ECON Final Exam (Unit 1)

If D2 and S2 represent the demand and supply schedules in a particular market, then the equilibrium price and quantity are ___ and ____, respectively

$10, 12

"If I didn't have class, I would save $4 from parking and $10 p/h for four hours." Opportunity cost?

$44

Kim has $24 per week in entertainment budget. Splits her time $3 for yoga and $8 for movies. Total utility from each activity in table. What's Kim's total utility maximizing point?

1 movie, 5 yoga classes

if DI and SI represent the demand and supply schedules in a particular market, then the equilibrium price and quantity are ___ and ___, respectively

$6, 13

After "mad cow disease" the likely effect on the US demand curve for Canadian beef is:

A shift of the demand curve for beef to the left

The imposition of the price ceiling on a market often results in:

A shortage

Will NOT result in a leftward shift of the market demand curve for labor

An increase in the wage rate

Marginal utility can:

Be positive, negative, or zero

A 10% decrease in potato chips leads to a 30% increase in the quantity of soda demanded. Appears that:

Cross-price elasticity of demand for soda is -3

Other things being equal, a ___ supply of workers tend to __ real wages

Larger; decrease

As the __ substitute for low-skill labor becomes available; the demand curve for low-skill will to the left

Technology

Nearly all supply curves share a basic similarity: they slope

Up from left to right

In economics, the demand for a good refers to the amount of the good that people

Will buy at various prices

Gomer decides to spend an hour playing ball instead of studying. What was his opportunity cost?

The benefit to his grades from studying for an hour

As depicted in ___, it is necessary to give up some of one good to gain more of the other good

The production possibilities frontier

Student has a test. The opportunity cost of scoring a 94% on economics instead of 77:

15 points on the history exam

Billy Bob Barber Shop knows that 5% increase in the price of their haircuts results in a 15% decrease in the # of haircuts purchased. What is the elasticity demand?

3.0

Demand for a product is unit elastic, at a price of $20, 10 units of a product are sold. If the price is increased to $40, then one would expect sales to equal:

5 units

The table below sets out cost information for the production of volleyballs. Some values are missing. Which of the following statements is correct?

A= 42, E= 12

Andy thinks pizza and beer complement one another if price of pizza goes down, expected...

Andy's demand for beer to increase

Why is there scarcity?

Because our unlimited wants exceed our limited access

In April 2009, mid-recession, government in Ontario increased min. wage. Likely effect of policy?

Both the leftward shift in the labor demand curve and the higher minimum wage will lead to an increase in unemployment rate

Model that economists use for illustrating the process of individual choice in a situation of scarcity is the ___, sometimes also called opportunity set, diagram shows choices are possibly

Budget constraint

Slope of ___ is determined by relative price of two goods, which is calculated by taking the price of one good and dividing it by the price of the other good

Budget constraint

Specialization

Can lead to an increase in overall population

When ___, a firm will supply a higher quantity at any given price for its output, and the supply curve will shift to the right

Cost of production fall

A 10% increase in the price of soda leads to a 20% increase in the quantity of iced tea demanded. Appears that:

Cross-price elasticity of demand for iced tea is -2

In countries like ___ the command economy predominates

Cuba and North Korea

A change from Point A to Point E represents a:

Decrease in supply

"The Wealth of Nations" Smith introduces ___ :work required to produce a good or service is divided into a number of tasks that are preformed by different workers

Division of labor

A price cut will increase the total revenue a firm receives if the demand for its products is

Elastic

Demand is said to be ___ when the quantity demanded is very responsible to changes in price

Elastic

Supply is said to be ___ when the quantity supplied is very responsive to changes in price

Elastic

When economists are sketching examples of demand & supply, it is common to sketch a demand or supply curve that is close to horizontal, and then to refer to that curve as

Elastic

Youth smoking seems to be more ___ than adult smoking- that is, the quantity of youth smoking will fall by a greater % than the quantity of adult smoking in response to a given % increase in price

Elastic

The price elasticity of demand for tickets to local baseball games is estimates to be equal to .89. In order to boost tickets revenues, an economists would advise

Increasing the price of game tickets because demand is elastic

When economists are sketching examples of demand & supply, it is common to sketch a demand or supply curve that is close to vertical, and then to refer to that curve as

Inelastic

Taxes on goods with ___ demand curves will tend to raise more tax revenue for the government than taxes on goods with ___ demand curves

Inelastic; elastic

At Point A in the production possibilities graph shown above, the economy:

Is not using the resources efficiently

Scarcity implies that:

It is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available

In the ___, households work and receive payments from firms

Labor market

If an increase in the Price of Good X causes a decrease in demand for Good Y, conclude that:

Goods X and Y are complement goods

In a command market, the ___ either makes most economic decisions itself or strongly influenced

Government

__ describes a situation where a ___ causes a reduction in the buying power of income even though actual income has not changed:

Income effect, higher price

A change from Point A to Point B represents a:

Increase in quality supplied

If the demand curve is perfectly elastic, then an increase in supply will:

Increase the quantity exchanged but result in no change in the price

Improvements in the productivity of labor will tend to

Increase wages

Generally accepted as valid criticism of production of useful goods/services

Environmental pollution

If the supply curve for a product is horizontal, then the elasticity of supply is

