Microeconomics Exam 1 Chang MSU

C. Graph C

A. Graph B B. Graph D C. Graph C D. Graph A

A. Graph D

A. Graph D B. Graph B C. Graph C D. Graph A

C. Len, Ren, and Jen

A. Ken and Ben B. Ren only C. Len, Ren, and Jen D. Len, Ken, Ren, and Ben

C. a decrease in demand.

A. an increase in quantity demanded. B. an increase in demand. C. a decrease in demand. D. an increase in quantity demanded.

C. Diminishing marginal product

A bakery hires a baker who can make 15 cakes per day. The bakery then decides to hire a second baker who will use the kitchen at the same time as the first baker. The bakery finds that the second baker can produce only an additional nine cakes per day. What concept does this scenario illustrate? A. The cost-benefit principle B. The marginal principle C. Diminishing marginal product D. The opportunity cost principle

C. there is an inverse relationship between price and quantity demanded.

A downward-sloping demand curve implies: A. buyers are willing to buy less when prices are lower. B. there is a positive relationship between price and quantity demanded. C. there is an inverse relationship between price and quantity demanded. D. there is no relationship between price and quantity demanded.

C. multiply the individual supply of one of the suppliers by ten.

A market consists of ten similar suppliers that are making the same supply decisions. To find the market supply of these ten suppliers, you: A. take one-tenth of the individual supply of each supplier and add it up. B. take the individual supply of one supplier. C. multiply the individual supply of one of the suppliers by ten. D. find the average quantity produced by the ten suppliers.

D. a market in action.

A seller at a farmer's market wants $10 for a bag of 10 apples. You think his price is too high, so you counter with an offer of $6 for the bag. The seller then offers you a much smaller bag of five apples for $6. You bargain again, and the seller lets you buy the 10 apples for $8. This scenario is an example of: A. a centrally planned market. B. perfect competition. C. a shortage. D. a market in action.

B. quantity demanded exceeds quantity supplied.

A shortage occurs when: A. quantity supplied exceeds quantity demanded. B. quantity demanded exceeds quantity supplied. C. there is excess production. D. when there is insufficient demand.

B. 148 cans

A. 125 cans B. 148 cans C. 45 cans D. 99 cans

D. 20 million gallons per week

A. 14 million gallons per week B. 30 million gallons per week C. 42 million gallons per week D. 20 million gallons per week

B. equal to

According to the marginal principle, keep increasing quantity until the marginal benefit of an additional item is _____ the marginal cost of an additional item. A. less than B. equal to C. greater than D. greater than or less than

B. when the quantity supplied equals the quantity demanded.

An equilibrium in a market occurs: A. at the halfway point on a demand curve. B. when the quantity supplied equals the quantity demanded. C. when suppliers have sold all the goods and services that they have produced. D. at the halfway point on the price axis.

D. determined by the intersection of the demand and supply curves.

An equilibrium price is: A. the price that prevails when there is a shortage. B. the price that prevails when quantity supplied is less than quantity demanded. C. the price that occurs when there is a surplus. D. determined by the intersection of the demand and supply curves.

B. that plots the quantity of an item that someone plans to buy, at each price.

An individual demand curve is a graph: A. that plots the market price of a product at different points in time. B. that plots the quantity of an item that someone plans to buy, at each price. C. that plots the quantity of an item that someone plans to buy, at one single price point. D. that plots the quantity of an item that a seller plans to sell, at each price.

A. opportunity; financial

Decisions should reflect the _____ costs, rather than just the _____ costs. A. opportunity; financial B. financial; marginal C. nonfinancial; financial D. opportunity; nonfinancial

A. is when buying an additional item yields a smaller marginal benefit than the previous item.

Diminishing marginal benefit: A. is when buying an additional item yields a smaller marginal benefit than the previous item. B. is when consumers do not follow the rational rule. C. is when buying an additional item yields a larger marginal benefit than the previous item. D. is not important in determining a consumer's purchase decision.

d. both the buyer and the seller.

