ECON Final Exam (Unit 1)
If D2 and S2 represent the demand and supply schedules in a particular market, then the equilibrium price and quantity are ___ and ____, respectively
$10, 12
"If I didn't have class, I would save $4 from parking and $10 p/h for four hours." Opportunity cost?
$44
Kim has $24 per week in entertainment budget. Splits her time $3 for yoga and $8 for movies. Total utility from each activity in table. What's Kim's total utility maximizing point?
1 movie, 5 yoga classes
if DI and SI represent the demand and supply schedules in a particular market, then the equilibrium price and quantity are ___ and ___, respectively
$6, 13
After "mad cow disease" the likely effect on the US demand curve for Canadian beef is:
A shift of the demand curve for beef to the left
The imposition of the price ceiling on a market often results in:
A shortage
Will NOT result in a leftward shift of the market demand curve for labor
An increase in the wage rate
Marginal utility can:
Be positive, negative, or zero
A 10% decrease in potato chips leads to a 30% increase in the quantity of soda demanded. Appears that:
Cross-price elasticity of demand for soda is -3
Other things being equal, a ___ supply of workers tend to __ real wages
Larger; decrease
As the __ substitute for low-skill labor becomes available; the demand curve for low-skill will to the left
Technology
Nearly all supply curves share a basic similarity: they slope
Up from left to right
In economics, the demand for a good refers to the amount of the good that people
Will buy at various prices
Gomer decides to spend an hour playing ball instead of studying. What was his opportunity cost?
The benefit to his grades from studying for an hour
As depicted in ___, it is necessary to give up some of one good to gain more of the other good
The production possibilities frontier
Student has a test. The opportunity cost of scoring a 94% on economics instead of 77:
15 points on the history exam
Billy Bob Barber Shop knows that 5% increase in the price of their haircuts results in a 15% decrease in the # of haircuts purchased. What is the elasticity demand?
3.0
Demand for a product is unit elastic, at a price of $20, 10 units of a product are sold. If the price is increased to $40, then one would expect sales to equal:
5 units
The table below sets out cost information for the production of volleyballs. Some values are missing. Which of the following statements is correct?
A= 42, E= 12
Andy thinks pizza and beer complement one another if price of pizza goes down, expected...
Andy's demand for beer to increase
Why is there scarcity?
Because our unlimited wants exceed our limited access
In April 2009, mid-recession, government in Ontario increased min. wage. Likely effect of policy?
Both the leftward shift in the labor demand curve and the higher minimum wage will lead to an increase in unemployment rate
Model that economists use for illustrating the process of individual choice in a situation of scarcity is the ___, sometimes also called opportunity set, diagram shows choices are possibly
Budget constraint
Slope of ___ is determined by relative price of two goods, which is calculated by taking the price of one good and dividing it by the price of the other good
Budget constraint
Specialization
Can lead to an increase in overall population
When ___, a firm will supply a higher quantity at any given price for its output, and the supply curve will shift to the right
Cost of production fall
A 10% increase in the price of soda leads to a 20% increase in the quantity of iced tea demanded. Appears that:
Cross-price elasticity of demand for iced tea is -2
In countries like ___ the command economy predominates
Cuba and North Korea
A change from Point A to Point E represents a:
Decrease in supply
"The Wealth of Nations" Smith introduces ___ :work required to produce a good or service is divided into a number of tasks that are preformed by different workers
Division of labor
A price cut will increase the total revenue a firm receives if the demand for its products is
Elastic
Demand is said to be ___ when the quantity demanded is very responsible to changes in price
Elastic
Supply is said to be ___ when the quantity supplied is very responsive to changes in price
Elastic
When economists are sketching examples of demand & supply, it is common to sketch a demand or supply curve that is close to horizontal, and then to refer to that curve as
Elastic
Youth smoking seems to be more ___ than adult smoking- that is, the quantity of youth smoking will fall by a greater % than the quantity of adult smoking in response to a given % increase in price
Elastic
The price elasticity of demand for tickets to local baseball games is estimates to be equal to .89. In order to boost tickets revenues, an economists would advise
Increasing the price of game tickets because demand is elastic
When economists are sketching examples of demand & supply, it is common to sketch a demand or supply curve that is close to vertical, and then to refer to that curve as
Inelastic
Taxes on goods with ___ demand curves will tend to raise more tax revenue for the government than taxes on goods with ___ demand curves
Inelastic; elastic
At Point A in the production possibilities graph shown above, the economy:
Is not using the resources efficiently
Scarcity implies that:
It is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available
In the ___, households work and receive payments from firms
Labor market
If an increase in the Price of Good X causes a decrease in demand for Good Y, conclude that:
Goods X and Y are complement goods
In a command market, the ___ either makes most economic decisions itself or strongly influenced
Government
__ describes a situation where a ___ causes a reduction in the buying power of income even though actual income has not changed:
Income effect, higher price
A change from Point A to Point B represents a:
Increase in quality supplied
If the demand curve is perfectly elastic, then an increase in supply will:
Increase the quantity exchanged but result in no change in the price
Improvements in the productivity of labor will tend to
Increase wages
Generally accepted as valid criticism of production of useful goods/services
Environmental pollution
If the supply curve for a product is horizontal, then the elasticity of supply is
Equal to infinity
If the supply curve for a product is vertical, then elasticity of supply is
Equal to zero
The ___ is the only price where quantity demanded is equal to quantity supplied
Equilibrium price
Basic difference between macro and micro economics
