Micro Exam 1
The fact that people with higher incomes get to consume more goods and services addresses the ___ part of one of the two big economic questions.
"for whom"
Jo decides to take a trip which costs $1000. While on vacation, Jo does not go to work where she could have earned $800. In terms of dollars, the opportunity cost of the vacation is
$1800
You decide to take a vacation and the trip costs you $2000. While you are on vacation, you do not go to work where you could have earned $750. In terms of dollars, the opportunity cost of the vacation is
$2750
Fran decides to go to a concert which costs $250 for the ticket and parking instead of taking a shift at work where should could've earned $100 for the evening. In terms of dollars, the opportunity cost of the concert is
$350
A 10 percent increase in the quantity of spinach demanded results from a 20 percent decline in its price. The price elasticity of demand for spinach equals ___ and is ___.
0.5, inelastic
When the price of a movie ticket increases from $5 to $7, the quantity of tickets demanded decreases from 600 to 400 a day. What is the price elasticity of demand for movie tickets?
1.20
The demand and supply curves for OU tents in Norman, Oklahoma, are given by the following equations: Qd = 18 - P Qs = -2 + P Where P is measured in dollars and Q is the number of shirts sold per year. The equilibrium price is ___ and the equilibrium quantity is ___.
10, 8
A local pizzeria raised its price from $9 to $11 for each pizza and the sales of its pizza decreased from 60 to 40 per day. What is the price elasticity in this case?
2
Betty and Ann live on a desert island. With a day's labor, Ann can product 8 fish or 4 coconuts; Betty can product 6 fish or 2 coconuts. Ann's opportunity cost of producing 1 coconut is ___ and she should specialize in the production of ___.
2 fish per coconut; coconuts
In an hour, Cindy can make either 10 pizzas or 20 hoagies. Cindy's opportunity cost of producing one pizza is
2 hoagies
A local pizzeria raised its price from $9 to $11 for each pizza and the sales of its pizza decreased from 150 to 100 per day. The price elasticity of demand is ___ and it is ___.
2, elastic
In an hour, Andy can make either 5 pizzas or 12 pies and Chris can make either 6 pizzas or 18 pies. ___ advantage in making pizzas.
Andy has a comparative
In an hour, Cindy can make either 10 pizzas or 20 hoagies and Cal can make either 10 pizzas or 36 hoagies. Who has the comparative advantage in making pizzas?
Cindy
The study of the decisions of individual units in the economy is known as
Microeconomics
Which of the following is a positive economic statement?
On average 40% of Dr. Rogers' students earn a B grade or better
The demand and supply curves for OU Hoodies in Norman, Oklahoma, are given by the following equations: Qd = 10 - P Qs = 2 + P Where P is measured in dollars and Q is the number of shirts sold per year. The equilibrium price is ___ and the equilibrium quantity is ___.
P=4, Q=6
Which of the following is a positive statement?
People buy more of a good or service when its price falls
If both demand and supply decrease, what will be the effect on the equilibrium price and quantity?
The quantity will decrease but the price could either rise, fall, or remain the same
If both demand and supply increase, what will be the effect on the equilibrium price and quantity?
The quantity will increase but the price could either rise, fall, or remain the same
Which of the following is NOT part of the first big economic question?
Why do incentives affect only marginal costs?
Which of the following is a normative statement?
You should eat less candy
Which of the following would NOT shift the demand curve for turkey?
a change in the price of a turkey
Which of the following shifts the supply curve for student housing in Norman rightward?
a decrease in the price of a factor of production used to produce the good
Which of the following shifts the supply curve rightward?
a decrease in the price of a factor of production used to produce the good
On campus and off campus housing are substitutes. Which of the following decreases the demand for on campus housing?
a decrease in the price of off campus housing
Which of the following leads to a movement along the supply curve for shredded wheat but does not shift the supply curve for shredded wheat?
a fall in the price of shredded wheat
Which of the following leads to a movement along the supply curve for student housing but does not shift the supply curve for student housing?
a fall in the price of student housing
When people's incomes increase, the demand for a good increases. The good is called
a normal good
Ticket scalpers at the NCAA basketball tournament last year charged prices high above the printed ticket price. This observation is evidence of
a shortage at printed ticket prices
A normative statement concerns
a value judgment
Joe likes to sleep late in the mornings and play tennis in the afternoons. The opportunity cost of Joe attending his morning class for one hour is
an hour of sleep given up
Between 2001 and 2015, equilibrium college tuition rose from $15,000 to $27,000 and equilibrium enrollment increased from 16 million to 21 million students. These changes could be the result of
an increase in demand
Markets are best defined as
arrangements where buyers and sellers get together to buy and sell
John has two hours of free time this evening. He ranked his alternatives, first go to a concert, second go to a movie, third study for an economics exam, and fourth answer his email. What is the opportunity cost of attending the concert for John?
attending a movie
Sliding down along a linear demand curve, the price elasticity of demand
becomes less elastic (more inelastic)
Positive economic statements
can be tested against the facts
In order to achieve the maximum gains from trade, people should specialize according to
comparative advantage
In order to achieve the maximum gains from trade, people should specialize in the good for which they have
comparative advantage
The quantity demanded of a good or service is the amount that
consumers plan to buy during a given time period at a given price
A recession occurs and people's incomes decrease. Knowing that an iPad is a normal good, you predict that the demand for an iPad
decreases
Sliding down and to the right along a linear demand curve, the price elasticity of demand
decreases
Demands differ from wants because
demands reflect a decision about which wants to satisfy and a plan to buy the good, while wants are unlimited and involve no specific plan to acquire the good
If a decrease in the price of gasoline increases the demand for large cars, then
gasoline and large cars are complements in consumption
If an increase in the price of gasoline decreases the demand for movies, then
gasoline and movies are complements in consumption
Which goods have less ELASTIC demands (e.g. are more INELASTIC)?
