Midterm Practice Exam

In one hour (illustrative), Sofia can bake 6 pies or 2 cakes, and Ravi can bake 2 pies or 2 cakes. Ravi is offered 4 pies for each cake he gives Sofia. What does the comparative-advantage model predict about this deal?

Select one.

• Ravi refuses, because he would receive less than a cake costs him to bake
• Both bakers gain, because any rate they agree on helps both
• Both bakers refuse, because 4 lies outside the range that helps them
• Sofia refuses, because she would pay more than the 3 pies a cake costs her to bake

A nation that can make every good with less labor than its trading partner can still come out ahead by concentrating on the good it makes at the lowest opportunity cost and importing the rest.

True or false.

• True
• False

Demand for a museum's audio guides (illustrative) is Qd = 70 − 5P. The guide's own price drops from 11 to 9 dollars while all else stays the same, and the number rented climbs from 15 to 25, a midpoint elasticity of −2.5. Which statement correctly names the change and says what −2.5 measures?

Select one.

• Demand increased, and the elasticity measures how far the demand curve moved right
• Quantity demanded rose along a fixed curve, and the elasticity measures how strongly
• Supply increased, and the elasticity measures how far the supply curve moved
• Demand decreased, and the elasticity measures the change in total revenue

A weekend cooking workshop charges a 45-dollar fee, and attending takes 3 hours that Imani would otherwise spend tutoring at 20 dollars an hour, her best other use of the time. What does the workshop really cost her?

Select one.

• 45 dollars, the workshop fee alone
• 65 dollars, the fee plus one hour of tutoring
• 105 dollars, the fee plus the tutoring pay she gives up
• 135 dollars, the fee multiplied by the 3 hours she is away

An illustrative market has demand read as prices P = 18 − Q ⁄ 5 and supply read as prices P = 6 + Q ⁄ 5, with P in dollars and Q in units per day, and the lines meet at 12 dollars and 30 units. What makes a 40th unit of trade reduce total surplus?

Select one.

• It is worth 10 dollars to a buyer but costs a seller 14 dollars
• It is worth 14 dollars to a buyer and costs a seller 10 dollars
• It pushes the price above 12 dollars, which hurts buyers
• It leaves unsold units piling up at the equilibrium price

A market for concert posters (illustrative) starts with demand Qd = 100 − 5P and supply Qs = 5P − 20, with P in dollars and quantities in posters per week. At once, demand grows to Qd = 110 − 5P and supply shrinks to Qs = 5P − 30, each by 10 posters at every price. Which conclusion is correct?

Select one.

• Both curves moved, so the price and the quantity must both fall in every case of this kind
• Demand rose, so the quantity must climb above 40 while the price stays at 12 dollars
• The price rises to 14 dollars for certain; quantity stays at 40 only because the shifts are equal
• The quantity must fall because supply fell, while the change in price cannot be signed

A valley village's production possibilities frontier (illustrative) is written (loaves of bread, baskets). Moving from (32, 40) to (40, 0) adds the last 8 loaves. What is the opportunity cost of each of those loaves?

Select one.

• 5 baskets per loaf
• 40 baskets per loaf
• 0.2 baskets per loaf
• 8 baskets per loaf

In one hour (illustrative), Rosa can paint 12 mugs or 3 vases, and Kofi can paint 6 mugs or 2 vases. What is Rosa's opportunity cost of painting one vase?

Select one.

• 1⁄4 mug per vase
• 3 mugs per vase
• 4 mugs per vase
• 3 vases per hour

Which of these statements are positive rather than normative? Choose every one that applies.

Select every option that applies.

• Raising the bridge toll would reduce the number of cars crossing each day.
• A bakery that hires a second baker will bake more loaves each morning.
• The town should give every resident a free bus pass.
• When stadium ticket prices rise, fewer fans attend the games.
• It is unfair that some neighborhoods have fewer parks than others.

Which research question would a microeconomist take up, rather than a macroeconomist?

Select one.

• How fast prices are rising on average across the nation
• How a family farm decides how many acres of beans to plant
• What share of the nation's workforce is looking for a job
• How quickly the nation's total production grew over a decade

In one hour (illustrative), Nadia can print 9 posters or 3 banners, and Ike can print 4 posters or 2 banners. Which of them has the comparative advantage in banners, and for what reason?

Select one.

• Ike, because a banner costs him 2 posters and costs Nadia 3
• Nadia, because she prints 3 banners an hour and Ike prints only 2
• Nadia, because she holds the absolute advantage in both goods
• Neither, because Nadia is the faster printer of everything

Which description fits a producer that holds the comparative advantage in a particular good?

Select one.

