ECON 2030 Exam 1

Suppose that you have a choice between going to the movies with a friend for two hours or working at your job. If you go to the movies, you will spend $7 on a ticket and $5 on popcorn. If you choose to work, you will earn $10 an hour. What is your opportunity cost of going to the movies?

$32 (everything you give up to see the movie - the money for the ticket, the money for the popcorn, and the foregone income)

If the law of demand applies to this good, then Q1 could be

0

Refer to Figure 2-6. If the economy is currently producing at point A, what is the opportunity cost of moving to point B?

12 thousand forks

Refer to Table: Roses. The table above shows the demand schedules for roses of two individuals (Madison and Hannah Ann) and the rest of the market. If the price of a dozen roses is $4, what is the Market Quantity Demanded?

150 dozen

Candace can perform either a combination of 35 manicures and 70 pedicures or a combination of 50 manicures and 45 pedicures. If she now performs 35 manicures and 70 pedicures, what is the opportunity cost of performing an additional 15 manicures?

25 pedicures

If the price of pineapple juice was $4.50 a gallon and it is now $5.75 a gallon, what is the percentage change in price?

27.7%

Production Possibilities for Batterland Pancakes Waffles 600 0 450 150 300 250 150 325 0 375 What is the opportunity cost to Batterland of increasing the production of pancakes from 150 to 300?

75 waffles

The circular-flow diagram

All of the above are correct.

Which of these activities will most likely result in a positive externality?

An elderly woman plants a flower garden on the vacant lot next to her house.

Which of these activities will most likely impose a negative externality?

Bridget drives her car after having too much alcohol to drink.

Refer to Figure: Clorox Wipes. An increase in the price of a substitute (Lysol wipes) would be represented by a movement from

D1 to D2.

Bill is restoring a car and has already spent $4000 on the restoration. He expects to be able to sell the car for $5800. Bill discovers that he needs to do an additional $2400 of work to make the car worth $5800 to potential buyers. He could also sell the car now, without completing the additional work, for $3800. What should he do? (Hint: think about his marginal cost of the additional work versus the marginal benefit of the additional work)

He should sell the car now for $3800.

The following equations represent the demand and supply for bird feeders. QD = 35 - P QS = -5 + 3P What is the equilibrium price (P) and quantity (Q - in thousands) of bird feeders?

P = $10; Q = 25 thousand

If the quantity of tacos demanded is represented by the equation QD = 20 - 0.5P then the corresponding price of tacos is represented by the equation

P = 40 - 2QD

Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for limo rides and that limo rides and champagne are complements. What panel describes what happens in this market when the price of champagne falls?

Panel (c)

Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for ramen noodles, an inferior good. Which panel describes what happens in this market as a result of an increase in income?

Panel (d)

Suppose the state of Massachusetts passes a law that increases the tax on alcoholic beverages. As a result, residents in Massachusetts start purchasing their alcohol in surrounding states. Which of the following principles does this best illustrate?

People respond to incentives.

Refer to Figure 2-1. ________ is (are) inefficient in that not all resources are being used.

Point A

Refer to Figure 2-1. ________ is (are) unattainable with current resources.

Point C

Refer to Figure: Clorox Wipes. A decrease in the price of bleach (an input for clorox wipes) would be represented by a movement from

S1 to S2.

The willingness of citizens to pay for vaccinations does not include the benefit society receives from having vaccinated citizens who cannot transmit an illness to others. This extra benefit society gets from vaccinating its citizens is known as

an externality.

An outward shift of a nation's production possibilities frontier can occur due to

an increase in the labor force.

If a decrease in income leads to an increase in the demand for frozen taquitos, then frozen taquitos are

an inferior good.

Suppose your management professor has been offered a corporate job with a 30 percent pay increase. He has decided to take the job. For him, the marginal

benefit of leaving was greater than the marginal cost.

In economics, capital refers to

buildings and machines used in the production process.

The production possibilities frontier is a graph that shows the various combinations of output that an economy

can produce.

Suppose that McDonald's successfully implements self-serve kiosks in their restaurants, and this investment in technology allows the company to reduce the number of employees at each location. All else equal, this technological improvement would ________ the equilibrium price for its products and ________ the equilibrium quantity consumed.

decrease; increase

The opportunity cost of taking an online history class is

equal to the highest value of an alternative use of the time and money spent on the class.

Studies have shown that drinking one glass of red wine per day may help prevent heart disease (hint: increases demand). Assume this is true, and a fungal disease destroys a large portion of the grape harvest of California vineyards (hint: decreases supply). In the market for red wine, these two developments would

increase demand and decrease supply, resulting in an increase in the equilibrium price and an ambiguous effect on the equilibrium quantity of red wine.

Another term for factors of production is

inputs

Refer to Table 2-1. Assume Love's kitchen only produces cakes and roast chicken. A combination of 20 cakes and 60 roast chickens would appear

inside Love's production possibilities frontier.

The decisions of firms and households are guided by prices and self-interest in a

market economy.

Mitch has $100 to spend and wants to buy either a new amplifier for his guitar or a new mp3 player to listen to music while working out. Both the amplifier and the mp3 player cost $100, so he can only buy one. This illustrates the basic concept that

people face trade-offs

The adage, "There is no such thing as a free lunch," is used to illustrate the principle that

people face tradeoffs

Economics deals primarily with the concept of

scarcity

When computing the opportunity cost of attending a concert you should include

the price you pay for the ticket and the value of your time.

Hurricane Katrina damaged a large portion of oil refining and pipeline capacity in the Gulf coast states. In the market for gasoline

the supply curve shifted to the left resulting in an increase in the equilibrium price.

For most students, the largest single cost of a college education is

the wages given up to attend school.

Refer to Figure: Hunter Hayes Concert Tickets. At a price of $5

there is a shortage of 4 tickets.

Refer to Figure: Chase Rice Concert Tickets. If the price is $25

there is a surplus of 300 tickets.