Equal to infinity

If the supply curve for a product is vertical, then elasticity of supply is

Equal to zero

The ___ is the only price where quantity demanded is equal to quantity supplied

Equilibrium price

Basic difference between macro and micro economics

Microeconomics concentrates on the behavior of individual consumers & firms. Macroeconomics focuses on the performance of the entire economy

Philosophers draw a distinction between positive statements, which describe the world as is, and ___, which describes how the world should be

Normative statements

The elasticity of supply is demand as the ___ change in quantity supplied divided by the ___ change in price

Percentage, percentage

The "law of supply" functions in labor markets; that is a higher for labor leads to a higher quantity of labor supplied

Price

The elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in ___

Price

Contrast to goods and service markets, ___ are rare in labor markets, because rules that prevent people from earning income are not politically popular

Price ceilings

The downward slope of demand curve again illustrates the pattern that as ___ rises, ___ decreases

Price; quality demanded

Why would labor be treated as a variable cost

Producing larger quantities of a good or service generally requires more workers

Demand curve shows the relationship between price and __ on a graph

Quality demanded

___ refers to the tool # of units that are purchased at that price

Quality demanded

Supply curve is graphical illusion of relationships of prices (vertical axis) and ___ (horizontal axis)

Quality supplied

When economist's talk about supply, referring to a relationship between price received for each unit sold and the ___

Quantity supplied

If the supply curve for aspirin is perfectly elastic, than a reduction in demand will cause the equilibrium price to:

Stay the same and the equilibrium quantity to fall

Most choice involves ___, which involves comparing the benefits and costs of choosing most/less of a good

Marginal analysis

As a person receives more of a good, the ___ for each additional unit of the good declines

Marginal utility

The term ___ to the additional utility provided by one additional unit of consumption

Marginal utility

Decrease in consumer preference for a product, other things being equal, will cause

Market demand to shift to the left

___: most economic decisions about what to produce, how, and for who to produce it (buyers and sellers)

Market-oriented economy

Considered to be a tell-tale signal that the point with the highest total utility has been found

The marginal utility per dollar is the same for both goods

Whenever there is a surplus at a particular price, the quantity sold at that price will equal:

The quantity demanded at that price

Whenever there is a shortage at a particular price, the quantity sold at that price will equal:

The quantity supplied at that price

If cola and iced tea are good substitutes for consumers, likely that

Their cross price elasticities are greater than zero

According to the law of supply

There is a direct relationship between price and the quantity supplied

When quantity demanded decreases in response to change in price

There is a movement along the demand curve

Steel mill wage cost increase by 18% over a year. What is the likely economic effect on the market for steel?

There is an increase in the cost of producing steel, which shifts the supply curve to the left, thereby increasing the price of steel

Demand in said to be ___ when the quantity demanded changes at the same proportion as the price

Unit elastic

Price elasticity of demand is defined as:

The percentage change in quantity demanded divided by the % change in price

General pattern that consumption of the first few units of goods tends to bring a higher level of ___ to a person than consumption of later units is a common pattern

Utility

If a paper mill shuts down its operations for three months so that it produces nothing its ___ will be reduced to zero

Variable

If labor demand is downward sloping and labor supply is upward sloping, then when labor demand rises faster than labor supply, it is expected that real wages ____

Will increase

A perfect elastic supply curve is

Horizontal

Mimi plays golf 5 times per month when the price is $40 and 4 times per month when the price is $50. What is the price elasticity of Mimi's demand curve?

1.0

Lesson of ___: forget about money that's irretrievable gone instead focus on marginal costs and benefits of future options

Sunk costs

Any given supply curve or demand is based on the ceteris paribus assumptions that:

All else is held equal

When the economy moves from Point A to Point B in the diagram:

All of the other occur

If this information were used to create a total cost graph, the curve should

All of these

Most likely to cause variation in American households spending patterns

All will cause variation

Results in a rightward shift of the market demand curve for labor

An increase in demand for the firm's product

Total cost function for GoodieCookieCO. How are company's fixed costs represented in a graph?

As the point where the total cost curve touches the vertical axis

Significance of the point marked L1 at the bottom upward-sloping portion of the individual labor supply curve?

As wages increase over this range, the quantity of hours worked also increase

Significance of the point at the top of backward bending of the supply curve marked L3?

As wages increase over this range, the quantity of hours worked decreased

In market-oriented economy, the amount of a good that is produced is decided by interaction of:

Buyers and sellers

If the price is below equilibrium level, then quality demanded will exceed the quantity supplied

Excess demand

A firm's ___ consist of expenditures that must be made before production starts that typically, over the short run, ___ regardless of the level of production?

Fixed cost, do not change

10% increase in income leads to a 15% decreases in the quantity of mac & cheese demanded but charge in the price of mac & cheese. From this info, we can assume:

Macaroni is an inferior good and price elasticity of supply is infinite

The demand curve for typical good has a:

Negative slope because some customers switch to other goods as the price rises

The price elasticity of demand measures the:

Responsiveness of quantity demanded to a change in price

If the demand curve the a life-saving medicine is perfectly inelastic, then a reduction in supply will cause equilibrium price to:

Rise and the equilibrium quantity to fall

Occurs simultaneously with an income effect

Substitution effect

___ arises when a price changes because consumers have an incentive to consume less of the good with a relatively higher price and more of the good with a relatively lower price

Substitution effect

A 25% decrease in the price of breakfast cereal leads to a 20% increase in the quantity of cereal demanded. As a result:

Total revenue will decrease