Microecon.

Refer to the accompanying table below. The marginal cost of the 3rdunit of this activity is: Units of ActivityTotal CostTotal Benefit 0 $0 $0 1 $30 $100 2 $40 $160 3 $60 $190 4 $100 $210 5 $150 $220 6$210$225 Multiple Choice $30 $25 $20 $10

$20

The Scarcity Principle tells us ______, and the Cost-Benefit Principle tells us ______. A. that choices must be made; how to make good choices B.that good choices eliminate scarcity; how to make good choices C.how to make choices; that choices must be made D.how to make good choices; that choices involve costs and benefits

A. that choices must be made; how to make good choices

Assume that Dusty has $30 in income, the price of a loaf of bread is $1.50, and the price of a jar of peanut butter is $3. Dusty can buy a maximum of ______ loaves of bread or a maximum of ______ jars of peanut butter. Multiple Choice A.20; 10 B.15; 15 C.10; 20 D.10; 5

A.20;10

What might cause a demand curve to shift to the right? Multiple Choice A.An increase in the price of a substitute B.An increase in the product's own price C.An increase in the price of a complement D.A decrease in the price of a substitute

A.An increase in the price of a substitute

As the price of a good rises: A.firms generally decrease the supply of the good. B.more firms can cover their opportunity cost of producing the good. C.firms generally increase the supply of the good. D.government regulation becomes more justified.

B.more firms can cover their opportunity cost of producing the good.

Suppose that when a perfectly competitive firm produces 500 units of output a day, it earns an economic loss. If the price of each unit of output is $1.50, then, in the short run, it's clear that this firm: Multiple Choice A.should shut down. B.should not shut down if its total variable cost is less than $750. C.is not maximizing its profit. D.should produce more than 500 units a day.

B.should not shut down if its total variable cost is less than $750.

Suppose that the demand for electricity has been found to be price inelastic. The most likely explanation for this finding is that: Multiple Choice A.electricity is a luxury good. B.the fraction of income spent on electricity is large. C.few substitutes for electricity exist. D.electricity is sold in a monopoly market.

C.few substitutes for electricity exist.

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: Multiple Choice A.30. B.0.30. C.0.333. D.3.

D.3

If a consumer buys two different goods, the rational spending rule requires that the: Multiple Choice A.total expenditure on the two goods be equal. B.ratio of total utility to price be equal for the two goods. C.ratio of average utility to price be equal for the two goods. D.ratio of marginal utility to price be equal for the two goods.

D.ratio of marginal utility to price be equal for the two goods.

Suppose one knows two facts: first, the market for prescription drugs experiences chronic shortages and second, the government sets the price for prescription drugs. One can conclude that the government has: A.set the price too high. B.set the price above the equilibrium price. C.encouraged buyers to hoard prescription drugs. D.set the price below the equilibrium price.

D.set the price below the equilibrium price.

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: Multiple Choice $6. $4. $0.25. $0.

$0

Suppose Chris's marginal utility from the first taco he eats is 15, and his marginal utility from the second taco he eats is 12. One can infer that: Multiple Choice A.Chris's total utility from eating two tacos is 27. B.Chris should eat one taco. C.Chris's average utility from eating two tacos is 27. D.Chris should eat two tacos.

A.Chris's total utility from eating two tacos is 27.

For which of the following products is demand likely to be least elastic with respect to price? Multiple Choice A.Food B.Vegetables C.Green vegetables D.Green beans

A.FOOD

Which of the following is the most likely to be a fixed factor of production at a farm? Multiple Choice A.The land on which the farm is located B.The number of workers hired to harvest the crops C.The amount of fertilizer used each week D.The amount of water used each day

A.The land on which the farm is located

Suppose we observe a decrease in the equilibrium price of tuna and an increase in the equilibrium quantity of tuna. This is best explained by: Multiple Choice A.a decrease in the cost of fuel used by tuna fishing boats. B.a decrease in the tuna population in the oceans. C.a decrease in the expected future price of tuna. D.an increase in the price of salmon, a substitute for tuna.

A.a decrease in the cost of fuel used by tuna fishing boats.

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: Multiple Choice A.elastic. B.inelastic. C.unit elastic. D.perfectly elastic.

A.elastic.

Suppose the price P on a given demand curve results in a price elasticity of demand equal to 1. Any price higher than P will lie on the ______ part of the demand curve, and any price lower than Pwill lie on the ______ part of the demand curve. Multiple Choice A.elastic; inelastic B.unit elastic; inelastic C.inelastic; elastic D.elastic; unit elastic

A.elastic; inelastic

After the price of Revlon nail polish increased, Jen stopped buying Revlon nail polish and started buying a cheaper brand of nail polish instead. This is called: A.the substitution effect of a price change. B.the income effect of a price change. C.a decrease in the buyer's reservation price. D.a decrease in the seller's reservation price.

