Micro- Module 1

The equilibrium price and quantity are a. $0.00 and 350 cases. b. $4.00 and 250 cases. c. $2.00 and 300 cases. d. $6.00 and 200 cases.

$2.00 and 300 cases

Refer to Table 4-6. The equilibrium price and quantity, respectively, are a. $2 and 65 units. b. $3 and 50 units. c. $3 and 60 units. d. $4 and 50 units.

$3 and 50 units

Alana decides to spend 2 hours working overtime rather than going shopping with her friends. She earns $11 per hour for overtime work. Her opportunity cost of working is a. 37,900 b. 45,900 c. 53,900 d. 61,900

45,900

Refer to Table 4-1.If the law of demand applies to this good, then Q1 could be a. 80. b. 90. c. 120. d. 50.

80

Which of the following events would cause both the equilibrium price and equilibrium quantity of number two grade potatoes to increase if number two grade potatoes are an inferior good? a. An increase in consumer income b. A decrease in consumer income c. Greater government restrictions on agricultural chemicals d. Fewer government restrictions on agricultural chemicals

A decrease in consumer income

Which of the following events would unambiguously cause a decrease in the equilibrium price of cotton shirts? a. An increase in the price of wool shirts and a decrease in the price of raw cotton b. A decrease in the price of wool shirts and a decrease in the price of raw cotton c. An increase in the price of wool shirts and an increase in the price of raw cotton d. A decrease in the price of wool shirts and an increase in the price of raw cotton

A decrease in the price of wool shirts and a decrease in the price of raw cotton

If consumers often purchase croissants to eat while they drink their cappuccinos at local coffee shops, what would happen to the equilibrium price and quantity of cappuccinos if the price of croissants rises? a. Both the equilibrium price and quantity would increase. b. Both the equilibrium price and quantity would decrease. c. The equilibrium price would increase, and the equilibrium quantity would decrease. d. The equilibrium price would decrease, and the equilibrium quantity would increase.

Both the equilibrium price and quantity would decrease.

If scientists discover that steamed milk, which is used to make lattés, prevents heart attacks, what would happen to the equilibrium price and quantity of lattés? a. Both the equilibrium price and quantity would increase. b. Both the equilibrium price and quantity would decrease. c. The equilibrium price would increase, and the equilibrium quantity would decrease. d. the equilibrium price would decrease, and the equilibrium quantity would increase.

Both the equilibrium price and quantity would increase.

What would happen to the equilibrium price and quantity of macaroni and cheese if consumers' incomes fall and macaroni and cheese is an inferior good? a. Both the equilibrium price and quantity would increase. b. Both the equilibrium price and quantity would decrease. c. The equilibrium price would increase, and the equilibrium quantity would decrease. d. The equilibrium price would decrease, and the equilibrium quantity would increase.

Both the equilibrium price and quantity would increase.

Suppose that demand for a good increases and, at the same time, supply of the good decreases. What would happen in the market for the good? a. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. b. Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous. c. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous. d. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

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

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? a. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. b. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous. c. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous. d. Equilibrium quantity and price would increase.

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

Beef is a normal good. You observe that both the equilibrium price and quantity of beef have fallen over time. Which of the following explanations would be most consistent with this observation? a. Consumers have experienced an increase in income, and beef-production technology has improved. b. The price of chicken has risen, and the price of steak sauce has fallen. c. New medical evidence has been released that indicates a negative correlation between a person's beef consumption and life expectancy. d. The demand curve for beef must be positively sloped.

New medical evidence has been released that indicates a negative correlation between a person's beef consumption and life expectancy.

What would happen to the equilibrium price and quantity of coffee if the wages of coffee-bean pickers fell and the price of tea fell? a. Price would fall, and the effect on quantity would be ambiguous. b. Price would rise, and the effect on quantity would be ambiguous. c. Quantity would fall, and the effect on price would be ambiguous. d. Quantity would rise, and the effect on price would be ambiguous.

