Micro Review

True or False: A Search Time Cost is the implicit price consumers pay for a good or service once a price ceiling has been set

False

True or False: A person who as an absolute advantage in the production of all goods will also have a comparative advantage in the production of all goods

False

True or False: As a consumer increases her consumption of some good/service, her willingness to pay for each additional unit increases

False

True or False: Comparative advantage is created due to lower explicit costs

False

True or False: Consumer surplus is the difference between the minimum amount a consumer is willing to pay, and what he or she actually pays

False

True or False: Labor and human kapital are examples of public goods; that is, G/S that are freely acquired and can be used by multiple people at the same time

False

True or False: Opportunity costs are the explicit, physical costs of a productive process

False

True or False: Points outside the production possibilities frontier are attainable but inefficient

False

True or False: Rational people act only when the marginal benefit of the action exceeds the marginal cost

False

True or False: The market for any good or service is the physical location of where exchange happens

False

True or False: The wage rate paid by Walkman (portable cassette players) producers falls and at the same time the price of raw materials used in the production of Walkman rises. Therefore, the supply curve of Walkmans will surely shift leftward

False

True or False: Under a price ceiling, the market price will drop due to competition amongst consumers

False

True or False: When the marginal benefit of producing a one of a specific good is greater than the marginal cost, the producer needs to increase the level of production

False

True or False: A dead weight loss is the loss in consumer surplus and producer surplus from an inefficient level of production

True

True or False: Economics is the social science that studies how individuals, groups, firms, governments and entire societies deal with notion of scarcity

True

True or False: If an agent is operating on its production possibilities curve, it must produce less of one good if it produces more of another

True

True or False: The Price Elasticity of Demand is ALWAYS negative

True

True or False: The price of a good will fall if there is a surplus at the current price

True

Suppose that you are willing to pay $20 to see a movie on Saturday night. A ticket costs $10, and the next-best alternative use of your time would be to go to dinner with a friend. The cost of the dinner is $20 and you value the experience of having dinner with your friend at $60. The opportunity cost of seeing the movie is equal to: a) $50 b) $30 c) $20 d) $10

a) $50

Consider the market for capes (admit it: you have been waiting for such a fashion statement to comeback). The current market price for your standard black cape is $5. Two consumers, Bruce and Dick, are willing to pay $7.25 and $8, respectively, for a cape. Two cape manufactures, O.C. Cobblepot Industries and Dent Enterprises, are willing to sell a black cape for a minimum price of $4 and $4.15, respectively. What is the social surplus? a) $7.10 b) $5.25 c) $1.85 d) $23.40 e) 4.50

a) $7.10

Tennis balls and tennis rackets are commonly used together. A decrease in the price of tennis rackets will result in: a) An increase in the demand for tennis balls b) A decrease in the demand for tennis balls c) An increase in the demand for tennis rackets d) A decrease in the demand for tennis rackets

a) An increase in the demand for tennis balls

An old lagoon front property was recently priced at $200, 000. Seeing the property, the Creature from the Black Lagoon thought, "It's nice, but if I have to pay more than $195, 000 for this property, then I would rather do without it". After negotiations, the Creature from the Black Lagoon bought the property for $192, 500. His CONSUMER SURPLUS was equal to a) $7,500 b) $2,500 c) $5,000 d) can't give a decisive answer with the limited information given

b) $2,500

Which of the following is not held constant along a given supply curve for a good? a) The cost of factors of production b) Price c) Technology d) Taxes

b) Price

You decide to take a vacation and the trip costs you $2,000. While you are on vacation, you do not report to work where you could have earned $750. The opportunity cost of the vacation is a) $2,750 b) $2,000 c) $750 d) $1,250

c) $750

At one point along a PPC, 50 tons of coffee and 100 tons of bananas are produced. At another point along the same PPC, 30 tons of coffee and 140 tons of bananas are produced. The opportunity cost of a ton of coffee between these points is a) 7/5 of a ton of bananas b) 5/7 of a ton of bananas c) 2 tons of bananas d) 1/2 of a ton of bananas.

