MICRO MIDTERM 1
Suppose that tom bought a bike from Helen for 195. If Helens reservation price was 185 and toms reservation price was 225, the total economics surplus from transaction was: A) 10 B) 40 C) 30 D) 20
B) 40
Suppose the most you would be willing to pay for a plane ticket home is $250. If you buy one for $175, then your economic surplus is: A) $175 B) $0 C) $250 D) $75
D) $75
Pat earns $25,000 per year (after taxes), and Pat's spouse, Chris, earns $35,000 (after taxes). They have two pre-school-aged children. Childcare for their children costs $12,000 per year. Given that Chris doesn't want to stay home with the kids, regardless of what Pat does, Pat should stay home with the kids if, and only if, the value of Pat spending more time with the kids is greater than or equal to: A) $13,000 per year B) $12,000 per year C) $37,000 per year D) $25,000 per year
A) $13,000 per year
The following graph depicts demand. Graph* The price elasticity of demand at point D is: A) 2/5 B) 8/5 C) 5/8 D) 5/2
A) 2/5
Refer to the figure below. If Laura and Chris are the only two consumers in this market then at a price of $3 per pound, the market demand for hamburger is: Figure* A) 3 pounds per week B) 4.5 pounds per week C) 1.5 pounds per week D) 4 pounds per week
A) 3 pounds per week
According to the Cost-Benefit Principle, you should spend an additional hour studying for an exam if, and only if,: A) the benefits of studying for an additional hour exceed the costs of studying for an additional hour B) you have time to study for an additional hour C) the benefits of studying for an additional hour are really high D) the benefits of studying for an additional hour are higher for you than for everyone else in your class
A) the benefits of studying for an additional hour exceed the costs of studying for an additional hour
For the Fall semester, you had to pay a nonrefundable fee of $600 for your meal plan, which gives you up to 150 meals. If you eat 100 meals, your marginal cost of the 100th meal is: A) $0.25 B) $4 C) $6 D) $0
D) $0
When Joe's Gas raises its price for regular unleaded gasoline, total revenue from regular unleaded gas falls to zero. It must be the case that: A) there are not many good substitutes for Joe's regular unleaded gasoline B) consumers are switching to premium grades of gasoline C) the demand for Joe's regular unleaded is inelastic D) the demand for Joe's regular unleaded gasoline is perfectly elastic
D) the demand for Joe's regular unleaded gasoline is perfectly elastic
Refer to the table below. The marginal cost of the 3rd unit of activity is: Units of Activity / Total Cost / Total Benefit .............0............................$0.......................$0............ .............1.............................$30....................$100........ ............2.............................$40....................$160........ ............3.............................$60....................$190........ ............4.............................$100....................$210........ ............5.............................$150....................$220........ ............6.............................$210....................$225........ A) $20 B) $30 C) $10 D) $25
A) $20
Larry was accepted at three different graduate schools, and must choose one. Elite U costs $50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at $60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000 scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000 per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at $25,000 per year. Larry maximizes his economic surplus by attending: A) NoName U B) Elite U C) State College D) Not enough information is provided to answer this question
A) NoName U
If the demand is ___________ with respect to price, a price increase will ___________ total expenditure. A) inelastic; increase B) elastic; increase C) unit elastic; decrease D) inelastic; decrease
A) inelastic; increase
If the supply curve and the demand curve both shift to the left, then the new equilibrium: A) quantity will be lower, but the direction of the price change is uncertain B) price will be higher, but the direction of the change in quantity is uncertain C) quantity will be higher, but the direction of the price change is uncertain D) price will be lower, but the direction of the change in quantity is uncertain
A) quantity will be lower, but the direction of the price change is uncertain
The price elasticity of a demand is a measure of: A) the change in quantity demanded of a good that results from a change in its price B) how consumers respond to excess demand C) the demand for a good D) the change in price of a good that results from a change in its quantity demanded
A) the change in quantity demanded of a good that results from a change in its price
The entire group of buyers and sellers of a particular good or service makes up: A) the market B) the equilibrium price and quantity C) the supply curve D) the demand curve
A) the market
One week ago you paid $35 for a non-refundable ticket to see a local band in concert on Saturday. Assume that $35 is the most you would have been willing to pay for a ticket. Today is the day of the concert and your boss called. She is looking for someone to cover a shift on Saturday at the same time as the concert. You would have to work 4 hours and she would pay you $11/hr. Each hour of work however is displeasing and reduces your satisfaction by $2 per hour. What is the opportunity cost today of going to the concert? A) $44 B) $36 C) $79 D) $71
B) $36
Refer to the figure below. There would be an excess supply of 25 at a price of _______ Figure* A) $20 B) $50 C) $45 D) $35
B) $50
