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ECO2023: Exam Study GuideMaterial from 1st Exam:ECO2023: Exam Study GuideMaterial from 1st Exam:If price rises, what happens to the demand for a product?-It does not changeWhich of the following events would increase producer surplus?- Sellers' costs stay the same and the price of the good increasesA decrease in demand will cause?- A decrease in quantity suppliedSuppose Katie, Kendra, and Kristen each purchase a particular type of cell phone at a price of $80. Katie's willingness to pay was $100, Kendra's willingness to pay was $95, and Kristen's willingness to pay was $80. What is the combined consumer surplus for the three girls?- $35Suppose an economy produces only two goods, computers and TVs. If the economy operates at a point on its production possibilities curve, it can produce more computers only if- Resource owners will conserve vital resources for the future, particularly if they expect the resource to increase in valueWhich of the following about economic thinking is true?- Changes in personal costs and benefits will exert a predictable influence on the choices of people.Economists use the term ceteris paribus to indicate which of the following?-Other things are assumed to be constantHarry, a wheat farmer, is deciding whether or not to add fertilizer to his crops. If he adds 1 pound of fertilizer per acre, the value of the resulting crops rises from $80 to $100 per acre. According to marginal analysis, Harry should add fertilizer if it costs less than how much?-$20 per poundA local restaurant offers an "all you can eat" Sunday brunch for $12. Susan eats four servings but leaves half of a fifth helping uneaten. Why?-Her marginal value of food has fallen to zeroBecause information is costly to acquire, how does the cost change decision making?- People will rationally choose not to become fully informed when making decisions"There is no such thing as a free lunch." This statement best reflects which of the following statements?- An opportunity cost is always present when scarce resources are used to produce a good.Economics is primarily the study of- The allocation of scarce resources in an effort to satisfy wants that are virtually unlimited.What do individuals have a strong incentive to do when price is the rationing criterion?- Provide services to others in exchange for incomeCriteria for rationing goods and resources must be established due to which of the following?-Scarcity imposed by natureThe fallacy of composition is the fallacious view that-What is true for the individual will also be true for the group.What is meant by “scientific method”?- The dispassionate development and testing of theories about how the world works.Material From Exam #2Chapter 4The Labor Market- Wage: Price for employment- Employment: Quantity of labor - *Note that is works just like the market for goods, just with a different name for price (wage) and quantity (employment)- Supply goes up, employment goes up and wage goes down- Demand goes up, employment goes up and wage goes upLabor Demand- Firms demand labor- Labor demand curve is downward sloping because as wage decrease, firms will want to employ more peopleLabor Supply- Workers supply labor- Labor supply curve is upward sloping because as wage increase, people want to work moreChanges in Labor Demand- An increase in labor demand, labor demand curve shift right- A decrease in labor demand, labor demand curve shifts leftChanges in Labor Supply- Increase in labor supply, labor supply curve shifts right- Decrease in labor supply, labor supply curve shifts leftLinking the Markets- There is a close relationship between the demand for the products and demand for the resources used to make those productsPrice Floor- A price floor is a legally established minimum buyers must pay for a good or resource - A price floor above price equilibrium does creates a surplus- A price floor below price equilibrium does nothing- We were not going to have the price that low anyways so it doesn't effect anything- When it is below or “on the floor” it is okExample: Minimum Wage- Minimum wage is an example of a price floor- Raising the minimum wage increase excess labor supply (unemployment)Price Ceiling- A price ceiling is a legally established maximum price sellers can charge for a good or resource - Price ceiling below price equilibrium creates a shortage - Price ceiling above price equilibrium does nothing- When price ceiling is above it is okExample: Rent Control- Rent controls lead to shortages as well- 1. Black Markets: paying above the legal price and not having the ability to go police enforcement- 2. Decline in the supply of future rental housing: you dont have as much incentive to make a new rental complex at 400 then you would at 600- 3. Decline in the quality rental housing: when you get charged a lot for your apartment you have an incentive to keep it nice, but when its cheap you don’t- 4. Shortage of non-price methods of rationing: you have an incentive to rent the apartment to whoever will pay the most, you can be more selective, not with rent control- 5. Inefficient housing match ups: a new family needs to expand in living space but cannot because there isa shortage of bigger onesImpact of a Tax- A tax on a product will cause the supply curve to shift left by the amount of the tax- Raises the price that buyers must pay- Reduces the quantity sold- Creates government revenue- Reduces the mount sellers receive- Creates deadweight lossDeadweight Loss- The loss to society that results from the loss of gains to trades that did not occur because a tax was imposed - Void that used to have something but now doesn't have anythingTax Incidence/Tax Burden- The Tax Incidence is the way the burden of a tax is distributed among economic units- It DOES NOT depend on whom the tax is imposed- Doesn't matter if the buyer or seller has to pay the tax- It DOES depend on society- The burden of the tax will fall on those who are relatively inelastic- Sellers can raise the price a whole lot knowing they will still sell- If it is elastic, the sellers will raise the price but nobody would buy- Deadweight loss will lower if taxes are placed on goods that are inelastic- It is good because trade are still happening with value being madeThe Tax System- Average Tax Rate (ATR) is the percentage of income paid in taxes- ATR is equal to tax liability divided by taxable income - Make $100 Taxed $5 ATR = 5%- Make $200 Taxed $20 ATR= 5%- Make


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FSU ECO 2023 - Exam Study Guide

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