Ecom Exam #1 Practice Problems

It is a beautiful afternoon, and you are considering taking a leisurely stroll through the park. Your alternatives to walking are streaming a movie that you value at $5, taking a nap that you value at $7, or reading a new book that you value at $12. What is the opportunity cost to you of taking the stroll through the park? $0 $5 $7 $12

$12

The cost of your favorite coffee is $5 per cup at the coffee shop. The marginal cost of each cup you drink is _____. The first cup of coffee you drink gives you a marginal benefit of $8. The marginal benefit from the second cup is $6, $4 from the third, $2 from the fourth, and $0 from the fifth. You should drink _____ cups of coffee. $5; two $0; three $2; five $2; three

$5; two

A friend comes up to you and offers you a free ticket to a Detroit Tigers game that night, and you decide to attend the game. The game takes five hours and costs you $25 for transportation. If you had not attended the game, you would have worked at your part-time job for $12 an hour. What is the cost to you of attending the game? the cost is zero—the ticket is free. $85 $60 $55​

$85

Maria's Pizza offers one slice for $2, two slices for $3.50, three slices for $4.50, and four slices for $5.00. Gil orders two slices. From this information, we know that the marginal benefit to Gil of a second slice is at least $_____, and the marginal benefit to Gil of a third slice is less than $_____. 3.50; 4.50 3.50; 1.00 1.50; 1.00 1.50; 4.50

1.50; 1.00

You are looking for a snack and have some money to spend on peanuts, pistachios, or both. Your marginal benefit from the first bag of peanuts is the same as your marginal benefit from the first bag of pistachios. The price of peanuts and the price of pistachios are the same. How should you spend your money? It doesn't matter which one you buy first, but every purchase after that should be of the good with the higher marginal benefit until your money runs out. Since the goods have the same price and marginal benefit, it doesn't matter which combination of peanuts and pistachios you buy. You should buy either peanuts or pistachios but not both. There is no way to determine how you should spend the money.

It doesn't matter which one you buy first, but every purchase after that should be of the good with the higher marginal benefit until your money runs out.

Variable costs: are incurred in building factories and assembly plants. are independent of the amount of output produced. don't change with the quantity of output produced. change with the quantity of output produced.

change with the quantity of output produced.

A market where no single buyer or seller can influence the price is a: buyer's market. seller's market. competitive market. factor market.

competitive market

The relationship between price expectations and current demand is: when future prices are expected to rise, current demand falls. negative; when future prices are expected to fall, current demand rises. positive; when future prices are expected to rise, current demand rises. positive; future prices are generally expected to rise.

positive; when future prices are expected to rise, current demand rises.

Which factor is MOST likely to shift the supply curve for milk to the left? a tax on each gallon of milk produced an increase in household income, milk being a normal good a decrease in the price of feed given to dairy cows new dairy farms entering the market

a tax on each gallon of milk produced

Tamara notices that studying for one hour after class increases her statistics grade by 16 points. The second hour yields a 9-point gain, the third hour yields a 4-point gain, and the fourth hour yields only a 1-point gain. This means that the marginal _____ of studying decreases with study hours. cost benefit opportunity cost time

benefit

The price of gasoline rises by 1%, and the quantity of gasoline purchased falls by 5%. The price elasticity of demand is equal to _____, and demand is described as _____. 0.2; inelastic 5; inelastic 0.2; elastic 5; elastic

5; elastic

Which statement BEST illustrates the law of demand? An increase in food prices encourages more individuals to buy more food, owing to scarcity. Consumers buy more iPhones because prices have fallen. Tesla produces more cars as prices increase. Fewer people visit Disneyland because incomes have fallen.

Consumers buy more iPhones because prices have fallen.

