Microeconomics Midterm 1

If the price of Product E decreasing by 9% causes its quantity demanded to increase by 14% and the quantity demanded for Product F to increase by 12% , what is the cross-price elasticity of demand? Round your answer to one decimal place. What is the relationship between these goods? no relationship complements substitutes

-1.3 complements

Attina always spends 10 % of her income on soft-shell crabs. Assume that her income increases by some percentage while the price of soft-shell crabs remains constant (and that all soft-shell crabs cost the same). What is her income elasticity of demand for soft-shell crabs?

1

Last week, Michelle spent $30 on caviar. Today, Michelle still spends $30 on caviar even though its price has doubled. What is Michelle's price elasticity of demand for caviar? (Use the midpoint formula for your calculation.)

1

Government intervention will or will not improve society well being? 1) a local energy company releases pollutants into the regional water reservoir 2) The costal town of WIllowby could prevent Manu shipwrecks by building a lighthouse, however no individual resident is willing to pay for the lighthouse because they could never recoup the costs from ships that benefit from the lighthouse. 3) A manufacturing company in Texas is switching from producing coats to producing T-Shirts in anticipation of warmer weather 4) Consumers are beginning to demand more smartphones than traditional cell phones

1 and 2 government intervention will improve 3 and 4 government intervention will not improve society well being

If Good C increases in price by 30 % a pound, and this causes the quantity demanded for Good D to increase by 40% , what is the cross-price elasticity of the two goods? Round your answer to one decimal place. What is the relationship between the two goods? complements no relationship substitute

1.3 substitutes

The Acmeville Metropolitan Bus Service currently charges $0.99 for an all-day ticket, and has an average of 513 riders a day. The bus company is not earning a profit, but according to their contract with the city, they cannot cut the number of buses on the road. They must therefore find a way to increase revenues. The bus company is considering increasing the ticket price to $ 1.21 . The marketing department's studies indicate this price increase would reduce usage to 249 riders per day. Calculate the absolute value of the price elasticity of demand for bus tickets using the simple percentage change method. Round your answer to one decimal place.

2.3

A farmer produces both beans and corn on her farm. If she must give up 16 bushels of corn to be able to get 6 bushels of beans, then her opportunity cost of 1 bushel of beans is 0.38 bushels of corn. 16.00 bushels of corn. 2.67 bushels of corn. 2.99 bushels of corn.

2.67 bushels of corn

Suppose that Michelle buys a cappuccino from Paul's Cafe and Bakery for $4.75 Michelle was willing to pay up to $7.75 for the cappuccino and Paul's Cafe and Bakery was willing to accept $0.75 for the cappuccino. Based on this information, answer the questions. Michelles consumer surplus is? Paul's Cafe and Bakery Producer Surplus is?

3 4

Sylvia's annual salary increases from $100,000 to $109,500. Sylvia decides to increase the number of vacations she takes per year from three to four. Use the midpoint method to calculate her income elasticity of demand for vacations. Round your answer to two decimal places. this good is? a normal good and income-elastic a normal good and income-inelastic an inferior good

3.15 units A normal good and income-elastic

At the beginning of this year, daily consumption of gasoline in the US amounted to 344 million gallons. It is estimated that for every 10% increase in the price of gasoline, quantity demanded falls by 2.00%. By the end of this year, the price of gasoline is expected to increase by 40 cents from $ 2.90 per gallon. Based on this information, what is the expected quantity demanded (QD) for gasoline at the end of this year? Please specify your answer to one decimal place.

334.9 millions of gallons

In anticipation of a major hurricane hitting the Gulf Coast, the quantity gasoline of sales rise from 360 million gallons to 375 million gallons. Based on this information, what is the percent change in gasoline sales? Please specify your answer to one decimal place and use the midpoint formula.

4.08 percent

According to the law of demand, an increase in price decreases demand. a decrease in price increases quantity demanded. a decrease in price increases demand. an increase in income increases demand.

