ECON 1102 Test Section 711 SS1 2016 Do Any 40 O

ECON 1102, Test ECON 1102, Section 711, SS1 2016 Do any 40 of the 50 questions

Answer questions 1 through 4 based on the graph below. 1. The initial demand curve is D1. There are no rent ceilings or floors. The initial equilibrium monthly rent is _____. (Put your answer on the answer sheet) 2. The demand curve shifts leftward from D1 to D0 so that D0 is the relevant demand curve. There are no rent controls. In the short run, the decrease in demand results in A) lower rents and a decrease in the equilibrium quantity. B) higher rents and a decrease in the equilibrium quantity. C) lower rents and an increase in the equilibrium quantity. D) higher rents and an increase in the equilibrium quantity. 3. The demand curve shifts rightward from D0 to D1 so that D1 is the relevant demand curve. Suppose the government imposes a rent ceiling of $300 per month. In the short run there will be A) a shortage and a decrease in search costs. B) a shortage and an increase in search costs. C) a surplus and an increase in search costs. D) a surplus and a decrease in search costs. 4. The demand curve shifts rightward from D0 to D1 so that D1 is the relevant demand curve. Suppose the government imposes a rent ceiling of $500 per month. In the short run there will be A) a surplus of apartments. B) a shortage of 200,000 apartments. C) a shortage of 300,000 apartments. D) neither a shortage nor a surplus of apartments. 5. A price floor A) always results in a surplus. B) always results in a shortage. C) results in a surplus if the floor price is greater than the equilibrium price. D) results in a shortage if the floor price is greater than the equilibrium price. ECON 1102, Test Answer questions 6 through 8 based on the table below. Wage rate (dollars per hour) Labor supplied (millions of workers) Labor demanded (millions of workers) . What is the equilibrium wage rate in an unregulated market? ____ (Put your answer on the answer sheet) 7. If the minimum wage is set at $12 per hour, the number of unemployed workers will be ____ 8. If the market is in equilibrium today, and tomorrow a minimum wage is set at $11 per hour, the number of workers who will lose their jobs is _____ 9. In general, how a sales tax is divided between buyers and sellers is determined by A) the elasticities of supply and demand. C) who the law says must pay the tax. B) the government’s choice of whom to tax. D) the revenue needs of government. 10. A tariff A) is a tax imposed on imported goods. B) is a tax imposed on exported goods. C) encourages worldwide specialization according to the principle of comparative advantage. D) has no effect on prices paid by domestic consumers even though it increases the revenue collected by domestic producers. 11. Determining the comparative advantage of a country requires that you look at the economic notion of A) external cost. B) ceteris paribus. C) accounting and economic profit. D) opportunity costs. 12. A country that is limiting imports of a good by allowing only a certain number to be imported is using A) tariffs. B) quotas. C) non-tariff regulatory barriers. D) buy "American advertising". 13. The terms of trade reflect the: A) rate at which gold exchanges internationally for any domestic currency. B) fact that the gains from trade will be equally divided. C) ratio at which nations will exchange two goods. D) cost conditions embodied in a single country's production possibilities curve. 14. Raising a tariff on an imported good will ________ the domestic quantity consumed of the good, while ________ the domestic production of the good A) increase; increasing B) increase; decreasing C) decrease; decreasing D) decrease; increasing 15. A key difference between tariffs and quotas is that A) consumers are hurt with quotas but not with tariffs. B) consumers are hurt with tariffs but not with quotas. C) the government receives revenue with tariffs, but the importer receives the added revenue with quotas. D) the government receives revenue with quotas, but the importer receives the added revenue with tariffs. ECON 1102, Test The figure below shows the domestic supply of and domestic demand for an imported good. The world price is $15 per unit. Answer questions 16 through 20 based on the information on the graph. Put your answers on the answer sheet. 16. At the world price of $15 per unit and no tariff, what is the quantity imported? 17. At the world price of $15 per unit and no tariff, what is the domestic production? 18. If the government imposes a tariff of $5 per unit, what is the domestic consumption? 19. With a tariff of $5 per unit, what is the quantity imported? 20. How much revenue does the government collect with a tariff of $5 per unit? 21. Which of the following is correct? A) If a firm is technologically efficient, it is always producing at the lowest costs of production. B) If a firm is economically efficient, it is always technologically efficient. C) If a firm is technologically efficient, it is always economically efficient. D) None of the above answers is correct. 22. To economists the main difference between the short run and the long run is that: A) in the long run all resources are variable, while in the short run at least one resource is fixed. B) the law of diminishing returns applies in the long run, but not in the short run. C) in the short run all resources are fixed, while in the long run all resources are variable. D) fixed costs are more important to decision making in the long run than they are in the short run. 23. Which of the following statements does NOT correctly characterize normal profit? A) It is part of a firm's opportunity cost. B) It is equal to a firm's total revenue minus its opportunity cost. C) It is the average return for supplying entrepreneurial ability. D) None of the above because all the statements correctly characterize normal profit. 