In a voluntary economic transaction between a buyer and a seller, _____ can earn economic surplus from the transaction. A. neither the buyer nor the seller B. only the seller C. only the buyer D. both the buyer and the seller

C. benefit of purchasing one more coffee equals the marginal cost

Joshua Murphy is planning on studying late into the night for his economics exam. How many cups of coffee should he buy tonight? Joshua should keep buying coffee throughout the evening until the marginal: A. cost of purchasing one more coffee is positive. B. benefit of purchasing one more coffee is positive. C. benefit of purchasing one more coffee equals the marginal cost. D. benefit of purchasing one more coffee is less than the marginal cost.

D. $4

Kevin Williamson goes to a local coffee shop and orders a medium-sized latte. His willingness to pay for that latte is $6. The price of the latte is $2. The cost to the coffee shop to produce the latte is $1. How much economic surplus does Kevin gain when he purchases the latte? A. $6 B. $1 C. $2 D. $4

A. less; $150

Nerida Kyle could either commute to work via Uber or purchase a new car. The average cost of her one-way Uber trip is $15. Nerida works five days a week for 50 weeks a year. Based solely on avoiding the cost of an Uber, Nerida should purchase a car if the cost of the car is _____ than _____ per week. A. less; $150 B. less; $75 C. greater; $150 D. greater; $75

D. the demand for paintbrushes to decrease.

Paint and paintbrushes are complements. If the price of paint rises, we can expect: A. the quantity demanded of paintbrushes to remain unchanged. B. the demand for paintbrushes to increase. C. the quantity demanded of paint to increase. D. the demand for paintbrushes to decrease.

B. amount of a good that a person is willing to buy at each price.

Quantity demanded is on the horizontal axis when you plot a demand curve and shows the: A. amount of a good that a person actually buys at the market price. B. amount of a good that a person is willing to buy at each price. C. amount of a good that a seller is willing to sell at a particular price. D. amount where opportunity cost is equal to the marginal benefit.

C. You can charge a higher price per pumpkin.

Suppose that you have a pumpkin stall at a farmer's market, and the Halloween season arrives. You know that your customers will want to buy many pumpkins to decorate their houses and make pumpkin pies. Which of the following is a likely result of this scenario? A. You will wind up with many unsold pumpkins. B. You will take fewer pumpkins to the market to sell. C. You can charge a higher price per pumpkin. D. You will be able to sell only the highest-quality pumpkins.

B. greater than or equal to the marginal cost.

The Rational Rule for Sellers says that a seller should sell one more unit of an item if the price is: A. less than the marginal benefit. B. greater than or equal to the marginal cost. C. greater than or equal to the marginal benefit. D. less than the marginal cost.

C. marginal principle

The __________ suggests, decisions about quantities are best made incrementally. A. interdependence principle B. opportunity cost principle C. marginal principle D. cost-benefit principle

D. costs and benefits

The cost-benefit principle states that _____ are the incentives that shape decisions. A. framing effects B. incomes C. opportunity costs D. costs and benefits

A. implies that buyers decisions are affected by many factors other than the price of an item.

The interdependence principle: A. implies that buyers decisions are affected by many factors other than the price of an item. B. is the same as the cost-benefit principle. C. refers to the marginal benefit of consuming additional units of an item. D. implies that consumers depend on each other to make purchase decisions in the market.

D. both financial and nonfinancial

The key to using the cost-benefit principle is to think about _____ aspects of a decision. A. only nonfinancial B. neither financial nor nonfinancial C. only financial D. both financial and nonfinancial

C. an increase in quantity demanded.

The movement from point M to point N represents: A. an increase in demand. B. a decrease in demand. C. an increase in quantity demanded. D. a decrease in quantity demanded.

