Micro-final
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 $2 $1 $6
$4
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? The opportunity cost principle The cost-benefit principle Diminishing marginal product The marginal principle
Diminishing marginal product
What is quantity supplied? It is a graph that plots the quantities of an item that a seller plans to sell at different prices. It is the amount of an item that a seller is willing to sell at a particular price. It is a graph that plots how much a seller produces at different points in time. It is the amount of an item that a buyer is willing to buy at a particular price.
It is the amount of an item that a seller is willing to sell at a particular price.
In which market structure do the actions of a rival have a significant impact on your operations? Monopoly Perfect competition Monopolistic competition Oligopoly
Oligopoly
Which of the following are true of statistical discrimination? There may be more than one correct answer. "Ban the box" laws not allowing employers to ask potential employees whether or not they have been in jail is increasing discrimination against Black men, particularly those without a college degree. Some employers run complex statistical analysis of candidates' resumes before deciding who to interview for a position. Statistical discrimination occurs when employers discriminate against job candidates based on an irrelevant but observable characteristic which correlates to an unmeasurable but relevant characteristic. Statistical discrimination occurs when firms base hiring decisions on which candidate will improve the firm's diversity statistics.
"Ban the box" laws not allowing employers to ask potential employees whether or not they have been in jail is increasing discrimination against Black men, particularly those without a college degree. Statistical discrimination occurs when employers discriminate against job candidates based on an irrelevant but observable characteristic which correlates to an unmeasurable but relevant characteristic.
Chin purchases five protein bars at a price of $3 each. The marginal benefit he receives from each bar is $5 for the first bar, $4.50 for the second bar, $4 for the third bar, $3.50 for the fourth bar, and $3 for the fifth bar. The marginal cost of producing the bars is $2 each. What is Chin's consumer surplus on the fifth bar? $2 $1 $0 $.50
$0
Chin purchases five protein bars at a price of $3 each. The marginal benefit he receives from each bar is $5 for the first bar, $4.50 for the second bar, $4 for the third bar, $3.50 for the fourth bar, and $3 for the fifth bar. The marginal cost of producing the bars is $2.50 each. What is Chin's total consumer surplus from the five bars that he purchased? $.50 $2.50 $5 $0
$5
Portia produces and sells headbands. Her marginal cost for one headband is $6, and her average cost is $4. She gains producer surplus only when she sells headbands at a price above: $10. $6. $4. $5.
$6.
A tax on buyers causes which of the following? (i) a leftward shift of the demand curve (ii) a decrease in quantity sold (iii) an increase in the price buyers pay (ii) and (iii) only (i) (i), (ii), and (iii) (i) and (iii)
(i), (ii), and (iii)
A tax on sellers causes which of the following? (i) a leftward shift of the supply curve (ii) a decrease in quantity sold (iii) an increase in the price buyers pay (i) and (iii) only (i) (i), (ii), and (iii) (ii) and (iii)
(i), (ii), and (iii)
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) (ii) and (iv) only (i) (i) and (ii)
(i), (ii), and (iii)
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), (ii), (iii), and (iv) (ii) and (iv) (i), (ii), and (iii) (i), (iii), and (iv)
(i), (iii), and (iv)
The price of product A is cut by 30%. As a result, the quantity demanded of product B rises by 40%. The cross-price elasticity of demand between product A and product B is _____, and they are _____. -1.33; complements -1.25; complements 1.25; complements -0.75; substitutes
-1.33; complements
The price of milk at the local grocery store rises by 25%, and the quantity of milk demanded falls by 10%. The absolute value of the price elasticity of demand for milk is _____, and demand is _____. 2.5; inelastic 0.4; elastic 0.4; inelastic 2.5; elastic
0.4; inelastic
If income rises by 20% and the quantity demanded of an item rises by 10%, the income elasticity of demand for this item is: 0.5. -0.5. -2. 2.
0.5.
