Macro

Refer to the data. The value for X is:

15

Kevin received 80 total units of utility from the first four chips he consumed. If the marginal utilities of the first, second, and third chips are 20, 25, and 20, respectively, the marginal utility of the fourth chip is

15 units of utility

What is the market clearing Price

150

Refer to the data. If the consumer's money income were cut from $52 to $28, and the prices of J and K remain at $8 and $4 respectively, she would maximize her satisfaction by purchasing:

2 units of J and 3 units of K.

All of the following would reduce property crime by increasing its "price," except

cutting out the middlemen ("fences") by selling stolen goods via Internet auction sites

A recent hurricane destroys half the orange crop. This change in economic circumstance would be to:

increase the price but decrease the quantity of oranges

The fact that most medical care purchases are financed through insurance:

increases the amount of health care consumed by reducing the price of additional units of care.

Most people do not steal because:

their marginal costs, including guilt costs, are too high

You start a new diet and give your roommate $70. Each day you stay on your diet your roommate will give you $10 back. If you cheat that day your roommate gets to keep the $10. What behavioral problem are you trying avoid?

time inconsistency

The utility of a particular good:

typically increases at a decreasing rate

Jim enjoys having either a peanut butter sandwich or a bologna sandwich for his lunch. A drop in the price of peanut butter increases the marginal utility per dollar of peanut butter and causes Jim to buy more peanut butter and less bologna to restore maximum utility. This best illustrates the:

utilty maximization rule

behavioral economists

view people's behavior without judgement or prediction

Unlike newspaper dispensing devices, soft drink dispensing machines do not permit people to take more than one can or bottle with each

marginal utility of extra soft drink cans or bottles declines slowly, particularly because they are storable and can be consumed later

Newspaper dispensing devices seemingly "trust" people to take only a single paper, but the devices actually rely on the law of:

diminishing marginal utility

The diamond-water paradox arises because:

essential goods may be cheap while nonessential goods may be expensive.

Which of the following is the correct Law of Demand

holding all else constant; as the price of a good increases the quantity demanded of the good decreases and vice versa

Refer to the given information. An increase in income, if X is a normal good, will:

increase D, increase P, and increase Q.

Refer to the given information. An increase in the price of a product that is a close substitute for X will:

increase D, increase P, and increase Q.

Refer to the given information. Consumer expectations that the price of X will rise sharply in the future will:

increase D, increase P, and increase Q.

Refer to the given information. If X is an inferior good, a decrease in income will:

increase D, increase P, and increase Q.

Refer to the given information. An improvement in the technology used to produce X will:

increase S, decrease P, and increase Q.

The opportunity cost of an action:

is a subjective valuation that can be determined only by the individual who chooses the action.

The price of apples decreases and Joshua responds by buying more apples and fewer oranges. Accordingly, the:

marginal utility of apples will decrease and the marginal utility of oranges will increase

Assume a drought in the Great Plains reduces the supply of wheat. Noting that wheat is a basic ingredient in the production of bread and potatoes are a consumer substitute for bread, we would expect the price of wheat to:

rise, the supply of bread to decrease, and the demand for potatoes to increase.

Your friend received an A on her calculus test and a C on her history test. She tells you that she works really hard on her math assignments, which is why she received an A in math, but she got a C in history because her professor doesn't like her. This type of reasoning could be the result of _____________?

self-serving bias

Suppose the prices of products X and Y are $5 and $10, respectively. For a specific consumer who is currently exhausting her total income, the total utility from X is 100, while the total utility from Y is 200. The marginal utility of X and Y are both equal to 8. From this information, we can conclude:

she should purchase relatively more X

IF the price was $100 then there would be a _________________

shortage

If the government was to step in and force companies to charge lower prices than equilibrium, it would cause a __________ in the market

shortage

Your job as a financial advisor is to help companies design employee retirement programs. You observe a very low participation rate for one of your companies, so you investigate. During your investigation you find out that when an employee starts working for this company the new employee needs to sign-up for the retirement program. You advise this company to change their policy so that the new employee is automatically enrolled in the program and needs to dis-enroll. What behavior are you relying on to increase the participation rate?

status quo bias

An increase in the excise tax on cigarettes raises the price of cigarettes by shifting the:

supply curve for cigarettes leftward.

A per unit tax is placed on good X

supply decrease

A reduction in the number of firms producing X

supply decrease

Suppose that salsa manufacturers sell 2 million bottles at $3.50 in one year and 3 million bottles at $3 in the next year. Based on this information, we can conclude that the:

supply for salsa has increased.

IF the price was $300 then there would be a _________________ of _______________ units

surplus; of 850

"Time inconsistency" refers to the:

tendency to regularly misjudge in the present what you will do in the future.

