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ECON 304 Lecture Notes - Lecture 22: Celery, Dim Sum

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beigewhale811
21 Oct 2020
School
American River College
Department
Economics
Course
ECON 304
Professor
Rosario

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Document Summary

Costs of resources resource costs clearly affect production costs and supply. If resources such as raw materials or labor become more expensive, production costs will rise and supply will be reduced (the supply curve shifts to the left, from s0 to s2 in figure 6). The reverse is true if resource costs drop (the supply curve shifts to the right, from s0 to s1). The growing power of microchips along with their falling cost has resulted in cheap and plentiful electronics and computers. Nanotechnology manufacturing processes that fashion new products through the combination of individual atoms may soon usher in a whole new generation of inexpensive products. However, when the cost of resources (such as oil and farm products) rise, the cost of products using those resources in their manufacture will go up, leading to the supply being reduced (the supply curve shifts leftward). Prices of related commodities most firms have some flexibility in the portfolio of goods they produce.

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Related Questions

Q 1: Below is a production possibilities table for consumer goods and capital goods : Production Alternatives Capital Goods Consumer Goods A 0 70 B 3 65 C 6 55 D 9 40 E 12 20 F 15 0 a. Show these data graphically. Upon what specific assumptions is this production possibilities curve based? b. If the economy is at point C, what is the cost of one more unit of capital good? Of one more unit of consumer good? Explain how the production possibilities curve reflects the law of increasing opportunity costs. c. If the economy characterized by this production possibilities table and curve were producing 7 units of capital goods and 45 units of consumer goods, what could you conclude about its use of its available resources? d. What would production at a point outside the production possibilities curve indicate? What must occur before the economy can attain such a level of production? e. Assume consumer good are bread and cookies here. What happens to this frontier if disease kills half of the economy’s hens and cows? Q 2(a): How does self-interest help achieve society’s economic goals? Why is there such a wide variety of desired goods and services in a market system? In what way are entrepreneurs and businesses at the helm of the economy but commanded by consumers? b. Why is private property, and the protection of property rights, so critical to the success of the market system? c. How the market system decides what to produce, how to produce it, and who obtains it. Q 3: How will each of the following changes in demand and/or supply affect equilibrium price and equilibrium quantity in a competitive market; that is, do price and quantity rise, fall, or remain unchanged, or are the answers indeterminate because they depend on the magnitudes of the shifts? Use supply and demand diagrams to verify your answers. i. Supply decreases and demand is constant. ii. Demand increases and supply increases. iii. Supply increases and demand decreases. b. Explain why the price in competitive markets settles down at the equilibrium intersection of supply and demand. Explain what happens if the market price starts out too high or too low. c. Consider the following events: Scientists reveal that consumption of oranges decreases the risk of Corona Virus and, at the same time, farmers use a new fertilizer that makes orange trees more productive. Illustrate and explain what effect these changes have on the equilibrium price and quantity of oranges.

Question 26 pts

Which of the following is not a reason why specialization and trade are beneficial to society?

Specialization fosters learning by doing, thus lowering the unit-costs of products

Firms and workers become less dependent on others for producing goods and services

The total output of economic goods may be increased even without any increase in resources

Scarce resources are utilized more efficiently by exploiting differences among them

Question 27 pts

Laissez-faire capitalism limits the government's economic functions to the following, except:

Protecting private property rights

Establishing a legal environment to enforce contracts among individuals

Setting prices of individual goods and services

Preventing individuals and firms from coercing others

Question 28 pts

A production system where various workers concentrate on different specialized tasks to contribute towards a whole product is referred to as:

Roundabout production

A coincidence of wants

Freedom of enterprise

Division of labor

Question 29 pts

The market system is said to be characterized by "consumer sovereignty." This is because:

A sovereign government determines which consumer goods will be produced

Firms must match their production decisions to the consumers' choices

The prices of consumer goods are regulated by a sovereign government

Consumer goods are considered to be more important than capital goods

Question 30 pts

Consumers express self-interest when they:

Seek the lowest price for a product

Reduce business losses

Exclude others in their thinking

Collect economic profits

Question 311 pts




Refer to the above graph with three demand curves. An "increase in quantity demanded" would be illustrated by a change from:

Point 5 to point 1

Point 4 to point 1

Point 2 to point 5

Point 4 to point 6

Question 32 pts

The table below shows the weekly demand for hamburger in a market where there are just three buyers.