The price of milk at the local grocery store is cut by 15%, and the quantity of milk demanded increases by 10% in response. What is the absolute value of the price elasticity of demand for milk? -1.5 -0.67 1.5 0.67
0.67
The price of a dozen eggs falls from $3 to $2.70. In response to this price change, the quantity supplied of eggs falls from 100,000 dozen eggs to 75,000 dozen eggs. What is the price elasticity of supply for eggs? 0.5 2.7 0.37 2
2.7
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 1.5; complements -2; substitutes 0.5; substitutes
2; substitutes
What is collusion? A merger of two sellers Regulatory restrictions on the entry of new sellers into an industry Agreements between sellers to increase their market power Cooperation between sellers to increase the level of competition
Agreements between sellers to increase their market power
Which of the following scenarios depicts a seller who is following the Rational Rule for Sellers? Mindy sets up a lemonade stand and calculates the cost of an additional cup of lemonade at 50 cents, and sells it for 25 cents. An auto-rickshaw driver in New Delhi, India, calculates a trip to have a marginal cost of 350 rupees and accepts a ride request for 315 rupees. American Airlines determines the marginal cost of an extra passenger to be $75 and sells a discount seat for $250. Andy's Diner finds that the marginal cost of a fish and chips meal is $7 and lists the item for sale at $6.50.
American Airlines determines the marginal cost of an extra passenger to be $75 and sells a discount seat for $250.
What conditions must be met for private bargaining to be effective in resolving an externality? Taxes must be low, and regulations must be minimal. Bargaining costs must be low, and property rights must be clear. Property rights must be clear, and production must begin at a socially optimal level. There must be trade in public goods.
Bargaining costs must be low, and property rights must be clear.
Which of the following statements describes the Coase Theorem? Elimination of an externality is possible only when the marginal benefit of a good is no higher than its marginal cost. If bargaining is costless, and property rights are clearly established and enforced, then externality problems can be solved through private bargaining. Even if bargaining is not costless, and property rights are unclear, externality problems can be solved through private bargaining. If the marginal benefit of a good exceeds the good's marginal cost, more of it should be produced.
If bargaining is costless, and property rights are clearly established and enforced, then externality problems can be solved through private bargaining.
Which of the following is a positive economic statement? That company with a 50% profit rate made too much profit at the expense of consumers. A 10% inflation rate is too high and should be reduced. If the government raises taxes, people will have less income available for purchases and saving. The government ought to balance its budget and eliminate the deficit.
If the government raises taxes, people will have less income available for purchases and saving.
How is the economic surplus generated by a decision calculated? It is the sum of benefits arising from the decision. It is the total benefits plus total costs 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.
It is the total benefits minus total costs arising from the decision.
If Italy is said to have an absolute advantage over Canada in the production of leather, this means that, given the same resources; Canada must have a comparative advantage over Italy in the production of leather. Italy can produce more leather than Canada. Italy must have an absolute advantage over Canada in producing all goods. Canada must have an absolute advantage in producing some good other than leather. Italy has an absolute advantage in all goods that are complements to leather.
Italy can produce more leather than Canada.
Which of the following scenarios illustrates the law of demand? A research company finds that the more expensive a particular brand of a designer handbag, the more that consumers are willing to purchase the brand. John likes to drink spring water. At $2 he buys four bottles of water, and at $1.50 he still buys four bottles of water. Francis does not care about the price of coffee at the coffee shop - he must buy two cappuccinos every day, regardless of the price. Kathleen eats more steak when the price is low, and less when the price is high.
Kathleen eats more steak when the price is low, and less when the price is high.
If Mary can bake a cake at a lower opportunity cost than Sarah can, then: Mary can bake more cakes than Sarah can in a given amount of time. Mary should not bake cakes. Sarah has a comparative advantage in baking cakes. Mary has a comparative advantage in baking cakes.
Mary has a comparative advantage in baking cakes.
Mary loves avocados and must consume avocados every week, regardless of the price. Which of the following must be true? Mary has an elastic demand for avocados. All consumers in the market have a high demand for avocados. Mary has an inelastic demand for avocados. Avocados are in large supply in the market.
Mary has an inelastic demand for avocados.
Patents on drugs to treat AIDS were removed in South Africa. How would the market for these drugs have been different if there had never been patents on drugs? The drugs would not have been developed. Larger quantities of the drugs would have been produced. The drug prices would have been even higher. The drug prices would have been lower from the start.
The drugs would not have been developed.
Which of the following is NOT a factor that can shift supply? The price of a substitute-in-production. The expected future price of a product. The price of a complement-in-production. The market price of a product.
The market price of a product.
A binding price floor in a market is removed. Which of the following is likely to occur as a result? The market price will rise. The market price will fall. The demand for the item will fall. The supply of the item will rise.
The market price will fall.
Which principle tells you that the true cost of something is the next best alternative you have to give up to get it? The marginal principle The cost-benefit principle. The interdependence principle. The opportunity cost principle.
