ECO2023 HW 1-6 (Exam 1)

(HW 4) The price of peanut butter rises from $1 per jar to $2 per jar. The quantity of grape jelly consumed falls from 6 million jars per year to 2 million jars. What is the arc cross-price elasticity of demand?

-1.5

(HW 4) The price of Gala apples rises from $5 per pound to $10 per pound. As a result, the quantity demanded falls from 10 million pounds to 5 million pounds. What is the Arc Own-Price Elasticity of Demand?

1

(HW 4) Your boss offers you a raise from $10 per hour to $15 per hour. As a result, you decide to drop a class and work 25 hours per work, rather than the 15 hours per week you were previously working. What is your Arc Price Elasticity of Supply?

1.25

(HW 4) You take a new job, raising your income from $50,000 per year to $70,000 per year. As a result, you decide to take two vacations per year, instead of one. What is your Arc Income Elasticity of Demand?

2

(HW 1) Paul makes fine silverware, jewelry, and other silver items. He's very productive, and can produce more quality silver pieces per hour than anyone else he knows. He is running his business by himself, however, and is considering taking on an assistant. Which of the following is, based on the Law of Comparative Advantage, a good reason to hire an assistant? A. Even if his assistant cannot operate the bellows as well as Paul can, or balance the books, or sweep, or do whatever other menial work as well as Paul can, an assistant can still be worth hiring. This is because hiring an assistant allows Paul to spend his time doing the really hard parts of his job--crafting silver into valuable goods. The assistant isn't as good at anything as Paul is, but the assistant is "good enough" at some things to make the business more productive overall. B. Working by oneself gets lonely and boring; work will be more fun and productive with someone to talk to. C. The assistant might turn out to be surprisingly skilled at silversmithing, and could one day outperform even Paul. D. Fine silver goods are part of a market that is likely to grow rapidly due to increasing income inequality. As a part of the population grows fantastically wealthy, producers of luxury goods--like Paul--will need to grow their businesses rapidly to satisfy these wealthy consumers. Paul will need an assistant just to keep up with the growing business.

A

(HW 1) Suppose you are willing to pay up to $70 for a new pair of shoes. You find a pair you like for $40 and buy them. The store that sold you those shoes would have been willing to sell them for as little as $35. Which of the following is correct? A. You are $30 better off, and the store owner is $5 better off. B. You are $5 better off, and the store owner is $30 better off. C. You are $35 better off, and the store owner is not better off at all. D. You are $40 worse off, and the store owner is $40 better off.

A

(HW 3) The surgeon general announces that wearing a hat significantly reduces your chance of getting skin cancer. Also, hats look cool (provided you choose the right kind) and you want to look cool, right? As a result, many more people buy and wear hats. What happens in the market for hats? A. Demand shifts to the right, price rises, quantity rises. B. Demand shifts to the right, price falls, quantity falls. C. Supply shifts to the right, price falls, quantity falls. D. Supply shifts to the left, price rises, quantity falls. E. The higher price of hats causes quantity demanded to fall.

A

(HW 3) Which of the following statements is correct? A. In equilibrium, Total Surplus is maximized. B. Total Surplus is Consumer Surplus minus Producer Surplus. C. Total Surplus is Producer Surplus minus Consumer Surplus. D. Total Surplus is maximized when the price is zero. E. When Total Surplus is maximized, this is inefficient.

A

(HW 3) John Malkovich releases a new movie in which all the characters are portrayed by puppets. As a result, many people choose to become puppeteers. Which of the following happens as a result of all these people entering the puppeteer market, ceteris paribus? A -Supply shifts to the right, driving the wage of puppeteers down. B -Supply shifts to the left, driving the wage of puppeteers up. C -Demand shifts to the right, driving the wage of the puppeteers up. D -Demand shifts to the left, driving the wage of puppeteers up.

A -Supply shifts to the right, driving the wage of puppeteers down.

(HW 2) Which of the following statements is correct? -Demand cannot change, only quantity demanded can change -A change in quantity demanded is a shift of the entire demand curve. A change in demand is a movement along the demand curve. -A change in quantity demanded is a movement along the demand curve. A change in demand is a shift of the entire demand curve. -Quantity demanded cannot change, only demand can change

A change in quantity demanded is a movement along the demand curve. A change in demand is a shift of the entire demand curve. ((A change in price causes a movement from one point on the demand curve to another. A change in something else (EX. income, prices of substitutes/complements, etc.) causes a shift of the entire demand curve))

(HW 5) Which of the following is an example of a binding price control? This is a "multiple answer" question, so there may be more than one correct answer. A. The price of mobile phone data is around $15 per gigabyte per month. The government imposes a price ceiling of $5 per month. B. The price of wheat is $20 per bushel. The government imposes a price floor of $5 per bushel. C. The price of steel is $300 per ton. The government imposes a price floor of $200 per ton. D. The price of cotton is $10 per bale. The government imposes a price floor of $15 per bale. E. The price of gasoline is $2 per gallon. The government imposes a price ceiling of $4 per gallon. F. The price of bananas is $2 per pound. The government imposes a price ceiling at $1 per pound.

A, D, F

(HW 6) Suppose the arc own-price elasticity of demand for potatoes is 0.2, and the arc price elasticity of supply is 0.4. If a $5 per pound tax is imposed on potatoes, which of the following is correct? A. The burden of the tax will fall more heavily on consumers. B. The burden of the tax will fall more heavily on producers. C. The burden of the tax will fall equally on producers and consumers. D. The burden of the tax will fall primarily on the government.

A.

