microeconomics midterm

When you chose to buy the second cup of coffee instead of the third bagel, which of the following is necessarily correct?

The marginal utility per dollar from the third bagel is less than the marginal utility per dollar from the second coffee.

CDs magazines b-6 0 c-4 4 d-0 12 The figure above gives your budget line for magazine and CDs per month. Given that your income equals to $60 per month, what is the price of a magazine and the price of a CD?

The price of a magazine is $5 and the price of CD is $10

a market demand curve is constructed by

a horizontal summation of each individual demand curve

Kelly graduates and her income increases by $25,000 a year. Other things remaining the same, she increases the quantity of clothes she buys. For Kelly, clothes are ________.

a normal good

The income elasticity of demand for bicycles is +10, which implies that bicycles are

a normal good

along an indifference curve, what point would a consumer prefer over a point along the line?

a point above the curve

A Giffen good shows

a positive relationship between price and quantity demanded

Suppose a rise in the price of peaches from $5.50 to $6.50 per bushel decreases the quantity demanded from 12,500 to 11,500 bushels. By using the midpoint formula, the price elasticity of demand is

.5

Pizza Pepsi Q MU Q MU 0 0 0 0 1 20 1 30 2 16 2 8 3 10 3 7 The above table shows Priscilla's marginal utility from the two goods she consumes, pizza and Pepsi. The price of a slice of pizza is $2 and of a can of Pepsi is $1. Suppose Priscilla has $6 to spend. Which combination of pizza and Pepsi will maximize Priscilla's utility?

2 slices of pizza and 2 cans of pepsi

Milkshakes Sodas Q MU Q MU 0 0 0 0 1 600 1 240 2 1000 2 360 3 1300 3 460 4 1540 4 520 5 1590 5 570 6 1636 6 590 7 1676 7 602 8 1708 8 610 9 1728 9 616 10 1738 10 620 The table shows Tom's total utility from milkshakes and sodas. Tom's total budget for milkshakes and sodas is $20.00 per week. Milkshakes cost $2.00 each and sodas cost $1.00 each. What is Tom's total utility at his consumer equilibrium?

2266 units

Quantity of tennis rackets demanded Price Jill Jed 60 1 0 50 2 0 40 2 1 30 3 2 20 4 3 Jill and Jed have individual demand curves for tennis rackets given in the table above and are the only two demanders in the market. What is the market quantity demanded at the price of $30?

5

*table above* The above table shows Homer's marginal utility from consuming various quantities of chocolate chip cookies and cake. The price of cookies is $1 per pound, the price of cake is $2 per slice and Homer has $9 to spend on cookies and cake. Homer will consume ________ pounds of cookies and ________ slices of cake.

5; 2

*table above* The above table shows Homer's marginal utility from consuming various quantities of chocolate chip cookies and cake. The price of cookies is $2 per pound, the price of cake is $2 per slice and Homer has $18 to spend on cookies and cake. Homer will consume ________ pounds of cookies and ________ slices of cake.

5; 4

a market demand can be constructed by

adding the quantities that all consumers buy at each price

marginal utility measures the

additional utility from an additional unit of consumption

Mark's marginal utility from reading books is the ________ when he reads ________.

change in his total utility; one additional book

CDs magazines b-6 0 c-4 4 d-0 12 The above figure gives your budget line between CDs and magazines. Which combination of CDs and magazines is not affordable?

combination of b and d

price quantity 8 2,000 7 4,000 6 6,000 5 8,000 4 10,000 3 12,000 The table above gives the demand schedule for snow peas. By using the midpoint formula, if the price of snow peas falls from $4.00 to $3.00 a bushel, total revenue will

decrease because demand is inelastic in this range.

