microeconomics final exam

The price at which quantity demanded equals quantity supplied is ________ and the corresponding quantity is ________.

$14, 31

Economists classify all of the following as physical capital, except_______?

$20.00 bill

Suppose you have purchased a nonrefundable concert ticket and, at the last moment, cannot go and cannot get a refund. You can, however, sell the ticket. If you paid $800 for the ticket, the cost of sending the ticket to someone through overnight mail is $25, what is the minimum you should accept for the ticket?

$25 because the $800 is a sunk cost

Suppose you have a choice of working full-time during the summer or going full-time to summer school. Summer tuition and books are $2,500. If you worked, you could make $7,000. Your rent is $1,000 for the summer, regardless of your choice. If these are the only relevant costs to consider, the opportunity cost of going to summer school is:​

$9,500

What is the price elasticity of demand for designer shoes if for every 20% price increase clothing demand decreases by 5%. The price elasticity of demand would be

-0.25; inelastic

What is the price elasticity of demand for generic shoes if for every 10% price increase clothing demand decreases by 15%. The price elasticity of demand would be

-1.5; elastic

A price ceiling (set above the equilibrium price) on corn will

. have no effect on the market of corn and all transactions will occur at equilibrium

A good economic theory:

. ​involves some simplification of reality.

Refer to Figure 2. What is the surplus of units if the government sets a price ceiling of $10.00 [Hint: Would buyer and sellers transact at equilibrium price of $8.00 or at a price ceiling of $10.00?]

0

Refer to Figure 2. What is the shortage of units because of the price ceiling of $6.00 [Hint: Compare quantity demanded and quantity supplied at the mandatory price ceiling of $6.00]?

100

Refer to Figure 2. How many units would be exchanged at the equilibrium price?

125

Refer to Figure 2. If a price ceiling is set at $10.00, the number of units exchanged would be____________[Hint: Would buyer and sellers transact at equilibrium price of $8.00 or at a price ceiling of $10.00?]

125

Refer to Figure 2. The number of units exchanged at equilibrium price of $8.00 is

125

Consider the Production Possibility Frontier for country X producing 2 groups of goods, MP3 players and watches. The opportunity cost of moving from the combination of MP3 players and watches B to C is

2 watches.

If the price per kilogram of oranges was $2.10, and the price went up to $2.50 per kilogram, how many fewer thousand kilograms will be demanded?

20,000

If the price was $3.00 per kilogram of oranges, and the price fell by $1.00, how does the quantity of oranges demanded change?

250 thousand kilograms to 300 thousand kilograms

At a price of $16, quantity demanded is ________, quantity supplied is ________; therefore excess ________ has occurred.

5, 35; supply

Refer to Figure 2. How many fewer units are exchanged because of the price ceiling than would have been exchanged at the equilibrium price?

50

Refer to Figure 2. The number of units exchanged at the binding price ceiling $6.00 is

75

Which of the following sentences is the best example of scarcity of time?

Adam is doing homework instead of going to the movies with his friends.

If there is freeway congestion at 8 a.m., we can reduce (or eliminate) the congestion by

All of the above

What would cause a shift in demand?

All of the above

Which of the following is a condition of price discrimination?

All of the above.

Which of the following is an example of a legal barrier to entry?

All of the above.

Which of the following would cause the supply curve to shift to the right?

An improvement in technology.

Which of the following will shift the supply curve to the left?

An increase in the price of inputs to production.

If Pepsi goes on sale, what will happen to the demand for Coca-Cola?

Demand for Coca-Cola will decrease.

Which of the following describes a market economy?

Economic decision-making happens through markets

Which of the following is an assumption of the theory of monopoly?

Extremely high barriers to entry.

Consider the Production Possibility Frontier for country X producing 2 groups of goods, MP3 players and watches. The opportunity cost of one additional watch is

Greater at B than at C

Identify which of the following microeconomic topics can have an impact on macroeconomic topics?

How do people decide how much to save for the future, or whether they should borrow to spend beyond their current means?

Elasticity of demand measures the behavioral response of economic agents in a given situation. Which question is likely to be answered using elasticity?

If a restaurant puts their pizza on sale, will the additional number of pizzas sold offset the discount on each item? Will their sales revenues for pizza go up or down?

Which of the following is characteristic of the monopoly firm?

It produces the quantity of output at which marginal revenue equals marginal cost, MR = MC.

What will we never happen in a world of scarcity?

Meet all of society's wants.