• It turns out more of that good than a rival from the same inputs
• It turns out more of every good than a rival does
• It can charge a higher price for that good than a rival
• It gives up less of other goods to make that good than a rival

Along the demand line Qd = 180 − 30P (illustrative), each 1-dollar increase in price cuts quantity demanded by exactly 30 units, so the price elasticity of demand is identical at every point on the line.

True or false.

• True
• False

Demand for gym day passes (illustrative) follows Qd = 200 − 20P. The price of a pass climbs from 4 dollars to 6 dollars, and no other influence on buyers changes. What is the correct description?

Select one.

• Demand decreases, so the whole demand curve shifts left
• Quantity demanded falls from 120 to 80 passes along the demand curve
• Quantity demanded rises from 80 to 120 passes along the demand curve
• Demand increases, so the whole demand curve shifts right

In an illustrative market for used e-scooters, five buyers would pay at most 115, 90, 70, 45 and 20 dollars for one scooter, and five sellers would take no less than 10, 30, 55, 75 and 95 dollars. Scooters change hands at 60 dollars. How large is producer surplus?

Select one.

• 70 dollars
• 85 dollars
• 95 dollars
• 180 dollars

A city market for parking permits (illustrative) has demand Qd = 100 − 5P and supply Qs = 5P − 20, with P in dollars and Q in permits per day; left alone it clears at 12 dollars and 40 permits. The city imposes a price ceiling of 8 dollars. What is the result?

Select one.

• Sellers offer 60 permits and buyers want 20, a surplus of 40
• Buyers want 60 permits and sellers offer 20, a shortage of 40
• Buyers want 60 permits and sellers offer 40, a shortage of 20
• Nothing changes, because a ceiling matters only above 12 dollars

If bakeries must pay their workers higher wages, the demand curve for bread moves to the left.

True or false.

• True
• False

Restaurant meals are a normal good. After household incomes go up, demand for meals (illustrative) moves from Qd = 60 − 4P to Qd = 84 − 4P, with Qd in meals per week. How many meals do diners want at 5 dollars on the new demand rule?

Select one.

• 40 meals per week
• 24 meals per week
• 64 meals per week
• 84 meals per week

A market for ferry-dock storage lockers (illustrative) has demand Qd = 150 − 10P and supply Qs = 20P − 60, with P in dollars and Q in lockers per month; with no rule in place it settles at 7 dollars and 80 lockers. Which one of these price ceilings would actually be binding?

Select one.

• A ceiling of 9 dollars
• A ceiling of 8 dollars
• A ceiling of 10 dollars
• A ceiling of 6 dollars

A small market (illustrative) has 20 identical buyers, and each one wants q = 12 − 2P units a week. What is total quantity demanded in this market at a price of 3 dollars?

Select one.

• 120 units per week
• 6 units per week
• 20 units per week
• 60 units per week

In an illustrative market for used laptops, five buyers would pay at most 150, 120, 100, 80 and 50 dollars for one laptop, and five sellers would take no less than 30, 50, 65, 75 and 120 dollars. Matching the highest value with the lowest cost, then the next highest with the next lowest, how many sales give the greatest total surplus?

Select one.

• Five sales, because every extra sale adds to the gains
• Three sales, because the fourth pair gains only 5 dollars
• Two sales, because only the first two gains are large
• Four sales, because the fifth pair's gain is negative

The prediction that riders buy fewer bus passes when the fare goes up, holding all else fixed, rests on values and is therefore a normative claim.

True or false.

• True
• False

An illustrative market has demand read as prices P = 16 − Q ⁄ 4 and supply read as prices P = 4 + Q ⁄ 4, with P in dollars and Q in units per day, and the lines meet at 10 dollars and 24 units. According to the demand curve, how much is the 12th unit worth to the buyer who gets it?

Select one.

• 7 dollars
• 6 dollars
• 13 dollars
• 19 dollars

Which of these claims about minimum-wage laws are positive, meaning evidence or the model could check them, rather than value judgments? Choose all that apply.

Select every option that applies.

• Lawmakers should raise the minimum wage even if a few workers lose hours.
• Neumark and Wascher (2000) reworked the New Jersey evidence with payroll records and found a fall in employment.
• In the simple competitive model, a binding wage floor raises the pay of workers who keep their jobs.
• No minimum wage is acceptable if it costs any worker a job.

In a market for fresh bagels (illustrative), demand is Qd = 120 − 4P and supply is Qs = 6P − 30, with P in dollars and quantities in dozens per day. Solve Qd = Qs. Where does this market come to rest?

Select one.

• At 15 dollars, with 60 dozen per day bought and sold
• At 5 dollars, with 0 dozen per day bought and sold
• At 18 dollars, with 48 dozen per day bought and sold
• At 12 dollars, with 72 dozen per day bought and sold