Econ midterm 1

when the current price of a good is below the equilibrium price

buyers have an incentive to offer to pay sellers more than the current price

suppose mary is willing to pay up to $15000 for a used fork pick up truck. if she buys one for $12000 her __ would be __

economic surplus, $3000

suppose that when the price of oranges is $3 per pound, the quantity demanded is 4.7 tons per day and the quantity supplied is 3.9 tons. in

excess demand will lead to the price of oranges to rise

Forest lives in complete isolation in Montana. He is self-sufficient and feeds himself through hunting, fishing, and farming. Which of the following statements about Forest is true?

forest has to make tradeoffs

If an increase in the price of Good X causes a decrease in the demand for Good Y, we can conclude that:

good X and good Y are complements

economics is best defined as the study of

how people make choices in the face of scarcity and the implications of those choices for society as a whole.

which of the following is NOT true of the equilibrium price

it is fair in the sense that everyone can afford basic goods and services

which of the following is NOT true of a demand curve?

it reflects sellers reservations prices

If all the world's resources were to magically increase one hundredfold, then:

people would still have to make trade offs

if demand increases and supply decreases, the change in the equilibrium price will __ and the change in the equilibrium quantity will be

positive; uncertain

efficiency occurs if the

socially optimal quantity of goods and services is being produced

a market equilibrium might not maximize total economic surplus because

sometimes goods entail costs and benefits that do not fall on buyers and sellers

If the demand for olives falls when the price of cheese falls, then we know that cheese and olives are:

substitutes

mircoeconomics differs from macroeconomics in that microeconomics focuses on

the choices made by individuals the implications of those choices

If fast food is an inferior good then:

the demand for fast food will fall as income rises.

you can spend $10 for lunch and you would like to purchase two cheeseburgers. when you get to the restaraunt, you find out the price for a cheeseburger has increased from 5 to 6, so you decide to get just one cheeseburger. this is best described as

the income effect of price change

the entire group of buyers and sellers of a particular good or service makes up

the market

if supply and demand both increase, the new equilibrium price will be __ and the new equilibrium quantity will be ___

uncertain; higher

For two goods X and Y to be classified as substitutes, it must be the case that:

when the price of X rises, the demand for Y increases

which of the following would NOT be studied in microeconomics

whether the federal budget should be balanced

a price ceiling that is set above the equilibrium price

will have no effect on the market

which of the following is NOT a characteristic of rent controls

greater availability of apartments

if the production od oranges reduces global warming , then the equilibrium quantity of oranges will be ___ the socially optimal quantity

lower than

alex received a four year scholarship to state U. that covered tuition-and fees, room and board, and books and supply. 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

which of the following would cause an increase in quantity of wheat supplied?

the price farmers receive for their wheat rises

As coffee becomes more expensive, Joe starts drinking tea instead of coffee, this is called

the substitution effect of a price change

suppose that as the price of apples rises, people switch from eating apples to oranges, this is known as

the substitution effect of a price change

If the price of rubber (an input to the production of tires) increases:

the supply of tires will decrease

you have noticed that there is a persistent shortage of teachers in an inner city school district in your state. based on this observation, you suspect that

the wage for teachers in that district is lower than the equilibrium wage

suppose that tom bought a bike from helen for $195. if helens reservation price was $185, and toms reservation price was $215, the sellers surplus from this transaction was

$10

you save $10 on gas every week because you take the bus to school. you have class 5 days a week. what is your average benefit per day of taking the bus to school?

$2

suppose that tom bought a bike from helen for $195. if helens reservation price was $185, and toms reservation price was $215, the total economic surplus from this transaction was

$30

suppose that 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

5

suppose that a disease effects people who consume beef has been discovered in the US, one likely result is

a decrease in demand for beef

"As the price of personal computers continues to fall, demand increases." This headline is inaccurate because:

a falling price of personal computers increases the quantity demanded, not demand

all else equal, relative to a person who earns minimum wage, a person who earns $30 an hour has

a higher opportunity cost of taking the day off work

The price of bananas will increase in response to:

an excess demand for bananas.

what might cause a demand curve to shift to the right

an increase in the price of a substitute

when the price of a good changes, the amount of that good that buyers wish to buy changes

because of both the substitution and the income effects

all else equal, a decrease in the demand for oranges will lead to an ___ in equilibrium price and a __ in equilibrium quantity

decrease, decrease

a sellera reservation price is generally equal to

the sellers marginal cost

Amy is thinking about going to the movies tonight. A movie ticket costs $15, and she'll have to cancel a $20 dog-sitting job that she would have been willing to do for free. The opportunity to Amy cost of going to the movies is:

$35

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 all of the meals, your average cost for a meal is

$4

suppose quantity demanded is given by Q^d=100-p and quantity supplied is given by Q^s=20+3p. in this case, equilibrium price, P* and equilibrium quantity Q* are as follows

P*=20, Q*=80

Chris has a one-hour break between classes every Wednesday. Chris can either stay at the library and study or go to the gym and work out. The decision Chris must make is:

an economic problem bc chris has only one hour, and engaging in one activity means giving up the other

suppose that the technology used to manufacture laptops has improved. the likely result would be

an increase in supply of laptops

Assume consumers eat either rice or pasta for dinner every night. If the price of rice increases, in the pasta market one would expect to see:

an increase in the demand for pasta

when a slice of pizza at the student union sold for $2, moe didnt purchase any. when the price fell to 1.75, she purhcased a slice each day for lunch. thus we can infer that moes reservation price for a slice of pizza is

at least 1.75 but less than 2

if a countrys economic decisions are made by an individual or small number of individual or small number of individuals, then it has a

centralized economy

a movement along a demand curve from one price quantity combination to another is called a

change in quantity demanded

suppose the cost to tim of a third glass of soda is zero because hes at a restaurant that gives free refills. According to the cost-benefit principle, Tim should

drink a 3rd glass of soda if the benefit of doing so is positive

suppose that the market price for hot dogs sold by street vendors has just risen from 4.50 to 5, and that now in response, curly has now begun operating a hot dog cart. we can assume that curlys reservation price for hot dogs is

greater than 4.50 but no more than 5

shelly purhcases a leather purse for $400. one can infer that

her reservation price was at least $400

is the local slaughterhouse gives off an unpleasant stench, then the equilibrium quantity of meat will be __ the quantity that maximizes total economic surplus

higher than

Moe has a big exam tomorrow. He considered studying this evening, but decided to hang out with Curly instead. If neither activity involves any explicit costs, and Moe always chooses rationally, it must be true that:

moe gets more benefit from spending time with curly than from studying

which of the following is NOT a characteristic of a market in equilibrium

neither buyers nor sellers want the price to change

if the demand for a good decreases as income decreases, then the good is a

normal good

if the demand for steak increases as income increases, then steak is a

normal good

an editorial in the paper argues that a person only should be allowed to attend school if the marginal cost of educating that person is less than the marginal benefit of educating that person. The writers reasoning is a application of

normative economics

one thing that distinguishes normative economic principles from positive economic principles is that

normative principles tell us how people should behave, and positive principles tell us how people will behave

if the supple curve both shift to the left, then the new equilibrium

quantity will be lower, but the direction of the price change is uncertain

Jessica's marginal cost for producing a pitcher of lemonade is $0.25. Therefore, $0.25 is her:

reservation price