If an increase in the price of Nike shoes increases the demand for Adidas shoes, this means that

Nike shoes and Adidas shoes are substitutes.

Suppose the government imposes a price ceiling above the equilibrium price of a given good. Which of the following is the most likely result?

No change will occur in the market.

The equilibrium price and quantity are:

Pe = $14, Qe = 31

What would cause the level of demand (meaning the relationship between price and quantity demanded) to shift?

Population grows in a particular market area.

A restaurant chain sponsors a charity that provides support to the parents of children being treated for cancer. How would the use of company funds for this purpose be justified by a business whose goal is to maximize profit?

The money spent is worth the boost it gives to corporate image.

Suppose that you own a house. What is the opportunity cost of living in the house?

The opportunity cost is the rent you could have received from a tenant if you didn't live there.

Which of the following is assumed to be constant while calculating the price elasticity of demand for Hershey's?

The price of all other products (e.g., Snickers)

Which topic below best applies to microeconomics?

The price that a farmer asks for her watermelons.

According to this graph, what happens to quantity demanded if the price of a used car increases from $5000 to $7000?

The quantity demanded drops to 1,000 cars.

According to this graph, what happens to quantity demanded if the price of a used car decreases from $4000 to $2000?

The quantity demanded increases to 6,500 cars.

A rock star intentionally sets her ticket prices below what would be necessary to sell out her shows. How might this be justified by a manager whose goal is to maximize long-term profit?

The revenue sacrificed is worth the boost it gives to her image as lines form for tickets.

The largest national herbal supplement store is running a sale on its excess supply of Vitamin C supplements. With this new price change what do you think will happen to the Vitamin C supplement market?

There will be an increase only in the quantity demanded.

Refer to Figure 1. If the tuition is set at $40, there will be students who will not be able to register as there is not enough seats. Due to this shortage of seats, since price is not longer a rationing device, how can the college allocate seats?

a & b

Refer to Figure 1. If the tuition is set at $40, there will need to be some kind of non-price rationing device used for

a and b

A production possibilities frontier can shift outward for all of the following reasons except:

a decrease in the size of the labor force.

The difference between a good and a service is that:

a good is tangible, but a service is not.

Which of the following is the best example of a monopoly?

a local public utility

More students prefer to take 10 a..m. classes than 8 a.m. classes, meaning that the demand for seats in 10 a.m. classes at the university is higher than the demand for seats in 8 a.m. classes. The supply of seats is fixed. If the university can charge a different price based on time, and wishes to maximize the total number of seats purchased during the day, it should set:

a lower price for 8 a.m. when there is a low demand and a higher price for 10 a.m. when there is a high demand.

A right granted to a firm by government that permits the firm to provide a particular good or service and excludes others from doing the same is called

a public franchise.

Refer to Figure 1. If the tuition is set at $60 there will be

a shortage at 10 a.m. and a surplus at 8 a.m

Refer to Figure 1. If the tuition is set at $40, there will be

a shortage at 10 a.m. and at 8 a.m (meaning that many students will not be able to register as there is not enough seats)

Dawnell is a skilled dancer. She is currently teaching modern dance full time for three high schools and makes $44,000 a year. She is now giving up her work and joining a touring dance company for the next two years. She will make $24,000 a year dancing, but gain much more in experience and connections. Dawnell's decision will result in

a two year opportunity cost of $40,000 after leaving her teaching position.

To engage in price discrimination, it is necessary that

all of the above

Which of the following is a necessary condition for price discrimination to hold?

all of the above

Kayden decided to attend college and gain a degree in accounting. He is now starting his degree. The yearly cost of tuition is $10,000 and he left his auto mechanic shop management job giving up a $32,000 a year to attend college. Kayden's decision resulted in

an opportunity cost to attend college of $42,000 per year.

Normative economics

answers the question "What ought to be?"

A combination of clothing and cell phones that would meet the allocative efficiency would be:

any combination on the production possibilities frontier that brings the highest level of satisfaction to the people in the economy.

Buying low and selling high is often referred to as

arbitrage.

According to the law of demand, assuming Ceteris Paribus,

as the price of bread increases, the quantity demanded of bread will decrease.

According to the law of supply, assuming other factors are held constant

as the price of bread increases, the quantity supplied of bread will increase.

More students prefer to take 10 a..m. classes than 8 a.m. classes, meaning that the demand for seats in 10 a.m. classes at the university is higher than the demand for seats in 8 a.m. classes. The supply of seats is fixed. If the university can only charge one price, regardless the time, but wishes to maximize the total number of seats purchased during the day, it should set the price

at equilibrium for 8 a.m. classes.

