MICRO FINAL exam 1

If a 16 percent increase in price for a good results in a 7 percent decrease in quantity demanded, the price elasticity of demand is a) 0.44. b)0.07. c)2.29. d)0.16.

a) 0.44. quarter pounder

If muffins and bagels are substitutes, a higher price for bagels would result in a) an increase in the demand for muffins. b)a decrease in the demand for bagels. c)an increase in the demand for bagels. d)a decrease in the demand for muffins.

a) an increase in the demand for muffins.

Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the a) flatter the demand curve will be. b)steeper the demand curve will be. c)further to the right the demand curve will sit. d)closer to the vertical axis the demand curve will sit.

a) flatter the demand curve will be.

Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the a) flatter the demand curve will be. b)steeper the demand curve will be. c)further to the right the demand curve will sit. d)closer to the vertical axis the demand curve will sit.

a) flatter the demand curve will be.

Economists make assumptions to a) simplify the complex world and make it easier to understand. b)develop models when the scientific method cannot be used. c)provide issues for political discussion. d)minimize the number of experiments that yield no useful data.

a) simplify the complex world and make it easier to understand.

Which of the following changes would not shift the supply curve for a good or service? a)A change in the price of the good or service b)A change in expectations about the future price of the good or service c)A change in input prices d)A change in production technology

a)A change in the price of the good or service

For which of the following individuals would the opportunity cost of going to college be highest? a)A promising young mathematician who will command a high salary once she earns her college degree b) A famous, highly paid actor who wants to take time away from show business to finish college and earn a degree c)A student who is the best player on his college basketball team, but who lacks the skills necessary to play professional basketball d)A student with average grades who has never held a job

b) A famous, highly paid actor who wants to take time away from show business to finish college and earn a degree

If scientists discover that steamed milk, which is used to make lattés, prevents heart attacks, what would happen to the equilibrium price and quantity of lattés? a)The equilibrium price would decrease, and the equilibrium quantity would increase. b) Both the equilibrium price and quantity would increase. c)Both the equilibrium price and quantity would decrease. d)The equilibrium price would increase, and the equilibrium quantity would decrease.

b) Both the equilibrium price and quantity would increase.

When we move along a given supply curve, a)technology and price are held constant. b) all nonprice determinants of supply are held constant. c) all determinants of quantity supplied are held constant. d)only price is held constant.

b) all nonprice determinants of supply are held constant.

If the demand for a product increases, then we would expect equilibrium price a)and equilibrium quantity both to decrease. b) and equilibrium quantity both to increase. c)to increase and equilibrium quantity to decrease. d)to decrease and equilibrium quantity to increase.

b) and equilibrium quantity both to increase.

​ Refer to Figure 4-7. At what price would there be an excess supply of 400 units of the good? a)$25 b)$35 c)$40 d)$30

b)35

hich of the following demonstrates the law of demand? a)After Roberto got a raise at work, he bought more pretzels at $1.50 per pretzel than he did before his raise. b)Ashlyn buys more donut holes at $0.25 per donut hole than at $0.50 per donut hole, other things equal. c)Benjamin buys fewer muffins at $0.75 per muffin than at $1 per muffin, other things equal. d)Tiana buys fewer Snickers at $0.60 per candy bar after the price of M&Ms falls to $0.50 per bag.

b)Ashlyn buys more donut holes at $0.25 per donut hole than at $0.50 per donut hole, other things equal.

Which of the following is an example of a normative, as opposed to a positive, statement? a)Following the most recent recession, the economy is recovering at a slower than usual pace. b)The social security system is a good system and it deserves to be preserved as it is c)The elimination of trade restrictions would increase an economy's standard of living. d)A decrease in the minimum wage would decrease unemployment.

b)The social security system is a good system and it deserves to be preserved as it is

Suppose scientists provide evidence that people who drink energy drinks are more likely to have a heart attack than people who do not drink energy drinks. We would expect to see a)a decrease in the supply of energy drinks. b)a decrease in the demand for energy drinks. c)an increase in the demand for energy drinks. d)no change in the demand for energy drinks.

b)a decrease in the demand for energy drinks.

Making rational decisions at the margin means that people a)make those decisions that do not impose a marginal cost. b)compare the marginal costs and marginal benefits of each decision. c)always calculate the dollar costs for each decision. d)evaluate how easily a decision can be reversed if problems arise.

b)compare the marginal costs and marginal benefits of each decision.

The demand for grape-flavored a)Hubba Bubba bubble gum is likely elastic because the market is broadly defined. b)elastic because there are many close substitutes for grape-flavored Hubba Bubba. c)inelastic because there are many close substitutes for grape-flavored Hubba Bubba. d)inelastic because the market is broadly defined.

b)elastic because there are many close substitutes for grape-flavored Hubba Bubba.

When large changes in price lead to no changes in quantity demanded, demand is perfectly a)inelastic, and the demand curve will be horizontal. b)inelastic, and the demand curve will be vertical. c)elastic, and the demand curve will be horizontal. d)elastic, and the demand curve will be vertical.

b)inelastic, and the demand curve will be vertical.

Suppose the price of a bag of frozen chicken nuggets decreases from $6.60 to $6.50 and, as a result, the quantity of bags demanded increases from 600 to 620. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is a)0.02. b)0.03. c) 2.15. d)0.47.

c) 2.15.

Which of the following changes would not shift the demand curve for a good or service? a)A change in the price of a related good or service. b)A change in expectations about the future price of the good or service. c) A change in the price of the good or service. d)A change in income.

c) A change in the price of the good or service.

