Economics review questions

/in , /by
  1. Final review (1)
  2. Trading Countries: Assume that Brazil and Chile can switch between producing beef and producing wheat at a constant rate.  The following table shows the pounds of beef or the bushels of wheat each country can produce in one hour.  Brazil has an absolute advantage in the production of
  • wheat and Chile has an absolute advantage in the production of beef.
  • beef and Chile has an absolute advantage in the production of wheat.
  • both goods and Chile has an absolute advantage in the production of neither good.
  • neither good and Chile has an absolute advantage in the production of both goods.

 

  1. Trading Countries: Assume that Brazil and Chile can switch between producing beef and producing wheat at a constant rate.  The following table shows the pounds of beef or the bushels of wheat each country can produce in one hour.   Brazil should specialize in the production of
  • wheat and Chile should specialize in the production of beef.
  • beef and Chile should specialize in the production of wheat.
  • both goods and Chile should specialize in the production of neither good.
  • neither good and Chile should specialize in the production of both goods.

 

  1. Trading Countries: Assume that Brazil and Chile can switch between producing beef and producing wheat at a constant rate.  The following table shows the pounds of beef or the bushels of wheat each country can produce in one hour.  Which of the following prices would both Brazil and Chile gain from trade with each other?
  • 6 bushels of wheat for 3 pounds of beef.
  • 6 bushels of wheat for 4 pounds of beef.
  • 6 bushels of wheat for 5 pounds of beef.
  • 6 bushels of wheat for 6 pounds of beef.

 

  1. Consider that after much lobbying by quite a few special interest individuals and groups, the government decides to increase the tariff on foreign-produced shoes. As a result of this action,
    • one would expect that the domestic price of shoes would fall.
    • one would expect that the supply of foreign shoes to the domestic market would decline, causing the domestic shoe price to rise.
    • one would expect the number of unemployed workers in the domestic shoe industry would rise.
    • one would expect the demand for foreign-produced shoes would increase, causing the price of shoes to decrease in other nations.
  2. Final review (1)
  3. A significant technology improvement occurred in the manufacturing sector near a small town about 25 miles west of Albany, New York. This led to an increase in the supply of quite a few essential products such as laundry detergent.  As a result, the price of laundry detergent decreased from $12 to $8, and the quantity demanded increased from 90 to 110 cases.  Using the midpoint method, one can conclude that the price elasticity of demand (in absolute terms) for this price change is equal to
    • 2
    • 5
    • 2
    • 5

 

  1. Consider the market for apple fritters. If the firms collectively produce a quantity smaller than the equilibrium of supply and demand, this quantity is inefficient because the marginal buyer’s willingness to pay is
    • negative
    • zero
    • positive but less than the marginal seller’s cost.
    • positive and greater than the marginal seller’s cost.

 

  1. Over the past 4 years, the expenditures made have been greater than the tax revenue collected. The local government seeks to raise tax revenue without causing a significant loss in welfare.  The economic advisors suggest that the government should consider implementing a sales tax on goods with__________ elasticities of demand and______________ elasticities of supply as a way to raise tax revenue while minimizing the deadweight loss.
    • small, small
    • large
    • large, small
    • large, large

 

  1. On April 30, the Wall Street Journal reported that oil companies were shutting down operations in response to low oil prices to a much greater degree than analysts anticipated. What must be the case?
    • The demand for oil is less elastic that analysts thought.
    • The demand for oil is more elastic than analysts thought.
    • The supply of oil is less elastic than analysts thought.
    • The supply of oil is more elastic than analysts thought.

 

  1. Consider a market where the demand and supply for the good are described by the following equations: QD = 225 – 3P and QS = – 22.5 + 1.5P. If the government implements a price floor of $60, this would result in
    • a surplus of 45 units.
    • a shortage of 45 units.
    • a surplus of 22.5 units.
    • a shortage of 22.5 units.