microeconomics final study
Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that when the firm hires 2 workers, the total cost of production is $100. When the firm hires 3 workers, the total cost of production is $120. In addition, assume that the variable cost per unit of labor is the same regardless of the number of units of labor that are hired. What is the firm's fixed cost?
$60
Figure 10-2. The graph depicts the market for plastic. Refer to Figure 10-2. Suppose that the production of plastic creates a social cost which is depicted in the graph above. Without any government regulation, what price will the firm charge per unit of plastic?
$7.00
Comparing marginal revenue to marginal cost (i) reveals the contribution of the last unit of production to total profit. (ii) is helpful in making profit-maximizing production decisions. (iii) tells a firm whether its fixed costs are too high.
(i) and (ii) only
Economists normally assume that the goal of a firm is to (i) earn profits as large as possible, even if it means reducing output. (ii) earn revenues as large as possible, even if it means reducing profits. (iii) minimize costs, regardless of profits.
(i) only
When the price of a good is $5, the quantity demanded is 120 units per month; when the price is $7, the quantity demanded is 100 units per month. Using the midpoint method, the price elasticity of demand is about
0.55.
Refer to Table 5-5. Demand is unit elastic when quantity demanded changes from
10 to 9.
The following table shows the private value, private cost, and external cost for various quantities of output in a market. Refer to Table 10-1. What is the socially-optimal quantity of output in this market?
2 units
Figure 3-22: Alice and Betty's Production Possibilities in one 8-hour day. Alice's Production Possibilities FrontierBetty's Production Possibilities Frontier, Refer to Figure 3-22. What are Alice and Betty's opportunity costs of 1 pizza?
Alice's opportunity cost of 1 pizza is 2 pitchers of lemonade and Betty's opportunity cost of 1 pizza is 1.5 pitchers of lemonade.
A student might describe information about the costs of production as
All of the above could be correct.
An entrepreneur's motivation to start a business arises from a. an innate love for the type of business that he or she starts. b. a desire to earn a profit. c. an altruistic desire to provide the world with a good product. d. All of the above could be correct.
All of the above could be correct.
Belarus has a comparative advantage in the production of linen, but Russia has an absolute advantage in the production of linen. If these two countries decide to trade,
Belarus should export linen to Russia.
Suppose that Bieber and Rihanna are duopolists in the music industry. In May, they agree to work together as a monopolist, charging the monopoly price for their music and producing the monopoly quantity of songs. By June, each singer is considering breaking the agreement. What would you expect to happen next?
Bieber and Rihanna will each break the agreement. Both singers' profits will decrease.
If consumers often purchase muffins to eat while they drink their lattés at local coffee shops, what would happen to the equilibrium price and quantity of lattés if the price of muffins rises?
Both the equilibrium price and quantity would decrease.
Suppose that Charles wants to dine at a fancy restaurant, but the only available table is in the smoking section. Charles dislikes the smell of cigarette smoke. He notices that only one person, Sam, is smoking in the smoking section. Charles values the absence of smoke at $40. Sam values the ability to smoke in the restaurant at $15. Which of the following represents an efficient solution in the absence of transaction costs?
Charles offers Sam between $15 and $40 not to smoke. Sam accepts, and both parties are better off.
Suppose a certain country imposes a tariff on a good. Which of the following results of the tariff is possible?
Consumer surplus decreases by $200; producer surplus increases by $100; and government revenue from the tariff amounts to $50.
Which of the following is not a characteristic of a competitive market?
Entry is limited.
Assume, for Mexico, that the domestic price of oranges without international trade is lower than the world price of oranges. This suggests that, in the production of oranges,
Mexico has a comparative advantage over other countries and Mexico will export oranges.
Suppose the government imposes a tax in a certain market in order to internalize an externality. This type of policy is based on which of the Ten Principles of Economics?
People respond to incentives.
The first major piece of antitrust legislation was the
Sherman Act.
Suppose that flu shots create a positive externality equal to $8 per shot. Further suppose that the government offers a $11-per-shot subsidy to producers. What is the relationship between the equilibrium quantity and the socially optimal quantity of flu shots produced?
The equilibrium quantity is greater than the socially optimal quantity
Suppose that Company A's railroad cars pass through Farmer B's corn fields. The railroad causes an externality to the farmer because the railroad cars emit sparks that cause $1,500 in damage to the farmer's crops. There is a special soy-based grease that the railroad could purchase that would eliminate the damaging sparks. The grease costs $1,200. Suppose that the railroad is not liable for any damage caused to the crops. Assume that there are no transaction costs. Which of the following characterizes an efficient outcome?
