Econ 231-Microeconomics-Dr. Sauley

If the price of jelly goes up by 10 percent, we observe a decrease in the quantity demanded of peanut butter of 20 percent. The cross-price elasticity of these goods is: -2. 0.5. 2. -0.5.

-2

A 5% increase in the price of Good C leads to a 20% decrease in the quantity demanded of Good D. The cross-price elasticity of these goods is: -4 -0.25 -8 -0.125

-4

If the price of a good increases by 10 percent, its quantity demanded drops by 50 percent. The price elasticity of demand is: -5. -1. -0.2. -2.

-5

Your coffee shop is doing well so far! Last month you had revenues equal to $50,000. You spent $30,000 on coffee, cups, employees, and other variable costs, and the combination of all of your fixed costs, including rent for the store came out to be $10,000. You know you could have become a banker and earned $6,000 last month, but you followed your dreams and are now the proud owner of a profitable coffee shop! Speaking of profits, what is your economic profit of running the coffee shop last month? $30,000 $4,000 $20,000 $10,000

$4,000

Suppose that when the average family income rises from $30,000 per year to $40,000 per year, the average family's purchases of toilet paper rise from 100 rolls to 105 rolls per year. The income-elasticity of demand for toilet paper is _______, suggesting toilet paper is ________________. 0.17; a normal good. 0.17; an inferior good. 0.05; an inferior good. 0.05; a normal good.

0.17; a normal good.

Larry was accepted at three different graduate schools, and must choose one. Elite U costs $50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at $60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000 scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000 per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at $15,000 per year. What is Larry's economic surplus from attending State College instead of his next best alternative? a.)$5,000 b.)$40,000 c.)$20,000 d.)$10,000

A.)$5,000

After browsing several pairs of shoes, Bob buys a pair of Nike running shoes. Economists would say that: Bob will get more utility per dollar from the Nike running shoes than any other in the store. Bob is revealing his strong distaste for New Balance running shoes. Bob made a poor choice, if he really prefers Adidas. Bob is revealing he will always choose Nike over any other shoe brand.

Bob will get more utility per dollar from the Nike running shoes than any other in the store.

The total surplus in a market lost to market inefficiencies is also known as 1Deadweight Loss 2Producer Surplus 3Consumer Surplus 4Total Surplus

Deadweight Loss

Which of the following is not an example of unintended consequences? Sinking ships in shallow waters during wars leading to more habitats for coral reefs Paying ransoms leading to more kidnappings Taking asprin for pain, which also lowers your blood pressure Increasing the price of a good and seeing the quantity demanded decrease

Increasing the price of a good and seeing the quantity demanded decrease

Which of the following is not a requirement of perfect competition? Identical product Large advantage for existing firms Many players No barriers to entry

Large advantage for existing firms

Ben and Oakley are planting a garden together. If Oakley devotes all his time to planting trees, he can plant 5 trees an hour, and if he devotes all his time to planting flowers, he can plant 40 flowers an hour. If Ben devotes all his time to planting trees, he can plant 10 trees an hour, and if he devotes all his time to planting flowers, he can plant 50 flowers an hour. Which of the following statements is correct? Oakley has both the absolute advantage and the comparative advantage in flowers. Ben has the comparative advantage in flowers, but Oakley has the absolute advantage in flowers. Ben has both the absolute advantage and the comparative advantage in flowers. Oakley has the comparative advantage in flowers, but Ben has the absolute advantage in flowers.

Oakley has the comparative advantage in flowers, but Ben has the absolute advantage in flowers.

What happens in a monopoly when the firm is making an economic profit? Firms will exit until economic profit is zero Firms will enter until economic profit is zero The price will continue to increase until there is no economic profit The amount of firms will stay constant

The amount of firms will stay constant

Refer to the accompanying figure. If this restaurant makes 75 salads in one hour, then what's the maximum number of pizzas it can make in that same hour? a.)30 b.)20 c.)10 d.)0

a.)30

After getting a raise at work, Marcus now regularly buys steak in lieu of ground beef. Which factor of demand has influenced Marcus's demand for steak? a.)Price of a substitute good b.)Income c.)Price of a complementary good d.)Preferences

b.) Income

Why is the market for used cars not considered perfectly competitive? a.)there is no standardized good. b.)All of these are reasons why the used car market is not considered perfectly competitive. c.)there is incomplete information. d.)the buyers are not price takers.

b.)All of these are reasons why the used car market is not considered perfectly competitive

If the price of milk is above the equilibrium price, then there will be: a.)excess demand for cheese. b.)excess supply of dairy products. c.)neither excess supply and excess demand. d.)both excess supply and excess demand

b.)excess supply of dairy products.

