The Market for Car-Seat Heaters Price (dollars per heater) 40 50 60 70 80 90 100
Quantity Demanded (heaters per month) 500 450 400 350 300 250 200
Quantity Supplied (heaters per month) 300 350 400 450 500 550 600
7) Refer to Table 2. Suppose a problem develops with car-seat heaters - they malfunction and occasionally cause serious burns. As a result, demand decreases by 100 heaters at each price. The new equilibrium price is $________ and the new equilibrium quantity is ________ heaters per month. A) 60; 400 B) 50; 450 C) 70; 450 D) 70; 350 E) 50; 350 Use the table below to answer the following question. Table 3 Quantity Demanded 55 45
Price per Volleyball $19 $21
8) Refer to Table 3. The table shows two points on the demand curve for volleyballs. What is the price elasticity of demand between these two points? A) 2.5. B) 0.5. C) 2.0. D) 0.4. E) none of the above
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9) A technological breakthrough lowers the cost of photocopiers. If the demand for photocopiers is price inelastic, we predict that photocopier sales A) fall and total revenue increases. B) rise and total revenue decreases. C) rise and total revenue increases. D) fall and total revenue decreases. E) rise, but changes in total revenue will depend on elasticity of supply. Use the information below to answer the following question.
Figure 1 10) Consider the demand and supply curves in Figure 1. If the market is at the competitive equilibrium, which area in the diagram indicates producer surplus? A) ABC B) 0BCD C) EBC D) AEC E) 0ECD 11) When a price ceiling is set below the equilibrium price, A) the quantity supplied exceeds the quantity demanded. B) the quantity demanded exceeds the quantity supplied. C) the demand curve shifts leftward. D) the quantity supplied equals the quantity demanded. E) the supply curve shifts rightward.
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Use the table below to answer the following question. Table 4 Wage Rate (dollars per hour) 7 6 5 4
Quantity Supplied (hours per week) 1,000 800 600 400
Quantity Demanded (hours per week) 200 400 600 800
12) Table 4 gives the supply and demand schedules for teenage labour in Genoa City. In an unregulated market, A) there is no teenage unemployment and the wage rate is $6 per hour. B) there is no teenage unemployment and the wage rate is $5 per hour. C) teenage unemployment is 400 hours and the wage rate is $6 per hour. D) the minimum wage is $7 per hour. E) teenage unemployment is 400 hours and the wage rate is $5 per hour. 13) The burden of the tax on buyers is greater the more (1) elastic is demand (2) inelastic is demand (3) elastic is supply (4) inelastic is supply A) (1) and (4) B) (2) and (4) C) (2) only D) (2) and (3) E) (1) and (3)
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Refer to the figure below to answer the following question.
Figure 2 14) Refer to Figure 2. The graph shows the market for shoes in Canada. The world price of a pair of shoes is $20. With free international trade, Canadian consumer surplus ________ and Canadian producer surplus ________. A) increases by area A; decreases by area B B) increases by area A + B; decreases by area B C) decreases by area B; increases by area A D) increases by area B; decreases by area B E) decreases by area A + B; increases by area B
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Refer to the table below to answer the following question. Table 5 Canada's Market for Widgets Price (dollars per widgets) 5 6 7 8 9 10 12
Canadian Supply (millions) 12 16 20 24 28 32 36
Canadian Demand (millions) 52 48 44 40 36 32 28
15) Table 5 shows the Canadian supply of and demand for widgets. Widgets are available on the world market for $7. Canadian widget producers convince the government to protect the domestic industry from cheap imports. If the Canadian government sets an import quota of 8 million widgets, the resulting price of a widget in Canada will be ________, and domestic production will be ________. A) $6; 40 million B) $10; 32 million C) $8; 32 million D) $7; 36 million E) $9; 28 million
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THE UNIVERSITY OF WESTERN ONTARIO LONDON CANADA Economics 1021A-002/004 Review 3
December 5, 2011
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Sally has to decide whether to study for her economics test or her accounting test. If she chooses to study for accounting, her opportunity cost of studying accounting is A) not comparable to the value of studying economics. B) equal to the value of studying economics. C) studying economics. D) the future lost wages that will occur if she fails her accounting exam. E) less than the value of studying economics. 2) Consider the following household. In 5 hours, Bob can cook 5 meals or clean 6 rooms. In 5 hours, Mary can cook 30 meals or clean 10 rooms. Select the best statement. A) Bob has a comparative advantage in cooking. B) Since Mary is better at producing both goods, she should produce both. C) Bob has an absolute advantage in the production of both goods. D) Mary should specialize in cooking. E) none of the above Use the table below to answer the following question. Table 1 Production for one week by Sheila and Bruce Sheila Good X 8 6 4 2 0
Bruce Good X Good Y 20 0 15 2 10 4 5 6 0 8
Good Y 0 1 2 3 4
3) Given the information in Table 1, can Sheila and Bruce gain by specialization? A) No, not under the given circumstances. B) It depends on the wages each earns . C) Yes, if each specializes in the good in which he has a comparative advantage. D) Only if they are married to each other. E) Yes, but only if Bruce gets paid more than Sheila.