The opportunity cost principle.
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? A new robot has been installed at the Mars chocolate company that reduces the time needed to produce M&Ms by half. Consumers are now purchasing fewer M&Ms compared to other types of chocolates. A new study finds that the benefits of eating chocolate are not as great as previously thought. The supply of cacao beans, used to produce chocolate, has fallen around the world.
The supply of cacao beans, used to produce chocolate, has fallen around the world.
Which of the following illustrates a positive externality? Martin's company experiences an increase in profits due to his cost-cutting initiatives. Artem loses sleep when an airport is built near his home, and planes fly overhead. The value of Maria's house rises when the city builds a park nearby, enhancing her view. Ella can buy a shirt at half price because someone else returned it.
The value of Maria's house rises when the city builds a park nearby, enhancing her view.
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. There is a surplus of the item. There is decreased demand for the item. New sellers are offering the same product.
There is a shortage of the item.
Which of the following is a characteristic of monopoly that is not present in other market structures? Sellers are price-takers. The product is identical across all sellers. There are many buyers. There is only one seller.
There is only one seller.
Why are supply curves typically upward-sloping? They slope upward because sellers demand more when prices are lower. They slope upward because sellers prefer to sell more when prices are lower. They slope upward due to the law of demand. They slope upward because higher prices lead individual businesses to supply a larger quantity and more businesses are willing to supply goods and services.
They slope upward because higher prices lead individual businesses to supply a larger quantity and more businesses are willing to supply goods and services.
Which of the following statements is based on normative analysis? We should protect the environment. The temperature in the office room is 22 degrees centigrade. Mario is 24 years old. When the burner beneath a pot of water on the stove is turned on, the water will heat up.
We should protect the environment.
Alena manages a small theme park. She hires one more custodian at $450 per week, and her park is cleaner and more attractive. As a result of this improvement, ticket sales rise by 40 tickets per week. Tickets sell for $12. Use the Rational Rule for Employers to determine if hiring the extra custodian was a good move. Yes, it was a good move because the ticket sales rose more than price. Yes, it was a good move because it added more to revenue than to cost. No, it was a bad move because it added more to cost than revenue. No, it was a bad move because price did not rise as much as ticket sales.
Yes, it was a good move because it added more to revenue than to cost.
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. You will be able to sell only the highest-quality pumpkins. You will wind up with many unsold pumpkins. You will take fewer pumpkins to the market to sell.
You can charge a higher price per pumpkin.
A tax on sellers shifts the: demand curve to the right. supply curve to the left. demand curve to the left. supply curve to the right.
supply curve to the left.
A normal good is: a good which is normally purchased by many consumers. a good for which higher income causes an increase in demand. a good which is only purchased by high-income consumers. a good for which higher income causes a decrease in demand.
a good which is only purchased by high-income consumers.
A subsidy is a: a government payment designed to encourage particular purchases or productive activities. a tax designed to encourage particular purchases or productive activities. government regulation of the quantity sold in a market. form of tax.
a government payment designed to encourage particular purchases or productive activities.
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 centrally planned market. a market in action. a shortage. perfect competition.
a market in action.
A market with many small sellers and a high level of product differentiation is known as a monopolistically competitive market. a monopoly. an oligopoly. a perfectly competitive market.
a monopolistically competitive market.
Walmart has a large aisle that displays many different kinds of toothpastes. This observation indicates that the toothpaste market is a perfectly competitive market. a monopoly. an oligopoly. a monopolistically competitive market.
a monopolistically competitive market.
An externality is defined as: an effect of market activity that impacts the opposite side of the market from the side whose decision caused the effect. the impact of an activity on buyers and sellers in the market where the activity takes place. a side-effect of an activity that affects bystanders whose interests are not taken into account. the effect of an activity undertaken outside a building rather than inside a building.
a side-effect of an activity that affects bystanders whose interests are not taken into account.
Which of the following would be both nonrival and nonexcludable? a museuman immunization a road a siren tornado warning system
a siren tornado warning system
In a market graph, consumer surplus is the area: between the demand curve and the supply curve. above the price and below the demand curve. above the price. below the demand curve.
above the price and below the demand curve.
Which term best describes the situation that, relative to England, France can produce beef at a lower cost of production (i.e., can produce beef using fewer inputs)? absolute advantage appreciating currency comparative advantage black market budget constraint compound interest
absolute advantage
A binding price floor is: always above the equilibrium price. always below the equilibrium price. always at the equilibrium price.t he maximum price that a seller can charge in a market.
always above the equilibrium price.