If a 20 percent decrease in the price of a good leads to a 15 percent increase in the quantity demanded, then demand is ________ and total revenue will ________ as a result of the fall in price.

elastic; increase

If tea and coffee are substitutes, the cross elasticity of coffee with respect to the price of tea will be ________ and an increase in the price of tea will ________ the demand for coffee.

positive; increase

the budget line________

shows the limits to a households consumption choices

Milkshakes Sodas Q MU Q MU 0 0 0 0 1 600 1 240 2 1000 2 360 3 1300 3 460 4 1540 4 520 5 1590 5 570 6 1636 6 590 7 1676 7 602 8 1708 8 610 9 1728 9 616 10 1738 10 620 The table shows Tom's total utility from milkshakes and sodas. Tom's total budget for milkshakes and sodas is $20.00 per week. Milkshakes cost $2.00 each and sodas cost $1.00 each. What quantity of sodas does Tom purchase at his consumer equilibrium?

six

A consumer has maximized his or her utility by consuming

so that the ratio of marginal utility to price is the same for all the goods consumed

According to the substitution effect along an indifference curve, when the relative price of a good falls, the consumer ________ substitutes ________ of that good for the other good.

sometimes; more

People buy more of good 1 when the price of good 2 rises. These goods are

substitutes

The effect of a change in price on the quantity bought while keeping the consumer on the same indifference curve, is called the

substitution effect

The "law of demand" states that, other thing remaining the same, the higher

the price of a good, the smaller is the quantity demanded.

An indifference curve shows combinations of goods ______________.

which the consumer prefers equally

Microsoft raises the price of its Office software by 10 percent. As a result, the quantity of personal computers demanded at the current price decreases by 5 percent. What is the cross elasticity of demand for personal computers with respect to the price of Microsoft Office software?

-0.5

If a 10 percent increase in income results in an 8 percent increase in the quantity demanded of a good, the income elasticity of demand equals ________ and the good is ________ good.

.8; a normal

If the price elasticity of demand for a good is 0.8, then a

1 percent rise in the price leads to a 0.8 percent decrease in the quantity demanded.

indifference curve that is 90 degree angle

shows two perfect complements

The table gives some of Tammy's total and marginal utilities from comedy videos. Which of the following statements is true? TU MU 0 0 1 250 2 180 3 580 4 700 5 100

tammys total utility from 5 comedy videos is 800

Dell lowers the price of their PCs by 10 percent. As a result, the quantity of Gateway computers demanded at the current price decreases by 12 percent. What is the cross elasticity of demand for Gateway computers with respect to the price of Dell computers?

1.2

Using average price and average quantity, calculate the price elasticity of demand if a price rise from $8 to $10 and decreases the quantity demanded from 20 units to 15 units. The price elasticity of demand equals

1.29

Using the average price and average quantity, what is the elasticity of demand for oranges when the price of oranges changes from $200 to $160 per bushel and so the quantity demanded changes from 1000 to 1400 bushels?

1.5

If the price of a burger decreases by 5 percent and as a result the quantity of burgers demanded increases by 8 percent, the price elasticity of demand equals

1.6

quantity demanded Price Bart's Lisa's Homer's 2 9 5 7 3 7 4 6 4 4 2 5 5 1 0 3 Homer, Bart, and Lisa are the only consumers in the market. Using the information in the above table, what is the market demand for chocolate chip cookies at $4.00 per pound?

11 pounds

Taco Bell's economists determine that the price elasticity of demand for their tacos is 2.0. So, if Taco Bell raises the price of its tacos by 6.0 percent, the quantity demanded will decrease by ________ percent

12

price quantity 8 2,000 7 4,000 6 6,000 5 8,000 4 10,000 3 12,000 The table above gives the demand schedule for snow peas. By using the midpoint formula, the price elasticity of demand between $6.00 and $7.00 per bushel is

2.6

Quantity of Mt. Dew (per day) Total utility (units) 1 30 2 55 3 75 4 90 5 100 The table above gives Cathy's total utility from Mt. Dew. Cathy's marginal utility from the 3rd Mt. Dew is ________ units.

20

Suppose that Dave has $200 to spend per week and he buys only magazines and pizza. The price of a pizza is $10 and the price of a magazine is $5. What is the maximum amount of pizza Dave can buy each week?

20

Jake plans to spend $100 on fried chicken and Pepsi. The price of a gried chicken is $5 and Pepsi is $2 pe bottle. If Jake buys 10 fried chickens how many bottles of Pepsi can he buy?

25

M MU GB MU 0 0 1 100 1 200 2 75 2 180 3 50 3 160 4 25 4 140 5 5 5 120 Kelly's marginal utilities for magazines and packages of gummy bears are listed in the table above. For Kelly, what is the total utility received from consuming 5 magazines?

