Econ 201 Problem Sets

Supply slopes up because A) Marginal costs are increasing B) Marginal benefits are decreasing C) Demand slopes down D) Price and quantity are inversely related

A) Marginal costs are increasing

A field experiment at an all-you-can-eat pizza restaurant shows that a 50% discount on the price of the meal led customers to consume 27.9% less pizza. In other words, when people have to pay a higher price for their meal, they want to "get their money's worth" by eating more pizza. 10) Suppose the regular price of the buffet is $10 and the discounted price is $5. Once a customer has paid for the buffet, what is the marginal cost of eating another slice of pizza? (Assume the only costs are monetary costs.) A) $0 B) $5 C) $10 D) It depends on whether the customer is getting a discount.

A) $0

Micah can produce bicycles at a marginal cost of $125. Jacqueline values this bicycle at $225. If Jacqueline buys a bicycle from Micah, what is the total economic surplus created? A) $100 B) $125 C) $225 D) It depends on the price that Jacqueline pays

A) $100

Suppose that cans of CELSIUS energy drink have unit elastic demand. Initially, the price is $2 per can and quantity demanded is 100. Price increases to $3 per can. What is the new quantity demanded? A) 50 B) 66.7 C) 100 D) 150

A) 50

Carly Rae Jepsen released her new album on the same night that Taylor Swift released hers. Taylor Swift's album got most of the attention - it was immediately written about in major publications, teaser clips for the music videos were shown on Thursday Night Football, and the album was streamed 185 million times on Spotify in one day. Journalists have a limited amount of time to write and fans have a limited amount of time to listen to music, so Carly Rae Jepsen's album received less fanfare than it would have received if it had been released a week earlier. This is an example of which type of externality? A) A common resource problem B) Intergenerational externalities C) Network effects D) Thick market externalities

A) A common resource problem

When Karl gets a raise, his demand for Twix bars shifts to the right. This means that, for Karl, Twix bars are: A) A normal good B) An inferior good C) A network good D) A good with no marginal benefits

A) A normal good

Conrad's restaurant is featured on Diners, Drive-Ins, and Dives (a show on the Food Network). As a result, more people buy Conrad's wraps. This is an example of: A) An increase in demand B) A decrease in demand C) An increase in quantity demanded D) A decrease in quantity demanded

A) An increase in demand

Suppose seeing the shirt on television and in the New York Times causes many people to become aware that it exists and can be purchased at the Nike website. While lots of these people hate the shirt when they see it, some people like it, and as a result, Nike sells more of these shirts. This is an example of A) An increase in demand due to an increase in the number of buyers B) A decrease in demand due to shifts in income C) An increase in demand due to network effects D) A decrease in demand due to changes in tastes and preferences

A) An increase in demand due to an increase in the number of buyers

The Rational Rule says that, if something is worth doing, keep doing it until A) Marginal benefits are equal to marginal costs B) Marginal benefits are greater than marginal costs C) The opportunity cost is zero D) Your willingness to pay is zero

A) Marginal benefits are equal to marginal costs

A recent article in the New York Times discussed how the weakening of the British pound relative to other currencies has made Scotch whisky "more affordable for buyers outside of Britain". Scotch whisky is made in Scotland, which is a country that uses the British pound. In EC 202, we discuss how changes in exchange rates affect the prices of exports. For now, just assume that the world price of whisky has gone down. How will this affect producer surplus and consumer surplus in countries that have international trade in whisky? A) Consumer surplus rises, producer surplus falls B) Consumer surplus and producer surplus both rise C) Consumer surplus and producer surplus both fall D) Consumer surplus falls, producer surplus rises

A) Consumer surplus rises, producer surplus falls

Suppose Michigan passes a law which will outlaw the sale of gasoline-powered cars starting in 2024. Note that, even after the ban goes into effect, existing gasoline-powered cars can still be driven in the state. How will that affect the demand for gasoline-powered cars today? A) Demand will increase B) Demand will decrease C) Demand will be unaffected

A) Demand will increase

The city of Eagleton raises the minimum wage from $9 per hour to $16 per hour. As a result of this minimum wage increase, unemployment increases from 3% to 7%. This suggests that the demand for labor is relatively: A) Elastic B) Inelastic

A) Elastic

Continuing with the previous question, if Michigan were to simplify these licensing requirements, which of the following would likely happen: A) Existing establishments would be less profitable B)The number of licensed marijuana establishments would decrease C) The equilibrium price of marijuana would increase D) The number of licensed marijuana establishments would be unaffected

A) Existing establishments would be less profitable

According to what we learned in class, the reason that LeBron James shouldn't own and operate a bakery, even if that bakery is profitable, is because: A) His opportunity costs are high because he will have to forego his NBA salary B) The fixed costs of opening a new business are too high C) Opening a bakery is a sunk cost

A) His opportunity costs are high because he will have to forego his NBA salary

Alexandra's income increases by 10%. As a result, her consumption of lemonade increases by 5%. Which of the following statements is true: A) Income elasticity of demand is positive, so lemonade is a normal good B) Income elasticity of demand is negative, so lemonade is an inferior good C) Income elasticity of demand is positive but less than one, so lemonade is an inferior good D) Price elasticity of demand is -0.5

A) Income elasticity of demand is positive, so lemonade is a normal good

If Starbucks is able to reduce the time it takes to make complicated drinks (and therefore reduce the amount of time people have to spend in line), how would that directly affect demand? A) Increase demand B) Decrease demand C) Increase quantity demanded D) Decrease quantity demanded

A) Increase demand

But the complexity of the drinks, along with order surges at certain times of the day, have made barista jobs more demanding and can sometimes result in delays. To help address that, the company unveiled a new cold beverage system that reduces the number of steps needed to make the drinks, as well as the need for employees to repeatedly bend down and dig into buckets for ice. In a demonstration of the system, two Starbucks employees showed that it took 35 seconds to make a mocha frappuccino with whipped cream as opposed to 87 seconds now. The new cold beverage system would represent a: A) Increase in supply B) Decrease in supply C) Increase in quantity supplied D) Decrease in quantity supplied

