Econ 101 Final - Trost

She will hire four workers at a total cost of $640.

Marie Johnston is a manager at an electronics store and has to decide how many workers to hire. If she hires one worker, her revenue is $800 per day. If she hires another worker, she can make another $600 per day. The marginal benefit of hiring another worker decreases by $200 with each additional hire. Assuming that workers are paid $20 per hour and work eight hours, how many employees should Marie hire, and what will be her total cost for labor?

less; $150

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.

scarcity

Opportunity cost arises from the fundamental economic problem of

The supply of drawing paper will decrease

Paper producers can manufacture both printing and drawing paper. What effect would rising prices for printing paper have on the market for drawing paper?

$1

Pule purchases four bottles of bathroom cleaner for $3 each. The maximum prices she would have been willing to pay for each bottle are $6 for the first bottle, $5 for the second bottle, $4 for the third bottle, and $3 for the fourth bottle. The marginal cost of producing the bottles is $2.50. What is Pule's consumer surplus on the third bottle of bathroom cleaner?

income elasticity of demand; -0.6; inferior

Sarah got a 30% raise at work. As a result, she bought 18% less frozen pizza. From this info, we know that Sarah's _______ for frozen pizza is _________. Here, frozen pizza is an inferior good.

regardless of which decision is made.

Sunk costs are costs that are incurred

24

Suppose Demand: P = 48-4Q Supply: P = 6+2Q Now suppose supply shifts BACK by 3 units. What is the equilibrium price?

20

Suppose Demand: P = 48-4Q Supply: P = 6+2Q What is the equilibrium price?

0

Suppose Qd = 10 - P Qs = -8 + P/2 What quantity would be bought and sold in this market?

0.82

Suppose Qd= 10 - P. Using the midpoint formula, calculate the price elasticity of demand if price started at 4 and rose by one dollar. Use absolute value and round to two decimal points.

Price falls. The effect on quantity is uncertain.

Suppose supply shifts out and demand shifts back. What happens to the equilibrium price and quantity?

fall; rise or fall

Suppose the local real estate market is in equilibrium. A recession causes local household incomes to decline. At the same time, construction of a large subdivision of new homes has just been completed. Given these two changes and assuming that real estate is a normal good, we can predict that the price of real estate will _____ and the quantity of real estate bought and sold will _____.

more than 20%; fall

Suppose the price of brats rises by 20%. For demand for brats to be considered "elastic" the quantity would have to fall by ________. If this were the case, a brat seller's total revenue would ______ if price rose by 20%

400

Suppose there are 10 sellers of red and white striped overalls on State Street, and that they all have identical individual supply curves: Qs = 5P - 100 If the price is $28, how many overalls will be for sale on State Street? (what is the market quantity supplied?)

many; many

The gas stations in your town form a competitive market. In other words, there are _____ gas stations and _____ people with cars in your town.

perfectly inelastic

The price elasticity of demand for a good with a vertical demand curve is:

Total revenue will fall

The price elasticity of demand for lettuce has been estimated to be 2.58. If an insect infestation destroys 10% of the nation's lettuce crop, how will that affect total revenue from lettuce, all other things unchanged?

2

The price of a car wash falls by 10%. In response to this price change, the quantity demanded for car washes increases by 20%. What is the absolute value of the price elasticity of demand for car washes?

2.7

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? (use the midpoint formula)

2; substitutes

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 _____.

will rise because demand for beef will rise

The price of turkey meat in the US is higher this year because millions of turkeys are dying from bird flu. If many consumers who like turkey also like beef, the price of beef:

sellers can make more profit per unit if the market prices rise.

The supply curve is upward-sloping because

125

The table shows the monthly individual demand schedules of four students for soda. What is the total monthly market demand for soda at $2 per can?

the amount the university would receive if it sold the mansion

The university recently inherited a large mansion from a wealthy alumnus. The university plans to use the mansion for faculty parties and to house distinguished guests. The opportunity cost of the mansion to the university is best represented by:

cross-price elasticity between zoomies and blabbos; -0.5; complements

There are 2 (made up) products: zoomies and blabbos. Last week, the price of zoomies rose by 30% and the number of blabbos sold fell by 15%. Based on this info, the _________________ is _____ and the two products are _______.

going to the party

This Friday night you have 3 options: go to a party, watch a movie at home, or put in 3 hours at your part time job which pays $15/hour. You can only do one of them. You are pretty stressed from studying econ and decide that work is the LAST thing you want to do. What is the opportunity cost of watching a movie at home?

demand shifted out

This weekend in Madison, the price of gas rose and people bought more gas than normal. What must have happened?

