Microeconomics Exam 1
You want to purchase two pizzas. The price is $8 per pizza, 2 for $15, 3 for $20. What will be the marginal cost to you of buying a third pizza?
$5
This is a schedule of the marginal benefits and marginal costs for product "X" Quantity 1: Marginal Benefit: $15; Marginal Cost: $6 Quantity 2: Marginal Benefit: $10; Marginal Cost: $7 Quantity 3: Marginal Benefit: $8; Marginal Cost: $7 Quantity 4: Marginal Benefit: $7; Marginal Cost: $8 Quantity 5: Marginal Benefit: $2; Marginal Cost: $9 Use the marginal principle to predict how much X will be consumed
3
I can cut down 4 trees or dig 12 holes in an hour. You can cut down 3 trees or dig 6 holes in an hour The cost of one of my trees is
3 holes
The cost of letting senior citizens into a $5 movie for free
just a and b is higher on a Saturday night than a Monday night is lower if the senior citizen would not have gone to the movie without the free pass
You are considering renting a car and driving to Seattle for Christmas. Which of the following would be marginal costs that you will consider in making your decision?
just a and b the car rental price gasoline
The following graph shows demand and supply for apple cider. Use it to answer the next question As a result,
quantity demanded has fallen, price has risen, quantity supplied has fallen
If you buy a motorcycle for $1000 and then discover that you hate riding it and will never ride it again, the best thing to do is
sell the motorcycle for the best offer you can get
A good is "scarce", as economists use the term, only when
something has to be given up to get more of it
A good is "scarce" when
something must be given up to get more of it
I can cut down 4 trees or dig 12 holes in an hour. You can cut down 3 trees or dig 6 holes in an hour We could both be made better off if I
specialize in digging holes
The spread of the Zika virus has many health experts worried, and the Food and Drug Administration (FDA) is being pressured to approve anti-Zika remedies (like the release of genetically modified mosquitoes) without doing full-scale testing. The principal trade-off facing the FDA is
the risk of harm from Zika versus the risk of harm from the remedy
If you are searching for a new pair of skis, it makes sense to keep looking as long as
the shopping time matters less to you than the lower price you expect to get
You and your friend decide to live in the wild for a year. Your friend has a small comparative advantage at hunting and you have a small comparative advantage at fishing. Therefore,
the two of you will eat better if your friend does all the hunting and you do all the fishing
If you've purchased an all you can eat ticket to a clam roast for $25, good economic thinking would tell you to take one last plateful if
the value of that plateful to you is greater than zero
Sunk costs are irrelevant to economic decisions because
they cannot be affected by the decision in question
The idea that human behavior is "self-interested" assumes that people want
to advance projects in which they are interested
Your friend criticizes the Law of Demand, saying "Lots of things affect how much people consume, so it would be silly to assume that quantity demanded always falls when price rises." Your best response is
to point out that she is ignoring the "ceteris paribus" condition
In economics, the cost of something is
what you must give up to get it
The idea that "people respond to incentives" would lead us to conclude that single parent births
will increase if public child support increases
Can you ever have too much safety?
yes, if the marginal benefits of safety are less than the marginal cost
Could you ever have too much environmental protection?
yes, if the marginal costs are greater than the marginal benefits
If you say that expanding the food stamp program is the right thing to do, and I reply that expanding the program will lead to less spent in other areas, we are unlikely to have a meeting of minds because
you are making a normative argument and I am making a positive argument
If you stop studying biology and spend an hour studying economics instead, we can conclude that
you value one additional hour of studying economics more than one additional hour of studying biology
The table below shows number of brooms and pitchforks that can be produced per hour in Serbia and Croatia. Serbia: 3 Brooms; 9 Pitchforks Croatia: 2 Brooms; 1 Pitchforks Which of the following statements is true?
Serbia has the comparative advantage in pitchforks; Croatia in brooms
Which of the following is the most important advantage to a society of using money rather than relying exclusively on barter?
The use of money lowers the cost of exchanging goods
The following graph shows demand and supply for apple cider. Use it to answer the next question Assume S0 is the original supply curve, and that supply has shifted to S1. Which of the following could explain the shift?
