Exam One Missed Problem Set Questions

inelastic, B

According to a news story about the bus system in the Lehigh Valley in​ Pennsylvania, "Ridership fell 14 percent in 2012 after a 33 percent​ increase" in bus fares. ​Source: Dan​ Hartzell, "Rebounding from a 2012 Rate​ Hike, LANTA's Ridership Was up Last​ Year," (Allentown,​ PA) Morning Call​, March​ 13, 2014 Given this​ information, the demand for bus trips is (elastic/inelastic). The best explanation for this result is that A. over time people can find alternate forms of transportation. B. bus trips are a necessity for those without cars. C. bus trips only appeal to a certain market. D. these trips are a small portion of​ someone's budget.

B

An article in the Wall Street Journal in early 2001 noted two developments in the market for laser eye surgery. The first development concerned side effects from the​ surgery, including blurred vision. The second development was that the companies renting eyeminus−surgery machinery to doctors had reduced their charges. In the market for laser eye​ surgeries, these two developments A. decreased demand and increased​ supply, resulting in a decrease in both the equilibrium price and the equilibrium quantity of laser eye surgeries. B. decreased demand and increased​ supply, resulting in a decrease in the equilibrium price and an uncertain effect on the equilibrium quantity of laser eye surgeries. C. decreased demand and increased supply resulting in an increase in both the equilibrium quantity and the equilibrium price of laser eye surgeries. D. decreased demand and decreased​ supply, resulting in a decrease in the equilibrium quantity and an increase in the equilibrium price of laser eye surgeries.

D

An article in the Wall Street Journal notes that although U.S. oil production has increased rapidly in recent​ years, the increase has still amounted to only 5 percent of world production.​ Still, that increase has been​ "enough to help trigger a price​ collapse." ​Source: Georgi Kantchev and Bill​ Spindle, "Shale-Oil Producers Ready to Raise​ Output," Wall Street Journal​, May​ 13, 2015. A small increase in supply can lead to a large decline in equilibrium price when A. demand is relatively elastic. B. supply is perfectly elastic. C. demand is perfectly elastic. D. demand is relatively inelastic.

A

Choco Fantasy is a firm that produces both dark chocolates as well as liquor chocolates. It can produce​ 10,000 bars of dark chocolate per month if all its resources are used to produce only this variety.​ Similarly, using all its resources in the production of liquor​ chocolates, the firm can produce​ 8,000 bars per month.​ However, during a given​ month, the firm produces both varieties. Which of the​ following, if​ true, would suggest that the firm is operating on its​ PPF? A. Even though the demand for both liquor and dark chocolates has​ increased, the company can increase the production of only one variety. This is the correct answer. B. In an attempt to cut​ costs, the company is planning to fire its unproductive resources. C. The opportunity cost of shifting resources from the production of liquor chocolates to dark chocolates is marginal. D. Most domestic consumers prefer the better quality Swiss chocolates imported by the country. E. Medical reports earlier this year indicated that higher chocolate consumption increases the risk of heart attack.

C

Consider the supply of zinc. What would make the supply of zinc more​ elastic? The supply of zinc would become more elastic if A. the definition of the market becomes narrower. B. more substitutes were available. C. the time horizon becomes longer. D. it becomes a larger portion of a​ consumer's budget. E. it were more of a luxury.

D

If demand is perfectly​ elastic, then what is the effect of an increase in​ price? A. no change in quantity demanded B. a very small change in quantity demanded C. a change in quantity demanded exactly equal to the change in price D. a decrease in quantity demanded to zero

Yes, B

Leonard​ Fleck, a philosophy professor at Michigan State​ University, has​ written, ​"When it comes to health care in​ America, we have limited resources for unlimited health care needs. We want everything contemporary medical technology can offer that will improve the length or quality of our lives as we age. But as presently healthy​ taxpayers, we want costs​ controlled." ​Source: Leonard​ Fleck, Just​ Caring: Health Care Rationing and Democratic Deliberation. New​ York: Oxford University​ Press, 2009. Is it necessary for all economic systems to limit services such as health​ care? (Yes/No) A market system prevents people from getting as many goods and services as they want due to which of the​ following? A. The government because it allocates the goods and services. B. Their income. C. Both A and B. D. Neither A nor B.

C

Microsoft charges a price of​ $599 for a copy of Windows 7. Is this pricing decision​ rational? A. Microsoft's choice was​ rational: the price will maximize profit. B. We cannot assume that this pricing decision was rational because we do not have enough information to make an assumption. C. When we assume the managers at Microsoft have used all available information and have weighed all known benefits and​ costs, we are assuming rationality. D. ​Microsoft's choice cannot be​ rational: the price is clearly more than most people are willing and able to pay.

