Micro Econ Exam 1
If the price of salt increases and the quantity demanded does not change, then
A) the price elasticity of demand is equal to zero B) demand is perfectly inelastic.
A change in which of the following alters buying plans for cars but does NOT shift the demand curve for cars?
PRICE DOESNT SHIFT THE CURVE
If the U.S. Surgeon General announced that increased grapefruit juice consumption could help prevent heart attacks, what would happen to the equilibrium price and quantity of grapefruit juice?
Price and quantity both increase.
The price elasticity of demand for corn is 0.4. A new hybrid of corn is discovered and all farmers start to use it, which increases the quantity of corn they can produce from each acre. What happens to the farmers' total revenue?
The total revenue will decrease.
Which of the following shifts the demand curve for oranges?
a decrease in the price of a pound of bananas, a substitute in consumption for oranges
To maximize its revenue,
a firm facing inelastic demand should always raise its price
When people's incomes increase, the demand for a good increases. The good is called
a normal good.
The principle of increasing opportunity cost leads to
a production possibilities frontier (PPF) that is bowed outward from the origin.
Ticket scalpers at the NCAA basketball tournament last year charged prices high above the printed ticket price. This observation is evidence of
a shortage at printed ticket prices.
The "income effect" in the market for aspirin means that
an increase in the price of aspirin will reduce the total purchasing power of aspirin takers, making them able to afford fewer aspirin.
Oatmeal is a normal good and cold cereal is a substitute for oatmeal. Raisins are a complement for oatmeal. Which of the following increases the demand for oatmeal?
an increase in the price of cold cereal
Changes in which of the following shifts the supply curve of hamburgers?
an increase in the price of meat used to produce hamburgers
The price elasticity of demand for gasoline is 0.40. If the price of gasoline rises by 20 percent, there will be
an increase in the total revenue received from the sale of gasoline.
Markets are best defined as
arrangements where buyers and sellers get together to buy and sell.
On a straight-line downward-sloping demand curve, the maximum elasticity of demand occurs
at its vertical intercept.
If consumers' incomes increase and the demand for bus rides decreases,
bus rides are an inferior good.
Cupcakes and granola bars are substitutes in consumption. The price of a granola bar increases so the demand for
cupcakes will increase, that is, the demand curve will shift rightward.
Ham and eggs are complements. If the price of ham rises, the demand for eggs will
decrease and the demand curve for eggs will shift leftward.
The demand for computer chips is a downward sloping straight line. If there is an increase in the supply of computer chips, this change will
decrease the price elasticity of demand for computer chips.
The equilibrium price is the price at which the quantity
demanded equals the quantity supplied.
Demands differ from wants because
demands reflect a decision about which wants to satisfy and a plan to buy the good, while wants are unlimited and involve no specific plan to acquire the good
Marginal benefit curves slope
downward, but not because of increasing opportunity cost.
Resource use is allocatively efficient when marginal benefit is
equal to marginal cost.
If the price of crude oil falls, the equilibrium price of gasoline ________ and the equilibrium quantity ________.
falls; increases
If the price of a video download is above its equilibrium price, the quantity supplied is ________ than the quantity demanded.
greater than
15. If the demand curve for oranges is a downward sloping straight line, the price elasticity of demand will increase the
higher the price of oranges.
increase in production =
increase in marginal cost
If good growing conditions increase the supply of strawberries and hot weather increases the demand for strawberries, the quantity of strawberries bought ________.
increases and the price might rise, fall or not change
An increase in the expected future price of a good
increases its demand.
At the midpoint of a downward sloping straight-line demand curve, the demand
is unit elastic.
. If the price of a video download is below its equilibrium price, the quantity supplied is ________ than the quantity demanded.
less
A local transit authority charges $1 for a bus ride. An economics study suggests that in the price range from $0.50 to $1.50, the elasticity of demand for bus trips is 1.1. To increase its revenue, the transit authority should
lower the fare.
Susan likes to drink sodas. The ________ soda Susan drinks, the ________ of the last soda.
more; lower the marginal benefit
The price elasticity of demand depends on
neither the units used to measure price nor the units used to measure quantity.
Marginal cost is the ________ one more unit of a good and ________ of the good increases.
opportunity cost of producing; increases as production
Most students attending college pay tuition and are unable to hold a full-time job. For these students, tuition is
part of the opportunity cost of going to college. So are their forgone earnings from not holding a full- time job
The price elasticity of demand is defined as the magnitude of the
percentage change in quantity demanded divided by the percentage change in price.
The price elasticity of demand for furniture is estimated at 1.3. This value means a one percent increase in the
price of furniture will decrease the quantity of furniture demanded by 1.3 percent.
Harry produces 2 balloon rides and 4 boat rides an hour. Harry could produce more balloon rides but to do so he must produce fewer boat rides. Harry is ________ his production possibilities frontier.
producing on
The quantity of CDs that firms plan to sell this month depends on all of the following EXCEPT the
quantity of CDs that people plan to buy.
Increasing opportunity cost occurs along a production possibilities frontier because
resources are not equally productive in all activities.
Gruel is an inferior good. Hence, a decrease in people's incomes
shifts the demand curve for gruel rightward.
Capital accumulation definitely
shifts the production possibilities frontier outward.
When producing goods and services along a PPF, tradeoffs exist because
society has only a limited amount of productive resources.
When the price of a pizza decreases from $12 to $10, it is definitely the case that the
substitution effect means people buy more pizza.
Marginal benefit is the benefit
that is received from consuming one more unit of a good or service
The quantity demanded is
the amount of a good or service that a consumer is willing and able to purchase at a given price
Opportunity cost is best defined as
the highest-valued alternative that is forgone when choosing among various alternatives.
Assuming farmers can plant either corn or soybeans, as U.S. farmers plant more corn to meet rising global demand,
the opportunity cost of producing corn increases.
A supply curve shows the relation between the quantity of a good supplied and
the price of the good. Usually a supply curve has positive slope.
The "law of demand" states that changes in
the quantity demanded of a good are inversely related to changes in its price.
A marginal benefit curve shows
the quantity of one good that people are willing to forgo to get another unit of another good.
A relative price is the
the ratio of one money price to another
In March, the quantity of orange juice sold in the town of Jackson was 3000 cartons and the price $3. In May, the quantity of orange juice sold in the town of Jackson was 3500 cartons and the price was $3.20. This change in the price and quantity sold could have been the result of
the release of a medical study suggesting that consuming orange juice helps prevent cancer.
Apples are a normal good, so if the price of an apple increases from 50¢ to 60¢, the quantity of apples demanded decrease because of
the substitution and income effects.
A bakery can produce either cakes or cookies. If the price of cookies rises, then
the supply curve of cake shifts leftward.
The "law of demand" refers to the fact that, all other things remaining the same, when the price of a good rises
there is a movement up along the demand curve to a smaller quantity demanded.
Cable television companies must pay increased charges by the networks for the programs the cable companies carry. As a result, the price of cable television rises. Thus
there is a movement up the demand curve for cable television to a smaller quantity demanded.
The production possibilities frontier is the boundary between
those combinations of goods and services that can be produced and those that cannot.
Scarcity guarantees that
wants will exceed demands.
Allocative efficiency occurs when
we cannot produce more of any good without giving up some other good that we value more highly.
If the marginal benefit of a good exceeds its marginal cost,
we should produce more to achieve the allocatively efficient use of resources.