c) 2 tons of bananas

Which of the following would not cause the market supply of cell phones to change? a) Telecommunications are deregulated, and anyone can produce and sell cell phones b) A cheaper technology for producing cell phones is developed c) A reduction in the demand for cell phones causes the price to fall d) Taxes levied on cell phone production are reduced

c) A reduction in the demand for cell phones causes the price to fall

Suppose that the supply curve within the textbook market shifts to the left. Which of the following is a possible reasoning for the shift? a) Printing technology advances b) A decrease in the number of textbook consumers c) An increase in printing costs d) Textbook prices are expected to increase in the future e) A decrease in excise taxes on textbook suppliers

c) An increase in printing costs

An individual producer's supply curve for a good is derived from: a) The preferences of consumers of that good b) The income of consumers of that good c) The marginal cost of producing that good d) All of the above

c) The marginal cost of producing that good

When a parent tells you NOT to study economics because its a pointless discipline, why is he or she incorrect? a) The government continues to play a role in our daily lives b) People have the freedom do whatever they want, and economists have nothing to add to their decision-making process c) There are not enough resources to produce all the goods and services that we wanted and needed d) Economics has nothing to offer in terms of understanding the stock market e) Economics has nothing to offer in terms of understanding government programs like Social Security

c) There are not enough resources to produce all the goods and services that we wanted and needed

The basic goal of economies is a) controlling the effects of government actions b) determining how to distribute all that is produced in an economy c) addressing the scarcity problem created because the population's desire for goods exceeds the ability to produce them d) matching limited resources to people's limited wants and needs e) controlling tastes and wishes so that there will be enough resources to produce all the goods and services that people want

c) addressing the scarcity problem created because the population's desire for goods exceeds the ability to produce them

Economists believe that optimal decisions are made up to the point where a) marginal benefit is zero b) marginal benefit is greater than marginal cost c) marginal benefit is equal to marginal cost d) marginal cost is greater than marginal benefit e) marginal cost is zero

c) marginal benefit is equal to marginal cost

A rational person does not act unless a) the action is ethical b) the action produces marginal costs that exceed marginal benefits c) the action produces marginal benefits that exceed marginal costs d) the action makes money for the person e) none of the above

c) the action produces marginal benefits that exceed marginal costs

The price of a ticket to a '76ers (the once great Philadelphia basketball team) game is set at $25. At about 5 minutes before the game is about to start, there are still 10, 000 tickets left unsold. It follows that a) the equilibrium price of tickets to the '76ers game is $25 b) the equilibrium price of tickets to the '76ers game is more than $25 c) the equilibrium price of tickets to the '76ers game is less than $25 d) the quantity of tickets demanded is equal to the quantity supplied at the $25 price

c) the equilibrium price of tickets to the '76ers game is less than $25

Consider the market for private tutors for Econ 101, where the current equilibrium price and quantity (in hours of tutoring) are $40 and 500 hours, respectively. If the producer price threshold is at $15 per hour, which of the following statements would be true? a) If the government imposes a price ceiling of $30, there would be a shortage of tutor hours in the market b) There would be no effect on the equilibrium price and quantity if the government imposes a price ceiling less than $40 c) If the government imposes a price ceiling of $50, there would be a surplus of tutor hours in the market d) All of the above are true

a) If the government imposes a price ceiling of $30, there would be a shortage of tutor hours in the market

At an income of $100, George buys 10 cans of diet Pepsi. At an income of $120, George buys 12 cans of diet Pepsi. What economic classification describes George's demand for diet Pepsi? a) It is a normal good b) It is an inferior good c) It is a luxury good d) It is a superior good

a) It is a normal good

Sam's production possibilities frontier has good A on the horizontal axis and good B on the vertical axis. If Sam is producing at a point inside his frontier, then he a) can increase production of both goods with no increase in resources b) values good A more than good B c) values good B more than good A d) is fully using all his resources

a) can increase production of both goods with no increase in resources

If price rises and total revenue rises, then the price elasticity of demand over that range is a) inelastic b) elastic c) unit-elastic d) equal to 1