The farmer will pay the railroad $1,200 to purchase the grease so that no crop damage will occur.
For a particular good, a 3 percent increase in price causes a 10 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?
There are many close substitutes for this good.
Four roommates share an off-campus house and equally share the cost of rent. Everyone says that she values a clean house, yet the house is usually dirty. To an economist, a clean house in this case represents
a common resource problem.
A special kind of imperfectly competitive market that has only two firms is called
a duopoly.
A price ceiling is
a legal maximum on the price at which a good can be sold.
Which of the following is not a common resource?
a neighborhood garden
If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then
a one-unit decrease in output will increase the firm's profit.
If a competitive firm is currently producing a level of output at which marginal revenue exceeds marginal cost, then
a one-unit increase in output will increase the firm's profit.
Scenario 16-5McDonald's restaurants has recently announced intentions to open a new restaurant in Smalltown, Indiana. Assume that the fast-food restaurant market in Smalltown is characterized by monopolistic competition. Refer to Scenario 16-5. As a result of the new McDonald's, residents of Smalltown are likely to benefit from
a product-variety externality.
A law that encourages market competition by prohibiting firms from gaining or exercising excessive market power is
an antitrust law.
Resources tend to be allocated inefficiently when goods
are available free of charge.
Profit maximizing firms in competitive industries with free entry and exit face a price equal to the lowest possible
average total cost of production.
Suppose a firm in each of the two markets listed below were to increase its price by 15 percent. In which pair would the firm in the first market listed experience a dramatic decline in sales, but the firm in the second market listed would not?
both buyers and sellers
Who is a price taker in a competitive market?
both buyers and sellers
The idea that "externalities arise because something of value has no price attached to it" is associated with
both public goods and common resources.
A monopoly can earn positive profits because it
can maintain a price such that total revenues will exceed total costs.
If four firms comprise the entire golf club industry, the market would be
characterized by interdependence of firms.
Which of the following costs of publishing a book is a fixed cost?
composition, typesetting, and jacket design for the book
Suppose a firm in each of the two markets listed below were to increase its price by 25 percent. In which pair would the firm in the first market listed experience a dramatic decline in sales, but the firm in the second market listed would not?
corn and satellite radio
If your local gasoline station raised its price by 20 percent, its sales of gasoline would decrease substantially because your local gas station. a. has little or no market power. b. is small relative to the size of the gasoline market. c. is a competitive firm. d. All of the above are correct.
d. All of the above are correct.
The economic inefficiency of a monopolist can be measured by the
deadweight loss
If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then
decreasing output would increase the firm's profit.
Tax incidence
depends on the elasticities of supply and demand.
The market demand curve for a monopolist is typically
downward sloping.
An agreement between two duopolists to function as a monopolist usually breaks down because
each duopolist wants a larger share of the market to capture more profit.
Demand is said to have unit elasticity if the price elasticity of demand is
equal to 1.
A free-rider problem exists for any good that is not
excludable
If people can be prevented from using a certain good, then that good is called
excludable
A profit-maximizing firm in a monopolistically competitive market differs from a firm in a perfectly competitive market because the firm in the monopolistically competitive market
faces a downward-sloping demand curve for its product.
Each firm in a monopolistically competitive market
faces a downward-sloping demand curve.
Firm A produces and sells in a market that is characterized by highly differentiated consumer goods. Firm B produces and sells industrial products. Firm C produces and sells an agricultural commodity. Which firm is likely to spend the greatest portion of its total revenue on advertising?
firm A
Competitive markets are characterized by
free entry and exit by firms.
A benefit of a monopoly is
greater creativity by authors who can copyright their novels.
The typical firm in the US economy
has some degree of market power.
In a competitive market, the actions of any single buyer or seller will
have a negligible impact on the market price.
The general term for market structures that fall somewhere between monopoly and perfect competition is
imperfectly competitive markets.
A certain competitive firm sells its output for $20 per unit. The 50th unit of output that the firm produces has a marginal cost of $22. Production of the 50th unit of output does not necessarily
increase the firm's average variable cost by $0.44.
A restaurant that has market power can
influence the market price for the meals it sells.
A firm has market power if it can
influence the market price of the good it sells.
In the long run,
inputs that were fixed in the short run become variable.
A competitive firm
is a price taker, whereas a monopolist is a price maker.
