Macro Econ Midterm 1 Exam

Instead of attending class, one could have worked an extra hour at the cafe for $10 or watched a neighbor's child for $15. What is the opportunity cost of attending class?

$15

The key to using the cost benefit principle is to think about ______ aspects of a decision

Both financial and nonfinancial

A market consists of ten similar suppliers that are making the same supply decisions. To find the market supply of these ten suppliers, you:

multiply the individual supply of one of the suppliers by ten

Kevin Williamson goes to a local coffee shop and orders a medium-sized latte. His willingness to pay for that latte is $6. The price of the latte is $2. The cost to the coffee shop to produce the latte is $1. How much economic surplus does Kevin gain when he purchases the latte?

$4

Lisa is choosing between three alternatives: a) working at her job that pays 60 dollars; b) writing a term paper which she values at 40 dollars; or c) going out with a friend, which she values at 80 dollars. The opportunity cost of writing the term paper is:

$80

The United Kingdom plans to end the use of gas-powered and diesel-powered cars by the year 2040. At the same time, car manufacturers, such as General Motors and Nissan, are increasing the number of electric car models they produce. Based on this information, which of the following statements is/are correct?(i) If the supply of new electric cars is greater than the demand for new electric cars, then the price of electric cars will fall in the future.(ii) The demand for gasoline will fall in the future.(iii) The demand for electricity will rise in the future.(iv) The demand for diesel will rise in the future.

(i), (ii), and (iii)

Which of the following five scenarios illustrate markets in action?(i) You rent a book at the university bookstore.(ii) You bargain at a street stall.(iii) You mow your own lawn.(iv) You get a manicure at a nail salon.(v) You grow your own vegetables and consume them yourself.

(i), (ii), and (iv)

Which of the following are correct about fixed costs?(i) They do not change with the level of production in the short run.(ii) They include variable costs.(iii) They are present even when the firm is producing zero units.(iv) They are irrelevant to marginal cost.

(i), (iii), and (iv)

Which of the following lists only the factors that would cause a decrease in the supply of an item?

A rise in input prices; a decrease in the number of sellers in the market; a rise in the price of a substitute-in-production.

which of the following scenarios depicts a seller who is following the rational rule for sellers?

American airlines determines the marginal cost of an extra passenger to be $75 and sells a discount seat for $250

Which of the following is a decision that follows the net marginal benefit principle?

Deciding whether to spend one more hour studying

How is the economic surplus generated by a decision calculated?

It is the total benefits minus the total costs arising from the decision.

which of the following scenarios illustrates the law of demand

Kathleen eats more steak when the price is low, and less when the price is high.

You eat M&Ms every day. When you go to the store to buy some, you find that M&Ms are more expensive than they were last month. Which of the following could explain why M&Ms are more expensive?

The supply of cacao beans, used to produce chocolate, has fallen around the world.

Scarcity

There are limited resources to satisfy all of a society's wants

You're shopping online, and you place an item in your virtual cart. Two days later, you return to the virtual cart to check out and find that the item is now more expensive. Assuming that the market is competitive, what could explain the price increase?

There is a shortage of the item.

Which of the following graphs shows what will happen to the supply curve for luxury SUVs, if economists predict an increase in demand for these vehicles?

There will be a movement along the supply curve. Suppliers will raise their prices and in doing so supply will increase at that price point.

Suppose that you have a pumpkin stall at a farmer's market, and the Halloween season arrives. You know that your customers will want to buy many pumpkins to decorate their houses and make pumpkin pies. Which of the following is a likely result of this scenario?

You can charge a higher price per pumpkin.

A normal Good is:

a good for which a higher income causes an increase in demand

A seller at a farmer's market wants $10 for a bag of 10 apples. You think his price is too high, so you counter with an offer of $6 for the bag. The seller then offers you a much smaller bag of five apples for $6. You bargain again, and the seller lets you buy the 10 apples for $8. This scenario is an example of:

a market in action.

Which of the following graphs illustrates what we expect to see in the market for printing paper if the price of printing paper rises?

a movement along the demand curve with a decrease in quantity demanded and an increase in price

The city of Vaughan in Ontario, Canada, opened a new subway line that extended the existing subway system between the greater Toronto area and the city of Vaughan. The route previously only had bus service. Which of the following graphs depicts the effect you would expect to see on the demand for bus rides on this route after the introduction of the subway?

a shift in demand to the left

The net marginal benefit principle

asking "one more", the addition of one more of something as long as net benefits out way costs to the point at which they are equal

Graphically, shortages will always occur:

at prices below the equilibrium price.

why are supply curves typically upward sloping?

they slope upward because higher prices lead individual businesses to supply a larger quantity and more businesses are willing to supply goods and services

Joshua Murphy is planning on studying late into the night for his economics exam. How many cups of coffee should he buy tonight?

benefit of purchasing one more coffee equals the cost

Kathleen Alvarado is binge-watching her favorite show on Netflix. She is attempting to decide how many more episodes to watch. Kathleen should continue watching episodes as long as the marginal:

benefit of watching another episode exceeds the marginal cost.

In a voluntary transaction between a buyer and seller, ____ can earn economic surplus from the transaction

both

The cost benefit principle states that _______ are the incentives that shape decisions

cost and benefits

Dell and Apple are competitors in the computer market. Which graph illustrates the effect of a rise in the price of Dell computers on the demand for Apple computers?

demand for apple computers will shift to the right: A rise in quantity demanded at all price points

When there is a shortage of highly skilled workers in a particular region, the:

demand for skills education increases.

