Macroeconomics Test 1
Which of these items is a normal good? canned food instant noodles steak third-hand cars
Steak
Use the table to answer the question. At what price does this market experience a surplus of 140 units?
$13
Decisions should reflect the ___ costs, rather than just the ___ costs.
opportunity; financial
The interdependence principle states that your best choice today depends on all of these EXCEPT:
past decisions you have made.
Graph C (horizontal supply curve) shows the supply curve for oil. The figure depicts a supply curve that is:
perfectly elastic
Gary is willing to pay $700 for a new iPad. The Apple Store is selling a new iPad for $600. It costs Apple $400 to produce this iPad. How much economic surplus does Apple receive if Gary purchases this iPad?
$200
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.
As the manager of a farm-to-table restaurant, Carlos sets the prices of entrees each day. Today, his restaurant sold out of avocado toast during brunch service, so he had to recommend to some avocado toast aficionados the goat cheese radish tartine with micro greens. Which price did he MOST likely set for avocado toast?
$7.00
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 these statements regarding fixed costs are correct? (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 costs.
(i), (iii), and (iv)
If income rises by 10% and the quantity demanded of an item falls by 30%, the income elasticity of demand for this item is: -0.33. 0.67. 0.33. -3.
-3
The local grocery store cuts the price of milk by 15%. In response to the price cut, the quantity of milk demanded falls by 5%. The absolute value of the price elasticity of demand for milk is ___, and the price elasticity of demand is ___.
0.33; inelastic
Ashley Furniture sells 13,000 couches per month at a price of $800 per couch. When the price falls to $600, the quantity sold rises to 18,500. Use the midpoint formula to calculate the absolute value for price elasticity of demand for couches at Ashley Furniture. 1.69 0.82 0.59 1.22
1.22
Cody is the sole proprietor of his photography business. He specializes in family beach portraits. In the summer vacation season, Cody sells 35 portrait packages per week at $400 per package. In the winter off-season, Cody sells 7 portrait packages per week at $175 per package. Calculate Cody's price elasticity of supply of beach portraits using the midpoint formula.
1.70 (7-35)/((7+35)/2) = -1.33 (175-400)/((175+400)/2) = -0.7826 -1.33/-0.7826 = 1.70
Consider the data in the table. The price of gasoline is $3.99 per gallon. If Rexhall Fuel Supplies is a rational seller, how many gallons of gasoline should it be willing to sell? See google doc 7 42 million gallons per week 14 million gallons per week 30 million gallons per week 20 million gallons per week
20 million gallons per week
(Table: The Demand for Potato Chips) Use Table: The Demand for Potato Chips. If Blair, Serena, and Dan are the only three buyers in the market and the price of a bag of potato chips is $0.60, the total market quantity demanded is ____ bags per month.
205 35+40+130 = 205
You're a management consultant hired by Sunco Lighting, Inc., to estimate the demand for high-efficiency LED light bulbs. The table shows the results of a survey you conducted of four representative consumers in a market of 40,000 consumers overall. You asked the four buyers how many high-efficiency LED light bulbs they would buy in a year at different prices. (Google doc image 4) What market quantity demanded would you project, based on these data, at a price of $7 per bulb? 1,100 2,400 240,000 960,000
240,000
The price of product C rises by 10%. As a result, the quantity demanded of product D rises by 20%. The cross-price elasticity of demand between product C and product D is _____, and they are _____.
2; substitutes
(Figure: Recliners and Couches) American Signature is a furniture company based in Columbus, Ohio. The graph represents American Signature's production possibility frontier for manufacturing couches and recliners. (Check Google Doc 1 for image) The sales team at American Signature has reported that sales of couches have increased. The company would like to increase manufacturing from 100,000 couches to 200,000 couches. As the company's economist, what is the opportunity cost of producing the 100,000 additional couches? 300,000 recliners 100,000 recliners 300,000 couches 100,000 couches
300,000 recliners
When a popular comedian announces a tour, tickets often sell out quickly. However, it is quite common for the tour coordinator to later announce additional shows in the form of matinees and late-evening performances. Why would the tour coordinator include unpublicized additional shows in the tour schedule? Additional shows create extra capacity and increase the tour's price elasticity of supply. People who purchased a ticket consider the comedian's show to be an inferior good. The tour coordinator knows that the price elasticity of demand for tickets is perfectly elastic. Attendees to the shows consider many other comedians' performances to be close substitutes.