Quantity demanded is on the horizontal axis when you plot a demand curve and shows the: amount of a good that a person actually buys at the market price. amount of a good that a person is willing to buy at each price. amount where opportunity cost is equal to the marginal benefit. amount of a good that a seller is willing to sell at a particular price.
amount of a good that a person is willing to buy at each price.
Marjean walks to work every day along a busy road. As she does so, she breathes in the fumes of many cars, often arriving at work coughing. The economic term for the impact of the cars on Marjean is: an alternative action. an externality. exploitative supply. a nonmarket repercussion.
an externality.
You have a comparative advantage if you can complete a task: using fewer inputs than anyone else. at a higher opportunity cost than anyone else. using more inputs than anyone else. at a lower opportunity cost than anyone else.
at a lower opportunity cost than anyone else.
People gain consumer surplus when they purchase an item: at an equitable price. with a marginal benefit below the price of the item. at a price below the value of the benefit they receive from the item. at a price above marginal revenue but lower than the cost of production.
at a price below the value of the benefit they receive from the item.
Graphically, shortages will always occur: at the equilibrium price. at prices below the equilibrium price. at prices above the equilibrium price. when the quantity supplied exceeds the quantity demanded.
at prices below the equilibrium price.
In a voluntary economic transaction between a buyer and a seller, _____ can earn economic surplus from the transaction. neither the buyer nor the seller only the seller both the buyer and the seller only the buyer
both the buyer and the seller
Joshua Murphy is planning on studying late into the night for his economics exam. How many cups of coffee should he buy tonight? Joshua should keep buying coffee throughout the evening until the marginal: cost of purchasing one more coffee is positive. benefit of purchasing one more coffee equals the marginal cost. benefit of purchasing one more coffee is positive. benefit of purchasing one more coffee is less than the marginal cost.
benefit of purchasing one more coffee equals the marginal cost.
The key to using the cost-benefit principle is to think about _____ aspects of a decision. neither financial nor nonfinancial both financial and nonfinancial only nonfinancial only financial
both financial and nonfinancial
The economic burden of a tax is the: laws governing sales taxes in a country. percentage increase in the tax on an item. government-designated burden of a tax payment. burden created by the change in after-tax prices faced by buyers and sellers.
burden created by the change in after-tax prices faced by buyers and sellers.
To get maximum output, you should allocate each task to the person who: has a cost advantage in completing the task. has an absolute advantage in completing the task. can do the task with the lowest opportunity cost. can do the task with the smallest amount of input.
can do the task with the lowest opportunity cost.
You have an absolute advantage in producing a product if you: have the most capital to work with. can produce the product at the lowest opportunity cost. have training in producing it. can produce the product using the fewest inputs.
can produce the product using the fewest inputs.
Which of the four options best represents specialization and its relationship with trade? absolute advantage economic crises comparative advantage all the above
comparative advantage
Specialization will increase output when it is based on: comparative advantage. who can produce the fastest. who can produce at the least comparative cost. absolute advantage.
comparative advantage.
The cost-benefit principle states that _____ are the incentives that shape decisions. costs and benefits incomes framing effects opportunity costs
costs and benefits
When the economic surplus in a market is less than it would be if the market were efficient, the market is experiencing: an inverse externality. deadweight loss. asymmetry problems. a situation in which marginal benefit equals marginal cost.
deadweight loss.
In 2016, Amazon began charging a 5.75% sales tax on products it sells in the District of Columbia. Holding all else constant, the effect of this tax would be to _____ in the District of Columbia. decrease the number of consumers increase Amazon sales decrease prices for local businesses decrease Amazon sales
decrease Amazon sales
A subsidy for buyers of a product shifts the: supply curve to the left. supply curve to the right. demand curve to the right. demand curve to the left.
demand curve to the right.
The cross-price elasticity of demand measures how responsive the: demand for one good is to a change in the demand for another good. supply of one good is to a change in the price of another good. price of a good is to a change in the price of another good. demand for one good is to a change in the price of another good.
demand for one good is to a change in the price of another good.
Buyers bear a smaller incidence of the tax when: demand is perfectly inelastic. demand is more elastic than supply. supply is more elastic than demand.the tax is higher.
demand is more elastic than supply.