A) Increase in supply

Which of the following is an example of a shortage? A) It is illegal to sell cigarettes for more than $8 per pack. This leads to long lines outside stores that sell cigarettes B) A tax on beer increases the price and reduces consumption C) There are not many Super Bowl tickets available, and lots of people want to go. As a result, Super Bowl tickets are very expensive. D) A subsidy on electric cars increases the demand for electric cars

A) It is illegal to sell cigarettes for more than $8 per pack. This leads to long lines outside stores that sell cigarettes

Louisa owns a lawnmowing service. She hires high school students and college students to mow lawns for homes and businesses in the area. This summer, Louisa upgraded her lawnmower fleet by purchasing new mowers that are much faster and allow her employees to cut lawns in half the time. According to what we learned in class, how willthis shift Louisa's labor demand? A) Labor demand shifts right B) Labor demand shifts left C) Labor demand is unaffected.

A) Labor demand shifts right

Trombone Champ is a computer game in which the user plays the role of a trombone player. The current price of the game is $15. The makers of Trombone Champ determine that price elasticity of demand for their product is -1.5. If the makers of Trombone Champ wish to maximize revenue, what should the price of their product be? A) Less than $15 B) Exactly $15 C) More than $15

A) Less than $15

Which of the following strategies by Applebee's would be most likely to lead them "winning" the game and keeping Olive Garden from entering A) Make a binding commitment to the city of East Lansing: Applebee's will get a small tax break if they enter but will pay a huge fine if they decide not to enter. B) Announcing on television that they have decided not to enter the market (but secretly planning on entering the market). C) The mayor of the town secretly offering Applebee's a bribe if they will enter the market.

A) Make a binding commitment to the city of East Lansing: Applebee's will get a small tax

But while some of the city's wealthiest neighborhoods would enjoy the greatest benefits, one of its poorest and most polluted — the South Bronx — could end up with dirtier air from diverted traffic... The plan seeks to decrease the number of vehicles on the road and boost public transit at a time when cities globally are seeking to curb harmful emissions from cars, buildings and power plants to combat climate change. But according to an environmental assessment released by the Metropolitan Transportation Authority, motorists detouring around the new tolls could add traffic and soot to parts of the Bronx, Staten Island, Nassau County on Long Island and Bergen County in New Jersey. According to the above article, putting tolls on people who drive in Manhattan will result in ___________ enjoying positive externalities and _____________ suffering from negative externalities A) Manhattan residents; South Bronx residents B) Nobody; Manhattan residents C) Drivers in Manhattan; South Bronx residents D) Drivers in the South Bronx; Manhattan residents

A) Manhattan residents; South Bronx residents

Suppose the school district finds that high school attendance drops dramatically. They are willing to increase the amount of their gas cards, but doing so is expensive. They are willing to pay any amount as long as it increases attendance, but they don't want to waste money on gas cards if they don't increase attendance. So, they increase the amount of money on the gas cards by a few dollars per week. As long as attendance keeps increasing, they will continue increasing the amount on the gas cards. Once the attendance stops increasing, they will stop increasing the amount. This is an example of the A) Marginal principle B) Interdependence principle C) Opportunity cost principle

A) Marginal principle

You are interested in learning whether increasing sales taxes would benefit the economy of East Lansing. This would be best described as: A) Microeconomics B) Macroeconomics

A) Microeconomics

Which of the following is the best example of a nonrival good? A) Netflix B) Fish in a lake C) The first-place prize in a golf tournament D) Cigarettes

A) Netflix

Before the pandemic, around 5% of the roughly 25,000 annual customers of Three Kings Tattoo were ages 50 or older. Owner Matthew Marcus estimated that the 50-plus crowd now make up about 15% of the clients at his seven locations, which include New York, Los Angeles, Denver and London. Many of them arrive with grown children or grandchildren for matching tats. "The pandemic created more of a YOLO mentality in people," said Mr. Marcus, using the you-only-live-once acronym. Diego Martin, owner of Hudson Valley Tattoo Company in Wappinger Falls, N.Y., estimated that the proportion of customers in their 60s and 70s has doubled in the past year to about 10% of some 3,000 men and women served. One of them, a 75-year-old man, is covering an entire arm in what is known as a sleeve. How would we expect this increased interest from older people to affect the tattoo market? A) Price and quantity will increase B) Price and quantity will decrease C) Price will increase and quantity will decrease D) Price will decrease and quantity will increase

A) Price and quantity will increase

Dimensional lumber (wooden boards) and paper are complements in production because the sawdust produced by cutting trees into lumber can be used to make paper. Paper and pencils are complements in consumption. Suppose that demand for dimensional lumber increases and the price of pencils increases. How will this affect the price and quantity of paper? A) Price decreases. The effect on quantity is ambiguous B) Price increases. Quantity decreases C) The effect on price is ambiguous. Quantity increases D) Price decreases. Quantity decreases.

A) Price decreases. The effect on quantity is ambiguous

The demand for pickup trucks shifts left. At the same time, the supply curve for pickup trucks shifts right. What are the net effects on price and quantity? A) Price decreases. The effect on quantity is ambiguous. B) Price decreases. Quantity increases C) The effect on price is ambiguous. Quantity decreases D) Price increases and quantity decreases

A) Price decreases. The effect on quantity is ambiguous.

