Micro Final Exam

Suppose the government imposes a $15 per month tax on internet service. If the demand curve for internet service is perfectly inelastic, and the supply curve is upward-sloping, the monthly price for internet service would increase by

$15

Pudding cups are sold at a price of $3.50 each. The marginal benefit Chelsea receives from each cup is; $5 for the first cup, $4.50 for the second cup, $3.50 for the fourth cup, and $3 for the fifth cup. The marginal cost of producing the cups is $3 each. What is Chelsea's total consumer surplus she would earn purchasing pudding cups in the this market?

$3.00

The sock market is at equilbrium. How much economic surplus is being generated in the sock market?

$45

The price of a carton of eggs is $5, and 100 cartons are sold. The producer is $70, and total surplus equals $150. What is the consumer surplus

$80

The price of candles increases by 50%. As a result, the quantity demanded of matches decreases by 40%. The cross-price elasticity of demand between candles and matches is ______, and they are _______.

-0.80; complements

A characteristic of monopolistic competition that is not present in any other market structure is that there

are many sellers and each produces its own version of the product

San Francisco decides to remove a binding price ceiling on rail fares. Which of the following is likely to happen in the market?

overcrowding on trains will go down

When the absolute value of the price elasticity of demand is infinite, demand is:

perfectly elastic

Suppose that more security guards become aware that wearing Kevlar vests can protect from injury and decide to start wearing Kevlar. At the same time, the price of materials used to produce the vests falls. The equilibrium price of Kevlar vests _______, and the equilbrium quanitty produced ______.

probably changes, but in an ambiguous direction; increases

An increase in the price of shampoo will generally result in a decrease in the:

quantity of shampoo demanded

Taking the absolute value of the cross-price elasticity of demand is incorrect because it would:

remove the ability to tell whether the two products are substitutes or complements

A product that is most likely to have congestion effects is

roads

A good has a free-rider problem when

someone can enjoy the benefits of the good without the bearing the costs

If the price of jet fuel rises, the

supply of airline flights decreases.

Your college roommate has the right to practice her tuba during the day. You, however, find that studying during the day is most conducive to good grades, and her tuba-playing makes it difficult for you to concentrate. You make a deal with your roommate: you will clean the dorm room once a week if she will practice her tuba at other times or elsewhere. This is an example of

the Coase Theorem

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

the demand for paintbrushes to decrease

The price of a car wash falls by 10%. In response to this price change, the quantity demanded for car washes increases by from 100 to 120 car washes. Use the traditional method for calculating percentage change, what is the price elasticity of demand for car washes?

-2

Jamie must give up the production of 75 ties to produce 25 additional dress shirts. The opportunity cost of producing four dress shirts is _______ ties.

12

The price of a pound of grapes rises from $3 to $3.30. In response to this price change, quantity supplied increases from 10,000 pounds to 15,000 pounds. Using the traditional method for percentage change, what is the approximate price elasticity of supply for grapes

5.0

The price elasticity of demand for beef is -0.9. If the price of beef decreases by 10%, how much of an increase would we expect in the quantity demanded of beef

9%

The market for lobster is in equilibrium. Which factor is most likely to INCREASE the equilibrium price of lobster?

an increase in the price of salmon, a substitute in consumption

If Barry's Bagels purchased all of its competitors to become a monopoly, all else equal, price will _______, and output will ________.

Increase; fall

Mila is a dentist who employs an assistant, John. Uf Mila worked all day at the front desk, she could answer 40 emails. If she worked all day with patients, she could clean the teeth of 40 patients. If John worked all day at the front desk, he could answer 60 emails. If he worked all day with patients, he could clean the teeth of 20 patients. ______ has a(n) ________ advantage in ________.

John; comparative; answering emails

Mr. Grassland sells 100 cookies at a price of $5/cookie. if the price is lowered to $4 per cookie, Mr. Grasslands can sell 125 cookies. Each cookie costs $1 to produce. You are asked to consult for Mr. Grasslands, to help the company maximize revenue. Which of the following should you recommend?

Mr. Grasslands will earn the same revenue whether cookies for sold for $4 or $5

Mrs. Fields runs a similar cookie production company in another state. She also finds that she sells 100 cookies at a price of $5/cookie. Similarily, if Mrs. Fields, lowers her price to $4 per cookie, she can sell 125 cookies. Each cookie costs $1 to produce. You are asked to consult for Mrs. Fields, to help the company maximize profit. Which of the following should you recommend?