Refer to the above table. At a price of $6, the weekly market quantity demanded for hamburger is:

17

23

24

18

Question 33pts

If farmers withhold some of their current corn harvest from the market because they anticipate a higher price of corn in the near future, then this would cause a(n):

Movement up along the current supply curve of corn

Movement down along the current supply curve of corn

Leftward shift in the current supply of corn

Rightward shift in the current supply of corn

Question 34 pts

Which of the following will not cause the supply curve to shift?

A technological change in the production of the good

A change in the prices of other goods that producers could be producing

A change in the costs of resources needed to produce the good

A change in the price of the good

Question 35 pts

All of the following would affect the position of the supply curve for cranberries, except the:

Price of agricultural land for cranberries

Cost of fertilizers for cranberry production

Popularity of cranberry drinks

Development of a new pest control for cranberries

Question 36 pts

When high-school and college graduates apply for jobs in the labor markets,

Job applicants and employers are both "buyers".

Job applicants are the "sellers" while employers are the "buyers".

Job applicants and employers are both "sellers".

Job applicants are the "buyers" while employers are the "sellers".

Question 37 pts




Refer to the figure above, which shows three supply curves for corn. Which of the following would cause the supply of corn to shift from S1 to S2?

A decrease in consumer incomes, assuming corn is a normal good

The development of a more effective insecticide against corn rootworm

An increase in the price of fertilizer

A change in consumer tastes away from cornbread

Question 38 pts

Which is of the following statements is correct?

If demand increases, then price will decrease

If demand decreases, then price will decrease

If price decreases, then demand will decrease

If price increases, then demand will decrease

Question 39 pts

Which would be a likely cause of an increase in the demand for pizza?

A decrease in the price of hamburger sandwiches

A health report showing eating pizza reduces stress

A reduced desire for take-out and fast-food dining

A decrease in the prices of cheese, pepperoni, and mushrooms

Question 40 pts

A market for a product reaches equilibrium when:

Price falls further after there is a shortage

The price rises further after there is a surplus

Buyers intend to buy a quantity equal to the quantity that sellers intend to sell

The actual quantity bought by buyers equals actual quantity sold by sellers

Question 41 pts

A higher price reduces the quantity demanded for a product because:

Individuals can afford less of the product and will switch to substitutes

The financial assets of individuals increase

Individuals will buy more of the product and less of its substitutes

The purchasing power of individuals increases

Question 42 pts

The idea of the Law of Demand, as applied to electric cars, assumes which of the following to be constant?

Price of electric cars

How much sellers are charging customers for electric cars

Price of gasoline cars

Quantity of electric cars demanded by buyers

Question 43 pts

Use the following graph of the demand for coffee:



Refer to the above diagram of three demand curves for coffee. An increase in the price of coffee, other factors constant, would cause a:

Movement from point a to point b

Movement from point b to point a

Shift from D1 to D2

Shift from D1 to D3

Question 44 pts

Which of the following factors will decrease the current demand for a product?

A decrease in the current price of a complementary product

A decrease in the current price of a substitute product

An increase in the current price of a substitute product

An expected increase in the future price of the product

Question 45pts

In competitive markets, a surplus or shortage will:

Cause shifts in the demand and supply curves that tend to eliminate the surplus or shortage

Cause changes in the quantities demanded and supplied that tend to intensify the surplus or shortage

Cause changes in the quantities demanded and supplied that tend to eliminate the surplus or shortage

Never exist because the markets are always at equilibrium

Question 46 pts

Which of the following would cause a leftward shift in the supply curve for car washes?

