micro final exam
the greater the number of substitutes available, the:
more elastic is demand.
in general, the flatter the supply curve is, the:
more elastic is supply.
price elasticity of demand measures the percent change in:
quantity demanded divided by the percentage change in price
price elasticity of demand measures how consumers:
respond to a change in price
TC=
FC+VC
inelastic supply has a numerical value:
greater than 1
which of these is most likely to have perfect inelastic demand curve?
heart transplant surgery
Amy decides to open a bakery that will specialize in delicious gourmet brownies. Her explicit costs would include all of these EXCEPT the:
interest earnings amy forgoes from selling her savings bond to finance her store.
which of the following explains why the marginal cost curve has a U shape
the marginal product of labor rises, then falls.
consider the following. Which, if any, are positive statements? 1. main street needs more coffee shops. 2. a new parking garage on campus will reduce parking congestion. 3. last winter, the state should have spent more money on snow removal.
# 2 only.
if the total cost of 3 units is $40 and the total cost of 4 units is $50, then the marginal cost of the fourth unit is:
$10
Assume that a student attends a four-year college with tuition costs of $20,000 per year, room and board costs of $5,000 per year, and books/entertainment costs of $1,000 per year. If the student did not go to college, she would work at a job that pays $25,000 per year but still face the same room and board and entertainment expenses. The opportunity cost of attending college for this student for four years is:
$100,000
which of the following price floors for milk would not cause a surplus in the market of the equilibrium price for milk is $3.60?
$3.50
if the demand for Quilted Northern toilet paper is elastic, then the:
% change in quantity demanded is greater than the % changes in price.
the midpoint method
(Q2-Q1)/[(Q2+Q1)/2] / (P2-P1)/[(P2+P1)/2]
andrea has $30 to spend on game apps and movie downloads. if game apps are $3 each and movie downloads are $5 each, which combination can andrea afford?
5 game apps and 3 movie downloads
when the price of a good decreases from $10 to $8, the quantity supplied of the good decreases from 80 units to 65 units. the price elasticity of supply:
0.93 ((65-80)/((65+80)/2))/ ((10-8)/((10+8)/2))= 0.93
when price of coffee increased from $4.50 to $5.55, the quantity demanded decreased from 185 units to 150 units sold. using the midpoint method, the price elasticity of demand is:
1
5 determinants of supply
1. Technology 2. Number of producers 3. Price of inputs 4. Expectations 5. Price of related goods
if the price of a product falls by 15% and the quantity supplied falls by 25%, the elasticity of supply is:
1.67
suppose that a bag of jelly beans rises from $1.60 to $2.00, with the result that sales of jelly beans falls from 120 bags to 80 bags a day. using the midpoint method, what is the elasticity of demand for jelly beans?
1.80
Walmart is thinking about offering a 25% discount on a brand of shoes. If the elasticity of demand is two, then the discount would increase sales by:
50%
price floor
A legal minimum on the price at which a good can be sold
Elasticity
A measure of how much one economic variable responds to changes in another economic variable.
as output increases, ATC and AVC get closer to each other because:
AFC decreases
if marginal cost (MC) is less than ATC, then:
ATC is decreasing.
if cross elasticity of demand for good A with respect to good B is -4.4, then good A could be _____________ and good B, ______________.
DVD player; DVDs
Inelastic
Describes demand that is not very sensitive to a change in price
AFC=
FC/Q
is Jeremy's budget line shifts inward to the left in a parallel manner, what may have happened?