West Virginia is located on mountains that contain large amount of coal. Thus, West Virginia provides the United States with a comparative advantage in coal production due to A) Relatively abundant inputs B) Specialized skills C) Mass production

A) Relatively abundant inputs

A tax on sellers shifts the _______ curve to the _______: A) Supply; left B) Supply; right C) Demand; left D) Demand; right

A) Supply; left

Michigan State University decides fine everyone who leaves an electric scooter on a walkway 20 dollars. One day, you are in a hurry to get to class and don't have time to park your scooter where it goes. So, you leave your scooter on the walkway, knowing that you will get fined 20 dollars. Which of the following is most likely to be true: A) The benefit you got from being to class on time was greater than $20 B) Your willingness to pay to get to class on time was less than $20 C) You acted irrationally and didn't follow the cost-benefit principle

A) The benefit you got from being to class on time was greater than $20

You are binge watching Riverdale on Netflix and have one episode left in the season. Which of the following would be describe the marginal benefit of watching that last episode? A) The enjoyment you get from watching the last episode B) The total enjoyment you received from the first season C) The hour that you could have spent studying economics (your best possible alternative use of the time, of course)

A) The enjoyment you get from watching the last episode

For example, in 2007, she performed in 178 concerts. Often she was the opening act for a more famous performer, so she made much less money per show than she makes now. The fact that Taylor gives fewer concerts now than she did in 2007 suggests that, for her, A) The income effect is larger than the substitution effect. B) The substitution effect is larger than the income effect. C) The substitution effect is equal to the income effect. D) Your opportunity cost of working is negative.

A) The income effect is larger than the substitution effect.

Suppose the price of roses decreases. Assume that roses and oranges tend to have similar growing climates, and that farmland that currently grows one of them can easily grow the other crop instead. Which of the following responses is likely? (Note: that we are looking for what happens after the price changes, not for what caused the price change) A) The price of oranges decreases B) Quantity of roses demanded decreases C) The quantity of oranges sold decreases

A) The price of oranges decreases

A single country has accounted for about 80 percent of the fishing in the international waters just off Argentina, Ecuador and Peru this year. And it is not a South American country. It is China. In recent years, hundreds of Chinese fishing vessels have begun to operate almost 24 hours a day, seven days a week, off the coast of South America. The ships move with the seasons, from Ecuador to Peru to Argentina. China has focused on these faraway waters after depleting fish stocks closer to its own shores. China's fishing expansion is part of a much larger story, of course. As the world's most populous country, and one with an economy that has grown rapidly in recent decades, China has a growing global footprint — economically, diplomatically and militarily. It needs so much fish to feed a middle class that has become vastly larger over the past generation. For the purposes of this problem, we can assume that there have been no new technologies making it easier to harvest fish. So, the marginal cost curve for producing fish is unchanged. Which of the following best describes what happened to the market for fish as China's middle class has grown: A) There was an increase in demand and an increase in quantity supplied B) There was an increase in demand and an increase in supply C) There was a decrease in demand and a decrease in quantity supplied D) There was an increase in demand and a decrease in supply

A) There was an increase in demand and an increase in quantity supplied

A politician argues that the United States should temporarily ban the import of battery-powered electric scooters because this is an "infant industry". According to what we learned in class, which of the following counterarguments would we expect an economist to raise: A) This temporary ban might become permanent because the electric scooter manufacturers will never become globally competitive. B) This ban will destroy American jobs in the electric-powered-scooter industry C) This ban will hurt the wages of manufacturing workers in other countriesD) This ban will increase the price that people in other countries pay for electric scooters

A) This temporary ban might become permanent because the electric scooter manufacturers

McDonald's has been promoting the "McRib Farewell Tour", encouraging customers to purchase the sandwich and suggesting that it may soon be permanently removed from the menu. This is one of McDonald's many recent marketing moves that have led the Wall Street Journal to claim "McDonald's is Cool Again". That article notes that McDonald's is seeing increased visits to its stores and increased revenue. How would we expect this to affect the wages of McDonald's workers? A) Wages increase because labor demand increases B) Wages increase because labor demand decreases C) Wages increase because the supply curve of McRib sandwiches shifts to the right D) Wages increase because the labor supply curve shifts to the left

A) Wages increase because labor demand increases

Kara owns a company that makes jackets. Her company is doing well and she's considering expanding by hiring more employees. However, she knows that if she hires more employees and increases her production, she will have to cut prices in order to sell more jackets. This is a good example of: A) Why labor demand slopes down B) Why Marginal Resource Cost is a horizontal line C) Why machinery is not a good substitute for high-skill labor D) Why marginal revenue product is upward sloping

A) Why labor demand slopes down

When you hang out with your friends, you often accidentally grab the wrong cell phone because you all have the same model of iPhone and black phone cases. You decide that you want to purchase a different colored cell phone case to prevent this from happening. This means that you consider a specific color of cell phone case to be a ________. A) congestion good B) network good C) normal good D) substitute for a cell phone

A) congestion good

In class, we said that to find the opportunity cost of an action, ask yourself: A) "One more?" B) "Or what?" C) "How many?" D) "What are the benefits?"

B) "Or what?"

You are deciding what to order at Starbucks. A coffee costs $3 and a cappuccino costs $5. You value a coffee at $5 and a cappuccino at $8. You only want to order one drink. After you buy your preferred drink, what is your consumer surplus? A) $2 B) $3 C) $5 D) $8

B) $3

If Raphael sells three cakes for $70 each, what is producer surplus? A) $30 B) $55 C) $155 D) $210 E) It depends on how much the consumer values the cakes

B) $55

If the price elasticity of demand for a product is equal to -0.4, then a 25 percent decrease in price will increase quantity demanded by A) 0.1% B) 10% C) 2.5% D) 62.5%

B) 10%

Which of the following statements is true: A) Labor unions shift the labor demand curve to the right B) A monopsony will likely lead to lower wages C) All wage differences between men and women are due to discrimination D) Jobs which are unpleasant will have a compensating differential in pay, which leads to workers at this job being paid less.