A decrease in taxes on car washes

An increase in the price of car washing equipment

A decrease in the price of water

An increase in the number of cars in the city

Question 47pts

The market system automatically corrects a surplus condition in a competitive market by:

Raising the price of the commodity in question while decreasing the quantity demanded

Raising the price of the commodity in question while increasing the quantity demanded

Reducing the price of the commodity in question while increasing the quantity demanded

Reducing the price of the commodity in question while decreasing the quantity demanded

Question 48 pts

A leftward shift of the supply curve for oil in the United States is most likely to result from:

A decrease in the world price of oil

An increase in the costs of exploration and drilling for oil

An increase in the subsidy for oil exploration and drilling

A decrease in the fees that oil companies must pay for drilling licenses

Question 49 pts

A fall in the price of milk, used in the production of ice cream, will:

Decrease the supply of ice cream

Have no effect on the supply of ice cream

Increase the supply of ice cream

Cause a movement along the supply curve of ice cream

Question 50 pts




Refer to the above graph, which shows the market for beef where demand shifted from D1 and D2. The change in equilibrium from E1 to E2 is most likely to result from:

An increase in the cost of cattle feed

A decrease in consumer incomes

A decrease in the tax on beef products

An increase in the price of pork

1. The Houston Chronicle reported that in Houston, the average price of new homes has decreased, while at the same time, the number of new homes sold has increased. This situation could be explained by which one of the following: (draw curves before answering)

  1. An Increase in demand
  2. An Increase in supply
  3. A Decrease in demand
  4. A Decrease in supply

2. In another market, the average price of new homes fell, while at the same time, the number of new homes sold decreased. The situation would best be explained by (Draw the curves before answering)

  1. An Increase in Demand
  2. An Increase in Supply
  3. A Decrease in demand
  4. A Decrease in supply

3. A consumer is said to have achieved maximum total utility when:

  1. Purchases of Good A give the same satisfaction as purchases of Good B.
  2. Purchases of the last dollar spent on Good A give the same satisfaction as purchases of the last dollar spent on Good B.
  3. The average purchases per dollar of Good A give the same satisfaction as the average purchases per dollar of Good B.
  4. The total utility derived from Good A is the same as the marginal utility derived from Good B.

4. You are given the following information about a firm's present output position: MPP (Marginal Physical Product) of Land = 12; MPP of Labor = 16; Price of Land = $2; Price of Labor = $4. With no additional money to spend, this firm should:

5. A firm achieves the least cost in production by substituting factors until

  1. their factor prices are equal
  2. their marginal products are equal to the factor prices
  3. their marginal products are each equal to zero
  4. the ratios of their marginal product equal the ratio of their prices
  5. none of the above

6.The economy is currently on its production possibilities frontier (PPF). A politician says that it is possible to get more of everything--more infrastructure, more schools, more national defense, more spending on social programs, and so on. The politician is

  1. correct if he is assuming a rightward-shifting PPF.
  2. incorrect if he is assuming a rightward-shifting PPF.
  3. correct if he is assuming a PPF that does not change.
  4. none of the above

7. Assume your swimsuit business is at its maximum profit position, and one new change occurs: consumer incomes decrease. If swimsuits are normal goods, the equilibrium price of swimsuits will __________, and the CONSUMER surplus will ________.

  1. increase, increase
  2. decrease, decrease
  3. increase, decrease
  4. decrease, increase

8. Firms that shuts-down in the short-run still must pay:

  1. Marginal cost
  2. Variable cost
  3. Fixed cost
  4. Total cost

9. The term externalities refer to:

  1. Black-market economic activity.
  2. The impact on markets of imported goods.
  3. The costs and benefits of a market activity borne by a third party.
  4. The inequitable distribution of income.

10. If full external costs are not internalized, firms will tend to allocate more of society's scarce resources to produce than is societally warranted, and if full external benefits are not internalized, firms will allocate less of society's resources to produce than is societally justified. True/False.

