ECON TEST 1
Nerida Kyle is thinking of buying a car to avoid taking Lyft to work. She is using the cost-benefit principle to evaluate this decision and is calculating the costs and benefits to owning the car over the next year. She's gathered the following information to help her make her decision: - The car costs $15,000 to purchase, but she can resell it after a year of use for $13,500. - She thinks gas will cost her about $1,200 for the year. - The annual insurance premium for her car is $800. - Maintenance and repairs will cost about $300 for the year. - Using Lyft to get to work would cost her $4,000 for the year. $4,000. $3,800. $7,800. $1,500.
$3,800. 15,000+800+300+1200 - 13, 500
Fill in the blanks below using the following choices: (A) If the congestion effect of using a highway increases, then the demand for that highway __________. (B) If the network effect of using a social media platform increases, the demand for advertising by businesses on that platform ________. (A) increases; (B) decreases (A) increases; (B) increases (A) decreases; (B) decreases (A) decreases; (B) increases
(A) decreases; (B) increases
Gary Parker is willing to pay $950 for a new iPad. Apple (the producer of iPads) is selling a new iPad for $460. It costs Apple $320 to produce this iPad. How much economic surplus does Gary receive if he purchases this iPad? $__________.
490 950-460 how much he is willing to pay - how much it costs
Kevin Williamson goes to a local coffee shop and orders a medium-sized latte. His willingness to pay for that latte is $10.0. The price of the latte is $4.5. The cost to the coffee shop to produce the latte is $2.0. How much economic surplus does Kevin gain when he purchases the latte? $_________.
5.5 willingness to pay - cost
Gary Parker is willing to pay $1,000 for a new iPad. Apple (the producer of iPads) is selling a new iPad for $400. It costs Apple $350 to produce this iPad. How much total economic surplus is generated if Gary purchases this iPad? $__________.
650 1,000- 350 how much he is willing to pay - how much it costs to produce
Which statement BEST illustrates the law of demand? An increase in food prices encourages more individuals to buy more food as a result of scarcity. Consumers buy more iPhones because prices have fallen. Tesla produces more cars as prices increase. Fewer people visit Disneyland because incomes have fallen.
Consumers buy more iPhones because prices have fallen.
Charles McCoy is a manager at a Chipotle restaurant, and he has to decide how many workers to hire. One worker can make 20 burritos that sell for $7 on average in one hour. A second worker can make another 16 burritos in one hour. The marginal product of each additional worker decreases by four burritos, with each additional hire. The cost of ingredients is $2 per burrito no matter what the total quantity produced is. Given that workers are paid $21 per hour and have eight-hour shifts, how many employees should Charles hire for each hour?
Four
A campus bookstore sells both new and used books and rents them as well. In a particular semester, the percentage of students who opt for used books and rentals increases, and the percentage of students who opt for new books decreases. Which graph shows the new equilibrium that would result in the market for used books? Graph A Graph B Graph C Graph D None of these answers is correct.
Graph A
Market for New Housing in Dubai) Which graph shows the effect on the supply curve for new housing in Dubai, if economists predict a decrease in demand for new housing? Graph A Graph B Graph C Graph D None of these answers is correct.
Graph B
Which graph shows what will happen to the supply of roses if the price of roses falls? Graph A Graph B Graph C Graph D None of these answers is correct.
Graph B
Fossil has started an aggressive advertising campaign for its wallets. Which graph shows how the demand in the market might change if the advertising campaign is successful? Graph A Graph B Graph C Graph D None of these answers is correct.
Graph D
Amul Food Factory in India makes ice cream and produces processed and condensed milk. In the factory, the firm's employees use raw milk and sugar. The firm runs on electricity and purchases raw milk every day. Large robotic assembly lines fill and package the ice cream containers. Large industrial freezers store the ice cream. Based on this scenario, can you identify the fixed costs for Amul Food Factory? The cost of the raw milk purchased from the farmers. The cost of building the factory, purchasing the robotic assembly lines and industrial freezers. The cost of purchasing electricity, raw milk, and sugar. The cost of the employees hired and the number of packages purchased.
