MICRO exam 1 Study for final

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Equality means distributing society's resources in the most efficient manner.

False

When the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A rises to $70, the quantity demanded of good A falls to 400 units. Using the midpoint method, the price elasticity of demand for good A is

0.67, and an increase in price will result in an increase in total revenue for good A.

A manufacturer produces 350 units when the market price is $10 per unit and produces 460 units when the market price is $14 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about

0.81

Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year, and a worker in Oatland can grow either 5 bushels of corn or 50 bushels of oats per year. There are 20 workers in Cornland and 20 workers in Oatland. If the two countries do not trade, Cornland will produce and consume 400 bushels of corn and 100 bushels of oats, while Oatland will produce and consume 60 bushels of corn and 400 bushels of oats. If each country made the decision to specialize in producing the good in which it has a comparative advantage, then the combined yearly output of the two countries would increase by

380 bushels of corn and 100 bushels of oats

Table 3-2 Assume that England and France each has 10 labor hours available. If each country divides its time equally between the production of pastrami and milk, the the total production is

6 units of pastrami and 3.75 units of milk

If the price elasticity of supply is 0.6, and a price increase led to a 3.7 percent increase in quantity supplied, then the price increase is about

6.17 percent

Tuition is the single-largest cost of attending college for most students.

False

Demand is said to be inelastic if

The quantity demanded changes only slightly when the price of the good changes

T/F An economy can produce at any point on or inside its production possibilities frontier, but it cannot produce at points outside its production possibilities frontier.

True

a group of buyers and sellers of a particular good or service is called

a market

The gains from trade are

a result of more efficient resource allocation than would be observed in the absence of trade

A payroll tax is a

a tax on the wages that firms pay their workers

Trade between countries

allows each country to consume at a point outside its production possibilities frontier

trade

allows specialization, which reduces costs.

Both Ryan and Daunuta produce hair scarves and brooches. However, Ryan is better at producing both goods. In this case, trade could

benefit both Danuta and Ryan

A shortage results when a

binding price ceiling is imposed on a market

A surplus results when a

binding price floor is imposed on a market.

equilibrium quantity must decrease when

both demand and supply decrease

Under rent control, bribery is a potential mechanism to

bring the total price of apartment including the bribe closer to the equilibrium price.

A good will have more inelastic demand, the

broader the definition of the market

Price ceilings and price floors that are binding

cause surpluses and shortages to persist since price cannot adjust to the market equilibrium price

the law of demand states that, other things equal, when the price of a good

falls, the quantity demanded of the good rises

The goal of rent control is to

help the poor by making housing more affordable

Microeconomics is the study of

how individual households and firms make decisions.

The "invisible hand refers to

how the decisions of households and firms lead to desirable market outcomes

When two variables have a positive correlation,

if the x-variable decreases, the y-variable decreases.

in the circular flow diagram

income payments flow from firms to households,

a decrease in the price of a good will

increase in quantity demanded

An increase in the price of a good will

increase quantity supplied

suppose an increase in the price of rubber coincides with an advance in the technology of tire production. as a result of these two events, the demand for tires

is unaffected, and the supply of tires could increase, decrease, or stay the same.

Goods with many close substitutes tend to have

more elastic demands

The burden of a luxury tax usually falls

more on the middle class than on the rich.

Where can an economy not produce?

outside its production possibilities frontier

Resources are

scarce for households and scarce for economies

quiz 4 question 15 table 4-6 If the price were $4, a

surplus of 25 units would exist, and price would tend to fall

A rational decisionmaker

takes an action only if the marginal benefit of that action exceeds the marginal cost of that action

The production possibilities frontier illustrates

the combination of output that an economy can produce

what would happen to the equilibrium price and quantity of lattes if the cost of producing steamed milk , which is used to make lattes, rises?

the equilibrium price would increase , and the equilibrium quantity would decrease

in the circular flow diagram in the market for

the factors of production, households are sellers and firms are buyers.

The price elasticity of supply measures how much

the quantity supplied responds to changes in the price of the good

When a country has a comparative advantage in producing a certain good,

then specializing in the production of that good and trading for other goods could allow that country to consume at a point beyond its production possibilities frontier.

Scarcity means that there is less of a good or resource available than people wish to have.

true

opportunity cost of an item

what you give up to get that item


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