Which of the following events would cause a movement upward and to the left along the demand curve for olives? a)The price of pickles decreases, and pickles are a substitute for olives. b)Consumer income decreases, and olives are a normal good. c) The price of olives rises. d)The number of people who purchase olives decreases.

c) The price of olives rises.

If the price of walnuts rises, many people would switch from consuming walnuts to consuming cashews. But if the price of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the importance of a)a necessity versus a luxury in determining the price elasticity of demand. b)the definition of a market in determining the price elasticity of demand. c) the availability of close substitutes in determining the price elasticity of demand. d)the time horizon in determining the price elasticity of demand.

c) the availability of close substitutes in determining the price elasticity of demand.

When the government implements programs such as progressive income tax rates, which of the following is likely to occur? a)Equality is decreased and efficiency is increased. b)Equality is decreased and efficiency is decreased. c)Equality is increased and efficiency is decreased. d)Equality is increased and efficiency is increased

c)Equality is increased and efficiency is decreased.

Refer to Figure 4-10. Which of the following movements would illustrate the effect of an increase in the price of Kevlar, a material used to make bullet-proof vests, on the market for bullet-proof vests? a)Point C to Point B b)Point C to Point D c)Point A to Point B d)Point A to Point D

c)Point A to Point B

Which of the following would shift the supply of umbrellas to the left? a)Rainfall is expected to be unusually low in the coming year. b)The price of an umbrella increases by $12. c)The number of firms making umbrellas decreases. d)The cost of the fabric used to make umbrellas decreases.

c)The number of firms making umbrellas decreases.

When the price of candy bars is $1.20, the quantity demanded is 490 per day. When the price falls to $1.00, the quantity demanded increases to 500. Given this information and using the midpoint method, we know that the demand for candy bars is a)perfectly inelastic. b)unit elastic. c)inelastic. d)elastic

c)inelastic.

Refer to Figure 5-3. The maximum value of total revenue corresponds to a price of a)$20. b)$100. c)$70. d) $50.

d) 50

Refer to Figure 4-1. The movement from point A to point B on the graph is caused by a)a decrease in the price of a substitute good. b)an increase in income. c)an increase in price. d) a decrease in price.

d) a decrease in price.

You are considering staying in college another semester so that you can complete a major in finance. In deciding whether or not to stay you should a)compare the total cost of your education to the total benefits of your education. b)compare the total benefits of your education to the cost of staying one more semester. c)compare the total cost of your education to the benefits of staying one more semester. d) compare the cost of staying one more semester to the benefits of staying one more semester.

d) compare the cost of staying one more semester to the benefits of staying one more semester.

The property of society getting the most it can from its scarce resources is called a)externality b)equality c)productivity d)efficiency

d) efficiency

Refer to Figure 5-1. Between point A and point B on the graph, demand is a)perfectly elastic. b)inelastic. c)unit elastic. d) elastic, but not perfectly elastic.

d) elastic, but not perfectly elastic.

Soup is an inferior good if the demand a)curve for soup slopes upward. b)for soup rises when the price of soup falls. c)for soup falls when the price of a substitute for soup rises. d) for soup falls when income rises.

d) for soup falls when income rises.

In the early 19th century, the Russian government sent doctors to southern Russian villages to provide assistance during a cholera epidemic. The villagers noticed that wherever doctors appeared, people died. Therefore, many doctors were chased away from villages, and some were even killed. This reaction to the correlation between doctors and deaths is most likely a problem of A)omitted variables b) government propaganda c) bias d) reverse causality

d) reverse causality

For a good that is a luxury, demand a)tends to be inelastic. b)cannot be represented by a demand curve in the usual way. c)has unit elasticity. d) tends to be elastic

d) tends to be elastic

If something happens to alter the quantity supplied at any given price, then a)the supply curve becomes steeper. b)the supply curve becomes flatter. c) we move along the supply curve. d) the supply curve shifts.

d) the supply curve shifts.

Suppose that demand for a good increases and, at the same time, supply of the good decreases. What would happen in the market for the good? a)Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous. b)Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. c)Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous. d)Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.

d)Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.

Which of the following is not a determinant of the price elasticity of demand for a good? a)The time horizon b)The definition of the market for the good c)Whether a good is a necessity or a luxury d)The flatness of the supply curve for the good

d)The flatness of the supply curve for the good

Demand is said to be price elastic if a)buyers do not respond much to changes in the price of the good. b)the price of the good responds substantially to changes in demand. c)demand shifts substantially when income or the expected future price of the good changes. d)buyers respond substantially to changes in the price of the good.

d)buyers respond substantially to changes in the price of the good.

Economists sometimes give conflicting advice because a)economics is more of a belief system than a science. b)graduate students in economics are encouraged to argue with each other. c)economists acting as scientists do not like to agree with economists acting as policy advisers. d)economists have different values and scientific judgments.

d)economists have different values and scientific judgments.

Refer to Figure 5-5. If the price decreased from $36 to $12, total revenue would a)decrease by $4,800, and demand is inelastic between points X and Z. b)decrease by $7,200, and demand is inelastic between points X and Z. c)increase by $7,200, and demand is elastic between points X and Z. d)increase by $4,800, and demand is elastic between points X and Z.

d)increase by $4,800, and demand is elastic between points X and Z.

When recommending specific policies to undertake, economists make a)positive statements. b)descriptive statements. c)claims about how the world is. d)normative statements.

d)normative statements.