A decrease in price increases quantity demanded

Select the correct definition of the term "comparative advantage." the ability to produce a good or service at a higher opportunity cost than another a nation offering more favorable trade policy with its allies than with other countries the ability to produce a good or service at a lower opportunity cost than another the ability to produce more of a good or service than another over a specified time period the ability to produce less of a good or service than another over a specified time period

The ability to produce a good or service at a lower opportunity cost than another

Daniel has decided to open his own bakery using locally sourced ingredients and supplies. He provides income and jobs to local suppliers. He also provides his community with a place to buy delicious baked goods.

The invisible hand

Producer surplus is the difference between the market price and the minimum price a buyer is willing to pay. the market price and the minimum price a seller is willing to accept. the maximum price a seller is willing to accept and the market price. the maximum price a buyer is willing to pay and the market price.

The market price and the minimum price a seller is willing to accept.

Consumer surplus is equal to the difference between the minimum price a seller is willing to accept and the market price. the maximum price a buyer is willing to pay and the market price. the minimum price a buyer is willing to pay and the market price. the maximum price a seller is willing to accept and the market price.

The maximum price a buyer is willing to pay and the market price.

The mayor of New Monopoly realizes that the congestion at the port costs the shipping companies and his town money. Which decision would NOT move him towards a command economy?

The mayor decides to let individual firms and consumers find a solution for the excessive wait time

When there are fewer substitutes, demand tends to be perfectly inelastic. less elastic. more elastic.

less elastic

The correct term above (recession) is a key component of macroeconomics. both microeconomics and macroeconomics. microeconomics.

macroeconomics

In a market economy, individuals' economic lives are said to be interrelated with many other individuals and firms. almost completely controlled by government regulation. illegal and in violation of government rules on prices and sales. based more on production than on consumption.

Interrelated with many other individuals and firms

Which statement describes the equity‑efficiency trade‑off? The least efficient economic outcome is the fairest outcome. There is always a more equitable outcome that is also more efficient. Actions intended to make economic outcomes fairer may cause efficiency to decrease. Government intervention can increase efficiency in a market.

Actions intended to make economic outcomes fairer may cause efficiency to decrease.

Which of the scenarios are examples of an economic signal? Companies begin hiring more people after a long period of high unemployment in the United States. The market price for toilet paper has not changed over the last 10 years. Purchases of floppy disks and CDs decline dramatically as the demand for online streaming of similar goods increases. Prices in housing markets fall.

All of the above

Which demonstrates a scenario with no opportunity cost? It's Friday night and you stay up late talking and hanging out with your friends. The chemistry club is giving out free pizza for lunch to all who come to their table to get it. Naomi, age 8, is at a bookstore and chooses to buy a book about a young wizard instead of buying a math textbook that she would probably never open. Chez Moi and Chez Nous, two premiere French restaurants with three Michelin stars, both offer you a full time sous chef job at the same salary. You are ecstatic because you know it is a win-win scenario and choose to work for Chez Nous. Or All of these have opportunity costs

All of them have opportunity costs

Rent controls are a typical example of a price ceiling. Please select all likely consequences of rent controls when the price ceiling is binding. more subletting of apartments black markets inefficient allocation of apartments reductions in apartment quality

All the above

An economic transaction in which one party trades a good or service for another good or services is called barter. comparative advantage. absolute advantage.

Barter

The demand curve determines equilibrium price in a market. depicts the relationship between production costs and output. is a graphical representation of the relationship between price and quantity demanded. is a graphical representation of the relationship between price and quantity supplied

Is a graphical representation of the relationship between price and quantity demanded

During the Obama administration, the development of low-cost batteries for electric cars received large amounts of federal funding in terms of subsidies. Meanwhile, American households gave a higher priority towards minimizing their environmental impact. Consider the market for zero-emissions electric vehicles where there is an upward-sloping supply curve and a downward-sloping demand curve. Which direction will demand and supply shift? Both curves will shift left. Demand will shift right and supply will shift left. Both curves will shift right. Demand will shift left and supply will shift right.

Both Curves will shift right

What will happen to the equilibrium price? Price decreases. Change is ambiguous. Price increases. Price remains constant.

Change is ambiguous

Assume that a monsoon destroys the coffee crop in Vietnam, one of the world's largest coffee producers. What will likely occur? People will consume more coffee. Consumers will try to find alternatives to coffee due to increases in the price of coffee. There will be no change in the market for coffee. The price of sugar and creamer will increase.

