Question 1

Suppose the government imposes a tariff on imported batteries, as shown in the figure. The area labeled $(A + E)$ represents:

Accepted Answer

Tariff revenue

Question 2

According to the Demand and Supply Model, raising the minimum wage typically results in ____, and creates a ____.

Accepted Answer

Reduced employment; deadweight loss

Question 3

If the price of hotdogs, which are a complement to hotdog buns, rises, which of the following is correct?

Accepted Answer

The quantity demanded of hotdog buns decreases.

Question 4

The production possibilities frontier (PPF) is downward sloping, which illustrates that:

Accepted Answer

Countries face tradeoffs.

Question 5

Refer to the table: Jeffrey's PPF between peanut butter ice cream and peanut butter cookies. If Jeffrey moves from Point A to Point B, the opportunity cost of producing an additional gallon of ice cream is:

Accepted Answer

$20$ dozen cookies

Question 6

Based on the PPF between steak and cookies, the opportunity cost of producing an additional pound of steak is greatest at:

Accepted Answer

Point D

Question 7

If bus tickets are an inferior good and consumers' incomes fall, what happens to the equilibrium price and quantity of bus tickets?

Accepted Answer

The equilibrium price and quantity will both rise.

Question 8

Suppose the face value price of a concert ticket is $55, but the current secondary market price is $120. At the initial face value price, there is:

Accepted Answer

A shortage

Question 9

Whenever the price of a good or service is above the equilibrium price, there will be a ____, and the quantity demanded will ____ the quantity supplied.

Accepted Answer

Surplus; be less than

Question 10

The attainable production points on a production possibilities frontier are:

Accepted Answer

The points along and inside the production possibilities frontier

Question 11

Refer to the table: If the equilibrium price of a drone is $500, what is the equilibrium quantity?

Accepted Answer

$6,400$ drones

Question 12

Refer to the table: If an innovative production technology increases the supply of drones by $400$ drones at every price, at the initial equilibrium price, there is a ____, and the equilibrium price of a drone will ___.

Accepted Answer

Surplus; fall

Question 13

Based on the PPF graph for Bryce and Cathy, Bryce has an absolute advantage in producing coconut ice cream, and Cathy has a comparative advantage in producing key lime pies. This means:

Accepted Answer

Bryce: coconut ice cream; Cathy: key lime pies

Question 14

If the price of cheese, which is a substitute in production for cream, rises, which of the following is correct?

Accepted Answer

The supply of cream decreases.

Question 15

Increasing opportunity costs imply that:

Accepted Answer

Producing additional units of one good results in increasing amounts of lost output of the other good.

Question 16

The price of wood boards, which are a complement in production for saw dust, rises. As a result, the equilibrium price of saw dust ____, and the equilibrium quantity of saw dust ___.

Accepted Answer

Falls; decreases

Question 17

Suppose the government imposes an excise tax of $2 per bucket in the market for tater tots. According to the graph, consumers pay ___ of this tax.

Accepted Answer

$1

Question 18

Smartphones are a normal good, and consumers' incomes fall. As a result, the equilibrium price of a smartphone ___ and the equilibrium quantity of smartphones ___.

Accepted Answer

Falls; decreases

Question 19

If the price of coffee beans rises, a country should ___ coffee beans, and as a result, domestic coffee bean producers are made ___ off.

Accepted Answer

Export; better

Question 20

Consumers expect the price of gasoline to rise in the near future. As a result, the equilibrium price of gasoline ___ and the equilibrium quantity of gasoline ___.

Accepted Answer

Rises; increases

Principles of Macroeconomics: Midterm 1 Study Guide

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