econ final 1

"There is no such thing as a free lunch." This statement best reflects the fact that

• consumers are unwilling to pay for a good unless it provides them with value.

• an opportunity cost is always present when scarce resources are used to produce a good.

• it generally requires enormous effort to search out the best place to eat lunch.

• the value of a good to consumers will decrease as they have more of it.

Which of the following is not correct?

• The height of the demand curve represents the consumers' willingness to pay, or the value they place upon a unit of the good

• The height of the supply curve represents the minimum price the producer would accept in order to be persuaded to produce the output.

• The vertical distance between the supply curve and the demand curve represents profit.

• The vertical axis represents the price at which a single unit of the good will be sold.

Which of the statements below is correct?

• Honduras has the comparative advantage in both goods.

• Nicaragua has the comparative advantage in oranges.

• Honduras has the comparative advantage in oranges.

• It would be impossible for Honduras and Nicaragua to gain from trade.

Last year, 1,000 cases of bottled water were sold at $5; this year, 1,200 cases were sold at $7. These data could be explained by the

• supply and demand curves shifting to the right.

• supply and demand curves shifting to the left.

• supply curve shifting to the left, with no change in demand.

• demand curve shifting to the right, with no change in supply.

A new hormone will increase the amount of milk each cow produces. If this hormone is adopted by many dairies, what will be the effect on the milk market?

• An increase in supply, higher equilibrium price, and lower equilibrium quantity.

• An increase in supply, lower equilibrium price, and higher equilibrium quantity

• A decrease in supply, lower equilibrium price, and lower equilibrium quantity.

• An increase in supply, higher equilibrium price, and higher equilibrium quantity.

• A decrease in supply, lower equilibrium price, and higher equilibrium quantity.

Suppose demand decreases and supply increases at the same time. Which of the following will happen?

• Equilibrium price will be indeterminate, while equilibrium quantity will decrease.

• Equilibrium price will be indeterminate, while equilibrium quantity will increase.

• Equilibrium quantity will be indeterminate, and equilibrium price will increase.

• Equilibrium quantity will be indeterminate, while equilibrium price will decrease.

• The change in equilibrium price and quantity cannot be determined.

The market for letter envelopes is in equilibrium, but then two things happen at the same time. First, the invention of email and other electronic communication causes people to write fewer paper letters. Second, new regulations on paper production makes production of envelopes more costly. What happens to the price and quantity of paper envelopes?

• price falls, quantity falls

• price rises, quantity is indeterminate

• price is indeterminate, quantity rises

• price is indeterminate, quantity falls

Because you have a nice, spacious, comfortable vehicle, your friends often ask you for a ride (to the store, to a club, to the doctor, etc.). Eventually you get tired of giving out free rides, and ask your friends to chip in $5 (for gas and the value of your time) for each trip. They agree, and you give them 2 rides per week.

After a few weeks of this, one of your friends loses his own car in an accident. To persuade you to provide even more transportation, your friends offer you $9 per ride. Now you provide 6 rides per week.

What is the Arc Price Elasticity of Supply?

• -2.5

• 2.5

• -1.75

• 1.75

You like to consume two goods: Gingobongos and Blartypimbles. Your Arc Cross-Price Elasticity of Demand for Gingobongos and Blartypimbles is -0.95. What kind of goods are Gingobongos and Blartypimbles?

• Substitutes

• Complements

• Normal

• Inferior

The price of a fancy meal out with your significant other drops from $87 to $75, and as a result you increase the number of fancy meals from 20 per year to 25 per year. What is the Arc Own-Price Elasticity of Demand for fancy meals out with your significant other?

• -1.8125

• -1.5

• 1.5

• 1.8125