ECON FINAL - EXAM 1 REVIEW

Suppose a parking garage has the following pricing schedule: 0-2 Hours, $5; 2-4 Hours, $10; 4-8 Hours, $15. The marginal (i.e., extra) cost of the fifth hour of parking is 1. $0 2. $5 3. $10 4. $15 5. $25

$5

Wine: England 72, Portugal 49 Cloth: England 8, Portugal 7 The table above depicts England and Portugal's ___ each good

Productivity at

Suppose labor costs in the jewelry industry ___. Everything else held constant, this will cause the ___ jewelry to decrease

increase; supply of

Suppose the price of umbrellas decreases. Everything else held constant, this will cause the _____ of umbrellas to _____.

quantity supplied; increase

Suppose the price of umbrellas decreases. Everything else held constant, this will cause the _____ umbrellas to _____.

quantity demanded of; increase

Suppose books are a normal good. An increase in national income will cause the ___ to ___

quantity of books supplied; increase

In a market, a surplus exists when _____ is greater than _____.

quantity supplied; quantity demanded

Sunk cost

something you're giving up regardless of the decision

Suppose Remus decides to go fishing at Lake Pescaccio on his day off from work, but he faces a choice: he can fish the east, south, or west side of the lake. His expected catch for the day is as follows: 3 fish on the east side, 7 fish on the south side, or 5 fish on the west side. Everything else held constant, Remus' benefit of fishing the south side of the lake is _____ fish

7 fish

Suppose that chicken and turkey are substitutes in consumption. Which of the following would cause the demand for turkey to increase, everything else held constant

An increase in the price of chicken

Specialization and trade is based off of ___ 1. absolute advantage 2. comparative advantage

Comparative advantage

In a surplus prices go ____; in a shortage prices go ____

down; up

Suppose rational decision-maker Christine has received a voucher for a free concert ticket that she can use to either see Helen or Beth. Suppose further that her reservation price for seeing Helen is $25 and her reservation price for seeing Beth is $20 In the situation above, what is Christine's sunk cost in making her decision?

$0 The tickets were free with her voucher!

Suppose a store sells pairs of shoes for $30 each and is running a "buy one, get one 50% off" sale. Suppose further that you buy four pairs of shoes. The marginal (i.e., extra) cost of the fourth pair of shoes purchased is 1. $0 2. $15 3. $30 4. $45 5. $75 6. $90

$15

Suppose rational decision-maker Harry has decided to attend a concert but he faces a choice: he can buy a ticket to see either Kim Boekbinder or Zoe Boekbinder. The price of a ticket to see Kim is $25 and the price of a ticket to see Zoe is $15. In making his decision, what is Harry's sunk cost?

$15

Suppose Justin is employed, his regular wage is $10 per hour, and he must receive overtime pay for hours worked over 40 in a workweek at a rate of time and one-half his regular rate of pay (i.e., $15 per hour). Last week he worked 42 hours. What was Justin's marginal benefit for working the 42nd hour?

$15 ****only look at the 42nd hour

Reservation price

Minimum price at which you'd be willing to sell

Suppose a local retailer is running the following scale on 12-packs of Pepsi products: $5 each or three for $12. Suppose further that Anna is a rational customer and her reservation price for 12-packs of Pepsi products is $5.50 for the first, $3.50 for the second, and $2.50 for the third In the situation above, what is the marginal cost of the third 12 pack?

$2.00 (because the first two equal $5+$5 and the third is only $2 because the total comes out to be $12 ---> 3 for $12 deal)

Suppose rational decision-maker Carla decided to go to a concert and faced a choice: buy a ticket to see Beth or buy a ticket to see Robin. She chose to purchase a ticket to see Beth. Suppose further that at the price of a ticket to see Beth was $25 and the price of a ticket to see Robin $20 In making her decision about which ticket to purchase, Carla's sunk cost was

$20

Suppose a store sells pairs of shoes for $30 each and is running a "buy one, get one 50% off" sale. Suppose further that you buy four pairs of shoes. The marginal (i.e., extra) cost of the third pair of shoes purchased is 1. $0 2. $15 3. $30 4. $45 5. $75 6. $90

$30

Suppose a local retailer is running the following scale on 12-packs of Pepsi products: $5 each or three for $12. Suppose further that Anna is a rational customer and her reservation price for 12-packs of Pepsi products is $5.50 for the first, $3.50 for the second, and $2.50 for the third In the situation above, how many 12-packs will Anna purchase?

1

Aurora: 25 bagels; 200 cookies Eos: 20 bagels; 240 cookies Who has the absolute advantage in the production of bagels? Cookies? Who has the comparative advantage in the production of bagels? Cookies? Is mutually beneficial trade possible between Aurora and Eos?