There has been a very bad apple harvest
The opportunity cost to college athletes on scholarship who stay in school
are the wages they could make otherwise
This is a schedule of the marginal benefits and marginal costs for product "X" Quantity 1: Marginal Benefit: $15; Marginal Cost: $6 Quantity 2: Marginal Benefit: $10; Marginal Cost: $7 Quantity 3: Marginal Benefit: $8; Marginal Cost: $7 Quantity 4: Marginal Benefit: $7; Marginal Cost: $8 Quantity 5: Marginal Benefit: $2; Marginal Cost: $9 If those benefits and costs are yours, how much would you be willing to pay for a pass that would let you consume all the X you wanted?
at least $42
This is a schedule of the marginal benefits and marginal costs for product "X" Quantity 1: Marginal Benefit: $15; Marginal Cost: $6 Quantity 2: Marginal Benefit: $10; Marginal Cost: $7 Quantity 3: Marginal Benefit: $8; Marginal Cost: $7 Quantity 4: Marginal Benefit: $7; Marginal Cost: $8 Quantity 5: Marginal Benefit: $2; Marginal Cost: $9 If they charge you $12 for an "all you can consume" pass, how many will you consume?
at least 5
If you decide to go to a movie this evening rather than study economics, you thereby demonstrate that
at the margin, you value two hours of movie watching more than two hours of studying economics
Douglas entered the Air Force's Officer Candidate School (AFOCS) after graduating from Clemson. Had he not entered the AFOCS, Douglas would have attended business school (he was accepted by Duke). Had he not been accepted by either the Air Force or Duke, he would have gone to work for his father. The opportunity cost of his going to AFOCS was
attending Duke Business School
If you've bought an $80 sticker to park on campus, and you plan to park on campus eighty times before the semester ends, the marginal cost to you each time you park is
$0
Suppose you pay $75 to play a round of golf. The golf round takes four hours in total. If you were not playing golf you would be working and earning $20 per hour. The opportunity cost of your golf game is:
$155
If you pay $2 for each ride you take on a roller coaster, and you are about to take your tenth and last ride for the day, the marginal cost of that ride is
$2
You see this deal at the supermarket: one frozen pizza for $3.00, two for $5.00. Your marginal cost for the second pizza is
$2.00
This is Billy's total benefit schedule for ice cream cones on a hot afternoon. Think "at the margin" and answer the next question. Quantity: 1: $15 Quantity: 2: $25 Quantity: 3: $33 Quantity: 4: $30 Quantity: 5: $25 Billy will buy a pass that lets him consume as many ice cream cones as he wants as long as the pass costs no more than
$33
You have been asked to work in the college bookstore during the Clemson-Boston College game, and you are a big football fan. Which of the following would reduce the opportunity cost of working during the football game?
After a traumatic break-up with your ex, you come to hate football
I traded my old ten speed bike for a vintage skateboard. As a result of the deal
All of the above
If a buyer values a product at $19 and a seller' opportunity cost of selling the product is $14, the gains from trade
are $5
Plastic straws contribute to the deaths of a million Great Auks every spring. Thinking like economists, we can conclude
None of the above
Your very smart and athletic friend turns down a football scholarship at Clemson to play minor league baseball for the Braves. As economists, we can conclude that
None of the above
If Switzerland can make 35 pounds of chocolate or 5 watches while Albania can make 6 pounds of chocolate or 1 watch, who has the comparative advantage?
Switzerland has the comparative advantage in chocolate; Albania in watches
Suppose you know the following facts: (i) Clemson has just won the national championship and the nation is going crazy, and (ii) a new technology has lowered the cost of producing orange dye. What would be the effect in the market for orange t-shirts?
The equilibrium quantity would rise but the effect on equilibrium price is uncertain
The form of rationing we see most often in our society is
price
The graph below shows the market for EarPods. Use it to answer the next question Assume EarPods are a normal good. Which of the following could explain a movement from point A to point B
a fall in the price of EarPods
The graph below shows the market for EarPods. Use it to answer the next question Assume EarPods are a normal good. Which of the following could explain a movement from point B to point C
a rise in consumer income
Which of the following is not an assumption of the economic model?
all are assumptions of the economic model people respond to incentives goods are scarce people make decisions by comparing marginal benefits and marginal costs the only costs that matter are opportunity costs
Which of the following is an example of a scarce good?
all are scarce goods Coca Cola Big Macs Diamonds
How can I raise the cost of coming to class?
all of the above charge an admission fee schedule class at inconvenient times give extra homework to anyone who shows up
We know that trade makes people better off because
all of the above it is a voluntary activity people wouldn't engage in it otherwise it only occurs when there is the potential for mutual gains
Which of the following costs will you consider when deciding whether it is efficient to take a hike one afternoon?