Consumers will try to find alternatives to coffee due to increases in price of coffee

In which field do researchers focus on investigating the phenomena described? Political Science Business Economics Sociology

Economics

Suppose that towns collect resources from their surroundings. Then, through trade, they attempt to obtain other desirable items. Mortarville, an urban town that specializes in brick and ore, wants wood to build roads so that it can expand and connect to other major cities. Mortarville has a willingness to pay $50 for wood, since wood is hard for them to obtain. Mayflair also needs wood to build grain silos for their wheat harvests. Mayflair is willing to pay $45 for wood. Timber, the only foresting company, sets the price of wood at $60 . The change in total surplus that arises due to trades between Timber and the towns is

Equal to zero

Maynard, Jonny, Geddy, and Regine are trying to form a band. They each have some basic skills on most instruments, so their current plan is for each of them to rotate among vocals, guitar, bass, and drums. After a year of practice and rehearsals the band still sounds awful. Maynard cannot keep a steady beat when on bass or drums, Geddy sounds terrible on everything except the bass, nobody except Jonny can remember all the chords on guitar, and even Regine's own mother thinks her singing sounds like a dying cow. At their current rate, they expect it will be several years before they are good enough to land their first paid performance. None of them have enough money saved up to last that long. They all know you are taking economics and ask your advice. What would you say to them? Change the rotation to be random rather than equal to take advantage of heteroskedasticity. Continue with the current plan, as economies of scale should eventually kick in. Abandon the band, as continued practice is doomed to suffer diminishing marginal returns. Invest their remaining savings in new instruments, as they are at a point where the marginal product of capital exceeds the marginal product of labor. Have each member specialize in the role that they are best in to take advantage of benefits from specialization.

Have each member specialize in the role that they are best in to take advantage of benefits from specialization.

Vincent and Jean are two cooks who work in a village. Each of them can either bake cakes or make pizzas. Every ingredient is readily available to them, and the only scarce resource is the cooks' time. Vincent can bake 10 cakes or make 5 pizzas in an hour. Jean can bake 12 cakes or make 8 pizzas in an hour. Please answer the four questions. 1 Which cook has the absolute advantage in baking cakes? Neither Vincent Jean 2 . Which cook has the absolute advantage in making pizzas? Neither Vincent Jean 3 . Which cook has the comparative advantage in baking cakes? Neither Jean Vincent 4 . Which cook has the comparative advantage in making pizzas? Jean Vincent Neither

Jean Jean Vincent Jean

What is marginal analysis?

Marginal analysis consists of examining the costs and benefits of doing a little bit more or a little bit less of something. It allows individuals to make optimal decisions about how much of something to consume or do.

Determine which economic principle is illustrated by each scenario. The owner of a snow cone trailer realizes that the demand for snow cones is low during the winter, and thus, closes shop until the temperature warms back up near summertime. The local river has so much pollution that three-eyed fish are forming. The government responds by regulating the amount of chemicals that can be dumped into the river. At a high-end restaurant, the restaurant owner has one chef at a meat station, one chef at a vegetable station, and one chef, who has an artistic eye, plate the food she is given. The result is increased service speed, and the kitchen is able to serve more customers in an evening. During the summer, a bumper crop of oranges in Florida causes a surplus in the supply of oranges nationwide. As a result, prices fall to compensate for the surplus and consumers enjoy the fruits of the farmers' labor. market efficiency government intervention specialization equilibrium

Market Efficiency Government intervention Specialization equilibrium

The seaport town of New Monopoly has become extremely popular with shipping companies due to its superior location. The port has become so congested that ships must wait hours every day just to dock.

Market Failure

You and other college students are deciding whether to major in music or engineering. You learn that there is a shortage of engineers, making it easy for engineering graduates to find employment, while there is a glut of musicians for whom finding a job is difficult. As a result, you and many other college students decide to major in engineering. Which economic principle does this illustrate? Changes in incentives are unlikely to change the decisions people make. Specialization leads to economic efficiency. Markets tend to move towards equilibrium as individuals respond to incentives. Individuals do not normally take into account the decisions of other individuals. Government intervention can improve efficiency when there is a market failure.