B) A monopsony will likely lead to lower wages

Continuing with the previous question, suppose that some of the 185 million people who streamed Taylor Swift's album Midnights on Spotify were not regular Spotify users. They logged on just to listen to Midnights, but once on the app, they started listening to more music by lesser-known artists. Had these people not logged on to Spotify for Midnights, they never would have heard of these artists and never would have listened to their music. For the lesser-known artists, this is an example of ________: A) A public good B) A positive externality C) A negative externality

B) A positive externality

A field experiment at an all-you-can-eat pizza restaurant shows that a 50% discount on the price of the meal led customers to consume 27.9% less pizza. In other words, when people have to pay a higher price for their meal, they want to "get their money's worth" by eating more pizza. After the researchers conducted this part of the experiment, they did another analysis. They surveyed the customers after they ate and asked them to rate the taste of the pizza. Based on what we have learned about diminishing marginal benefits, who would we expect to give the pizza a higher rating? A) Customers who paid the higher price, because the pizza is worth more to them B) Customers who paid the lower price, because they didn't eat as many slices and therefore avoided the slices that gave a lower marginal utility

B) Customers who paid the lower price, because they didn't eat as many slices and therefore avoided the slices that gave a lower marginal utility

Jane enjoys streaming The Office, but she finds that, because she has seen every episode several times, she gets bored of them quickly. In fact, in a given binge-watch session, she enjoys each episode less than the one before it. Jane uses her parent's logins for streaming services, so it doesn't cost her any money to watch the episodes. For Jane, watching The Office on has _____ marginal benefits and _____ marginal costs. (Assume the only costs are monetary costs.) A) Decreasing; Increasing B) Decreasing: Constant C) Constant; Increasing D) Increasing; Decreasing

B) Decreasing: Constant

According to the Wikipedia article, Dvorak has not replaced QWERTY as the most common keyboard layout because QWERTY was introduced 60 years earlier. This sentence suggests that ac computer keyboard layout is a: A) good with zero marginal benefits B) network good C) congestion good D) normal good

B) network good

Online college exams have become more common, but one major concern for students and professors is the amount of cheating that occurs. According to what we learned in class about coordination games, which of the following would be an effective deterrent to cheating: A) E-mailing students a reminder of the penalties for cheating B) E-mail students results from a study which found that cheating in online exams is very rare and actually less common than cheating in in-person exams C) Offer students an A if they turn in a classmate for cheating D) Send students an e-mail reminding them how important their grades are for future success

B) E-mail students results from a study which found that cheating in online exams is very rare and actually less common than cheating in in-person exams

According to what we learned in class, which of the following statements about redistribution of income is not true: A) There are substantial differences over what a "fair" outcome is B) Economists have the ability to use mathematics to show what a "fair" outcome will be C) There are substantial costs to redistributing income D) Redistribution can be thought of as a form of social insurance

B) Economists have the ability to use mathematics to show what a "fair" outcome will be

Entrepreneurs who wish to open a licensed marijuana retail establishment in Michigan must go through an extensive and complicated application process. Which of the following statements is likely true: A) Existing businesses like these complicated restrictions because they shift labor demand to the right B) Existing businesses like these complicated restrictions because they shift labor supply to the left C) Existing businesses do not like these complicated restrictions because they shift labor demand to the right D) Existing businesses do not like these complicated restrictions because they shift labor supply to the right

B) Existing businesses like these complicated restrictions because they shift labor supply to the left

When Raising Cane's Chicken Fingers restaurant opened in East Lansing, a line of 400 customers wrapped around the block. Suppose you are considering waiting in that line. You've decided that your marginal benefit from getting to buy chicken fingers on opening day to be $10. Which of the following statements is true? A) The private marginal benefit is greater than $10 B) External marginal cost is greater than zero because you will be making the line longer for other people C) If private marginal cost is greater than $10, you will decide to get in line D) If private marginal benefit is less than social marginal cost, you will decide to get in line

B) External marginal cost is greater than zero because you will be making the line longer for other people

According to what we learned in class, which of the following statements about inequality is true? A) Most poor people are senior citizens B) Full-time workers are unlikely to be in poverty C) Only a small fraction of Americans ever experience poverty D) Married couples are more likely to be in poverty than single parents are.

B) Full-time workers are unlikely to be in poverty

Which of the following statements regarding globalization is not true: A) The United States is one of many countries that has had an increase in international trade over the past few decades B) Globalization has increased the wages of workers in the United States without a college degree and helped to reduce income inequality C) Globalization increases the variety of goods available to consumers D) Wages are mostly determined by productivity

B) Globalization has increased the wages of workers in the United States without a college degree and helped to reduce income inequality

This is an old economics joke: A hundred-dollar bill is lying on the ground. An economist walks past it. A friend asks: "Didn't you see the money there?" The economist replies: "I thought I saw something, but I must've imagined it. If there had been $100 on the ground, someone would've picked it up."1 Which of the following would best explain why the economist doesn't believe that there is a $100 bill on the ground? A) He believes that supply slopes up B) He believes that most situations quickly move toward equilibrium C) He believes that picking up a $100 bill would not be rational behaviorD) He believes that the marginal benefit of picking up a $100 bill is negative

B) He believes that most situations quickly move toward equilibrium

The cross-price elasticity of milk and apple juice cookies is 2. What happens to the quantity of apple juice if the price of milk goes up by 10% A) Decreases 20% B) Increases 20% C) Decreases by 0.4% D) Increases by 0.4%

B) Increases 20%

In class, we discussed possible reasons why small increases in the minimum wage do not seem to have significant effects on employment rates. One explanation we discussed is that the demand for labor may be A) Elastic B) Inelastic C) Unit elastic

B) Inelastic

According to what we learned in class, which of the following statements about inequality is true? A) The lowest-earning people in the U.S. are considerably poorer than the lowest-earning people in other advanced democracies B) Inequality in the United States is greater now than it was fifty years ago C) There is more inequality in permanent income than in income at a given point in time D) The highest-earning people in the U.S. have around the same income as the highest-earning people in other advanced democracies

