Microecon midterm 1

During the summer you have made the decision to attend summer school, which prevents you from working at your usual summer job in which you normally earn $6,000 for the summer. Your tuition cost is $3,000 and books and supplies cost $1,300. In terms of dollars, the opportunity cost of attending summer school is A) $10,300. B) $6,000. C) $4,300. D) $3,300.

A) $10,300.

Jane is willing to pay $50 for a pair of shoes. The actual price of the shoes is $30. Her marginal benefit is A) $50. B) $30. C) $20. D) $80.

A) $50.

If the U.S. Surgeon General announced that increased grapefruit juice consumption could help prevent heart attacks, what would happen to the equilibrium price and quantity of grapefruit juice? A) Price and quantity both increase. B) Price and quantity both decrease. C) Price increases but quantity decreases. D) Price decreases but quantity increases.

A) Price and quantity both increase.

A normative statement is A) about what ought to be. B) about what is. C) always true. D) one that is based on an economic experiment.

A) about what ought to be.

Marginal cost is the A) cost of an increase in an activity. B) total cost of an activity. C) cost of an activity minus the benefits of the activity. D) cost of all forgone alternatives.

A) cost of an increase in an activity.

The figure above shows Clara's demand for CDs. If the price of a CD were to increase from $15 to $25, Clara's total consumer surplus for all the CDs she buys would A) decrease by $40. B) remain unchanged. C) decrease by $90. D) increase by $80.

A) decrease by $40

In the above figure, the curve labeled a is the ________ curve and the curve labeled b is the ________ curve. A) marginal cost; marginal benefit B) marginal cost; trade line C) marginal benefit; trade line D) production possibilities frontier; trade line

A) marginal cost; marginal benefit

The law of demand implies that demand curves A) slope down. B) slope up. C) shift rightward whenever the price rises. D) shift leftward whenever the price rises.

A) slope down.

The bowed outward shape of the production possibilities frontier in the above figure indicates that A) some resources are better suited for producing computers. B) the opportunity cost of producing more computers decreases as more computers are produced. C) computer technology is subject to the principle of decreasing costs. D) All of the above answers are correct.

A) some resources are better suited for producing computers.

A substitute is a good A) that can be used in place of another good. B) that is not used in place of another good. C) of lower quality than another good. D) of higher quality than another good.

A) that can be used in place of another good.

Using the above figure, suppose that roses are a normal good. If there is an increase in income, A) the equilibrium price will rise above $25 per dozen roses. B) the equilibrium quantity will decrease below 10 dozen roses. C) we cannot predict what will happen to the equilibrium price. D) we cannot predict what will happen to the equilibrium quantity.

A) the equilibrium price will rise above $25 per dozen roses.

The figure shows the demand curve for popsicles. The price elasticity of demand when the price of a popsicle increases from $0.30 to $0.50 is ________. A) 0 B) 1 C) 1/2 D) 2

B) 1

A 20 percent increase in the quantity of pizza demanded results from a 10 percent decline in its price. The price elasticity of demand for pizza is A) 0.5. B) 2.0. C) 10.0. D) 20.0.

B) 2.0.

The table above lists six points on the production possibilities frontier for grain and cars. Given this information, which of the following combinations is unattainable? A) 6 tons of grain and 18 cars B) 4 tons of grain and 26 cars C) 2 tons of grain and 27 cars D) 7 tons of grain and 10 cars

B) 4 tons of grain and 26 cars

Two countries, Blue Violet and Orange Rose, produce only two goods: teapots and coffeepots. The table above gives their production possibilities. ________ has a comparative advantage in teapots and ________ has a comparative advantage in coffeepots. A) Orange Rose; Blue Violet B) Blue Violet; Orange Rose C) Blue Violet; Blue Violet D) Orange Rose; Orange Rose

B) Blue Violet; Orange Rose

The figure above shows Roger's production possibilities frontier. Point a is an ________ point and at that point production is ________. A) attainable; efficient B) attainable; inefficient C) unattainable; inefficient D) unattainable; efficient

B) attainable; inefficient

In the above below, if 4000 bicycles are produced per month, A) marginal benefit is greater than marginal cost. B) fewer bicycles should be produced to reach the allocatively efficient level of output. C) the marginal cost of production is 2 bottles of soda per bicycle. D) Both answers A and B are correct.

B) fewer bicycles should be produced to reach the allocatively efficient level of output.

As a person consumes more of a good, the A) marginal benefit increases. B) marginal benefit decreases. C) marginal benefit increases or decreases depending whether or not the economy is on the PPF. D) price of the good falls.

B) marginal benefit decreases.

When supply and demand both increase, the A) quantity definitely decreases. B) quantity definitely increases. C) price definitely increases. D) price definitely decreases

B) quantity definitely increases.

A complement is a good A) of lower quality than another good. B) used in conjunction with another good. C) used instead of another good. D) of higher quality than another good

B) used in conjunction with another good.

The figure above shows Clara's demand for CDs. At a price of $20 for a CD, the value of Clara's total consumer surplus for all the CDs she buys is A) $40. B) $30. C) $20. D) $4.

C) $20.