Jamie purchases a new watch for $300. One can infer that: a.)her willingness to pay was less than $300. b.)she paid too much. c.)her willingness to pay was exactly $300. d.) her willingness to pay was at least $300.

d.)her willingness to pay was at least $300.

Ben is asked to rate the utility he would get from reading different types of publications for the next hour. If he read a graphic novel he would get utility of 5. If he read a biography, he would get utility of 4, and if he read his economics textbook, he would get utility of 9. An economist would predict that Ben will spend his next hour reading: his economics textbook. It is impossible to predict how Ben will spend his time. a graphic novel. a biography.

his economics textbook.

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?

$2.50

Suppose when the price of calculators is $10, the quantity demanded is 100, and when the price is $12, the quantity demanded drops to 80. Using the mid-point method, the price elasticity of demand is: -1.22. -0.81. -150 percent. -81 percent.

-1.22

Quinn's income to spend on either bowling or eating out each month is $100. It costs $10 to bowl for the night and it costs $20 for Quinn to eat at a restaurant. A point on Quinn's budget constraint would be: 4 nights of bowling and 3 trips to the restaurant. 3 nights of bowling and 4 trips to the restaurant. 2 nights of bowling and 5 trips to the restaurant. 10 nights of bowling and 5 trips to the restaurant.

4 nights of bowling and 3 trips to the restaurant.

The minimum amount a person would take in order to give a good or service to another individual is also known as 1Equilibrium 2Quantity Demanded 3Willingness to Pay 4Willingness to Sell

4.Willingness to Sell

Suppose the price elasticity for a good is 5. This means a 1% increase in the price of the product will lead to a ____ % change in the quantity supplied. 5 0.2 0.5 2

5

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.)he is irrational. C.)the benefit of golfing is greater than the benefit of studying. D.)Dean can play golf for free.

A.)the economic surplus from playing golf is greater than the economic surplus from studying.

In which of the following markets could the government improve social welfare by implementing a tax to offset a negative externality? Education, which leads to a smarter population, which could advance our knowledge of the world Cigarette smoke, which leads to second hand smoke and can cause lung cancer to non smokers Vacations, which people enjoy Apple pies, which smell delicious

Cigarette smoke, which leads to second hand smoke and can cause lung cancer to non smokers

When a perfectly competitive market is in equilibrium: Economic Profit > 0 Economic Profit = 0 Economic Profit < 0

Economic Profit = 0

Which of the following markets would economists consider monopolistic competition? Strawberries Airplane Manufacturers Fast Food Utilities

Fast Food

What happens in a perfectly competitive market where firms are earning a positive economic profit? he price will continue to increase until there is no economic profit The amount of firms will stay constant since all firms need to make a profit Firms will exit until economic profit is zero Firms will enter until economic profit is zero

Firms will enter until economic profit is zero

There are many reasons a government should get involved in an economic market. Which of the following is not one of the reasons we discussed in class? Government officials disliking certain individuals in a marketplace Encouraging or discouraging the consumption of goods with externalities Correcting market failures Changing the distribution of economic surplus

Government officials disliking certain individuals in a marketplace

Government intervention can come in many forms. Which of the following would not be considered a government intervention into an economic market? nstituting a tax on goods with negative externalities, such as cigarettes Capping the price of gasoline for wholesalers Subsidizing the production of a good with positive externalities, such as education Individuals buying goods from a company because they believe in what the company stands for

Individuals buying goods from a company because they believe in what the company stands for

Which of the following is an example of a positive externality? Air pollution from increased traffic Rescuing a puppy Consuming fresh fruit The delicious scent of fresh donuts from walking by Murray Donuts in the morning

The delicious scent of fresh donuts from walking by Murray Donuts in the morning

Suppose a market goes from being in equilibrium without any government regulations, to having a binding price ceiling enacted. What will happen to consumer and producer surplus in this market? We cannot know what will happen to PS without more information, but CS will decrease We cannot know what will happen to CS without more information, but PS will decrease CS will increase, but PS will decrease CS will decrease, but PS will increase

We cannot know what will happen to CS without more information, but PS will decrease

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: a.)the opportunity cost of attending State U. includes the money Alex could have earned working for four years. b.)the opportunity cost of attending State U. includes the sum of the benefits c.)Alex would had from attending each of the other schools to which he was admitted. d.)attending State U. for four years is costless for Alex. Alex has no incentive to study hard while at State U.