goods with few substitutes
Which goods have more elastic demands?
goods with many substitutes
Because of increasing marginal cost, most supply curves
have a positive slope
Pat has two hours of free time this evening. They ranked their alternatives, first go to a movie, second go to a bar, third study for an economics exam, and fourth sleep. Pat's opportunity cost of attending the movie is the ___ which is ___?
highest value alternative; going to bar
When economists talk of scarcity, they are referring to the
inability of society to satisfy all human wants because of limited resources
Which of the following is NOT one of the factors that influences the supply of a product?
income
If demand for Jo's maple syrup is inelastic, then when Jo raises the price of maple syrup, her total revenue will
increase
The cross price elasticity of demand for bus ridership and the price of on campus showing is 2. This suggests that if the price of on campus housing increases by 10%, then the quantity of bus riders will
increase by 20%
A recession occurs and people's incomes decrease. Knowing that a McDonald's Happy Meal is an inferior good, you predict that the demand for Happy Meals
increases
Moving up (to the left) along a linear demand curve, the price elasticity of demand
increases
Which of the following explains why supply curves slope upward?
increasing marginal cost
If the price elasticity is between 0 and 1, demand is
inelastic
Vic goes to college to become an economist. This is an example of an
investment in human capital
The statement that "peach ice cream is better than chocolate ice cream"
is a normative statement
The quantity supplied of a good or service is the quantity that a producer ___ at a particular price during a given time period.
is willing to sell
The cross elasticity of demand measures the responsiveness of the quantity demanded of a particular good to changes in the prices of
its substitutes and its complements
Factors of production are grouped into four categories
land, labor, capital, entrepreneurship
A decrease in the demand for beef because of concerns over cholesterol results in
lower beef prices
A local transit authority charges $1 for a bus ride. An economics study suggests that in the price range from $0.50 to $1.50, the elasticity of demand for bus trips is 1.1. To increase its revenue, the transit authority should
lower the fare
Economic models
make assumptions to simplify reality
Economics is best defined as the study of how people, businesses, governments, and societies
make choices to cope with scarcity
When Al says, "Dr. Rogers is the best economics professor at OU," she is
making a normative statement
The analysis of the behavior of individual decision-making units is the definition of
microeconomics
Scarcity exists because
our wants exceed the resources available to satisfy them
The price elasticity of demand is calculated as the absolute value of the
percentage change in quantity demanded divided by the percentage change in price
If the price of a good increases from $3 to $4, and the quantity demand remains unchanged, then the demand is
perfectly inelastic
The income elasticity of demand is
positive for a normal good and negative for an inferior good
If the demand for bikes falls and the supply of bikes increase, the equilibrium
price of bikes definitely decreases
If the demand for student housing falls and the supply of student housing increases, the equilibrium
price of housing definitely decreases
Any point on a production possibilities frontier (PPF) itself is
production efficient
Which of the following is the best way to describe equilibrium in a market? At equilibrium, the
quantity supplied equals the quantity demanded
The elasticity of supply measures the sensitivity of
quantity supplies to a change in price
If the demand for bathing suits and supply of bathing suits both decrease, then definitely the equilibrium
quantity will decrease
If the demand for bikes and supply of bikes both decrease, then definitely the equilibrium
quantity will decrease
An increase in the number of suppliers in a market results in a
rightward shift in the supply curve
You observe that an increase in the price of salsa decreases the demand for tortilla chips. You can conclude that
salsa and tortilla chips are complements
Gruel is an inferior good. Hence, an INCREASE in people's incomes
shifts the demand curve for gruel leftward
The law of demand implies that demand curves
slope down
Increasing marginal costs explains why supply curves
slope upward
The law of demand states that, other things remaining the same, the higher the price of a good, the
smaller is the quantity of the good demanded
People buy more coffee when the price of tea rises. These goods are
substitutes
The price of a tomato increases and people buy more lettuce. You infer that lettuce and tomatoes are ___.
substitutes
The price of an apple increases and people buy more pears. You infer that apples and pears are
substitutes
For normal goods which of the following explains why demand curves slope downward?
substitution effect and income effect
Microeconomics is the study of
the choices that individuals and businesses make
Each point on the demand curve reflects
the highest price consumers are willing and able to pay for that particular unit of a good
When the price of a pizza decreases from $14 to $12
the income effect points out that the total purchasing power of people who buy pizza increases
Changes in which of the following DOES NOT shift the demand curve for a good?
the price of the good
Which of the following influences people's buying plans (quantity demanded) and does not shift the demand curve?
the price of the good
The price elasticity of demand measures
the responsiveness of the quantity demanded to changes in price
A bakery can produce either cakes or cookies. If the price of cookies rises, then
the supply curve of cake shifts leftward
The "law of demand" refers to the fact that, all other things remaining the same, when the price of a good rises
there is a movement up along the demand curve to a smaller quantity demanded
If the price of chocolate chip cookies rises, then
there is a movement upward along the demand curve for chocolate chip cookies
Any production point outside the production possibilities frontier is
unattainable
formula for opportunity cost
what you sacrifice / what you gain
formula for price elasticity of demand
{ (Q2-Q1)/[(Q2+Q1)/2] x 100 } / { (P2-P1)/[(P2+P1)/2] x 100 }
