Eco

Posted on Mar 25, 2019 in Economy

1. Refer to Figure 1. From the figure it is apparent that 

a. New Zealand will experience a shortage of wool if trade is not allowed. b. New Zealand will experience a surplus of wool if trade is not allowed. c. New Zealand has a comparative advantage in producing wool, relative to the rest of the world. d. foreign countries have a comparative advantage in producing wool, relative to New Zealand. (C)

2. Refer to the figure above. When trade in wool is allowed, consumer surplus in New Zealand a. increases by the area B + D. b. increases by the area C + F. c. decreases by the area B + D. d. decreases by the area D + G. (C)

3.Since air pollution creates a negative externality, a. social welfare will be enhanced when some, but not all air pollution is eliminated. b. social welfare is optimal when all air pollution is eliminated. c. governments should encourage private firms to consider only private costs. d. the free market result maximizes social welfare.(A)

 4. At the local park there is a playground for children to use. While anyone is allowed to use the playground, it is often very busy, reducing the enjoyment of many of the children who use it. The playground is a a. private good. b. natural monopoly. c. common resource. d. public good. (C)

5. According to the Coase theorem, in the presence of externalities a. private parties can bargain to reach an efficient outcome. b. government assistance is necessary to reach an efficient outcome. c. the assignment of legal rights can prevent externalities. d. the initial distribution of property rights will determine the efficient outcome. (A)

6. Which of the following statements is true? A) Quantities Q0 and Q1 are the utility-maximizing quantities of hoagies at two different prices of hoagies. B) Quantities Q0 and Q1 are derived independently of the utility-maximizing model.  C) Quantity Q0 could be a utility-maximizing choice if the price is $5.75, but quantity Q1 may not be because we have no information on the marginal utility per dollar when price changes. D) Quantities Q0 and Q1 may not necessarily be the utility-maximizing quantities of hoagies at two different prices because we have no information on the consumerʹs budget or the price of other goods. (A)

7. In order to derive an individualʹs demand curve for salmon, we would observe what happens to the utility-maximizing bundle when we change A) the price of the product and hold everything else constant. B) income and hold everything else constant. C) tastes and preferences and hold everything else constant. D) the price of a close substitute and hold everything else constant. (A)

 8. Along a downward-sloping linear demand curve, A) the marginal utility from the consumption of each unit of the good falls and the total utility from consuming larger quantities increases. B) the marginal utility from the consumption of each unit of the good rises and the total utility from consuming larger quantities remain constant. C) the marginal utility from the consumption of each unit of the good and the total utility from consuming larger quantities increase. D) the marginal utility from the consumption of each unit of the good and the total utility from consuming larger quantities remain constant. (A)

9. When a country allows trade and becomes an importer of a good, (a) both domestic producers and domestic consumers become better off. (b) domestic producers become better off, and domestic consumers become worse off. (c) domestic producers become worse off, and domestic consumers become better off. (d) both domestic producers and domestic consumers become worse off. (C)

10. The world price of a pound of T-bone steak is $9.00. Before Guatemala allowed trade in beef, the price of a pound of T-bone steak there was $12.00. Once Guatemala began allowing trade in beef with other countries, Guatemala began (a) exporting T-bone steak and the price per pound in Guatemala remained at $12.00. (b) exporting T-bone steak and the price per pound in Guatemala decreased to $9.00. (c) importing T-bone steak and the price per pound in Guatemala remained at $12.00. (d) importing T-bone steak and the price per pound in Guatemala decreased to $9.00. (D)

11. Refer to Figure 5. With no international trade, (a) the equilibrium price is $12 and the equilibrium quantity is 300. (b) the equilibrium price is $16 and the equilibrium quantity is 200. (c) the equilibrium price is $16 and the equilibrium quantity is 300. (d) the equilibrium price is $16 and the equilibrium quantity is 450. (A)