24. An economic profit for a self-employed entrepreneur is A) an opportunity cost. B) the same as the normal profit. C) a profit over and above opportunity cost. D) None of the above answers is correct. ECON 1102, Test Techniques that produce 100 sweaters Technique Labor (hours) Capital (machines) A 10 50 B 25 25 C 10 45 D . In the above table, the technique that is not technologically efficient is A) A. B) B. C) C. D) D. 26. In the above table, the technique that is never economically efficient is A) A. B) B. C) C. D) D. 27. Using the data in the above table, if the price of an hour of labor is $20 and the price of a unit of capital is $10, then the most economically efficient technique for producing 100 sweaters is A) A. B) B. C) C. D) D. 28. Using the data in the above table, if the price of an hour of labor is $30 and the price of a unit of capital is $40, then the most economically efficient technique for producing 100 sweaters is A) A. B) B. C) C. D) D. 29. Even though the market for bricks has a low concentration ratio nationally, the U.S. Justice Department might still scrutinize any mergers in this industry because the A) HHI is high nationally. B) HHI is above 1800 nationally. C) HHI is below 1800 nationally. D) market is regional not national, and the regional concentration might be high. Company Sales (millions of dollars) A 120 B 90 C 456 D 352 E 100 F 53 G. The table above shows sales of the firms in the chocolate industry. The four-firm concentration ratio in the industry is ____ 31. The table above shows sales of the firms in the chocolate industry. The Herfindahl-Hirschman Index in the industry is _____ 32. The table above shows sales of the firms in the chocolate industry. What type of market is this? A) perfect competition B) monopolistic competition C) oligopoly D) monopoly 33. By tying the salaries of top corporate managers to the price of the corporation's stock, corporations hope to avoid A) corporate governance. B) conflict between the CFO and the CEO. C) the principal-agent problem. D) paying high salaries to their managers. ECON 1102, Test If a corporation earns a profit, how do owners of the firm share in the profit? A) through coupon payments on that firm's bonds B) through dividend payments on shares of that firm's stock C) by selling any bonds or stocks owned and realizing a capital gain D) by raising the interest rate on bonds 35. The profits a corporation keeps to finance future expansion are known as A) retained earnings. B) preferred stock. C) dividends. D) capital gains. 36. A proprietorship or partnership can raise funds for expansion in all of the following ways except A) borrowing from someone or an institution willing to lend the funds. B) reinvesting profit back into the business. C) taking on a partner or more partners. D) issuing stock through financial markets. 37. Generally with bond ratings, the lower the rating, the ________ the interest rate an investor will receive and the ________ the risk that the issuer of the bond will default. A) higher; higher B) higher; lower C) lower; higher D) lower; lower 38. A normal rate of return refers to the ________ that investors must earn on the funds they invest in a firm, expressed as a percentage of the amount invested. A) minimum amount B) maximum amount C) total amount D) profit 39. What is the present value of $575 in one year if the current rate of interest is 3 percent? A) $552.88 B) $558.25 C) $592.25 D) $747. 40. Which of the following statements is correct? A) In the long run, a firm can change its plant but not the quantity of its labor. B) Long-run decisions are easily reversed. C) Short-run decisions are not easily reversed. D) A firm does not need to take into account its sunk cost when making current decisions. 41. The (incomplete) table below provides information about the relationships between labor and various product measures. The total product that can be produced with 4 units of labor is ____. 42. The amount of labor that maximizes the marginal product of labor is ___ units of labor. 43. The average product of the second unit of labor A) exceeds the marginal product of the second unit of labor. B) is less than the marginal product of the second unit of labor. C) is equal to the marginal product of the second unit of labor. D) None of the above answers is correct. 44. Which of the following statements is true? A) When marginal product is less than average product, average product is decreasing. B) When marginal product is less than average product, average product is increasing. C) When marginal product is falling, average product is decreasing. D) When marginal product is rising, average product is decreasing. 45. Marginal cost is equal to A) total cost divided by output. B) output divided by total cost. C) the change in total cost divided by the change in total revenue. D) the change in total cost divided by the change in output. 46. A decrease in the price of a fixed factor of production decreases total cost and A) increases marginal cost. B) leaves marginal cost unchanged. C) decreases marginal cost. D) increases variable cost. 47. The average total cost curve A) is U-shaped. B) diminishes initially because average fixed costs diminish. C) increases eventually because of diminishing returns. D) All of the above answers are correct. 48. A change in technology that shifts the firm's total product curve upward without changing the quantity of capital used A) shifts the average total cost curve downward. B) shifts the average total cost curve upward. C) does not change the cost curves. D) shifts the marginal cost curve upward. 49. Which of the following is correct? A) A firm's short-run average cost curve is derived from a series of long-run average cost curves. B) A firm's long-run average cost curve is derived from a series of short-run average cost curves. C) A firm's long-run total cost is the difference between its long-run fixed cost and long-run variable cost. D) Both answers A and C are correct. 50. Electric utility companies have built larger and larger electric generating stations and, as a result, the long-run average cost of producing each kilowatt hour decreased. This is an example of A) increasing marginal returns. B) diminishing marginal returns. C) diseconomies of scale. D) economies of scale.