Microeconomics concentrates on the behavior of individual consumers & firms. Macroeconomics focuses on the performance of the entire economy
Philosophers draw a distinction between positive statements, which describe the world as is, and ___, which describes how the world should be
Normative statements
The elasticity of supply is demand as the ___ change in quantity supplied divided by the ___ change in price
Percentage, percentage
The "law of supply" functions in labor markets; that is a higher for labor leads to a higher quantity of labor supplied
Price
The elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in ___
Price
Contrast to goods and service markets, ___ are rare in labor markets, because rules that prevent people from earning income are not politically popular
Price ceilings
The downward slope of demand curve again illustrates the pattern that as ___ rises, ___ decreases
Price; quality demanded
Why would labor be treated as a variable cost
Producing larger quantities of a good or service generally requires more workers
Demand curve shows the relationship between price and __ on a graph
Quality demanded
___ refers to the tool # of units that are purchased at that price
Quality demanded
Supply curve is graphical illusion of relationships of prices (vertical axis) and ___ (horizontal axis)
Quality supplied
When economist's talk about supply, referring to a relationship between price received for each unit sold and the ___
Quantity supplied
If the supply curve for aspirin is perfectly elastic, than a reduction in demand will cause the equilibrium price to:
Stay the same and the equilibrium quantity to fall
Most choice involves ___, which involves comparing the benefits and costs of choosing most/less of a good
Marginal analysis
As a person receives more of a good, the ___ for each additional unit of the good declines
Marginal utility
The term ___ to the additional utility provided by one additional unit of consumption
Marginal utility
Decrease in consumer preference for a product, other things being equal, will cause
Market demand to shift to the left
___: most economic decisions about what to produce, how, and for who to produce it (buyers and sellers)
Market-oriented economy
Considered to be a tell-tale signal that the point with the highest total utility has been found
The marginal utility per dollar is the same for both goods
Whenever there is a surplus at a particular price, the quantity sold at that price will equal:
The quantity demanded at that price
Whenever there is a shortage at a particular price, the quantity sold at that price will equal:
The quantity supplied at that price
If cola and iced tea are good substitutes for consumers, likely that
Their cross price elasticities are greater than zero
According to the law of supply
There is a direct relationship between price and the quantity supplied
When quantity demanded decreases in response to change in price
There is a movement along the demand curve
Steel mill wage cost increase by 18% over a year. What is the likely economic effect on the market for steel?
There is an increase in the cost of producing steel, which shifts the supply curve to the left, thereby increasing the price of steel
Demand in said to be ___ when the quantity demanded changes at the same proportion as the price
Unit elastic
Price elasticity of demand is defined as:
The percentage change in quantity demanded divided by the % change in price
General pattern that consumption of the first few units of goods tends to bring a higher level of ___ to a person than consumption of later units is a common pattern
Utility
If a paper mill shuts down its operations for three months so that it produces nothing its ___ will be reduced to zero
Variable
If labor demand is downward sloping and labor supply is upward sloping, then when labor demand rises faster than labor supply, it is expected that real wages ____
Will increase
A perfect elastic supply curve is
Horizontal
Mimi plays golf 5 times per month when the price is $40 and 4 times per month when the price is $50. What is the price elasticity of Mimi's demand curve?
1.0
Lesson of ___: forget about money that's irretrievable gone instead focus on marginal costs and benefits of future options
Sunk costs
Any given supply curve or demand is based on the ceteris paribus assumptions that:
All else is held equal
When the economy moves from Point A to Point B in the diagram:
All of the other occur
If this information were used to create a total cost graph, the curve should
All of these
Most likely to cause variation in American households spending patterns
All will cause variation
Results in a rightward shift of the market demand curve for labor
An increase in demand for the firm's product
Total cost function for GoodieCookieCO. How are company's fixed costs represented in a graph?
As the point where the total cost curve touches the vertical axis
Significance of the point marked L1 at the bottom upward-sloping portion of the individual labor supply curve?
As wages increase over this range, the quantity of hours worked also increase
Significance of the point at the top of backward bending of the supply curve marked L3?
As wages increase over this range, the quantity of hours worked decreased
In market-oriented economy, the amount of a good that is produced is decided by interaction of:
Buyers and sellers
If the price is below equilibrium level, then quality demanded will exceed the quantity supplied
Excess demand
A firm's ___ consist of expenditures that must be made before production starts that typically, over the short run, ___ regardless of the level of production?
Fixed cost, do not change
10% increase in income leads to a 15% decreases in the quantity of mac & cheese demanded but charge in the price of mac & cheese. From this info, we can assume:
Macaroni is an inferior good and price elasticity of supply is infinite
The demand curve for typical good has a:
Negative slope because some customers switch to other goods as the price rises
The price elasticity of demand measures the:
Responsiveness of quantity demanded to a change in price
If the demand curve the a life-saving medicine is perfectly inelastic, then a reduction in supply will cause equilibrium price to:
Rise and the equilibrium quantity to fall
Occurs simultaneously with an income effect
Substitution effect
___ arises when a price changes because consumers have an incentive to consume less of the good with a relatively higher price and more of the good with a relatively lower price
Substitution effect
A 25% decrease in the price of breakfast cereal leads to a 20% increase in the quantity of cereal demanded. As a result:
Total revenue will decrease