B

National Economic Council in the Obama administration. He has been quoted as giving the following moral defense of the economic approach. ​"There is nothing morally unattractive about​ saying: We need to analyze which way of spending money on health care will produce more benefit and which​ less, and using our money as efficiently as we can. I​ don't think there is anything immoral about seeking to achieve environmental benefits at the lowest possible​ costs." ​Source: David​ Wessel, "Precepts from Professor​ Summers," Wall Street Journal​, October​ 17, 2002. It would be more moral to reduce​ pollution, A. not taking the cost into account because pollution is potentially harmful to our health. B. taking the cost into account because money spent on pollution reduction is not available for other worthy activities. C. taking the cost into account because reducing pollution often reduces economic growth. D. taking the cost into account because the total cost of reducing pollution is likely enormous. E. not taking the cost into account because pollution reduction is typically associated with large benefits.

B

One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls A. economics. B. scarcity. C. the market. D. rationality.

D

Positive technological change in the production of LCD televisions caused the price of LCD televisions to fall. Holding everything else​ constant, how would this affect the market for Blus−ray players​ (a complement to LCD​ televisions)? A. The demand for Blu−ray players would decrease because consumers could afford to buy fewer LCD Televisions and Blu−ray players. B. The demand for Blu−ray players would increase and the equilibrium price of Blu−ray players would decrease. C. The supply of Blu−ray players would increase and the equilibrium price of Blu−ray players would decrease. D. The demand for Blu−ray players would increase and the equilibrium price of Blu−ray players would increase.

will increase, may increase or decrease

Suppose that many cities begin to pass taxes on carbonated​ sodas, while at the same time scientists discover a cure for citrus​ greening, which is reducing orange crops in Florida and Brazil. a. Can we use this information to be certain whether the equilibrium price of orange juice will increase or​ decrease? b. Can we use this information to be certain whether the equilibrium quantity of orange juice will increase or​ decrease? The equilibrium quantity of orange juice will (increase, decrease, may increase or decrease) and the equilibrium price of orange juice (increase, decrease, may increase or decrease).

A

The demand curve for corn is downward sloping. If the price of​ corn, an inferior​ good, falls, A. the income effect which causes you to reduce your corn purchases is smaller than the substitution effect which causes you to increase your corn​ purchases, resulting in a net increase in quantity demanded. B. both the income and substitution effects reinforce each other to increase the quantity demanded. C. the income effect which causes you to increase your corn purchases is larger than the substitution effect which causes you to reduce your corn​ purchases, resulting in a net increase in quantity demanded. D. the income and substitution effects offset each other but the price effect of an inferior good leads you to buy less corn.

D

The graph illustrates an initial competitive equilibrium in the market for apples at the intersection of D1 and S1​ (point A​). If the price of​ oranges, a substitute for​ apples, decreases and the wages of apple workers​ increase, how will the equilibrium point​ change? A. The equilibrium point will move from A to C. B. The equilibrium will first move from A to B​, then return to A. C. The equilibrium point will move from A to B. D. The equilibrium point will move from A to E.

E, E

What does increasing marginal opportunity costs​ mean? A. The economy is unable to produce increasing quantities of goods and services. B. Production is not occurring on the production possibilities frontier. C. Increasing the production of a good requires decreases in the production of another good. D. Increasing the production of a good requires smaller and smaller decreases in the production of another good. E. Increasing the production of a good requires larger and larger decreases in the production of another good. What are the implications of this idea for the shape of the production possibilities​ frontier? A. The production possibilities frontier will have a positive slope. B. The production possibilities frontier will have a negative slope. C. The production possibilities frontier will be bowed inward. D. The production possibilities frontier will be a straight line. E. The production possibilities frontier will be bowed outward.

A, No

What is the economic definition of​ utility? Utility is A. the enjoyment or satisfaction people receive from consuming goods and services. B. the decrease in additional satisfaction consumers receive as they consume more of a good or service during a given period of time. C. the difference between the highest price a consumer is willing to pay and the price the consumer actually pays. D. the sum of consumer and producer surplus. E. the change in enjoyment or satisfaction a person receives from consuming one additional unit of a good or service. Is it​ measurable? (Yes/No)

D

When economists speak of a shortage, they mean a situation in which A. the quantity demanded exceeds quantity supplied. B. some consumers are unable to make a purchase at the current price. C. the market price is below the equilibrium price. D. all of the above. E. A and B only.