econ test one
The term ______________ means "additional."
"marginal"
No-Jo values a used laptop at $500, but she succeeds in buying one for $425. No-Jo's willingness to pay was
$500.
Jiyeon raised his quantity demanded of hockey pucks from 100 to 150 when the price fell from $5 to $3 per puck. Using the midpoint method, his price elasticity of demand is:
-0.80
If goods X and Y are COMPLEMENTS, which of the following could be the value of cross-price elasticity of demand?
-1
If I tell you that Nutella and Smuckers are SUBSTITUTES to me, then which of the following could be the value of the cross-price elasticity of demand for good Smuckers?
0 or above
Jong wins the lottery, increasing his by 60%. He used to buy 10 blocks of cheese per month and now he buys 12. HIs income elasticity of demand for cheese is __________, making it a(n) __________ good.
0.33; necessity
Suppose that a fall in the price of a good from $10 to $8, causes total expenditure on the good to decrease. Which of the following could be the absolute value of the PED, in this price range?
1.6. B 2.3. C Both A and B. D Neither A nor B.
You recently bought a sandwich for $9, and your consumer surplus is $1. How much were you willing to pay for the sandwich?
10
If own-price elasticity of demand equals 0.3 in absolute value, then what percentage change in price will result in a 6% decrease in quantity demanded? (Hint: Make %ΔP the subject of the formula and then solve.)
20%
Suppose that a 2% increase in price results in a 6% decrease in quantity demanded. The price elasticity of demand for this product is equal to:
3
What is the opportunity cost to Supertown of increasing the production of machines from 200 to 300?
300
If this economy devotes all of its resources to the production of dryers, then it will produce
80 dryers and 0 washers.
Suppose there is an early freeze in California that reduces the size of the lemon crop. As the price of lemons rises, what happens to consumer surplus in the market for lemons?
Consumer surplus decreases
The distinction between efficiency and equality can be described as follows:
Efficiency refers to maximizing the size of the pie; equality refers to distributing the pie fairly among members of society.
Which of the following would cause the demand curve to shift to the right?
Income decreases for an inferior good.
Which of the following is true when the price of a good or service falls?
More buyers enter the market.
Suppose the state of Virginia passes a law that lowers the legal drinking age to 18. As a result, college students from North Carolina who are between 18 and 20 years old decide to cross the border to purchase and consume beer in Virginia. Which of the following principles does this best illustrate?
People respond to incentives.
Which of the following does NOT affect the magnitude of own-price elasticity of demand?
The amount by which quantity supplied will change as price changes.
increase in the price of an input and an increase in the price of a complement.
The change in equilibrium shown in the accompanying figure would be explained by a(n):
As a consumer, a certain good has few close substitutes available, then:
The demand for that good will be relatively inelastic, compared to goods for which there are many close substitutes
Kim attends the Blacksburg's farmer's market every Saturday. On her last visit, she notices that all of the green apples sold by the many different farmers have roughly the same price. Which statement best explains why the prices are so similar?
The farmer's market in Blacksburg is a competitive market so neither the consumer nor the producer has a large influence on the price, allowing for the market to set the price.
Bill is an accomplished businessman who pays a landscaper to maintain his lawn rather than do it himself. Bill's time is worth $1,000 per hour. This is clearly more than the amount he would have to pay his landscaper for an hour of work. This scenario is an example of which principle of economics?
Trade can make everyone better off.
f a demand curve is VERTICAL, then own-price elasticity of demand for this good is equal to:
Zero.
If Benny's pizza is a normal good, then which of the following could be the value of income elasticity of demand?
above 0
When the price is ___________the equilibrium price, we would expect there to be a ___________, causing the market to put ___________pressure on the price until it went back to the equilibrium price.
above; surplus; downward
The basic goal of economics is
addressing the scarcity problem created because the population's desire for goods exceeds the ability to produce them.
If a new french fry-cutting machine works twice as fast as the old machine, McDonald's would:
be willing to produce and sell more french fries at every price.
Who benefits from voluntary trade?
buyers and sellers
Companies use advertising to shift consumer demand. Which of the following demand shifters do you think advertisers most often rely on?
changes in tastes and preferences
Which one of the following pairs of goods is likely to have a negative cross-price elasticity of demand?
coffee and cream
The price of good X increases by 25%, causing the quantity consumed of good Y to decrease by 10%. If everything else is held constant in the economy, we can say with certainty that good X and good Y are:
complements.