11. Joe was very careful about smoking in his home until he bought a fire insurance policy. After buying the policy, he became careless. His attitude is: "I'm insured. What do I care if this place burns down; I'll just collect the money". Joe's attitude is an example of ______________.

12. Megatrust Bank had historically scrutinized loans very carefully and extended them, only to persons whom they considered very creditworthy. They made relatively few loans. However, after the government provided guarantees to sub-prime loans, Megatrust relaxed its standards and increased its loan volume. (And its default rate as well.) This is an example of _______________.

13. In the short-run, if a perfectly competitive firm finds itself operating at a loss, it will

  1. Reduce the size of its plant to lower fixed costs.
  2. Raise the price of its product.
  3. Shut down.
  4. Continue to operate as long as it covers its variable cost.

14. If income today is more equally distributed than it was in 1960, a Lorenz Curve depicting today's distribution would be

  1. More bowed and to the left of the 1960's curve.
  2. More bowed and to the right of the 1960's curve.
  3. Less bowed and to the left of the 1960' curve.
  4. Less bowed and to the right of the 1960's curve.

15. Which of the following statements is true?

  1. As output increases, the average fixed cost becomes smaller and smaller.
  2. Average fixed cost does not change as output increases.
  3. The marginal cost curve intersects the average fixed cost curve at its minimum point.
  4. When marginal cost is greater than average fixed cost, average fixed cost increases.
  5.  

16. A firm in any of the market structures we have studied will maximize its profit (or minimizes its loss) when its

  1. Average costs are at a minimum
  2. Marginal revenue and marginal cost are the same.
  3. Marginal revenue is less than marginal cost.
  4. Marginal revenue is zero.

17. If the demand for a good increase, when the price of other good increases, these goods are

  1. Capital goods
  2. Substitute goods
  3. Complementary goods
  4. Luxury goods

18. Which of the following pairs of products are complementary goods?

  1. mobile phones and laptops
  2. pens and pencils
  3. sugar and artificial sweeteners
  4. radios and television
  5. toothbrushes and toothpaste

19. The amount of a good that is given up to produce another good is:

  1. Scarcity
  2. Specialization
  3. Opportunity cost
  4. Trade
  5. Efficiency

20. The most important characteristic of the equilibrium price is that it:

  1. Guarantees that producers earn a profit.
  2. Increases the quantity demanded.
  3. Clears the market.
  4. Decreases the quantity supplied.

21. Rank the following market structures based on the number of participating firms: From the fewest number of firms to the most number of firms:

  1. Oligopoly
  2. Perfect Competition
  3. Monopoly
  4. Monopolistic Competition

22. If firms in a monopolistically competitive market are earning economic profits which of the following scenarios would best reflect the change facing incumbent firms as the market adjusts to its new equilibrium?

  1. an increase in demand
  2. a decrease in demand
  3. a downward shift in their marginal cost curve
  4. an upward shift in their marginal cost curve


23. If labor in Mexico is less productive than labor in the United States in all areas of production, 

  1. neither nation can benefit from trade
  2. Mexico can benefit from trade but the United States cannot
  3. Mexico will not have a comparative advantage in any good
  4. both nations can benefit from trade

24. Which of the following statements is false?

  1. The typical monopolistically competitive firm could reduce its average total cost if it produced more output.
  2. Monopolistically competitive firms advertise to increase the elasticity of the demand curve they face.
  3. Expensive advertising might help consumers if it is a signal that the product is good.
  4. Brand names acquired at great cost might help consumers by assuring quality.

25. Suppose the state of Wyoming passes a law that increases the tax on cigarettes. As a result, smokers who live in Wyoming start purchasing their cigs in surrounding states. Which of the following principles does this best illustrate:

  1. people respond to incentives
  2. rational people think at the margin
  3. a trademark can make everyone better off
  4. markets are usually a good way to organize economic activity