For a firm to price discriminate,
it must have some market power.
Suppose that a "doggie day care" firm uses only two inputs: hourly workers (labor) and a building (capital). In the short run, the firm most likely considers
labor to be variable and capital to be fixed.
Suppose most people regard emeralds, rubies, and sapphires as close substitutes for diamonds. Then DeBeers, a large diamond company, has
less market power than it would otherwise have.
A monopolist produces
less than the socially efficient quantity of output but at a higher price than in a competitive market.
A monopoly firm is a price
maker and has no supply curve
A perfectly competitive firm produces where
marginal cost equals price, while a monopolist produces where price exceeds marginal cost.
If firms are competitive and profit maximizing, the price of a good equals the
marginal cost of production.
In which of the following product markets are we likely to observe the largest amount of advertising?
markets with highly differentiated products
Because public goods are
not excludable, people have an incentive to be free riders.
The U.S. military defends Jacob from foreign attackers. The fact that Jacob enjoys this protection does not detract from others Americans' enjoyment of it. For this reason, we say that national defense is
not rival in consumption.
The story of the prisoners' dilemma shows why
oligopolies can fail to cooperate, even when cooperation is in their best interest.
Game theory is important for the understanding of
oligopolies.
We must be knowledgeable of how people behave in strategic situations if we are to understand
oligopolistic markets.
Which of the following is not a characteristic of a monopoly?
one buyer
A firm cannot price discriminate if it
operates in a competitive market.
Assume that your roommate is very messy. Suppose she gets a $25 benefit from being messy but imposes a $50 cost on you. The Coase theorem would suggest that an efficient solution would be for you to
pay your roommate at least $25 but no more than $50 to clean up after herself.
A good is excludable if
people can be prevented from using it.
The provision of public goods gives rise to
positive externalities, whereas the use of common resources gives rise to negative externalities.
The relationship between advertising and product differentiation is
positive; the more differentiated the product, the more a firm is likely to spend on advertising.
As the number of firms in an oligopoly increases, the
price approaches marginal cost, and the quantity approaches the socially efficient level.
A rational pricing strategy for a profit-maximizing monopolist is
price discrimination.
The practice of selling the same goods to different customers at different prices, but with the same marginal cost, is known as
price discrimination.
Total revenue equals
price x quantity.
A textbook is a
private good and the knowledge that one gains from reading the book is a public good.
Property rights are well established for
private goods.
A key characteristic of a competitive market is that
producers sell nearly identical products.
Refer to Figure 13-1. Suppose the production function shifts from TP1 to TP2. Such a shift in the total product curve is most likely due to an increase in the firm's
productivity.
Markets do not ensure that the air we breathe is clean because
property rights are not well established for clean air.
Markets fail to allocate resources efficiently when
property rights are not well established.
A production function is a relationship between inputs and
quantity of output.
Economists believe that production possibilities frontiers are often bowed because
resources are not completely adaptable.
Rent control
serves as an example of a price ceiling.
If the government allowed a free market for transplant organs such as kidneys to exist, the
shortage of organs would be eliminated, and there would be no surplus of organs.
As we move downward and to the right along a linear, downward-sloping demand curve,
slope remains constant but elasticity changes.
The analysis of competitive firms sheds light on the decisions that lie behind the
supply curve.
A tariff is a
tax on an imported good.
Refer to Figure 10-4. At Q3
the marginal consumer values this product less than the social cost of producing it.
If a firm uses labor to produce output, the firm's production function depicts the relationship between
the number of workers and the quantity of output.
Farmer McDonald sells wheat to a broker in Kansas City, Missouri. Because the market for wheat is generally considered to be competitive, Mr. McDonald maximizes his profit by choosing
the quantity at which market price is equal to Mr. McDonald's marginal cost of production.
A monopolistically competitive firm chooses
the quantity of output to produce and the price at which it will sell its output.
Table 3-23: Assume that the farmer and the rancher can switch between producing pork and producing tomatoes at a constant rate. Refer to Table 3-23. Assume that the farmer and the rancher each has 24 labor hours available. If each person spends all his time producing the good in which he has a comparative advantage and trade takes place at a price of 1 pound of pork for 2 pounds of tomatoes, then
the rancher will gain from this trade, but the farmer will not.
Suppose that a firm produces electricity by burning coal. The production process creates a negative externality of air pollution. If the firm does not internalize the cost of the externality, it will produce where
the value of electricity to consumers equals the private cost of producing electricity.