$11

Use the table to answer the question. At what price does this market experience a surplus of 70 units?

market price; marginal cost

When deciding on how much to produce, suppliers in perfect competition use the cost-benefit principle and use ______ as the benefit and _______ as the cost for each unit.

- we are assuming no individual sellers or buyers can influence the market - we are assuming that all sellers make the same product

When discussing the "supply and demand" model that we've been working with, what important assumption are we making about competition? (choose all that apply)

sunk costs; marginal costs

When making a decision, you should ignore _______ and focus on _______ .

unintended consequences

When my cat was a kitten, she used to poop in the bathtub. We started closing the bathroom door so she couldn't do that but instead she pooped on the rug outside of the bathroom which was way worse. This is a good example of what?

the amount you spent on gas to get to Chicago.

You've driven to Chicago and are trying to decide which fancy restaurant to walk to from your hotel. Which of these costs should NOT affect your decision?

will rise; could either rise or fall

he local news in Madison announces that this winter will be extremely snowy. At the same time, the price of plastic (which is used to make snow shovels) rises. As a result, the equilibrium price of snow shovels in Madison ________ and equilibrium quantity _______.

a decrease in quantity demanded.

(Figure: Graph) Refer to the graph to answer the question. In the graph, the movement from point P to point Q represents

Graph A

(Figure: Market for New Housing) Which of the graphs shows the effect on the housing market today, if the realtor association predicts new housing prices to fall in a few months?

Graph D

(Figure: Market for Stevia) Stevia is a natural sweetener that is used as a sugar substitute. Which of the following graphs illustrates the impact of a rise in the price of Stevia on the demand for sugar?

40,000; 30,000

(Figure: Market for TVs 2) According to the figure, if there is international trade in this market, and the world price of televisions is $500, domestic consumers will purchase _____ units from domestic producers and _____ units from foreign producers.

A report is published noting that the product has adverse health effects.

(Figure: Shift in Demand 2) Use the figure to answer the question. Which of the following market changes would lead to a shift of the demand curve from Old demand to New demand?

A rise in the price of a product that is a complement-in-production.

(Figure: Shift in Supply 1) Use the figure to answer the question. Which of the following market changes would lead to a shift of the supply curve from Old supply to New supply?

Lower costs of transportation for the producers.

(Figure: Shift in Supply 1) Use the figure to answer the question. Which of the following market changes would lead to a shift of the supply curve from Old supply to New supply?

B

(Figure: Shifts in Demand and Supply II) Which graph of the private-college market BEST illustrates the likely response if Congress were to use taxes to make public higher educational institutions tuition-free? (students can go to either public or private universities - they are substitutes)

Panel B

(Figure: Shifts in Demand and Supply) The figure shows how supply and demand might shift in response to specific events. Suppose a fall frost destroys one-third of the nation's orange crop. Which panel BEST describes how this will affect the market for oranges? ("1" is before "2" is after)

the economy has unemployment and/or inefficiently allocates resources

(Figure: Strawberries and Submarines) Above is the PPF (Production Possibilities Frontier) for Strawberries and Submarines. Suppose the economy is operating at point G. This implies that:

B

(Figure: Supply and Demand in the Market) Use Figure: Supply and Demand in the Peach Market. The market is in equilibrium at point C. A reputable scientist asserts in a major scientific publication that drinking peach juice will increase your lifespan. What will be the MOST likely new equilibrium point in the peach juice market?

