ECON 2 Microeconomics

Refer to Exhibit 22-13. What dollar amounts go in blanks (T) and (U)? 8;1

$20; $30

Refer to Exhibit 22-3. What is the average total cost of producing 45 units of output? 8;1

$24.44

Refer to Exhibit 21-7. For graph (3), if the price of Y is $200, the price of X is 7;2

$25.

Refer to Exhibit 21-7. For graph (2), if the price of X is $60, what is the consumer's income? 7;2

$3,000

Refer to Exhibit 22-11. Average variable cost at three units of output is 8;1

$60.

Refer to Exhibit 22-11. Average total cost of the sixth unit of output is 8;1

$90.83.

Refer to Exhibit 3-16. Which of the graphs best represents the market for theater tickets that are already sold out on the day of the performance? 3;2

(3)

If Jack bought 21 CDs last year when his income was $30,000 and he buys 23 CDs this year when his income is $35,000, then his income elasticity of demand is ______________ which means that CDs are a(n) ______________ good for Jack. 6;3

+0.59; normal

As the price of good X rises from $1.50 to $1.75 the result is a decrease in the quantity demanded of good X from 650 units to 590 units. The price elasticity of demand for good X is _____________ and total revenue __________ as the price of good X rises from $1.50 to $1.75. 6;1

0.63; rises

Refer to Exhibit 21-3. Linda spends $5 a week on apples and oranges. If the price of both goods is $1 per unit, how many apples and oranges, respectively, does she purchase per week if she wants to maximize her utility? 7;3

1 and 4

Refer to Exhibit 20-3. When price decreases from $3.50 to $2.50, the price elasticity of supply is 6;3

1.0.

If quantity demanded rises by 10 percent as price falls by 9 percent, the price elasticity of demand equals 6;2

1.11.

Refer to Exhibit 21-4. What value goes in blank (C)? 7;2

10

Refer to Exhibit 21-5. What value goes in blank (A)? 7;2

10.0

Refer to Exhibit 21-1. The marginal utility of the second plum is 7;1

12 utils.

Refer to Exhibit 3-14. At a price of $13, there is a ____________ unit ____________ of good X. 3;1

140; shortage

Refer to Exhibit 20-3. When price decreases from $4.50 to $3.50, the price elasticity of demand is 6;3

2.00.

Refer to Exhibit 20-5. For graph (1), what is the price elasticity of demand going between $2.00 and $1.50? 6;2

2.33

If price elasticity of demand is 0.5, it follows that a _______ percent decrease in price would cause a _______ percent increase in quantity demanded. 6;3

2; 1

Refer to Exhibit 3-14. At a price of $10, there is a ____________ unit ____________ of good X. 3;1

340; shortage

Refer to Exhibit 3-14. At a price of $15, there is a ____________ unit ____________ of good X.

40; surplus

Refer to Exhibit 21-5. What value goes in blank (C)? 7;3

44

Refer to Exhibit 20-2. The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X, as shown by the shift of S1 to S2. Approximately what percentage of the tax do producers end up paying? 6;1

45 percent

Refer to Exhibit 20-3. When price decreases from $5.50 to $4.50, the price elasticity of demand is 6;2

5.0.

Refer to Exhibit 3-13. Fill in blanks (C) and (D) respectively with the market quantity demanded at each given price. 3;3

74; 62

Rich has $100,000 and Poore has $1,000. Which of these statements is most strongly supported by the theory of consumer choice? 7;1

An extra dollar given to Rich is worth less to him than his 100,000th dollar.

Refer to Exhibit 20-4. As a consequence of the depicted change in supply of X, the demand curve for Y shifted from D1 to D2. What is true of the cross elasticity of demand for Y? 6;2

Ec > 0

Refer to Exhibit 3-11. Fill in blanks (A) and (B) respectively with "Exchange" or "No Exchange" to indicate whether or not exchange would take place at the given prices. 3;3

Exchange; Exchange

Which of the following statements is false? 6;1

If the income elasticity of demand for a good is less than zero, the good is a normal good.

Suppose you could quantify the amount of satisfaction you receive from consuming ice cream in money terms. You might say, "I expect to get $3 worth of satisfaction from this ice cream cone." According to traditional economic theory, if the price of this ice cream cone were $3.05, would you buy one? 7;1

No way, because it's not worth it.

Suppose the government provides peanut butter to everyone free of charge and everyone consumes it to the point at which he receives no additional satisfaction from another spoonful. Is this necessarily good? 7;2

No, because there might be some cases where the resources used to produce peanut butter could have been better used to produce more of other products.

Which of the following statements best represents the law of supply? 3;2

Price and quantity supplied are directly related, ceteris paribus.

Which of the following best describes an interpersonal utility comparison? 7;3

Smith gets more utility from working on his computer than Jones gets from working on his computer.

Which of the following statements is false? 6;1

Soap has a higher price elasticity of demand than Ivory Soap.

The demand curve for good X is generally highly inelastic at and around the current price. If we assume that the supply curve is neither perfectly elastic nor perfectly inelastic, then who will pay the greater share of a tax placed on the production of good X? 6;1

The buyers will pay the greater share.