A.the substitution effect of a price change.

If a firm spends $400 to produce 20 units of output and spends $880 to produce 40 units, then between 20 and 40 units of output, the marginal cost of production is: Multiple Choice A.$20. B.$24. C.$22. D.$480.

B.$24.

Suppose the price of an apple is $0.75, and the price of a banana is $0.50. If Hugh is maximizing his utility, and his marginal utility from consuming an apple is 24 utils, then his marginal utility from consuming a banana must be: Multiple Choice A.12 utils. B.16 utils. C.32 utils. D.36 utils.

B.16 utils.

If demand is ______ with respect to price, a price increase will ______ total revenue. Multiple Choice A.elastic; increase B.inelastic; increase C.unit elastic; decrease D.inelastic; decrease

B.inelastic; increase

If supply increases and demand decreases, the new equilibrium price will be ______ and the new equilibrium quantity will be ______. Multiple Choice A.lower; lower B.lower; uncertain C.higher; higher D.higher; uncertain

B.lower; uncertain

Suppose that Cathy spends all of her income on 20 units of good X and 25 units of good Y. Cathy's marginal utility from the 20th unit of good X is 9 utils, and her marginal utility from the 25th unit of good Y is 19 utils. If the price of good X is $0.50 per unit and the price of good Y is $1.00 per unit, then to comply with the rational spending rule, Cathy should: Multiple Choice A.purchase more than 20 units of good X and less than 25 units of Y. B.purchase less than 20 units of good X and more than 25 units of good Y. C.purchase more than 20 units of good X and more than 25 units of good Y. D.continue to purchase 20 units of good X and 25 units of good Y.

B.purchase less than 20 units of good X and more than 25 units of good Y.

According to economists, the satisfaction people get from their consumption activities is called: Multiple Choice A.demand. B.utility. C.a need. D.a want.

B.utility.

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. She dislikes both tasks equally and they both take the same amount of time. Janie will therefore choose to ______ because it generates a ______ economic surplus. A.mow the lawn; bigger B.wash clothes; bigger C.mow the law; smaller D.wash clothes; smaller

B.wash clothes; bigger

What might cause a decrease in current supply of a product? Multiple Choice A.An increase in the product's own price B.New information that leads sellers to believe that the product's price will fall in the future C.New information that leads sellers to believe that the product's price will rise in the future D.A decrease in the price of one of the inputs used to make the product

C.New information that leads sellers to believe that the product's price will rise in the future

If the percentage change in the price of a good is equal to the percentage change in the quantity demanded of that good, then the demand for that good is: Multiple Choice A.elastic. B.inelastic. C.unit elastic. D.perfectly elastic.

C.Unit elastic

Economists have found that the price elasticity of demand for water is higher in the summer than in the winter. Why is this likely to be so? Multiple Choice A.Winter is longer than summer, and price elasticity is lower over longer time horizons. B.Summer is longer than winter, and price elasticity is higher over longer time horizons. C.Winter water use tends to be for necessities such as cleaning and cooking, and summer water use tends to be for both necessities and non-necessities such as gardening and recreation. D.People take more vacations in the summer and so use less water at home.

C.Winter water use tends to be for necessities such as cleaning and cooking, and summer water use tends to be for both necessities and non-necessities such as gardening and recreation.

Your classmates from the University of Chicago are planning to go to Miami for spring break, and you are undecided about whether you should go with them. The round-trip airfare is $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 would 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 airfare is $450. If the Chicago-Atlanta round-trip air fare were $350, should you use the coupon to go to Miami? A.No, your economic surplus would be -$50. B.No, your economic surplus would be -$100. C.Yes, your economic surplus would be $50. D.Yes, your economic surplus would be $400.

C.Yes, your economic surplus would be $50.

Suppose Mary is willing to pay up to $15,000 for a used Ford pick-up truck. If she buys one for $12,000, her ______ would be ______. A.benefit; $12,000 B.cost; $15,000 C.economic surplus; $3,000 D.economic surplus; $12,000

C.economic surplus; $3,000

If the San Diego Opera decreases the price of their opera tickets and their total revenue falls, then this suggests that, at the original price, the demand for tickets to the San Diego Opera was: Multiple Choice A.unit elastic. B.elastic. C.inelastic. D.either elastic or inelastic.

C.inelastic.

