EC-201 Intro to Microeconomics Exam 1 HW Problems

Madeline spends all of her spare money on widgets, which cost $2 each, and gizmos, which cost $6 each. What is her opportunity cost if Madeline buys 12 widgets? ________ Gizmos

4

The five dollar Burger Joint gift card that your friend gave you for your birthday expires today. You can either use the gift card to buy yourself dinner at Burger Joint or you can stay home and eat a delicious home-cooked meal. What is the opportunity cost of eating the home-cooked meal? A) The value of a five-dollar dinner at Burger Joint. B) The value of the ingredients that go into the home-cooked meal, and the value of a five-dollar dinner at Burger Joint. C) There is no opportunity cost since you did not pay for the gift card. D) The time it takes to eat your home-cooked meal, and the value of the five-dollar dinner at Burger Joint. E) The value of the ingredients that go into the home-cooked meal.

B

The market supply is the: A) sum of all prices that sellers charge for a particular quantity. B) total quantity produced by all sellers in the market at each price. C) total cost of production of an item for the entire market. D) quantity supplied at each price by one seller.

B

Paint and paintbrushes are complements. If the price of paint rises, we can expect: A) the quantity demanded of paint to increase. B) the demand for paintbrushes to increase. C) the demand for paintbrushes to decrease. D) the quantity demanded of paintbrushes to remain unchanged.

C

An article in Forbes noted that the Intercounty Connector toll road that connects two counties in Maryland was not generating as much toll revenue as predicted. At that time, the toll rate was $8 for a passenger car making a round trip from end to end on the tollway during rush hour. What additional information would you need to know in order to determine if the toll should be increased or decreased? A) The price elasticity of demand B) The income elasticity of drivers using the tollway C)The number of vehicles using the tollway per day D) The price elasticity of supply

D

If there is a technological advance in the production of the Amazon Echo smart speaker, you would expect to see _____ overtime. A) a fall in the equilibrium quantity sold B) no change in its equilibrium price C) a rise in its equilibrium price D) a fall in its equilibrium price

D

From January through April in the United States, personal certified public accountants (CPAs) see a dramatic increase in their number of billable hours, but the average hourly rate of a CPA remains the same. In this instance, __________ must have _________.

Demand and Supply; Risen

During winter, the number of daily air routes between Denver and Aspen, Colorado, increases, as does the price of a ticket. In this instance, the ________ must have _________.

Demand; Risen

What happens to the equilibrium price and quantity when demand decreases and at the same time supply increases, but the relative size of the shifts are not known? The equilibrium price __________, and the change in the equilibrium quantity is __________.

Falls; Ambiguous

You are studying the international market for coffee. The world production of coffee beans increases, and at the same time, consumers worldwide start favoring tea over coffee. What is the effect on the equilibrium price and the equilibrium quantity in the coffee market? The equilibrium price ________, and the change in the equilibrium quantity is ____________.

Falls; Ambiguous

The manufacturing plant used to produce aircraft is a ________ for Boeing. The cost of the manufacturing plant ________ be included in the opportunity cost of producing an additional aircraft.

Fixed Cost; Should Not

A rational buyer will:

Keep buying a product until marginal benefit equals price

Suppose that a rise in average income increases the demand for preventative dental visits. a. The increase in income leads to an increase in _________

Quantity Supplied

You would expect the value of the cross-price elasticity to be large , because the opportunity cost of getting information on price is low.

Substitutes

Tropicana produces both orange juice and lemonade. What will happen to the supply of Tropicana orange juice when the price of lemonade rises in the market and the price of orange juice stays the same?

Supply will decrease

Marah is deciding whether or not to open a lemonade stand. She expects to sell 20 cups of lemonade for $1 per cup. She already made a sign that cost her $10 and will have $15 worth of additional costs for cups and lemonade mix if she decides to open the stand. a. If Marah decides to open the lemonade stand, how much profit will she earn? Should she open the stand? What does the $10 sign represent?

-$5; Yes; Sunk Cost

A shift in the demand curve can be caused by: A) a change in one of the determinants of demand. B) a change in the cost of production. C) a change in the price of a good. D )a change in the technology used by firms.

A

Diminishing marginal product leads to: A) rising marginal costs for a seller. B) decreased profitability for a seller. D) increased supply of the item in the market. E) lower opportunity costs of producing the item.

A

The law of demand refers to A) the inverse relationship between price and quantity demanded. B) the positive relationship between price and quantity supplied. C)the inverse relationship between price and quantity supplied. D) the positive relationship between price and quantity demanded.

A

What will happen in the market for clothing when a major department store shifts its production of clothing to a low-labor-cost country? A) The shift in production will lead to a decrease in supply and a rise in the price of clothing. B) The lower cost of production will lead to an increase in supply and a fall in the price of clothing. D) Buyers will stop buying clothing from this department store. E) Supply will remain unchanged, and so there will be no change in the price of the clothing.

B

The relationship between price expectations and demand is: A) negative; when future prices are expected to fall, current demand will rise. B) negative; when future prices are expected to rise, current demand will fall. C) positive; future prices are generally expected to rise. D) positive; when future prices are expected to rise, current demand will rise.

D

Which of the following lists only factors that would cause an increase in the supply of an item? A) An increase in input prices; a decrease in the number of sellers in the market; an increase in the price of a substitute-in-production. B) A decrease in the number of sellers in the market; a fall in the price of a complement-in-production; a technological setback. D) A rise in the price of a substitute-in-production; an increase in the price of a complement-in-production; an expectation that the price of the item will increase in the future. E) A decrease in input prices; a technological innovation; a fall in the price of a substitute-in-production.

D

Andrew, a college student, loves drinking coffee late at night to study for exams. Having no income, he is used to buying cheap, bad-tasting coffee, such as Beanlightened, that he needs to grind and brew himself. The coffee tastes putrid but, with enough cream and sugar, Andrew is able to tolerate it. Occasionally, he does go out to Starbucks when he has spare money. After graduation, Andrew gets a job working at a database firm as a programmer. His income is now a healthy $75,000 a year, and he decides he has had enough bad-tasting coffee. He ends up buying coffee daily from Starbucks, even though it costs significantly more than Beanlightened. 1. In economic terms, Starbucks coffee is for Andrew a(n) 2. Beanlightened coffee is for Andrew a(n)

Substitute; Inferior Good

Over the last decade, the price of hybrid electric vehicles decreased, while the number of hybrid vehicles sold increased. In this instance, _______ must have ____________.

Supply; Risen

The labor used to produce the aircraft is a ____________ for Boeing and __________ be included in the opportunity cost of producing an additional aircraft.

Variable Cost; should

An engine supplier decreases the price it charges Nissan by 50%. As a result, Nissan's cost of production will ________, and Nissan should __________ its supply.

decrease; increase

The demand curve(i) is a curve that shows the maximum willingness to pay for a product.(ii) is a curve that shows the marginal benefit gained from a product.(iii) is a curve that shows the production cost of a product.(iv) is a curve that shows the relationship between the price of a product and a consumer's willingness to buy at each price.

i, ii, iv

A supply curve (i) plots the quantities a seller is willing to sell at different prices. (ii) shows the total cost to the seller. (iii) shows rising marginal costs. (iv) shows rising fixed costs.

i, iii