ECON 1100 Midterm 1 Charlie Xu

Demand is said to be elastic if a. buyers respond substantially to changes in the price of the good b. demand shifts only slightly when the price of the good changes c. the quantity demanded changes only slightly when the price of the good changes d. the price of the good responds only slightly to changes in demand

c.

A market demand curve shows a. the relationship between price and the number of buyers in a market b. how quantity demanded changes when the number of sellers changes c. the sum of all prices that individual buyers are willing and able to pay for each possible quantity of good d. how much of a good all buyers are willing and able to buy at each possible price

d.

A movement along the demand curve might be caused by a change in a. income b. the prices of substitutes or complements c. expectation about future prices d. the price of the good or service that is being demanded

d.

England can benefit from trade a. only with nations that can produce goods England cannot produce b. only with less developed nations c. only with nations outside of europe d. with any nation

d.

Following the implementation of laws requiring automobiles to have seat belts, which of the following occurred? a. an individual's probability of surviving an auto accident rose b. there was an increase in pedestrian deaths c. there was an increase in automobile accidents d. all of the above is correct

d.

If the price of natural gas rises, when is the price elasticity of demand likely to be the highest? a. immediately after the price increase b. one month after the price increase c. three months after the price increase d. one year after the price increase

d.

Ray buys a new tractor for $118,000. He receives consumer surplus of $13,000 on his purchase. Ray's willingness to pay is a. $13,000 b. $105,000 c. $118,000 d. $131,000

d.

Trade makes costs a. higher and reduces the variety of goods and services available b. higher but raises the variety of goods and services available c. lower but reduces the variety of goods and services available d. lower and raises the variety of goods and services available

d.

Which of the following is NOT an example of the opportunity cost of going to school? a. the money a student could have earned by working if he had not gone to college b. the nap a student could have enjoyed if he had not attended class c. the party a student could have enjoyed if he had not stayed in to study for his exam d. the money a student spends on rent for his apartment while attending school

d.

Get Smart University is contemplating an increase in tuition to enhance revenue. If GSU feels that raising tuition would enhance revenue, it is a. ignoring the law of demand b. assuming that the demand for university education is elastic c. assuming that the demand for university education is inelastic d. assuming that the supply of university education is elastic

c.

Comment on the following statement: "one of the mysteries of semantics is why the government-managed economies ever came to be called planned and the market economies unplanned. It is the former that are in chronic chaos, in which buyers stand in line hoping to buy some toilet paper or soap. It is the latter that are in reasonable equilibrium - where if you want a bar of soap or a steak or a shirt or a car, you can go to the store and find that the item is magically there for you to buy. It is the liberal economies that reflect highly sophisticated planning system, and the government-managed economies that are primitive and unplanned"

- that statement does not make sense because the liberal economies often result into rather dispirited and unmotivated private sector\ - the statement does not make sense because the term planned economy does not describe the conscious use of centralized decision making for key economic decisions - the statement does not make sense because the planned economy process of decision often leads to shortages and surpluses - the statement makes sense because decentralized market economy often uses advantages of centralized decision making for key economic decisions

A species of snakes became extinct due to pollution in a river where the snakes once lived. This is an example of a. a market failure caused by an externality b. a market failure caused by market power c. a market failure caused by equality d. There is no market failure in this case

a.

Ashley bakes bread that she sells at the local farmer's market. If she purchases a new convection oven that reduces the costs of baking bread, the a. supply curve for Ashley's bread will shift to the right b. supply curve for Ashley's bread will shift to the left c. demand curve for Ashley's bread will shift to the right d. demand curve for Ashley's bread will shift to the left

a.

For most students, the largest single cost of a college education is a. the wages given up to attend school b. tuition, fees, and books c. room and board d. transportation, parking, and entertainment

a.

If the demand for lightbulbs increases, producer surplus in the market for lightbulbs a. increases b. decreases c. remains the same d. may increase, decrease, or remain the same

a.

The marginal benefit Kyra gets from eating a second sandwich is a. the total benefit Kyra gets from eating two sandwiches minus the total benefit she gets from eating one sandwich b. the same as the total benefit she gets from eating two sandwiches c. less than the marginal cost of eating the second sandwich since she chose to eat the second sandwich d. the total benefit Kyra gets from eating three sandwiches minus the total benefit she gets from eating two sandwiches

a.

Which of the following events cause equilibrium price to rise? a. demand increases and supply decreases b. demand and supply both decrease c. demand decreases and supply increases d. demand and supply both increase

a.

Willingness to pay a. measure the value that a buyer places on a good b. is the amount a seller actually reviewed for a good minus the minimum amount the seller is willing to accept c. is th maximum amount a buyer is willing to pay minus the minimum amount a seller is willing to accept d. is the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it

a.

A rational decision maker takes an action only if the a. marginal benefit is less than the marginal cost b. marginal benefit is greater than the marginal cost c. average benefit is greater than the average cost d. marginal benefit is greater than both the average cost and the marginal cost

b.

Communist countries worked under the premise that a. markets were the best way to organize economic activity b. central planners were in the best position to determine the allocation of scarce resources in the economy c. household and firms, guided by an "invisible hand," could achieve the most efficient allocation of scarce resources d. allowing the market forces of supply and demand to operate with no government intervention would achieve the most efficient allocation of scarce resources

b.

In which of these instances is demand said to be perfectly inelastic? a. an increase in price of 2% causes a decrease in quantity demanded of 2% b. a decrease in price of 2% causes an increase in quantity demanded of 0% c. a decrease in price of 2% causes a decrease in total revenue of 0% d. an increase in price of 2% causes a decrease in quantity demanded of 0.5%

b.

Suppose an airline determines that its customers traveling for business have inelastic demand and its customers traveling for vacations have an elastic demand. If the airline's objective is to increase total revenue, it should a. increase the price charged to vacationers and decrease the price charged to business travelers b. decrease the price charged to vacationers and increase the price charged to business travelers c. decrease the price to both groups of cutsomers d. increase the price for both groups of customers

b.

Suppose the demand for a good increases and, at the same time, supply of the good decreases. What would happen in the market for the good? a. equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous b. equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous c. equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous d. equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous

b.

Which of the following statements about models is correct? a. the more details a model includes, the better the model b. models assume away irrelevant details c. models cannot be used to explain how the economy functions d. models cannot be used to make predictions

b.

Hamid spends an hour studying instead of watching TV with his friends. The opportunity cost to him of studying is a. the improvement in his grades from studying for the hour b. the improvement of his grades from studying minus the enjoyment of watching TV c. the enjoyment he would have received if he had watched TV with his friends d. zero. since Hamid chose to study rather than to watch TV, the value of studying must have been greater to him than the value of watching TV

c.

If textbooks and study guides are complements, then an increase in the price of textbooks will result in a. more textbooks being sold b. more study guides being sold c. fewer study guides being sold d. no difference in the quantity sold of either good

c.

Refer to the figure below. If the supply curve is S, the demand curve is D, and the equilibrium price is $100, what is the producer surplus? a. $625 b. $1,250 c. $2,500 d. $5,000

c.