a) inelastic

Johnny Dio is a hitman (read: he assassinates people for money) for an organized crime syndicate. Johnny purchases a gun in order to perform the service of assassination; hence, the gun for Johnny is a/an: a) kapital good or service b) consumer/consumption good or service c) export good or service d) government good or service

a) kapital good or service

Which would be an example of a government price ceiling? a) limits on interest rates charged by credit card companies b) subsidies for apartment rent in major cities c) minimum-wage laws for unskilled workers d) price supports for agricultural products

a) limits on interest rates charged by credit card companies

Assume that the city of Jacksonville were to increase the city tax on groceries by 1% and all the tax were passed along the customers. As a result, some customers begin doing their grocery shopping in Springfield and 3% less groceries are sold in the city of Jacksonville. Given this information, demand for groceries would be considered to be: a) relatively elastic b) relatively inelastic c) perfectly elastic d) perfectly inelastic

a) relatively elastic

The policy of subsidizing domestic production is said to be preferred by economists over the use of tariffs and/or quotas because a) social surplus is greater with domestic subsidies than under free trade b) there exists only a small amount of dead weight loss c) imports increase more under subsidization than under tariffs and quotas d) All of the above

a) social surplus is greater with domestic subsidies than under free trade

If you pay a price exactly equal to your willingness to pay, then a) your consumer surplus is $0 b) your willingness to pay is less than your consumer surplus c) your consumer surplus is negative d) you place little value on the good

a) your consumer surplus is $0

Harley Quinn Products, Inc. designs and sells croquet mallets. The company is willing to sell a croquet mallet for as little as $45 each. Its main competitor is Joker Outriggers, which is willing to sell the same croquet mallet for a minimum of $40. The current market price of that type of croquet mallet is $57. What is the TOTAL producer surplus for the two firms? a) $95 b) $12 c) $17 d) $29 e) $5

d) $29

Martin is selling his guitar. The minimum amount he needs to be paid for the guitar is $15,500. He finds a buyer for who is willing to pay $22,400, but this buyer insists that Martin pays for delivery of the guitar. The cost of delivery is $700. Martin's producer surplus from selling his guitar is equal to a) $14,800 b) $7,600 c) $6,900 d) $6,200

d) $6,200

Market supply and market demand curves are similar in that both: a) Involve the willingness and ability of a supplier to sell a product or service b) Involve the willingness and ability of a buyer to buy a product or service c) Have price on the x-axis and quantity on the y-axis d) Can be derived by adding horizontally all the curves of the individuals in the market

d) Can be derived by adding horizontally all the curves of the individuals in the market

Jean-Luc loves his earl grey tea and his nautical books. If the price of earl grey tea increases by 25% and Jean-Luc decreases his consumption of nautical books by 10%, then the two goods are a) substitutes b) inferior c) normal d) complements

d) complements

In the goods market (recall the circular-flow chart) a) and the factors market, firms sell to households b) households sell to firms. In factor markets firms sell to households c) and in factor markets, households sell to firms d) firms sell to households. In factor markets, households sell to firms

d) firms sell to households. In factor markets, households sell to firms.

The big difference between a tariff and a quota is that a tariff a) maximizes the possible consumer surplus b) decreases Dead Weight Loss c) supports foreign production and increases imports d) increases domestic government revenue

d) increases domestic government revenue

Overtime worked by a JCPenney associate is considered ______ and earns ________. a) entrepreneurship; profit b) labor; profit c) human capital; interest d) labor; wages

d) labor; wages

For any quantity, the supply curve shows the minimum supply price of the product. Why? For any quantity, a) the supply curve shows the maximum price suppliers must receive in order to produce the last unit of the good b) the increasing slope of the supply curve reflects the increase in suppliers' fixed costs c) the increasing slope of the supply curve reflects the decrease in suppliers' fixed costs d) the supply curve shows the minimum price suppliers must receive in order to produce the last unit of the good

d) the supply curve shows the minimum price suppliers must receive in order to produce the last unit of the good

