CIS: Microeconomics Final

Consumer | Willingness & Ability to Pay ---------------------------------------------- Jessica | $150 Jackie | $125 Brad | $105 Robert | $60 Gwen | $25 if the price of the Phantom of the Opera is $50, then Robert's consumer surplus is? a)$10 b)$50 c)$60 d)$15

a)$10

After earning your BA, you have decided whether to accept the offer of a job that will pay you $45,000 per year or spend and additional two years earning an MBA. If you decided to pursue a graduate degree, your annual expenses for tuition, books, board, and lodging will be $32,000. You have been offered a scholarship for $10,000 per year, but in order to pay the remaining $22,000 per year, you would have to cash in savings bonds that your grandparents have given you that have been earning $500 in interest per year. The annual opportunity cost of earning your MBA is: a)$67,500 b)$77,000 c)$99,000 d)$77,500

a)$67,500

Suppose at a price of $10 the quantity demanded is 100. When the price falls to $8, the quantity demanded increases to 130. The price elasticity of demand between the prices of $10 and $8, using the midpoint method, is approximate: a)1.17 b)1.00 c)1.50 d)0.85

a)1.17

If the demand for tires goes down when the price of gas goes up, then tires and gas are: a)Complements b)both expensive c)both inexpensive d)substitutes

a)Complements

Economists would most likely agree with which one of the following statements? a)People usually exploit opportunities to make themselves better off b)If people make wise decisions, they can avoid incurring any opportunity cost c)When transactions occur voluntarily, the seller gains and the buyer loses d)Market economies generate economic growth, but they do not promote efficiency

a)People usually exploit opportunities to make themselves better off

A consumer's spending is restricted because of: a)a budget constraint b)total utility c)utility maximization d)marginal utility

a)a budget constraint

f a 20% price increase generates a 20% decrease in quantity demanded, then this is ________ response. a)a unit-elastic b)an inelastic c)a perfect elastic d)an elastic

a)a unit-elastic

An improvement in the technology for producing a good will cause? a)an increase in the supply of the good b)an increase in the demand of the good c)an increase in the incomes of consumers d)a shift to the left in the short run supply curve

a)an increase in the supply of the good

For which of the following decisions would marginal analysis be relevant? a)deciding how much to spend on a summer vacation b)spending $1,000 on a summer vacation or on painting your house c)eating dinner at home or going out to a restaurant for dinner d)buying a new car or a second-hand car

a)deciding how much to spend on a summer vacation

The cross-price elasticity with respect to the price of natural gas has been estimated as being equal to 0.2. This implies that: a)electricity and natural gas are substitutes b)one of the two goods is inferior and the other is normal, but we need additional information to determine which of them is normal. c)electricity and natural gas are complements d)natural gas and electricity are both normal goods.

a)electricity and natural gas are substitutes

An individual gets 5 units of utility from one slice of pizza and 9 units of utility from two slices of pizza. The principle of diminishing marginal utility implies that the total utility from three slices of pizza will be: a)less than 13 units of utility b)less than 9 units of utility c)exactly 12 units of utility d)more than 14 units of utility

a)less than 13 units of utility

To say that price serves as a rationing mechanism means that? a)only those with the willingness and ability to pay for goods in a market get them b)wants are insatiable c)supplies keep dwindling d)resources are scarce e)demand is limitless

a)only those with the willingness and ability to pay for goods in a market get them

After finishing high school, LeBron James decided to enter the NBA rather than going to college to begin his studies to become a doctor. This choice between the two careers can best be described by: a)opportunity cost b)market failure c)equilibrium d)scarcity

a)opportunity cost

The price of gasoline rises 5% and the quantity of gasoline purchased falls to 1%. The price elasticity of demand is equal to ________________ and demand is described as ____________. a)0.5; inelastic b) 0.2; inelastic c)0.2; elastic d)5; elastic

b) 0.2; inelastic

You decide to quit your $60,000 per year job as an information technology specialist and illustrate children's books. At the end of the first year of illustrating, you have earned $20,000. You also spent $5,000 for paint and paper. Your economic profit in the first year as an illustrator is: a)$15,000 b)-$45,000 c)$20,000 d)-$40,000

