ECO231 - Exam 1

Demand curve is not affected by

price

determinants of supply

tech, price, expectations, & number of sellers

How to find Economic surplus?

b(x)-c(x)=ES

marginal benefit

the extra benefit of adding one unit

Alex received a four-year scholarship to State U. that covered tuition and fees, room and board, and books and supplies. If Alex becomes a full-time student, then:

the opportunity cost of attending State U. includes the money Alex could have earned working for four years.

production possibilities frontier (PPF)

(2 options!!!) a line on a production possibilities curve that shows the maximum possible output an economy can produce

PPF Pivot

Changes in production capabilities of a single good. change in slope, anchor pts. (ex. can baking cakes, affect cookies?)

invisible hand

individual acting in their own self interest to provide consumers with the right combination of goods.

Economic Surplus

Difference between benefit and cost. (if its + do the thing)

PPF Shift

The PPF can change (ex. doubling a recipie)

Suppose Karl divides his time between making birdhouses and growing artichokes. Karl's friend recently gave Karl some new woodworking tools that greatly reduced the amount of time it takes Karl to make each birdhouse, but the new tools had no impact on the amount of time it takes Karl to grow artichokes. Thus, the new tools _____ Karl's opportunity cost of growing artichokes.

a. increased b. decreased c. had no affect - a

You want to buy a TV that regularly costs $250. You can either buy the TV from a nearby store or from a store that's downtown. Relative to going to the nearby store, driving downtown involves additional time and gas. The downtown store, however, has a 10 percent off sale this week. Last week you drove downtown to save $20 on some concert tickets, a 15 percent savings. Should you drive downtown to buy the TV?

Yes, because you will save more than $20.

Dean should play golf instead of preparing for tomorrow's exam in economics if:

a. the economic surplus from playing golf is greater than the economic surplus from studying. b. the benefit of golfing is greater than the benefit of studying. - A

Standardized good

a good for which any two units have the same features and are interchangeable. (gustav selling ice)

Suppose the most you would be willing to pay to have a freshly washed car before going out on a date is $6. The smallest amount for which you would be willing to wash someone else's car is $3.50. You are going out this evening and your car is dirty. How much economic surplus would you receive from washing it?

a. $2.50 b. $6.00 c. $3.00 d. $9.50 - a

your friends from the University of Cincinnati are planning to go to Miami for spring break, and you are undecided about whether you should go with them. The round-trip airfare is $600, but you have a frequent-flyer coupon worth $500 that you could use to pay part of the airfare. All other costs for the vacation are exactly $900. The most you would be willing to pay for the trip is $1,400. Your only alternative use for your frequent-flyer coupon is for your trip to Atlanta two weeks after the break to attend your sister's graduation, which your parents are forcing you to attend. The Cincinnati-Atlanta round-trip airfare is $450. What is the opportunity cost of using the coupon for the Miami trip?

a. $450 b. $550 c. $500 d. $100 - a

Suppose the total benefit of watching 1 baseball game is 100, the total benefit of watching 2 games is 120, and the total benefit of watching 3 games is 125. In this case, the marginal benefit of watching the 3rd game is:

a. $5 b. $125 c. $345 - a

If Ana devotes all her time to making fudge, she can make 3 pounds of fudge an hour, and if she devotes all her time to making toffee, she can make 2 pounds of toffee an hour. If Leo devotes all his time to making fudge, he can make 4 pounds of fudge an hour, and if he devotes all his time to making toffee, he can make 5 pounds of toffee an hour. Which of the following statements is correct?

a. Ana has both an absolute advantage and the comparative advantage in fudge. b. Ana has the comparative advantage in toffee, but Leo has the absolute advantage in toffee. c. Leo has both the absolute advantage and the comparative advantage in fudge. d. Ana has the comparative advantage in fudge, but Leo has the absolute advantage in fudge. - d

Suppose Colin brews beer and makes cheese. If Colin can increase his production of beer without decreasing his production of cheese, then he is producing at an:

a. Efficient pt b. Inefficient pt c. Unattainable d. Ideal pt - b (ideal pt is not real)

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:

a. the value she places on seeing the movie. b. the $12 she spent c. only $0 because she would have spent $12 @ the movie. - a

Marginal Cost

additional amount spent

market economy includes

command, market, and mixed

Terms of trade have to be in between

opportunity cost