The production decisions of perfectly competitive firms follow one of the Ten Principles of Economics, which states that rational people
think at the margin.
The nature of a firm's cost (fixed or variable) depends on the
time horizon under consideration.
Governments can grant private property rights over resources that were previously viewed as public, such as fish or elephants. Why would governments want to do so?
to prevent overuse
The amount of money that a firm receives from the sale of its output is called
total revenue.
From society's standpoint, cooperation among oligopolists is
undesirable, because it leads to output levels that are too low and prices that are too high.
Consumer surplus equals the
value to buyers minus the amount paid by buyers.
Analyzing the behavior of the firm enhances our understanding of
what decisions lie behind the market supply curve.
A firm charges a price that exceeds marginal cost
when the market is a monopoly or monopolistically competitive.
In the short run, a firm incurs fixed costs
whether it produces output or not.
A rain barrel is a container that captures and stores rainwater for landscape and garden use during dry periods. Rain barrels provide an external benefit to the community through water conservation.If the government offers a per unit subsidy on rain barrels equal to the per-unit externality, then
the after-subsidy equilibrium quantity of rain barrels will equal the socially optimal quantity of rain barrels.
The United States has imposed taxes on some imported goods that have been sold here by foreign countries at below their cost of production. These taxes
harm the United States as a whole, because they reduce consumer surplus by an amount that exceeds the gain in producer surplus and government revenue.
Refer to Scenario 9-2. Suppose the world price of cardboard is $60. Then, relative to the no-trade situation, international trade in cardboard
harms Boxlandian consumers by $704 and benefits Boxlandian producers by $864.
A country has a comparative advantage in a product if the world price is
higher than that country's domestic price without trade.
Domestic producers of a good become better off, and domestic consumers of a good become worse off, when a country begins allowing international trade in that good and
the world price exceeds the domestic price of the good that prevailed before international trade was allowed.
If labor in Mexico is less productive than labor in the United States in all areas of production,
then both Mexico and the United States still can benefit from trade.
"Other things equal, when the price of a good rises, the quantity demanded of the good falls, and when the price falls, the quantity demanded rises." This relationship between price and quantity demanded
All of the above are correct.
Refer to Table 3-36. Antigua has an absolute advantage in the production of
towels and Barbuda has an absolute advantage in the production of umbrellas.
Figure 3-16: Hosne's Production Possibilities FrontierMerve's Production Possibilities Frontier, Refer to Figure 3-16. Hosne should specialize in the production of
purses.
Consumer surplus in a market can be represented by the
area below the demand curve and above the price.
A binding price floor will reduce a firm's total revenue
when demand is elastic.
Scenario 9-1: The before-trade domestic price of peaches in the United States is $40 per bushel. The world price of peaches is $52 per bushel. The U.S. is a price-taker in the market for peaches. Refer to Scenario 9-1. If trade in peaches is allowed, the United States
will become an exporter of peaches.
Suppose Jamaica has an absolute advantage over other countries in producing sugar, but other countries have a comparative advantage over Jamaica in producing sugar. If trade in sugar is allowed, Jamaica
will import sugar.
A likely example of complementary goods for most people would be
canoes and paddles.
What is the fundamental basis for trade among nations?
comparative advantage
The maximum price that a buyer will pay for a good is called
willingness to pay.
Under rent control, landlords cease to be responsive to tenants' concerns about the quality of the housing because
with shortages and waiting lists, they have no incentive to maintain and improve their property.
Tariffs and quotas are different in the sense that
tariffs raise revenue for the government, while quotas do not raise revenue for the government.
In the 1970s, long lines at gas stations in the United States were primarily a result of the fact that
the U.S. government maintained a price ceiling on gasoline.
Producer surplus is
the amount a seller is paid minus the cost of production.
Steak and chicken are substitutes. A sharp reduction in the supply of steak would
decrease consumer surplus in the market for steak and increase producer surplus in the market for chicken.
A surplus exists in a market if
the current price is above its equilibrium price.
A macroeconomist - as opposed to a microeconomist - would study
the effects of borrowing by the federal government.
Caroline sharpens knives in her spare time for extra income. Buyers of her service are willing to pay $2.95 per knife for as many knives as Caroline is willing to sharpen. On a particular day, she is willing to sharpen the first knife for $2.00, the second knife for $2.25, the third knife for $2.75, and the fourth knife for $3.50. Assume Caroline is rational in deciding how many knives to sharpen. Her producer surplus is
$1.85.
