Micro Final Exam

Refer to the accompanying table. Based on their comparative advantage, Kate should specialize in making _______ while Julia should specialize in making _______. Time to make a pie Time to make a cake Kate. 60 minutes 80 minutes Julia. 50 minutes 60 minutes

pies; cakes

If there is an excess supply of sport utility vehicles, then

quantity supplied is greater than quantity demanded.

Suppose Monique is willing to pay up to $16,000 for a used Ford pick-up truck. If she buys one for $16,000, her economic ______ would be ______.

surplus; $0

opportunity cost of making "X"

"X" will be on the top of the equation

You save $10 on gas every week because you take the bus to school. You have class 5 days a week. What is your average benefit per day of taking the bus to school?

$2

Kendall is thinking about going to the movies tonight. A movie ticket costs $15, and she'll have to cancel a $20 dog-sitting job that she would have been willing to do for free. Kendall's opportunity cost of going to the movies is

$35. The opportunity cost of a good is the next best alternative forgone to produce that particular good. Here, The cost of going to the movies is the price of the ticket and the money she would have earned by dog-sitting job instead of going to movies. Total opportunity cost= $15+$20= $35

Suppose Xin and Zander work in a bakery making pies and cakes. Suppose it takes Xin 1.5 hours to make a pie and 1 hour to make a cake, and suppose it takes Zander 2 hours to make a pie and 1.5 hours to make a cake. What is the opportunity cost to Xin of making a cake?

2/3 of a pie.

Dent 'n' Scratch Used Cars and Trucks employs 3 salespeople. Data for their sales last month are shown in the accompanying table: Cars Sold Trucks Sold Kristen 10 5 Joe 9 9 Raj 3 12 Based on last month's data, Raj's opportunity cost of selling a truck is selling

3/12= 1/4 of a car

Refer to the accompanying table. Kate's opportunity cost of making a cake is Time to Make a Pie Time to make a cake Kate 60 minutes 75 minutes Julia 45 minutes 90 minutes

5/4 of a pie.

Refer to the accompanying table. Kate's opportunity cost of making a pie is Time to Make a Pie Time to Make a Cake Kate. 50 minutes 60 minutes Julia 60 minutes 80 minutes

5/6 of a cake

Comparative Advantage

Ability to produce lower opportunity cost than competitors

Absolute Advantage

Ability to product more goods or services than a competitor

Gertie saw a pair of jeans that she was willing to buy for $35. The price tag, though, said they were $29.99. Therefore

Gertie should buy the jeans because the price is less than her reservation price.

The Principle of Increasing Opportunity Costs

Low-Hanging-Fruit Principle: take advantage of your least-cost opportunities first.

Jessica's marginal cost for producing a pitcher of lemonade is $0.25. Therefore, $0.25 is her

Option C is correct -> Reservation price. In this case, marginal cost was the reservation price. Marginal cost as the additional cost to produce an additional unit. Seller's reservation price is known as the minimum price that a seller would pay to take an action.

A decrease in the price of pizza will lead to

an increase in the quantity of pizza demanded.

To understand how the price of a good is determined in a free market, one must account for the desires of

buyers and sellers.

An individual has an absolute advantage in producing pizzas if that individual

can produce more pizzas in a given amount of time than anyone else.

The Scarcity Principle applies to

everyone.

Ashley has a comparative advantage over her classmates in writing term papers if she:

has a lower opportunity cost of writing term papers than her classmates.

Opportunity Cost Formula

what you give up/what you gain

The Principle of Increasing Opportunity Costs states that

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

If a nation can produce more computers per year than any other nation, that nation has a(n) ______ advantage in the production of computers.

Absolute advantage

Refer to the accompanying figure, which shows the market for cups of coffee. What might cause a shift from the original demand curve to the new demand curve?

According to the above figure , the demand for cups of coffee only be increased when an increase in consumer's taste for coffee because as we can see that cups of coffee and coffee are complementary goods that means they can only be used together . So clearly it shows that whenever there is increase in the demand for coffee , it will lead to increase in the demand for cups of coffee as well So clearly the answer should be (d) an increase in consumer's taste for coffee

After the price of Revlon nail polish increased, Jen stopped buying Revlon nail polish and started buying a cheaper brand of nail polish instead. This is called

the substitution effect of a price change.

For two goods, X and Y, to be classified as substitutes, it must be the case that

when the price of X rises, the demand for Y increases.