b)-$45,000

The Cozy Chair Company believes it can sell 200 chairs at $200 per chair or 300 chairs at $150 per chair. Using the midpoint formula, what do they think is the price elasticity of demand? a)0.7 b)1.4 c)0.5 d)2.5

b)1.4

Suppose that in Australia, it takes two hours of labor to harvest 10 bushels of apples and four hours of labor to harvest 10 bushels of tomatoes. Further, suppose that in Brazil it takes 4 hours of labor to harvest 10 bushels of apples and 5 hours of labor to produce 10 bushels of tomatoes. Which of the following statements is TRUE? a)Brazil has an absolute advantage in producing both goods. b)Of these two countries, Brazil has a comparative advantage in producing tomatoes c)Of these two countries, Brazil has a comparative advantage in producing apples. d)In trade between these two countries, Australia would gain and Brazil would lose

b)Of these two countries, Brazil has a comparative advantage in producing tomatoes

Which of the following will not cause an increase in the supply of good X? a)a decrease in the price of inputs used to produce good X. b)an increase in the price of the inputs used to produce good X. c)an improvement in the technology used to produce good X. d)a decrease in the price of inputs used to produce good X.

b)an increase in the price of the inputs used to produce good X.

After graduation from college, you might have an increase in your income from a new job. If, as a result, you decide that you will purchase more T-bone steak and less hamburger, then for you hamburger would be considered: a)a substitute good. b)an inferior good. c)a normal good. d)a complementary good.

b)an inferior good.

The condition of scarcity means that: a)only a command economy can make efficient use of resources b)choices must be made in the allocation of productive resources c)you will not incur an opportunity cost if you make the right choice d)only a command economy can make efficient use of resources

b)choices must be made in the allocation of productive resources

What is traded in factor markets? a)exports and imports b)land, labor, capital, and technology c)mineral products d)agricultural products

b)land, labor, capital, and technology

A perfectly price-inelastic curve is: a)horizontal b)vertical c)upward sloping d)downward sloping

b)vertical

Pauli's Pizza offers the following prices: one slice for $2, two slices for $3.50, three slices for $4.50, four slices for $5.00. The marginal cost of the third slice is: a)$2 b)$10 c)$1 d)$4.50

c)$1

Luis is willing to sell his pool table for $600, but if he gets $840, the producer surplus Luis receives is________________? a)$1,440 b)$600 c)$240 d)$840

c)$240

Which of the following best describes the law of demand? a)As income taxes rise, fewer new cars are purchased. b)As the population rises, more electricity is consumed. c)As the price of a DVD rental rises, fewer DVDs are rented. d)As the price of corn rises, more acres of corn are planted.

c)As the price of a DVD rental rises, fewer DVDs are rented.

Economists generally agree that people are most likely to change their behavior when they: a)live in a world without scarcity b)live in a world without opportunity costs c)are given incentives to do so d)re asked to do so voluntarily

c)are given incentives to do so

What are the two sectors represented in a simple circular-flow diagram of the economy? a)profit and not-for-profit b)unions and management c)households and firms d)business and government

c)households and firms

If an increase in income leads to an increase in demand for a good, then the good is said to be: a)a staple or necessity b)inferior c)normal d)a luxury

c)normal

Those points lying beyond the PPF: a)represent outcomes that are attainable with the current level of technology and resources, but are less desirable than those on the frontier b)are inefficient c)represent outcomes unattainable with the current level of technology and resources d)represent outcomes in which resources would be unemployed

c)represent outcomes unattainable with the current level of technology and resources

If the supply and demand curve intersect at a price of $14, then any price below that would result in: a)surplus. b)an increase in demand. c)shortage. d)equilibrium.

c)shortage.