Additional shows create extra capacity and increase the tour's price elasticity of supply.
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?
Both the price and quantity would increase.
The building contractor Wise Choice Construction is initially at point E in the multi-family apartment building market. When prices of single-family homes rise, Wise Choice starts to build more single-family homes and fewer multi-family apartment buildings. Which point represents a plausible supply choice for the company in the multi-family apartment building market? See google doc 12 C B A D
C
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.
The demand for disposable diapers is inelastic. Which statement would explain this phenomenon? Disposable diaper purchases consume a large portion of most parents' income. Parents have a lot of time to adjust to price changes. Disposable diapers are a necessity for most parents of infants. There are many substitutes for disposable diapers.
Disposable diapers are a necessity for most parents of infants.
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.
Figure: Four sample demands) A hotel in Cape Cod, Massachusetts, is completely booked during August. However, in September, tourism drops significantly, and some hotel rooms remain empty. Which of the graphs depicts this scenario? (See google doc image 5) Graph A Graph B Graph C Graph D
Graph A
If companies frequently start using drones to deliver products, which graph shows the effect this will have on the market for drones? See google doc 11 Graph A Graph B Graph D Graph C
Graph A
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.
An intern at Purell determines that, of the four options, graph C BEST represents the market demand curve for hand sanitizer at the beginning of the coronavirus pandemic. Demand for hand sanitizer appears to be:
Inelastic
(Figure: Supply Curve for Hotel Rooms) The ligure shows the supply curve for hotel rooms. The figure depicts a supply curve that is:
Perfectly inelastic
The figure shows four different demand curves for four different products. Which of the products has a perfectly inelastic demand curve? See google doc 14 product D product A product C product B
Product A
When faced with a quantity decision, the economic surplus is always maximized by following the:
Rational Rule.
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 supply of drawing paper will decrease. The quantity of drawing paper supplied will increase. 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 down the market demand curve
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.
Which statement is TRUE?
You can acquire both inputs and final goods and services in markets.
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.
Dental services are: a normal good. expenses that do not change with income. an inferior good. a natural good.
a normal good
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.
In which scenario are you NOT part of a market transaction?
You take a photo of flowers in bloom in a city park.
Diane is an avid Gardner. Which graph of the potting soil market illustrates her most probable response if the cost of flowerpots falls?
a (demand increase; demand curve shift to the right)
Figure: Netflix subscriptions) The graph represents monthly Netflix subscriptions. If Hulu, another streaming service, raises its price, what is MOST likely to happen to the demand curve for Netflix? (See google doc 6) a shift from Old demand to New demand 1 a shift from Old demand to New demand 2 a movement from point A to point B a movement from point B to point A
a shift from Old demand to New demand 1
The coffee harvest in many countries is unusually good this year. This entails:
a shift to the right of the entire supply curve for coffee beans.
For normal goods, an increase in income will result in:
an increase in the equilibrium price and the equilibrium quantity.
Rising marginal costs imply:
an upward sloping supply curve
Sunk costs are costs that:
are incurred in the past and cannot be reversed.
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.
(Figure: Demand and Supply of Sugar) Use Figure: Demand and Supply of Sugar. A factor that may have shifted the supply curve from S1 to S2 is:
better technology in the production of sugar.
Diane is a student studying economics and currently working on her class schedule for next semester. She considers the fact that more and more data is available every day and that data interpretation skills are learned by taking additional economics courses in her course selection. This acknowledgment highlights the dependencies that exist:
between markets.
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
The law of demand implies that you will:
buy more goods and services at lower prices.
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: inferior goods. unrelated goods. substitutes in production. complements in production.
complements in production.
A trade-off involves weighing:
costs and benefits
The cross-price elasticity of demand between Fanta and Dr. Pepper has been estimated at 0.61. If the price of Dr. Pepper falls by 10%, the quantity demanded of Fanta will: not change because many people prefer Fanta to Dr. Pepper. increase. decrease by less than 6.1%. decrease by 6.1%.
decrease by 6.1%.
Your economics instructor starts class the first day by asking, "How many of you would pay me $10 for an A in this class? $20? $30? ..." and continues until all of the hands are lowered. The data your instructor collects from this exercise illustrate the:
demand for As.
