MicroEcon Midterm

If the demand for a Versace wedding dress is inelastic and the price is increased, what will be the impact on total revenue? A. Increase B. Decrease C. No Change

A

If the equilibrium price of widgets is $22, and a price ceiling of $24 is imposed by the government, as a result A. there will be no effect on the widget market. B. there will be a shortage of widgets. C. there will be a surplus of widgets. D. the price of widgets will increase.

A

Chris is a lawyer and an excellent typist who can type 120 words per minute but she is pressed for time as she has all the legal work she can handle at $75 an hour. Chris' friend Pat works as a waiter and would like some typing work, provided that he can make as least his wage as a waiter, which is $25 per hour. Pat can only type 60 words per minute. A. Chris should do all the typing because she is faster. B. Pat should do the typing as long as his earnings are more than $25 and less than $37.50 an hour. C. Pat should do the typing and Chris should pay him $20 per hour. D. Unless Pat can match Chris' typing speed, he should remain a waiter.

B

A public good is: A. a good or service for which it is relatively easy to exclude nonpaying customers from consumption. B. a good or service that is consumed by both the paying and nonpaying customers. C. any good or service that is produced by the government. D. a good or service that is consumed by private individuals and financed by private contributions.

B

A supply schedule shows: A. projected sales as ad spending varies. B. how many units producers are willing and able to sell at various prices. C. possible combinations of output as input prices vary. D. how many units consumers would like to buy at various prices. E. all of the above.

B

Consumers will willingly make less-informed decisions: A. if information costs are less than the perceived benefits of gathering information. B. if information costs are greater than the perceived benefits of gathering information. C. since ignorance always leads to bliss. D. whenever acquiring more information requires sacrifice.

B

If an increase in the price of Product X causes an increase in the demand for Product Y, we can conclude thatA. Products X and Y are complements. B. Products X and Y are substitutes. C. Products X and Y are normal goods. D. the price of Product Y will decrease.

B

If the price of gasoline decreases from $3.00 per gallon to $2.00 and the number of gallons purchased increases from 5,000 to 5,300 what is the price elasticity of demand? (Negative signs eliminated in these answers.) A. 0.01 B. 0.15 C. 6.87 D. 171.67

B

It is not possible for one individual to have the absolute advantage over another individual in all areas. A. True B. False

B

Medical research helps to develop better treatments for neuromuscular disease which creates high costs for insurance companies and Medicaid. Medical researchers are constantly in search of funds. Many in the public, however, are unwilling to contribute money toward neuromuscular disease research until a member of their own family suffers from a neuromuscular ailment. If left strictly to the private market, it is likely that there will be: A. an overallocation of resources to neuromuscular disease research, relative to the efficient level. B. an underallocation of resources to neuromuscular disease research, relative to the efficient level. C. an efficient quantity of resources devoted to neuromuscular disease research. D. zero dollars devoted to neuromuscular disease research.

B

If new manufacturers enter the computer industry, then (ceteris paribus): A. some established manufacturers must exit the industry. B. the equilibrium price of computers must rise. C. the supply curve shifts to the right. D. the supply curve shifts to the left.

C

Which of the following is likely to be a description of a good with demand that is price elastic? A. demand over three year's time B. a good with several substitutes C. a luxury D. spending on the good representing a large percentage of income E. all of the above

E

Consider a production possibilities curve for an economy producing bicycles and video games. It is possible to increase the production of bicycles without sacrificing video games if: A. the production possibilities curve shifts outward due to technological progress. B.the production possibilities curve shifts outward due to increased immigration (which enlarges the labor force). C.the economy moves from a point inside the production possibilities curve to a point on the curve. D. any of the above occur. E. either a. or b., but not c. occurs.

D

A free-rider problem arises whenever: A. goods cannot be provided exclusively to those who pay for them. B. the price of a good is very low. C. the government provides goods or services D. goods cease to be scarce.

A

An externality occurs when: A. people other than those making the demand/supply decisions share the benefits or costs of an activity B. only the people making the demand and supply decisions share the benefits or the costs of an activity. C. private costs of production equal the full social costs associated with production of a good. D. private costs of production are ignored.