The cost of building the factory, purchasing the robotic assembly lines and industrial freezers.
What would you expect to happen to the demand for a luxury good today, if the government announces it will stop taxing that luxury good next year? The demand for the luxury good will shift to the right today. The demand for the luxury good will shift to the left today. Consumers will stop their consumption of the luxury good altogether. There will be no impact on the demand for the luxury good.
The demand for the luxury good will shift to the left today.
As a part of a market research project, you survey six random people to see how much gas per week they would buy at various prices. The data you collect is in the accompanying table. What is the change in the total demand for gasoline in your survey when the price changes from $2 per gallon to $2.50 per gallon? The total quantity demanded in the market falls by 14 gallons. The total quantity demanded in the market falls by 13 gallons. The total quantity demanded in the market rises by 16 gallons. The total quantity demanded in the market rises by 11 gallons.
The total quantity demanded in the market falls by 14 gallons. add up 2 row and 2.50 row and find the difference
The price of smoothies at a local smoothie shop is $3. Cheryl is willing to pay $6 for her first smoothie each day. The marginal benefit to her of each additional smoothie falls by $2. How many smoothies should Cheryl purchase? One Two Three Four
Two
Refer to the graph to answer the question. In the graph, the movement from point W to point P represents: an increase in quantity demanded. a decrease in quantity demanded. a decrease in demand. an increase in demand.
a decrease in demand.
A normal good is: a good which is normally purchased by many consumers. a good for which higher income causes an increase in demand. a good which is only purchased by high-income consumers. a good for which higher income causes a decrease in demand.
a good for which higher income causes an increase in demand.
An individual supply curve is a graph with quantities of a product that a seller is willing to supply at different price points. the quantity a seller is willing to supply at one particular price. a graph that plots the quantities of an item that a buyer plans to buy at different prices. a graph that plots how much a seller produces at different points in time.
a graph with quantities of a product that a seller is willing to supply at different price points.
A recent news story reported that the Organization of Petroleum Exporting Countries is expected to increase the supply of oil next summer. Summer is traditionally a time of increased demand for oil because of vacation travel. What would be the combined effect of these two events on the market for gasoline? an increase in the quantity and the price an increase in the quantity and an unpredictable change in the price an unpredictable change in both the price and the quantity an unpredictable change in the price and a decrease in the quantity
an increase in the quantity and an unpredictable change in the price
Rising marginal costs imply falling variable costs. a downward-sloping demand curve. an upward-sloping supply curve. rising fixed costs.
an upward-sloping supply curve.
The demand curve... [Select all that apply.] is a curve that shows the maximum willingness to pay for a product. is a curve that shows the marginal benefit gained from a product. is a curve that shows the production cost of a product. is a curve that shows the relationship between the price of a product and a consumer's willingness to buy at each price.
check all of the boxes
The cost-benefit principle states that _____ are the incentives that shape decisions. incomes opportunity costs costs and benefits framing effects
costs and benefits
Ivan has inherited his grandmother's 1963 Chevrolet Corvette, which he values at $60,000. Samantha is interested in buying such a car and is willing to pay up to $55,000. Ivan hears Samantha is looking for this particular car and offers to sell it to her for $70,000. A voluntary economic exchange _____ between Ivan and Samantha because _____ positive economic surplus from the transaction. occurs; only Samantha receives does not occur; neither Ivan nor Samantha receives occurs; both Ivan and Samantha receive does not occur; only Ivan receives
does not occur; only Ivan receives
Suppose the New York City housing market is in equilibrium. A recession causes local household incomes to decline. At the same time, construction of a series of new apartment buildings has just been completed. Given these two changes, and assuming that apartment housing is a normal good, we can predict that the price of apartments will _________, and the quantity of apartments bought and sold will __________. rise or fall; fall rise or fall; rise fall; rise or fall rise; fall or rise
fall; rise or fall
The principle that your best choice depends on your other choices, the choices others make, developments in other markets, and expectations about the future is known as the _____ principle. marginal interdependence cost-benefit opportunity cost
interdependence
The rational rule suggests you should continue with an activity until your _____ benefit _____ your _____ cost. marginal; is less than; marginal total; equals; total total; exceeds; total marginal; equals; marginal
marginal; equals; marginal
A market consists of ten similar suppliers that are making the same supply decisions. To find the market supply of these ten suppliers, you: find the average quantity produced by the ten suppliers. take one-tenth of the individual supply of each supplier and add it up. take the individual supply of one supplier. multiply the individual supply of one of the suppliers by ten.
