Exam One Ch. 1-4, 9
A doctor has worked as a general practitioner for several years, earning an annual salary of $150,000. They are now deciding whether they want to open their own private practice or continue as a team member in the existing office. One-time start-up costs for the practice would be $100,000. If they open their own practice, they will receive a salary of $50,000 from the business annually until the practice is well-established. They anticipate the practice will take two years to become fully established. They paid $200,000 for medical school. They should open their own practice if the future benefits exceed: $300,000. $200,000. $500,000. $400,000.
$300,000.
A friend comes up to you and offers you a free ticket to a Dodgers game that night, and you decide to attend the game. The game takes five hours and costs you $25 for transportation. If you had not attended the game, you would have worked at your part-time job for $12 an hour. What is the cost to you of attending the game? The cost is zero—the ticket is free. $85 $60 $55
$85
Which of the following is (are) included in investment?(i) military spending(ii) the purchase of an aircraft by a domestic airline(iii) the purchase of $45,000 worth of bonds(iv) the purchase of $32,000 worth of stock(v) social security payments(vi) the construction of a highway by the federal government (i), (ii), (v), and (vi) (ii), (iii), and (iv) (i) and (vi) (ii) only
(ii) only
In 2017, the total population of Africa was estimated to be about 1,250,000,000 people. This number, in billions, is: 125. 1.25. 1,250. 12.5.
1.25.
Suppose you manage a convenience store. If macaroni and cheese is an inferior good, what do you suppose would happen to the price and quantity sold of macaroni and cheese as incomes fall during a recession? The price would increase, and the quantity would decrease. Both the price and quantity would increase. Both the price and quantity would decrease. The price would decrease, and the quantity would increase.
Both the price and quantity would increase.
The demand curve for meals at a local Chick-fil-A will shift to the left if: Chick-fil-A offers a free sandwich to people who sign up for their new rewards app. the price of a meal at Chick-fil-A rises. incomes increase, and Chick-fil-A meals are a normal good. the price of gasoline falls in the area.
Chick-fil-A offers a free sandwich to people who sign up for their new rewards app.
Which statement BEST illustrates the law of demand? An increase in food prices encourages more individuals to buy more food, owing to scarcity. Consumers buy more iPhones because prices have fallen. Tesla produces more cars as prices increase. Fewer people visit Disneyland because incomes have fallen.
Consumers buy more iPhones because prices have fallen.
Which of these scenarios depicts a rational buyer? Mary values a bag of salad at $2, but she buys the bag of salad even when the price is $4. John walks into a grocery store and purchases monthly groceries without paying attention to the prices of groceries. Darwin buys a can of shoe polish at $4.50 when his marginal benefit from it is $3.75. Damien buys a sandwich for $5 when the marginal benefit of the sandwich to him is $7.
Damien buys a sandwich for $5 when the marginal benefit of the sandwich to him is $7.
Vincent makes handcrafted dining tables, and he is trying to decide how many tables to produce. He can sell each dining table for $1,000. The cost of the first table is $900, for the second it's $1,100. For each additional table he produces, the marginal cost of each table increases by $200. How many dining tables should Vincent produce, and what is the total cost of his production? Vincent will not make any tables. He will produce one table at a cost of $900. He will produce two tables at a cost of $2,000. He will produce three tables at a cost of $3,300.
He will produce one table at a cost of $900.
How is the economic surplus generated by a decision calculated? It is the total benefits minus total costs arising from the decision. It is the total benefits plus total costs arising from the decision. It is the sum of benefits arising from the decision. It is the sum of costs arising from the decision.
It is the total benefits minus total costs arising from the decision.
Consider the market for iPads. What happens if a fantastic new alternative tablet is developed by Samsung and, at the same time, a factory that makes iPads catches fire, destroying 3 million iPads? Price decreases, and quantity increases. Price increases, and quantity increases. The change in price is indeterminate, and quantity decreases. Price increases, and the change in quantity is indeterminate.
The change in price is indeterminate, and quantity decreases.
Paper producers can manufacture both printing paper and drawing paper. What effect would rising prices for printing paper have on the supply of drawing paper? The quantity of drawing paper supplied will increase. The supply of drawing paper will decrease. The supply of drawing paper will increase. The quantity of drawing paper supplied will decrease.
The supply of drawing paper will decrease.
HelloFresh is a service that provides subscribers with recipes and all the necessary ingredients to prepare meals at home, delivered to their door once per week. Holding other things constant, what would happen if the company found a more efficient way to keep food fresh and safe during shipment? There would be a movement up the market demand curve. There would be a movement down the market demand curve. The market demand curve would shift to the left. The market demand curve would shift to the right.
