Econ midterm #1

Paul goes to Sportsmart to buy a new tennis racquet. He is willing to pay $200 for a new racquet, but buys one on sale for $125. Paul's consumer surplus from the purchase is

$75

Which of the following displays these two characteristics: rivalry and non-excludability?

A common resource

What is the difference between an "increase in demand" and an "increase in quantity demanded"?

An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve.

What is the difference between an "increase in supply" and an "increase in quantity supplied"?

An "increase in supply" means the supply curve has shifted to the right while an "increase in quantity supplied' refers to a movement along a given supply curve in response to an increase in price.

Which of the following is the correct way to describe equilibrium in a market?

At equilibrium, quantity demanded equals quantity supplied

WHich of the following goods would have the most inelastic demand? - bread - ski vacations - luxury cars - big screen TVs

Bread

Which of the following products comes closest to having a perfectly in elastic demand? - iPhones - bus rides - gasoline - cholesterol medication in general

Cholesterol medication in general

The demand for gasoline in the short run is

Inelastic because there are no good substitutes for gasoline

Which of the following activities create a negative externality? - graduating from college - keeping a junked car parked on your front lawn - repainting the house you live in to improve its appearance - cleaning up the sidewalk on your block

Keeping a junked car parked on your front lawn

Consider the following pairs of items: - shampoo and conditioner - iPhones and earbuds - a laptop computer and a desktop computer - beef and pork - air-travel and weed killer Which of the pairs listed will have a cross price elasticity of zero?

None of the above

The "tragedy of the commons" refers to the phenomenon where

People overuse a common resource

Which of the following is an example of a positive externality? - banning the sale of candy in elementary schools - prohibiting street parking in all residential neighborhoods - forbidding the use of cell phones in public - planting trees along a sidewalk which add beauty and create shade

Planting trees along a sidewalk which add beauty and create shade

Which of the following displays these two characteristics: non-rivalry and no exclude it laity in consumption?

Public goods

Consider the following pairs of items: - shampoo and conditioner - iPhones and earbuds - a laptop computer and a desktop computer - beef and pork - air-travel and weed killer Which of the pairs listed will have a negative cross-price elasticity?

Shampoo and conditioner and iPhones and earbuds

Consumer surplus in a market for a product would be equal to ____________ if the market price was zero.

The area under the demand curve

Consider the following economic agents: a. the government b. consumers c. producers Who in a centrally planned economy, decides what goods and services will be produced with the scarce resources available in that economy?

The government

On would speak of a change in the quantity of a good supplied rather than a change in the supply, if

The price of the good changes

The law of demand implies, holding everything else constant, that as the price of bagels increases,

The quantity of bagels demanded will decrease

An externality is

a benefit or cost experienced by someone who is not a producer or consumer of a good or service

The area _____________ the market supply curve and _____________ the market price is equal to the total amount of producer surplus in a market.

above/below

When every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it, ________ occurs.

allocative efficiency

Economists estimated that the price elasticity of beer is -0.30 and the income elasticity of beer is 0.09. This means that

an increase in the price of beer will lead to an increase in revenue for beer sellers and beer is a normal good.

Economists assume that individuals

are rational and respond to incentives

Income elasticity measures how a goods quantity demanded responds to

change in buyers' incomes.

The difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is called

consumer surplus

The decision about what goods and services will be produced in a market economy is made by

consumers and firms choosing which goods and services to buy or produce

Each point on a ________ curve shows the willingness of consumers to purchase a product at different prices.

demand

If a demand curve shifts to the left, then

demand has decreased

If a demand curve shifts to the right, then

demand has increased

Productive efficiency is achieved when

firms produce goods and services at the lowest cost.

Price elasticity of demand measures

how responsive quantity demanded is to a change in price.

The demand for all carbonated beverages is likely to be ________ the demand for Dr. Pepper.

less elastic than

In economics, the term ___________________ refers to a group of buyers and sellers of a product and the arrangement by which they come together to trade.

market

An economic ________ is a simplified version of some aspect of economic life used to analyze an economic issue.

model

When a negative externality exists, the private market produces

more than the economically efficient output level

Private producers have no incentive to provide public goods because

once produced, it will not be possible to exclude those who do not pay for the good.

By definition, economics is the study of

the choices people make to attain their goals, given their scarce resources

When demand is elastic, a fall in price causes total revenue to rise because

the increase in quantity sold is large enough to offset the lower price

Conceptually, the efficient level of carbon emissions is the level for which

the marginal benefit of reducing carbon emissions is equal to the marginal cost of reducing carbon emissions.

A positive externality causes

the marginal social benefit to exceed the marginal private cost of the last unit produced

Suppose when the price of hybrid automobiles rises consumers buy fewer hybrid automobiles. This implies that

there is a negative relationship between hybrid automobile prices and quantities purchased by consumers.

Who receives the most of what is produced in a market economy?

those who are willing and able to buy them

A product is considered to be nonexcludable if

you cannot keep those who did not pay for the item from enjoying its benefits.

A product is considered to be rivalrous if

your consumption of the product reduces the quantity available for others to consume.