Refer to the table below. According to the Cost-Benefit Principle, how many units of this activity should be carried out? Units of Activity / Total Cost / Total Benefit .............0............................$0.......................$0............ .............1.............................$30....................$100........ ............2.............................$40....................$160........ ............3.............................$60....................$190........ ............4.............................$100....................$210........ ............5.............................$150....................$220........ ............6.............................$210....................$225........ A) 6 B) 3 C) 4 D) 1
B) 3
If the price elasticity of demand for pineapples is 0.75, then a 4% increase in the price of pineapples will lead to a: A) 3% increase in the quantity of pineapples demanded B) 3% decrease in the quantity of pineapples demanded C) 0.75% increase in the quantity of pineapples demanded D) 0.75% decrease in the quantity of pineapples demanded
B) 3% decrease in the quantity of pineapples demanded
If two products are complements, then the: A) price elasticity of demand for both will be positive B) cross-price elasticity of demand between them will be negative C) income elasticity of demand for both will be high D) cross-price elasticity of demand between them will be positive
B) cross-price elasticity of demand between them will be negative
Refer to the figure below. A decrease in supply is represented by a shift from: Figure* A) curve D to curve C B) curve B to curve A C) curve C to curve D D) curve A to curve B
B) curve B to curve A
Suppose that the market price for hot dogs sold by street vendors has just risen from $4.50 to $5.00, and that in response Curly has now begun operating a hot dog cart. We can assume that Curly's reservation price for hot dogs is: A) $4.50 B) greater than $4.50 but no more than $5.00 C) $5.00 D) at least $5.00
B) greater than $4.50 but no more than $5.00
If the local slaughterhouse gives off an unpleasant stench, then the equilibrium quantity of meat will be _______ the quantity that maximizes total economic surplus. A) lower than B) higher than C) more equitable D) equal to
B) higher than
Economics is best defined as the study of: A) supply and demand B) how people make choices in the face of scarcity and the implications of those choices C) the financial concerns of businesses and individuals D) inflation, interest rates and the stock market
B) how people make choices in the face of scarcity and the implications of those choices
Tony notes that an electronics store is offering a flat $20 off all prices in the store. Tony reasons that if he wants to buy something with a price of $50, then it is a good offer, but if he wants to buy something with a price of $500, then it is not a good offer. This is an example of: A) inconsistent reasoning because prices are sunk costs B) inconsistent reasoning; saving $20 is saving $20 C) rational choice because saving 40% is better than saving 4% D) the proper application of the Cost-Benefit Principle
B) inconsistent reasoning; saving $20 is saving $20
If the price of textbooks increases by one percent and the quantity demanded falls by one-half percent, then demand for textbooks is: A) unit elastic B) inelastic C) negative D) elastic
B) inelastic
Suppose that you bought a concert ticket from Ticketmaster for $50, but when you get to the concert, there are a large number of people waiting outside who offer to pay you more than $50 for your ticket. What is probably true? A) the Ticketmaster price was above the equilibrium price. B) there is an excess demand for tickets at the ticketmaster C) there is an excess supply of tickets at the ticketmaster price D) the Ticketmaster price is the equilibrium price
B) there is an excess demand for tickets at the Ticketmaster price
Refer to the table below. Suppose the columns in this table reflect demand and supply. At a price of $30: Price Per Unit / Column A Units Per Year/ Column B Units Per Year ...........$20....................................100.................................................40......................... ...........$30....................................95..................................................50......................... ...........$40....................................80..................................................60......................... ...........$50....................................65..................................................70......................... ...........$60....................................50..................................................80......................... A) the market will be in equilibrium B) there will be an excess demand of 45 units C) there will be an excess supply of 45 units D) there will be an excess demand of 95 Units
B) there will be an excess demand of 45 units
Larry was accepted at three different graduate schools, and must choose one. Elite U costs $50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at $60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000 scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000 per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at $25,000 per year. Larry's opportunity cost of attending State College is: A) $20,000 B) $30,000 C) $45,000 D) $70,000
C) $45,000
Refer to the figure below. The equilibrium price is ________, and the equilibrium quantity is _______. Figure* A) $8;6 B) $4;6 C) $6;4 D) $2,8
C) $6;4
If the quantity demanded of a good is Q when the price for the good is P, the price elasticity of a demand for that good at that point is: A) (Q/P) x (1/slope) B) Q x P x (1/slope) C) (P/Q) x (1/slope) D) (P/Q) x (slope)
C) (P/Q) x (1/slope)
The following graph depicts demand. Graph* The slope of the demand curve (ignoring the negative sign) is: A) 1.5 B) 2 C) 0.5 D) 1
C) 0.5