C. vary with the quantity of output produced.

Variable costs are the costs that A. stay fixed with the quantity of output produced. B. are incurred to build factories and assembly plants. C. vary with the quantity of output produced. D. are independent of the amount of output produced.

C. It is the amount of an item that a seller is willing to sell at a particular price.

What is quantity supplied? A. It is a graph that plots how much a seller produces at different points in time. B. It is a graph that plots the quantities of an item that a seller plans to sell at different prices. C. It is the amount of an item that a seller is willing to sell at a particular price. D. It is the amount of an item that a buyer is willing to buy at a particular price.

C. $9

What is the equilibrium price in this market? A. $3 B. $7 C. $9 D. $11

D. 300 units

What is the equilibrium quantity in this market? A. 100 units B. 240 units C. 330 units D. 300 units

B. highly skilled workers can negotiate higher salaries.

When there is a shortage of highly skilled workers in a particular region: A. there is a corresponding surplus of low-skilled workers in the region. B. highly skilled workers can negotiate higher salaries. C. unemployment rises among highly skilled workers. D. the incomes of highly skilled workers fall.

B. only variable costs.

When you calculate marginal costs, they should include: A. the market price of the product. B. only variable costs. C. only fixed costs. D. both the variable and fixed costs.

B. (i), (iii), and (iv)

Which of the following are correct about fixed costs?(i) They do not change with the level of production in the short run.(ii) They include variable costs.(iii) They are present even when the firm is producing zero units.(iv) They are irrelevant to marginal cost. A. (i), (ii), and (iii) B. (i), (iii), and (iv) C. (ii) and (iv) D. (i), (ii), (iii), and (iv)

A. technological advance in production techniques

Which of the following events would lead to a shift of the supply curve from Old supply to New supply? A. technological advance in production techniques B. a decrease in the size of the market C. a natural disaster that causes a shutdown of production D. increased taxation of raw materials used by producers

B. The market price of a product.

Which of the following is NOT a factor that can shift supply? A. The expected future price of a product. B. The market price of a product. C. The price of a complement-in-production. D. The price of a substitute-in-production.

B. The supply of cacao beans, used to produce chocolate, has fallen around the world.

You eat M&Ms every day. When you go to the store to buy some, you find that M&Ms are more expensive than they were last month. Which of the following could explain why M&Ms are more expensive? A. A new robot has been installed at the Mars chocolate company that reduces the time needed to produce M&Ms by half. B. The supply of cacao beans, used to produce chocolate, has fallen around the world. C. A new study finds that the benefits of eating chocolate are not as great as previously thought. D. Consumers are now purchasing fewer M&Ms compared to other types of chocolates.

D. There is a shortage of the item.

You're shopping online, and you place an item in your virtual cart. Two days later, you return to the virtual cart to check out and find that the item is now more expensive. Assuming that the market is competitive, what could explain the price increase? A. New sellers are offering the same product. B. There is decreased demand for the item. C. There is a surplus of the item. D. There is a shortage of the item.

D. fall, due to a rise in supply.

As a result of technological innovation, automated water pumps are being installed on the farms of Kenyan tomato farmers. As a result of the increased use of automated water pumps, the equilibrium price of tomatoes will: A. rise, due to a fall in supply. B. rise, due to a rise in demand. C. fall, due to a fall in demand. D. fall, due to a rise in supply.

D. (i), (ii), and (iii)

The United Kingdom plans to end the use of gas-powered and diesel-powered cars by the year 2040. At the same time, car manufacturers, such as General Motors and Nissan, are increasing the number of electric car models they produce. Based on this information, which of the following statements is/are correct?(i) If the supply of new electric cars is greater than the demand for new electric cars, then the price of electric cars will fall in the future.(ii) The demand for gasoline will fall in the future.(iii) The demand for electricity will rise in the future.(iv) The demand for diesel will rise in the future. A. only (i) B. (i) and (ii) C. (ii) and (iv) D. (i), (ii), and (iii)

