Micro Economics WK 1-2

The following table shows the total benefit that Jenny derives from consuming different quantities of chocolate. Quantity of Chocolate Consumed /Total Benefit ($) 0 /0 1 /10 2 /18 3 /24 4 /29 5 /30 Refer to the table above. If the price of one chocolate is $2, the marginal benefit per dollar spent on the fourth unit will equal: a)$2. b)$4. c)$2.5.

$2.5

The deadline for your research paper is tomorrow and you still need a day of work to complete the paper. Unfortunately, you are scheduled to work all day in the cafeteria. You can turn the paper in one day late for a 10 percent penalty or take the day off of work and turn the paper in by the deadline. Losing a day of wages will cost you $90. The marginal cost of turning the paper in on time is: a)10 percent deducted from your final score. b)$90 in forgone wages. c) not getting to lounge around all day.

$90 in forgone wages.

An economic model: a)should make clear assumptions b)should reasonably predict cause and effect. c)should describe the real world reasonably. d)All of these are true.

All of these are true.

___ occurs when economic benefits are distributed fairly a)equity b)Productive efficiency c)Equality

Equity

________ is concerned with the fair distribution of resources across society. a)equity b)Utility c)Efficiency

Equity

Which of the following statements is true about individuals and utility? a) Individuals always seek to maximize utility. b)Individuals always seek to maximize their income, not utility. c)Individuals will either minimize or maximize utility depending on the situation.

Individuals always seek to maximize utility.

A demand curve:

Is a graph that shows the quantities demanded by consumers of a particular good or service at various prices, visually displays the demand schedule, and is a graph depicting various price-quantity combinations of a good.

Which of the following is an example of a disincentive? a)Law enforcement creates a "Mug Shots" section to post all recent arrests online in order to discourage potential law breakers. b)You offer workers a bonus if they sell 100 widgets per month. c)A local gym offers a weight loss competition and the winner earns a free trip to Bermuda.

Law enforcement creates a "Mug Shots" section to post all recent arrests online in order to discourage potential law breakers.

An optimizing consumer has to choose between two goods-Good A priced at PA and Good B priced at PB. Given that MBA is the marginal benefit from consuming Good A and MBB is the marginal benefit from consuming Good B, the consumer's well-being will be maximized at the point where: a)MBA = MBB. b) MBA/PA = MBB/PB. c)MBA/PB=MBB/PA.

MBA/PA = MBB/PB.

Jan heads to the store to buy burgers for dinner. Seeing a sale on hot dogs, she buys those instead. The change in her demand for burgers is due to which factor? a) Income b)Preferences c)Prices of related goods

Prices of related goods

The amount of a particular good that buyers in a market will purchase at a given price during a specified period is called: a)demand. b) quantity demanded. c)quantity supplied.

Quantity Demand

Decisions about how to allocate resources are made by: a)individuals. b)businesses. c)governments d)Resource allocation decisions are made by all of these.

Resource allocation decisions are made by all of these.

Study of economics?

Studies how individuals and groups manage resources

Scarcity refers to the situation in which: a)nations poverty level increases b)unlimited wants>limited resources c)unlimited resources>limited wants

Unlimited wants>limited resources

"Late registration will result in an additional $30 fee." This is an example of: a) a disincentive. b)marginal cost. c)limited time pricing.

a disincentive.

Between two indifference curves, the one on the right indicates: a)a higher level of utility than the one on the left. b) a lower level of consumer income than the one on the left. c)the same level of utility as the one on the left

a higher level of utility than the one on the left.

There has been a decrease in the demand for socks. This change can be shown graphically as: a)a shift in the demand curve to the left. b) a shift in the demand curve to the right. c)a movement along the demand curve to the right.

a shift in the demand curve to the left.

An increase in the price of Heinz ketchup is likely to cause: a)a decrease in the demand for Hunt's catsup, due to a change in preferences. b)an increase in the demand for Hunt's catsup, due to a change in the price of a complementary good. c)an increase in the demand for Hunt's catsup, due to a change in the price of a substitute good.

an increase in the demand for Hunt's catsup, due to a change in the price of a substitute good.

Considering the concept of cross-price elasticity, when two goods are complements: a)an increase in the price of one will cause a decrease in the quantity demanded of the other. b)a decrease in the price of one will cause a decrease in the quantity demanded of the other. c)an increase in the price of one will cause an increase in the quantity demanded of the other.

an increase in the price of one will cause a decrease in the quantity demanded of the other.

Causation occurs when: a)change in one variable is the reason for the change in another variable. b)two variables tend to move in the same direction. c)change in one variable does not cause any change in another variable.

change in one variable is the reason for the change in another variable.