There would be a movement down the market demand curve.
Why might you underestimate the increase in market quantity demanded when you lower your price? You may not take into account potential new customers attracted by the lower price. Some of your current customers may switch to a rival's product, so a drop in price doesn't produce any additional sales. Lowering the price only increases the quantity demanded for inferior goods. A price reduction increases the quantity demanded for individuals but not for the entire market.
You may not take into account potential new customers attracted by the lower price.
In which scenario are you NOT part of a market transaction? You take a photo of flowers in bloom in a city park. You pay $5 to pick apples at a pick-your-own apples orchard. You buy meat and produce from a local farmer. You sell vegetables at a local fruit and vegetable stand.
You take a photo of flowers in bloom in a city park.
Antonio has a cell phone, and his service provider is AT&T. When he calls his wife, Erika, who is also an AT&T customer, he does not have to pay for those minutes. The more AT&T customers there are in the market, the greater the benefit Antonio receives. This is: a network effect. the Coase theorem. a Pigouvian subsidy. a technology spillover.
a network effect.
Dental services are: a normal good. expenses that do not change with income. an inferior good. a natural good.
a normal good.
In the market for organic beef, what would cause a price increase? a fall in the price of chicken a consensus among doctors that beef is heavy in saturated fat, which causes heart attacks a rise in the prices of grass and organic corn a trend toward veganism in the United States
a rise in the prices of grass and organic corn
For normal goods, an increase in income will result in: an increase in the equilibrium price and equilibrium quantity. a decrease in the equilibrium price and an increase in the equilibrium quantity. a decrease in the equilibrium price and equilibrium quantity. an increase in the equilibrium price and a decrease in the equilibrium quantity.
an increase in the equilibrium price and equilibrium quantity.
Shifts in the market demand curve occur: because of all the factors that shift individual demand curves, along with changes in the types and number of buyers. only because of changes in income and preferences, along with changes in the types and number of buyers. only because of changes in the types and number of buyers. only because of the same factors that shift individual demand curves.
because of all the factors that shift individual demand curves, along with changes in the types and number of buyers.
The cost-benefit principle evaluates _____ costs and benefits, and willingness-to-pay considerations quantify _____ costs and benefits. both monetary and nonmonetary; only nonmonetary only monetary; both monetary and nonmonetary only nonmonetary; only monetary both monetary and nonmonetary; only monetary
both monetary and nonmonetary; only nonmonetary
In employing the marginal principle, a seller may: decide whether to supply one more unit of a good or service. compare production of a good or service to the next best alternative. consider the choices made by other sellers in the market. decide whether to charge the perfectly competitive price.
decide whether to supply one more unit of a good or service.
If the price of paint rises, we can expect the: quantity of paint demanded to increase. demand for paintbrushes to decrease. demand for paintbrushes to increase. quantity of paintbrushes demanded to remain unchanged.
demand for paintbrushes to decrease.
Over the past several years, sushi has become increasingly popular among consumers. This means that the _____ has _____. quantity of sushi demanded; increased demand for sushi; decreased demand for sushi; increased quantity of sushi demanded; decreased
demand for sushi; increased
The difference between a centralized economy and a market economy is that: the centralized economy does not have any markets for goods and services, whereas a market economy has fully functioning markets. governments make production decisions in a centralized economy, and individuals make production decisions in a market economy. governments have maximum decision-making power in a centralized economy but have zero decision-making power in a market economy. individuals make production decisions in a centralized economy, and the government makes production decisions in a market economy.
governments make production decisions in a centralized economy, and individuals make production decisions in a market economy.
The Rational Rule for Sellers says that a seller should sell one more unit of an item if the price is: less than the marginal cost. greater than or equal to the marginal cost. less than the marginal benefit. greater than or equal to the marginal benefit.
greater than or equal to the marginal cost.
When there is a shortage of highly skilled workers in a particular region: the incomes of highly skilled workers fall. highly skilled workers can negotiate higher salaries. unemployment rises among highly skilled workers. there is a corresponding surplus of low-skilled workers in the region.
highly skilled workers can negotiate higher salaries.
The interdependence principle states that your best choice today depends on all of these EXCEPT: past decisions you have made. expectations about the future. other decisions you are currently making. decisions others are currently making.
past decisions you have made.
The law of supply refers to the: positive relationship between price and quantity supplied. inverse relationship between price and quantity supplied. inverse relationship between price and quantity demanded. positive relationship between price and quantity demanded.
positive relationship between price and quantity supplied.