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

For the fall semester, you had to pay a nonrefundable fee of $600 for your meal plan, which gives you up to 150 meals. If you eat 100 meals, your marginal cost of the 100th meal is: a.)$0. b.)$6. c.)$4. d.)$0.25.

a.)$0

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.)$500 c.)$550 d.)$100

a.)$450

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

a.)Ana has the comparative advantage in fudge, but Leo has the absolute advantage in fudge.

Suppose it takes Dan 5 minutes to make a sandwich and 15 minutes to make a smoothie, and it takes Tracy 6 minutes to make a sandwich and 12 minutes to make a smoothie. Which of the following statements is correct? a.)Dan should specialize in sandwiches, and Tracy should specialize in smoothies. b.)Tracy should specialize in sandwiches and smoothies. c.)an should specialize in smoothies, and Tracy should specialize in sandwiches. d.)Dan should specialize in both sandwiches and smoothies.

a.)Dan should specialize in sandwiches, and Tracy should specialize in smoothies.

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? a.)Yes, because you will save more than $20. b.)No, because you will save more than $20. c.)Yes, because you will save 10 percent, which is better than nothing. d.)No, because you will only save 10 percent, which is less than 15 percent.

a.)Yes, because you will save more than $20.

The most likely complementary good for burgers would be: a.)buns. b.)charcoal. c.)a tailgate. d.)hot dogs.

a.)buns

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 effect on d.)shrug emoji

a.)increased

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.)inefficient point. b.)efficient point. c.)unattainable point. d.)ideal point.

a.)inefficient point.

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 on the umbrella, food and drinks. c.)only $0 because she would have spent $12 to go to the movie. d.)the value she places on seeing the movie plus the $12 she spent on the umbrella, food and drinks.

a.)the value she places on seeing the movie.

A historic drought causes most carrot crops to fail, decreasing the amount of available carrots. The carrot cake market would see: a.)an increase in the supply of carrot cake. b.) a decrease in the supply of carrot cake. c.)no change in the supply of carrot cake, but the demand would increase. d.)no change in the supply of carrot cake, but the demand would decrease.

b.)a decrease in the supply of carrot cake.

A 5% increase in the price of Good C leads to a 20% decrease in the quantity demanded of Good D. Theses goods are: compliments substitutes unrelated none of these

compliments

All externalities: are harmful to society and create costs external to the decision maker. are beneficial to society and create benefits external to the decision maker. are addressed by the government through taxation. create either a cost or benefit to a person other than the person who caused it.

create either a cost or benefit to a person other than the person who caused it.

Which is the most likely substitute good for ice cream? a.) a freezer b.)chocolate syrup c.)a bowl d.) popsicles

d.) popsicles

The price of chew toys has gone down, and all other variables have remained constant. This makes Blanton very happy because he gets a new toy since he's such a good boy! If I wanted to show this change graphically it would be: a.)a shift in the demand curve to the left. b.)a shift in the demand curve to the right. c.)a movement along the demand curve to the left. d.) a movement along the demand curve to the right.

d.)a movement along the demand curve to the right.

If the price of a cup of Dunkin' Donuts coffee rises, while the price of a Starbucks latte doesn't, we expect the quantity of lattes demanded to: increase as some people switch from coffee to the relatively less expensive latte. decrease as some people switch from coffee to the relatively less expensive latte. increase as some people switch from coffee to the relatively more expensive latte. decrease as some people switch from coffee to the relatively more expensive latte.

increase as some people switch from coffee to the relatively less expensive latte.

A baker of chocolate chip cookies is likely to have a ______________ price elasticity of supply than the seller of rare baseball cards due to ______________. more elastic; the availability of inputs less elastic; the availability of inputs less elastic; a shorter adjustment time less elastic; a more flexible production process

more elastic; the availability of inputs

Which protectionist policy leads to an increase in producer surplus when importing a good, but does not necessarily provide the local government with any tax revenue? quota opportunity cost tariff price ceiling

quota

You are thinking of opening a coffee shop. Before you begin your journey as an entrepreneur, you think it may be best to consider all of the costs likely to be involved. You know you will need to constantly resupply coffee essentials, such as cups, coffee beans, and sugar. You will also have to hire baristas to work at your coffee shop, and find a storefront to run the coffee shop out of. Which of these costs is an example of a fixed cost? coffee cups sugar baristas renting a storefront

renting a storefront