Diana is deciding on whether or not she should enroll in a data collection course. She knows that this skill is highly sought after in the professional world. Weighing what may affect her in future opportunities demonstrates ...

dependency through time

An equilibrium price is:

determined by the intersection of the demand and supply curves.

A bakery hires a baker who can make 15 cakes per day. The bakery then decides to hire a second baker who will use the kitchen at the same time as the first baker. The bakery finds that the second baker can produce only an additional nine cakes per day. What concept does this scenario illustrate?

diminishing marginal product

According to the marginal principle, keep increasing quantity until the marginal benefit of an additional item is ______ to the marginal cost of an additional item

equal to

As a result of technological innovation, automated water pumps are being installed on the farms of Kenyan tomato farmers. As a result of the increased use of automated water pumps, the equilibrium price of tomatoes will:

fall, due to a rise in supply.

You are considering whether you should go out to dinner at a restaurant with your friend. The meal is expected to cost you $50, you typically leave a 20% tip, and a round-trip Uber ride will cost you $15. You value the restaurant meal at $30 and the time spent with your friend at $50. You should ____ to dinner with your friend because the benefit of doing so is _____ than the cost.

go; greater

The rational rule for sellers says that a seller should sell one more unit of an item if the price is:

greater than or equal to the marginal cost

When there is a shortage of highly skilled workers in a particular region:

highly skilled workers can negotiate higher salaries.

Which of the following would be considered in a cost-benefit analysis to decide if a person should cycle to work or ride the subway?(i) The air pollution that the cyclist has to breathe.(ii) The cost of subway tickets.(iii) The time it takes to cycle to work versus the time it takes to ride the subway to work.(iv) The cost per gallon of gasoline.

i, ii, and iii

When deciding what the actual opportunity cost of a decision is ...

identify the most expensive loss

the interdependence principle:

implies that buyers decisions are affected by many factors other than the price of an item

Jonathan Mendez is deciding whether to study for his economics exam at a café down the street or go to a concert a few cities over. The time spent commuting to the concert is ____ in his opportunity cost calculations and represents a _____ cost.

included; nonfinancial

When you get hired for a well-paying job, you will most likely view older used cars as

inferior good

The principle that your best choice depends on your other choices, the choices others make, developments in other markets , and expectations about the future is known as the ________ principle

interdependence

diminishing marginal benefit

is when buying an additional item yields a smaller marginal benefit than the previous item

What is quantity supplied?

it is the amount of an item that a seller is willing to sell at a particular price

A rational buyer will:

keep buying a product until marginal benefit equals price

Nerida Kyle could either commute to work via Uber or purchase a new car. The average cost of her one-way Uber trip is $15. Nerida works five days a week for 50 weeks a year. Based solely on avoiding the cost of an Uber, Nerida should purchase a car if the cost of the car is _____ than _____ per week.

less than; $150

Diana is a student studying economics and currently working on her class schedule for next semester. She decides to enroll in a course on economic data analysis because she knows that data analysis is a highly sought-after skill from employers in her career field. Weighing what may affect her in the future opportunities demonstrated dependency:

through time

Variable costs are the costs that

vary with the quantity of output produced.

An equilibrium in a market occurs:

when the quantity supplied equals the quantity demanded.

Dependencies between your own choices reflect the fact that:

you have limited resources

when you calculate marginal costs, they should include:

only variable costs

Decisions should reflect the _____ costs, rather than just the _____ costs

opportunity; financial

The opportunity cost of attending college include the:

potential income that could be earned working

when plotting a demand curve

price is on the vertical axis, quantity is on the horizontal axis

Graphically, the equilibrium quantity can be identified as the:

quantity corresponding to the intersection of the demand and supply curves.

A shortage occurs when:

quantity demanded exceeds quantity supplied.

An increase in quantity demanded:

results in a movement along the demand curve

A decrease in demand:

results in a shift in demand

A coffee shop opens next to an existing coffee shop. Which of the following graphs shows the effect of this new coffee shop on the market supply curve for coffee in this area?

supply shifts to the right. the price of goods stays the same, however, supply increases at each price between the amount of goods available to the market doubled.

Which of the following events would lead to a shift of the supply curve from Old supply to New supply?

technological advance in production techniques

an individual demand curve is a graph

that plots the quantity of an item that someone plans to buy, at each price

Paint and paintbrushes are complements. If the price of paint rises, we can expect:

the demand for paintbrushes to decrease; a shift in demand to the left

the law of demand states that

the lower the price the greater quantity demanded, the higher the price the less willing consumers are to purchase more of that good

The _________ suggests, decisions about quantities are best made incrementally

the marginal principle

which of the following is not a a factor that can shift the supply curve?

the market price of a product

Which principle tells you that the true cost of something is the next best alternative you have to give up to get it?

the opportunity cost principle

Which of the following can shift the supply curve?

the price of a complement in production, the price of a substitute in production, and the expected future price of a product

when plotting a supply curve:

the quantity supplied goes on the horizontal axis while the price goes on the vertical axis

The price of gasoline is $2.50 per gallon at the closest gas station, but is only $2.30 per gallon at a gas station two miles away. By driving to the farther gas station, the opportunity cost is:

the value of one's time and expenses to go to the farther gas station.

A downward sloping demand curve implies

there is an inverse relationship between price and quantity

If a store runs a sale on a product to clear out its stock, we can conclude that

there was a surplus of the product in the store.