In order to satisfy as many wants as possible, it is necessary to achieve productive efficiency

because otherwise resources are idle.

According to this graph, which age group will make up most of the population in the United States in 2030?

between 20-64

Third-degree price discrimination is discrimination among

buyers

The term "arbitrage" refers to

buying a good in a market where its price is low and selling the good in another market where its price is higher.

Land, or natural resources, include(s) the fertility of the land, minerals below it, and

climate.

Complete the following sentence: If people think that the price of televisions will decrease in the near future, that belief may cause a(n)

decrease in the demand for televisions today.

When the price of a particular good increases

demand for complementary goods falls.

Some highways have commuter or express pass lanes. During rush hour lanes on the highway move slowly or often are stop and go, but the express lanes continue to move at a faster pace. Express pass users pay for a transponder and monthly fees to have express lane access even with no other people in their cars. In this example, the drivers who purchase these express passes are probably

drivers who value speed and convenience more than those in the stop and go lanes and are willing to pay additional express pass fees for the option of avoiding traffic jams.

Consider the graph of the production possibility frontier for country Z below. A combination of clothing and cell phones that would meet the productive efficiency would be:

e ( 20,0)

Which of the following is not an example of a legal barrier to entry?

economies of scale

A natural monopoly exists when

economies of scale are so large that only one firm can survive and achieve low unit costs

If the percentage change in quantity demanded is greater than the percentage change in price for good A, then the demand for good A is

elastic

The demand for airline tickets by leisure travelers would be more ________ than demand for the same tickets by business travelers?

elastic

The demand for museum tickets by students would be more ________ than demand for the same tickets by adults

elastic

The ________ is where quantity demanded and quantity supplied are equal at a certain price.

equilibrium

Refer to Figure 1. If the tuition is set at $70 there will be

equilibrium at 10 a.m. and a surplus of seats at 8 a.m

Refer to Figure 1. If the tuition is set at $50 there will be

equilibrium at 8 a.m. and a shortage of seats at 10 a.m.

Refer to Figure 1. If the tuition is set at $50 there will be for 8:00am class and $70 for 10:00am class

equilibrium at 8 a.m. and at 10 a.m.

The Latin expression Ceteris paribus means:

everything else being equal.

Which of the following is not an example of a legal barrier to entry?

exclusive ownership of raw materials

Efficiency involves

getting the maximum possible output from available resources

A price floor (set below the equilibrium price) on corn will

have no effect on the market of corn and all transactions will occur at equilibrium

If the price elasticity of demand for a cookie is 10, this means that

if price was raised 1 percent, quantity demanded would fall by 10 percent.

Suppose you have an hour before your next class starts. You can either read a book, get something to eat, or take a nap. The opportunity cost of getting something to eat is:

impossible to determine because the most preferred alternative is not known

Demand is ________ if a large percentage change in price causes a smaller percentage change in quantity demanded.

inelastic

If the percentage change in quantity demanded is less than the percentage change in price for good B, then the demand for good B is

inelastic

The demand for cigarettes of an addicted smoker would most likely be ________.

inelastic

The demand for food would be more ________ in Florida or New York during Hurricane Irma that affected Florida.

inelastic

The demand for vital medicine would most likely be ________.

inelastic

A price searcher

is a seller that has the ability to control to some degree the price of the product it sells.

You are the owner of a bed & breakfast who wants to maximize profits. Until the place sells, the mortgage of $3000/month must be paid, since it is a sunk cost. If the restaurant operates, you will incur an additional $4,000 on operations , so total costs be $7,000 per month, but revenue will be only $6000 per month. Until the building can be sold,

it is best to ignore sunk costs and keep the bed & breakfast operating.

All of the following are considered natural resources EXCEPT

labor

A price ceiling (set below the equilibrium price) on corn will

lead to a shortage of corn.

Public franchises, patents, and government licenses are examples of __________ barriers to entry.

legal

An economic model is useful if it:

makes accurate predictions.

To make an economically rational decision, marginal cost should be compared to

marginal benefit.