An equilibrium price is: the price that prevails when there is a shortage. the price that prevails when quantity supplied is less than quantity demanded. the price that occurs when there is a surplus. determined by the intersection of the demand and supply curves.
determined by the intersection of the demand and supply curves.
Why does an employer's labor demand curve slope downward? diminishing product demand marginal cost adjustment substitution rule diminishing marginal product
diminishing marginal product
If Bishan wants to capitalize on comparative advantage in his life, then he should: compare his preferences to those of others and trade with those who like things he does not like. do more of what he has an absolute advantage in and trade for other things. do more of what he is relatively good at and then trade for other things. produce either goods or services but not both.
do more of what he is relatively good at and then trade for other things.
When the absolute value of the price elasticity of demand is greater than 1, demand is: perfectly inelastic. inelastic. elastic. unit elastic.
elastic.
According to the marginal principle, keep increasing quantity until the marginal benefit of an additional item is _____ the marginal cost of an additional item. greater than equal to less than greater than or less than
equal to
The marginal private benefit is the: addition to the satisfaction a buyer receives from the total quantity of a product consumed. total extra benefit society gains from the consumption of an extra unit of a good. extra benefit that goes to bystanders for each additional unit of a good consumed by others. extra benefit enjoyed by the buyer of one extra unit of a good or service.
extra benefit enjoyed by the buyer of one extra unit of a good or service.
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: rise, due to a rise in demand. fall, due to a fall in demand. rise, due to a fall in supply. fall, due to a rise in supply.
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 not go; greater not go; less go; less
go; greater
The statutory burden of a tax is the: laws governing sales taxes in a country. percentage increase in the tax on an item. government-designated burden of a tax payment. burden created by the change in after-tax prices faced by buyers and sellers.
government-designated burden of a tax payment.
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 benefit. less than the marginal cost. greater than or equal to the marginal cost. 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: there is a corresponding surplus of low-skilled workers in the region. unemployment rises among highly skilled workers. highly skilled workers can negotiate higher salaries. the incomes of highly skilled workers fall.
highly skilled workers can negotiate higher salaries.
"If we know the marginal social cost [of pollution] emissions, a tax is better, but if we know the optimal quantity, cap and trade is better." Given this statement and the knowledge of ways governments can intervene in markets, evaluate the following statement: Any outcome that can be achieved by taxing can also be accomplished by establishing a quota. This is because if we know the marginal social cost, we can set the optimal quantity equal to the optimal price. If we know the optimal quantity, we can set a quota equal to the optimal price. knowing the marginal social cost allows companies to know how much to increase their prices and make more profits. This is better for the economy as a whole because then companies can create more jobs. Cap and trade restricts quantity, which lowers profits. if we know the marginal social cost, we can set the tax so that price is equal to the optimal price. As a result, the optimal quantity will be achieved. If we know the optimal quantity, we can set a quota and the market will find the optimal price. if we know the optimal quantity, cap and trade can be used to set the price. If we know the marginal social cost, a tax can be used to set the quantity.
if we know the marginal social cost, we can set the tax so that price is equal to the optimal price. As a result, the optimal quantity will be achieved. If we know the optimal quantity, we can set a quota and the market will find the optimal price.
The interdependence principle: implies that buyers decisions are affected by many factors other than the price of an item. implies that consumers depend on each other to make purchase decisions in the market. refers to the marginal benefit of consuming additional units of an item. is the same as the cost-benefit principle.
implies that consumers depend on each other to make purchase decisions in the market.
a rightward movement along the demand curve signifies what?
increase in QD
Suppose the percentage change in newspapers demanded for any price change is infinite. The absolute value of the elasticity of demand for newspapers is _____, and demand is _____. infinity; perfectly elastic 0; perfectly inelastic infinity; perfectly inelastic 0; perfectly elastic
infinity; perfectly elastic
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 cost-benefit opportunity cost marginal
interdependence
Diminishing marginal benefit: is when buying an additional item yields a smaller marginal benefit than the previous item. is when consumers do not follow the rational rule. is not important in determining a consumer's purchase decision. is when buying an additional item yields a larger marginal benefit than the previous item.
is when buying an additional item yields a smaller marginal benefit than the previous item.
