Econ exam 1

John is trying to decide how to divide his time between his job. What is the lowest price per window that would induce John to spend at least one hour per day cleaning windows

$1

The long-run equilibrium price in this industry is how much

$10

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the accompanying table. (think: additional output, additional earning, minimum earn per unit at each input level)

$3.50

Smith and Jones comprise a two-person economy. Their hourly rates of production are shown in the accompanying table. (think: absolute advantage, comparative advantage, time format table, output format table). The opportunity cost of making a calculator for Smith is ______ and for Jones it is ______

0.10 computers; 0.05 computers

Refer to the accompanying figure. At the equilibrium price, total consumer surplus in this market is (think: consumer and producer surplus, at equilibrium and other prices)

12,000

Suppose Xin and Zander work in a bakery making pies and cakes. Suppose it takes Xin 1.5 hours to make a pie and 1 hour to make a cake, and suppose it takes Zander 2 hours to make a pie and 1.5 hours to make a cake. Which of the following statements is correct?

2/3 of a pie

If 20 percent increase in the price of a good leads to a 60 percent decrease in the quantity demanded, then what is the price elasticity of demand?

3

The accompanying figure below shows a single consumer's demand for ice cream at the student union

3,000

Suppose an increase in the price of golf clubs from $75 to $125 leads to an increase in quantity supplies from 200 units to 300 units. The price elasticity of supply for golf clubs at the original price of $75 is _____, so supply is _____.

3/4; inelastic

) If a 1 percent increase in the price of oranges leads to a five percent increase in the quantity supplied, the price elasticity of supply for oranges is ______. (think: price elasticity of supply)

5

If the price elasticity of demand for cigarettes is 0.55, and the price of cigarettes increases by 10 percent, then the quantity of cigarettes demanded will fall by (think: price elasticity of demand)

5.5

Refer to the accompanying graph. If this firm is a price taker, then when the price of each unit of output is $30, this firm's profit-maximizing level of output is ______. (think: profit maximizing condition, shut down condition, profit maximizing quantity, short run profit/loss, total revenue, long run profit)

80

What might cause a demand curve to shift to the right

An increase in the price of a substitute

Refer to the accompanying figure. Which of the following is true? (think: attainable points, efficient points, unattainable points)

Points B, C, E, and F are efficient.

Point U is

neither attainable nor efficient

If Alex and Jamal work our an efficient arrangement for these two chores, then under that arrangement

Jamal would do all of the cleaning, while Alex would do all of the cooking

Refer to the accompanying figure. If the current market price were $20 (think: equilibrium price and quantity, quantity supplied and demanded at specific prices, shortage and surplus)

There would be an excess demand of 25 units

Refer to the accompanying figure. Assume the market is originally at point W. Movement to point X is the result of (think: read graph)

an increase in demand and no change in supply.

An increase in both the equilibrium price and the equilibrium quantity of DVD players is best explained by (think: shifts on demand and supply).

an increase in the demand for DVD players.

If the income elasticity for a particular good is negative, then which of the following is true?

as income increases, consumers will tend to purchase less of the good

The accompanying figure shows Isabella's daily production possibilities curve for dresses and skirts. Point T is

attainable

Suppose the accompanying figure shows the demand curve, marginal revenue curve, and marginal cost curve for a monopolist. (think: recall other questions related to this graph)

b

Refer to the accompanying figure. A decrease in supply is represented by a shift from (think: shifts on demand and supply, quantity demanded and quantity supplied).

curve b to curve a

As the price of flour (an input into the cookie production process) increases, firms that produce cookies will:

decrease the supply of cookies

) Refer to the accompanying figures. If Mallory and Rick are the only two consumers in this market and the price of soda increases from $0.75 to $1 per can, the quantity of soda demanded in the market will ______ by ______ cans per month. (think: individual to market demand)

decrease;40

Refer to the same figure. If the market supply curve is given by s1, then in the long run, which of the following is true?

enter the market. leading the market supply to shift out of s2

Refer to the accompanying figure. Assume demand remains unchanged at d1. If supply shifts from s1 to s2, then the equilibrium price will _______ and the equilibrium quantity will ______.

fall; rise

Refer to the accompanying figure. If Laura and Chris are the only two consumers in this market, then when the price of hamburger decreases from $2.50 to $2 per pound, the quantity demanded in the market will _____ by _____ pounds per week

increase; 1.5

Suppose a 10% increase in the price of aspirin leads to a 5% decrease in the quantity demanded of aspirin. The demand for aspirin, therefore, is

inelastic

Suppose the company that owns the vending machines on your campus has doubled the price of a can of soda. They then notice that they are selling approximately 15 percent fewer sodas. The price elasticity of demand for sodas from the campus vending machines, therefore, is (think: degree of price elasticity)

inelastic

If the demand for salad dressing increases when the price of lettuce decreases, the cross-price elasticity of demand between salad dressing and lettuce will be ______ because these two goods are ______. (think: complements and substitutes)

negative; complements

During recessions, when some workers lose their jobs and have lower incomes, sales of durable goods (goods with a life expectancy of 3 years or more) decline. Apparently, durable goods are (think: income elasticity)

normal goods

Refer to the accompanying table. Suppose all firms in this industry have identical costs to this firm and are producing 25 units of output. WHich of the following is true

old firms will exit the industry

An implication of scarcity is that

people must make trade-offs

The figure below depicts the short-run market equilibrium in a perfectly competitive market and the cost curves for a representative firm in that market. Assume that all firms in this market have identical cost curves. (think: recall other questions with similar graph)

price will equal $5, and there will be 20 firms in the industry.

) Refer to the accompanying figure. If the market for doughnuts is perfectly competitive, and the price of a doughnut is 25 cents, then this firm should (think: profit maximizing condition, shut down condition, profit condition in terms of graphs)

produce 80 doughnuts

The accompanying table shows a pizzeria's fixed cost and variable cost at different levels of output. Pizzas sell for $20 each. (think: profit, variable cost, fixed cost)

profit; $650

Suppose that when a perfectly competitive firm produces 1,000 units of output, its total variable cost is $1,900. If the marginal cost of producing the 1,000th unit is $1.70, and if the market price of each unit of output is $1.70, then the firm should (think: profit maximizing condition, shut down condition, profit condition in terms of equations)

shut down

Assume the demand for coffee increases and the supply of coffee decreases. Which of the following outcomes is certain to occur? (think: changes to equilibrium price and quantity after shifts of demand and supply)

the equilibrium price of coffee will rise

The quanitity of tea demanded will increase if

the price of tea falls

Refer to the accompanying figure. If the current market price were $20

there would be an excess demand of 25 units