Price would fall, and the effect on quantity would be ambiguous.

What will happen to the equilibrium price and quantity of new cars if the price of gasoline rises, the price of steel rises, public transportation becomes cheaper and more comfortable, and auto-workers negotiate higher wages? a. Price will fall, and the effect on quantity is ambiguous. b. Price will rise, and the effect on quantity is ambiguous. c. Quantity will fall, and the effect on price is ambiguous. d. Quantity will rise, and the effect on price is ambiguous.

Quantity will fall, and the effect on price is ambiguous.

What would happen to the equilibrium price and quantity of lattés if coffee shops began using a machine that reduced the amount of labor necessary to produce them? a. Both the equilibrium price and quantity would increase. b. Both the equilibrium price and quantity would decrease. c. The equilibrium price would increase, and the equilibrium quantity would decrease. d. The equilibrium price would decrease, and the equilibrium quantity would increase.

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

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? a. Both the equilibrium price and quantity would increase. b. Both the equilibrium price and quantity would decrease. c. The equilibrium price would increase, and the equilibrium quantity would decrease. d. the equilibrium price would decrease, and the equilibrium quantity would increase.

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

Which of the following events would cause the price of oranges to fall? a. There is a shortage of oranges. b. The FDA announces that bananas cause strokes, and oranges and bananas are substitutes. c. The price of land throughout Florida decreases, and Florida produces a significant proportion of the nation's oranges. d. At the current price, quantity demanded is greater than quantity supplied.

The price of land throughout Florida decreases, and Florida produces a significant proportion of the nation's oranges.

Suppose the United States had a short-term shortage of farmers. Which market mechanisms would adjust to remove the shortage? a. The government would provide tax incentives to encourage people to become farmers. b. The government would subsidize the production of food. c. The prices of food and the wages of farmers would adjust. d. There are no market mechanisms to remove the shortage.

The prices of food and the wages of farmers would adjust.

Which of the following is not a determinant of the demand for a particular good? a. The prices of related goods b. Income c. Tastes d. The prices of the inputs used to produce the good

The prices of the inputs used to produce the good

Which of the following would not increase in response to a decrease in the price of ironing boards? a. The quantity of irons demanded at each possible price of irons b. The equilibrium quantity of irons c. The equilibrium price of irons d. The quantity of irons supplied at each possible price of irons

The quantity of irons supplied at each possible price of irons

Refer to Table 4-5. If the four suppliers listed are the only suppliers in this market and the market quantity demanded is 390 cases when the price is $2.00, which of the following statements is correct? a. There is a shortage of 90 cases at a price of $2.00. b. The market is in equilibrium at a price of $2.00. c. There is a surplus of 90 cases at a price of $2.00. d. There is a surplus of 80 cases at a price of $2.00.

There is a shortage of 90 cases at a price of $2.00.

Thousands of people develop lung cancer from second-hand exposure to cigarette smoke. This is an example of a. a market failure caused by an externality. b. a market failure caused by market power. c. a market failure caused by equality. d. There is no market failure in this case.

a market failure caused by an externality.

which of these activities will most likely impose an external cost? a. an athlete works out at a gym b. a postal worker smokes a cigarette in a crowded break room c. a young father pushes his baby in a stroller d. a construction worker eats a hotdog during her lunch break

a postal worker smokes in a crowded break room

When we move along a given demand curve, a. only price is held constant. b. income and price are held constant. c. all nonprice determinants of demand are held constant. d. all determinants of quantity demanded are held constant.

all nonprice determinants of demand are held constant.

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

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.

