Economics Mid Term

In the graph, calculate the value of consumer surplus in this market:

$50

Which of the following would be most inelastic?

A cavity filled at the dentist

A util is:

A hypothetical unit of satisfaction

On a graph with a demand curve, consumer surplus is the area:

Above the market price and below the demand curve

Producer surplus is shown graphically as the area:

Above the supply curve and below the market price

Which event would cause the budget line to shift outward?

An increase in income

An effective price ceiling occurs at a price _____ the equilibrium price and causes a _____.

Below; shortage

Consumer surplus is the difference between the:

Maximum price the buyer is willing to pay and the market price

_____ are costs that have already been incurred and cannot be recovered.

Sunk Costs

Scarcity is BEST defined as when:

unlimited wants exceed limited resources.

In the graph, if a price floor on soybeans is set at $2 per bushel, the amount of surplus in this market would be _____.

0 bushels

In the town of Skateville, average incomes fall by 20% due to a recession; as a result the sales of skateboards fall by 15%. The income elasticity of demand is _____, and skateboards are a(n) _____ good.

0.75; normal

Which statement about the pet goods market is CORRECT? I) The market for pet goods has been on the rise in recent years due to the lower cost of producing pet goods. II) One reason for the growth of the pet goods market has been the increase in the number and availability of goods and services for pets. III) Like other markets, the pet goods market typically declines when there are downturns in the economy.

1,2,and3

A company specializing in foreign language lessons sells one set of lessons for $199, nut all five sets of lessons purchases upfront sell for $499, a discount of nearly 50%. The company is offering this large discount in hopes that its customers experience:

A framing bias

Which factor would shift the supply of skateboards to the right?

A large reduction in the price of wheels used to produce skateboards.

In which cause would producers bear 100% of the tax incidence?

A perfectly elastic demand curve with an inelastic supply curve

The difference between market price and the price at which sellers would be willing to supply the product is called:

A producer surplus

(Figure) What would be a reason why an economy is operating at point D?

A reduction in business investment causes unemployment to increase.

In the graph, if a price ceiling is set at $4, which of the following would result?

A shortage of 20 units

Which statement is a CORRECT description of the law of demand?

As prices of a good fall, the quantity demanded of that good rises

The price elasticity of supply measures the:

Change in quantity demanded divided by the change in price

In comparing the change in prices of different items, it is preferable to:

Compare the percent change in prices among different items

To say that economics is a way of thinking about how people make rational decisions means that people:

Consider only monetary terms in their decisions

Suppose that a customer's willingness to pay for a product is $79, and the seller's willingness to sell is $64. If negotiated price is $65:

Consumer surplus is greater than producer surplus

All of these are included in implicit costs, EXCEPT:

Depreciation

Which of the following is NOT considered an explicit cost?

Depreciation on equipment

Which effect does NOT deal with macroeconomics?

Effect of Walmart's pricing policies on consumers

(Figure) The area between which two points on the production possibilities frontier could represent an improvement in productive efficiency?

From D to B

The more responsive buyers are to a change in price, the:

Greater the price elasticity of supply

Tracey sells 100 gourmet cupcakes per day at $2 each. She is considering raising her price to $2.50 per cupcake in order to increase her revenues. If the price elasticity of demand for Tracey's cupcakes is 2, would she increase her revenues?

No; revenues would fall because she would sell far fewer cupcakes

Xiao has a budget of $150 to spend on T-shirts and jeans. The jeans she likes cost $56, and T-shirts cost $10. The combination of three T-shirts and three pairs of jeans would fall:

Outside the budget line

The reason that the law of demand exists is that:

People substitute cheaper products for more expensive products

The price elasticity of demand is calculated by dividing the:

Percentage change in quantity demanded by the percentage change in price

Phi eats a hamburger and becomes sick. At this point:

Phi's marginal utility is negative

Another way of referring to a market economy is as a:

Price System

If demand is unitary elastic, then the:

Price elasticity equals one

The gap between the supply curve and the market price is called:

Producer surplus

Economists explicitly assume that the primary objective of firms is to maximize:

Profits

Which statement is NOT true when a market is in equilibrium?