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
According to the marginal principle, keep increasing quantity until the marginal benefit of an additional item is _____ the marginal cost of an additional item.
equal to
(Figure: Graph 2) In the graph, the movement from point J to point K must have been caused by a(n):
fall in the price of the item.
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. greater than or equal to the marginal benefit. less than the marginal benefit.
greater than or equal to the marginal cost.
Nissan manufactures sedans and pickup trucks. As one of Nissan's economists, you're in charge of ensuring efficient management of costs. At one manufacturing plant, if Nissan devotes all of its resources to manufacturing sedans, it can produce 480,000 sedans per year. If Nissan devotes all of its resources to manufacturing trucks, it can produce 240,000 trucks per year. What is Nissan's opportunity cost of producing one sedan at this manufacturing plant?
half truck
Supply curves typically slope upward because:
higher prices lead businesses to supply more output and more businesses to enter the market.
When there is a shortage of highly skilled workers in a particular region:
highly skilled workers can negotiate higher salaries.
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 Rational Rule for Sellers involves the:
marginal principle, the cost-benefit principle, and the opportunity cost principle.
The _____ is the increase in output that is produced when a business hires an additional worker. marginal product marginal cost total product average product
marginal product
Gasoline prices have been rising. As time passes, people will adjust to the higher price, and the demand for gasoline becomes: steeper. higher. more elastic. more inelastic.
more elastic
Gasoline prices have been rising. As time passes, people will adjust to the higher price, and the demand for gasoline becomes: steeper. higher. more elastic. more inelastic.
more elastic.
In the markets for grocery and household items, some consumers have more elastic responses than others. Stores recognize this and often offer price reductions in the form of coupons. The price elasticity of demand for people who use coupons is _____ elastic than for other consumers because coupon users _____. less; have higher incomes than the average consumer more; are willing to search for a low-cost alternative more; have higher incomes than the average consumer less; are willing to search for a low-cost alternative
more; are willing to search for a low-cost alternative
If the income elasticity of demand for a good is ___, the good is said to be ____.
negative; inferior
If the income elasticity of demand for a good is _____, the good is said to be _____. negative; inferior negative; a complement positive; a substitute positive; inferior
negative; inferior
(Figure: Graph) Refer to the graph to answer the question. A decrease in the price of an item will cause the movement from: (Google Doc Image 3) point P to point W. point N to point M. point T to point P. point Q to point P.
point Q to point P.
The law of supply refers to the: inverse relationship between price and quantity demanded. positive relationship between price and quantity demanded. positive relationship between price and quantity supplied. inverse relationship between price and quantity supplied.
positive relationship between price and quantity supplied.
Much like toilet paper, toothpaste is a necessity. The income elasticity of demand for toothpaste is likely to be _____ and _____. positive; above 1 negative; below −1 negative; close to 0 positive; close to 0
positive; close to 0
A measure of how responsive buyers are to price changes is the: price elasticity of demand. price elasticity of supply. cross-price elasticity of demand. income elasticity of demand.
price elasticity of demand
A measure of how responsive buyers are to price changes is the: price elasticity of demand. price elasticity of supply. cross-price elasticity of demand. income elasticity of demand.
price elasticity of demand.
If quantity demanded responds substantially to a relatively small change in price, demand is: price-elastic. insensitive to changes in price. price-inelastic. positively sloped.
price-elastic
If quantity demanded responds substantially to a relatively small change in price, demand is: price-elastic. insensitive to changes in price. price-inelastic. positively sloped.
price-elastic.
A shortage occurs when:
quantity demanded exceeds quantity supplied
We expect that price will fall when:
quantity supplied is greater than quantity demanded
When plotting a supply curve, you measure: quantity supplied on the vertical axis. quantity supplied on the horizontal axis. price 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.
Dependencies over time reflect the fact that: you have limited resources. society has limited resources. resources are spread across varying markets. resources can be spread across time.
resources can be spread across time.
Diminishing marginal product leads to: increased supply of an item. rising marginal costs for a seller. lower opportunity costs of producing an item. decreased profitability for a seller.
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
Researchers have found a new strain of canola (a grain used to produce canola oil) that is resistant to pesticides and drought while yielding more canola oil. Holding all else constant, this research will:
shift the supply curve for canola oil rightward
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 _____. supply of sawdust; decrease quantity of boards supplied; increase supply of sawdust; increase quantity of sawdust supplied; increase
supply of sawdust; decrease
You notice that the price of computers has risen and that the quantity of computers sold has decreased. These observations suggest that the ___ curve for computers has shifted to the ___.
supply; left
Use Figure: The Demand and Supply of Quinoa. If the price of quinoa is $10 per bushel, a ____ of _____ bushels per period will result.
surplus; 8000
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.