255

Suppose the price of coffee is $3, the price of a bagel is $2 and a person's budget is $40. The budget line's equation is

2Qbagel + 3Qcoffee = 40

Bob plans to spend $60 per month on DVD movie rentals and CDs. The price of a movie rental is $3 and the price of a CD is $15. If Bob rents 5 DVDs permonth, how many CDs can he buy?

3

Cookies Cake Q MU Q MU 1 32 1 40 2 28 2 32 3 24 3 24 4 20 4 16 5 16 5 8 6 12 6 0 The above table shows Homer's marginal utility from consuming various quantities of chocolate chip cookies and cake. The price of cookies is $2 per pound, the price of cake is $2 per slice and Homer has $12 to spend on cookies and cake. Homer will consume ________ of cookies and ________ of cake.

3 pounds; 3 slices

Shaniq consumes only magazine and CDs. Her income equals $60 per month. CDs are $12 each and magazines are $5 each. What is the equation for her budget line?

60 = 5Qm+12QCD

Danny has $12 to spend on two goods: pies and soda. The price of a pie is $4, and the price of a can of soda is $2. To maximize his utility, Danny buys ________.

the combination that gives him the same marginal utility per dollar spent on pies as on soda

Milkshakes Sodas Q MU Q MU 0 0 0 0 1 600 1 240 2 1000 2 360 3 1300 3 460 4 1540 4 520 5 1590 5 570 6 1636 6 590 7 1676 7 602 8 1708 8 610 9 1728 9 616 10 1738 10 620 The table above shows Tom's total utility from milkshakes and sodas. Tom's total budget for milkshakes and sodas is $20.00 per week. Milkshakes cost $2.00 each and sodas cost $.50 each. What quantity of milkshakes does Tom purchase at his consumer equilibrium?

eight

Quantity of videos demanded Price Alex Lynn Liza 6 2 0 3 5 4 0 6 4 6 1 9 3 8 2 12 2 10 3 15 1 12 4 18 Given the individual demands for video downloads in the above table, and assuming that these three people are the only ones in the market, which of the following statements is NOT true about market demand for video downloads?

The height of the market demand curve at a quantity demanded of 16 is $5.

an increasing shift in the budget line in the direction indicated would occur as a result of

an increase in money income

An increase in Abigail's income decreases her demand for used cars. For her, used cars are

an inferior good

The price elasticity of demand for cigarettes is 0.4. If government wants to reduce smoking by 10 percent, by how much should it raise the price of cigarettes by imposing a tax?

by 25%

If macaroni and cheese is an inferior good, an increase in income will

decrease the demand for macaroni and cheese

a decrease in the expected future price of cars

decreases the current demand for cars, that is, there is a leftward shift of the demand curve for cars.

Donuts and coffee are complements. When the price of a donut increases, the demand for coffee ________ and the cross elasticity of demand for coffee with respect to the price of a donut is ________.

decreases; negative

If Pete enjoys his first pancake of the morning much more than his fifth pancake of the morning, he is exhibiting

diminishing marginal utility

Milkshakes Sodas Q MU Q MU 0 0 0 0 1 600 1 240 2 1000 2 360 3 1300 3 460 4 1540 4 520 5 1590 5 570 6 1636 6 590 7 1676 7 602 8 1708 8 610 9 1728 9 616 10 1738 10 620 The table above shows Tom's total utility from milkshakes and sodas. Tom's total budget for milkshakes and sodas is $20.00 per week. Milkshakes cost $2.00 each and sodas cost $.50 each. What quantity of sodas does Tom purchase at his consumer equilibrium?

eight

According to the total revenue test, a price cut increases total revenue if demand is

elastic

Dan sells newspapers. Dan says that a 4 percent increase in the price of a newspaper will decrease the quantity of newspapers demanded by 8 percent. According to Dan, the demand for newspapers is ________.

elastic

When the consumer is at his or her best affordable consumption point, it is the case that the marginal rate of substitution is

equal to the price ratio

As more of a good is consumed, its marginal utility ________ and its total utility ________.