Jeremy has less money ti spend on the two goods
ATC=
TC/Q or AFC+AVC
AVC=
VC/Q
sunk cost
a cost that has already been committed and cannot be recovered
Assume the demand schedule for smart phones is downward sloping. If the price of smart phones increases from $200 to $600:
a decrease in quantity demanded of smart phones will occur.
orange juice drinkers want to consume more orange juice at a lower price. Which of the following events would have this effect?
a decrease in the price of orange juice processing.
which circumstance will cause a movement down along a demand curve?
a decrease in the product price
holding everything else constant, an increase in the price of MP3 players will result in
a decrease in the quantity of MP3 player demanded
suppose that the quantity demanded for a product rises by 9% as people's incomes rise by 3%. what type of good is this product?
a luxury good.
which of these is not an example of a sunk cost?
a new laptop that you purchased for school and CAN return
what would cause a shift in the demand curve to the right? (example)
a new study that shows that honey cures cancer.
implementing a price ceiling can cause:
a shortage.
on a graph with a demand curve, consumer surplus is the area:
above the market price and below the demand curve.
if the price of a commodity increases by %5, the total revenue spent on which of these commodities would probably decrease?
air travel to Barcelona
marginal utility
an additional amount of satisfaction
what is the difference between an "increase in demand" and an "increase in quantity demanded"?
an increase in demand is represented by a rightward shift of the demand curve while an increase in quantity demanded is represented by a movement along a given demand curve.
an increase in the demand for lobster due to changes in consumer tastes, accompanied by a decrease in the supply of lobster as a result of bad weather reducing the number of fisherman trapping lobster, will result in:
an increase in the equilibrium price of lobster; the equilibrium quantity of lobster may increase or decrease.
which event will cause an increase in the supply of yogurt?
an increase in the number of sellers in the yogurt market.
Jessica lists her faulty treadmill for sale on craigslist but does not disclose the problems with it. If Blake buys the treadmill believing that it's problem-free, this is an example of market failure due to:
asymmetric info
when the supply curve shifts to the right and the demand curve shifts to the left, the equilibrium quantity will:
be indeterminate.
an effective price ceiling occurs at a price _______ the equilibrium price and causes a _________.
below; shortage
butter is a substitute for margarine. if the price of margarine drops, we would expect to see:
both the price of butter and quantity of butter fall
marginal product=
change in TC/ change in Quantity
an increase in the price of one product but not another:
changes the slope and budget line.
when the price of running shoes is higher than the market equilibrium price, what happens?
consumer surplus falls and DWL rises
5 determinants of demand
consumer tastes and preferences market size income, prices of related goods consumer expectations
price elasticity of demand measures how:
consumers respond to change in price.
fixed costs
costs that remain constant as output changes
minimum wage laws
create a price floor below which workers cannot be legally paid.
whether 2 goods are substitutes or complements can be determined by computing the:
cross elasticity of demand.
which scenario is the MOST likely effect of the decrease in the price of tablet computers on the market for laptop computers (a substitute)?
decreased equilibrium price and decreased equilibrium quantity
Certeris Paribus, the effect of a decrease in income on a normal good is to shift the:
demand curve to the left, reducing both equilibrium price and output
If demand is unitary elastic, a reduction in price leaves total revenue unchanged because:
demand is unresponsive to change in price.
the price elasticity of supply measures the responsiveness of quantity ________ to changes in __________.
demanded; income
what is not considered an explicit cost?
depreciation on equipment.
the idea that each additional unit offers less additional satisfaction when additional units of product are consumed is known as:
diminishing marginal utility
a perfectly inelastic demand is BEST represented by drawing a
downward-sloping demand curve
When the supply of coffee decreases and the demand for coffee increases simultaneously, the price of coffee will:
either rise or fall.
if a products price rises by 6% and it quantity demanded falls by 8%, then we can say that demand for this product is:
elastic.
Academic book publishers hire editors, designers, and production and marketing managers who help prepare books for publication. Because these employees work on several books simultaneously, the number of people the company hires will not go up and down with the quantity of books the company publishes during any particular year. The salaries and benefits of people in these job categories will be included in
fixed cost and total cost but not variable cost.
average fixed cost
fixed cost divided by the quantity of output always decreasing
total cost
fixed costs plus variable costs
if the income elasticity of a good is negative, the good is said to be an:
inferior good
Suppose your income falls from $35,000 to $33,000 and that your quantity demanded of a good increases from 40 to 55. The good is said to be a(n):
inferior good.