B) Inequality in the United States is greater now than it was fifty years ago

As of fall 2022, Lansing School District is no longer providing school bus services to high school students. Instead, they are providing students with city bus passes and gasoline gift cards. The school district is concerned that removing bus services could affect school attendance. This is an example of the: A) Marginal principle B) Interdependence principle C) Sunk cost fallacy

B) Interdependence principle

Suppose the price of crude oil increases, and as a result, the marginal cost of producing gasoline increases by $1 per gallon. According to the equilibrium model discussed in class, how would this affect the market price of gasoline? A) The price of gasoline will be unaffected B) It will increase by less than $1 per gallon C) It will increase by more than $1 per gallon D) It will increase by exactly $1 per gallon

B) It will increase by less than $1 per gallon

Which of the following is true for both perfect competition and monopoly? A) Price = Marginal Cost B) Marginal Revenue = Marginal Cost C) The quantity sold maximizes total surplus D) Price > Marginal Revenue

B) Marginal Revenue = Marginal Cost

A market with lots of competitors all selling slightly different products would be categorized as: A) Perfect competition B) Monopolistic competition C) Monopoly D) Oligopoly

B) Monopolistic competition

Chris and Jalen are playing a game of rock-paper-scissors. They have decided to wager on the game. The loser pays the winner $1. If there is a tie, no money exchanges hands. Chris and Jalen both play rock. Is this a Nash Equilbrium? A) Yes, because neither player has an incentive to unilaterally deviate from their chosen strategy B) No, because both players have an incentive to unilaterally deviate from their chosen strategy C) No, because only one player has an incentive to unilaterally deviate from their chosen strategy D) Yes, because no money changes hands, so no player is made worse off by the game

B) No, because both players have an incentive to unilaterally deviate from their chosen strategy

Which of the following is the best example of a free-rider problem? A) People line up early in the morning to get the best seats to a MSU football game, even though everyone would be better off if they just came one hour later. B) One of your classes has group projects, and everyone in the group gets the same grade on the project. You decide not to do any work on the project. C) You and your roommate use the principle of comparative advantage to divide up chores D) You use a library card to check a book out of the library

B) One of your classes has group projects, and everyone in the group gets the same grade on the project. You decide not to do any work on the project.

Demand for flu shots is shown in the graph below. The vaccine industry is such that the marginal cost of producing one flu shot is always $4, no matter what the quantity is. Next, suppose the government determines that getting vaccinated confers a positive externality of $2 per shot. They decide to put a corrective subsidy of $2 in place in order to "internalize the externality" (as we discussed in class). Which of the following is true: A) Putting the subsidy in place has no impact on the equilibrium number of vaccines B) Putting the subsidy in place increases the equilibrium number of vaccines by 1 C) Putting the subsidy in place increases the equilibrium number of vaccines by 2 D) Putting the subsidy in place increases the equilibrium number of vaccines by 4

B) Putting the subsidy in place increases the equilibrium number of vaccines by 1

The main reason why you cannot have everything you want is that: A) Taxes are too high B) Resources are limited C) Opportunity costs are equal to zero

B) Resources are limited

Kristen's hobbies mostly involve hanging out with big groups of people indoors - going to concerts, visiting restaurants, and going out dancing with her friends. During the 2020 pandemic, many of these options were unavailable to her due to government-mandated business closures. How did this affect Kristen's labor supply curve? (A couple notes: First, assume that the labor demand curve for Kristen did not change. Second, use what we know about the opportunity cost of labor to answer this question) A) Shifted to the left B) Shifted to the right C) Movement "up" along the supply curve D) Movement "down" along the supply curve

B) Shifted to the right

Maria is deciding how big of a house to build. She gets decreasing marginal benefits from house size (so, the marginal benefit of the first square foot is greater than the marginal benefit of the second square foot and so on). The builder charges $100 per square foot. Maria decides to build a 1,700 square foot house. What if, instead, the builder offered a discount, where the first 1,000 square feet were half price ($50 per square foot)? How big of a house would Maria choose to build: A) Less than 1,700 square feet B) Still 1,700 square feet C) More than 1,700 square feet

B) Still 1,700 square feet

Surya is hoping to buy tickets for the MSU-Ohio State football game. He looks at some online message boards and it appears that everyone is charging $200 for a ticket. However, he notices that the listings have been active for several days, and from what he has heard, most of these people haven't been able to find a buyer. This is an example of a A) Shortage B) Surplus C) Equilibrium

B) Surplus

You are the fifteenth caller for a contest at your favorite radio station and win your choice of three concert tickets: Post Malone, Taylor Swift, and the Jonas Brothers. You choose Post Malone, because that is your favorite performer. Your second choice would have been the Jonas Brothers. What is the opportunity cost of the concert tickets? A) Zero, because they were free B) The Jonas Brothers tickets C) The Jonas Brothers tickets and the Taylor Swift tickets

B) The Jonas Brothers tickets

A field experiment at an all-you-can-eat pizza restaurant shows that a 50% discount on the price of the meal led customers to consume 27.9% less pizza. In other words, when people have to pay a higher price for their meal, they want to "get their money's worth" by eating more pizza. This actually does not fit with what we have learned about rational decision making and how people make decisions on the margins. Why? A) The customers are not accounting for the opportunity cost of eating pizza instead of another meal B) The marginal cost of a slice of pizza is zero for all customers, so all customers (whether or not they are receiving a discount) should consume until the point where the marginal benefit of the last slice of pizza is zero. This means that the price paid should not affect consumption C) The marginal cost of a slice of pizza is greater for customers paying the higher price. This means that marginal benefit will equal marginal cost at a lower quantity, so consumers paying a higher price should eat less pizza. D) All-you-can-eat pizza restaurants have bad pizza, and rational people would never go to that type of restaurant

B) The marginal cost of a slice of pizza is zero for all customers, so all customers (whether or not they are receiving a discount) should consume until the point where the marginal benefit of the last slice of pizza is zero. This means that the price paid should not affect consumption

According to the law of demand, when the price of a good increases A) Marginal cost decreases B) The quantity demanded decreases C) Opportunity costs are zero D) Quantity demanded is unaffected

B) The quantity demanded decreases

Which of the following is an example of a cartel: A) Apple designs FaceTime so that it cannot be used by anyone without an iPhone B) Two beer distributors agree that each of them will serve half of the city of Lansing C) McDonald's runs a radio commercial that says its French fries taste better than Burger King's D) Pfizer charges a very high price for a cancer treatment drug that it has patented.