As an economy moves from point to point along its PPF, what is changing? a)the productivity of the resources available in the economy b)the number of resources available in the economy c)the allocation of resources within the economy d)the size of the labor force

c)the allocation of resources within the economy

Economists identify the satisfaction a person derives from the consumption of goods and services as: a)pleasure b)usefulness c)utility d)happiness

c)utility

You manage a popular nightclub and lately, revenues have been disappointing. Your bouncer suggests that raising drink prices will increase revenues, but your bartender suggests that decreasing drink prices will increase revenues. You aren't sure who is right, but you do know that: a)your bouncer thinks the demand for drinks is elastic, while your bartender thinks the demand for drinks is inelastic. b)both the bouncer and bartender think the demand for drinks is elastic. c)your bouncer thinks the demand for drinks is inelastic, while bartender thinks the demand for drinks is elastic d)both the bouncer and bartender think the demand for drinks is inelastic.

c)your bouncer thinks the demand for drinks is inelastic, while bartender thinks the demand for drinks is elastic

Vonda and Aleiyah are shopping together at the mall for new jeans. Vonda is willing to pay $90 and Aleiyah is willing to pay $50 for a pair of jeans. What is the gain in total consumer surplus when the price decreases from $59 to $40? a)$10 b)$31 c)$60 d)$29

d)$29

Which of the following statements is true? a)A country cannot have a comparative advantage in producing a particular good unless it first has an absolute advantage in producing that good. b)A country cannot have a comparative advantage in producing a certain item if it incurs an increasing opportunity cost in producing the item c)Comparative advantage in producing a certain item arises from being the first country to manufacture that item d)All countries can gain from trade if they all specialize in production according to comparative advantage

d)All countries can gain from trade if they all specialize in production according to comparative advantage

Which of the following examples illustrates the law of Demand? a)Fewer people play golf because incomes are lower. b)Oil companies drill for new sources of oil because oil prices are higher. c)An increase in tuition encourages more students to enroll in college because the quality of education has risen. d)Consumers buy more personal computers because prices have fallen.

d)Consumers buy more personal computers because prices have fallen.

Consumer | Willingness & Ability to Pay ---------------------------------------------- Jordan | $150 Corey | $140 Randy | $120 Ray | $100 Jack | $80 If the price of basketball sneakers is $145, which player will purchase the sneakers? a)Jack b)Randy c)Ray d)Jordan

d)Jordan

Which of the following is true if there is a decrease in the demand for cupcakes? a)There is an increase in total surplus b)There is an increase in producer surplus c)There is an increase in consumer surplus d)There is a decrease in producer surplus

d)There is a decrease in producer surplus

Adam Smith used the idea of the invisible hand to refer to the ability of market economies too: a)solve the problem of market failure b)convince people that society is better off if its members sacrifice their own self-interest for the cause of the greater good c)recover from recessions d)harness the power of individual self-interest for the good of society as a whole

d)harness the power of individual self-interest for the good of society as a whole

The amount by which an additional unit of an activity increases total benefit is: a)utility b)marginal cost c)net benefit d)marginal benefit

d)marginal benefit

The law of diminishing marginal utility indicates that the slope of the marginal utility curve eventually becomes: a)positive b)horizontal c)vertical d)negative

d)negative

Maria wants to get rid of her bookshelf. She is willing to give it away for free but away for free but her neighbor offers to pay $30 for it. Maria experiences a? a)producer surplus loss b)consumer surplus gain c)consumer surplus loss d)producer surplus gain

d)producer surplus gain

Economists typically depict the PPF as a bowed-out curve rather than as a straight line in order to show that: a)the opportunity cost of producing a good decline as more is produced b)the opportunity cost of producing a good rise as more is produced c)the opportunity cost is always present d)resources used in the production of one good cannot be used in the production of another

d)resources used in the production of one good cannot be used in the production of another

The demand for meals at a local Applebee's will shift to the left if: a)local incomes increase and Applebee's is a normal good. b)the price of gas falls in the local area. c)The price of a meal at Applebee's rises. d)the Olive Garden offers a 10% discount coupon in the local newspaper.

d)the Olive Garden offers a 10% discount coupon in the local newspaper.

If market failures exist, the market can become efficient when: a)the government eliminates all market transactions b)all citizens immigrate to a country where the market failure does not exist c)people just ignore the problem d)the government intervenes to improve society's welfare

d)the government intervenes to improve society's welfare

A change in demand can be caused by all of the following except a change in a)population b)tastes c)the prices of other goods d)income e)the price of the good being considered

e)the price of the good being considered