Econ 1B Quizzes

In May and June, Tammy spent all her clothing budget on bathing suits and beach bags. Each bathing suit cost $75. At Tammy's optimal choice, her marginal utility from the last bathing suit purchased is 300 and her marginal utility from the last beach bag purchased is 200. This means that each handbag must cost:

50

Excess supply occurs when the actual price in some market is ________ the equilibrium price.

ABOVE

The elasticity of supply is defined as the

% change in Qs/ % change in price

According to Daniel Kahneman and Amon Tversky, a $1 loss pains us ________ times more than a $1 gain helps us.

2.25

Which assumptions reflect permanent universal conditions?

More output satisfies more wants World has limited productive resources

A budget constraint model differs from production possibilities model in that, typically

PPM dem. diminishing returns

Society gains advantages through trade because of its ability to

Specialize resources to uses where opp cost is minimized refine tasks associated with production

elasticity

Which of the following concepts can be used to understand the effects of price changes on quantity demanded and quantity supplied, as well as the effect of raising taxes on revenue from the tax?

It is said that the rational consumer will act according to their self-interest, and that self-interest can include a concern for one's family and friends, but not often society as a whole. Which of the following illustrates this type of decision?

boat rental worth additional fish catch, renting vehicles for national parks responsive to price charged

Because of our limited money, time, and effort, we are best off when we allocate those things

by constantly assessing the opp. Costs of our choices

Which of the following are true statements about natural resources?

can be used by ppl to produce goods and services

Functions are often described as cause and effect in economics. In an economics function, if the variable is on the right-hand side and is doing the explaining, it represents a(n)________?

cause

Negative cross price elasticity of demand between two goods indicates that the two goods are

complements

Making an economically rational decision requires

considering all prospective marginal benefits and marginal costs to one self

After cost overruns of the solar project, $10 million was already spent and unrecoverable. It was going to cost $12 million more in order to complete the project, and now society somehow needs to make the rational choice to

continue with the project provided that additional solar electricity worth more than $10 mill

Suppose the price of apples increase by 20%, resulting in consumers to purchase 15% more pears. Given this information, it appears that

cross price of pears .75

Given that total revenue = price x quantity, what will happen to total revenue if price increases when demand is elastic?

decrease

An decrease in the quantity supplied can be the result from

decrease in price

In a market with relatively inelastic demand, if the supply curve shifts due to a fall in production costs, the equilibrium price will ________ by ________ than equilibrium quantity.

decrease more

The circular flow diagram demonstrates

direct relationships between groups in an economy

The upward sloping portion of a long-run cost curve illustrates:

diseconomies to scale

If a solar panel manufacturer wants to look at its total costs of production in the short run, which of the following would provide a useful starting point?

divide total costs into 2 categories - fixed costs that can't be changed in the short run and variable costs that can be changed

Which of the following statements is/are reflecting decision-making on the margin?

double order to a dozen doughnuts, pay only 20% more; one more day in cottage, cost of rental rise?

When a long-run average cost curve illustrates economies to scale it will be:

downward sloping

​What is the relationship between total surplus and economic efficiency?

economically efficient market will have maximum possible total surplus given supply and demand curve

The term ________ describes a situation where the quantity of output rises, but the average cost of production falls.

economies of scale?

The size of the change in the quantity demanded of a good or service due to change in its price is measured by the elasticity of demand. When the percentage change in the quantity demanded for a good or service is more than the percentage change in price, the demand for that good or service is ________ and the price elasticity coefficient is ________.

elastic, > 1

Teenage workers are assumed to have ________ labor supply, therefore a 5% increase in wage would result in ________ percentage change in quantity of labor supplied.

elastic; greater

A price ceiling creates ________ when it is set ________ the equilibrium price.

excess demand, below

The term "constant returns to scale" describes a situation where

expanding all inputs doesn't change avg cost of production

Self-interest can include more than a concern for oneself. To the extent that the happiness of others contributes significantly to the our own happiness, actions taken in our own self-interest may have benefits for

family and friends

statements for behavioral

find 100 and spend freely vs 100 loss

In a planned economy, government determines the prices for goods and services, and

firms determine what goods to produce to maximize profits

Implicit costs are ________.

forgone opportunity to do something else with your resources

Sales taxes are:

generally regressive; imposed percentage of the value of the purchase

A free market is described by which of the following statements?

government doesn't act on it

The slope of a budget constraint line is influenced by

how much one item costs compared to the cost of the other item

Which of the following questions would be asked by an economist studying elasticity?

how responsive r consumers and producers to changes in prices

Elasticity measures the behavioral response of economic agents in a given situation. Which question is likely to be answered using elasticity?

if a restaurant puts pizza on sale, will additional # of pizzas offset discount on each item? will sales rev for pizza go up or down

​Select all the reasons why a decrease in the price of a product would lead to an increase in purchases of the product.​

income effect and substit. effect bc product is cheaper and person gain more utils of satisfaction

When a 10% increase in income causes a 4% increase in quantity demanded of a good

income elasticity of 0.4 and good is a normal good

2 The marginal product of labor is known to be greater than the average product of labor at a given level of employment. The Average Product at this point would be ________.

increasing

A person who takes life-saving prescription drugs most likely has a(n) ________demand for that drug. Therefore an increase in the price of the drug will result in ________ total revenue for the drug company.