Abs bagels = Aurora Abs cookies = Eos Comp bagels = Aurora Comp cookies = Eos Mutually beneficial trade can occur if Aurora specializes in bagels and Eos specializes in coolies

Which of the following statements accurately describes the pattern of specialization and trade in the case of John and Yoko? 1. John will specialize in the production of peaches, Yoko will specialize in the production of cream, and mutually beneficial trade can occur. 2. John will specialize in the production of cream, Yoko will specialize in the production of peaches, and mutually beneficial trade can occur. 3. Mutually beneficial trade cannot occur because John can produce more of both goods per hour than Yoko can. 4. Mutually beneficial trade cannot occur because Yoko can produce more of both goods per hour than John can. 5. Mutually beneficial trade cannot occur because John and Yoko each have the same opportunity cost of producing both goods.

2

Suppose Remus decides to go fishing at Lake Pescaccio on his day off from work, but he faces a choice: he can fish the east, south, or west side of the lake. His expected catch for the day is as follows: 3 fish on the east side, 7 fish on the south side, or 5 fish on the west side. Everything else held constant, Remus' opportunity cost of fishing the south side of the lake is _____ fish.

5 fish

John: 60 peaches; 15 cream Yoko: 50 peaches; 10 cream Who has the absolute advantage in the production of peaches? Cream? Who has the comparative advantage in the production of peaches? Cream?

Abs peaches = John Abs cream = John Comp peaches = Yoko Comp cream = John

Suppose ramen in an inferior good. Suppose further that national income is decreasing while, at the same time, productivity in the ramen industry increases. In the situation above, the equilibrium price of ramen will ___, everything else held constant.

Be ambiguous

Suppose that chicken and turkey are substitutes in consumption. Suppose further that the price of chicken decreases. Which side of the turkey market is directly affected by this change? How will their behavior change? What will be the result?

Buyer Buy less P Decrease; Q decrease

Suppose that limes and coconuts are complements in consumption. Suppose further that the price of limes increases. Which side of the coconut market is directly affected by this change? How will their behavior change? What will be the result?

Buyer Buy less P decrease, Q decrease

Suppose that Brussels sprouts are an inferior good. Suppose further that incomes in the country are decreasing. Which side of the Brussels sprout market is directly affected by this change in income? How will their behavior change? What will be the result?

Buyer Buy more P Increase; Q increase

Suppose that Brussels sprouts are a normal good. Suppose further that incomes in the country are increasing. Which side of the Brussels sprout market is directly affected by this change in income? (I.e., Who in the Brussels sprout market will notice the change and react to it?) How will their behavior change? (I.e., buy/sell more/less.) What will be the result? (I.e., The equilibrium price of Brussels sprout will increase/decrease and the equilibrium quantity of Brussels sprouts transacted will increase/decrease.)

Buyers Buy more P Increase; Q increase

A decrease in the hourly wage rate, everything else held constant, will cause _____ in the marginal cost of an extra hour of leisure. 1. an increase 2. a decree 3. no change

Decrease

Sticks: Canada 2; US 3 Bats: Canada 4; US 5 In the situation above, suppose the two countries move from autarky to mutually beneficial trade. Everything else held constant, this will cause the price of hockey sticks in the US to

Decrease

Suppose that coconuts and bananas are complements in consumption. Suppose further that the price of coconuts decreases while, at the same time, a fungal disease kills ten percent of the world's banana crop In the situation above, the supply of bananas will ___

Decrease

Wine: England 72, Portugal 49 Cloth: England 8, Portugal 7 In the situation above, suppose the two countries move from autarky to mutually beneficial trade. Everything else held constant, this will cause the number of workers in the Portuguese wine industry to

Decrease

Margin

Extra

Suppose rational decision-maker Christine has received a voucher for a free concert ticket that she can use to either see Helen or Beth. Suppose further that her reservation price for seeing Helen is $25 and her reservation price for seeing Beth is $20 In the situation above, which concert will Christine choose to attend?

Helen

Absolute advantage

Highest productivity

Suppose pencils and paper are complements in consumption. Suppose further that demand for pencils decreases In the situation above, the equilibrium quantity of paper transacted will ___, everything else held constant.

Increase

Suppose ramen in an inferior good. Suppose further that national income is decreasing while, at the same time, productivity in the ramen industry increases. In the situation above, the demand for ramen will ___

Increase

Suppose ramen in an inferior good. Suppose further that national income is decreasing while, at the same time, productivity in the ramen industry increases. In the situation above, the equilibrium quantity of ramen transacted will

Increase

Suppose lawn mower buyers, but not sellers, expect the price of lawn mowers to increase next month. Everything else held constant, the equilibrium price of lawn mowers will _____ and the equilibrium quantity transacted will _____ TODAY.