B) Two beer distributors agree that each of them will serve half of the city of Lansing

Human capital is: A) capital equipment made by hand. B) accumulated knowledge and skills that make a worker more productive. C) capital equipment that must be operated by humans. D) human labor used in place of machines

B) accumulated knowledge and skills that make a worker more productive.

It has been determined that producing one ton of coal creates health costs in the surrounding area that are equal to $3. This can be graphed using some of the lines shown below. Which of the following is true: A) 𝑆1 is social supply and 𝑆2 is private supply B) 𝑺𝟐 is social supply and 𝑺𝟏 is private suply C) 𝐷1 is social demand and 𝐷2 is private demand D) 𝐷2 is social demand and 𝐷1 is private demand

B) 𝑺𝟐 is social supply and 𝑺𝟏 is private suply

Suppose that supply slopes up (as usual), and suppose that demand is perfectly elastic. Initially, the price is $12. Due to an increase in labor costs, the marginal cost of production increases by $1 per unit. What will the new equilibrium price be? A) $0 B) $11 C) $12 D) $13

C) $12

Blake is considering vaping. One of his friends just quit vaping and has offered Blake his Juul for free, but only if Blake is going to use it himself. If Blake does start vaping, he will spend $20 per week on Juul pods. Additionally, Blake's girlfriend will break up with him if he starts vaping. What is the opportunity cost of vaping for Blake? A) $20 per week B) Zero, because he got the Juul for free C) $20 per week and his girlfriend

C) $20 per week and his girlfriend

The price of a good is originally 10 and decreases to 9. As a result, quantity increases from 20 to 30. What is the price elasticity of demand? A) -0.1 B) -0.2 C) -5 D) -10

C) -5

In a model of perfect competion, the demand curve that an individual firm sees is: A) Downward sloping B) Upward sloping C) A horizontal line D) A vertical line

C) A horizontal line

Relative to a model of perfect competition, a monopolist produces A) The same quantity B) A higher quantity C) A lower quantity

C) A lower quantity

You own a snow shoveling company. You have four employees and are considering hiring a fifth. Hiring a fifth employee will increase the number of houses you can serve from 45 to 50. You charge $20 per house. What is the marginal revenue product of the fifth employee? A) 5 houses B) 10 houses C) $20 D) $100 E) $1,000

D) $100

Jack and Vince are friends who were planning to watch a football game together at a bar tonight. They were deciding between Buffalo Wild Wings and Harper's. Neither of them really has a preference for which bar to go to - they just want to be together. Jack's cell phone died before they could finalize their plans, so they don't know which bar to meet at. This could be categorized as a A) Hawk-Dove game B) Prisoners' Dilemma C) Coordination game D) Game with no Nash Equilibrium

C) Coordination game

Buyers bear a smaller incidence of the tax when: A) The tax is higher B) Supply is more elastic than demand C) Demand is more elastic than supply D) Demand is perfectly inelastic

C) Demand is more elastic than supply

In a 2002 opinion piece, a Stanford student criticizes several aspects of the college admissions process. Some quotes from the article include: "Every American high schooler knows the supposed secret to a lifetime of success: admission to an elite university." "But in California, some of the best private high schools in the country compete in a state where public ones rank in the bottom half of the nation. Private high schools help the rich insulate their children and provide them with the best secondary education possible — while everyone else struggles to keep up." "Students at private schools have personal connections with their counselors, who often in turn have the ears of admission officers at elite universities across the country." These quotes suggest that the author is especially concerned with: A) Expensive college tuition B) Equality of outcomes C) Equality of opportunity D) Income redistribution

C) Equality of opportunity

The value of the British pound has fallen relative to the dollar. As a result, it has become more expensive for residents of the United Kingdom to vacation in the United States.people less eager to buy tickets on British Airways, so a quick search on Kayak reveals lots of unsold tickets. What do we expect to happen to tickets next? A) There will be a persistent (long-lasting) surplus B) There will be a persistent (long-lasting) shortage C) Equilibrium price will decrease D) Equilibrium price will increase

C) Equilibrium price will decrease

Which of the following is consistent with a model of perfect competition? A) A small number of sellers B) Lots of firms selling slightly different products C) Firms are "price takers" D) Demand slopes up E) The demand curve is a vertical line

C) Firms are "price takers"

The price of mystery novels is $11 each, and Mara buys 5 novels per year. Which of thefollowing is most likely to be true: A) Mara's total benefit from buying novels is $55 B) If the price of novels went down to $8 each, Mara would buy fewer novels C) Mara's marginal benefit from the fourth novel she buys is more than $11 D) If Mara bought a sixth novel, her marginal benefit from that novel would be negative

C) Mara's marginal benefit from the fourth novel she buys is more than $11

Marco went to Buffalo Wild Wings to watch a football game. Chicken wings there cost $0.75 each. Marco bought and ate 20 chicken wings. Afterwards, he regretted his decision and decided that next time he would buy fewer chicken wings. This means that A) Marco's marginal benefit from the 20th chicken wing was zero B) Marco's marginal benefit from the 20th chicken wing was negative C) Marco's marginal benefit from the 20th chicken wing was less than $0.75