Consider your decision to attend class in college or skip it. Which of the four core principles of economics applies to the notion that attending class today will require you to give up time and energy to pay attention, but in doing so you will gain a better understanding of the material? the cost-benefit principle the opportunity cost principle the marginal principle the interdependence principle

Cost-Benefit

At the local grocery store, blueberry jam is less expensive than it was last month. Which statement can explain why blueberry jam costs less now? Consumers are purchasing less blueberry jam and more of other types of jam. Blueberry farms have been negatively affected by weather, so that blueberries are in short supply. A recent research article reports on the benefits of eating blueberries. The grocery store is experiencing a short

Consumers are purchasing less blueberry jam and more of other types of jam.

_____ is a measure of how much your decision has _____ your well-being. Willingness to pay; improved Willingness to pay; reduced Economic surplus; increased Economic surplus; decreased

Economic surplus; increased

Just after the price of canned tuna fish fell, Isabelle got a raise. She wound up buying less canned tuna. How can we explain this? For Isabelle, canned tuna is an inferior good, and the leftward shift of her demand curve more than offset the movement down and to the right along her demand curve. For Isabelle, canned tuna is a normal good, and the rightward shift of her demand curve reinforced the movement down and to the right along her demand curve. For Isabelle, canned tuna is an inferior good, and the rightward shift of her demand curve more than offset the movement up and to the left along her demand curve. For Isabelle, canned tuna is a normal good, and the leftward shift of her demand curve more than offset the movement up and to the right along her demand curve.

For Isabelle, canned tuna is an inferior good, and the leftward shift of her demand curve more than offset the movement down and to the right along her demand curve.

For which goods is the cross-price elasticity of demand MOST likely a large positive number? baseballs and baseball bats movie downloads and orange juice French fries and onion rings all of these because the cross-price elasticity is a positive number

French fries and onion rings

Consider the decision to read your textbook on economics regularly. Which of the four core principles of economics applies to the notion that each extra page you read and each extra problem you complete will help you increase your understanding of the material? Cost-benefit principle Opportunity cost principle Marginal principle Interdependence principle

Marginal principle

The driving app Waze provides information about traffic problems, accidents, and police, along with basic driving directions. More people using the app means there is more information available. This is an example of: a network effect. consumer preferences. expectations. marginal benefits.

a network effect

If drivers for ridesharing services like Uber and Lyft successfully negotiate for higher pay, and parking lot operators in the city raise parking rates, what can you conclude about the new equilibrium in the ridesharing market? The equilibrium price will rise, but the impact on quantity is unclear. The equilibrium quantity will rise, but the impact on price is unclear. Both the equilibrium price and quantity will rise. Both the equilibrium price and quantity will fall.

The equilibrium price will rise, but the impact on quantity is unclear.

_____ is assessed by asking: "What is the _____ I am willing to pay to get this benefit, or avoid that cost?" Willingness to pay; least Willingness to pay; most Opportunity cost; least Opportunity cost; most

Willingness to pay; most

Which event will lower the price of bacon? a shift to the right of the supply curve for bacon a shift to the right of the demand curve for bacon a decrease in the number of bacon suppliers a decrease in the number of bacon buyers

a shift to the right of the supply curve for bacon

There are empty candy shelves at Walmart on the day before Halloween. Which of these explains this event? a rise in the equilibrium price of candy a surplus in the candy market a shortage in the candy market a decision by Walmart that kids should not have candy on Halloween

a shortage in the candy market

For normal goods, an increase in income will result in: an increase in the equilibrium price and equilibrium quantity. a decrease in the equilibrium price and an increase in the equilibrium quantity. a decrease in the equilibrium price and equilibrium quantity. an increase in the equilibrium price and a decrease in the equilibrium quantity.

an increase in the equilibrium price and equilibrium quantity.

