Micro Test 1 Homework Q&A

Price falls

A blizzard had stopped shipments of gasoline to the northeast United States. Now the snow has melted, and gasoline shipments resume. What does this (i.e., the resumption of shipments) do to the price of gasoline in the northeast united States?

C

A man goes on vacation to a nation of cannibals (don't ask why; it's just the setup of the joke). One day he is walking through the city and he sees a butcher shop. Signs in the window say: "Psychologist brains, $20 per pound" "Engineer brains, $50 per pound" "Economist brains, $100 per pound" The tourist is surprised, and says to the butcher "Wow, I had no idea economist brains were so popular. Is it because they think economists are so smart, and eating them makes the diner smarter?" The butcher scoffs and says "Are you kidding? Do you know how many economists it takes to get a pound of brains?" This joke makes sense and is funny because... A. The demand for economist brains is high, making the price high. B. The supply of economist brains is high, making the price high. C. The supply of economists brains is very low (or limited), making the price high. D. The demand for economist brains is low, making the price high.

An increase in supply.

A new robotic sewing machine allows textile companies to produce clothing more quickly and cheaply, and with fewer mistakes, than human-operated sewing machines.

Price rises.

Acai is revealed by new research to be a "superfruit", and it will cure cancer, eczema, bigotry, and boredom. What does this new research do to the price of acai?

An increase in quantity supplied

After getting a raise from $10 per hour to $12 per hour, Jamia persuades her boss to let her work more hours.

A

Based on your answers to the previous two questions, which of the following is correct? A. Florida has a comparative advantage in producing oranges, and Hawaii has a comparative advantage in producing pineapples. B. Florida has a comparative advantage in producing pineapples, and Hawaii has a comparative advantage in producing oranges. C. Florida has a comparative advantage in producing both oranges and pineapples. D. Hawaii has a comparative advantage in producing both oranges and pineapples. E. Hawaii has an absolute advantage in producing both oranges and pineapples

A

Consumer Surplus is... A. The difference between what a consumer is willing to pay, and what the consumer actually pays (the price). B. The area beneath the demand curve and above the price. C. A measure of the pleasure consumers get from consuming goods and services, net of the cost of obtaining those goods and services. D. All of the above. E. None of the above.

A decrease in supply.

Due to a programming error, millions of computer parts must be returned to their manufacturers to have their firmware replaced. This will take some time, and make computers and computer parts more scarce.

0.5

For Hawaii, what is the opportunity cost of producing a pineapple? That is, how many millions of tons of oranges does Hawaii give up to produce a thousand tons of pineapple? (Don't worry too much about units here; a unit of oranges is a million tons, and a unit of pineapples is a thousand tons). You will have to enter your answer as a decimal, like 1.0, or 1.5, or 0.7, or else Blackboard won't like it.

1.25

How many oranges would be traded for a pineapple? To put it another way, the terms of trade would be 1 pineapple for __ oranges. What goes in the blank? There is a range of acceptable answers.

D

Producer Surplus is... A. The difference between the price of a good, and the marginal cost to the firm of producing that good. B. The difference between what a firm receives for selling a good, and the minimum price at which it would have been willing to sell that good. C. The difference between what a firm receives for selling a good, and the opportunity cost of producing that good. D. The difference between what a firm receives for selling a good, and the value of the resources that must be used to produce that good. E. The benefit to producers from producing and selling a good. F. All of the above. G. None of the above.

D

Suppose the arc own-price elasticity of demand for gasoline is 0.15. Which of the following is correct? A. If the price of gasoline rises by 1%, the quantity demanded will rise by 0.15%. B. If the quantity of gasoline rises by 1%, the price will fall by 0.15% C. If the price of gasoline rises by 1%, the quantity demanded will fall by 15%. D. If the price of gasoline rises by 1%, the quantity demanded will fall by 0.15%.

A

Suppose you are willing to pay up to $70 for a new pair of shoes. You find a pair you like for $40 and buy them. The store that sold you those shoes would have been willing to sell them for as little as $35. Which of the following is correct? A. You are $30 better off, and the store owner is $5 better off. B. You are $5 better off, and the store owner is $30 better off. C. You are $35 better off, and the store owner is not better off at all. D. You are $40 worse off, and the store owner is $40 better off.