A rational buyer will: keep buying a product until marginal benefit equals price. buy the product only when the marginal benefit of consuming the product is twice as much as the price of the product. not consider costs versus benefits when purchasing a product. buy a product until the marginal benefit of consuming the product is less than the price of the product.
keep buying a product until marginal benefit equals price.
what we expect to see in the market for printing paper if the price of printing paper rises?
left shift in the already existing demand curve (QD)
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. greater; $150 greater; $75 less; $75 less; $150
less; $150
The __________ suggests, decisions about quantities are best made incrementally. interdependence principle opportunity cost principle marginal principle cost-benefit principle
marginal principle
The marginal revenue from hiring an additional worker is known as marginal revenue product. marginal worker revenue. labor marginal product. labor marginal revenue.
marginal revenue product.
A quantity regulation is a: limit on how many firms can operate in a market. minimum or maximum price that can be charged. minimum or maximum quantity that can be sold. limit on the number of consumers allowed in a market.
minimum or maximum quantity that can be sold.
Suppose the price of gasoline rises. As time passes, people adjust to the higher price by searching for the alternatives. The demand for gasoline becomes: more elastic. steeper. more inelastic. higher.
more elastic.
A market consists of ten similar suppliers that are making the same supply decisions. To find the market supply of these ten suppliers, you: take the individual supply of one supplier. multiply the individual supply of one of the suppliers by ten. find the average quantity produced by the ten suppliers. take one-tenth of the individual supply of each supplier and add it up.
multiply the individual supply of one of the suppliers by ten.
how does new technology shift supply
new tech shifts the supply curve to the right
A good is characterized as _____ when one person's use of the good does not reduce another person's ability to use the same unit of the good. shareable nonexcludable nonrival free
nonrival
Statements about what option should be chosen are _____ statements. assessment valuation positive normative
normative
When a company has market power, it is _____ in its market. one of many small companies not able to impact the market equilibrium price a producer of nondifferentiated products not a price-taker
not a price-taker
When you calculate marginal costs, they should include: only fixed costs. the market price of the product. both the variable and fixed costs. only variable costs.
only variable costs.
By contrast with a market that produces the socially optimal output, a market with negative externalities will: underproduce. produce the correct output. produce no output. overproduce.
overproduce.
When the absolute value of the price elasticity of demand is infinite, demand is: perfectly inelastic. inelastic. perfectly elastic. elastic.
perfectly elastic.
The price elasticity of demand for a good with a vertical demand curve is: inelastic. elastic. perfectly inelastic. perfectly elastic.
perfectly inelastic.
Analysis that describes what would happen if various actions were taken is _____ analysis. normative partitioning positive valuation
positive
What type of relationship exists between the level of a company's market power and the price that its owner is able to charge for its product? negative positive circular opposing
positive
The opportunity costs of attending college include the: cost of clothes to wear at school. cost of room and board. effort and hard work. potential income that could be earned working.
potential income that could be earned working.
The producer surplus on a unit sold equals: 1/2 (price times quantity minus marginal cost). marginal benefit minus price. (price minus marginal cost) multiplied by (1/2 quantity sold). price minus marginal cost.
price minus marginal cost.
Graphically, the equilibrium quantity can be identified as the: quantity corresponding to the intersection of the demand and supply curves. quantity corresponding to the intersection of the demand curve and the price axis. maximum quantity that buyers are willing to buy. maximum quantity that sellers are willing to sell.
quantity corresponding to the intersection of the demand and supply curves.
A shortage occurs when: quantity supplied exceeds quantity demanded. when there is insufficient demand. there is excess production. quantity demanded exceeds quantity supplied.
quantity demanded exceeds quantity supplied.
In 2017, eBay started charging a 20% value-added tax on fees charged to small businesses in the United Kingdom. Holding all else constant, this would _____ in the United Kingdom. raise the prices that eBay sellers charge their customers shift the demand for eBay products to the right shift the supply curve of eBay products to the right lead to increased sales for eBay sellers
raise the prices that eBay sellers charge their customers
The main role of markets is: facilitating consumption. preventing waste in choices. providing jobs and products. reallocating resources to better uses.
reallocating resources to better uses.
Taking the absolute value of the income elasticity of demand is incorrect because it would: cause the value of the cross-price elasticity of demand to become zero. remove the ability to tell whether the product is an inferior good or a normal good. cause the value of the cross-price elasticity of demand to become smaller. remove the ability to tell whether the two products have inelastic demand or elastic demand.
remove the ability to tell whether the product is an inferior good or a normal good.