I am asking $100 for my watch. You tell me it is only worth $50. Why might I place a higher value on my watch than you do (even if it is really only worth $50)?

the endowment effect

Suppose the price of an iced coffee is $4 and the price of a candy bar is $2. In order to maximize total utility, a consumer who buys some of each should allocate purchases such that:

the marginal utility of an iced coffee is twice that of a candy bar

Last month Laura saw the value of her stock portfolio rise by $20,000. This month she saw the value of her portfolio decline by $20,000. According to behavioral economics:

the positive utility Laura received from seeing her portfolio value rise was less than the disutility she felt when its value declined.

If all the firms in a competitive industry are legally required to meet new regulations that increase their costs of production:

the supply of the product will decrease.

Refer to the data. The value for Z is:

-5

If I have $2 in my pocket and I decide to spend it on beer and wings. BUT beer is $2 each and wings are $0.50 each. What is the opportunity cost of a wing

1/4 a beer

Refer to the data. The value for Y is:

45

Refer to the data. What level of total utility is realized from the equilibrium combination of J and K, if the consumer has a money income of $52 and the prices of J and K are $8 and $4 respectively?

276 utils

If I have $10 and plan on spending all of it on beer and wings. Beers are $2 each and wings are $0.50 each. Which of the following combination of beer and wings would be on the budget line

3 beers and 8 wings

Refer to the data. If the consumer has money income of $52 and the prices of J and K are $8 and $4 respectively, the consumer will maximize her utility by purchasing:

4 units of J and 5 units of K.

What is the equilibrium quantity

400

The advent of DVDs has virtually demolished the market for videocassettes. When people's preferences for videocassettes change it means after the change at the old production level the MB of videocassettes is now:

< MC so less production is needed

While eating at Alex's "Pizza by the Slice" restaurant, Kara experiences diminishing marginal utility. She gained 10 units of satisfaction from her first slice of pizza consumed and would only receive 5 units of satisfaction from consuming a second slice, at the same price. Based on this information we can conclude that:

Alex may have to lower the price to convince Kara to buy a second slice.

In the market for Beer, people love beer and wings together. What will happen if the price of wings increases

Demand for beer decreases

In the housing market in Naples. If both buyers and sellers believe housing prices will increase in the future what will happen to the market now

Demand will increase and Supply will decrease

If the government is trying to fight illegal activity like illegal drugs or prostitution, what may the best economic approach with the fewest unintended consequences?

Go after demanders not the sellers, to lower the price

Which of the diagrams illustrates the effect of an increase in automobile worker wages on the market for automobiles?

Graph A. demand increas

Refer to the graphs. Assume that pizza is measured in slices and beer in pints. In which of the graphs is the opportunity cost of a pint of beer equal to one slice of pizza?

Graph D.

There are two economists arguing about individual behavior. The first economist argues that individuals behave, for the most part, in a rational manner. The second economist argues that complete rationality is not consistent with the observed behavior in presence of uncertainty. The second economist is probably of the what school of thought?

The Behavioral school of thought

The marginal tax rate is always:

The amount you pay in taxes on the last dollar earned

The budget line shows:

all possible combinations of two goods that can be purchased, given money income and the prices of the goods

The law of diminishing marginal utility states that:

beyond some point, additional units of a product will yield less and less extra satisfaction to a consumer.

An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction assumes that:

bicycles are normal goods.

The market demand for a product will increase if:

buyers purchase more of the product at each price which might exist

Theft and burglary:

can be viewed as attempts to maximize utility, given certain marginal costs and marginal benefits.

Marginal utility is the:

change in total utility obtained by consuming one more unit of a good.

Refer to the given information. An increase in the price of a product that is a complement to X will:

decrease D, decrease P, and decrease Q.

Refer to the given information. A reduction in the number of firms producing X will:

decrease S, increase P, and decrease Q.

Refer to the given information. An increase in the prices of resources used to produce X will

decrease S, increase P, and decrease Q.

rational behavioral in neo-classical economic thought is:

getting the most benefit from limited resources

Susie knows that too many sugary treats, while delicious when eaten, have long-term adverse effects on weight and health. Based on this information, a behavioral economist would expect Susie to:

give away most of her sugary treats in an effort to resist temptation.

What are two reasons why the demand curve is downward sloping:

income and substitution effect

The upward slope of the supply curve reflects the:

law of supply.

You are at a casino and they announce your name as the winner of a $1000 lottery. When you show up to pick up your prize, the casino tells you that there was a mistake and you didn't win. You state "I wish they didn't even have this stupid lottery, I was better off before the announcement!" This is an example of ____________.

loss aversion

A change in the price of a good will:

not change supply; not change demand

An excise tax placed on gasoline would:

not change the demand for gas and decrease the supply of gas

Marginal utility can be:

positive, negative, or zero.

