Microecon ch.4-8 assignment

Chin purchases five protein bars at a price of $3 each. The marginal benefit he receives from each bar is $5 for the first bar, $4.50 for the second bar, $4 for the third bar, $3.50 for the fourth bar, and $3 for the fifth bar. The marginal cost of producing the bars is $2 each. What is Chin's consumer surplus on the fifth bar?

$0

If income rises by 20% and the quantity demanded of an item rises by 10%, the income elasticity of demand for this item is

0.5.

Which of the following is a positive economic statement?

If the government raises taxes, people will have less income available for purchases and saving

If Mary can bake a cake at a lower opportunity cost than Sarah can, then

Mary has a comparative advantage in baking cakes.

Mary loves avocados and must consume avocados every week, regardless of the price. Which of the following must be true?

Mary has an inelastic demand for avocados.

If Spain is said to have an absolute advantage over Mexico in the production of natural gas, this means that, given the same resources

Spain can produce more natural gas than Mexico.

Which of the following statements is based on normative analysis?

We should protect the environment.

Suppose that you have a pumpkin stall at a farmer's market, and the Halloween season arrives. You know that your customers will want to buy many pumpkins to decorate their houses and make pumpkin pies. Which of the following is a likely result of this scenario?

You can charge a higher price per pumpkin

A subsidy is a

a government payment designed to encourage particular purchases or productive activities

A seller at a farmer's market wants $10 for a bag of 10 apples. You think his price is too high, so you counter with an offer of $6 for the bag. The seller then offers you a much smaller bag of five apples for $6. You bargain again, and the seller lets you buy the 10 apples for $8. This scenario is an example of

a market in action

When the absolute value of the price elasticity of demand is greater than 1, demand is:

elastic

A quantity regulation is a

minimum or maximum quantity that can be sold

Suppose the price of gasoline rises. As time passes, people adjust to the higher price by searching for the alternatives. The demand for gasoline becomes

more elastic

Analysis that describes what would happen if various actions were taken is _____ analysis.

positive

Which principle helps buyers and sellers make decisions about whether to trade?

the cost-benefit principle

The price of product A is cut by 30%. As a result, the quantity demanded of product B rises by 40%. The cross-price elasticity of demand between product A and product B is _____, and they are _____.

-1.33; complements

The United Kingdom plans to end the use of gas-powered and diesel-powered cars by the year 2040. At the same time, car manufacturers, such as General Motors and Nissan, are increasing the number of electric car models they produce. Based on this information, which of the following statements is/are correct?

(i) If the supply of new electric cars is greater than the demand for new electric cars, then the price of electric cars will fall in the future. (ii) The demand for gasoline will fall in the future. (iii) The demand for electricity will rise in the future.

A tax on buyers causes which of the following?

(i) a leftward shift of the demand curve (ii) a decrease in quantity sold (iii) an increase in the price buyers pay

A tax on sellers causes which of the following?

(i) a leftward shift of the supply curve (ii) a decrease in quantity sold (iii) an increase in the price buyers pay

Chin purchases five protein bars at a price of $3 each. The marginal benefit he receives from each bar is $5 for the first bar, $4.50 for the second bar, $4 for the third bar, $3.50 for the fourth bar, and $3 for the fifth bar. The marginal cost of producing the bars is $2.50 each. What is Chin's total consumer surplus from the five bars that he purchased

$5

Portia produces and sells headbands. Her marginal cost for one headband is $6, and her average cost is $4. She gains producer surplus only when she sells headbands at a price above:

$6

The price of milk at the local grocery store rises by 25%, and the quantity of milk demanded falls by 10%. The absolute value of the price elasticity of demand for milk is _____, and demand is _____.

0.4; inelastic

The price of milk at the local grocery store is cut by 15%, and the quantity of milk demanded increases by 10% in response. What is the absolute value of the price elasticity of demand for milk?

0.67

The price of a dozen eggs falls from $3 to $2.70. In response to this price change, the quantity supplied of eggs falls from 100,000 dozen eggs to 75,000 dozen eggs. What is the price elasticity of supply for eggs?

2.7

The price of product C rises by 10%. As a result, the quantity demanded of product D rises by 20%. The cross-price elasticity of demand between product C and product D is _____, and they are _____.

