Micro Econ

Alex has $18 per week in his entertainment budget. He splits his time between going to the movies and renting video games. Each movie costs $6 while each video game rental costs $3. The measured total utility of each of his activities is shown in the table below. What is Alex's utility maximizing point?

1 movie, 4 video game rentals

Kim has $23 per week in her entertainment budget. She splits her time between going to the movies and yoga classes. Each movie costs $8 while each yoga class costs $3. The total utility from each of these activities is set out in the table below. What's Kim's total utility maximizing point? That is, what combination of movies and yoga classes will maximize Kim's total utility?

1 movie, 5 yoga classes

If the government set a price ceiling of $40, there would be:

16 units sold

If you consume pasta every day of the week, its marginal utility is bound to ________ at the end of the week, ceteris paribus, and this demonstrates the law of _____

Decline; Diminishing Marginal Utility

If Pepsi goes on sale, what will happen to the demand for Coca-Cola?

Demand for Coca-Cola will decrease

Which of these statements best fits how a behavioral economist might view a situation?

If you find $100 on the street, you will be more likely to spend if freely than you would be to take $100 out of your bank account

Which of the following statements do economists believe about utility?

It is personal and subjective

How does a price floor set above the equilibrium price affect quantity demanded and quantity supplied?

It results in a greater quantity supplied than the quantity demanded, otherwise known as excess supply

Natural resources, or land, can include the fertility of the land, minerals below it, and what other aspects?

Livestock

Price ceilings attempt to make consumer prices ____

Lower

Economic capital is productive, so it does not include____

Money

Which of the following statements is/are reflecting decision-making on the margin?

One more day in this cottage will be nice, but how much will the cost of the rental rise? If we double the order to a dozen doughnuts, we will pay only twenty percent more

Which of the following events can shift the level of demand (demand is the relationship between price and quantity demanded)?

Population grows in a particular market area

Suppose there is a major technological advance in the production of a good that causes production costs to fall. If demand for the product is relatively inelastic, what will happen in the market?

Price will relatively decrease greater than the increase in quantity

Financial capital, like money, is simply a tool. Once financial capital is converted to economic capital (invested), it produces a resource that is

Productive

The distinguishing feature of economic capital (as opposed to financial capital, like money) is that it is

Productive

Behavioral economics applies insights from which other discipline in order to explain irrational consumer behavior?

Psychology

Price ceilings typically result in _____

Shortages

Identify the macroeconomic issue among the following statements.

The average cost of producing electricity nationally is rising

A restaurant chain sponsors a charity that provides for children with cancer to be treated with their parents present. How would the use of company funds for this purpose be justified by a business whose goal is to maximize profit?

The money spent is worth the boost it gives to corporate image

Using the midpoints method, calculate the price elasticity of demand of Good X using the following information: When the price of good X is $50, the quantity demanded of good X is 400 units. When the price of good X rises to $60, the quantity demanded of good X falls to 300 units

The price elasticity of demand for good X = 1.57

Identify the microeconomic topic(s) among the following

The price that a farmer asks for her watermelons

Suppose the local government is concerned about the health of local school children, and for that reason imposes a price ceiling of $3 on yogurt. Based on the graph below, which of the following is true?

The quantity demanded will be 5 yogurts. The quantity supplied will be 3 yogurts. There will be a shortage of 2 yogurts.

A rock star intentionally sets her ticket prices below what would be necessary to sell out her shows. How might this be justified by a manager whose goal is to maximize long-term profit?

