Micro Econ 1

Economics is the study of how evenly goods and services are distributed within society.

False

Pizza is a normal good if the demand

for pizza rises when income rises

Harry is a computer company executive, earning $200 per hour managing the company and promoting its products. His daughter Quinn is a high school student, earning $6 per hour helping her grandmother on the farm. Harry's computer is broken. He can repair it himself in one hour. Quinn can repair it in 10 hours. Harry's opportunity cost of repairing the computer is lower than Quinn's.

False

The gains from specialization and trade are based not on comparative advantage but on absolute advantage.

False

bagel shop sells fresh-baked bagels from 5 a.m. until 7 p.m. every day. The shop does not sell day-old bagels, so all unsold bagels are thrown away at 7 p.m. each day. The cost of making and selling a dozen bagels is $1.00; there are no costs associated with throwing bagels away. If the manager has eight dozen bagels left at 6:30 p.m. on a particular day, which of the following alternatives is most attractive?

Lower the price of the remaining bagels, even if the price falls below $1.00 per dozen.

A decrease in demand shifts the demand curve to the left.

True

A supply schedule is a table that shows the relationship between

a.price and quantity supplied.

A baker recently has come to expect higher prices for bread in the near future. We would expect

a.the baker to supply less bread now than she was supplying previously.

Suppose the income of buyers in a market for an inferior good decreases and a technological advancement occurs also. What would we expect to happen in the market?

b. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

In a market economy, economic activity is guided by

c.self-interest and prices.

What would happen to the equilibrium price and quantity of lattés if the cost of producing steamed milk, which is used to make lattés, rises?

d. The equilibrium price would increase, and the equilibrium quantity would decrease.

Suppose the cost of operating a 75-room hotel for a night is $6,000 and there are five empty rooms for tonight. If the marginal cost of operating one room for one night is $40, the hotel manager should rent one of the empty rooms only if a customer is willing to pay

d. more than $40, because the marginal benefit will exceed the marginal cost.

If the government were to intervene in a market economy and fix the price of visiting a health care provider below the market price, then we would expect, relative to the market outcome,

d.an increase in the number of visits people want to make and a decrease in the number of visits health care providers want to provide.

A circular-flow diagram is a model that

d.helps to explain how the economy is organized.

People are willing to pay more for a diamond than for a bottle of water because

d.the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water.