A to C

(Figure: Supply of Coconuts) Use Figure: Supply of Coconuts. An improvement in the technology used to harvest coconuts (e.g., a faster, less expensive coconut picker) would be represented in the figure as a movement from:

1

(Figure: Tax on Seller) In the graph shown, the original equilibrium price is $50. A $6 tax is placed on the seller in this market. The economic burden of this tax on the buyer is $_____.

surplus; 2,000

(Figure: The Demand and Supply of Wheat) A price of $7 in this market would result in a _____ of _____ bushels per period.

$7; 7,000

(Figure: The Demand and Supply of Wheat) Use Figure: The Demand and Supply of Wheat. If there is an increase in demand of 2,000 bushels per period at each price, the equilibrium price and quantity will be _____ and _____ bushels per period, respectively.

0.4 of the windows washed; 0.5 of the windows washed

(Table: Joachim and Zane's opportunity cost) The table provides data on how long it takes Joachim and Zane to clean the bathrooms and wash the windows at a home .Joachim's opportunity cost for cleaning bathrooms is _____, and Zane's opportunity cost for cleaning bathrooms is _____.

shift demand back; increase quantity demanded

A fall in the expected future price of a product will _________ while a fall in today's price will ___________.

Buyers will flock to purchase these items, and the excess demand will cause prices to rise.

A hurricane is expected to hit the Carolinas. Why might the prices of batteries, candles, and bottled water rise?

keep buying a product until marginal benefit equals price.

A rational buyer will:

the price of thin-crust pizza

A shift of the demand curve for thin-crust pizza would NOT be caused by a change in:

quantity demanded exceeds quantity supplied.

A shortage occurs when:

(i), (ii), and (iii)

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

supply is perfectly inelastic.

A tax on buyers would not cause a decrease in quantity sold if:

the additional costs and benefits of the next unit.

According to the "marginal principle", decisions should be made based on...

else might my decision affect and what else might affect my decision?

According to the interdependence principle, when faced with a decision, you should ask what

time he spent cooking the dinner.

Alan Patel is a college student living alone in a campus apartment. He finished cooking dinner when his friends text him to join them at the dining hall on campus for dinner. He now has to decide whether to eat the dinner he prepared or walk to campus to meet his friends at the dining hall. Alan should consider all the following costs when making this decision EXCEPT the

The cost of building the factory, purchasing the robotic assembly lines and industrial freezers.

Amul Food Factory in India makes ice cream and produces processed and condensed milk. In the factory, the firm's employees use raw milk and sugar. The firm runs on electricity and purchases raw milk every day. Large robotic assembly lines fill and package the ice cream containers. Large industrial freezers store the ice cream. Based on this scenario, can you identify the fixed costs for Amul Food Factory?

availability of substitutes

An important determinant of the price elasticity of demand is the:

nothing - it stays the same

As the cost of producing something rises (ceteris paribus), what happens to my willingness to pay for the product?

the supply curve would shift to the right

Asphalt is a byproduct of gasoline production. What would happen to the supply curve for asphalt if the demand for gasoline increases?

0.72

At a price of 7, consumers buy 162 pumpkins per day at Costco. When the price dropped to 2, consumers bought 376 pumpkins per day. What is the price elasticity of demand for pumpkins? (use absolute value (no negatives) - use 2 decimal places)

0.1

Bob's Basses only makes basses using rare, hard-to-get African Blackwood. What would you guess the elasticity of supply for Bob's basses is?

The substitution and income effect both push you to buy a lower quantity.

Ceteris paribus, as price rises, what do the substitution and income effects do to demand?

C; D

Check all the options that would cause demand to shift out. a. An increase in the price of a complement b. A fall in the cost of production c. An increase in the price of a substitute d. An increase in income (assuming a normal good) e. An increase in the number of suppliers of the product. f. A fall in the price of the product

ii and iv

Choose ALL correct answers The demand curve... (i) is a curve that shows the maximum willingness to pay for each unit of a product. (ii) is a curve that shows the marginal benefit gained from each unit of a product. (iii) is a curve that shows the marginal production cost of a product. (iv) is a curve that shows the relationship between the price of a product and how much a consumer is willing and able to buy at each price.