The revenue sacrificed is worth the boost it gives to her image as lines form for tickets

The local government is concerned about poverty so it institutes a minimum wage of $9 per hour. If the demand and supply for labor are given in the graph above, there will be

a surplus of 6 workers

Supply and demand for bushels of wheat (millions) are shown in the following table. A $9.00 government mandated price floor would result in:

an excess supply of 2 million bushels of wheat

An increase in the quantity supplied can be the result from

an increase in price

According to the law of supply, assuming other factors are held constant

as the price of bread increases, the quantity of bread supplied will increase

Marginal utility can

be positive, negative, or zero

Due to limits on our time, money, and effort, we are best off when we allocate those things...

by constantly assessing the opportunity costs of our choices

Complete the following sentence: If people think that the price of televisions will decrease in the near future, that belief may cause a(n)

decrease in the demand for televisions today

Teenage workers are assumed to have ________ labor supply, therefore a 5% increase in wage would result in ________ percentage change in quantity of labor supplied

elastic, greater

A price ceiling creates ________ when it is set ________ the equilibrium price

excess demand -- below

Decreased competition due to fewer producers in a market will cause

higher prices due to an decrease in the quantity supplied at every price

A price floor attempts to keep prices ___

higher than the equilibrium price

A person who takes life-saving prescription drugs most likely has a(n) ________demand for that drug. Therefore an increase in the price of the drug will result in ________ total revenue for the drug company

inelastic; increased

The theory of rational behavior

is an assumption that economists make to have a useful model for how decisions are made

Suppose you are in charge of sales at a pharmaceutical company, and your firm has a new drug that causes bald men to grow hair. Assume that the company wants to earn as much revenue as possible from this drug. If the elasticity of demand for your company's product at the current price is 1.4, what would you advise the company to do?

lower the price

Marginal cost is necessary to consider in a rational decision, and should be compared to

marginal benefit

When income increases and the demand for a good increases, the good is considered a

normal good

When certain assumptions are used to create a model of reality, its value can be tested and determined by

predicting outcomes

The downward slope of a demand curve illustrates the pattern that as ________ decreases, ________ increases

price : quantity demanded

The production possibilities model shows an inverse relationship between the amount of one thing that can be produced and the amount of something else because

production of different types will compete for limited resources

A supply curve is a graphical illustration of the relationship between price and

quantity supplied

The advantages that society gains through trade lie in the ability to

refine tasks associated with production

Refer to the figure below. If the government set a price ceiling at $10, there would be a(n):

shortage of 24 units

You are a lawyer representing a client who lost their $1 million home in a house fire. They are suing the home's architect as design flaws were a major cause of the fire. How large would the damages awarded by the court to your client need to be in order for them to be equally happy as they were before the fire?

some amount greater than $1 million

An Uber driver faces costs for driving that include sunk costs like insurance that contribute to the average cost per mile of $.50. Yet when a rider offers to pay less than that for a ride, the driver agrees because

sunk costs like auto insurance (in this case) do not increase as driving increases

If consumers find cola and iced tea good substitutes, then it is likely that

the goods' cross price elasticities are greater than zero

Suppose that there are only two types of output in North Korea: nuclear missiles and consumer goods. All else constant, as the nation produces more missiles

the greater is the opportunity cost of consumer wants satisfied. Every additional missile will reduce consumer goods production by more and more

When a 5% increase in income causes a 3% drop in quantity demanded of a good

the income elasticity is .6 and the good is an inferior good

Receiving less and less enjoyment from a second and then a third serving of ice cream is an example of ________

the law of diminishing returns

Scarcity is imposed on individual households in the form of

the prices of the goods that we may purchase. income (budget) limitations

You are the manager of a restaurant and would like to increase revenue. The host staff suggests that you should increase the price of drinks and food, but the servers suggest decreasing the price of drinks and food. You are unsure if you should increase or decrease price, but you know that

the servers thinks demand for drinks and food is elastic

Scarcity is a condition that is everywhere and always, since it is based upon two assumptions that reflect permanent universal conditions. The assumptions are that

the world has limited productive resources more output satisfies more wants

When quantity demanded decreases in response to a change in price

there is a movement from one point to another along the demand curve

The typical pattern revealed when consumers choose is that as the quantity consumed of some product rises,

total utility rises, but marginal utility falls

The house that Jeanne inherited from her mother can rent for $1500/month, but Jeanne decides to allow her brother to stay there for only $500 per month. This decision carried with it a

zero monetary cost but a $1000 per month opportunity cost