Increase; increase

John: 60 peaches; 15 cream Yoko: 50 peaches; 10 cream Suppose in a ten-hour day Yoko produces 40 cream and picks 250 peaches. On that day Yoko's level of production was:

Inefficient

Croissants: Amber 3, Jade 9 Oranges: Amber 21, Jade 27 In the situation above, ___ has the absolute advantage in making croissants and ___ has the comparative advantage in picking oranges

Jade; Amber

Suppose Tony, a rational painter, has a reservation price of $500 for his painting "Banana Head." Suppose further that a potential client liked the painting and make him an offer that Tony rejected. We know with certainty that the client's offer was ___ $500

Less than

Suppose Tony, a rational painter, has a reservation price of $500 for his painting 'Banana Head'. Suppose further that a potential client liked the painting and made him an offer that Tony rejected. It can be concluded with certainty that the client's offer was _____ $500.

Less than

Suppose Chris, a rational art collector, has a reservation price of $700 for Rosemary's painting Shark. Suppose further that Chris purchased the painting. We know with certainty that the price of Shark was _____ $700.

Less than or equal to

Suppose you observe a market in which, at any given point in time, the quantity producers are willing and able to sell is ___ the quantity consumers are willing and able to purchase. Thus we say that there is a ___ of the good and over time, everything else held constant, the price in market will increase

Less than; shortage

Comparative advantage

Lowest opportunity cost

"For American families, household incomes rose strongly in 2015, breaking a years-long pattern of income stagnation. The median household's income in 2015 was $56,500, an increase of 5.2 percent over the previous year, the Census Bureau reported Tuesday." The preceding is an example of a statement about a _____ issue.

Macroeconomic

"How has the price of all goods and services in the US changed over the last 12 months?" is an example of a ___ problem?

Macroeconomic

"The European Central Bank said the euro zone grew faster than expected in the first half of the year, and raised its growth forecast for the bloc for 2017 to 2.2% - the fastest pace in ten years. France's president threw his weight behind a German proposal for a European Monetary Fun to damped Euro-zone economic shocks." This is an example of a ___ issue

Macroeconomic

"How has the price of used cars in the US changed over the last 12 months?" is an example of a ___ problem?

Microeconomic

"To get a job as a top executive, new evidence shows, it helps greatly to have experience in as many of a business's functional areas as possible. A person who burrows down for years in, say, the finance department stands less of a chance of reaching a top executive job than a corporate finance specialist who has also spent time in, say, marketing." The preceding is an example of a statement about a _____ issue.

Microeconomic

Autarky

Production = consumption --> NO TRADE

Market equilibrium

Quantity supplied = quantity demanded

Suppose milk is the main input in the production of cream cheese. Suppose further that the price of milk increases. Which side of the cream cheese market is directly affected by this change? How will their behavior change? What will be the result?

Seller Sell less P increase, Q decrease

Suppose worker productivity increases in the watch industry. Which side of the watch market is directly affected by this change? How will their behavior change? What will be the result?

Seller Sell more Decrease in price; increase in quantity

Excess demand

Shortage - not enough of something so buyers change behavior

Quantity demanded

Specific amount willing and able to purchase at a specific point in time

Quantity supplied

Specific amount willing and able to sell at a specific price at a given point in time

Excess supply

Surplus - too much of something so sellers change behavior (sales)

Suppose you observe a market in which, at a given point in time, the quantity producers are willing and able to sell is greater than the quantity consumers are willing and able to purchase. Thus we say that there is a _____ of the good and over time, everything else held constant, the price in the market will _____.

Surplus; decrease

Suppose rational decision-maker Charles faces a choice: he can either see Helen Gillet or Beth Patterson in concert. Suppose further that tickets to see Helen are $10 each while tickets to see Beth are $15 each. Everything else held constant, what is the opportunity cost of seeing Helen if Charles has not yet obtained a ticket to see either performer? 1. $10 2. $10 minus the expected pleasure of seeing Beth in concert 3. The expected pleasure of seeing Beth in concert 4. The expected pleasure of seeing Beth in concert plus $10 5. The expected pleasure of seeing Beth in concert minus $5 6. The expected pleasure of seeing Beth in concert minus $15

The expected pleasure of seeing Beth in concert

Suppose rational decision-maker Charles faces a choice: he can either see Helen Gillet or Beth Patterson in concert. Suppose further that tickets to see Helen are $10 each while tickets to see Beth are $15 each. Everything else held constant, what is the benefit of seeing Helen if Charles has not yet obtained a ticket to see either performer? 1. $5 2. $5 minus the expected pleasure of seeing Helen in concert 3. The expected pleasure of seeing Helen in concert 4. The expected pleasure of seeing Helen in concert plus $5 5. The expected pleasure of seeing Helen in concert minus $5 6. The expected pleasure of seeing Helen in concert minus $10

The expected pleasure of seeing Helen in concert plus $5

Suppose rational decision-maker Carla decided to go to a concert and faced a choice: buy a ticket to see Beth or buy a ticket to see Robin. She chose to purchase a ticket to see Beth. Suppose further that at the price of a ticket to see Beth was $25 and the price of a ticket to see Robin $20 In the situation above, what was Carla's benefit from seeing Robin in concert?

