ECO231 midterm

Which is the most likely substitute good for ice cream?

popsicles

Dean should play golf instead of preparing for tomorrow's exam in economics if:

the economic surplus from playing golf is greater than the economic surplus from studying.

A 5% increase in the price of Good C leads to a 20% decrease in the quantity demanded of Good D. The cross-price elasticity of these goods is:

-4

If the price of a good increases by 10 percent, its quantity demanded drops by 50 percent. The price elasticity of demand is:

-5

Jamie purchases a new watch for $300. One can infer that:

her willingness to pay was at least $300.

Suppose Colin brews beer and makes cheese. If Colin can increase his production of beer without decreasing his production of cheese, then he is producing at an:

inefficient point

For the fall semester, you had to pay a nonrefundable fee of $600 for your meal plan, which gives you up to 150 meals. If you eat 100 meals, your marginal cost of the 100th meal is:

$0

Suppose the most you would be willing to pay to have a freshly washed car before going out on a date is $6.00. The smallest amount for which you would be willing to wash someone else's car is $2.50. You are going out this evening and your car is dirty. How much economic surplus would you receive from washing it?

$3.50

Suppose that when the average family income rises from $30,000 per year to $40,000 per year, the average family's purchases of toilet paper rise from 100 rolls to 105 rolls per year. The income-elasticity of demand for toilet paper is _______, suggesting toilet paper is ________________.

0.17; a normal good.

Government intervention can come in many forms. Which of the following would not be considered a government intervention into an economic market?

Individuals buying goods from a company because they believe in what the company stands for

A historic drought causes most carrot crops to fail, decreasing the amount of available carrots. The carrot cake market would see:

a decrease in the supply of carrot cake.

The total surplus in a market lost to market inefficiencies is also known as

deadweight loss

When price decreases from $70 to $60, demand is ___________ and total revenue ______________.

elastic; increases

If the price of milk is above the equilibrium price, then there will be:

excess supply of dairy products.

After getting a raise at work, Marcus now regularly buys steak in lieu of ground beef. Which factor of demand has influenced Marcus's demand for steak?

income

A baker of chocolate chip cookies is likely to have a ______________ price elasticity of supply than the seller of rare baseball cards due to ______________.

more elastic; the availability of inputs

Alex received a four-year scholarship to State U. that covered tuition and fees, room and board, and books and supplies. If Alex becomes a full-time student, then:

the opportunity cost of attending State U. includes the money Alex could have earned working for four years.

The minimum amount a person would take in order to give a good or service to another individual is also known as

the willingness to sell

our friends from the University of Cincinnati are planning to go to Miami for spring break, and you are undecided about whether you should go with them. The round-trip airfare is $600, but you have a frequent-flyer coupon worth $500 that you could use to pay part of the airfare. All other costs for the vacation are exactly $900. The most you would be willing to pay for the trip is $1,400. Your only alternative use for your frequent-flyer coupon is for your trip to Atlanta two weeks after the break to attend your sister's graduation, which your parents are forcing you to attend. The Cincinnati-Atlanta round-trip airfare is $450. What is the opportunity cost of using the coupon for the Miami trip?

$450

Larry was accepted at three different graduate schools, and must choose one. Elite U costs $50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at $60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000 scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000 per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at $15,000 per year. What is Larry's economic surplus from attending State College instead of his next best alternative?

$5000

Suppose when the price of calculators is $10, the quantity demanded is 100, and when the price is $12, the quantity demanded drops to 80. Using the mid-point method, the price elasticity of demand is:

-1.22

If the price of jelly goes up by 10 percent, we observe a decrease in the quantity demanded of peanut butter of 20 percent. The cross-price elasticity of these goods is:

-2

Suppose the price elasticity for a good is 5. This means a 1% increase in the price of the product will lead to a ____ % change in the quantity supplied.

5

Why is the market for used cars not considered perfectly competitive?

All of these are reasons why the used car market is not considered perfectly competitive.

If Ana devotes all her time to making fudge, she can make 3 pounds of fudge an hour, and if she devotes all her time to making toffee, she can make 2 pounds of toffee an hour. If Leo devotes all his time to making fudge, he can make 4 pounds of fudge an hour, and if he devotes all his time to making toffee, he can make 5 pounds of toffee an hour. Which of the following statements is correct?

Ana has the comparative advantage in fudge, but Leo has the absolute advantage in fudge.

In which of the following markets could the government improve social welfare by implementing a tax to offset a negative externality?

Cigarette smoke, which leads to second hand smoke and can cause lung cancer to non smokers

Suppose it takes Dan 5 minutes to make a sandwich and 15 minutes to make a smoothie, and it takes Tracy 6 minutes to make a sandwich and 12 minutes to make a smoothie. Which of the following statements is correct?

Dan should specialize in sandwiches, and Tracy should specialize in smoothies.

There are many reasons a government should get involved in an economic market. Which of the following is not one of the reasons we discussed in class?

Government officials disliking certain individuals in a marketplace

Which of the following is not an example of unintended consequences?

Increasing the price of a good and seeing the quantity demanded decrease

Suppose a market goes from being in equilibrium without any government regulations, to having a binding price ceiling enacted. What will happen to consumer and producer surplus in this market?

We cannot know what will happen to CS without more information, but PS will decrease

You want to buy a TV that regularly costs $250. You can either buy the TV from a nearby store or from a store that's downtown. Relative to going to the nearby store, driving downtown involves additional time and gas. The downtown store, however, has a 10 percent off sale this week. Last week you drove downtown to save $20 on some concert tickets, a 15 percent savings. Should you drive downtown to buy the TV?

Yes, because you will save more than $20.

The price of chew toys has gone down, and all other variables have remained constant. This makes Blanton very happy because he gets a new toy since he's such a good boy! If I wanted to show this change graphically it would be:

a movement along the demand curve to the right.

he most likely complementary good for burgers would be:

buns

A 5% increase in the price of Good C leads to a 20% decrease in the quantity demanded of Good D. Theses goods are:

compliments

If the price of a cup of Dunkin' Donuts coffee rises, while the price of a Starbucks latte doesn't, we expect the quantity of lattes demanded to:

increase as some people switch from coffee to the relatively less expensive latte.

Suppose Karl divides his time between making birdhouses and growing artichokes. Karl's friend recently gave Karl some new woodworking tools that greatly reduced the amount of time it takes Karl to make each birdhouse, but the new tools had no impact on the amount of time it takes Karl to grow artichokes. Thus, the new tools _____ Karl's opportunity cost of growing artichokes.

increased

Jen spends her afternoon at the beach, paying $1 to rent a beach umbrella and $11 for food and drinks rather than spending an equal amount of money to go to a movie. Her opportunity cost of going to the beach is:

the value she places on seeing the movie.