MICRO Exam 1

Refer to the given table. The equilibrium price in this market is

between $40 and $50.

In a free market, if the price of a good is below the equilibrium price, then

buyers, hoping to ensure they acquire the good, will bid the price higher.

The fact that most people make some decisions based on intuition rather than calculation is

consistent with the cost-benefit model because most people intuitively weigh costs and benefits.

Refer to the accompanying figure. A decrease in demand is represented by a shift from

curve D to curve C.

As the price of flour (an input in the production of cookies) increases, firms that produce cookies will

decrease the supply of cookies.

Refer to the accompanying table. According to the table, Elena has the absolute advantage in

delivering pizza.

If a person takes an action if, and only if, the extra benefits from taking that action are at least as great as the extra costs, then that person is

following the Cost-Benefit Principle.

The emergence of English as the de facto world language _____ a comparative advantage in the production of books, movies, and popular music.

has given English-speaking countries

You paid $35 for a ticket (which is nonrefundable) to see SPAM, a local rock band, in concert on Saturday. Assume that $35 is the most you would have been willing to pay for a ticket. Your boss called, and she is looking for someone to cover a shift on Saturday at the same time as the concert. You would have to work 4 hours and she would pay you $11/hr. The cost to you of working is $2/hr. Your economic surplus from going to work instead of seeing SPAM on Saturday is

$1.

You have two options for how to spend the afternoon. You can either go see a movie with your roommate or work as a tutor for the Math Department. From experience, you know that going to see a movie gives you $20 worth of enjoyment, and with your student discount, a movie ticket only costs $12. If you spend the afternoon working as a math tutor, you will get paid $45. On a typical day, you wouldn't be willing to spend the afternoon working as a math tutor for less than $35. What is your economic surplus from working as a math tutor instead of going to the movies?

$2

Smith and Jones comprise a two-person economy. Their hourly rates of production are shown in the accompanying table. If Smith and Jones devote all of their resources to producing computers, then the maximum number of computers they can produce in an hour is

16.

The price of bananas will increase in response to

an excess demand for bananas.

Refer to the accompanying figure. At a price of $1, there will be

an excess demand of 8.33 units.

The accompanying table shows the relationship between the speed of a computer's CPU and its benefits and costs. Assume that all other features of the computer are the same (that is, CPU speed is the only source of variation), and only the CPU speeds listed in the table are available for purchase. The total cost of a 2.5GHz computer is

$1,000.

Refer to the accompanying table. The marginal benefit of the 5th unit of activity is

$10.

The accompanying table shows the relationship between the number of times you get your car washed each month and your total monthly benefit from car washes. Each car wash costs $15. What's the average benefit of 4 car washes per month?

$14

You have two options for how to spend the afternoon. You can either go see a movie with your roommate or work as a tutor for the Math Department. From experience, you know that going to see a movie gives you $20 worth of enjoyment, and with your student discount, a movie ticket only costs $12. If you spend the afternoon working as a math tutor, you will get paid $45. On a typical day, you wouldn't be willing to spend the afternoon working as a math tutor for less than $35. What is your opportunity cost of seeing a movie this afternoon?

$22

Refer to the accompanying table. The average cost of 5 units of activity is

$6

For the fall semester, you had to pay a nonrefundable fee of $600 for your meal plan, which gives you up to 150 meals. If you only eat 1 meal, your average cost for a meal is

$600.

Suppose that Tom bought a bike from Lauren for $199. If Lauren's reservation price was $179, and Tom's reservation price was $249, the total economic surplus from this transaction was

$70.

Refer to the accompanying table. The marginal cost of the 4th unit of activity is

$8

Smith and Jones comprise a two-person economy. Their hourly rates of production are shown in the accompanying table. The opportunity cost of making a calculator for Smith is ______ and for Jones it is ______.

0.10 computers; 0.05 computers

Smith and Jones comprise a two-person economy. Their hourly rates of production are shown in the accompanying table. Suppose Smith and Jones begin by producing 16 computers and 0 calculators per hour. If they wish to produce 14 computers and 40 calculators per hour efficiently, then Smith should spend ______, and Jones should spend ______.

1 hour making computers; 40 minutes making computers and 20 minutes making calculators

If Sasha works for 6 hours she can rent out 9 apartments, and if she works for 7 hours she can rent out 12 apartments. The average benefit from 7 hours of work equals

1.71 apartments

If Aaliyah can produce 3 pairs of shoes per hour, while Bahjat can produce 2, then ______ has a(n) ______ advantage in producing shoes.

Aaliyah; absolute

Which of the following is NOT a reason why there are gains to specialization?

It increases the amount of productive resources in the economy.

Suppose Bianca buys a used a textbook from Sebastian for $55. If Bianca's surplus from this transaction was $10, we can infer that

Bianca's reservation price was $65.

Suppose you bought three tickets to a concert in advance at the University ticket window. At the last minute one friend canceled, so you could use only two of the tickets. You sold the third ticket just outside the entrance to the concert for more than the price you had originally paid. Which transaction occurred in a market?

Both the purchase at the University ticket window and the sale at the concert entrance were market transactions.