D. American Airlines determines the marginal cost of an extra passenger to be $75 and sells a discount seat for $250.

Which of the following scenarios depicts a seller who is following the Rational Rule for Sellers? A. Andy's Diner finds that the marginal cost of a fish and chips meal is $7 and lists the item for sale at $6.50. B. An auto-rickshaw driver in New Delhi, India, calculates a trip to have a marginal cost of 350 rupees and accepts a ride request for 315 rupees. C. Mindy sets up a lemonade stand and calculates the cost of an additional cup of lemonade at 50 cents, and sells it for 25 cents. D. American Airlines determines the marginal cost of an extra passenger to be $75 and sells a discount seat for $250.

B. The opportunity cost principle.

Which principle tells you that the true cost of something is the next best alternative you have to give up to get it? A. The cost-benefit principle. B. The opportunity cost principle. C. The marginal principle D. The interdependence principle.

B. a good for which higher income causes an increase in demand.

A normal good is: A. a good which is only purchased by high-income consumers. B. a good for which higher income causes an increase in demand. C. a good which is normally purchased by many consumers. D. a good for which higher income causes a decrease in demand.

C. keep buying a product until marginal benefit equals price.

A rational buyer will: A. not consider costs versus benefits when purchasing a product. B. buy the product only when the marginal benefit of consuming the product is twice as much as the price of the product. C. keep buying a product until marginal benefit equals price. D. buy a product until the marginal benefit of consuming the product is less than the price of the product.

B. at prices below the equilibrium price.

Graphically, shortages will always occur: A. at the equilibrium price. B. at prices below the equilibrium price. C. when the quantity supplied exceeds the quantity demanded. D. at prices above the equilibrium price.

D. potential income that could be earned working.

The opportunity costs of attending college include the: A. cost of clothes to wear at school. B. effort and hard work. C. cost of room and board. D. potential income that could be earned working.

D. quantity corresponding to the intersection of the demand and supply curves.

Graphically, the equilibrium quantity can be identified as the: A. maximum quantity that sellers are willing to sell. B. quantity corresponding to the intersection of the demand curve and the price axis. C. maximum quantity that buyers are willing to buy. D. quantity corresponding to the intersection of the demand and supply curves.

B. It is the total benefits minus total costs arising from the decision.

How is the economic surplus generated by a decision calculated? A. It is the total benefits plus total costs arising from the decision. B. It is the total benefits minus total costs arising from the decision. C. It is the sum of costs arising from the decision. D. It is the sum of benefits arising from the decision.

A. Kathleen eats more steak when the price is low, and less when the price is high.

Which of the following scenarios illustrates the law of demand? A. Kathleen eats more steak when the price is low, and less when the price is high. B. John likes to drink spring water. At $2 he buys four bottles of water, and at $1.50 he still buys four bottles of water. C. Francis does not care about the price of coffee at the coffee shop - he must buy two cappuccinos every day, regardless of the price. D. A research company finds that the more expensive a particular brand of a designer handbag, the more that consumers are willing to purchase the brand.

B. They slope upward because higher prices lead individual businesses to supply a larger quantity and more businesses are willing to supply goods and services.

Why are supply curves typically upward-sloping? A. They slope upward due to the law of demand. B. They slope upward because higher prices lead individual businesses to supply a larger quantity and more businesses are willing to supply goods and services. C. They slope upward because sellers prefer to sell more when prices are lower. D. They slope upward because sellers demand more when prices are lower.

B. go; greater

You are considering whether you should go out to dinner at a restaurant with your friend. The meal is expected to cost you $50, you typically leave a 20% tip, and a round-trip Uber ride will cost you $15. You value the restaurant meal at $30 and the time spent with your friend at $50. You should ____ to dinner with your friend because the benefit of doing so is _____ than the cost. A. not go; less B. go; greater C. not go; greater D. go; less