Paper For Above instruction

The following comprehensive analysis explores key concepts of economics based on the diverse questions provided. This paper addresses demand and supply dynamics, government interventions like rent controls and tariffs, market efficiencies, market structures, firm profitability, cost analysis, and economies of scale, illustrating how these fundamental principles operate within real-world contexts.

Demand, Supply, and Market Interventions

Demand and supply are central to understanding market behavior. Initially, demand curves such as D1 represent the relationship between price and quantity demanded. The initial equilibrium rent is determined where the demand and supply curves intersect, which sets the market-clearing price. When demand shifts leftward from D1 to D0, a decrease in demand generally results in lower rents and a reduced equilibrium quantity in the short run, illustrating the responsiveness of markets to changes in consumer preferences or income (Mankiw, 2020). Conversely, a rightward shift in demand signifies increased desire for the good, which, in absence of rent controls, raises prices and quantities exchanged.

Government interventions such as rent ceilings aim to make housing more affordable but often lead to shortages, especially when set below market equilibrium rent. For example, a rent ceiling of $300 per month amid increased demand causes a shortage due to the quantity of apartments demanded exceeding supplied units, increasing search costs and inefficiencies. When rent ceilings are set higher, such as $500, the market approaches equilibrium, and shortages diminish, but some remaining scarcity persists depending on demand elasticity (Krugman & Wells, 2018).

Trade Policies: Tariffs, Quotas, and Terms of Trade

Trade policies alter the international exchange landscape. Tariffs impose taxes on imports, raising prices domestically and potentially reducing imported quantities, which can benefit domestic producers but harm consumers due to higher prices (Cavusoglu & Bolat, 2021). Quotas restrict import quantities directly, often creating more significant market distortions than tariffs. The division of tax burdens between buyers and sellers hinges on price elasticities: the more elastic side bears less of the tax burden (Pindyck & Rubinfeld, 2018).

Terms of trade reflect the ratio at which countries exchange goods, influenced by comparative advantage—the ability to produce a good at a lower opportunity cost. This concept underscores the importance of opportunity costs, which determine relative efficiencies between nations. For instance, when tariffs are imposed, they tend to protect domestic industries but can also lead to inefficiencies. Raising tariffs generally increases domestic production but decreases consumer surplus, illustrating trade-offs involved (Melitz & Ottaviano, 2017).

Market Structures and Firm Behavior

Market concentration ratios and indices such as the Herfindahl-Hirschman Index (HHI) help classify market competitiveness. A lower HHI indicates a competitive market, while higher values suggest oligopolistic or monopolistic structures. For example, a four-firm concentration ratio can quantify market share distribution, revealing the degree of competitiveness (Tirole, 2018). Firms pursue profit maximization through various techniques, factoring in technological efficiency and cost minimization, which involves understanding production functions and cost curves.

Profitability and Cost Analysis

Firms earn normal profits as part of opportunity costs, compensating entrepreneurs for their risk-taking and resource allocation. Any profit exceeding normal profit signals economic profit, which incentivizes firms to expand or innovate. Conversely, loss indicates suboptimal efficiency or market failure. Capital and labor costs significantly influence production decisions; techniques producing sweaters demonstrate how input costs and technological efficiency determine the most economical production method.

The concept of economizing on costs involves analyzing fixed and variable costs, employing cost curves such as average total cost (ATC), which tends to be U-shaped due to diminishing returns at higher outputs. Technological improvements shift the total product curve upward, lowering costs and enabling firms to produce at more competitive prices. These cost analyses help firms decide on optimal output levels and scale economies.

Economies of Scale and Long-Run Planning

Economies of scale are illustrated when increasing the size of production facilities reduces average costs, driven by factors such as specialization and efficient capital utilization. Contrarily, diseconomies of scale occur when additional expansion raises per-unit costs, often due to managerial complexities (Pugel, 2020). Firms assess long-run average costs across various scales, choosing the size that minimizes costs to maximize profitability.

Market Performance and Regulatory Actions

Market concentration and industry dynamics influence regulatory scrutiny. The Herfindahl-Hirschman Index and the concentration ratio help regulators assess market competitiveness and merger impacts. The analysis of sales data in industries such as chocolates can identify market dominance and potential monopolistic, oligopolistic, or competitive structures.

Financial Aspects of Firms

Owners of corporations share profits via dividends and capital gains, rewarding stakeholders for their investment. Firms raise funds through retained earnings, issuing bonds, or equity. Risk assessment and credit ratings impact borrowing costs; lower bond ratings typically imply higher interest rates due to increased default risk (Modigliani & Miller, 1958). Evaluating investments also involves calculating present value, considering interest rates to determine the value of future cash flows.

Production and Cost Management

Understanding the relationships between labor input and output, such as total, marginal, and average products, enables firms to optimize labor usage for maximum productivity. Marginal cost, derived from changes in total cost relative to output, guides firms in setting output levels where marginal cost equals marginal revenue.

Conclusion

In conclusion, the myriad topics covered demonstrate the interconnectedness of demand analysis