Ray's company just announced that everyone will be getting their pay cut by 5% in order to avoid having to close down. Ray's demand for coffee, a normal good, will likely: a) decrease, and his demand curve will shift to the right. b) decrease and his demand curve will shift to the left. c)increase, and his demand curve will shift to the left.

decrease, and his demand curve will shift to the left.

Utility is: a)as difficult to measure as an individual's income level b)as easy to measure as price signals in the economy. c) difficult to measure because it is very subjective.

difficult to measure because it is very subjective.

Johnny spends his day doing a variety of activities; he spends the morning exercising and doing yard work, reads in the afternoon, and hosts a dinner party in the evening. Economists would best explain his choice to do a variety of activities instead of a single activity using the concept of: a)budget constraints b)income effect c)diminishing marginal utility

diminishing marginal utility

Income elasticity of demand describes: a)how much the quantity demanded changes in response to a change in consumers' incomes. b)how quickly the market will change in response to a change in consumers' incomes. c)how much the quantity demanded changes in response to a change in price.

how much the quantity demanded changes in response to a change in consumers' incomes.

Economics is the study of: a)state, nation, government and politics and policies of governments. b)how people choose to allocate scarce resources and how the choices affect society. c)the problems related to existence and evolution of society.

how people choose to allocate scarce resources and how the choices affect society.

You decide to skip work and drive your car on a long road trip. The opportunity cost of driving your car: a)is zero because the car is paid for. b)includes lost wages that you could have earned working instead of taking the trip. c) None of these.

includes lost wages that you could have earned working instead of taking the trip.

The understanding of why the economy is contracting during slowdowns and how to recommend appropriate policies is studied under: a) international economics. b) microeconomics. c)acroeconomics.

macroeconomics.

Scarcity requires that we: a)adopt economic policies that will lead to unlimited resources b)make decisions in order to arrange our resources rationally c) make sure we only want things that we are capable of consuming and producing.

make decisions in order to arrange our resources rationally

The extra cost associated with producing or consuming the next unit is called the: a)variable cost. b)marginal cost. c)sunk cost.

marginal cost.

The two broad fields that make up the subject of economics are: a)microeconomics and macroeconomics. b) personal investments and business investments. c) imports and exports.

microeconomics and macroeconomics.

The most likely complementary good for cereal would be: a) a bagel. b)shoes. c)milk

milk

Positive Economics generate...

objective descriptions that can be verified with data.

The percentage change in the quantity demanded of a good or service when its price changes by one percent is: a)price elasticity of demand. b)income elasticity of demand. c)price elasticity of supply.

price elasticity of demand.

We need to calculate the price elasticity of demand because: a)producers need to know that consumers will have the same response to a price change regardless of the good or service. b)producers need to know that consumers are more sensitive to price changes for some goods and services than for others. c)producers need to be able to predict the future preferences of their customers.

producers need to know that consumers are more sensitive to price changes for some goods and services than for others.

Entrepreneurs tend to take greater risks if low tax rates offer greater after-tax profit potentials. The government's decision to offer low tax rates to entrepreneurs is: a)providing an incentive, in the hopes that more entrepreneurs will take risk and create economic growth. b)providing a market for an economic expansion. c)providing a disincentive, in the hopes that entrepreneurs will not get into tax default after assuming too much risk.

providing an incentive, in the hopes that more entrepreneurs will take risk and create economic growth.

Saturday afternoon you can either attend a street festival, work and earn $100, or study for your midterm exam. You flip a coin between the street festival and studying, but did not really consider working. The coin flip determined that you would stay home and study. The opportunity cost of the time spent studying includes: a)earning a high score on your midterm. b)the loss of $100 worth of wages and going to the street festival. c)the benefit that could have been received at the street festival.

the benefit that could have been received at the street festival.

Bob got laid off six months ago. He used to go to the movies once a month, but he's only been twice since losing his job. This type of behavior can be measured using: a)the cross-price elasticity. b) the income elasticity of demand. c)the price elasticity of demand.

the income elasticity of demand.

Demand for Snickers bars will decrease if: a)the price of Milky Way bars (a substitute) decreases. b)a news story claiming 95% of all geniuses eat at least one Snickers bar a day is released. c)the price of Milky Way bars (a substitute) increases.

the price of Milky Way bars (a substitute) decreases.

Price elasticity of demand describes: a)the size of the shift in demand of a good or service when its price changes by one percent. b)the size of the percentage change in the quantity demanded of a good or service when its price changes by one percent. c)the size of the percentage change in the quantity supplied of a good or service when its demand changes due to a price change.

the size of the percentage change in the quantity demanded of a good or service when its price changes by one percent.

People choose to do something: a)when they believe it won't harm anyone and will better themselves. b)when they believe the costs outweigh the benefits of the decision. c)when they believe the benefits outweigh the costs of the decision.

when they believe the benefits outweigh the costs of the decision.