You are given data on four products — toothpaste, shampoo, soap, and laundry detergent. The absolute value of the price elasticity of demand for toothpaste is 4. The absolute value of the price elasticity of demand for shampoo is 0.2. The absolute value of the price elasticity of demand for soap is 0.5. The absolute value of the price elasticity of demand for laundry detergent is 2. Which product has the most inelastic demand? shampoo laundry detergent toothpaste soap
shampoo
The outcome that is most efficient for society as a whole — including the interests of buyers, sellers, and bystanders — is the _____ outcome. socially optimal social benefit maximizing externally optimal public optimal
socially optimal
A good has a free-rider problem when: any seller provides it for free as a special promotion. someone can enjoy the benefits of the good without bearing the costs. it can be transported at no cost to the consumer, with sellers bearing all transportation costs. it has no negative externalities but only positive externalities.
someone can enjoy the benefits of the good without bearing the costs.
An individual demand curve is a graph: that plots the market price of a product at different points in time. that plots the quantity of an item that someone plans to buy, at one single price point. that plots the quantity of an item that a seller plans to sell, at each price. that plots the quantity of an item that someone plans to buy, at each price.
that plots the quantity of an item that someone plans to buy, at each price.
Which principle helps buyers and sellers make decisions about whether to trade? the equity principle the law of diminishing returns the cost-benefit principle the law of surplus
the cost-benefit principle
Paint and paintbrushes are complements. If the price of paint rises, we can expect: the demand for paintbrushes to increase. the quantity demanded of paint to increase. the quantity demanded of paintbrushes to remain unchanged. the demand for paintbrushes to decrease.
the demand for paintbrushes to decrease.
The marginal benefit minus the marginal cost equals: the consumer surplus minus the producer surplus. the efficiency balance. the consumer surplus. the economic surplus.
the economic surplus.
The Rational Rule for Society is that society should produce another unit of a good if: the marginal social benefit exceeds the marginal social cost. the marginal private benefit exceeds the marginal private cost. the total social benefit exceeds the total social cost. gains to the producer exceed losses to the producer.
the marginal social benefit exceeds the marginal social cost.
A price ceiling is: the minimum price that a seller can charge in a market. the maximum price that a seller can charge in a market. the average price that a seller can charge in a market. any price above the equilibrium price.
the maximum price that a seller can charge in a market.
The Rational Rule for Employers implies that they keep hiring until marginal product equals marginal revenue. revenue equals cost. the wage equals marginal product. the wage equals the marginal revenue product of the last worker hired.
the wage equals the marginal revenue product of the last worker hired.
Externalities tend to occur because decision makers consider _____ and do NOT consider _____. their own income as limitless; their income as limited their own costs and benefits; the effects of their actions on others their own needs as most important; the fact that others also have needs the welfare of others; their own welfare
their own costs and benefits; the effects of their actions on others
A downward-sloping demand curve implies: buyers are willing to buy less when prices are lower. there is a positive relationship between price and quantity demanded. there is no relationship between price and quantity demanded. there is an inverse relationship between price and quantity demanded.
there is an inverse relationship between price and quantity demanded.
In a perfectly competitive labor market, employers will not pay less than the market wage because at a wage below the equilibrium they would be inundated with excess workers. they would not be able to hire anyone. there would be a surplus of workers. the equilibrium wage would rise.
they would not be able to hire anyone.
Variable costs are the costs that are independent of the amount of output produced. are incurred to build factories and assembly plants. stay fixed with the quantity of output produced. vary with the quantity of output produced.
vary with the quantity of output produced.
In a labor market graph, _____ is measured on the vertical axis, and _____ is measured on the horizontal axis. product price; number of workers wage; hours of labor number of workers; product price hours of labor; wage
wage; hours of labor
An equilibrium in a market occurs: when suppliers have sold all the goods and services that they have produced. when the quantity supplied equals the quantity demanded. at the halfway point on the price axis. at the halfway point on a demand curve.
when the quantity supplied equals the quantity demanded.
To avoid harm to society, the government often becomes the supplier of a good or service when the respective market has high profit, and the government can use those to replace tax revenue. has been engaging in illegal activities that the government seeks to eliminate. would be competitive enough to cause surpluses to develop. would be a natural monopoly, and the good or service is considered essential.
would be a natural monopoly, and the good or service is considered essential.
Dependencies between your own choices reflect the fact that: resources can be spread across time. you have limited resources. society has limited resources. resources are spread across varying markets.
you have limited resources.