Multiple Choices and Answers-first midterm

Multiple Choices - Answers are at the end of this file 1 When a nation first begins to trade with other countries and the nation becomes an

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1 Answers are at the end of this file. 1. When a nation first begins to trade with other countries and the nation becomes an exporter of corn, a. this is an indication that the world price of corn exceeds the nation’s domestic price of corn in the absence of trade. b. this is an indication that the nation has a comparative advantage in producing corn. c. the nation’s consumers of corn become worse off and the nation’s producers of corn become better off. d. All of the above are correct. 2. It has been estimated that the price elasticity for cigarettes is 0.164. Assuming there are currently no taxes on cigarettes, to reduce cigarette purchases 5%, government would need to tax cigarettes enough to: a. raise the price by 0.82%. b. lower the price by 0.82%. c. raise the price by 30.5%. d. lower the price by 30.5%. 3. The difference between production possibilities frontiers that are bowed out and those that are straight lines is that a. bowed-out production possibilities frontiers apply to economies that face tradeoffs, whereas straight-line production possibilities frontiers apply to economies that do not face tradeoffs. b. bowed-out production possibilities frontiers apply to economies in which resources are not specialized, whereas straight-line production possibilities frontiers apply to economies in which resources are specialized. c. bowed-out production possibilities frontiers illustrate increasing opportunity cost, whereas straight-line production possibilities frontiers illustrate constant opportunity cost. d. straight-line production possibilities frontiers illustrate real-world conditions, whereas bowed-out production possibilities frontiers illustrate more simplistic assumptions. 4. Suppose that the equilibrium price in the market for widgets is $5. If a law increased the minimum legal price for widgets to $6, a. the resulting increase in consumer surplus would be larger than any possible loss of producer surplus. b. the resulting increase in consumer surplus would be smaller than any possible loss of producer surplus. c. any possible increase in producer surplus would be larger than the loss of consumer
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This note was uploaded on 11/04/2009 for the course ECON 201 taught by Professor Williams during the Fall '08 term at UVA.

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Multiple Choices - Answers are at the end of this file 1 When a nation first begins to trade with other countries and the nation becomes an

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