ASU Econ 211 Final Exam
What does a production possibilities frontier display? - ANS-Possible combinations of
output an economy can produce given available factors of production and technology.
What is a normative statement? - ANS-Policymakers should increase the minimum
wage to improve standard of living.
The opportunity cost of helping a friend move is... - ANS-the next best use of the time
and energy spent helping your friend.
An entity has a comparative advantage if it can produce what? - ANS-At a lower
opportunity cost than another entity.
T/F: Suppose the United States has an absolute advantage in the production of oil and
wheat. This means that the U.S. would not gain from trading these goods. - ANS-FALSE
The United States has a comparative advantage in the production of wheat and an
absolute advantage in the production of both apples and wheat relative to Canada. If
the U.S. and Canada specialize and trade, the U.S. should produce what? - ANS-Wheat
The law of the demand states that if price rises, quantity demanded does what? -
ANS-Decreases
We would expect demand for cars to increase if... - ANS-The price of gasoline falls.
As income increases, consumers purchase more cars. Cars what type of good? -
ANS-Normal goods
Supply curves show the relationship between price and quantity demanded. Assuming
the law of supply holds, supply curves are what? - ANS-Upward sloping
Which causes a leftward shift in the supply curve for apples? - ANS-An increase in the
price of labor
An increase in the equilibrium price of coffee could be caused by - ANS-A decrease in
supply of coffee.
, What is Consumer surplus? - ANS-The amount a buyer is willing to pay for a good less
the amount the buyer actually pays.
When is a market is efficient? - ANS-The sum of consumer and producer surplus is
maximized.
What is Producer surplus? - ANS-The difference between the price producers collect
and the minimum price required to bring goods to market.
Rent control is an example of what? - ANS-A price ceiling
A price ceiling on a coffee would likely cause what? - ANS-A shortage of coffee
What is minimum wage an example of? - ANS-A price floor
In the labor market, suppliers of labor are - ANS-Households
T/F: A payroll tax on a firm will raise more revenue than an income tax of the same
amount on households. - ANS-FALSE
T/F: If the government decides to impose a $1 tax on coffee, it makes no difference if
the government collect the tax from producers or consumers. - ANS-TRUE
T/F: The revenue collected by the government from a tax is not considered part of total
surplus. - ANS-FALSE
T/F: If supply and demand are relatively inelastic, deadweight loss greater than
otherwise. - ANS-FALSE
T/F: If tax rates are high enough, the government can increase revenue by lowering the
tax rate. - ANS-TRUE
What are Investment expenditures? - ANS-Firm purchases of capital goods and
inventory.
What does GDP include? - ANS-Government purchases of equipment used to build
roads.
What measure of GDP is adjusted for changing prices? - ANS-Real GDP
What does a production possibilities frontier display? - ANS-Possible combinations of
output an economy can produce given available factors of production and technology.
What is a normative statement? - ANS-Policymakers should increase the minimum
wage to improve standard of living.
The opportunity cost of helping a friend move is... - ANS-the next best use of the time
and energy spent helping your friend.
An entity has a comparative advantage if it can produce what? - ANS-At a lower
opportunity cost than another entity.
T/F: Suppose the United States has an absolute advantage in the production of oil and
wheat. This means that the U.S. would not gain from trading these goods. - ANS-FALSE
The United States has a comparative advantage in the production of wheat and an
absolute advantage in the production of both apples and wheat relative to Canada. If
the U.S. and Canada specialize and trade, the U.S. should produce what? - ANS-Wheat
The law of the demand states that if price rises, quantity demanded does what? -
ANS-Decreases
We would expect demand for cars to increase if... - ANS-The price of gasoline falls.
As income increases, consumers purchase more cars. Cars what type of good? -
ANS-Normal goods
Supply curves show the relationship between price and quantity demanded. Assuming
the law of supply holds, supply curves are what? - ANS-Upward sloping
Which causes a leftward shift in the supply curve for apples? - ANS-An increase in the
price of labor
An increase in the equilibrium price of coffee could be caused by - ANS-A decrease in
supply of coffee.
, What is Consumer surplus? - ANS-The amount a buyer is willing to pay for a good less
the amount the buyer actually pays.
When is a market is efficient? - ANS-The sum of consumer and producer surplus is
maximized.
What is Producer surplus? - ANS-The difference between the price producers collect
and the minimum price required to bring goods to market.
Rent control is an example of what? - ANS-A price ceiling
A price ceiling on a coffee would likely cause what? - ANS-A shortage of coffee
What is minimum wage an example of? - ANS-A price floor
In the labor market, suppliers of labor are - ANS-Households
T/F: A payroll tax on a firm will raise more revenue than an income tax of the same
amount on households. - ANS-FALSE
T/F: If the government decides to impose a $1 tax on coffee, it makes no difference if
the government collect the tax from producers or consumers. - ANS-TRUE
T/F: The revenue collected by the government from a tax is not considered part of total
surplus. - ANS-FALSE
T/F: If supply and demand are relatively inelastic, deadweight loss greater than
otherwise. - ANS-FALSE
T/F: If tax rates are high enough, the government can increase revenue by lowering the
tax rate. - ANS-TRUE
What are Investment expenditures? - ANS-Firm purchases of capital goods and
inventory.
What does GDP include? - ANS-Government purchases of equipment used to build
roads.
What measure of GDP is adjusted for changing prices? - ANS-Real GDP