Both a monopolist and a perfect competitor firm maximize profits (or minimize losses) by producing the quantity of output at which __________ equals __________.

marginal revenue; marginal cost

Both a price taker and a price searcher maximize profits (or minimize losses) by producing the quantity of output at which __________ equals __________.

marginal revenue; marginal cost

A price ceiling is a government-mandated

maximum price above which legal trades cannot be made

A price floor is a government-mandated

minimum price below which legal trades cannot be made

What is NOT included in economic capital?

money

In general, electric, gas, and water companies are examples of __________ monopolies.

natural

Colleges and universities use such things as grade point averages (GPAs) as

non-price rationing devices

Demand "A" represents a demand curve that is?

perfectly elastic

If quantity demanded becomes zero at the smallest percentage increase in price of good D, then demand for good D is

perfectly elastic

Demand "D" represents a demand curve that is?

perfectly inelastic

If quantity demanded is completely unresponsive to changes in the price of good ABC, then demand for good ABC i

perfectly inelastic

The statement, "Violent crime has decreased in the last five years," is:

positive because it is testable

The downward slope of a demand curve illustrates the pattern that as ________ rises, ________ decreases.

price; quantity demanded

The production possibilities model illustrates an inverse relationship between two goods or services because

production of different types will compete for limited resources.

Financial capital, like money, is simply a tool. Once financial capital is converted to economic capital (invested), it produces a resource that is

productive.

Second-degree price discrimination is discrimination among

quantities

A demand curve for newspapers shows the graphical relationship between price and

quantity demanded for newspapers

The price elasticity of demand measures the responsiveness of

quantity demanded to a change in price.

Demand "B" represents a demand curve that is?

relatively elastic

Demand "C" represents a demand curve that is?

relatively inelastic

If buyers do not respond much to a change in price, then demand is considered

relatively inelastic

A price floor (set above the equilibrium price) on corn will

result in a surplus of corn.

A seller that has the ability (to some degree) to control the price of the product it sells is called a price

searcher

In order to satisfy as many wants as possible, it is necessary to achieve allocative efficiency,

since otherwise output may go to where it is less valued.

You pay insurance for your car and decide to become an Uber driver. You face costs for driving that include sunk costs like insurance that contribute to the average cost per mile of $.50. Yet when a rider offers to pay less than that for a ride, the driver agrees because

sunk costs like auto insurance (in this case) do not increase as driving increases.

A drought decreases the supply of agricultural products. This means that at any given price, a lower quantity will be supplied. Conversely, especially good weather would shift the

supply curve to the right.

Marginal benefit is

the additional benefit that one more unit of something will provide.

Marginal revenue is equal to __________ divided by __________.

the change in total revenue; the change in quantity of output

Marginal cost is

the cost of obtaining or producing one more unit of something.

X-inefficiency results from

the lack of competitive pressure.

When choosing a college major in a rational way, Minty should consider

the opportunity cost of the degree and the benefit this degree would bring.

The price elasticity of demand is defined as:

the percentage change in quantity demanded divided by the percentage change in price.

If the price elasticity of demand for a cookie is 10, this means that

the percentage change in quantity demanded is 10 times the percentage change in price.

Scarcity is imposed on individual households in the form of income and

the prices of the goods that a person may purchase.

From the graph above, one could conclude that, all else remaining constant

the relationship between X and Y is direct.

The perfectly competitive firm charges ____________ price for each unit of the good it sells, and the perfectly price-discriminating monopolist charges _________________ price for each unit of the good it sells.

the same; a different

Determining the price elasticity of demand involves all of the following factors, but NOT

the slope of the supply curve

Normative economics is:

the study of what ought to be

A severe freeze has damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of

the supply curve

Suppose Congress passes legislation that offers subsidies to orange farmers. The impact on the market for orange juice will be a rightward shift of

the supply curve

From the graph above, one could conclude that, all else remaining constant

there is a trade-off between X and Y.

The problem of scarce resources

they always want more of at least one good.

Economists would say that the decisions we make are influenced by

trade-offs.

When picking up a rental car at an airport car rental agency, some travelers stand in line waiting to sign paperwork and pick up car keys at the rental desk while other travelers can go right to their rental car by using their rental car loyalty club card. In this example, the travelers who move quickly through to the parking lot pick up their car are probably

travelers who value convenience more than those waiting in line and are willing to pay additional club fees for the option of avoiding them.

If the percentage change in quantity demanded is equal to the percentage change in price for good C, then demand for good C is

unit elastic

Perfect price discrimination is discrimination among

units

Resources are all of the following EXCEPT

unlimited and in abundance.

The opportunity cost of choosing a particular activity:

varies depending on time and circumstances.

As resources are scarce, _____.

​people must make choices among alternatives.