(HW 2) The Law of Demand says that if the price of strawberries falls from $4 per pound to $3 per pound, the quantity of strawberries purchased by consumers will... A. stay the same. B. rise. C. fall. D. rise by 25%.

B

(HW 2) Winston Churchill goes to a party, and asks an attractive, high-status woman "Madam, would you sleep with me for five million pounds?" The woman says "Prime Minister, I'm shocked! Well, I suppose I would." Churchill then asks "Would you sleep with me for five pounds?" The woman responds "Why, what kind of woman do you think I am?" Churchill says "We have already determined that, madam; now we are merely haggling over the price." This woman's behavior obeys the... A. Law of Comparative Advantage. B. Law of Supply. C. Law of Unintended Consequences. D. Law of Demand.

B

(HW 2) Which of the following describes a movement along the demand curve, and not a shift of the demand curve? A. A new, faster digital memory card format is released, and as a result, people buy fewer MicroSD cards. B. The price of corn falls, and as a result, consumers buy more corn. C. Because people hear that High Fructose Corn Syrup is unhealthy, they buy less of it, and as a result, food processing businesses choose to buy less corn at every price. D. The price of MicroSD memory cards rises, and as a result, consumers buy fewer MicroSD memory cards. E. People buy fewer printed books due to a drop in the price of e-books.

B & D

(HW 1) You buy a new phone for $1300 but discover that i has software problems that you did not anticipate. As a result, the phone is only worth $800 to you. As a result.... A. You are $1300 worse off because the phone is worthless B. You are $500 worse off because the phones value is less than its cost to you. C. You are $500 better off because the phones value is greater than its cost to you. D. None of the above

B.

(HW 3) The market for razor blades is in equilibrium. Then, two things happen at the same time. First, a new company, Barry's Razors, enters the market with its precision German-made razors (heavily advertised on podcasts, because that's where all the hip kids' ears are these days). Second, a new medical cream is invented that will prevent the growth of new hair in whatever area to which it is applied (it is not permanent, and has no side effects, except that it makes the user strongly dislike swimming, inflicting medical irony on professional swimmers). What is the effect of these two things (a new razor producer enters the market, and a new drug can prevent the regrowth of hair) in the market for razors? A. Price rises, quantity falls. B. Price falls, quantity falls. C. Price falls, quantity is indeterminate. D. Price is indeterminate, quantity falls.

C

(HW 4) The cross-price elasticity of demand for good X is -0.79, relative to good Y's price. How are goods X and Y related? A. They are substitutes. B. Both goods violate the law of supply. C. They are complements. D. They are both normal goods.

C

(HW 3) Consumer Surplus is... A. The difference between what a consumer is willing to pay, and what the consumer actually pays (the price). B. The area beneath the demand curve and above the price. C. A measure of the pleasure consumers get from consuming goods and services, net of the cost of obtaining those goods and services. D. All of the above.

D

(HW 4) Suppose the arc own-price elasticity of demand for gasoline is 0.15. Which of the following is correct? A. If the price of gasoline rises by 1%, the quantity demanded will fall by 15%. B. If the quantity of gasoline rises by 1%, the price will fall by 0.15% C. If the price of gasoline rises by 1%, the quantity demanded will rise by 0.15%. D. If the price of gasoline rises by 1%, the quantity demanded will fall by 0.15%.

D

(HW 4) Your income elasticity of demand for flip-flops is -0.1. What sort of good are flip-flops for you? A. Flip-flops are a normal good. B. Flip-flops are a substitute. C. Flip-flops are a complement. D. Flip-flops are an inferior good.

D

Which of the following is correct? A. Equilibrium in monopoly is efficient if the firm has maximized profit. B. Equilibrium in oligopoly is always efficient because firms cannot collude. C. Equilibrium in monopolistic competition is never efficient because of deadweight loss. D. Equilibrium in perfect competition is efficient.

D

(HW 3) Producer Surplus is... A. The difference between the price of a good, and the marginal cost to the firm of producing that good. B. The difference between what a firm receives for selling a good, and the minimum price at which it would have been willing to sell that good. C. The difference between what a firm receives for selling a good, and the opportunity cost of producing that good. D. The difference between what a firm receives for selling a good, and the value of the resources that must be used to produce that good. E. The benefit to producers from producing and selling a good. F. All of the above.

F

(HW 2) The price of computer processors falls, and AMD, producer of computer processors and graphics processing units, reduces its output. Change (increase or decrease) in supply or change in quantity supplied?

decrease in quantity supplied

(HW 2) Due to program error, millions of computer parts must be returned to their manufacturers to have their firmware replaced. This will take some time, and make computers and computer parts more scarce. Change (increase or decrease) in supply or change in quantity supplied?

decrease in supply

(HW 2) After getting a raise from $10 an hour, to $12 an hour, Jamia persuades her boss to let her work more hours. change (increase or decrease) in supply or change in quantity supplied?

increase in quantity supplied

(HW 2) A new robotic sewing machine allows textile companies to produce clothing quicker and faster, and with fewer mistakes, than human sewing machines. change (increase or decrease) in supply or change in quantity supplied?

increase in supply

(HW 4) The price of spaghetti goes up, and you know that you could buy other pasta, or other kinds of food entirely, but you really love pasta. Therefore you keep buying the same quantity of pasta, regardless of the price change. How would an economist describe your demand for pasta? neither elastic nor inelastic both elastic and inelastic inelastic elastic

inelastic

(HW 2) The price of steel stays at $135 per ton. change (increase or decrease) in supply or change in quantity supplied?

no change in supply/QS