2; substitutes

A binding price floor in a market is removed. Which of the following is likely to occur as a result?

The market price will fall

You eat M&Ms every day. When you go to the store to buy some, you find that M&Ms are more expensive than they were last month. Which of the following could explain why M&Ms are more expensive?

The supply of cacao beans, used to produce chocolate, has fallen around the world.

You're shopping online, and you place an item in your virtual cart. Two days later, you return to the virtual cart to check out and find that the item is now more expensive. Assuming that the market is competitive, what could explain the price increase?

There is a shortage of the item

In a market graph, consumer surplus is the area:

above the price and below the demand curve.

Which term best describes the situation that, relative to England, France can produce beef at a lower cost of production (i.e., can produce beef using fewer inputs)?

absolute advantage

A binding price floor is

always above the equilibrium price

You have a comparative advantage if you can complete a task:

at a lower opportunity cost than anyone else.

People gain consumer surplus when they purchase an item:

at a price below the value of the benefit they receive from the item

Graphically, shortages will always occur

at prices below the equilibrium price.

The economic burden of a tax is the

burden created by the change in after-tax prices faced by buyers and sellers.

To get maximum output, you should allocate each task to the person who:

can do the task with the lowest opportunity cost

You have an absolute advantage in producing a product if you:

can produce the product using the fewest inputs.

Specialization will increase output when it is based on

comparative advantage

Which of the four options best represents specialization and its relationship with trade?

comparative advantage

When the economic surplus in a market is less than it would be if the market were efficient, the market is experiencing:

deadweight loss

In 2016, Amazon began charging a 5.75% sales tax on products it sells in the District of Columbia. Holding all else constant, the effect of this tax would be to _____ in the District of Columbia

decrease Amazon sales

A subsidy for buyers of a product shifts the

demand curve to the right

The cross-price elasticity of demand measures how responsive the

demand for one good is to a change in the price of another good

Buyers bear a smaller incidence of the tax when:

demand is more elastic than supply

An equilibrium price is

determined by the intersection of the demand and supply curves

If Bishan wants to capitalize on comparative advantage in his life, then he should

do more of what he is relatively good at and then trade for other things.

As a result of technological innovation, automated water pumps are being installed on the farms of Kenyan tomato farmers. As a result of the increased use of automated water pumps, the equilibrium price of tomatoes will

fall, due to a rise in supply

The statutory burden of a tax is the

government-designated burden of a tax payment.

When there is a shortage of highly skilled workers in a particular region

highly skilled workers can negotiate higher salaries

Suppose the percentage change in newspapers demanded for any price change is infinite. The absolute value of the elasticity of demand for newspapers is _____, and demand is _____.

infinity; perfectly elastic

Statements about what option should be chosen are _____ statements

normative

When the absolute value of the price elasticity of demand is infinite, demand is

perfectly elastic

The price elasticity of demand for a good with a vertical demand curve is

perfectly inelastic

The producer surplus on a unit sold equals:

price minus marginal cost

Graphically, the equilibrium quantity can be identified as the

quantity corresponding to the intersection of the demand and supply curves

A shortage occurs when

quantity demanded exceeds quantity supplied

In 2017, eBay started charging a 20% value-added tax on fees charged to small businesses in the United Kingdom. Holding all else constant, this would _____ in the United Kingdom.

raise the prices that eBay sellers charge their customers

The main role of markets is

reallocating resources to better uses

Taking the absolute value of the income elasticity of demand is incorrect because it would

remove the ability to tell whether the product is an inferior good or a normal good

The marginal benefit minus the marginal cost equals:

the economic surplus

You are given data on four products — toothpaste, shampoo, soap, and laundry detergent. The absolute value of the price elasticity of demand for toothpaste is 4. The absolute value of the price elasticity of demand for shampoo is 0.2. The absolute value of the price elasticity of demand for soap is 0.5. The absolute value of the price elasticity of demand for laundry detergent is 2. Which product has the most inelastic demand?

shampoo

A tax on sellers shifts the

supply curve to the left

An equilibrium in a market occurs

when the quantity supplied equals the quantity demanded