B; C; E

Choose all options that would make demand for a good LESS elastic: a. longer time frame b. it's a necessity c. shorter time frame d. it's not a necessity e. it has few substitutes f. it has lots of substitutes

quantity demanded; increases; demand; decreases

Cocoa Pebbles and Cocoa Krispies are substitutes (both cereal). If the price of Cocoa Pebbles falls, the _______ of Cocoa Pebbles ______ , while the _______ of Cocoa Krispies _______.

20 million gallons per week

Consider the data in the table. The price of gasoline is $3.99 per gallon at the gas station. If Rexhall Fuel Supplies is a rational seller, how many gallons of gasoline should this seller be willing to sell?

supply; back(left); higher; lower

Consider the supply and demand model. Increasing labor costs will shift the ______ curve(s) ______ and lead to _______ price and ________ quantity

price must be higher than the equilibrium price

Consider the supply and demand model. For a surplus to exist....

15

Consider these demand and supply equations: Qd = 100 - P Qs = -20 + 2P If price is $35, how big is the shortage?

rising marginal costs for a seller.

Diminishing marginal product leads to

approaching the production limit due to a fixed factor of production

Diminishing marginal product of labor is due to....

only variable costs

For a firm, marginal cost is determined by...

as quantity rises, marginal utility and willingness to pay fall

For an individual, what is the main reason that demand slopes down?

a tax cut on consumer income will lead to a rise in their demand.

For normal goods

lower his profitability by $5 per ton.

Frank is a barley farmer in a perfectly competitive market. The market price of barley is $250 per ton. If Frank charges $245 per ton, he will

Marginal cost increases when marginal product decreases.

From the following statements, choose the correct one: - Marginal cost increases when marginal product decreases. - Marginal cost increases when marginal product increases. - The supply curve slopes upwards because marginal cost decreases with output. - The supply curve slopes downwards because marginal cost increases with output. - The supply curve slopes upward because marginal product increases with output.

generic-brand toothpaste

Good M has an income elasticity of demand of -0.7. Which of the following items might good M be?

normal goods.

Holding all else constant, if people eat out more at expensive restaurants when they earn more, then expensive restaurant meals are

19

If Qd = 32 - P, and Qs = -7 + 2P what is the equilibrium Quantity?

elastic; lower

If demand is _____, a higher price yields _____ total revenue.

price falls, the effect on quantity is unclear

If supply shifts out (increases) and demand shifts back (decreases), what happens to equilibrium price and quantity?

the effect on price is unclear, quantity rises

If supply shifts out (increases) and demand shifts out (increases), what happens to equilibrium price and quantity?

6.6

If the price elasticity of demand is 0.3 and the price rises by 22 percent, then by what percent does quantity fall by? Round to one decimal place.

0.47

If the price of a good falls by 17%, quantity demanded rises by 8%. What is the price elasticity of demand? (put the absolute value - so NO negative sign) Round to two decimal points.

0.625

If the price of a good falls by 8%, quantity demanded rises by 5%. What is the price elasticity of demand? (put the absolute value - so NO negative sign) Round to two decimal points.

weak substitutes

If two products have a cross-price elasticity of 0.1, then they can be described as...

price to rise

In a well-functioning market, a shortage will cause...

both milk and bread are normal goods

Jessica's income increased by 10% this year. In the same year, Jessica's quantity demanded of milk increased by 10% and her quantity demanded for bread increased by 5%. Assuming all else equal, this means that, for Jessica:

benefit of watching another episode is less than the marginal cost.

Kathleen Alvarado is binge-watching her favorite show on Netflix. She is trying to decide how many more episodes to watch. Kathleen should continue watching episodes unless the marginal

quantity will rise but the effect on price is not certain

Levi runs a stand in a perfectly competitive market that sells Rice Krispies treats on State Street (main ingredients: Rice Krispies and marshmallows). Suppose the grocery store has a big sale on Rise Krispies. Also suppose that the "Rice Krispies Treat Lovers of America" is having their national conference in Madison. What will happen to the price and quantity of Rice Krispies Treats?

2.5

Lyft cuts the price of a ride in New York City by 10%. Thereafter, the quantity of rides demanded rises by 25%. What is the absolute value of the price elasticity of demand for Lyft rides?