Question

1. Sugarcane can be used to produce sugar as well as the fuel ethanol for automobiles. Falling oil prices will cause a(n) ________ in the supply of sugar, resulting in ______ candy prices.

1. increase; lower
2. decrease; higher
3. decrease; lower
4. increase; higher

2. Markets have the advantage over central planning as the method of resource allocation because:

1. resources are distributed to those goods that have a larger number of substitutes.
2. resources travel to their highest-value uses.
3. central planners have never been shown to correctly identify high value uses of products.
4. resources are allocated equally across all uses.

3. Uni-Trax Publishers allows its sales team to buy and sell shares that pay out $1 only if the sales in the future fall within a certain range. Suppose that, currently, shares for sales between 1,000 and 2,000 textbooks are selling for 10 cents each. Shares for sales between 2,000 and 3,000 textbooks are selling for 30 cents each. Shares for sales between 3,000 and 4,000 textbooks are selling for 40 cents each. Based on this information, what is the probability of Uni-Trax Publishers selling between 2,000 and 4,000 textbooks?

1. 10%
2. 30%
3. 40%
4. 70%

4. Suppose that a hurricane hits both North Carolina and South Carolina. North Carolina has severe price-gouging laws in place, while South Carolina has none. Both states have a shortage of ice. Which state will recover from its ice shortage more quickly?
5. North Carolina will recover more quickly because the antigouging laws create incentives to invest in ice production.
6. North Carolina will recover more quickly because prices can adjust to make businesses willing to invest in ice production.
7. South Carolina will recover more quickly because prices can adjust to make businesses willing to invest in ice production.
8. South Carolina will recover more quickly because the antigouging laws create incentives to invest in ice production.

5. Both ethanol and sugar are made from sugarcane, and ethanol can be used as a substitute for oil. As the price of oil increases, Brazilians shift sugarcane from sugar production to ethanol production, thereby:

a) increasing the price of ethanol.

b)increasing the price of sugar.

c)increasing the price of both ethanol and sugar.

d)decreasing the price of both ethanol and sugar.

6.A decrease in the demand for a good sold in market A:

a)will not affect market A, but will affect nearby markets.

b)might affect other markets, even those halfway across the world.

c)might affect distant markets, but will not affect market A.

d)will affect only market A.

7. Futures markets are often good predictors of what will happen to the price of goods in the future because:

a)speculators typically have better information than consumers.

b)the markets are highly regulated.

c)speculators have an incentive to “get it right” because their own money is on the line.

d)the markets are more complete.

8.After a hurricane knocks out power to thousands of households, the price of electric generators increases threefold. According to economists:

a)this discourages the use of electric generators in low-value uses, making them more readily available for high-value uses.

b)the rising price will give an incentive for firms to ship fewer electric generators to the disaster area.

c)this is a vivid example of market and class exploitation by capitalists.

d)the increase in demand for electric generators should technically cause the price to fall after a hurricane.

Answer 1

1) Sugar will increase in the market resulting in lowered prices of candy.

Option (A) is correct.

2) It is because resources travel to their highesr valued users.

Sp option (B) is correct.

3)

Answer is 70%, as the probability between 2000 and 3000 is 0.3 and the probability between 3000 and 4000 is 0.4.

Probability of choosing between 2000-4000=Probability of choosing 2000-3000+ Probability of choosing between 3000-4000

=0.3+0.4

=0.7

=70%

Option (D) is correct.

4) South Carolina will recover more quickly because prices can adjust to make businesses willing to invest in ice production.

So option (c) is correct.

5) Increasing the price of sugar.

Option(B) is correct.

6) might affect other markets, even those halfway across the world.

Option (B) is correct.

7) It is because speculators have an incentive to “get it right” because their own money is on the line.

So option (C) is correct.

8) This discourages the use of electric generators in low-value uses, making them more readily available for high-value uses.

So option (A) is correct.