C) Marco's marginal benefit from the 20th chicken wing was less than $0.75

Alphatown is 10 miles from Bravoville. At first, everyone travelling from Alphatown to Bravoville takes the highway. There is a lot of traffic on the highway, so it takes 30 minutes to get there. Then people start using Waze, and Waze finds a non-highway route from Alphatown to Bravoville that only takes 20 minutes. Is this an equilibrium? Note: suppose everyone has easy access to Waze. A) Yes B) No, people will switch from the highway to the Waze-recommended route. Eventually, nobody will ever take the highway, even though the Waze-recommended route now takes longer than the highway because of all the extra traffic C) No, some people will switch from the highway to the Waze-recommended route. Eventually, both routes will take less than 30 minutes D) No, some people will switch from the highway to the Waze recommended route. Eventually, both routes will take more than 30 minutes

C) No, some people will switch from the highway to the Waze-recommended route. Eventually, both routes will take less than 30 minutes

Suppose a law is passed increasing the jail sentences for people caught selling illegal drugs. What would be the effect on the price and quantity of illegal drugs sold? A) Price would decrease and quantity would increase B) Price would decrease and quantity would increase C) Price would increase and quantity would decrease D) Price would increase and quantity would increase

C) Price would increase and quantity would decrease

Which of the following is an example of positive economics? A) East Lansing should widen Grand River Avenue to reduce traffice B) The United States spends too much money on national defense C) Reducing the gas tax by 50 cents per gallon will reduce gas prices by 30 cents per gallon

C) Reducing the gas tax by 50 cents per gallon will reduce gas prices by 30 cents per gallon

Julie's demand for Uber rides slopes down. This is because: A) Julie doesn't really like Uber rides B) If Uber rides get too expensive, she will never ride an Uber C) She has decreasing marginal benefits from Uber Rides

C) She has decreasing marginal benefits from Uber Rides

The following is from the Wikipedia article on straw: Straw is an agricultural byproduct consisting of the dry stalks of cereal plants after the grain and chaff have been removed. It makes up about half of the yield of cereal crops such as barley, oats, rice, rye and wheat. It has a number of different uses, including fuel, livestock bedding and fodder, thatching and basket making How would the supply of straw be affected by an increase in the price of wheat? A) Movement up and to the right on the supply curve B) Movement down and to the left on the supply curve C) Supply increases D) Supply decreases

C) Supply increases

Due to improving technology, food prices have gone down over the past several decades. Americans are now spending less of their income on food than they used to. (Assume the demand curve for food has not changed.) This suggests that: A) The supply of food is inelastic B) The supply of food is elastic C) The demand for food is inelastic D) The demand for food is elastic

C) The demand for food is inelastic

The equilibrium apartment rental rate is $1000 per month. If a price ceiling is set at $800, we expect the outcome to be ______. If a price ceiling is set at $1200, we expect the outcome to be _____. A) Equilibrium; equilibrium B) A shortage; a surplus C) Equilibrium; a shortage D) A shortage; equilibrium

D) A shortage; equilibrium

One argument for redistribution is based on diminishing marginal benefits. Suppose Walter earns $1 million per year while Oliver earns $15,000 per year. Which of the following best summarizes the "diminishing-mariginal-benefits" argument for redistributing wealth from Walter to Oliver A) The marginal value of the 15,000th dollar of income is greater for Walter than for Oliver B) For Walter, the marginal value of dollar $1,000,001 is greater than the marginal value of dollar $15,001, while for Oliver the opposite is true. C) The marginal value of dollar $1,000,001 is less than the marginal value of dollar $15,001. D) It is not fair for Walter to earn so much more money than Oliver earns

C) The marginal value of dollar $1,000,001 is less than the marginal value of dollar $15,001.

To keep the local professional football team from leaving, the city of San Diego proposed a tax on hotel rooms that would be used to fund a new football stadium. Many people are opposed to using tax revenues to fund sports stadiums. The mayor argued that, because the tax would be paid by out- of-town visitors, the new stadium would be "free" for residents. Which of the following statements is most accurate? A) The mayor is correct B) The mayor is forgetting about the opportunity cost of having a football team instead of having another sports team C) The mayor is forgetting about the opportunity cost of spending the tax revenue on a new stadium instead of on something else D) The mayor is forgetting about the marginal benefits residents receive from the football stadium

C) The mayor is forgetting about the opportunity cost of spending the tax revenue on a new stadium instead of on something else

Continuing with the example above, what would you recommend Surya do? A) Offer $200 for the tickets B) Buy as many tickets as he can for $200, then plan to sell them for more than $200 on the day of the game C) Wait for the price to come down

C) Wait for the price to come down

Suppose Uber decided to implement "negative surge" pricing, where during certain times they would offer discounted rides while also cutting driver pay. When would we expect them to do this? A) When there are lots of drivers and lots of riders B) When there are very few drivers and lots of riders C) When there are lots of drivers and very few riders D) When there are very few drivers and very few riders

C) When there are lots of drivers and very few riders

A 2015 report by the Congressional Budget Office stated that a 10% increase in the price of cigarettes would decrease smoking by up to 15% among people under 18 and by up to 7% among adults. This suggests that the demand for cigarettes by children is _____________ and the demand for cigarettes by adults is ___________ A) elastic; elastic B) inelastic; elastic C) elastic; inelastic D) inelastic; inelastic

C) elastic; inelastic

Early in the Covid-19 pandemic, many places had a shortage of toilet paper. Jack is worried that that there will be a shortage of toilet paper in his neighborhood in a few days. How will this affect Jack's demand for toilet paper today? A) movement up and to the left of the demand curve B) movement down and to the right of the demand curve C) the demand curve shifts right D) the demand curve shifts left

C) the demand curve shifts right

The cross-price demand elasticity of baseballs and fish sticks is equal to zero. The price of baseballs goes up. Which of the following statements accurately describes what happens: A) Consumption of fish sticks goes up, because the goods are compliments B) Consumption of fish sticks goes up, because the goods are substitutes C) Consumption of fish sticks goes down, because the goods are compliments D) Consumption of fish sticks is unchanged

D) Consumption of fish sticks is unchanged

For the past several weeks, the price of ice cream has $4 per pint, and Aviv has bought 2 pints per week. This week, the price has increased to $5 per pint, and Aviv only bought 1 pint. This is best characterized as a: A) Increase in demand B) Decrease in demand C) Increase in quantity demanded D) Decrease in quantity demanded.