At a price of $50.00 per doll, most stores cannot keep the Miraculous Ladybug dolls in stock because consumers buy them all as soon as shipments arrive. This implies that there a) is an excess demand for Ladybug dolls, and the price must fall for equilibrium to be reached b) is an excess supply of Ladybug dolls, and the price must fall for equilibrium to be reached c) will be a downward shift in the demand curve for Ladybug dolls d) will be an upward shift in the supply curve for Ladybug dolls e) is an excess demand for Ladybug dolls, and the price must rise for equilibrium to be reached

e) is an excess demand for Ladybug dolls, and the price must rise for equilibrium to be reached

The government has been considering doing away with the minting of pennies because they are rarely used for purchases. How would an economist best explain this? a) More people are using credit cards and debit cards, so they are not in the habit of using monetary change b) Prices have increased over time, and the opportunity cost of carrying around large quantities of pennies has become too large c) Prices have increased over time, and it would take far too many pennies to buy anything of value d) Prices have increased over times, and the opportunity cost of carrying around pennies has fallen e) People who use pennies probably aren't spending enough money; removing the penny will force people to spend more

b) Prices have increased over time, and the opportunity cost of carrying around large quantities of pennies has become too large

An externality is defined as a) an additional cost imposed by the government on producers b) a cost or benefit that arises from production and falls on someone other than the producer, or a cost or benefit that arises from consumption and falls on someone other than the consumer c) an additional gain received by consumers from decisions made by the government d) the additional amount consumers have to pay to consume an additional amount of a good or service

b) a cost or benefit that arises from production and falls on someone other than the producer, or a cost or benefit that arises from consumption and falls on someone other than the consumer

Which one of the following goods exhibits nonexcludability? a) cable TV b) air-traffic control c) rides on the U.S. Space Shuttle d) the Internet e) a cheeseburger

b) air-traffic control

All of the following except one would increase the amount of a Federation-issued Phaser that buyers would like to purchase. Which is the exception? a) an increase in buyers' incomes b) an increased price in the cost of steel; a component in Phaser production c) increased prices of a Romulan Disruptor, a substitute for a Phaser d) an expected future increase in the price of a Phaser e) an increase in the total number of Federation employees that are required to purchase a Phaser

b) an increased price in the cost of steel; a component in Phaser production

Suppose you are in charge of pricing at Best Buy and you wish to increase revenues from your eMachines line. Walmart's chief economist informs you that the price elasticity of demand for eMachines is estimated to be E = 1.17. Based on this information, you would a) increase the price of an eMachine b) decrease the price of an eMachine c) not change the price of an eMachine d) do nothing because there is not enough information to make a rational decision

b) decrease the price of an eMachine

Cable television and air-traffic control are similar to each other because both of them are a) nonexcludable b) nonrivalrous c) excludable d) rivalrous e) private services

b) nonrivalrous

A public good is a good whose benefits are a) diminished as it is consumed and whose benefits cannot be withheld from anyone b) not diminished as it is consumed and whose benefits cannot be withheld from anyone c) not diminished as it is consumed and whose benefits can be withheld from anyone d) concentrated among a select few

b) not diminished as it is consumed and whose benefits cannot be withheld from anyone

The local Taco truck (Hooray for street meat!) charges the same price for everything on its menu: $3 will buy a taco, a burrito, or nachos. You buy the taco and think "if I had not purchased the taco, I would have purchased the burrito". The opportunity cost of the taco is: a) the $3 you paid for the taco b) the burrito c) the $3 you paid for the taco and the burrito d) the $3, the burrito, and the nachos

b) the burrito

A production possibilities frontier does NOT illustrate a) attainable and unattainable points b) the exchange of one good or service for another c) the limits on production imposed by our limited resources and technology d) opportunity cost

b) the exchange of one good or service for another

If the demand for diamonds is considered inelastic, then a) the percent change in the price of diamonds is greater than the percent change in the quantity demanded of a complement, like gold b) the percent change in price of diamonds is greater than the percent change in the quantity demanded of diamonds c) the price elasticity of demand for diamonds is greater than 1 d) both (b) and (c)

b) the percent change in price of diamonds is greater than the percent change in the quantity demanded of diamonds