Which of the following statements is true? 8;1

The marginal cost curve has an upward-sloping portion to it because of the law of diminishing marginal returns.

Don receives 100 utils from consuming two oranges. The utility he derives from consuming the second orange equals 30 utils. Which of the following conclusions is derived from the law of diminishing marginal utility? 7;1

The marginal utility Don receives from consuming the third orange will be less than 30 utils.

Tobacco production is one of the more heavily subsidized industries in the United States. Suppose that as a result of intense lobbying from health-related concerns, Congress repeals the tobacco firms' subsidies. Which of the following scenarios would likely occur? 3;1

The tobacco firms' supply curve would shift leftward, since it would now cost more to produce each level of output.

Dan is currently consuming 10 Cokes and 5 slices of pizza per week such that the marginal utility of the tenth Coke is 12 utils and that of the fifth slice of pizza is also 12 utils. How should Dan redirect his purchases so as to attain consumer equilibrium? 7;1

There is not enough information to answer the question.

Dan is currently consuming 10 Cokes and 5 slices of pizza per week such that the marginal utility of the tenth Coke is 12 utils and that of the fifth slice of pizza is also 12 utils. How should Dan redirect his purchases so as to attain consumer equilibrium? 7;2

There is not enough information to answer the question.

If the demand for good X is inelastic in the short run, then it will be __________ in the long run (as more time passes). 6;2

There is not enough information to answer the question.

Good X Refer to Exhibit 3-2. Suppose equilibrium is at point B. Something then changes and equilibrium becomes point C. Which of the following is consistent with the change in equilibrium from point B to C (assuming that good X is a normal good)? 3;3

There was a decrease in resource prices and income stayed constant.

Refer to Exhibit 3-2. Suppose equilibrium is at point C. Something then changes and equilibrium becomes point B. Which of the following is consistent with the change in equilibrium from point C to B (assuming that good X is a normal good)? 3;1

There was an increase in resource prices and income stayed constant.

When income rises for the buyers of good X, the ____________ curve for good X will shift ________________. 3;1

This question cannot be answered unless we know whether good X is a normal good, a neutral good, or an inferior good.

When income rises for the buyers of good X, the ____________ curve for good X will shift ________________. 3;3

This question cannot be answered unless we know whether good X is a normal good, a neutral good, or an inferior good.

The marginal cost curve passes through the __________ curve at its lowest point. 8;1

a and b

Which of the following illustrates the law of demand? 3;2

a and c

If the marginal utility of X is negative, then the last unit of X is 7;1

a bad

If the cross elasticity of demand for good A with respect to good B is -0.87, then good A is 6;1

a complement to good B.

In the supply-and-demand diagram of the market for peanut butter, the equilibrium point has moved down and to the right. What could have caused this? 3;2

a fall in the price of peanuts

Good Y Refer to Exhibit 3-3. A movement from point V to point W could not have been the result of 3;3

a increase in the price of good Y.

If Cassandra bought 16 cotton blouses last year when her income was $40,000 and she buys 14 cotton blouses this year her when income is $35,000, then blouses are 6;2

a normal good.

If Jack bought 18 CDs last year when his income was $20,000 and he buys 19 CDs this year when his income is $25,000, then for Jack CDs are 6;2

a normal good.

Good Y Refer to Exhibit 3-3. A movement from point Z to point W would have been the result of 3;3

a reduction in the price of good Y.

In the supply-and-demand diagram of the market for peanut butter, the equilibrium point has moved up and to the right. What could have caused this? 3;1

a shift in preferences toward peanut butter

If the MU/P ratio for good X is less than the MU/P ratio for good Y, this means that 7;3

an individual is receiving more utility per dollar from good Y than good X.

Refer to Exhibit 3-6. If an increase in income causes the demand for good X to shift from D1 to D3, then good X is 3;2

an inferior good.

If demand is perfectly elastic, it follows that 6;3

as price changes only a small percentage, quantity demanded falls to zero.

Suppose that there are two cities that are alike in every way except that one city has significantly better weather than the other city. Call the city with good weather Good-Weather City (GWC) and the other Bad-Weather City (BWC). Assume that the median price of a home in the two cities is originally the same. If the marginal utility of living in GWC is 500 and the marginal utility of living in BWC is 300, to make themselves better off economic theory tells us that 7;2

at least some people will move from BWC to GWC, which will make housing prices rise in GWC and fall in BWC.

Refer to Exhibit 22-4. Curve C is a(n) __________ cost curve. 8;1

average variable

The MU/P ratio for good X is greater than the MU/P ratio for good Y as a result of a fall in the price of good X. To achieve consumer equilibrium, the consumer reallocates dollars from the purchase of good Y to the purchase of good X. In the process, she 7;3

b and c

In year 1 the average price of X is $10, and in year 2 the average price of X is $23. Still, consumers buy more units of X in year 2 than in year 1. It follows that 3;3

b and d

Consumer equilibrium exists when the 7;3

c and d

Refer to Exhibit 20-2. The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X, as shown by the shift of S1 to S2. As a result, 6;1

consumers end up paying $6.25 per unit, and producers end up receiving $6.25 per unit, but keeping only $4.00 per unit.