Sellers have enough Inventory to satisfy all buyers and some left over for future demand

When the economy slides into a recession, budget lines:

Shift inward

Eve runs a yoga studio. She is considering expanding her operation, but to do so, she needs to double the size of er existing building. She is concerned that her insurance will increase significantly due to the increase exposure liability. And, she alone would bear the burden of that if an accident were to occur. Based on the above information, Eve's studio should considered a _____ and the decision to expand a _____ decision.

Sole proprietor; long run

(Figure) The graph represents the market for water park admissions. If the price of admissions is set at $50, this would result in a ______ of ______ units.

Surplus; 200

The law of demand states that:

The lower a product's price, the more of that product consumers will purchase during a given period

According to the law of demand, people buy more of a good when:

The price falls

Whenever you construct a demand curve, which statement is TRUE?

The price of all other goods must be held constant

Marginal utility is NOT:

The same for all units of a commodity consumed.

Economics is BEST defined as the study of how:

people make rational decisions.

Which factor would NOT cause the demand curve for green tea to shift to the right?

New research showing that drinking green tea reduces risk of illnesses.

If the total costs of 3 units of $40 and the total cost of 4 units is $50, the marginal cost of the fourth unit is:

$10

Suppose Peter faces this budget line for eating out. If his weekly budget for pancakes is $40, a breakfast at IHOP costs ______ and a breakfast at the Original Pancake House costs ______.

$10; $8

Suppose that a customer's willingness to pay for a product is $1,480, and the seller's willingness to sell is $1,210. If the negotiated price is $1,300, how much is consumer surplus?

$180

Jason purchased a new printer for $150 although he was willing to pay $175. The minimum price accepted by the seller, Jasmine, was $145. The results of this transaction are a consumer surplus of:

$25 and a producer surplus of $5

Jackie finds a pair of jeans that she likes but the price tag is missing. She is willing to buy it as long as it's not more than $100. The cashier informs Jackie that the price is $72. Jackie buys the jeans, and therefore achieved a consumer surplus of:

$28, the difference between what she was willing to pay and the price

Which tax structure would be an example of a progressive tax?

$4,000 in taxes collected on $20,000 in income, and $10,000 in taxes collected on $40,000

AJ plans to attend a retreat on mindfulness. He paid $500 nonrefundable registration fee, made a reservation at a hotel that costs $200, and budgeted for $150 for gas and food. Two days before the retreat, he becomes ill. Assuming he is able to cancel the hotel without penalty, AJ's suck cost equals:

$500

(Table) The table shows the demand of three individuals in a market. Assuming they are the only buyers, what is the total market demand if the price is $20?

5 units

Which of the following periods describes when companies can alter output but not their plant capacity?

In the short run

If the price elasticity of demand is 0.5, then the demand is:

Inelastic

A firm is an economic institution that transforms _____ of production into _____ for consumers.

Inputs; outputs

Walmart is able to order huge quantities of shovels and rakes at very low prices from many different factories in China as it opens more stores. This best represents:

Long-run economies of scale

If there is a lack of competition in a market, a market failure results because the quantity of goods sold is ______ than the optimal level while prices are ______ than the optimal level.

Lower; higher

The main difference between marginal utility and total utility is that:

Marginal utility looks at the satisfaction of an additional unit, while total utility looks at the satisfaction of the total quantity consumed

If you allocate your time between attending classes and practicing for an upcoming game, you will maximize your total utility by choosing a bundle in which the:

Marginal utility per hour from each activity is equal

The field of economics that focuses on decision making by individuals, businesses, industries, and governments is called:

Microeconomics

Mike really enjoys Bitter Sweet coffee and is willing to pay $10 per cup. The retail price is $3. Which of the following is correct?

Mike has a consumer surplus of $7 per cup.

The supply curve represents the ______ price at which a firm is willing to _____.

Minimum; Sell various quantities of a good

Due to a drought in Georgia, the market price for peanuts rises by 20% nationwide. If the price elasticity of demand for peanuts is 0.8, what would happen to total revenue for peanut farmers who were not affected by the drought?

Total revenue would fall as quantity demanded falls by 16%

If the percentage change in quantity demanded is equal to the percentage change in price, then demand is:

Unitary elastic

Sole proprietors and partnerships share the characteristic of:

Unlimited liability

Which of these questions would NOT be considered one of the basic economic questions?

When will the new high-speed train in California be completed?

For a country to have a comparative advantage in a good, it must have:

a lower opportunity cost of producing that good.