D) Decrease in quantity demanded.

"Creator" was a hamburger restaurant opened in San Francisco in which the entire preparation of the hamburger was done by a machine. (The machine is shown above. A video of the machine in action can be found here.) If machines like the ones used at "Creator" become more common, we expect this to _______ the wages of low-skill restaurant workers and ______ the wages of high-skill programmers and engineers. A) Increase; Decrease B) Increase; Increase C) Decrease; Decrease D) Decrease; Increase

D) Decrease; Increase

Which of the following statements regarding globalization is not true: A) Globalization has been driven by falling trade costs B) Globalization has increased the wages of college-educated workers C) The U.S. tends to import low-skill-intensive goods D) Due to globalization, the U.S. is negatively affected when there is economic growth in other countries

D) Due to globalization, the U.S. is negatively affected when there is economic growth in other countries

The equilibrium wage for grocery store cashiers is $15 per hour. Sam's Supermarket just opened, and Sam is planning to hire dock workers to unload food from trucks. He plans to pay them $15 per hour. Relative to working as a cashier, being a dock worker is more dangerous and requires workers to work odd hours. What do we expect to happen? A) Most cashiers will quit their jobs to work as dock workers B) Sam will have lots of workers apply to be dock workers, leading to a labor shortage C) Sam is overpaying dock workers, so he will lower dock worker wages D) Few workers will work for Sam unless he increases dock worker pay

D) Few workers will work for Sam unless he increases dock worker pay

Which of these industries would be the closest to "monopolistic competition" A) Soybeans B) A gas station without any local competitors C) Cell phone providers D) Ice cream

D) Ice cream

Which of the following is an example of someone benefitting from social insurance: A) Sara buys homeowners insurance B) Abby buys a smoke detector C) Natalie gets a payoff from her auto insurance company when she gets in a car accident D) Josephine gets workers compensation when her employer goes out of business

D) Josephine gets workers compensation when her employer goes out of business

6) Which of the following is definitely an example of someone not acting in their self-interest? A) A drug addict using heroin B) A criminal robbing a bank C) A person buying an expensive car D) None of the above; each of these could be an instance where someone is acting rationally and in their own best interest.

D) None of the above; each of these could be an instance where someone is acting rationally and in their own best interest.

Chris and Jalen are playing a game of rock-paper-scissors. They have decided to wager on the game. The loser pays the winner $1. If there is a tie, no money exchanges hands. Chris plays rock and Jalen plays paper. Which of the following is true? A) Both players are playing a best response B) Neither player is playing a best response C) Only Chris is playing a best response D) Only Jalen is playing a best response.

D) Only Jalen is playing a best response.

How do we expect the introduction of Happy Meals for adults at McDonald's to affect the price and quantity of Burger King value meals? A) Price increases. The effect on quantity is ambiguous B) Price decreases and quantity increases C) Price increases and quantity decreases D) Price decreases and quantity decreases

D) Price decreases and quantity decreases

Suppose the price of butter increases. Assume that butter and margarine are substitutes in consumption. Which of the following responses is likely? (Note: that we are looking for what happens after the price changes, not for what caused the price change) A) Quantity of margarine decreases B) Quantity of butter sold increases C) Price of margarine decreases D) Quantity of margarine increases

D) Quantity of margarine increases

Suppose golden retrievers create positive externalities because they are cute and people like seeing them at the park. Which of the following is true? A) The social supply curve is to the left of the private supply curve. B) The social supply curve is to the right of the private supply curve. C) The social demand curve is to the left of the private demand curve. D) The social demand curve is to the right of the private demand curve.

D) The social demand curve is to the right of the private demand curve.

Vandelay Industries is polluting into a local lake; doing so benefits them $10,000 per year. People who enjoy swimming in the lake are made worse off. They would value swimming in a clean lake at $15,000 per year. Currently, Vandelay Industries has the rights to use the lake however they want. Which of the following is an optimal solution according to the Coase theorem? A) Vandelay Industries pays the swimmers $5,000 and continues to pollute. B) The swimmers pay Vandelay Industries $25,000 and Vandelay Industries continues to pollute. C) The swimmers pay Vandelay Industries $4,000 and Vandelay Industries stops polluting. D) The swimmers pay Vandelay Industries $12,000 and Vandelay Industries stops polluting.

D) The swimmers pay Vandelay Industries $12,000 and Vandelay Industries stops polluting.

When Greggs sold out of its merchandise, some people who wanted to buy their clothing were unable to. What would we expect to happen? A) Supply will shift to the left B) Demand will shift to the right C) There will be a secondary market, where some people who bought the clothes when they were first available will resell them. The equilibrium price will be lower than the original retail price D) There will be a secondary market, where some people who bought the clothes when they were first available will resell them. The equilibrium price will be higher than the original retail price

D) There will be a secondary market, where some people who bought the clothes when they were first available will resell them. The equilibrium price will be higher than the original retail price

If Raphael sells the cakes for $70 each, what is total economic surplus? A) $30 B) $55 C) $155 D) $210 E) It depends on how much the consumer values the cakes

E) It depends on how much the consumer values the cakes