Markets tend to move towards equilibrium as individuals respond to incentives

Determine if the items represent an example of positive economics or normative economics. The richest 1 % of Americans should pay more taxes than the rest of the 99 %. normative economics positive economics A decrease in the supply of coconut will increase the price of German chocolate cake, a good which requires coconut shavings as a key ingredient. normative economics positive economics As minimum wage increases, the prices of all goods and services also tends to increase. positive economics normative economics Social welfare spending in Sweden occupies too large a portion of the national budget. normative economics positive economics

Normative Positive Positive Normative

Suppose you are a freshmen in college and you have not declared a major. One reason you enrolled at your respective college was the school's vibrant social life. At the same time, you want to balance your academic life because you know that your grades will matter for graduate school or job applications. You decide to forgo partying for two hours to study for an upcoming economics exam. In your first semester's Principles of Economics class, you learn that the enjoyment you would have received from partying is an example of a(n)

Opportunity Cost

What will happen to the equilibrium quantity? Quantity increases. Quantity remains constant. Change is ambiguous Quantity decreases.

Quantity Increases

Please select the economic term that is best described by each statement below. There are limited resources to satisfy all of society's wants. business cycle entrepreneurship margins trade-off recession scarcity

Scarcity

Which is NOT an example of a behavior exhibited in a market economy? For their wedding, Alex and Erika choose Matte Photography instead of Pro Finish Photography, since Matte Photography is cheaper. Despite the advice of its business partners, Puna discontinues its most popular lines of clothing, and chooses instead to produce retro jean jackets and purple sweatpants, thinking that jean jackets and sweatpants are bound to make a fashion comeback. Nettoyer decides to introduce a soap scent, Pomegranate, in response to Schoon's new soap scent, Blood Orange, and Sauber's award-winning scent, Tangerine. The president of the European country of Semolina decrees that pasta must be consumed at all meals in an effort to help domestic pasta makers.

The president of the European country of Semolina decrees that pasta must be consumed at all meals in an effort to help domestic pasta makers.

Which statement is the best definition of the price elasticity of demand

The ratio of percent change in quantity demanded to the percent change in price

Which statement is the best definition of the price elasticity of demand? The ratio of the percent change in demand to the percent change in income. The absolute value of the slope of the demand curve. The ratio of the percent change in price to the percent change in quantity demanded. The ratio of the percent change in quantity demanded to the percent change in price.

The ratio of the percent change in quantity demanded to the percent change in price

The five-dollar Burger Joint gift card that your friend gave you for your birthday expires today. You can either use the gift card to buy yourself dinner at Burger Joint, or you can stay home and eat a delicious home-cooked meal. What is the opportunity cost of eating the home-cooked meal? The value of a five-dollar dinner at Burger Joint. The value of the ingredients that go into the home-cooked meal, and the value of a five-dollar dinner at Burger Joint. There is no opportunity cost since you did not pay for the gift card. The time it takes to eat your home-cooked meal, and the value of the five-dollar dinner at Burger Joint. The value of the ingredients that go into the home-cooked meal.

The value of the ingredients that go into the home-cooked meal (because you can not use them again) and the value of a five-dollar dinner at burger joint

The day-to-day living conditions of modern Americans are very different from what they were in the 20th century. While doing research for an economics project, Charlie discovers that more households today, as compared to households 100 years ago, have electricity, air conditioning, and a car. Which of the following explains why modern Americans enjoy a higher standard of living than Americans 100 years ago? The invisible hand has guided all nations around the world to this prosperity. Market failures are nonexistent. There has been economic growth in our society. Americans have prospered and earned more money due to a complete lack of recessions.

There has been economic growth in our society

Which statement or statements are true of all households? They are composed of children and adults. They consume goods, services, or both. They provide labor to firms. They have income solely from employment.

They consume goods, services, or both

Which statement or statements are true of all firms? They make a net profit or go out of business after two quarters of consecutive loss. They produce goods, services, or both. They issue shares of publically traded stock. They sell goods, services, or both.

