Micro Midterm w/out multiple choice

If the price of a movie ticket increases by 4 percent and the quantity of movies demanded falls by 2 percent, the price elasticity of demand is

0.5. %ΔD/% ΔP = 2%/4% = -½

The University of South Dakota just lowered the price of its season football tickets from $350.00 to $300.00. As a result, there was an increase in the number of season tickets purchased from 430 to 470. Rounding to two decimal places, the price elasticity of demand for season tickets equals

0.58. %ΔD/% ΔP = [(Q1-Q2)/QAVE] / [(P1-P2)/PAVE] = [(430-470)/450] / [(350-300)/325] = -0.57777

A 10 percent increase in income increases the quantity of orange juice demanded from 19,200 to 20,800 gallons. The income elasticity of demand for orange juice is

0.8. %ΔD/% ΔIncome = [(Q1-Q2)/QAVE] / 10% = [(19,200-20,800)/20,000] / 10% = 0.8

The night before a midterm exam, you decide to go to the movies instead of studying for the exam. You score 60 percent on your exam. If you had studied the night before, you'd have scored 70 percent. What was the opportunity cost of your evening at the movies?

10 percent off your grade

Puerto Rico is producing 4 units of seafood and 6 units of pharmaceuticals. For Puerto Rico, the opportunity cost of producing an additional unit of pharmaceuticals is

2/3 unit of seafood per unit of pharmaceuticals.

The money price of a pizza is $12 per pizza and the money price of a taco is $2 per taco. The relative price of a pizza is

6 tacos per pizza.

Homer and Teddy are stranded on a desert island. To feed themselves each day they can either catch fish or pick fruit. In a day, Teddy could pick 60 pieces of fruit or catch 20 fish. Homer could pick 100 pieces of fruit or catch 150 fish. Which of the following statements is CORRECT?

Homer has an absolute advantage in both catching fish and picking fruit.

The study of the choices made by individuals is part of the definition of

Microeconomics

Missouri can produce 10,000 tons of pecans per year or 5,000 tons of pears per year. Washington can produce 12,000 tons of pecans per year or 48,000 tons of pears per year. If these two states were to engage in trade, which of the following is TRUE?

Missouri would specialize in pecan production and trade pecans to Washington for pears.

"The rich should pay higher income tax rates than the poor" is an example of a

Normative Statement

A fall in the price of a good causes producers to reduce the quantity of the good they are willing to produce. This fact illustrates

The law of supply

All shredded wheat producers have decided to add a new ingredient to shredded wheat, the "crunch enhancer." Crunch enhancer keeps cereals crisper longer in milk and, as a result, consumers decide they like shredded wheat more than before. What happens to the supply and demand curves for shredded wheat now that is costs more to produce and consumers like it better?

The supply and demand curves both shift rightward.

The statement "An increase in the price of gasoline will lead to a decrease in the amount purchased" is

a Positive Statement

The principle of increasing opportunity cost leads to

a production possibilities frontier (PPF) that is bowed outward from the origin.

Cupcakes and granola bars are substitutes in consumption. The price of a granola bar increases so the demand for

cupcakes will increase, that is, the demand curve will shift rightward.

A decrease in the expected future price of cars

decreases the current demand for cars, that is, there is a leftward shift of the demand curve for cars.

The law of demand concludes that a rise in the price of a golf ball ________ the quantity demanded and ________.

decreases; creates a movement up along the demand curve for golf balls

A person who has an absolute advantage in the production of all goods will

have a comparative advantage in the production of some goods but not in the production of others.

Opportunity cost is defined as the

highest valued alternative given up

If the cross elasticity of demand between hot chocolate and tea is positive, an increase in the price of tea will shift the demand curve for

hot chocolate rightward. When goods are substitutes, the cross elasticity is positive; an increase in the price of one good will increase the demand for the other good

All economic questions are about

how to cope with scarcity

Bus rides and canned soup are inferior goods, so the ________ elasticity of demand is ________.

income; negative When goods are inferior, there is a negative relationship between changes to income and demand for these goods

If demand for Farmer John's maple syrup is inelastic, then when Farmer John raises the price of maple syrup, his total revenue will

increase.

An increase in the number of fast-food restaurants

increases the supply of fast-food meals.

The elasticity of supply equals ________ if the supply curve is horizontal.

infinity

Perfectly elastic demand is represented by a demand curve that

is horizontal Extreme case of elastic demand when consumers will demand nothing if price increases even slightly

The equilibrium quantity of a good will increase and its equilibrium price might rise, fall, or stay the same when

its demand and supply both increase.

Because there are _____ substitutes available for fruit than for bananas, the price elasticity of demand for fruit is _____ elastic than the price elasticity for bananas.

less; less There are less substitutes for broader categories of goods and services; The fewer substitutes there are for a good or service, the less elastic the demand for that good or service

A fall in the price of wheat fertilizer ________ the equilibrium price of wheat and ________ the equilibrium quantity of wheat

lower; increase

The cross elasticity of demand for pizza with respect to the price of a soda is

negative because the goods are complements.

If the price of a song download is equal to the equilibrium price, there will be ________ of song downloads and the price will ________.

neither a shortage nor surplus; not change

Elasticity measures the

responsiveness of a variable to a change in another variable

Good A and good B are substitutes in production. The demand for good A increases so that the price of good A rises. The increase in the price of good A shifts the

supply curve of good B leftward.

During the last decade, the price of a computer fell every year and the quantity sold increased every year. This experience suggests that the

supply curve shifted rightward

If the price of oil is $60 per barrel, the quantity of oil supplied is 70 million barrels per day. If the price is $40 per barrel, the quantity of oil supplied is 69 million barrels per day. This implies that the

supply of oil is inelastic. %ΔD/% ΔP = [(Q1-Q2)/QAVE] / [(P1-P2)/PAVE] = [(70-69)/69.5] / [(60-40)/50] = 0.03597

Comparative advantage is

the ability to perform an activity at a lower opportunity cost than anyone else

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.

Scarcity guarantees that

wants will exceed demands.