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.
When the marginal benefit of an activity is equivalent, in the rational buyer's mind, to the price of the activity, the rational buyer should do ___ of the activity.
the same amount
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.
If resources are scarce:
they are insufficient to provide enough goods and services to satisfy all human material wants and needs.
(Figure: Leo's marginal benefit) The graph depicts Leo's marginal benefit curve for ride-shares per week. If the price is $4, how many rides will he order this week? (Google Doc image 2) two rides three rides four rides five rides
three rides
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
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:
when quantity supplied equals quantity demanded
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.
Janelle recently received a promotion at her job, increasing her income from $940 per week to $1,060 per week. As a result, she decides to purchase 9% more sushi per week. Computed using the midpoint method, the income elasticity of Janelle's demand for sushi is: 0.90. 1.33. 0.75. 1.00.
0.75
The state of Massachusetts recently saw a 10% increase in the price of electricity, which brought about a 2% fall in the quantity of electricity consumed. The price elasticity of demand is equal to _____, and demand is described as _____. 5; inelastic 0.2; inelastic 5; elastic 0.2; elastic
0.2; inelastic
A city economist is consulting with the public utility companies to determine an optimal pricing plan. When the price of water usage falls by 1%, the quantity demanded rises by 0.44%. The absolute value of the price elasticity of demand for water usage is _____. 0.44 44.0 2.27 1.00
0.44
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.
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.
In the market for organic beef, what would cause a price increase?
a rise in the prices of grass and organic corn
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
The difference between a centralized economy and a market economy is that:
governments make production decisions in a centralized economy, and individuals make production decisions in a market economy.
(Figure: Graph) Refer to the graph to answer the question. The movement from point M to point N represents a(n):
increase in quantity demanded.
In a small town in Kansas, the owner of the town's only gas station claims that he will sell the same quantity of gas no matter how high or low the price. If his assertion is correct, the demand curve for gas at his station must be _____, and the price elasticity is _____. horizontal; infinite vertical; infinite horizontal; zero vertical; zero
vertical; zero
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
In running a summer crab-burger shack by the beach, you incur two types of costs: the rental cost of the shack, and the costs of the ingredients and labor needed to cook the crab-burgers. While you rent the shack for the full summer, you order the ingredients and hire the labor necessary to cook the crab-burgers on a daily basis. Your costs are indicated in the accompanying table: If the market price of crab-burgers is $1.55, how many crab-burgers should you supply on a given day?
35
Janelle recently received a promotion at her job, increasing her income from $940 per week to $1,060 per week. As a result, she decides to purchase 9% more sushi per week. Computed using the midpoint method, the income elasticity of Janelle's demand for sushi is: 0.90. 1.33. 0.75. 1.00.
0.75.
Metformin, a diabetes drug, is produced as a generic by Glumetza. The marginal cost of producing a bottle of Metformin is indicated in the table below in 1,000 unit increments per day. See google doc 8 If the market price of Metformin is $11.65, how many bottles of Metformin should Glumetza produce per day to maximize its profits? 2,000 4,000 3,000 5,000
3000
The price of chicken breast rises from $3.30 per pound to $3.63 per pound. In response to this price change, the quantity demanded for chicken breast falls by 40%. The absolute value of the price elasticity of demand for chicken breast is _____, and the price elasticity of demand is _____. 4.2; elastic 4.2; inelastic 0.24; inelastic 0.24; elastic
4.2; elastic
(Figure: The Demand and Supply of Quinoa) Use Figure: The Demand and Supply of Quinoa. What is the equilibrium quantity of quinoa in each period?
6,000 bushels
(Figure: Four sample demands) What will happen to the demand for upscale restaurant meals if unemployment rises?
Graph A (demand shifts left)
(Figure: Four Supply Curves) Which of these graphs shows what will happen in the market for bread if the price of organic wheat used in bread production rises? See google doc 11 Graph B Graph C Graph D Graph A
Graph C
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.