D

The Law of Demand says that if the price of strawberries falls from $4 per pound to $3 per pound, the quantity of strawberries purchased by consumers will... A. rise by 25%. B. stay the same. C. fall. D. rise.

A

The cross-price elasticity of demand for good X is -0.79, relative to good Y's price. How are goods X and Y related? A. They are complements. B. They are both normal goods. C. Both goods violate the law of supply. D. They are substitutes.

A C D F G I

The graph below depicts a market with a binding price control. Select each of the answers below that is correct. A. A+B+C is total surplus before the price control is imposed (i.e., without the price control). B. B is the increase in total surplus resulting from the price control. C. A is consumer surplus. D. E is a price floor. E. A is producer surplus. F. B is deadweight loss, though it can be bigger due to resources wasted to produce surplus goods. G. C is producer surplus. H. F is a shortage of goods. I. F is a surplus of goods. J. E is a price ceiling.

D

The graph below depicts a market with a binding price control. Which of the following correctly labels A, B, C, and E? A. A is producer surplus. B is deadweight loss. C is consumer surplus. E is a price ceiling. B. A is producer surplus. B is deadweight loss. C is consumer surplus. E is a price floor. C. A is consumer surplus. B is deadweight loss. C is producer surplus. E is a price floor. D. A is maximum consumer surplus (though it could be smaller because consumers must wait in line or incur other costs to purchase the good). B is deadweight loss. C is producer surplus. E is a price ceiling.

C

The market for razor blades is in equilibrium. Then, two things happen at the same time. First, a new company, Barry's Razors, enters the market with its precision German-made razors (heavily advertised on podcasts, because that's where all the hip kids' ears are these days). Second, a new medical cream is invented that will prevent the growth of new hair in whatever area to which it is applied (it is not permanent, and has no side effects, except that it makes the user strongly dislike swimming, inflicting medical irony on professional swimmers). What is the effect of these two things (a new razor producer enters the market, and a new drug can prevent the regrowth of hair) in the market for razors? A. Price rises, quantity falls. B. Price falls, quantity falls. C. Price falls, quantity is indeterminate. D. Price is indeterminate, quantity falls.

1

The price of Gala apples rises from $5 per pound to $10 per pound. As a result, the quantity demanded falls from 10 million pounds to 5 million pounds. What is the Arc Own-Price Elasticity of Demand?

A decrease in quantity supplied

The price of computer processors falls, and AMD, producer of computer processors and graphics processing units, reduces its output.

The price does not change.

The price of french fries rises. What does this do to the price of hamburgers?

-1.5

The price of peanut butter rises from $1 per jar to $2 per jar. The quantity of grape jelly consumed falls from 6 million jars per year to 2 million jars. What is the arc cross-price elasticity of demand?

No change in supply or quantity supplied.

The price of steel stays at $135 per ton.

D

The price of tomatoes is in equilibrium at $6 per pound. If the government sets a price ceiling at $2 per pound, which of the following will occur? A. A surplus of 8 units. B. A surplus of 10 units. C. A shortage of 0 units. D. A shortage of 10 units.

B

The price of tomatoes is in equilibrium at $6 per pound. If the government sets a price ceiling at $4 per pound, which of the following will occur? (Refer to the graph below.) A. A shortage of 10 units. B. A shortage of 5 units. C. A surplus of 5 units. D. A shortage of 0 units.

B

The price of tomatoes is in equilibrium at $6 per pound. If the government sets a price floor at $8 per pound, which of the following will occur? (Refer to the graph below.) A. A shortage of 0 units. B. A surplus of 5 units. C. A surplus of 9 units. D. A shortage of 5 units.

The price does not change.

The price of wheat is $5.00 per bushel. Then....nothing happens.

Price rises.

The price synthetic rubber rises. What does this do to the price of tires?

A

The surgeon general announces that wearing a hat significantly reduces your chance of getting skin cancer. Also, hats look cool (provided you choose the right kind) and you want to look cool, right? As a result, many more people buy and wear hats. What happens in the market for hats? A. Demand shifts to the right, price rises, quantity rises. B. Demand shifts to the right, price falls, quantity falls. C. Supply shifts to the right, price falls, quantity falls. D. Supply shifts to the left, price rises, quantity falls. E. The higher price of hats causes quantity demanded to fall.