A consumer's willingness to pay directly measures
how much a buyer values a good.
Refer to Table 6-3. Following the imposition of a price floor $2 above the equilibrium price, irate buyers convince Congress to repeal the price floor and to impose a price ceiling $1 below the former price floor. The resulting market price is
$3.
At Nick's Bakery, the cost to make a cheese danish is $1.50 per danish. As a result of selling ten danishes, Nick experiences a producer surplus in the amount of $20. Nick must be selling his danishes for
$3.50 each.
Refer to Table 7-5. If the market price of an orange is $0.65, then consumer surplus amounts to
$3.60.
Refer to Table 7-1. If the price of the product is $122, then the total consumer surplus is
$41.
Billie Jo values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for $425. Billie Jo's willingness to pay for the dishwasher is
$500.
Refer to Table 6-1. Suppose the government imposes a price ceiling of $70 on this market. What will be the size of the shortage in this market?
0 units
Figure 3-21: Uzbekistan's Production Possibilities FrontierAzerbaijan's Production Possibilities Frontier, Refer to Figure 3-21. Azerbaijan's opportunity cost of one nail is
1/4 bolt and Uzbekistan's opportunity cost of one nail is 1/2 bolt.
Table 3-11: Assume that Max and Min can switch between producing mittens and producing hats at a constant rate. Refer to Table 3-11. Assume that Max and Min each has 36 labor hours available. If each person divides his/her time equally between the production of mittens and hats, then total production is
18 mittens and 7.5 hats.
Table 3-24: Assume that England and Spain can switch between producing cheese and producing bread at a constant rate. Refer to Table 3-24. The opportunity cost of 1 unit of bread for Spain is
2 units of cheese.
If the price elasticity of demand for a good is 2.0, then a 10 percent increase in price results in a
20 percent decrease in the quantity demanded.
Figure 3-20: Canada's Production Possibilities FrontierMexico's Production Possibilities Frontier, Refer to Figure 3-20. If Canada and Mexico switch from each country dividing its time equally between the production of Good X and Good Y to each country spending all of its time producing the good in which it has a comparative advantage, then total production of Good Y will increase by
3 units.
Suppose that a worker in Agland can produce either 10 units of organic grain or 2 units of incense per year, and a worker in Zenland can produce either 5 units of organic grain or 15 units of incense per year. There are 20 workers in Agland and 10 workers in Zenland. Currently the two countries do not trade. Agland produces and consumes 100 units of grain and 20 units of incense per year. Zenland produces and consumes 50 units of grain and no incense per year. If each country made the decision to specialize in producing the good in which it has a comparative advantage, then the combined yearly output of the two countries would increase by
50 units of grain and 130 units of incense.
Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?
A is Diet Pepsi and B is soda.
Suppose the world price of a television is $300. Before Paraguay allowed trade in televisions, the price of a television there was $350. Once Paraguay began allowing trade in televisions with other countries, Paraguay began
importing televisions and the price of a television in Paraguay decreased to $300.
In a certain economy, toys and greeting cards are produced, and the economy currently operates on its production possibilities frontier. Which of the following events would allow the economy to produce more toys and more greeting cards, relative to the quantities of those goods that are being produced now?
All of the above are correct.
Total surplus a. is the sum of consumer and producer surplus. b. can be used to measure a market's efficiency. c. is the value to buyers minus the cost to sellers. d. All of the above are correct.
All of the above are correct.
A decrease in the price of a good will
increase quantity demanded.
Equilibrium price must increase when demand
increases and supply does not change, when demand does not change and supply decreases, and when demand increases and supply decreases simultaneously.
When a production possibilities frontier is bowed outward, the opportunity cost of producing an additional unit of a good
increases as more of the good is produced.
Consider two individuals - Marquis and Serena - each of whom would like to wear sweaters and eat tasty food. The gains from trade between Marquis and Serena are most obvious in which of the following cases?
Marquis's skills are such that he can produce only sweaters, and Serena's skills are such that she can produce only tasty food.
Refer to Table 4-7. If these are the only four sellers in the market for ice cream, then when the price increases from $4 to $6, the market quantity supplied
increases by 10 gallons.
Pens are normal goods. What will happen to the equilibrium price of pens if the price of pencils rises, consumers experience an increase in income, writing in ink becomes fashionable, people expect the price of pens to rise in the near future, the population increases, fewer firms manufacture pens, and the wages of pen-makers increase?