The table above lists six points on the production possibilities frontier for grain and cars. From this information you can conclude that production is inefficient if this economy produces A) 6 tons of grain and 18 cars. B) 4 tons of grain and 26 cars. C) 2 tons of grain and 27 cars. D) 8 tons of grain and 10 cars.

C) 2 tons of grain and 27 cars.

The table above lists six points on the production possibilities frontier for grain and cars. What is the opportunity cost of producing the 5th ton of grain? A) 16 cars per ton of grain B) 6 cars per ton of grain C) 3 cars per ton of grain D) 2 cars per ton of grain

C) 3 cars per ton of grain

Twenty years ago a stove cost $300 and a refrigerator cost $1,500. Today a stove costs $600, while a refrigerator costs $1,800. Which of the following statements is true? A) The relative price of stoves and refrigerators has not changed. B) The relative price of a refrigerator has increased. C) The relative price of a stove has increased. D) The money price of a refrigerator has fallen.

C) The relative price of a stove has increased.

At a price of $10 in the above figure, there is A) a surplus of 200 units. B) a shortage of 200 units. C) a surplus of 400 units. D) a shortage of 400 units.

C) a surplus of 400 units.

According to the principle of comparative advantage, if a rich country trades with a poor country, then A) the rich country will benefit and the poor country will lose. B) the rich country will lose and the poor country will benefit. C) both countries will benefit. D) neither of the countries will benefit.

C) both countries will benefit.

The quantity demanded of a good or service is the amount that A) a consumer would like to buy but might not be able to afford. B) is actually bought during a given time period at a given price. C) consumers plan to buy during a given time period at a given price. D) firms are willing to sell during a given time period at a given price.

C) consumers plan to buy during a given time period at a given price.

If the good in the above figure is a normal good and income rises, then the new equilibrium quantity A) is less than 300 units. B) is 300 units. C) is more than 300 units. D) could be less than, equal to, or more than 300 units.

C) is more than 300 units.

The price elasticity of demand is equal to the ________ in the ________ divided by the ________ in the ________. A) percentage change; price; percentage change; quantity demanded B) change; price; change; quantity demanded C) percentage change; quantity demanded; percentage change; price D) change; quantity demanded; change; price

C) percentage change; quantity demanded; percentage change; price

The law of demand states that, other things remaining the same, the higher the price of a good, the A) smaller is the demand for the good. B) larger is the demand for the good. C) smaller is the quantity of the good demanded. D) larger is the quantity of the good demanded.

C) smaller is the quantity of the good demanded.

The production possibilities frontier is the boundary between... A) those combinations of goods and services that can be produced and those that can be consumed. B) those resources that are limited and those that are unlimited. C) those combinations of goods and services that can be produced and those that cannot. D) those wants that are limited and those that are unlimited.

C) those combinations of goods and services that can be produced and those that cannot.

The price elasticity of demand is 5.0 if a 10 percent increase in the price results in a ________ decrease in the quantity demanded. A) 2 percent B) 5 percent C) 10 percent D) 50 percent

D) 50 percent

When people's incomes increase, the demand for a good increases. The good is called A) an inferior good. B) a complement. C) a substitute. D) a normal good.

D) a normal good.

A decrease in the expected future price of cars... A) increases the current quantity demanded of cars, that is, there is a movement downward along the demand curve for cars. B) increases the current demand for cars, that is, there is a rightward shift of the demand curve for cars. C) decreases the current quantity demanded of cars, that is, there is a movement upward along the demand curve for cars. D) decreases the current demand for cars, that is, there is a leftward shift of the demand curve for cars.

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

A person who has an absolute advantage in the production of all goods will A) also have a comparative advantage in the production of all goods. B) not be able to gain from specialization and exchange. C) have a production possibilities frontier with a constant slope. D) have a comparative advantage in the production of some goods but not in the production of others.

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

Production efficiency occurs when production ________. A) is at a point beyond the production possibilities frontier B) is on the production possibilities frontier or inside it C) is at any attainable point D) is on the production possibilities frontier

D) is on the production possibilities frontier

The statement that ________ is a positive statement. A) more students should study economics B) the price of gasoline is too high C) too many people in the United States have no health care insurance D) the price of sugar in the United States is higher than the price in Australia

D) the price of sugar in the United States is higher than the price in Australia

The price elasticity of demand measures.. A) how often the price of a good changes. B) the slope of a budget curve. C) how sensitive the quantity demanded is to changes in demand. D) the responsiveness of the quantity demanded to changes in price.

D) the responsiveness of the quantity demanded to changes in price.

A decrease in the price of eggs from $1.50 to $1.30 per dozen resulted in an increase in egg purchases in two cities. In Philadelphia, daily egg purchases increased from 6000 to 8000 dozens; in nearby Dover, Delaware, daily egg purchases increased from 300 to 400 dozens. The price elasticity of demand is therefore A) lower in the smaller city as would be expected. B) greater in the smaller city as would be expected. C) certainly affected by population differences in different markets. D) the same in Philadelphia as in Dover.

D) the same in Philadelphia as in Dover.

Using the above figure, at a price of $10 per dozen roses: A) the rose market is in equilibrium B) there is a shortage of 8 dozen roses per day C) there is a surplus of 14 dozen roses per day D) there is a shortage of 14 dozen roses per day E) there is a surplus of 14 dozen roses per day

D) there is a shortage of 14 dozen roses per day