last year, paulas income was $15,000 and she enrolled in twelve hours of courses in community college. This year, Paulas income was $35,000 and she enrolled in three hours of community college courses. for paula, community college is a:
inferior good.
opportunity cost:
influence all economic decisions.
the marginal cost curve:
intersects the ATC curve at its minimum point.
the price elasticity of demand
is always negative.(we ignore neg sign)
if income increases by 12% and the quantity demanded of a good increases by 14%, the good is a _________ good.
luxury.
when quantity demanded in a market equals quantity supplied
market is in equilibrium
the __________ is so short that the output snd the number of firms in an industry are fixed.
market period.
the assumed goal of a firm is to:
maximize profit.
A price ceiling is mandated:
maximum price above which goods or services cannot be sold.
name a "public good"
national defense.
If, in the market for oranges, the supply has increased then
the supply curve for oranges has shifted to the right.
If soda and potato chips are complements, then their cross elasticity of demand is:
negative.
tracy sells 100 gourmet cupcakes pr day at $2 each. She is considering raising her price to $2.50 each in order to increase revenue. if the price elasticity of demand for tracy's cupcakes is 2, would she increase her revenues?
no; revenues would fall because she would sell fewer cupcakes.
if the demand for iphones inceeases as income increases, then the iphone is a __________ good.
normal
a shift in the demand curve is caused by a change in:
one of the determinants of demand
explicit costs are ______ costs and implicit costs are ________ costs.
out-of-pocket; opportunity
suppose the demand to toxic waste disposal is very elastic. The gov imposes an excise tax on toxic waste disposal. Who will pay the greater share of such a tax?
owners of the toxic waste disposal companies.
Economics is best defined as the study of how:
people make rational decisions.
Assume the price of a good is $1 and the total revenue is $200. If the price of the same good increases to $2 and the total revenue increases to $400, you know that the demand for the product is:
perfectly inelastic.
elasticity of supply is always:
positive bc of the law of supply
Suppose that the price of a good is $52 and the equilibrium price is $25. Compared to market equilibrium:
producer surplus is decreased and DWL is increased.
which is an implicit cost of production?
rent that could have been earned on a building owned and used by the firm.
if demand is extremely elastic, it is likely that ___ will bear most of the burden of a tax and that the DWL will relatively:
sellers; large
When income decreases, the budget line:
shifts inward
As output increases
the difference between average total cost and average variable cost decreases.
Suppose in the market for iphones, the following 2 changes happen: (1) prices of these phone data plans fall and (2) the cost of the iphones fall. what happens to the equilibrium price and the equilibrium quantity?
the equilibrium price is indeterminate and the equilibrium quantity rises.
one would speak of a change in the quantity of a good supplied, rather than a change in supply, if:
the price of the good changes
The law of demand implies, holding everything else constant, that as the price of bagels increases,
the quantity of bagels demanded will decrease.
in 2004, hurricanes destroyed a large portion of florida's orange and grapefruit crops. in the market for citrus fruit:
the supply curve shifted to the left resulting in an increase in the equilibrium price.
average total cost
total cost divided by the quantity of output
a gas station owner in a large city learned in his micro econ class that buyers are relatively unresponsive to changes in the price of gasoline. if, based on that assumption, he increases the price of gas at his station:
total revenue will increase.
due to a drought in GA, the market price for peanuts rises by 20% nationwide. if the price elasticity of demand for peanuts is 0.8, what would happen to the total revenue for peanut farmers who were not affected by the drought?
total revenue would rise as quantity demanded falls by 16%
in the market for cable TV, fewer people are subscribing to cable while the cost of providing cable TV has increased. As a result, since the drop in cable subscribers has had a bigger impact on the market, we can expect:
unknown change in equilibrium quantity but a decrease in equilibrium price
scarcity is BEST defined as:
unlimited wants exceed limited resources
average variable cost
variable cost divided by the quantity of output
john chose to buy pizza. if he had not bought pizza, he would have bought either a hotdog or a burger. johns opportunity cost of buying the pizza is:
whichever the alternative, the hotdog or the burger, has the next highest value to john.