Price will rise.
Some time ago, the nation of Republica opened up its paper market to international trade. Which of the following results of this policy change is consistent with the notion that Republica has a comparative advantage over other countries in producing paper?
Republica began exporting paper as a result of the policy change.
Figure 2-4. Refer to Figure 2-4. Inefficient production is represented by which point(s)?
T
If car manufacturers begin using new labor-saving technology on their assembly lines, we would not expect
individual car manufacturers to move up and to the right along their individual supply curves.
Holding all other forces constant, if decreasing the price of a good leads to a decrease in total revenue, then the demand for the good must be
inelastic.
Figure 2-16. Refer to Figure 2-16. Suppose this economy is producing at point B. Which of the following statements would best explain this situation?
There is widespread unemployment in the economy.
Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 0.75. Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded?
a 13.33 percent increase in the price of the good
Suppose an economy produces two goods, food and machines. This economy always operates on its production possibilities frontier. Last year, it produced 1000 units of food and 47 machines. This year, it is producing 1050 units of food and 52 machines. Which of the following events could not explain the increase in output?
a reduction in unemployment
Laissez-faire is a French expression which literally means Producer surplus equals the
allow them to do.
Producer surplus equals the
amount received by sellers minus the cost to sellers.
A supply curve slopes upward because
an increase in price gives producers an incentive to supply a larger quantity.
A perfectly elastic demand implies that
any rise in price above that represented by the demand curve will result in a quantity demanded of zero.
Table 4-5: The table below shows the quantities demanded of cases of Mt. Dew per month by four families at various prices. Suppose the four families listed in the table are the only demanders of Mt. Dew in the market. If the price of a case of Mt. Dew decreases by $1, the
market quantity demanded increases by 10.
A shortage results when a
binding price ceiling is imposed on a market.
A surplus results when a
binding price floor is imposed on a market.
A good will have a more inelastic demand, the
broader the definition of the market.
The price elasticity of demand measures
buyers' responsiveness to a change in the price of a good.
The burden of a luxury tax falls
more on the middle class than on the rich.
Assume the demand for cigarettes is relatively inelastic, and the supply of cigarettes is relatively elastic. When cigarettes are taxed, we would expect
most of the burden of the tax to fall on buyers of cigarettes, regardless of whether buyers or sellers of cigarettes are required to pay the tax to the government.
A legal maximum on the price at which a good can be sold is called a price
ceiling
Economists speaking like scientists make
claims about how the world is.
If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the
consumer does not purchase the good.
Lead is an important input in the production of crystal. If the price of lead decreases, then we would expect the supply of
crystal to increase.
When economists make
normative statements, they are speaking not as scientists but as policy advisers.
If a good is inferior, then an increase in income will result in a(n)
decrease in the demand for the good.
A $5 tax levied on the buyers of pants will cause the
demand curve for pants to shift down by $5.
A likely example of substitute goods for most people would be
pencils and pens.
Suppose that 50 hot dogs are demanded at a particular price. If the price of hot dogs rises from that price by 5 percent, the number of hot dogs demanded falls to 48. Using the midpoint approach to calculate the price elasticity of demand, it follows that the
price elasticity of demand for hot dogs in this price range is about 0.82.
Which of the following areas of study typifies microeconomics as opposed to macroeconomics?
the impact of minimum-wage laws on employment in the fast food industry
Which of the following will cause a decrease in producer surplus?
the imposition of a binding price ceiling in the market
For a vertical demand curve,
the slope is undefined, and the price elasticity of demand is equal to 0.
A university's football stadium is never more than half-full during football games. This indicates
the ticket price is above the equilibrium price.
When two countries trade with one another, it is most likely because
the two countries wish to take advantage of the principle of comparative advantage.
A simultaneous decrease in both the demand for MP3 players and the supply of MP3 players would imply that
the value of MP3 players to consumers has decreased, and the cost of producing MP3 players has increased.
Refer to Scenario 9-2. Suppose the world price of cardboard is $45. Then, if Boxland goes from prohibiting international trade in cardboard to allowing international trade in cardboard,
domestic producers of cardboard become worse off and domestic consumers of cardboard become better off.
When a country allows trade and becomes an importer of jet skis,
domestic producers of jet skis are worse off, domestic consumers of jet skis are better off, and the economic well-being of the country rises.
A tax imposed on the sellers of a good will lower the
effective price received by sellers and lower the equilibrium quantity.