If the marginal utility of a good is negative, then 7;3

consumers should buy less of it.

According to the traditional theory of marginal utility as presented in the textbook, as more units of a good are acquired, the consumer's marginal utility 7;1

diminishes.

The law of supply states that price and quantity supplied are 3;2

directly related, ceteris paribus.

The MU/P ratio for good X is greater than the MU/P ratio for good Y. To achieve consumer equilibrium, the consumer reallocates dollars from the purchase of good Y to the purchase of good X. If the law of diminishing marginal utility holds, the marginal utility of good X __________ and the marginal utility of good Y __________. 7;1

falls, rises

If demand decreases by a greater amount than supply decreases, then equilibrium price __________ and equilibrium quantity __________. 3;1

falls; falls

The price elasticity of demand tends to be higher for goods 6;1

for which the consumer spends a high percentage of his or her income.

The quantity demanded of good A rises as income rises. It follows that income elasticity of demand is __________than 0, and good A is a(n) __________ good. 6;3

greater; normal

If a good is income elastic, it follows that the percentage change in quantity demanded of a good 6;3

is greater than the percentage change in income.

Economies of scale, constant returns to scale and diseconomies of scale account for the shape of the __________ cost curve. 8;1

long-run average total

Government wants to maximize its tax revenue and it can only place a $2 per-unit tax on one of two goods. It should place the tax (on the production) of the good whose demand curve has the 6;3

lower price elasticity of demand.

We would expect the total utility of diamonds to be __________ than the total utility of water and the marginal utility of diamonds to be __________ than the marginal utility of water. 7;3

lower; higher

This is the solution to the diamond-water paradox: Those things that have high value in use sometimes have low prices because they are consumed at low __________ utility; those things that have low value in use sometimes have high prices because they are consumed at high __________utility. 7;1

marginal; marginal

Suppose that a consumer purchases a combination of X and Y such that MUX/PX = 15 utils per dollar and MUY /PY = 10 utils per dollar. To maximize utility, the consumer should buy 7;2

more of X and less of Y.

Which of the following would result in higher price elasticity of good X? 6;2

more substitutes for good X

If the quantity of output rises as more of a variable input is added to a fixed input, 8;1

none of the above

Refer to Exhibit 3-10. 300 units of X will be exchanged in this market if the price is 3;3

none of the above

Refer to Exhibit 3-4. A price of $4 in the market will result in a 3;2

none of the above

Which of the following statements is true? 6;2

none of the above

No matter what the price of a given item of food, a person will eat the same amount of that food. This is __________ with the idea of __________. 7;1

not consistent; consumer equilibrium

If a person is receiving greater marginal utility per dollar from consuming one good than another, it follows that he or she is 7;2

not maximizing utility.

Price elasticity of demand is the ratio of the 6;3

percentage change in quantity demanded to the percentage change in price.

Oil producers expect that oil prices next year will be lower than oil prices this year. As a result, oil producers are most likely to 3;2

place more oil on the market this year, thus shifting the present supply curve of oil rightward.

Refer to Exhibit 22-5. Economies of scale are present between 8;1

points A and B.

A "decrease in the quantity demanded" means that 3;3

price has increased and consumers therefore want to purchase less of the good.

An increase in the number of buyers in a particular market will result in a 3;1

rightward shift in the demand curve.

Refer to Exhibit 20-2. The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X, as shown by the shift of S1 to S2. As a result, the equilibrium price 6;3

rises from $5.00 to $6.25.

If people begin to favor science fiction novels to a greater degree than previously, the demand curve for science fiction novels

shifts rightward.

One reads the following in a newspaper: "Today the president and Congress agreed to impose new restrictive quotas on Japanese cars coming into the country." As a result, an economist would predict that the 3;2

supply of cars in the country will fall and the (average) price of cars will rise.

If the U.S. government imposes a more restrictive import quota on Japanese video gaming systems, the ____________ curve for Japanese video gaming systems in the U.S. will shift ___________. 3;1

supply; leftward

The 100th game of chess gives Jones more utility than the 32nd game of chess. It follows that 7;3

the law of diminishing marginal utility may hold since the 32nd game of chess might have been a different "good" than the 100th game of chess (after all, it could have been played with a different person).

Resource X is necessary to the production of good Y. If the price of resource X rises, 3;3

the supply curve of Y shifts leftward.

If the demand for a good is unit elastic and the price of the good increases, then 6;1

total revenue is not affected.

If good Z has an income elasticity of 1.0, then demand for good Z is income __________ and the good is __________. 6;1

unit elastic, normal

The price elasticity of demand is 6;2

usually negative, but could be zero.

The diamond-water paradox holds that often things that have high __________ have a __________ price and things that have a low __________ have a __________ price. 7;3

value in use; low; value in use; high

We take one dollar from a pauper and give it to a millionaire. Assuming a diminishing marginal utility of money, 7;2

we cannot say whether or not total utility changes.