ECON EXAM 1!
Gary consumes 10,000 units of electricity when his income is $500. When his income increases to $1,000, his consumption of electricity increases to 18,000 units. What is Gary's income elasticity of demand for electricity?
0.8
Taco Bell's economists determine that the price elasticity of demand for their tacos is 2.0. So, if Taco Bell raises the price of its tacos by 6.0 percent, the quantity demanded will decrease by ________ percent.
12.0
Suppose that you are spending two hours a day studying economics, and your grade is 85 percent. You want a higher grade and decide to study for an extra hour a day. As a result, your grade rises to 90 percent. Your marginal benefit is the
5 point increase in your grade.
Which of the following factors is likely to lead to an increase in the quantity demanded of pens?
A fall in the price of pens
Which of the following statements best describes a normal good?
A normal good is a good whose demand increases with an increase in consumers' income.
Which of the following statements is true? A) Rational economic agents maximize more than just monetary income. B) It is not necessary to consider the risks of a particular alternative while making an optimal decision. C) An individual does not require information to make optimal decisions. D) The principle of optimization is only accurate when it comes to making monetary decisions.
A) Rational economic agents maximize more than just monetary income.
Which of the following statements is true? A) Optimizers with the lowest opportunity cost of time push up the rental price of apartments with the lowest commute time. B) As the rental prices of downtown apartments rise, only workers with the highest opportunity cost of time will be willing to rent them. C) As the rental prices of downtown apartments rise, only workers with the lowest opportunity cost of time will be willing to rent them. D) Optimizers with the highest opportunity cost of time push up the rental price of apartments with the highest commute time.
B) As the rental prices of downtown apartments rise, only workers with the highest opportunity cost of time will be willing to rent them.
Which of the following is TRUE? A) If consumers expect the price of a good will rise in the future, the demand curve shifts leftward. B) For an inferior good, when income increases, the demand curve shifts leftward. C) An increase in population shifts the demand curve for most goods leftward. D) The demand curve for a good shifts leftward when the price of a substitute rises
B) For an inferior good, when income increases, the demand curve shifts leftward.
Which of the following is NOT an example of an opportunity cost?
Because Mary is now being paid a higher wage, she can afford to buy a new car even though she is moving into a bigger apartment.
Which of the following statements is true? A) Correlation can only arise when causation is not present. B) Causation arises when there is correlation between two variables, and can also arise even when there is no correlation. C) Causation can only arise when correlation is not present. D) Correlation arises when there is causation and can also arise even when there is no causation.
D) Correlation arises when there is causation and can also arise even when there is no causation.
Which of the following best describes a good with perfectly elastic demand?
Even the smallest increase in the price of the good will cause consumers to stop consuming it completely
A politician argues that a tornado that destroyed several houses (but caused no injuries) has some positive impacts, because rebuilding the homes will increase employment and income for construction workers. The politician is:
Incorrect, because the opportunity cost of the resources used in rebuilding mean that other, more desirable goods can't be purchased.
Soo Jin shares a one-bedroom apartment with her classmate. Her share of the rent is $700 per month. She is considering moving to a studio apartment which she will not have to share with anyone. The studio apartment rents for $950 per month. Recently, you ran into Soo Jin on campus and she tells you that she has moved into the studio apartment. Soo Jin is as rational as any other person. As an economics student, you rightly conclude that
Soo Jin figures that the additional benefit of having her own place (as opposed to sharing) is at least $250.
Which of the following is a normative statement?
States should require all motorcycle riders to wear helmets to reduce the number of riders killed.
Which of the following correctly identifies the trade-off that a budget constraint represents?
The amount of one good that has to be given up to purchase an additional unit of the other good
Greenaqua Corp. is the only supplier of bottled drinking water in the country Lithasia. Due to the profits the firm enjoys, new corporations are interested in entering the market. If a few more companies producing their own line of bottled drinking water enter the market, which of the following statements will be true about Greenaqua Corp.?
The elasticity of demand of Greenaqua Corp.'s product is likely to increase.