C

There is a story that is told, often with Winston Churchill as the man asking questions, and sometimes with some other high-society figure. It's almost certainly false (Links to an external site.), but it goes like this: Winston Churchill goes to a party, and asks an attractive, high-status woman "Madam, would you sleep with me for five million pounds?" The woman says "Prime Minister, I'm shocked! Well, I suppose I would." Churchill then asks "Would you sleep with me for five pounds?" The woman responds "Why, what kind of woman do you think I am?" Churchill says "We have already determined that, madam; now we are merely haggling over the price." This woman's behavior obeys the... A. Law of Demand. B. Law of Unintended Consequences. C. Law of Supply. D. Law of Comparative Advantage.

B C

This is a multiple answer question. That means there may be more than one correct answer (or maybe not); you must select all the best answers. Which of the following describes a movement along the demand curve, and not a shift of the demand curve? A. Because people hear that High Fructose Corn Syrup is unhealthy, they buy less of it, and as a result, food processing businesses choose to buy less corn at every price. B. The price of corn falls, and as a result, consumers buy more corn. C. The price of MicroSD memory cards rises, and as a result, consumers buy fewer MicroSD memory cards. D. People buy fewer printed books due to a drop in the price of e-books. E. A new, faster digital memory card format is released, and as a result, people buy fewer MicroSD cards.

2.0

Use the following graph for the next four questions. It depicts the Production Possibilities Frontiers for Florida and Hawaii. Suppose both states can only produce two goods, oranges and pineapples. For Florida, what is the opportunity cost of producing a unit of pineapples? That is, how many millions of tons oranges does Florida give up to produce a thousand tons of pineapples? (Don't worry too much about units here; a unit of oranges is a million tons, and a unit of pineapples is a thousand tons). You will have to enter your answer as a decimal, such as 1.5, or 5.0, or 0.8, or Canvas won't like it.

C

Which answer correctly labels the areas on the Supply and Demand graph below? A. A is producer surplus, B represents the costs of producing the equilibrium quantity of output, and C is consumer surplus B. A is producer surplus, B is consumer surplus, and C represents the costs of producing the equilibrium quantity of output. C. A is consumer surplus, B is producer surplus, and C represents the costs of producing the equilibrium quantity of output. D. A is revenue, B is cost, and C is profit.

A B F

Which of the following is an example of a binding price control? This is a "multiple answer" question, so there may be more than one correct answer. A. The price of cotton is $10 per bale. The government imposes a price floor of $15 per bale. B. The price of mobile phone data is around $15 per gigabyte per month. The government imposes a price ceiling of $5 per month. C. The price of wheat is $20 per bushel. The government imposes a price floor of $5 per bushel. D. The price of gasoline is $2 per gallon. The government imposes a price ceiling of $4 per gallon. E. The price of steel is $300 per ton. The government imposes a price floor of $200 per ton. F. The price of bananas is $2 per pound. The government imposes a price ceiling at $1 per pound.

A

Which of the following statements is correct? A. In equilibrium, Total Surplus is maximized. B. Total Surplus is Consumer Surplus minus Producer Surplus. C. Total Surplus is Producer Surplus minus Consumer Surplus. D. Total Surplus is maximized when the price is zero. E. When Total Surplus is maximized, this is inefficient. F. All of these statements are correct G. None of these statements are correct.

2

You take a new job, raising your income from $50,000 per year to $70,000 per year. As a result, you decide to take two vacations per year, instead of one. What is your Arc Income Elasticity of Demand?

C

Your 3rd grade lunch buddy is willing to take a container of apple sauce from your lunch box in exchange for something in his or her lunch box. Your options are: Food:worth 1 orange:1 applesauce 1 Jello:1.5 applesauce 1 cookie: 2 applesauce Which should you choose to maximize your utility? A. the orange B. the jello C. the cookie D. None of the above

1.25

Your boss offers you a raise from $10 per hour to $15 per hour. As a result, you decide to drop a class and work 25 hours per work, rather than the 15 hours per week you were previously working. What is your Arc Price Elasticity of Supply?

C

Your income elasticity of demand for flip-flops is -0.1. What sort of good are flip-flops for you? A. Flip-flops are a complement. B. Flip-flops are a substitute. C. Flip-flops are an inferior good. D. Flip-flops are a normal good.