Steffan, who runs a breakfast kitchen, notices that his business has declined by 25% in recent months and decides to cut his staff accordingly. Steffan can continue to serve his clientele with the same quality of service while reducing his staff by as much as possible if he were to cut his staff:
NOT 25%
An investor is franchising a new type of fitness studio that will be the first in the city and must determine how many locations to open. For each location, they will hire a manager for a salary of $4,000 per month and two part-time employees who will earn $2,000 each per month. The investor values their time spent overseeing each location at $7,500 per month. Additional operating costs, including rent and utilities, will be $6,000 per month at each location. The investor projects that when the business gains traction, the first location will have 1,000 members. The second location will bring in 900 members. The third and fourth locations will bring in 300 and 200 members, respectively. The monthly membership fee will be $70 per member. The investor has decided to definitely open two locations. Should they open a third location? Yes, because marginal benefit would exceed marginal cost. Yes, because marginal cost would exceed marginal benefit. No, because marginal cost would exceed marginal benefit. No, because marginal benefit would exceed marginal cost.
No, because marginal cost would exceed marginal benefit.
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?
The change in price is indeterminate and quantity decreases.
Which of these lists only 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
At Trader Joe's, the price of chocolate chip cookies falls. As a result, you would expect to see
a rise in the quantity demanded of chocolate chip cookies.
Three gas stations make up the market for gasoline in your town. The number of gallons of gasoline that each gas station is willing to supply per week at various prices is indicated in the accompanying table. See Google doc 9 C D B A
c
The graph shows how supply and demand might shift in response to specific events. Suppose a heat wave destroys one-quarter of the nation's potato crop. Which panel BEST illustrates how this event will affect the market for French fries?
c (Supply curve shift left)
In employing the marginal principle, a seller may: compare production of a good or service to the next best alternative. decide whether to supply one more unit of a good or service. decide whether to charge the perfectly competitive price. consider the choices made by other sellers in the market.
decide whether to supply one more unit of a good or service.
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? an increase in the incomes of consumers expectations of a future decline in the price of milk an increase in population the rising popularity of milk
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; rise or fall
In the graph, the movement from point L to point K is caused by a(n): See google doc 10 increase in the price of the item. decrease in the supply of the item. increase in the supply of the item. decrease in the price of the item.
increase in the price of the item.
You manage a restaurant, and lately revenues have been rather poor. One of your servers suggests that raising food prices will increase revenues, but your chef suggests that decreasing food prices will increase revenues. You aren't sure who is right, but you know that your server believes that the demand for your food is ___, and your chef believes that the demand for your food is ___.
inelastic; elastic
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.
You are an economist for a prestigious private university, and the Board of Trustees tasks you with determining how much a tuition increase would impact university enrollment for different types of students. The proposed tuition increase is 10%. The absolute value of the price elasticity of demand for legacy students, that is, students whose parents graduated from the university, is 0.15 and for nonlegacy students it is 0.33. The demand curve for legacy students is _____ elastic than the demand curve for nonlegacy students. The rise in tuition would lower legacy student enrollment by _____%. more; 1.5 less; 3.3 more; 3.3 less; 1.5
less; 1.5
A particular good is said to be ____ if the income elasticity of demand for the good is positive.
normal
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.
(Figure: Graph 1) In the graph, an increase in the price of the item will cause the movement from:
point F to point E
The figure shows four different demand curves for four different products. Which of the products has a perfectly inelastic demand curve? See google doc 14 product D product A product C product B
product A
(Figure: Demand Curves) The figure shows four different demand curves for four different products. Which of the products has a perfectly inelastic demand curve?
product A (Vertical demand curve)
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 decreases. quantity of big screen televisions supplied increases. supply of big screen televisions decreases.
quantity of big screen televisions supplied decreases.
If the price of jet fuel rises, the: supply of jet fuel will increase. quantity of jet fuel supplied will increase. supply of airline flights will increase. supply of jet fuel will decrease.
quantity of jet fuel supplied will increase.
At Walt Disney World in Orlando, Florida, there are both Disney-owned hotels and resorts and, in the surrounding area, independent hotels, motels, resorts, and private home rentals. The independent accommodations are:
substitutes for Disney-owned accommodations but complements to Disney's parks.
Suppose the cross-price elasticity of demand for apple sauce and avocados is 0.96, but the cross-price elasticity for soda and oranges is -0.80. This means that apple sauce and avocados are _____, whereas soda and oranges are _____. substitutes; complements inelastic goods; elastic goods complements; substitutes elastic goods; complements
substitutes; complements
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 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.
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.