Jamal and Alex live together and share household chores. They like to cook some meals ahead of time and eat leftovers. The accompanying table shows the number of rooms they can each clean and the number of meals they can each cook in an hour. If Alex and Jamal work out an efficient arrangement for these two chores, then under that arrangement:

Jamal would do all of the cleaning, while Alex would do all of the cooking.

Your scholarship depends on your maintaining a 3.5 cumulative GPA. Your GPA for last semester was 3.6, which brought your cumulative GPA down. What must be true?

Last semester's grades were lower than your overall GPA.

Ginger and Maryann are lost in the jungle, where the only things to eat are mangoes and fish. Ginger can gather more mangoes per hour than Maryann and can also catch more fish per hour than can Maryann. Therefore

Maryann should specialize in the activity for which she has a comparative advantage.

Suppose the market demand curve is given by Qd = 80 − 10P, and the market supply curve is given by Qs = 10 + 15P. What is the equilibrium price and quantity?

P* = $2.80 and Q* = 52

Suppose quantity demanded is given by Qd = 65 − P, and quantity supplied is given by Qs = 20 + 1.5P. In this case, equilibrium price, P*, and equilibrium quantity, Q*, are

P*= 18, Q*= 47 .

You have noticed that your next-door neighbor, Arya, always works in the garden, and her husband, Suresh, always walks the dog. You conclude that if Suresh and Arya are efficient, then it must be the case that

Suresh has a comparative advantage in walking the dog.

The accompanying figure shows Isabella's daily production possibilities curve for dresses and skirts. The maximum number of skirts that Isabella can make in a day is represented by point

V

You have two options for how to spend the afternoon. You can either go see a movie with your roommate or work as a tutor for the Math Department. From experience, you know that going to see a movie gives you $20 worth of enjoyment, and with your student discount, a movie ticket only costs $12. If you spend the afternoon working as a math tutor, you will get paid $45. On a typical day, you wouldn't be willing to spend the afternoon working as a math tutor for less than $35. Should you go see a movie or work as a math tutor?

You should work as a math tutor.

Suppose that the equilibrium price of T-shirts increases, and the equilibrium quantity of T-shirts decreases. This is best explained by

a decrease in the supply of T-shirts.

If the demand for a good decreases as income decreases, then the good is:

a normal good.

As the differences in opportunity costs between the U.S. and its trading partners increase, the potential gains from specialization and trade ______.

increase

If an increase in income leads to a decrease in the demand for ground beef, then ground beef is a(n)

inferior good.

The Cost-Benefit Principle indicates that an action should be taken if

its extra benefit is greater than or equal to its extra cost.

Jasmine divides her time between studying physics and studying economics. Her production possibilities curve for her final grade in each class is shown in the accompanying figure. If Jasmine moves from Point A to point C, her grade in Physics will go down by ______ her grade in economics.

less than the increase in

Dent 'n' Scratch Used Cars and Trucks employs 3 salespeople. Data for their sales last month are shown in the accmpanying table: Based on last month's data, Joe's opportunity cost of selling a car is ______ than Raj's, and Joe's opportunity cost of selling a car is ______ than Kristen's.

less; greater

If supply increases and demand decreases, the new equilibrium price will be ______ and the new equilibrium quantity will be ______.

lower; uncertain

If a given production combination is efficient, then it must be

on the production possibilities curve.

Production possibilities curves for large economies are generally bow-shaped because

opportunity costs tend to increase with increases in production.

According to the Incentive Principle

people tend to do more of something when its benefits are greater.

The textbook notes that the last time a major league batter hit .400 was in 1941. This is because

specialization by pitchers, infielders, and outfielders has made it harder for batters to hit.

If pencils and paper are complements for most consumers, then if the price of paper increases, you would expect

the equilibrium price and quantity of pencils to fall.

Refer to the accompanying figure. If demand shifts from D1 to D2, and at the same time, supply shifts from S1 to S2, then according to the figure

the equilibrium quantity will increase, and the equilibrium price will increase.

A seller's reservation price is generally equal to

the seller's opportunity cost of producing an additional unit.

The cost-benefit model used by economists is

useful because most people follow it most of the time.

Whether studying the output of the U.S. economy or how many classes a student will take, a unifying concept is that

wants are unlimited and resources are scarce, so trade-offs have to be made.

The Principle of Increasing Opportunity Costs states that

when increasing production, resources with the lowest opportunity costs should be used first.

Refer to the accompanying table. According to the Cost-Benefit Principle, how many units of this activity should be carried out?

3

If Sasha works for 6 hours she can rent out 9 apartments, and if she works for 7 hours she can rent out 12 apartments. The marginal benefit of Sasha's 7th hour of work equals

3 apartments

Buyers and sellers of a particular good make up the

market for the good.

You are the Minister of Trade for a small island country with the following annual PPC: You are negotiating a trade agreement with a neighboring island with the following annual PPC: Both islands specialize exclusively in the product for which they have a comparative advantage. You have agreed to give 350 coconuts to the other island in exchange for 1,300 fish. After the trade, your island has a total of ______ coconuts and ______ fish.

150; 1,300

Refer to the accompanying table. Kate's opportunity cost of making a cake is

2/1 of a pie.

If the supply curve and the demand curve both shift to the left, then the new equilibrium

quantity will be lower, but the direction of the price change is uncertain.