Fran runs a doughnut shop in a tiny 3- person town. the table below shows the quantity demand by the three townspeople at various prices price p donut / Q demanded by al / Q demanded by betty / Q demanded by carol .........10 c................................10...............................................4...............................................6....................... .........25 c................................9................................................2...............................................5....................... .........35 c................................7................................................1................................................5....................... .........50 c................................5...............................................0................................................4...................... When the price of a doughnut is 25 cents, what is the market demand for doughnuts? A) 20 doughnuts B) 9 doughnuts C) 16 doughnuts D) 13 doughnuts
C) 16 doughnuts
The table below shows how total donations, average donations, total labor costs and average labor costs vary depending on the number of employees State University hires for its fundraising activities. # Employees / Total D / Avg D / Total L C / Avg L C ...............1.............$30,000.....__________.......____________......$8,000.... ...............2............$42,426.....__________.......$17,000........._________..... ...............3............___________.....$17,321........$27,000........_________..... ...............4.............$60,000.....__________.......____________......$9,500.... ...............5.............___________.....$13,416.......$50,000........_________..... If the University follows the cost-benefit principle, then __________ employee(s) should be hired, generating ________ of net donations (total donations minus total labor costs): A) 1;$22,000 B) 3; $25,426 C) 2; $25,426 D) 2; $3,476
C) 2; $25,426
If the price of cheese falls by 1 percent and the quantity demanded rises by 3 percent, then the price elasticity of demand for cheese is equal to: A) 0.30 B) 0.333 C) 3 D) 30
C) 3
If an increase in the price of a good X leads to a decrease in the demand for good Y, then: A) good X and good Y are substitutes B) good X is a normal good and good Y is an inferior good. C) good X and good Y are complements D) good X and good Y are normal goods
C) Good X and good Y are complements
Frank owns an apple farm and plans to spend 4 hours today picking apples. The number of apples he can pick per hour depends on the total number of hours he spends working in either the east orchard or the west orchard in the manner shown in the table below. hrs in East / # per hr / hrs in West / # per hr ........1.....................40....................1.......................10......... .......2.....................32...................2.......................10......... .......3.....................24...................3.......................10......... .......4......................19....................4.......................10......... How should Frank divide his time between the east and the west orchard? A) he should spend all 4 hours in the east orchard B) he should spend 1 hour in the east orchard and 3 hours in the west orchard C) He should spend 2 hours in the east orchard and 2 hours in the west orchard D) he should spend 3 hours in the east orchard and 1 hour in the west orchard
C) He should spend 2 hours in the east orchard and 2 hours in the west orchard
Refer to the figure below. Suppose all the sellers in this market started out charging a price of $45 per unit, What is the most likely result? Figure* A) the would all just break even because $45 is their reservation price B) They would all make a large profit because $45 is more than equilibrium price. C) They would lower their prices because at $45 there would be excess supply D) They would lower their prices because at $45 there would be excess demand
C) The would lower their prices because at $45 there would be excess supply
When a slice of pizza at the student union sold for $2, Moe did not purchase any. When the price fell to 1.75, Moe purchased a slice each day for lunch. Thus, we can infer that Moe's reservation price for a slice of pizza: A) exactly 1.75 B) less than 1.75 C) at least 1.75 but less than 2 D) exactly 2.00
C) at least 1.75 but less than 2
The invention of online video streaming services caused the price elasticity of a demand for cable TV service to: A) remain the same B) become more inelastic C) become more elastic D) shift to the left
C) become more elastic
The responsiveness of the quantity demanded of one good to a change in the price of a different good is measured by the: A) income elasticity of demand B) price elasticity of supply C) cross-price elasticity of demand D) price elasticity of demand
C) cross-price elasticity of demand
For which of the following products is demand likely to be least elastic with respect to price? A) vegetables B) green beans C) food D) green vegetables
C) food
If your income elasticity of demand for hot dogs is negative, then: A) your demand curve for hot dogs is not downward sloping B) hot dogs have no close substitutes for you C) hot dogs are an inferior good for you D) you must not enjoy eating hot dogs
C) hot dogs are an inferior good for you
Refer to the figure below. Moving from demand curve D1 to the demand curve D2 could be caused by a(n): Figure* A) increase in the price of a complement B) decrease in the products expected future price C) increase in the price of a close substitute D) increase in quantity supplied
C) increase in the price of a close substitute
Suppose two demand curves intersect and so have a point in common. At that point, demand shown by the flatter curve will be _________ the steeper curve. A) less elastic than B) more likely to be unit elastic than C) more elastic than D) as elastic as
C) more elastic than
If the percentage change in quantity demanded is zero for any percentage change in the price of the good, demand is classified as: A) inelastic B) unit elastic C) perfectly inelastic D) perfectly elastic
C) perfectly inelastic