A shortage occurs when: quantity supplied exceeds quantity demanded. quantity demanded exceeds quantity supplied. there is excess production. there is insufficient demand.
quantity demanded exceeds quantity supplied.
When plotting a supply curve, you measure: quantity supplied on the vertical axis. price on the horizontal axis. quantity supplied on the horizontal axis. quantity demanded on the vertical axis.
quantity supplied on the horizontal axis.
A central and fundamental theme in economics is that: for me to have something, someone else must be willing to give it up. the United States is a rich country, but we are simply not aware of it. resources are limited and cannot satisfy all the ways a society wants to use them. we can build as much as we want, since resources are unlimited.
resources are limited and cannot satisfy all the ways a society wants to use them.
At Trader Joe's, the price of chocolate chip cookies falls. As a result, you would expect to see a(n): increase in the demand for chocolate chip cookies. rise in the quantity demanded of chocolate chip cookies. decrease in the demand for chocolate chip cookies. drop in the quantity demanded of chocolate chip cookies.
rise in the quantity demanded of chocolate chip cookies.
Diminishing marginal product leads to: decreased profitability for a seller. increased supply of an item. rising marginal costs for a seller. lower opportunity costs of producing an item.
rising marginal costs for a seller.
The study of economics arises because of the necessity of choice, and the necessity of choice arises because of the fundamental problem of: inefficiency. equilibrium. inequity. scarcity.
scarcity.
Henderson Lumber is a lumber mill that produces both boards used in construction and sawdust, a byproduct of the board production, used in agriculture. When the housing market collapses, causing house prices along with the prices of boards used to build houses to fall, Henderson Lumber's _____ will likely _____. quantity of sawdust supplied; increase quantity of boards supplied; increase supply of sawdust; increase supply of sawdust; decrease
supply of sawdust; decrease
The marginal cost of an additional worker is: always equal to the cost from the first worker hired. always equal to the benefit of hiring the additional worker. the total cost of all workers hired. the additional cost of hiring one more worker.
the additional cost of hiring one more worker.
Recent research suggests that certain refillable plastic water bottles may leech cancer-causing particles into the containers with repeated usage. As a result of this research being made public, one would expect: the demand for such containers to decrease. the quantity demanded of such containers to increase. no effect. the price of the containers to change because of a movement along the demand curve.
the demand for such containers to decrease.
It is a rainy day, and you are considering taking an Uber one mile to meet some friends. You have decided you are willing to pay $20 to avoid getting wet from the rain. The trip would normally cost you $8, but due to the weather the surcharge is triple the regular cost. You should _____ because the benefit to you of taking the Uber is _____ than the cost. walk; less walk; more take an Uber; less take an Uber; more
walk; less
An equilibrium in a market occurs: at the halfway point on a demand curve. at the halfway point on the price axis. when suppliers have sold all the goods and services that they have produced. when the quantity supplied equals the quantity demanded.
when the quantity supplied equals the quantity demanded.
Which of the following is an example of a durable good? a soft drink your new car your haircut fresh flowers from the florist
your new car
In 2010, Canada's GDP was approximately $1,357 billion, and its population was about 34.12 million. What was Canada's approximate GDP per person in 2010? $3,980 $26,246 $46,060 $39,770
$39,770
For Elandra, home-brewed coffee is an inferior good, and lattes from the coffee shop are a normal good. Recently, Elandra cut back on lattes and began brewing her own coffee at home. What may have caused this change? Elandra's income fell. There was a bumper crop in coffee beans. Elandra got a pay raise. The price of teabags fell.
Elandra's income fell.
You purchase a new car (produced this year) for $38,000. After six months, you sell the car for $31,500. How much does GDP rise because of these two transactions? GDP rises by $31,500. GDP rises by $6,500. GDP rises by $69,500. GDP rises by $38,000.
GDP rises by $38,000.
What is the difference between spending from a microeconomic standpoint versus spending from a macroeconomic standpoint? In microeconomics, spending refers to one individual's spending, whereas in macroeconomics, spending refers to government expenditure. In microeconomics, spending refers to domestic spending, whereas in macroeconomics, spending refers to foreign spending. In microeconomics, spending refers to spending by you, or your family, or your company, whereas in macroeconomics, spending refers to the spending by all consumers, all businesses, and the government in the economy. In microeconomics, spending refers to expenditure on consumer goods only, whereas in macroeconomics, spending refers to business expenditures only.