If a consumer places a value of $14 on a particular good and if the price of the good is $12, then the
consumer enjoys consumer surplus if he or she buys the good.
An expectation of a lower price in the future will:
decrease current demand.
The demand curve shift shown in the figure was caused by a(n):
decrease in the number of buyers in the market for the good.
A freak wildfire in the Napa Valley destroys many green grape vineyards causing the prices of both green grapes and sparkling wine to rise. As a result, the consumer surplus in the market for green grapes
decreases, and the consumer surplus in the market for sparkling wine decreases.
In the first few months of 2012, the price of gasoline increased by approximately 15%. Because of this increase, we would expect the ___________curve in the market for hybrid cars to ___________.
demand; shift to the right
For a market to be competitive:
each buyer and seller is small, relative to the whole market; no single decision-maker has any influence over the market price.
You calculated the price elasticity of demand for hot dog rolls to be -1.25. This tells you that demand is __________ and price is __________ to you.
elastic; more important than the quantity
Which of the following will shift both the supply and demand curves?
expectations of future prices
Opportunity cost is the ______________ alternative forfeited when a choice is made.
highest-valued
In a typical year, Chandler's parents spend 35% of its income on housing, 20% on travel-related expenses, 10% on utilities, 25% on health care, and 5% on miscellaneous items. For which category will demand be most responsive to a change in price?
housing
Gigi is a loyal Coca-Cola consumer (she even has the tattoo), whereas Tarisha can drink either Coca-Cola or Pepsi products. Gigi's demand for Coca-Cola will be relatively more __________, while Tarisha's demand will be relatively more __________.
inelastic; elastic
Breaking Bad products have an income elasticity of -1.4. Thus, these are __________ goods.
inferior
If the income elasticity of demand is -3, the good will be a(n):
inferior good.
When incomes fall by 20%, quantity demanded of specialty baked goods falls by 50%. Specialty baked goods are:
luxuries.
Demand is almost always more price elastic in the long run because:
more options become available and people can make different choices.
Imperfect markets:
occur when the buyer or seller has an influence on the price.
The cost of a trade-off is known as the ______________ of that decision.
opportunity cost
Where can an economy not produce?
outside its production possibilities frontier
hich one of the following pairs of goods is likely to have a positive cross-price elasticity of demand?
pancakes and waffles
The production possibilities frontier provides an illustration of the principle th
people face trade-offs.
Sellers of bottled water find that whether the price falls or rises, the quantity bought by consumers remains unchanged every week. The price elasticity of demand for bottled water is:
perfectly inelastic.
Actions and activities are encouraged with which type of incentive?
positive
Price elasticity of demand measures the change in:
quantity demanded due to the change in price.
According to the law of demand, ceteris paribus,
quantity demanded falls when the price rises, and the quantity demanded rises when the price falls.
The overriding reason why households and societies face many decisions is that
resources are scarce.
Cost is a measure of the
seller's willingness to sell
If the cost of flour increases from $3 to $5 a bag, you could predict the supply curve for bagels to:
shift to the left.
When a hurricane rips through Florida, the price of oranges rises because the:
supply curve shifts to the left.
Jazmine is a renowned college-level math tutoring. She knows that during the two weeks before exams at the Emporium, she can charge more for an hour of private tutoring. Expecting this price increase, Jazmine will:
supply less tutoring now, shifting supply to the left.
A technological advancement for Good A will shift the ___________curve of Good A to the ___________, making the equilibrium price ___________.
supply; right; decrease.
As a rational decisionmaker you will
take an action only if the marginal benefit of that action exceeds the marginal cost of that action.
Producer surplus is
the amount a seller is paid minus the cost of production.
An economy's production of two goods is efficient if
the economy is producing at a point on the production possibilities frontier.
After getting an A in AAEC 1005, you decide to start a economics tutoring business. When the price of an hour of tutoring increases,
the quantity demanded for tutoring decreases.
The law of supply states that, all other things being equal,
the quantity supplied falls when the price falls, and the quantity supplied rises when the price rises.
In an effort to fund the building of a new highway, the government of Transylvania decided to impose (place) a tax on gasoline producers. Our model of supply and demand predicts that:
the supply for gasoline decreased.
Producer surplus directly measures
the well-being of sellers
The need to study economics would cease to exist if:
there were enough resources to produce all the goods and services people would like to obtain.
An example of a direct negative incentive is:
threatening to fire those who do not perform well.
We can say that the allocation of resources is efficient if
total surplus is maximized.
Economics is the study of how society manages its
unlimited wants and limited resources
If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is
zero