Sven likes to water ski, but can only water ski during the one week each year when he is on vacation. Therefore, he plans to ski every day, for eight hours a day. The first day, Sven skied for eight hours and enjoyed every hour. The second day, Sven slept in and then skied for seven hours, which was fun but not as much fun as the first day. The third day, Sven skied for six hours, but was starting to get a bit bored by the end. The fourth day, Sven skied for four hours and then took a nap. On the fifth day of Sven's vacation, Sven went blueberry picking all day. On the fifth day of Sven's vacation, he had decided that another hour of skiing would yield: Multiple Choice A.more utility than blueberry picking. B.the same level of utility as the day before. C.less utility than blueberry picking. D.no utility at all.

C.less utility than blueberry picking.

Suppose several United States software design companies compete with each other in a perfectly competitive environment. If one company decides to move some of its offices to a low-wage country in order to reduce operating costs, then: Multiple Choice A.the other companies will still be able to remain profitable while operating solely in the United States. B.the company that moves to the low-wage country will earn a positive economic profit in the long run. C.other companies will have an incentive move to the low-wage country in order to remain competitive. D.the company that moves to the low-wage country will soon return to the United States.

C.other companies will have an incentive move to the low-wage country in order to remain competitive.

When the price of insulin is $10, consumers demand 100 units; when the price is $15, consumers demand 100 units; and when the price is $20, consumers demand 100 units. Based on this information, the demand for insulin is: Multiple Choice A.unit elastic B.perfectly elastic C.perfectly inelastic D.elastic

C.perfectly inelastic

Amy is thinking about going to the movies tonight. A movie ticket costs $15, and she'll have to cancel a $20 dog-sitting job that she would have been willing to do for free. The opportunity to Amy cost of going to the movies is: A.$5 B.$15 C.$20 D.$35

D.$35

Last year Christine worked as a consultant. She hired an administrative assistant for $15,000 per year and rented office space (utilities included) for $3,000 per month. Her total revenue for the year was $100,000. If Christine hadn't worked as a consultant, she would have worked at a real estate firm earning $40,000 a year. Last year, Christine's explicit costs were ______, and her implicit costs were ______. Multiple Choice A.$15,000; $43,000 B.$18,000; $40,000 C.$36,000; $140,000 D.$51,000; $40,000

D.$51,000; $40,000

Suppose an increase in the price of golf clubs from $75 to $125 leads to an increase in quantity supplied from 200 units to 300 units. The price elasticity of supply for golf clubs at the original price of $75 is ______, so supply is ______. Multiple Choice A.2; elastic B.2; inelastic C.4/3; elastic D.3/4; inelastic

D.3/4; inelastic

If the price elasticity of demand for chicken is 2, then a 20 percent decrease in the price of chicken will lead to a: Multiple Choice A.10 percent decrease in the quantity demanded of chicken. B.10 percent increase in the quantity demanded of chicken. C.40 percent decrease in the quantity demanded of chicken. D.40 percent increase in the quantity demanded of chicken.

D.40 percent increase in the quantity demanded of chicken.

A country is most likely to have a comparative advantage in the production of cars if: A.It imports most of the raw materials necessary to produce cars. B.Its citizens prefer driving cars to other forms of transportation. C.It has strict environmental protection laws governing automobile emissions. D.It has a relative abundance in the natural resources needed to produce cars.

D.It has a relative abundance in the natural resources needed to produce cars.

Everyone in the neighborhood has been complaining about the deteriorating condition of the park, but nobody has cleaned it up. Why not? Multiple Choice A.There is an excess demand for parks in the neighborhood. B.There is an excess supply of parks in the neighborhood. C.The social benefit of cleaning the park exceeds the social cost of cleaning it. D.No single person's benefit from cleaning the park exceeds that person's cost of cleaning it.

D.No single person's benefit from cleaning the park exceeds that person's cost of cleaning it.

If two products are substitutes, then the: Multiple Choice A.income elasticity of demand for both will be high. B.price elasticity of demand for both will be positive. C.cross-price elasticity of demand between them will be negative. D.cross-price elasticity of demand between them will be positive.

D.cross-price elasticity of demand between them will be positive.

When the price of a good rises, marginal utility per dollar spent on that good ______, leading consumers to purchase ______ of that good. Multiple Choice A.rises; more B.falls; more C.rises; less D.falls; less

D.falls; less

If an increase in income leads to a decrease in the demand for ground beef, then ground beef is a(n): Multiple Choice A.normal good. B.complementary good. C.substitute good. D.inferior good.

D.inferior good.

If the marginal utility of the 3rd cup of coffee is 23 and the marginal utility of the 4th cup is 15, then: Multiple Choice A.it is optimal for the consumer to have 3 cups of coffee. B.the price of a cup of coffee must be relatively low. C.it is optimal for the consumer to have 4 cups of coffee. D.there is evidence of diminishing marginal utility.

D.there is evidence of diminishing marginal utility.