multiply the individual supply of one of the suppliers by ten.
The opportunity cost principle states that the true cost of something is the next best alternative you have to give up to get it. least desired alternative you have to give up to get it. economic surplus you give up to get it. economic surplus you receive from getting it.
next best alternative you have to give up to get it.
When you calculate marginal costs, they should include: only variable costs. both the variable and fixed costs. only fixed costs. the market price of the product.
only variable costs.
Refer to the graph to answer the question.A decrease in the price of an item will cause the movement from point Q to point P. point P to point W. point T to point P. point N to point M.
point Q to point P.
In California, there has been a drought, and rural communities are fighting with urban areas over water. Which economic concept does this statement BEST represent? equilibrium incentives specialization scarcity
scarcity
Researchers have found a new strain of canola (a grain used to produce canola oil) that is resistant to pesticides and drought while yielding more canola oil. Holding all else constant, this research will: increase the quantity supplied of canola oil. decrease the quantity supplied of canola oil. shift the supply curve for canola oil leftward. shift the supply curve for canola oil rightward.
shift the supply curve for canola oil rightward.
Carolyn Bates is a junior in college studying economics. She has created a new software application that applies the four principles of economic decision making to any potential decision that a user faces. She is considering leaving school after this academic year to pursue further development of her app. Carolyn should ignore all of the following costs when calculating the opportunity costs of leaving college EXCEPT the 90 credit hours she has already completed for her degree. tuition costs she has already paid to her college. skills she may gain from her final year of economics courses. time she will spend working on the app instead of studying.
skills she may gain from her final year of economics courses.
Peanut butter and peanut oil are complements-in-production. When the price of peanut butter rises, the supply of peanut oil will increase. supply of peanut oil will fall. quantity supplied of peanut butter will fall. quantity supplied of peanut butter will remain unchanged.
supply of peanut oil will increase.
The marginal benefit of consuming an item is the additional benefit from buying one more unit of that item. the additional number of consumers who buy a unit of an item. the difference between what the consumer is willing to pay and the actual market price of the item. the total benefit from buying several units of the item.
the additional benefit from buying one more unit of that item.
Paint and paintbrushes are complements. If the price of paint rises, we can expect: the quantity demanded of paintbrushes to remain unchanged. the quantity demanded of paint to increase. the demand for paintbrushes to decrease. the demand for paintbrushes to increase.
the demand for paintbrushes to decrease.
The law of supply refers to the inverse relationship between price and quantity demanded. the positive relationship between price and quantity demanded. the inverse relationship between price and quantity supplied. the positive relationship between price and quantity supplied.
the positive relationship between price and quantity supplied.
Suppose there is a surplus of qualified architects in the United States. Over time, we would expect: the demand for qualified architects to fall. the salaries of qualified architects to rise. the supply of qualified architects to fall. the salaries of qualified architects to fall.
the salaries of qualified architects to fall.
Variable costs are the costs that are independent of the amount of output produced. are incurred to build factories and assembly plants. stay fixed with the quantity of output produced. vary with the quantity of output produced.
vary with the quantity of output produced.
An equilibrium in a market occurs when suppliers have sold all the goods and services that they have produced. at the halfway point on a demand curve. at the halfway point on the price axis. when the quantity supplied equals the quantity demanded.
when the quantity supplied equals the quantity demanded.