Which of these lists only factors that would cause an increase in the demand for an item? information on possible side effects of using an item; a rise in income (if the good is a normal good); a fall in the price of a substitute good an increase in the number of consumers in the market; a rise in income (if the good is a normal good); a rise in the price of a substitute good a decrease in the number of consumers in the market; a rise in the price of a substitute good; a fall in the price of a complementary good an increase in congestion effects; a decrease in the number of consumers in the market; increase in popularity of a product

an increase in the number of consumers in the market; a rise in income (if the good is a normal good); a rise in the price of a substitute good

Shifts in the market demand curve occur: because of all the factors that shift individual demand curves, along with changes in the types and number of buyers. only because of changes in income and preferences, along with changes in the types and number of buyers. only because of changes in the types and number of buyers. only because of the same factors that shift individual demand curves.

because of all the factors that shift individual demand curves, along with changes in the types and number of buyers.

The key to using the cost-benefit principle is to think about _____ aspects of a decision. both financial and nonfinancial only financial only nonfinancial neither financial nor nonfinancial

both financial and nonfinancial

Shifts in supply: always lead to increases in the equilibrium price. cause price and quantity to move in the same direction. always lead to increases in the equilibrium quantity. cause price and quantity to move in opposite directions.

cause price and quantity to move in opposite directions.

If people demand more Netflix subscriptions when the price of Hulu subscriptions falls, then Netflix and Hulu are: not related. substitutes. complements. inferior goods.

compliments

Spaghetti and salad are related goods. Holding everything else constant, if the price of spaghetti decreases and the demand for salad increases, spaghetti and salad are probably: complements. substitutes. inferior. normal.

compliments

Suppose that apples and pomegranates are substitute goods. The _____ pomegranates will increase when apple prices rise. demand for quantity demanded of supply of quantity supplied of

demand for

You run a successful designer clothing boutique but expect that demand for your products will decline in the next six months as the economy falls into a recession. As a result, the opportunity cost of supplying designer clothing today will: rise, causing your supply curve to shift to the left. fall, causing your supply curve to shift to the right. rise, causing your supply curve to shift to the right. fall, causing your supply curve to shift to the right.

fall, causing your supply curve to shift to the right.

The Rational Rule for Sellers says that a seller should sell one more unit of an item if the price is: less than the marginal cost. greater than or equal to the marginal cost. less than the marginal benefit. greater than or equal to the marginal benefit.

greater than or equal to the marginal cost.

When there is a shortage of highly skilled workers in a particular region: the incomes of highly skilled workers fall. highly skilled workers can negotiate higher salaries. unemployment rises among highly skilled workers. there is a corresponding surplus of low-skilled workers in the region.

highly skilled workers can negotiate higher salaries.

You are considering whether to invest in your friend's business or keep your money in your savings account. What is the opportunity cost of investing in your friend's business? investing in a different business foregone income your time interest you could have earned from the savings account

interest you could have earned from the savings account

The _____ of a good or service is the additional benefit derived from producing one more unit of that good or service. net benefit marginal benefit marginal cost utility

marginal benefit

When faced with a quantity decision, the economic surplus stops increasing when: total benefits equal to total costs. total benefits exceed total costs. marginal benefits equal marginal costs. marginal benefits exceed marginal costs.

marginal benefits equal marginal costs.

When a firm experiences diminishing marginal product, its: output is falling. marginal product is falling but is likely still positive. total product is falling because the marginal product is falling and positive. marginal product is negative.

marginal product is falling but is likely still positive.

If baseball bats and toothpicks are substitutes in production, a producer (with her fixed set of resources) will need to reduce the production of baseball bats when she: produces less of the other good. produces more of the other good. obtains more resources. produces more of the other good and obtains more resources.

produces more of the other good.

A shortage occurs when: quantity supplied exceeds quantity demanded. quantity demanded exceeds quantity supplied. there is excess production. there is insufficient demand.

quantity demanded exceeds quantity supplied.

The Cedar Point amusement park reduces its entry fees. As a result, the: demand will fall. quantity demanded will fall. demand will rise. quantity demanded will rise.

quantity demanded will rise.

An individual demand curve is a graph that plots the: quantity of an item that someone plans to buy at each price. quantity of an item that someone plans to buy at a particular price. quantity of an item that a seller plans to sell at each price. market price of a product at different points in time. ​

quantity of an item that someone plans to buy at each price.

