ECON Final Part 1

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Refer to Figure 4-7. At what price would there be an excess supply of 400 units of the good?

$35

Fossil fuels are considered to be nonrenewable energy sources. Which of the following statements is correct?

Fossil fuels are scarce resources.

The term market failure refers to

a situation in which the market on its own fails to allocate resources efficiently.

Refer to Figure 4-1. The movement from point A to point B on the graph shows

an increase in quantity demanded.

Savion's aunt gave him $25 for his birthday with the condition that Savion buys himself something. In deciding how to spend the money, Savion narrows his options down to four choices: Option 1, Option 2, Option 3, and Option 4. Each option costs $25. Finally, he decides on Option 2. The opportunity cost of this decision is

the value to Savion of the option he would have chosen had Option 2 not been available.

Aiden and Zaria charge people to park on their lawn while attending a nearby craft fair. At the current price of $10, six people park on their lawn. If they raise the price to $15, they know that only five people will want to park on their lawn. Whether they have six or five cars parked on their lawn does not affect their costs. From this information it follows that

they would do better charging $15 than $10.

Refer to Figure 4-9. All else equal, an increase in the use of laptop computers for note-taking would cause a move from

y to x

Consider Miray's decision to go to college. If she goes to college, she will spend $24,000 on tuition, $12,000 on room and board, and $1,900 on books. If she does not go to college, she will earn $16,000 working in a store and spend $8,000 on room and board. Miray's cost of going to college is

$45,900

What would happen to the equilibrium price and quantity of macaroni and cheese if consumers' incomes fall and macaroni and cheese is an inferior good?

Both the equilibrium price and quantity would increase.

Suppose there is a flood in St. Louis, Missouri, that destroys several beer bottling facilities. Which of the following would not be a direct result of this event?

Buyers would not be willing to buy as much as before at each relevant price.

Refer to Figure 4-8. All else equal, an increase in the income of buyers who consider turkey to be an inferior good would cause a move from

Da to Db.

Suppose the income of buyers in a market for an inferior good decreases and a technological advancement occurs also. What would we expect to happen in the market?

Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

Suppose the number of buyers in a market increases and a technological advancement occurs also. What would we expect to happen in the market?

Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.

Savion is restoring a car and has already spent $4,000 on the restoration. He expects to be able to sell the car for $5800. Savion discovers that he needs to do an additional $2,400 of work to make the car worth $5,800 to potential buyers. He could also sell the car now, without completing the additional work, for $3,800. What should he do?

He should sell the car now for $3,800.

Beef is a normal good. You observe that both the equilibrium price and quantity of beef have fallen over time. Which of the following explanations would be most consistent with this observation?

New medical evidence has been released that indicates a negative correlation between a person's beef consumption and life expectancy.

Suppose the state of Rhode Island passes a law that increases the tax on beer. As a result, beer consumers who live in Rhode Island start purchasing their beer in surrounding states. Which of the following principles does this best illustrate?

People respond to incentives.

Refer to Figure 4-10. Which of the following movements would illustrate the effect of an increase in the incomes of parents with school-aged children on the market for soccer lessons?

Point C to Point B

What will happen to the equilibrium price and quantity of new cars if the price of gasoline rises, the price of steel rises, public transportation becomes cheaper and more comfortable, and auto-workers negotiate higher wages?

Quantity will fall, and the effect on price is ambiguous.

Which of the following events would cause the price of oranges to fall?

The price of land throughout Florida decreases, and Florida produces a significant proportion of the nation's oranges

Which of the following demonstrates the law of supply?

When ketchup prices rose, ketchup sellers increased their quantity supplied of ketchup.

Refer to Figure 4-6. The shift from S' to S in the market for chocolate cake could be caused by

an increase in the price of butter.

Equilibrium quantity must decrease when

both demand and supply decrease.

Suppose you like to make, from scratch, pies filled with bananas and vanilla pudding. You notice that the price of bananas has increased. As a result, your demand for vanilla pudding would

decrease

Refer to Table 4-4. If these are the only four sellers in the market, then when the price decreases from $8 to $6, the market quantity supplied

decreases by 12 units

Refer to Figure 4-1. It is apparent from the figure that the

demand for the good conforms to the law of demand.

At the equilibrium price, the quantity of the good that buyers are willing and able to buy

exactly equals the quantity that sellers are willing and able to sell.

Soup is an inferior good if the demand

for soup falls when income rises.

Suppose the cost of operating a 75-room hotel for a night is $6,000 and there are five empty rooms for tonight. If the marginal cost of operating one room for one night is $40, the hotel manager should rent one of the empty rooms only if a customer is willing to pay

more than $40; because the marginal benefit will exceed the marginal cost.

Efficiency

refers to how much a society can produce with its resources. Equality refers to how evenly the benefits from using resources are distributed among members of society.

Efficiency means that

society is getting the most it can from its scarce resources.

Workers at a bicycle assembly plant currently earn the mandatory minimum wage. If the federal government increases the minimum wage by $1.00 per hour, then it is likely that the

supply of bicycles will shift to the left.

People are willing to pay more for a diamond than for a bottle of water because

the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water.

When computing the opportunity cost of attending a professional football game as a spectator, you should include

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


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