In microeconomics, spending refers to spending by you, or your family, or your company, whereas in macroeconomics, spending refers to the spending by all consumers, all businesses, and the government in the economy.
What is the difference between microeconomics and macroeconomics? Microeconomics is the study of individual decisions in specific markets, whereas macroeconomics is the study of the economy as a whole. Microeconomics focuses only on the forces of individual demand and individual supply, whereas macroeconomics focuses only on policy making for the economy. Microeconomics is the study of the economy as a whole, whereas macroeconomics is the study of individual decisions in specific markets. Microeconomics is the study of individual decisions in specific markets, whereas macroeconomics is the study of government policies.
Microeconomics is the study of individual decisions in specific markets, whereas macroeconomics is the study of the economy as a whole.
If drivers for ridesharing services like Uber and Lyft successfully negotiate for higher pay, and parking lot operators in the city raise parking rates, what can you conclude about the new equilibrium in the ridesharing market? The equilibrium price will rise, but the impact on quantity is unclear. The equilibrium quantity will rise, but the impact on price is unclear. Both the equilibrium price and quantity will rise. Both the equilibrium price and quantity will fall.
The equilibrium price will rise, but the impact on quantity is unclear.
Dale is a stay-at-home-parent whose typical day consists of getting the kids ready for school, doing the laundry, cooking three meals, and cleaning the house. How are Dale's home activities counted in GDP? They are counted by subtracting Dale's opportunity cost in terms of lost income. They are counted at market value. They are not counted. They are counted by assigning a value that is equivalent to what it would have taken to pay a housekeeper to perform the same tasks.
They are not counted.
You are a small business owner preparing to launch your first ad campaign to attract new customers, and must decide whether to learn about advertising yourself or hire a professional to launch the campaign. The campaign will last three months. If you hire a professional, you'll have to pay them a lump sum of $1,000 for the entire campaign. But if you decide to do it yourself, you'll take a course that costs $200 to introduce you to the skill. You'll also pay an employee $340 per month to work some of the hours you normally work while you manage the campaign. Would it be better to hire a professional rather than doing the campaign yourself? Yes, because your economic surplus is $220. Yes, because your full set of costs is only $540. No, because the benefit of not having to do it yourself is greater than the cost of the professional. No, because you can increase your economic surplus if you do it yourself.
Yes, because your economic surplus is $220.
You're the manager of an independent coffee bar with a loyal customer base, and you have accurate information about your current customers' demand curves. You lower the price on your lattes, but the new total quantity demanded for your lattes far exceeds your estimate. What is the MOST likely explanation? You neglected to factor in new customers entering your market due to the lower price. In response to your move, your competitors lowered their prices to remain competitive. Incomes have fallen, and your latte is a normal good. The price of bubble tea, which many of your customers see as a substitute for lattes, fell.
You neglected to factor in new customers entering your market due to the lower price.
You just moved into your new apartment, which has washer and dryer hookups, but your apartment complex doesn't provide washers and dryers. You don't want to go to a laundromat. You can rent a washer and dryer set from an appliance rental company for $30 per month. Alternatively, you could buy a set for $1,100, which you could sell after one year for $700, or $600 after two years. You plan to stay in this apartment for two years, since it's near your job. Should you buy or rent the set? You should rent the set because renting earns $40 worth of economic surplus. You should rent the set because renting earns $400 worth of economic surplus. You should buy the set because buying earns $220 worth of economic surplus. You should buy the set because buying earns $500 worth of economic surplus.
You should buy the set because buying earns $220 worth of economic surplus.
A farmer finds that when he produces more pumpkins, he also has more pumpkins he can sell as decorations. To the farmer, pumpkins and decorative pumpkins are: complements in production. substitutes in production. unrelated goods. inferior goods.
complements in production.
As an equity analyst with an investment management company, you monitor market conditions in the dairy sector. Which of these would shift the market supply curve you've modeled for milk? the rising popularity of milk an increase in population expectations of a future decline in the price of milk an increase in the incomes of consumers
expectations of a future decline in the price of milk
Suppose the New York City housing market is in equilibrium. A recession causes local household incomes to decline. At the same time, construction of a series of new apartment buildings has just been completed. Given these two changes, and assuming that apartment housing is a normal good, we can predict that the price of apartments will _____, and the quantity of apartments bought and sold will _____. fall; fall fall; rise fall; rise or fall rise; fall or rise
fall; rise or fall
Charles is a manager at a coffee shop, and he has to decide how many workers to hire. One worker can make 25 drinks that sell for $5 on average in one hour. A second worker can make another 20 drinks in one hour. The marginal benefit of each additional worker decreases by five drinks, with each additional hire. Given that workers are paid $15 per hour and have eight-hour shifts, how many employees should Charles hire for each hour? three four five six
five
Facebook is subject to network effects because: its value to an individual declines when the number of other people using it increases. its value is determined only by its marginal private benefit. its value to an individual increases when the number of other people using it increases. it yields negative externalities.
its value to an individual increases when the number of other people using it increases.