falls; rises

When Sam's annual income was only $15,000, he purchased 50 pounds of bananas a year. When his income rose to $18,000, he purchased 55 pounds a year. Therefore,

for sam, bananas are a normal good

Milkshakes Sodas Q MU Q MU 0 0 0 0 1 600 1 240 2 1000 2 360 3 1300 3 460 4 1540 4 520 5 1590 5 570 6 1636 6 590 7 1676 7 602 8 1708 8 610 9 1728 9 616 10 1738 10 620 The table above shows Tom's total utility from milkshakes and sodas. Tom's total budget for milkshakes and sodas is $10.00 per week. Milkshakes cost $2.00 each and sodas cost $1.00 each. What quantity of milkshakes does Tom purchase at his consumer equilibrium?

four

Nick considers macaroni and cheese to be an inferior good. As a result of macaroni and cheese being an inferior good, the

income effect is negative, so that less is purchased as income increases.

Which of the following lists has variables that all shift a good's demand curve?

income, preferences, number of buyers, price of complementary good

The substitution effect

increases purchases of the good as the price rises if the good is a normal good

As Goldilocks consumes more gummy bears, her total utility ________ and her marginal utility from gummy bears ________. (given gummy bears are normal goods having Diminishing marginal utility)

increases; decreases

Consumers' preferences are represented by

indifference curves

For Giffen good, it must be ________________ good and an income effect must be ____________ to a substitution effect.

inferior; superior

suppose the price of a good rises

is shown by decreasing income at the new relative price in order to move from the old indifference curve to the new indifference curve after the price change.

When a consumer is at his or her best affordable point, the budget line

is tangent to the highest attainable indifference curve

As long as the marginal utility per dollar from pizza is greater than the marginal utility per dollar from soda, then to maximize utility a consumer will buy

more pizza and less soda

Marginal utility theory is used in the derivation of the

negative slope of demand curves.

The price elasticity of demand is defined as the magnitude of the

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

Marginal utility theory predicts that when income increases a

person's consumption of normal goods will increase

What is a conventional example of Giffen good?

potato in ireland

The ________ effect can be divided into the ________ effect and the ________ effect.

price; substitution; income

Moving along a given budget line,

prices and real income are constant

In order to determine a household's budget line, you must know the

prices of the goods bought and the household income

*table above* The above table shows Priscilla's marginal utility from the two goods she consumes, pizza and Pepsi. The price of a slice of pizza is $2 and of a can of Pepsi is $1. Suppose Priscilla has $6 to spend. If Priscilla is consuming 1 slice of pizza and 2 cans of Pepsi, which of the following is correct?

priscilla should increase her consumption of pizza to maximize her utility

The cross elasticity of demand is calculated as the percentage change in the

quantity demanded of one good divided by the percentage change in the price of another good

Milkshakes Sodas Q MU Q MU 0 0 0 0 1 600 1 240 2 1000 2 360 3 1300 3 460 4 1540 4 520 5 1590 5 570 6 1636 6 590 7 1676 7 602 8 1708 8 610 9 1728 9 616 10 1738 10 620 The table shows Tom's total utility from milkshakes and sodas. Tom's total budget for milkshakes and sodas is $20.00 per week. Milkshakes cost $2.00 each and sodas cost $1.00 each. What quantity of milkshakes does Tom purchase at his consumer equilibrium?

seven

The income elasticity of demand is defined as the percentage change in

the quantity demanded divided by the percentage change in income.

The price elasticity of demand measures

the responsiveness of the quantity demanded to changes in price.

Utility is best defined as

the satisfaction from consuming a good

Julie's demand curve for video downloads is downward sloping because as the price of a download decreases, ________ and she watches ________ videos.

the slope of her budget line changes; more

when two points are along the same budget line ________

they are as good as each other

A measure of all the satisfaction you receive from all the coffee that you consume is your

total utility from coffee

Milkshakes Sodas Q MU Q MU 0 0 0 0 1 600 1 240 2 1000 2 360 3 1300 3 460 4 1540 4 520 5 1590 5 570 6 1636 6 590 7 1676 7 602 8 1708 8 610 9 1728 9 616 10 1738 10 620 The table shows Tom's total utility from milkshakes and sodas. Tom's total budget for milkshakes and sodas is $10.00 per week. Milkshakes cost $2.00 each and sodas cost $1.00 each. What quantity of sodas does Tom purchase at his consumer equilibrium?

two