Suppose that a new drug has been approved to treat a life-threatening disease. The demand for that drug is shown on the graph below. Prior to approval of this drug, the only treatment for this condition was any one of several non-prescription, or over-the-counter, pain relievers. The demand for one brand of the several non-prescription pain relievers is also shown on the graph. Graph* Demand for the new drug is __________ while demand for one brand of the over-the-counter pain relievers is ________. A) the line labeled B; the line labeled A B) the horizontal line at $60; the line labeled B C) the line labeled A; the line labeled B D) the vertical line at 100; the line labeled A
C) the line labeled A; the line labeled B
The opportunity cost of an activity includes the value of: A) the least-best alternative that must be foregone B) all of the alternatives that must be foregone C) the next-best alternative that must be foregone D) the chosen activity minus the value of the next-best alternative
C) the next-best alternative that must be foregone
Ginger bought a phone that came with a $10 rebate. Ginger should fill out and mail in the rebate form if: A) Ginger's surplus from purchasing the phone was less than $10 B) she would have bought the phone without the rebate, and so sending in the rebate form involves no opportunity cost C) the opportunity cost of the time and trouble of sending in the rebate form is less than $10 D) the opportunity cost of the time and trouble of sending in the rebate form is more than $10
C) the opportunity cost of the time and trouble of sending in the rebate form is less than $10
As coffee becomes more expensive, Joe starts drinking tea instead of coffee. This is called: A) a decrease in demand B) a decrease in reservation price C) the substitution effect of a price change D) the income effect of a price change
C) the substitution effect of a price change
Refer to the figure below. If the government imposed a price floor of $40, what would happen is this market? Figure* A) the equilibrium quantity would fall B) There would be excess demand C) there would be excess supply D) The price floor would have no effect
C) there would be excess supply
Refer to the figure below. What is the price elasticity of demand when the price of rice is $3 per pound? Figure* A) 0.67 B) 0.75 C) 2 D) 0.5
D) 0.5
Your classmates are planning to go to Miami for spring break, and you are undecided about whether you should go with them. The round-trip airfares are $600, but you have a frequent-flyer coupon worth $500 that you could use to pay part of the airfare. All other costs for the vacation are exactly $900. The most you should be willing to pay for the trip is $1,400. Your only alternative use for your frequent-flyer coupon is for your trip to Atlanta two weeks after the break to attend your sister's graduation, which your parents are forcing you to attend. The Chicago-Atlanta round-trip airfares are $450. Should you use the frequent-flyer coupon to go to Miami? A) Yes, your benefit is more than your cost B) No, because there are no benefits in the trip C) Yes, your benefit is equal to your cost D) No, your benefit is less than your cost
D) No, your benefit is less than your cost
Refer to the table below. Relative to column C, column D represents: Price Per Unit / Column C Units / Column D Units ...........$20..............................50............................40....................... ...........$30..............................60............................50....................... ...........$40..............................70............................60....................... ...........$50..............................80............................70....................... ...........$60..............................90............................80....................... A) an increase in supply B) a decrease in demand C) an increase in demand D) a decrease in supply
D) a decrease in supply
When the price of NBA tickets is $25 each 30,000 tickets are sold. After the price rises to $30 each, 20,000 tickets are sold. At the original price, the demand for NBA ticket is: A) unit elastic B) perfectly elastic C) inelastic D) elastic
D) elastic
Which of the following is NOT true of a demand curve? A) it shows the amount consumers want to buy at various prices B) it has a negative slope C) it relates to the price of an item to the quantity demanded of that item D) it reflects the sellers' reservation prices
D) it reflects the sellers' reservation prices
If individuals are rational, they should choose actions that yield the: A) smallest total costs B) largest total benefits C) smallest economic surplus D) largest economic surplus
D) largest economic surplus
Janie must choose to either mow the lawn or wash clothes. If she mows the lawn, she will earn $30, and if she washes clothes, she will earn $45. Because she enjoys being outdoors, she dislikes washing clothes by $20 more than she dislikes mowing the lawn. Janie will therefore choose to _______ because it generates a _______ economic surplus. A) wash clothes; smaller B) mow the lawn; smaller C) wash clothes; bigger D) mow the lawn; bigger
D) mow the lawn; bigger
If the demand for a good decreases as income decreases, then the good is a(n): A) inferior good B) complementary good C) substitute good D) normal good
D) normal good
If one fails to account for implicit costs in decision making, then applying the cost-benefit rule will be flawed because: A) the costs will be overstated B) the benefits will be overstated C) the benefits will be understated D) the costs will be understated
D) the costs will be understated
The economic surplus of an action is: A) the benefit gained by taking an action B) the difference the explicit and implicit costs of taking an action C) the money a person has left over after taking an action D) the difference between the benefit and the cost of taking an action
D) the difference between the benefit and the cost of taking an action