In Module 5, Dr. Meer described the impact of local gun buyback programs in economic terms. Which of the following best describes the effects of these programs?
The supply of guns in a city is very elastic, so increases in demand from buyback programs lead to a large increase in the equilibrium quantity of guns in the city but small or no changes in the number of guns on the street.
Which of the following decreases the supply of restaurant meals?
Waiters get a pay raise.
The price of cereal rises. As a result, people have cereal for breakfast on fewer days and eat eggs instead. This behavior is an example of
a decrease in the quantity demanded of cereal because of the substitution effect.
Which of the following leads to a movement along the demand curve for spinach but does NOT shift the demand curve for spinach?
a rise in the price of spinach
Oatmeal is a normal good and cold cereal is a substitute for oatmeal. Raisins are a complement for oatmeal. Which of the following increases the demand for oatmeal?
an increase in the price of cold cereal
Scenario: Maria has to choose between driving and taking a train to destination A. Travelling by train will cost her $400 and will take 4 hours. Driving to destination A takes 6 hours, and the required amount of gasoline costs $250. Her opportunity cost of time is $15 per hour. Refer to the scenario above. Maria should choose to:
drive, as it will save her $120.
An omitted variable is a variable that:
has been left out, and if included, would explain why the variables considered in a study are correlated.
If demand for Farmer John's maple syrup is inelastic, then when Farmer John raises the price of maple syrup, his total revenue will
increase
If good growing conditions increase the supply of strawberries and hot weather increases the demand for strawberries, the quantity of strawberries bought
increases and the price might rise, fall or not change
In the summer 2012 the lobster catch in Maine was especially large, but instead of celebrating the fisherman were suffering from a lower total revenue. (Source: New York Times, July 28, 2012) Despite the larger quantity of lobster caught, the total revenue of the fisherman decreased. This fact means that the demand for lobster is
inelastic
A student is studying for an exam 2 hours a day and is debating whether to study an extra hour. The student's marginal benefit
is the benefit the student receives from studying the extra hour
One year, the government boosted regulated taxi fares in New York City by 15 percent with the expectation that the total revenue from taxi rides would also increase by 15 percent. The taxi commission that authorized this fare increase must have believed that the demand for taxi service was
perfectly inelastic.
Suppose a medical study reveals new benefits to consuming beef and at the same time a bumper corn crop reduces the cost of feeding steers. The equilibrium price of beef will
perhaps rise, fall, or stay the same, but more information is needed to determine which it does.
If quantity of tea is measured on the horizontal axis and quantity of coffee is measured on the vertical axis, an increase in the price of coffee will cause the budget constraint to:
pivot leftward (inwards) along the vertical axis.
At a local ice cream parlor, when the price of half-gallons of chocolate ice cream was lowered by fifty cents per half-gallon, total revenue from the sale of chocolate ice cream decreased. This result indicates that
the demand for chocolate ice cream is inelastic.
Assume that an individual spends his income on sweaters and shirts. If the price of a sweater increases:
the opportunity cost of buying sweaters increases.
In March, the quantity of orange juice sold in the town of Jackson was 3000 cartons and the price $3. In May, the quantity of orange juice sold in the town of Jackson was 3500 cartons and the price was $3.20. This change in the price and quantity sold could have been the result of
the release of a medical study suggesting that consuming orange juice helps prevent cancer.
A bakery can produce either cakes or cookies. If the price of cookies rises, then
the supply curve of cake shifts leftward.
Homer changes jobs and his new job pays him a higher income. Before he changed jobs, Homer purchased 3 pounds of tuna and 2 pounds of chicken. After he changed jobs, Homer now purchases 2 pounds of tuna and 3 pounds of chicken. For Homer
tuna is an inferior good and chicken is a normal good
You have the choice of going on vacation to Florida for one week, staying at work for the week, or spending the week doing fix-up projects around your house. If you decide to go to Florida, the opportunity cost of the trip is
working or doing fix-up projects, depending on which you would have done otherwise.