Preliminary Exam- Micro

Suppose that Tom bought a bike from Lauren for $150. If Lauren's reservation price was $100, and Tom's reservation price was $210, the buyer's surplus from this transaction was

210-150=60

Jen spends her afternoon at the beach, paying $1 to rent a beach umbrella and $11 for food and drinks rather than spending an equal amount of money to go to a movie. Her opportunity cost of going to the beach is

The value she places on seeing the movie.

You have noticed that there is a persistent shortage of teachers in an urban school district in your state. Based on this observation, you suspect that

The wage for teachers in that district is lower than the equilibrium wage.

Economists use abstract models because

They are useful for describing general patterns of behavior.

When the price of a good changes, the amount of that good that buyers wish to buy changes

because of both the substitution and the income effects.

When the current price of a good is below the equilibrium price

buyers have an incentive to offer to pay sellers more than the current price.

The fact that most people make some decisions based on intuition rather than calculation is

consistent with the cost-benefit model because most people intuitively weigh costs and benefits.

If price is above the equilibrium price, then there will be

excess supply

The marginal benefit of an activity is the

extra benefit associated with an extra unit of the activity

You paid $35 for a ticket (which is nonrefundable) to see SPAM, a local rock band, in concert on Saturday. Assume that $35 is the most you would have been willing to pay for a ticket. Your boss called, and she is looking for someone to cover a shift on Saturday at the same time as the concert. You would have to work 4 hours and she would pay you $11/hr. The cost to you of working is $2/hr. What is your opportunity cost of going to work on Saturday?

$35

Matt has decided to purchase his textbooks for the semester. His options are to purchase the books online with next-day delivery at a cost of $175, or to drive to campus tomorrow to buy the books at the university bookstore at a cost of $170. Last week he drove to campus to buy a concert ticket because they offered 25 percent off the regular price of $16. The benefit to Matt of buying his books at the university bookstore instead of online is

$5

Suppose quantity demanded is given by Qd = 100 − P, and quantity supplied is given by Qs = 20 + 3P. In this case, equilibrium price, P*, and equilibrium quantity, Q*, are

100*20=20.00 4*20=80 p=20.00, Q=80

For the fall semester, you had to pay a nonrefundable fee of $750 for your meal plan, which gives you up to 150 meals. If you eat 150 meals, your average cost per meal is

750/150=$5

Which of the following is likely to lead to a decrease in the demand for tennis balls?

An increase in the price of tennis racquets.

Dividing the total cost of undertaking n units of an activity by n reveals the

Average cost

If the demand for cucumbers falls when the price of tomatoes rises, then we know that tomatoes and cucumbers are

Complimentary

According to the Cost-Benefit Principle, people will be less likely to smoke if the government

Increases taxes on cigarettes, effectively raising the price

Assume that Joe is willing to produce a hamburger for $1, and Mary is willing to pay $3 for a hamburger. Which of the following is true?

Joe and Mary can make a mutually beneficial exchange

If individuals are rational, they should choose actions that yield the

Largest Economic surplus

The extra benefit that results from carrying out one additional unit of an activity is the ______ of the activity.

Marginal Benefit

A study that deals with the salaries of university professors would be considered

Microeconomics

By convention, there are two major divisions of economics, called

Microeconomics and Macroeconomics

Suppose there are two parallel highways between two cities with approximately equal traffic. What would you expect to happen if the state began charging tolls to drive on one of those highways?

More drivers would drive on the non-toll road, making the toll road less congested.

Everyone in the neighborhood has been complaining about the deteriorating condition of the park, but nobody has cleaned it up. Why not?

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

Macroeconomics differs from microeconomics in that macroeconomics focuses on

The performance of national economies and ways to improve that performance.

When the supply curve shifts to the left and there is no change in demand

The equilibrium price will rise

Janie must choose to either mow the lawn or wash clothes. If she mows the lawn, she will earn $20, and if she washes clothes, she will earn $25. She dislikes both tasks equally and they both take the same amount of time. Janie will therefore choose ______ because ______.

To wash clothes; it generates a bigger economic surplus

Suppose we observe an increase in both the equilibrium price and quantity of bread. This is best explained by

a decrease in the price of butter, a complement to bread.

All else equal, relative to a person who earns minimum wage, a person who earns $30 per hour has

a higher opportunity cost of taking the day off work.

The Cost-Benefit Principle indicates that an action should be taken if

its extra benefit is greater than or equal to its extra cost.

If all the world's resources were to magically increase one hundredfold, then

people would still have to make trade-offs.

In a free market, if the price of a good is above the equilibrium price, then

sellers, dissatisfied with growing inventories, will lower their prices.

The economic surplus of an action is

the difference between the benefit and the cost of taking an action