In a perfectly competitive market, if the quantity demanded exceeds the quantity supplied, we expect prices to: stay the same. rise. fall. rise first, then fall when demand decreases.

rise

Samsung finds it difficult to hire enough skilled software engineers to program the popular Galaxy cell phone. Which economic concept does this statement BEST represent? scarcity specialization ceteris paribus trade-off

scarcity

Due to changing consumer tastes, the Ford Motor Company is planning to phase out traditional sedans such as the Fusion and Taurus and focus on SUVs and trucks. Ford's sedans and trucks/SUVs are: complements-in-production. substitutes-in-production. inputs in production. products that do not follow the law of supply.

subsitutes-in-production

Hershey's Kit Kat candy bars are cheaper than usual. This could be because there is: excess demand for Kit Kats. a shortage of Kit Kats. a surplus of Kit Kats. an increase in the demand for Kit Kats.

surplus of Kit Kats.

We expect that price will fall when: supply is greater than demand. the supply curve shifts to the left, and the demand curve shifts to the left. supply and demand both increase. the quantity supplied is greater than the quantity demanded.

the quantity supplied is greater than the quantity demanded.

A subscription to the pro version of a camera app you use unlocks some useful features, but the price of $4 per month is too high. You get a notification offering a special discount and decide to subscribe to the pro version at $2 per month. Your decision reveals something about: your individual demand curve. your individual supply curve. ceteris paribus conditions. buyer's remorse

your individual demand curve.

The rational rule summarizes the marginal principle. It says that if something is worth doing, keep doing it until your marginal benefits equal your marginal costs. benefits exceed your marginal costs. benefits are zero. costs are less than your marginal benefits.

benefits equal your marginal costs.

Diane is a student studying economics and is currently working on her class schedule for next semester. When she considers the fact that a popular class may fill up if she does not act quickly, she is acknowledging the dependencies that exist: between her own choices. between people or businesses in the same market. between markets. over time.

between people or businesses in the same market.

Your aunt tells you that although she has been in the same career for multiple years, she really doesn't enjoy it. Instead of her bachelor's degree, she always wished she had pursued vocational training instead. She thinks she should definitely keep her job since she paid $24,000 for tuition. The cost of vocational training would be $10,000.Your advice to her is that she should: consider the $24,000 a sunk cost and unrelated to her choice of vocational training. consider the $24,000 a sunk cost and unrelated to her choice of vocational training. include the $10,000 in her estimation of sunk costs. pursue the vocational training only if she is willing to pay $34,000 for her education. continue her current line of work since she already paid for it.

consider the $24,000 a sunk cost and unrelated to her choice of vocational training.

Paper boxes are made with paper, adhesive (e.g., glue), and steam. The paper and adhesive used to make cardboard boxes are _____ costs; the corrugator machine that brings together sheets of paper to form the wall boards of the boxes are a _____ cost. fixed; variable variable; fixed variable; permanent stable; fixed

variable; fixed

In September of 2021, California adopted a zoning law that requires communities to allow for duplexes in single-family home neighborhoods. The new zoning law would likely: shift the supply curve for housing in California to the left. cause a movement up and to the right along the supply curve for housing in California. shift the supply curve for housing in California to the right. have no effect on the supply of housing in California.

shift the supply curve for housing in California to the right.

Rose Riley's parents have booked and paid for a family trip to Aspen, Colorado, during her spring break. Rose's friends recently decided to drive to Destin, Florida, for spring break. Rose needs to decide whether to join her parents in Aspen or drive to the beach with her friends. The opportunity costs of joining her friends on the trip to Destin include each of the following EXCEPT her parents' anger if she skips the family trip to Aspen. her contribution to gas money for the drive to Destin. the ski lift ticket her parents have already purchased for her. the hotel costs she will split with her friends in Destin.

the ski lift ticket her parents have already purchased for her.