Following the Rational Rule, the maximum economic surplus occurs when: total benefits equal total costs. total benefits exceed total costs. marginal benefits equal marginal costs. marginal benefits exceed marginal costs.
marginal benefits equal marginal costs.
The _____ is the increase in output that is produced when a business hires an additional worker. average product total product marginal product marginal cost
marginal product
You run an electronics store that sells, among other items, big screen televisions. As the market price of big screen televisions decreases, the: supply of big screen televisions increases. quantity of big screen televisions supplied increases. supply of big screen televisions decreases. quantity of big screen televisions supplied decreases.
quantity of big screen televisions supplied decreases.
If the price of jet fuel rises, the: supply of airline flights will increase. supply of jet fuel will decrease. supply of jet fuel will increase. quantity of jet fuel supplied will increase.
quantity of jet fuel supplied will increase.
Which of these items is a normal good? canned food instant noodles steak third-hand cars
steak
In your media studies class, you learn that Westerns were once a staple of network television but are now less common. If the production costs per episode of Westerns are comparable to those of other scripted shows, the most likely explanation for their disappearance is that, over time: the market demand curve for Westerns shifted to the left. the market demand curve for Westerns shifted to the right. there was a movement up the market demand curve for Westerns. there was a movement down the market demand curve for Westerns.
the market demand curve for Westerns shifted to the left.
While attending college, you are also working as a freelance writer, writing product descriptions for catalogues for $40 per piece. You start each morning writing product descriptions when your mind is fresh. However, at a certain point, you recognize that the more product descriptions you write, the less quality time you can devote to your studies, worsening your grades and somewhat dampening your long-term income prospects. You should stop writing product descriptions when: the perceived opportunity cost of writing another product description in terms of foregone long-term income rises above the $40 you could earn writing another product description. the perceived opportunity cost of writing another product description in terms of foregone long-term income falls below the $40 you could earn writing another description. you've fully exhausted your creative powers for the day and so can write no more product descriptions. you'd prefer studying to writing product descriptions.
the perceived opportunity cost of writing another product description in terms of foregone long-term income rises above the $40 you could earn writing another product description.
We expect that price will fall when: supply is greater than demand. the supply curve shifts to the left, and the demand curve shifts to the left. supply and demand both increase. the quantity supplied is greater than the quantity demanded.
the quantity supplied is greater than the quantity demanded.
Rose's parents have booked and paid for a family trip to Aspen, Colorado, during her spring break. Rose's friends recently decided to drive to Destin, Florida, for spring break. Rose needs to decide whether to join her parents in Aspen or drive to the beach with her friends. The opportunity costs of joining her friends on the trip to Destin include each of these EXCEPT: her parents' anger if she skips the family trip to Aspen. her contribution to gas money for the drive to Destin. the ski lift ticket her parents have already purchased for her. the hotel costs she will split with her friends in Destin.
the ski lift ticket her parents have already purchased for her.
The opportunity cost of a good is: smaller during periods of economic recession. equal to the monetary cost of the good. larger during economic booms. the value of the next best alternative given up to acquire the good.
the value of the next best alternative given up to acquire the good.
In a typical week, Cheyenne buys four lattes at Starbucks. If the price of lattes doubles, what is the MOST likely number of lattes she will buy? two five eight four
two
Which of the following is an example of transfer payments? government loans interest earned on savings in banks military salaries unemployment benefits
unemployment benefits
On a hot sweltering day, you feel thirsty and buy an ice-cold soft drink, which you gulp down. Whether you buy a second drink or not will depend on: how you feel about soft drinks. the total quantity of soft drinks you have consumed that week. the price of the soft drink. whether the marginal benefit of the second soft drink exceeds the price of the drink.
whether the marginal benefit of the second soft drink exceeds the price of the drink.
Juan is willing to pay $900 for a new iPad. He offers to pay $800 for an iPad at the Apple store. It costs Apple $700 to produce this iPad. A voluntary economic transaction between Juan and Apple _____ occur because _____ would be better off due to the transaction. will; neither Juan nor Apple will; both Juan and Apple will not; only Juan will not; only Apple
will; both Juan and Apple