The expected pleasure of seeing Robin perform plus $5

TRUE OR FALSE: Engaging in trade with other countries allows the United States to consume outside of its production possibilities frontier?

True

Benefit

What you get

Opportunity cost

What you give up

Suppose Remus decides to go fishing at Lake Pescaccio on his day off from work, but he faces a choice: he can fish the east, south, or west side of the lake. His expected catch for the day is as follows: 3 fish on the east side, 7 fish on the south side, or 5 fish on the west side. Suppose further that Remus chose to fish the south side of the lake. Was Remus' decision rational?

Yes

Suppose rational decision-maker Carla decided to go to a concert and faced a choice: buy a ticket to see Beth or buy a ticket to see Robin. She chose to purchase a ticket to see Beth. Suppose further that at the price of a ticket to see Beth was $25 and the price of a ticket to see Robin $20 In the situation above, can be concluded with certainty that Carla's expected pleasure from seeing Beth was greater than or equal to her expected pleasure from seeing Robin?

Yes

Croissants: Amber 3, Jade 9 Oranges: Amber 21, Jade 27 In the situation above, can mutually beneficial trade occur?

Yes, if Amber specializes in picking oranges and trades them to Jade for her croissants

Croissants: Amber 3, Jade 9 Oranges: Amber 21, Jade 27 In the situation above, 3 ___ is ___ opportunity cost of producing one ___

oranges; Jade's; croissant

Suppose pencils and paper are complements in consumption. Suppose further that demand for pencils decreases In the situation above, the equilibrium price of pencils will ___, everything else held constant

decrease

Suppose lawn mower sellers, but not buyers, expect the price of lawn mowers to ___ next month. Everything else held constant, the equilibrium price of lawn mowers will ___ and the equilibrium quantity transacted will increase TODAY

decrease; decrease

Suppose worker productivity in the steel industry ___. Everything else held constant, this will cause the equilibrium price of steel to increase and the equilibrium quantity transacted to ___

decreases; decrease

Suppose pencils and paper are complements in consumption. Suppose further that demand for pencils decreases In the situation above, the ___ paper will ___, everything else held constant

demand for; increase

Suppose both buyers and sellers expect the price of gold to increase next week. Everything else held constant, the equilibrium price of gold will ___ TODAY

increase

Suppose that coconuts and bananas are complements in consumption. Suppose further that the price of coconuts decreases while, at the same time, a fungal disease kills ten percent of the world's banana crop In the situation above, the equilibrium price of bananas will ___ and the equilibrium quantity of bananas transacted will ___, everything else held constant

increase; be ambiguous

Suppose lawn mower sellers, but not buyers, expect the price of lawn mowers to increase next month. Everything else held constant, the equilibrium price of lawn mowers will _____ and the equilibrium quantity transacted will _____ TODAY.

increase; decrease

Suppose that brussels sprouts are the main ingredient in Ronni's Vegan Dog Treats. Suppose further that the world demand for Brussels sprouts increases. Everything else held constant, the equilibrium price of Ronni's Treats will ___ and the equilibrium quantity of Ronni's Treats transacted will ___

increase; decrease

Suppose at a given point in time, a market is in equilibrium. An increase in the number of consumers in the market causes market demand to ___, resulting in a ___ that will be eliminated as the market price of the good ___

increase; shortage; increases

On a PPF graph, a specific combination of goods is said to be inefficient at a particular point in time if it lies ___ the PPF

inside

Suppose Bertha, a rational artist, recently sold a painting to a customer for $300. It can be concluded with certainty that her reservation price for the painting was ___ $300

less than or equal to

"Eli Lilly is shedding 3,500 workers - over 8% of its global staff - and closing several facilities in a bid to cut $500 million in annual costs. The American drugmaker's revenues were up 8% in the first half of 2017, at more than $11 billion. But tougher times lie ahead as patents on blood-thinning and ADHD treatments expire." This quote is an example of a ___ issue

microeconomic

Sticks: Canada 2; US 3 Bats: Canada 4; US 5 In the situation above, mutually beneficial trade can occur if Canada trades ___ of their ___ for every ___ they receive from the US

nine; bats; five sticks