If the demand for a product increases, then we would expect equilibrium price a. to increase and equilibrium quantity to decrease. b. to decrease and equilibrium quantity to increase. c. and equilibrium quantity both to increase. d. and equilibrium quantity both to decrease.

and equilibrium quantity both increase

Equilibrium quantity must decrease when a. demand increases and supply decreases. b. demand decreases and supply increases. c. demand increases and supply does not change. d. both demand and supply decrease.

both demand and supply decrease

Suppose the cost of flying a 350-seat plane for an airline is $350,000 and there are 10 empty seats on a flight. The marginal cost of flying a passenger is a. $350 b. $3,500 c. $350,000 d. cannot be determined

cannot be determined

making rational decisions at the margin means that people a. make those decisions that do not impose a marginal cost b. evaluate how easily a decision can be reversed if problems arise c. compare the marginal costs and marginal benefits of each decision d. always calculate the dollar costs for each decision

compare the marginal costs and marginal benefits of each decision

Your professor loves her work, teaching math. She has been offered other positions in the corporate world that would increase her income by 15 percent, but she has decided to continue working as a professor. Her decision would not change unless the marginal a. cost of teaching increased. b. benefit of teaching increased. c. cost of a corporate job increased. d. benefit of a corporate job decreased.

cost of teaching increased

The "invisible hands" ability to coordinate the decisions of the firms and households in the economy can be hindered by a. government actions that distort prices. b. increased competition in markets. c. enforcement of property rights. d. too much attention paid to efficiency.

government actions that distort prices.

If an externality is present in a market, economic efficiency may be enhanced by a. government intervention. b. a decrease in foreign competition. c. fewer market participants. d. weaker property rights.

government intervention

Refer to Figure 4-1. The movement from point A to point B on the graph is caused by a. an increase in price. b. a decrease in price. c. a decrease in the price of a substitute good. d. an increase in income.

decrease in price

Equilibrium price must decrease when a. both demand and supply increase. b. both demand and supply decrease. c. demand does not change and supply increases. d. demand increases and supply does not change.

demand does not change and supply increases

The terms equality and efficiency are similar in that they both refer to benefits to society. However, they are different in that a. equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources. b. equality refers to maximizing benefits from scarce resources and efficiency refers to uniform distribution of those benefits. c. equality refers to everyone facing identical tradeoffs and efficiency refers to the opportunity cost of the benefits. d. equality refers to the opportunity cost of the benefits and efficiency refers to everyone facing identical tradeoffs.

equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources.

At the equilibrium price, the quantity of the good that buyers are willing and able to buy a. is greater than the quantity that sellers are willing and able to sell. b. exactly equals the quantity that sellers are willing and able to sell. c. is less than the quantity that sellers are willing and able to sell. d. could be greater or less than the quantity that sellers are willing and able to sell.

exactly equals the quantity that sellers are willing and able to sell.

laws the enforce chemical hazard control are examples of government intervention that is intended to reduce a. efficiency b. equality c. externalities d. productivity

externalities

The law of demand states that, other things equal, when the price of a good a. falls, the demand for the good rises. b. rises, the quantity demanded of the good rises. c. rises, the demand for the good falls. d. falls, the quantity demanded of the good rises.

falls, the quantity demanded of the good rises.

Bo buys and sells real estate. Two weeks ago, he paid $400,000 for a house on Cypress Street, intending to spend $50,000 on repairs and then sell the house for $500,000. Last week, the city government announced a plan to build a new landfill on Cypress Street just down the street from the house Bo purchased. As a result of the city's announced plan, Bo is weighing two alternatives: He can go ahead with the $50,000 in repairs and then sell the house for $390,000, or he can forgo the repairs and sell the house as it is for $350,000. He should a. keep the house and live in it. b. go ahead with the $50,000 in repairs and sell the house for $390,000. c. forgo the repairs and sell the house as it is for $350,000. d. move the house from Cypress Street to a more desirable location, regardless of the cost of doing so.

forgo the repairs and sell the house as it is for $350,000.