inelastic, increased

When income increases and demand for a good falls, the good is considered a

inferior good

If a data line on a graph has a slope of zero it means there

is a constant relationship between x and y

What are three of factors of production?

labor, capital and natural resources

When higher prices result in a lower quantity demanded, economists call this relationship

law of demand

When higher prices result in higher quantity supplied, economists call this relationship

law of supply

The short run average cost is never ________ the long run average cost.

less

Economies to scale refers to the ________ where all inputs are being allowed to increase together.

long avg cost curve

Price ceilings attempt to make consumer prices ________. ​

lower

A price floor attempts to keep prices ________.

lower than equil

Excess supply will result in suppliers ________ prices, which encourages demanders to demand ________ .

lowering, more

Marginal cost is necessary to consider in a rational decision, and should be compared to

marginal benefit

The term ________ is used to describe the additional cost of producing one more unit.

marginal cost

If average total cost is increasing, ________.

marginal cost must be greater than average total cost

step by step process of finding choice with highest total utility = comparison of

marginal utility gained and lose from different choices along budget constraint

tell tale signal that choice with highest total utility

marginal utility per dollar is same for both goods

What is one way to express economic theory?

mathematical equations

If an economist is trying to predict the outcome from particular causes and effects, what is the best tool(s) for her to use in order to test out her economic model?

mathematical functions

When quantity demanded decreases in response to a change in price

movement from one point to another along the demand curve

Sunk costs have ________.

no effect on output decisions

Which of the following are examples of long-run fixed costs:

none of - payments for production inputs, hourly wage costs, mortgage payments

The government wants to make Medicare benefits available to more people, but to achieve this goal, it needs to make cuts in the existing Medicare budget. The two areas where they are considering cuts are nonessential elective surgery and 6-12 month mental health care programs. Applying the concept of diminishing marginal utility, the budget cuts should be made for spending on:

nonessential cuz its lower marginal utility per dollar of expenditure

Who determines how much utility an individual will receive from consuming a good?

one's own preferences

In order to satisfy as many wants as possible, it is necessary to achieve ALLOCATIVE efficiency,

outlet may go where less valued

If the government sets floor prices for wheat or corn that guarantee farmers an above-market price for that product, the most probable result would be what?

over production

shannon shows consumption. increase income

parallel shift to right

Consumer surplus is best described as the extra benefit consumers receive when they ________.

pay less than they wouldve been willing to pay

The ability to pay principle of taxation holds that:

people with more income should pay more taxes

Once a model of reality is constructed around certain assumptions, it can be tested to determine its value in

predicting outcomes

A supply curve is a graphical illustration of the relationship between quantity supplied and

price

1. When the local grocery store puts cereal on sale, reducing its price from $4.10 per item to $3.70 per item, the quantity sold increases from 220 per week to 260 per week. This response illustrates which of the following concepts?

price elasticity of demand

ralph shows consumption choices between hot dogs and hamburgers.

price of hamburgers no affect on ralphs ability to buy hot dogs but decrease # of hamburgers he can buy; budget goes inward

Scarcity is imposed on individual households in the form of

prices of goods that we may purchase, income limitations

When supply is inelastic and demand is elastic, the tax incidence falls on ________.

producer

The production possibilities model is illustrated with a negatively sloped line because

production of different types will compete for limited resources

If the elasticity of demand for a company's product is estimated to be 1.72, what would you advise the company to do if their objective is to decrease revenue?

raise price

The price elasticity of demand measures the

responsiveness of quantity demanded to a change in price

You are the manager of a restaurant and would like to increase revenue. The host staff suggests that you should increase the price of drinks and food, but the servers suggest decreasing the price of drinks and food. You are unsure if you should increase or decrease price, but you know that

servers think demand for drinks and foods = elastic

A flat tax:

single identical tax rate on income of all taxpayers; may not be realistic bc most actual proposals exempt lower income households from paying taxes

Which of the following factors does NOT influence the price elasticity of demand of a product?

slope of the supply curve

Rational decision-making ignores any consideration of:

sunk costs

Good weather and heavy winter rain increases the supply of agricultural products. This means that at any given price, a higher quantity will be supplied. Conversely, a drought would shift the

supply curve to the left

How do we find the percentage change in quantity using the midpoint formula?

the change in quantity divided by the average quantity, multiplied by 100

Assuming there are only two types of outputs in Cuba: consumer goods and nuclear missiles. All else constant, as the nation produces more missiles

the greater is the opportunity cost of consumer wants satisfied, every additional missile will reduce consumer goods production by more and more

For an economist or mathematician, a variable is

the name given to a quantity that can assume a range of values

The marginal product curve is

upward sloping and then downward sloping

What combination of model characteristics are frequently used it the most effective models?

useful and simple

The theory of rational behavior

useful model for how decisions r made

In the case of a direct relationship between two variables, all else remaining constant:

value of two variables will move in the same direction; graphically, data line representing the relationship between variables has a positive slope

Land, or natural resources, include(s) the fertility of the land, minerals below it, and________?

wind and sun

A non-linear production possibilities model assumes that

with rational resource allocation decisions, the opp. cost of producing more will rise, some resources are specialized to one use more than another

Given that spending for a certain household will always include a base amount of $1000/month, and that additional spending is equal to half of any income earned, we can predict household spending with a model y=b+mx, where

y = spending

2 When the Total Product curve reaches its maximum point, the value of the Marginal Product at that point is ________.

zero