ECON 1

Suppose you find $20. If you choose to use the $20 to go to the baseball game, your opportunity cost of going to the game is:

$20 (because you could have used the $20 to buy other things) plus the value of your time spent at the game

Diego, Emi, and Finn are available to work as tutors for the semester. The opportunity cost of tutoring is $400 for Diego, $200 for Emi, and $100 for Finn. The university is hiring tutors at a price of $300. Producer surplus in this market is...

$300

Suppose that you have received $300 as a birthday gift. You can spend it today or you can put the money in a bank account for a year and earn 5 percent interest. The opportunity cost of spending the money today, in terms of what you could have after one year, is

$315

Brianne is willing to pay up to $160 for a particular pair of boots. She is able to buy the boots for $120. The marginal cost of producing the boots is $70. How large is the total surplus associated with her purchase of the boots?

$90

Hamburgers are a normal good. Also, hamburgers and hot dogs are substitutes. Which of the following would shift the demand curve for hamburgers to the left?

A decrease in overall consumer income

Consider the following statement: "An increase in the cost of oil will cause the price of a plane ticket to increase. This increase in price will cause a systematic decrease in demand for airline travel and a leftward shift in the demand curve." Identify the error in reasoning.

An increase in the price of a plane ticket causes a movement along the demand curve, not a shift of the demand curve.

You are the manager of Kraft's Jet-Puffed Marshmallows account, and you notice that when the price of chocolate increases, there is a decrease in demand for marshmallows at every price level. What is the economic relationship between these goods that explains this behavior?

An increase in the price of chocolate decreases demand for marshmallows. They are complements.

Consider the market for soccer jerseys. The Spanish national team wins the European Championships, and at the same time, the price of polyester (an input used to make jerseys) increases. What would happen in the market for Spain jerseys?

Equilibrium price increases, change in equilibrium quantity is ambiguous

A surplus exists whenever...

Market price is above the equilibrium price.

If a policymaker wants to make society as well off as possible in terms of economic surplus in a competitive market, then the policymaker should...

Not do anything.

The equilibrium price for gas is $3.00/gallon. What happens if the government places a price ceiling of gasoline at $4.00/gallon?

Nothing

Suppose there are three identical mugs available to be purchased. Buyer 1 is willing to pay $30 for one, buyer 2 is willing to pay $25 for one, and buyer 3 is willing to pay $20 for one. If the price is $25, how many mugs will be sold and what is the value of consumer surplus in this market?

Q=2, CS=$5

If an increase in the price of chicken leads to a systematic increase in the demand for fish, then chicken and fish are definitely...

Substitutes

Which of the choices illustrates the law of demand?

Sue wants to buy more candy bars at $1 than at $2.

How are inferior goods and complementary goods related?

They are not related concepts.

A rational person does not act unless the action...

produces marginal benefits that exceed marginal costs

The reason individuals and society face trade-offs when making decisions is that...

resources are scarce

Because people respond to incentives, we would expect that if the average salary of engineers increases by 50 percent while the average salary of teachers increases by 20 percent, ...

some students will switch majors from education to engineering

Whenever you go to the movie theater, you get a soda and popcorn. Your opportunity cost of going to see a movie is...

the price of the ticket, soda, and popcorn as well as the value of your time

The marginal benefit Sabrina gets from purchasing a third pair of gloves is

the total benefit from purchasing three pairs of gloves minus the total benefit from purchasing two pairs of gloves.

Microeconomics is best described as the study of how...

to manage scarce resources