A

The difference between a change in quantity demanded and a change in demand is that a change in: A. quantity demanded is caused by a change in a good's own price, while a change in demand is caused by a change in some other variable, such as income, tastes, or expectations. B. demand is caused by a change in a good's own price, while a change in quantity demanded is caused by a change in some other variable, such as income, tastes, or expectations. C. quantity demanded is a change in the amount people actually buy, while a change in demand is a change in the amount they want to buy. D. A change in demand and a change in quantity demanded are the same thing

A

The law of supply refers to: A. the positive relationship between the price of a good and the quantity supplied. B. the positive relationship between the price of a good and supply. C. the negative relationship between the price of a good and the quantity supplied. D. the negative relationship between the price of a good and supply.

A

Which of the following goods would be most likely to have elastic demand? A. a Dell computer B. salt C. cigarettes D. gasoline E. none of the above

A

It is not possible for one individual to have the comparative advantage over another individual in all areas. A. True B. False

A.

TJ and Colton have to fold letters and then seal envelopes for a political campaign. It takes TJ 40 seconds to fold a letter but it only takes Colton 20 seconds. It takes TJ 20 seconds to seal an envelope but it only takes Colton 5 seconds. Which person has the comparative advantage in each area? A. TJ has the comparative advantage in both area. B. TJ has the comparative advantage in folding letters and Colton has the comparative advantage in sealing envelopes. C. TJ has the comparative advantage in sealing envelopes and Colton has the comparative advantage in folding letters. D. Colton has the comparative advantage in both areas.

B

The tendency of those who are insured to take more risks is a problem of: A. free-riding. B. moral hazard. C. positive externalities. D. negative externalities. E. adverse selection.

B

Which of the following would increase the demand for 35mm film? A. a reduction in the price of film B. a reduction in the price of 35mm film cameras C. an increase in the price of vacation packages D. a reduction in the price of digital cameras (that do not use film)

B

The law of demand refers to the: A. decrease in price that results as more units of a product are demanded. B. increase in price that results from an increase in demand for a good of limited supply. C. inverse relationship between the price of a good and the quantity demanded. D. increase in the quantity of a good made available when its price increases.

C

The production possibilities curve illustrates: A.the minimum quantity of two resources necessary to produce a given level of output. B. that when resources are currently being used inefficiently, it is possible to increase production of one good only by sacrificing some of another good. C. that when resources are currently being used efficiently, it is possible to increase production of one good only by sacrificing some of another good D. the minimum quantities of output that can be produced using available resources. E. the maximum amount of output that can be produced when resources are used inefficiently.

C

What do economists mean when they say a country has a comparative advantage in the production of a particular good? a. That the country can produce with relatively low labor costs. B. That the country can produce with relatively low capital costs. C. That the country can produce the good at a lower opportunity cost than other countries. D. That the country can produce the good at a higher opportunity cost than other countries.

C

When the price of a movie ticket falls from $7.00 to $6.50: A. The supply of tickets will fall. B. The demand for tickets will rise. C. The quantity demanded of tickets will rise. D. Both a) and c)

C

Which of the following creates positive externalities? A. vaccines for communicable diseases such as measles and chicken pox. B. state programs that provide funds to plant wildflowers along state highways. C. both A and B. D. neither A nor B, since both are paid for by taxpayers.

C

Which of the following distinguishes a "straight-line" production possibilities curve from one that is "bowed out"? A. A straight-line production possibilities curve exhibits increasing opportunity costs, whereas a bowed production possibilities curve does not. B. A straight-line production possibilities curve exhibits decreasing opportunity costs, whereas a bowed production possibilities curve does not. C. A straight-line production possibilities curve exhibits constant opportunity costs, whereas a bowed production possibilities curve does not. D. A straight-line production possibilities curve is upward sloping, whereas a bowed production possibilities curve is not.

C

If a technology were developed that increased the productivity of all inputs, how would that be shown with a production possibilities curve? A. Movement from one point on the production possibilities curve to another. B. Flattening of the production possibilities curve. C. An inward shift of the production possibilities curve. D. An outward shift of the production possibilities curve.

D

If the price of Subway sandwiches increases 5% and the quantity of these sandwiches demanded decreases 10%, what would be the price elasticity of demand? A. 0.5 - inelastic demand B. 0.5 - elastic demand C. 2.0 - inelastic demand D. 2.0 elastic demand

D

Price elasticity of demand measuring 4.22 indicates A. Perfectly inelastic B. Relatively inelastic C. Unitary Elasticity D. Relatively elastic E. Perfectly Elastic

D

When a demand schedule is drawn in a graph: A. Price is measured on the vertical axis B. quantity is measured on the horizontal axis. C. the resulting curve has a negative slope. D. other variables are held constant. E. all of the above are correct.

E