They produce goods, services or both They sell goods, services, or both

John finds a set of wood in his garage which he is willing to sell for no less than $35 . John chooses to sell the set to Mayflair for $40 instead of to Mortarville for $45 . As a result of John's transaction with Mayflair, total surplus increased, but the market is inefficient. total surplus decreased, but the market is efficient. total surplus increased, and the market is efficient. total surplus decreased, and the market is inefficient.

Total surplus increased, but the market is inefficient

Why is the shape of the production possibilities frontier (PPF) often curved instead of straight? The productive efficiency of an economy decreases as it moves from left to right along the PPF. To take a potential sunk cost into account, the PPF is curved to distribute the burden of the sunk cost based on allocative effieciency. Because the production possibilities frontier is based on the productive capabilites, and of a nation overall, rather than the productive capacity of an individual. Typically, some resources are better suited for producing one good than another, which means that there are diminishing returns when moving such resources away from producing what they are best suited for.

Typically, some resources are better suited for producing one good than another, which means that there are diminishing returns when moving such resources away from producing what they are best suited for.

Economy

Well functioning system for coordinating productive activities, the activities that create the goods and services people want, then get it to those people.

When trading with more developed countries, less developed countries have a comparative advantage in the production of some goods or services. less developed countries do not have a comparative advantage in the production of any goods or services. less developed countries have a comparative advantage in the production of all goods or services

less developed countries have a comparative advantage in the production of some goods or services.

Suppose that Georgiania was a thriving empire in its golden age. Business was booming and it was the center of international trade under the leadership of Emperor Raphael III. His empire's pride and joy was the trading of green and black tea, and he decreed that their entire economy should be built around it. However, in the mid 1800s, Georgiania experienced a severe economic downturn when the other nations of the world created an embargo on tea from Georgiania, which led to civil strife due to thousands of workers being laid off. A downward fluctuation in the economy like this is known as market failure. the invisible hand. economic growth. a recession.

a recession

Producer surplus is shown graphically as the area above the supply curve and above the market price. under the demand curve and above the market price. under the demand curve and below the market price. above the supply curve and below the market price.

above the supply curve and below the market price

Which of the items is most likely to be a complement to coffee? tea baked beans creamer decaf coffee

creamer

Which decision is least likely to be well explained by marginal analysis? deciding which college to attend deciding between watching another episode of your favorite TV series and going to bed deciding how fast to go on the freeway deciding whether to do more sit-ups at the gym deciding whether to take a lunch break or knock on another door as a door-to-door salesperson

deciding which college to attend

While in class, you realize that there are more people in the classroom than there are seats. Across the hall, you notice a large, empty lecture hall and wonder why the university is not operating at

efficiency

Which is NOT an example of a resource? land human capital machinery labor firms

firms

Your economics professor is attempting to recruit more students to major in economics. She presents data showing that economics majors develop skills valuable in private industry, government, and research. She also argues that they earn a relatively higher income than other majors. Your professor is presenting you with to major in economics.

incentive

Over longer periods of time, demand tends to become more elastic. perfectly inelastic. less elastic.

more elastic

Garret is an undergraduate looking for a job to pay for college. As Garret seeks employment, he is glad to know that he will be paid at least $7.25 per hour. Select the term that best fits the scenario. license quota price floor price ceiling black market

price floor

An economic signal is the ability for an owner to choose to do whatever they want with the goods that they own so that they can better themselves off. some information that helps people to make better decisions economically. a measure of how efficient an economy is. a "lemon."

some information that helps people to make better decisions economically

You are assigned a final group project for your economics course. One member of your group is really good at finding resources for the project, one is really good at proofreading and editing, and you are really good at making a presentation. Based on this, you know that via you can complete the project more efficiently than if you all did each part together.

specialization

Economics is the study of

the consumption, production, and distribution of goods and services.

An economy is

the system society uses to coordinate productive activities.

Please select the economic term that is best described by each statement below. Comparing the benefits and costs of engaging in an activity. resources scarcity margins recession financial capital trade-off

trade-off

Consumer surplus is shown graphically as the area under the demand curve and below the market price. above the supply curve and above the market price. under the demand curve and above the market price. above the supply curve and below the market price.

under the demand curve and above the market price