The basic principles of economics suggest that a. markets are seldom, if ever, a good way to organize economic activity. b. government should become involved in markets when trade between countries is involved. c. government should become involved in markets when those markets fail to produce efficient or fair outcomes. d. government should never become involved in markets.

government should become involved in markets when those markets fail to produce efficient or fair outcomes.

the "invisible hand" refers to a. how central planners made economic decisions. b. how the decisions of households and firms lead to desirable market outcomes. c. the control that large firms have over the economy. d. government regulations without which the economy would be less efficient.

how the decisions of households and firms lead to desirable market outcomes.

Figure 4-1 the movement from point A to B on the graph shows a. decrease in demand b. increase in demand c. decrease in quantity demanded d. increase in quantity demanded

increase in quantity demanded

prices direct economic activity in a market economy by a. influencing the actions of buyers and sellers b. reducing scarcity of the goods and services produced c. reducing opportunity cost of goods and services produced d. allocating goods and services in the most equitable way

influencing the actions of buyers and sellers

a group of buyers and sellers of a particular good or service is called a. coalition b. an economy c. market d. competition

market

the term used to describe a situation in which markets do not allocate resources efficiently is a. economic meltdown b. market failure c. equilibrium d. the effect of the invisible hand

market failure

19. 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 a. more than $40; because the average benefit will exceed the marginal cost. b. more than $40; because the marginal benefit will exceed the marginal cost. c. more than $80; because the average benefit will exceed the marginal cost. d. more than $80; because the marginal benefit will exceed the marginal cost.

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

which of the following is not a characteristic of a perfectly competitive market? a. different sellers sell identical products. b. there are many buyers and sellers c. sellers must accept the price the market determines d. there is no free entry or exit

no free entry or exit

a competitive market is a market in which a. an auctioneer helps set prices and arrange sales b. there are only a few sellers c. the forces of supply and demand do not apply d. no individual buyer or seller has any significant impact on the market price

no individual buyer or seller has any significant impact on the market price

Candice is planning her activities for a hot summer day. She would like to go to the local swimming pool and see the latest blockbuster movie, but because she can only get tickets to the movie for the same time that the pool is open she can only choose one activity. This illustrates the basic principle that

people face tradeoffs

the adage, "there ain't no such thing as a free lunch," means a. even people on welfare have to pay for food b. the cost of living is always increasing c. people face tradeoffs d. all costs are included in the price of a product

people face tradeoffs

The ability of an individual to own and exercise control over scarce resources is called a. market failure. b. property rights. c. externality. d. market power.

property rights

efficiency a. and equality both refer to how much a society can produce with its resources. b. and equality both refer to how fairly the benefits from using resources are distributed between members of a society. c. refers to how much a society can produce with its resources. Equality refers to how evenly the benefits from using resources are distributed among members of society. d. refers to how evenly the benefits from using resources are distributed between members of society. Equality refers to how much a society can produce with its resources.

refers to how much a society can produce with its resources. Equality refers to how evenly the benefits from using resources are distributed among members of society.

the overriding reason why households and societies face many decisions is that a. resources are scarce b. goods and services are not scarce c. incomes fluctuate with business cycles. d. people, by the nature, tend to disagree

resources are scarce

Resources are a. scarce for households but plentiful for economies b. plentiful for households bu scarce for economies c. scarce for both d. plentiful for both

scarce for both

what term refers to the idea that society has limited resources and therefore cannot produce all the goods and services people wish to have inefficiency, inequality, scarcity, or market failure

scarcity

in a market economy, economic activity is guided by a. the government b. public-interest groups c. central planners d. self-interest and prices

self-interest and prices

Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight. If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300, the airline should a. sell the ticket because the marginal benefit exceeds the marginal cost. b. sell the ticket because the marginal benefit exceeds the average cost. c. not sell the ticket because the marginal benefit is less than the marginal cost. d. not sell the ticket because the marginal benefit is less than the average cost.

sell the ticket because the marginal benefit exceeds the marginal cost.

