### Demand Curve, Economic Point, Supply Curve, Excise Tax – Quiz 5 Macroeconomics

This chapter is about Demand Curve, Excise Tax, Economic Point, Supply Curve, Shift the Demand Curve, Comparative Advantage, Opportunity Cost, Shift the Supply Curve, Production Possibilities Frontier – PPF, Unemployment, Economy – Principles of Macroeconomics.

According to the Food and Drug Administration, “…the ultraviolet (UV) radiation from these devices [sun lamps and tanning beds] poses serious health risks.” As a result of reading this, the local mayor decides to introduce legislation that will put a 10% excise tax on tanning consumers. From an economic point of view, this will

shift the demand curve leftward for tanning. – correct

shift the demand curve rightward for tanning.

shift the supply curve rightward for tanning.

move down along the demand curve for tanning.

```Explanation: The excise tax lowers demand because consumers must now pay a higher tax in addition to the price they pay for the good. People will tan less because they now have to factor in the extra cost. This will be shown as a leftward shift of the demand curve.
```

Which of the following statements is consistent with Jonathan having a comparative advantage in producing apples?

Jonathan can sell apples at a lower price than anyone else and still make a profit.

Jonathan’s opportunity cost for producing apples is lower than anyone else’s. – correct

Jonathan can produce more apples (by weight) than anyone else.

Jonathan can produce more apples (by volume) than anyone else.

```Explanation: The person with the comparative advantage is always the one with the lowest opportunity cost. This means Jonathan has a comparative advantage in producing apples if he gives up less production of other goods when he produces apples.
```

Where is unemployment such that employment is below the full-employment level plotted on a production possibilities frontier?

a point beyond the PPF

##### a point inside the PPF– correct

point on the PPF

It will depend on how much unemployment exists, because the point could be on or inside the PPF.

```Explanation: Unemployment is represented by points inside the frontier where resources are not being used efficiently. All points on the PPF are points at which the economy is at the full-employment level of employment.
```

Click to view larger image.

Which of the following would lead to the situation shown in the figure above?

a reduction in the retirement age

a reduction in skills for workers who produce pizza and workers who produce wings

an improvement in technology for production of both pizza and wings – correct

an earthquake in the country

```Explanation: With improvement in technology it is possible to produce more of both goods while using the same amount of labor. This will allow the PPF to expand outward. An earthquake would destroy resources and cause the PPF to shrink inward. A reduction in retirement age would lower the size of the labor force, lower production, and cause the PPF to shrink inward. A reduction in worker skills would decrease the human capital available, decreasing production for workers and causing the PPF to shrink inward.
```

According to the Food and Drug Administration, “…the ultraviolet (UV) radiation from these devices [sunlamps and tanning beds] poses serious health risks.” As a result of reading this, the local mayor decides to introduce legislation that will put a 10% excise tax on tanning consumers. From an economic point of view, this will

shift the demand curve leftward for tanning. – correct

shift the demand curve rightward for tanning.

shift the supply curve rightward for tanning.

move down along the demand curve for tanning.

`Explanation: The excise tax lowers demand because consumers must now pay a higher tax in addition to the price they pay for the good. People will tan less because they now have to factor in the extra cost. This will be shown as a leftward shift of the demand curve.﻿`

Which of the following statements is consistent with Jonathan having a comparative advantage in producing apples?

Jonathan can sell apples at a lower price than anyone else and still make a profit.

Jonathan’s opportunity cost for producing apples is lower than anyone else’s. – correct

Jonathan can produce more apples (by weight) than anyone else.

Jonathan can produce more apples (by volume) than anyone else.

`Explanation: The person with the comparative advantage is always the one with the lowest opportunity cost. This means Jonathan has a comparative advantage in producing apples if he gives up less production of other goods when he produces apples.﻿`

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