Mrs. Fields should charge $5 per cookie in order to maximize profit

the tragedy of the commons is the:

Tendency to overconsume common resources

In the market for chimichangas, which factor would NOT shift the supply curve to the left?

a decrease in the price of chimichangas

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

A market is described by these two equations: Qd = 70 - 2P, and Qs = 10 + p. if the price in this market is currently $10/unit, there will be:

a shortage of 30 units

An externality is defined as:

a side-effect of an activity that affects bystanders whose interests are not taken into account.

when quantity supplied exceeds quantity demanded, ____ exists

a surplus

Suppose the average cost of an ophthalmologist visit $80. If the government imposes a price floor of $150 on the cost of an ophthalmologist visit, there will be

an excess availability of time slots for ophthalmologist visits

Suppose that the demand for and supply of a good are each neither perfectly inelastic nor perfectly elastic. If a tax on consumers of the good is imposed, the tax is paid by

both the buyers and the sellers

If Penelope, a monopolist, is producing a quantity where MC > MR, then profit:

can be increased by decreasing production

Spaghetti and salad are related goods. Holding everything else constant, if the price of spaghetti decreases and the demand for salad increases, spaghetti and salad are probably:

complements

Your personal best interest is based on the ________, and society's best interest is based on ________

costs and benefits you face personally; the costs and benefits of everyone

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

nonrival

Suppose the input costs associated with manufacturing bobsleds increase. This would lead to a(n):

decrease in the supply of bobsleds, higher prices, and a decrease in the equilibrium quantity

If baseball bats and furniture are substitutes in production, then a rise in the price of baseball bats

decreases the supply of furniture

Suppose the price of hand sanitizer decreases by 1%, and the quantity of cupcakes demanded increases by 100%. Demand for cupcakes is:

elastic

certain activities, such as companies polluting or dumping toxic waste, generate external costs that will likely be carried out at levels ______ those that would be efficient

exceed

the difference between a club good and a public good is that a club good is _________ and a public good is _________

excludable and nonrival; nonexcludable and nonrival

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

You read that college tuition is rising every year, and yet more students attend college every year. Isn't this a violation of the law of demand?

false

When a good is nonrival and nonexcludable, it suffers from the _______ problem

free-rider

Coworkers Evelyn and Reginald are washing the windows and waxing the floors of the dollar store at which they work. They know that to finish both tasks as quickly as possible, each should focus on just one task, but they don't know who should do what. Evelyn and Reginald should determine which one:

has the comparative advantage in window washing

Countries benefit from trade by importing goods in which their opportunity costs are relatively ______ and exporting goods in which their opportunity costs are relatively __________

high; low

Over the past few years, the technology associated with producing flat-panel televisions has improved. This has led to ________ in ________ flat-panel televisions.

increase; supply of

The socially optimal outcome is the outcome that:

is most efficient for society as a whole, including for buyers, sellers, and bystanders.

If a firm expects the good it produces to sell for lower prices in the future

it will increase supply today

If a country has the comparative advantage in producing wine, the domestic equilibrium price of wine without trade in the country would be ________ the world price, and the country would _________ wine

less than; export

Jasmine can either commute to work using a bus or purchase a new car. The bus fare each way is $2. Jasmine works five days a week for 50 weeks a year. Based solely on the benefit of avoiding the cost of her bus tickets, Jasmine should purchase a car if the cost of the car is _____ than _______ per week.

less; $20

Marginal private cost plus marginal external cost equals _______ cost

marginal social

Suppose the price of peanut butter rises. As time passes, people adjust to the higher price by finding other substitutes for peanut butter, and the demand for peanut butter becomes

more elastic

What happens at equilibrium price and quantity in a market when demand decreases and simultaneously supply decreases, and the relative size of the shifts is not known?

the equilibrium quantity falls, and the change in the equilibrium price is ambiguous

If Taylor Swift concert tickets are sold out within five minutes of being released, and many other consumers were unable to buy the quanitty of tickets they would have liked to, we can conclude that

there is a shortage of taylor swift concert tickets in the market

A downward sloping demand curve implies

there is an inverse relationship between price and quantity demanded

Economists generally believe that a person should specialize in the production of a good or service if:

they can produce the product while forgoing fewer alternative products than any other person

The demand for frozen burritos is very inelastic compared to the supply of frozen burritos, so if a tax is imposed on consumers of frozen burritos, the tax incidence

will fall on consumers more than producers

In which of the following situations would Maria's Doughnut Shop have the LEAST market power?

within three miles, there are five other doughnut shops and three bakeries that sell breakfast pastries

King Taco charges the same price for everything on its menu: $5 will buy a taco, a burrito, or nachos. You buy the burrito and think that if you had not purchased the burrito, you would have purchased the taco. The opportunity cost of the burrito is:

your forgone enjoyment of the taco