Assume that heating oil and natural gas are substitutes for each other. If the supply of natural gas increases due to new discoveries thus lowering the price of natural gas what happens to the market price and quantity of HEATING OIL?

price decreases quantity decreases

An improvement in production technology will:

shift the supply curve to the right.

An increase in money income:

shifts the consumer's budget line to the right

If expectations in the housing market leads to increasing current house prices. Which of the following is likely to occur in the future

High profits in the housing industry leads to more housing is built increasing supply driving house prices lower. Busting the housing bubble and leading to both buyers and sellers to expect lower prices in the future

Which of the following would be the opportunity cost of owning, and working in, your own firm?

Income earned from working at another occupation

Which of the following normally a progressive tax?

Income tax

A consumer is maximizing her utility with a particular money income when:

MUa/Pa = MUb/Pb = MUc/Pc = . . . = MUn/Pn.

Your friend tells you economics doesn't make sense because the price of a small diamond is a lot more than a gallon of water. Everyone needs water, but we can all do without a diamond. What type of analysis helps you explain why this is so?

Marginal analysis

Mrs. Arnold is spending all her money income by buying bottles of soda and bags of pretzels in such amounts that the marginal utility of the last bottle is 60 utils and the marginal utility of the last bag is 30 utils. The prices of soda and pretzels are $.60 per bottle and $.40 per bag respectively. It can be concluded that:

Mrs. Arnold should spend more on soda and less on pretzels

Neoclassical economics focuses almost entirely on predicting behavior, while placing little emphasis on the mental processes underlying the decisions. Why?

Neoclassical economists assume people are completely rational

If the government was to step in and force companies to charge lower prices than equilibrium, it would cause

No change in demand and no change in supply

Which of the following statements is correct?

Noncash gift-giving creates a value loss, but cash gifts do not

Why do people tend to eat more at all-you-can-eat buffet restaurants than at restaurants where each item is purchased separately?

Once the all-you-can-eat meal is purchased, consumers view additional trips back to the buffet as having a price of zero.

This market's equilibrium is

P = $5 Q = 7

Which of the following supermarket strategies to increase sales would be most consistent with a behavioral economics (versus neoclassical economics) approach?

Positioning frequently purchased items at the back of the store.

In the housing market in Naples. If both buyers and sellers believe housing prices will increase in the future what will happen to the market now to the prices of houses due to the change in Supply and Demand

Prices will rise sharply

You were initially happy when your employer told you that you were getting a 5% raise. You then found out that your friend, who does the same job as you, received a 10% raise from the same employer. With this new information you are upset. What might be at issue here?

The framing effect changed your perception of your raise

Camille is at the candy store with her grandmother, who offers to buy her $6 worth of candy. If lollipops are $1 each and candy bars are $2 each, what combination of candy can Camille's grandmother buy for her?

Two lollipops and two candy bars.

Water is essential to life, but inexpensive to buy." Which best explains this observation?

Water has a high total utility, but low marginal utility.

which of the following is NOT a determinant of demand

a per unit tax

The Government decides to stop prostitution. The crack down with sting operations on escorts and prostitutes ONLY. This will have what effect on the market for voluntary sex work?

decrease supply

which of the following is NOT a determinant of supply

demand

People love beer and wings together, they also love beer and pizza together. normally though people choose pizza or wings not both. If the price of wings increases what will happen:

demand for pizza increases

If X is an inferior good, a decrease in income

demand increaase

Consumer expectations that the price of X will rise sharply in the future will

demand increase

Which of the diagrams illustrate(s) the effect of a decline in the price of personal computers on the market for software?(software already made)

demand increase

Ben is exhausting his money income consuming products A and B in such quantities that MUa/Pa = 5 and MUb/Pb = 8. Ben should purchase:

more of B and less of A.

Suppose that MUx/Px exceeds MUy/Py. To maximize utility, the consumer who is spending all her money income should buy:

more of X and less of Y.

For economists, the word "utility" means:

pleasure or satisfaction

In the market for Beer, people love beer and wings together. What will happen if the price of wings increases to the Price and Quantity of beer.

price decreases; quantity decreases

The Government decides to stop prostitution. The crack down with sting operations on escorts and prostitutes ONLY. This will have what effect on the price and quantity in the market for voluntary sex work?

price increase, quantity decrease

People love beer and wings together, they also love beer and pizza together. normally though people choose pizza or wings not both. If the price of wings increases what will happen to the price and quantity of pizza

price increase; quantity increase

The Government decides to stop prostitution. The crack down with sting operations on escorts and prostitutes ONLY. This will have the effect of increasing the demand in the forced sex work market. What effect will that have on the price and quantity in this secondary market.

price increase; quantity increase