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4) Suppose John and Joe each have different production possibility frontiers; John specializes in cloth and Joe specializes in corn. John's island unexpectedly has exceptionally good weather, and suddenly he is twice as productive in the production of both corn and cloth. Select the best statement. A) There will be no change in what John and Joe specialize in, because John's comparative advantage has not changed. B) As a result, John will have an absolute advantage in both corn and cloth. C) As a result, it is possible that John and Joe will switch what they specialize in. D) This is an example of unemployed resources becoming employed. E) There will be a change in what John and Joe specialize in, because John's opportunity cost of production will have risen. 5) A technological improvement in the production of good A A) increases the supply of A. B) increases the demand for A. C) decreases the quantity demanded of A. D) decreases the equilibrium price of A and decreases the equilibrium quantity. E) decreases the supply of A. 6) If A and B are complements and the cost of a factor of production used in the production of A decreases, then the price of A) both A and B will rise. B) A will fall and the price of B will rise. C) A will rise and the price of B will fall. D) both A and B will fall. E) A will fall and the price of B will remain unchanged.
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Use the table below to answer the following question. Table 2 The Market for Car-Seat Heaters Price (dollars per heater) 40 50 60 70 80 90 100
Quantity Demanded (heaters per month) 500 450 400 350 300 250 200
Quantity Supplied (heaters per month) 300 350 400 450 500 550 600
7) Refer to Table 2. Suppose a problem develops with car-seat heaters - they malfunction and occasionally cause serious burns. As a result, demand decreases by 100 heaters at each price. The new equilibrium price is $________ and the new equilibrium quantity is ________ heaters per month. A) 60; 400 B) 50; 450 C) 70; 450 D) 70; 350 E) 50; 350 Use the table below to answer the following question. Table 3 Quantity Demanded 55 45
Price per Volleyball $19 $21
8) Refer to Table 3. The table shows two points on the demand curve for volleyballs. What is the price elasticity of demand between these two points? A) 2.5. B) 0.5. C) 2.0. D) 0.4. E) none of the above
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9) A technological breakthrough lowers the cost of photocopiers. If the demand for photocopiers is price inelastic, we predict that photocopier sales A) fall and total revenue increases. B) rise and total revenue decreases. C) rise and total revenue increases. D) fall and total revenue decreases. E) rise, but changes in total revenue will depend on elasticity of supply. Use the information below to answer the following question.
Figure 1 10) Consider the demand and supply curves in Figure 1. If the market is at the competitive equilibrium, which area in the diagram indicates producer surplus? A) ABC B) 0BCD C) EBC D) AEC E) 0ECD 11) When a price ceiling is set below the equilibrium price, A) the quantity supplied exceeds the quantity demanded. B) the quantity demanded exceeds the quantity supplied. C) the demand curve shifts leftward. D) the quantity supplied equals the quantity demanded. E) the supply curve shifts rightward.
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Use the table below to answer the following question. Table 4 Wage Rate (dollars per hour) 7 6 5 4
Quantity Supplied (hours per week) 1,000 800 600 400
Quantity Demanded (hours per week) 200 400 600 800
12) Table 4 gives the supply and demand schedules for teenage labour in Genoa City. In an unregulated market, A) there is no teenage unemployment and the wage rate is $6 per hour. B) there is no teenage unemployment and the wage rate is $5 per hour. C) teenage unemployment is 400 hours and the wage rate is $6 per hour. D) the minimum wage is $7 per hour. E) teenage unemployment is 400 hours and the wage rate is $5 per hour. 13) The burden of the tax on buyers is greater the more (1) elastic is demand (2) inelastic is demand (3) elastic is supply (4) inelastic is supply A) (1) and (4) B) (2) and (4) C) (2) only D) (2) and (3) E) (1) and (3)
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Refer to the figure below to answer the following question.
Figure 2 14) Refer to Figure 2. The graph shows the market for shoes in Canada. The world price of a pair of shoes is $20. With free international trade, Canadian consumer surplus ________ and Canadian producer surplus ________. A) increases by area A; decreases by area B B) increases by area A + B; decreases by area B C) decreases by area B; increases by area A D) increases by area B; decreases by area B E) decreases by area A + B; increases by area B
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Refer to the table below to answer the following question. Table 5 Canada's Market for Widgets Price (dollars per widgets) 5 6 7 8 9 10 12
Canadian Supply (millions) 12 16 20 24 28 32 36
Canadian Demand (millions) 52 48 44 40 36 32 28
15) Table 5 shows the Canadian supply of and demand for widgets. Widgets are available on the world market for $7. Canadian widget producers convince the government to protect the domestic industry from cheap imports. If the Canadian government sets an import quota of 8 million widgets, the resulting price of a widget in Canada will be ________, and domestic production will be ________. A) $6; 40 million B) $10; 32 million C) $8; 32 million D) $7; 36 million E) $9; 28 million
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