Efficiency means that a. society is conserving resources in order to save them for the future b. society's goods and services are distributed equally among society's members c. society's goods and services are distributed fairly, though not necessarily equally, among society's members d. society is getting the most it can from its scarce resources

society is getting the most it can from its scarce resources

Suppose sunflowers are currently selling for $45 per dozen, but the equilibrium price of sunflowers is $25 per dozen. We would expect a a. shortage to exist and the market price of sunflowers to increase. b. shortage to exist and the market price of sunflowers to decrease. c. surplus to exist and the market price of sunflowers to increase. d. surplus to exist and the market price of sunflowers to decrease.

surplus to exist and the market price of sunflowers to decrease.

You have driven 850 miles on a vacation and then you notice that you are only 50 miles from an attraction you hadn't known about, but would really like to see. In computing the opportunity cost of visiting this attraction you had not planned to visit, you should include a. both the cost of driving the first 850 miles and the next 50 miles. b. the cost of driving the first 850 miles, but not the cost of driving the next 50 miles. c. the cost of driving the next 50 miles, but not the cost of driving the first 850 miles. d. neither the cost of driving the first 850 miles nor the cost of driving the next 50 miles.

the cost of driving the next 50 miles, but not the cost of driving the first 850 miles.

Alana decides to spend 2 hours working overtime rather than going shopping with her friends. She earns $11 per hour for overtime work. Her opportunity cost of working is a. the $22 she earns working b. the $22 minus the enjoyment she would have received from going shopping c. the enjoyment she would have received d. nothing

the enjoyment she would have received

when computing the opportunity cost of attending a professional football game as a spectator, you should include a. the price you pay for the ticket and the value of your time b. the price you pay for the ticket, but not the value of your time c. the value of your time, but not the price you pay for the ticket d. neither

the price you pay for the ticket and the value of your time

The marginal benefit Joseph gets from purchasing a fourth pair of shoes is a. the same as the total benefit he gets from purchasing the four pairs of shoes. b. more than the marginal cost of purchasing the fourth pair of shoes. c. the total benefit he gets from purchasing four pairs of shoes minus the total benefit he gets from purchasing three pairs of shoes. d. the total benefit he gets from purchasing five pairs of shoes minus the total benefit he gets from purchasing four pairs of shoes.

the total benefit he gets from purchasing four pairs of shoes minus the total benefit he gets from purchasing three pairs of shoes.

Nevaeh decides to spend four hours playing video games rather than attending her classes. Her opportunity cost of playing video games is a. the value of the knowledge she would have received had she attended her classes. b. the $40 she could have earned if she had worked at her job for those four hours. c. the value of her time playing video games minus the value of attending classes. d. nothing, since she valued playing video games more than attending classes.

the value of the knowledge she would have received had she attended her classes.

If the supply of a product increases, then we would expect equilibrium price a. to increase and equilibrium quantity to decrease. b. to decrease and equilibrium quantity to increase. c. and equilibrium quantity to both increase. d. and equilibrium quantity to both decrease.

to decrease and equilibrium quantity to increase.

Dee is an accomplished actress and a homeowner who pays a landscaper to maintain her lawn rather than do it herself. Dee has determined that she can earn more in the hour it would take her to work on her lawn than she must pay her landscaper. This scenario is an example of which principle of economics? a. Trade can make everyone better off. b. Markets are usually a good way to organize economic activity. c. Governments can sometimes improve market outcomes. d. Prices rise when the government prints too much money.

trade can make everyone better off

economics is the study of how society manages its

unlimited wants and limited resources

The opportunity cost of an items is a. the number of hours needed to earn money to buy the item b. what you give up to get that item c. usually less than the dollar value of the item d. the dollar value of the item

what you give up to get that item

the quantity demanded of a good is the amount that buyers are a. willing to purchase b. willing and able to purchase c. willing, able, and need to purchase

willing and able to purchase