all of the above the gas it takes to get to the hiking trail the studying you won't be able to do the wear and tear on your hiking boots
Which of the following is true of the statement "All pollution must be stopped"
all of the above: it ignores the importance of comparing marginal benefits and marginal costs it does not consider that we may have too much pollution control it ignores the fact that to get more of anything, we must give up something else
If Clemson raises the price of on-campus parking, you would expect to see
an increase in the demand for off-campus parking
Economic scarcity is a problem that confronts
both the rich and the poor
Economists use the term "opportunity cost" to highlight the fact that
costs are really opportunities given up
Smith accidentally runs his car off the road into deep snow. Jones happens along in a tow truck, and offers to haul Smith out for the outrageous price of $300. Smith, though angered by the high price, considers he has no choice and pays the $300. Smith's welfare was _________ and Jones' was ________ as a result of Jones passing by.
enhanced, enhanced
Steve is walking along 5th Avenue passing by a penny, a nickel, a dime, and a quarter along the way. He only bothers to bend down to pick up the quarter. We can infer that the opportunity cost to Steve of picking up a coin measured in monetary units is
greater than ten cents but less than 25 cents
Microeconomics focuses principally on
how individuals choose among scarce goods
Economics is a model of
how people make choices
If you paid $25,000 for your car just a short while ago, but the best offer you can get for it now is $12,000. You should only sell the car
if its worth to you is less than $12,000
Which of the following is a positive statement?
if we provide a basic income to all living people, world hunger will decrease
Based on the concept of opportunity cost, where would you expect to have the least trouble finding someone to clean your house?
in a low-income area with high unemployment
The table below shows number of brooms and pitchforks that can be produced per hour in Serbia and Croatia. Serbia: 3 Brooms; 9 Pitchforks Croatia: 2 Brooms; 1 Pitchforks A trade that could make both countries better off
is 1 broom for 2 pitchforks
An article in the newspaper suggests that an Indian tribe should use coal rather than gas power because the tribe owns 114 billion tons of coal reserves. This statement
is false because it ignores opportunity costs
The concept of opportunity cost suggests that the cost to airlines of allowing employees to fly for free
is greater at Christmas than in mid-February
The cost to a ski instructor is taking a day off
is higher on the weekend when more people ski
The real cost of any action
is the value of the alternative sacrificed
Suppose global warming leads to improved avocado harvests (avocado trees love warm weather). Use this as the starting point to answer the next question. Draw the curves! Given the improved avocado harvests, what will happen to the price of salsa (a substitute for avocado dip)?
it will fall
Suppose global warming leads to improved avocado harvest (avocado trees love warm weather). Use this as the starting point to answer the next question. Draw the curves! Given the improved avocado harvests, what will happen to the amount of avocado dip that consumers purchase?
it will rise
Suppose global warming leads to improved avocado harvests (avocado trees love warm weather). Use this as the starting point to answer the next question. Draw the curves! Many consumers eat raw avocado in a spinach salad. Given the improved avocado harvests, what will happen to the price of spinach?
it will rise
This is Billy's total benefit schedule for ice cream cones on a hot afternoon. Think "at the margin" and answer the next question. Quantity: 1: $15 Quantity: 2: $25 Quantity: 3: $33 Quantity: 4: $30 Quantity: 5: $25 Billy will consume a third ice cream cone as long as the marginal cost is
less than $8
The costs that influence decisions are always
marginal costs
If Switzerland can make 35 pounds of chocolate or 5 watches while Albania can make 6 pounds of chocolate or 1 watch
none of the above
Movie-goers who are willing to put up with long lines at a cinema to get a lower price are
none of the above
Anyone who claims that cheaper labor in one country enables that country to produce everything at lower costs than another country, so that no trade is possible, is
not considering opportunity cost
I can cut down 4 trees or dig 12 holes in an hour. You can cut down 3 trees or dig 6 holes in an hour A trade that would help us both is
one of your trees for 2.5 of my holes
A trade that can make both countries better off would be
one watch for 6.5 pounds of chocolate
I am considering joining a "shopper's club" where I pay $100 membership fee and then get a twenty-five percent discount on ally my purchases. In making my decision, I should
only join if I expect to get at least $100 worth of discounts
the fact that more pedestrians were killed after laws made cars safer demonstrates that
people respond to incentives
Marginal benefit is the benefit
that arises from a small increase in an activity
The concept of comparative advantage explains why, if China becomes much more productive
the U.S. ends up better off
The U.S. federal government spends $7 billion on airport security annually. It would be worth spending more if
the benefits of the additional safety are greater than the additional costs
If it costs a theater $180,000 to put on four shows, and the cost would rise to $200,000 if the theater adds a fifth show,
the marginal cost of the fifth show is $20,000
This is Billy's total benefit schedule for ice cream cones on a hot afternoon. Think "at the margin" and answer the next question. Quantity: 1: $15 Quantity: 2: $25 Quantity: 3: $33 Quantity: 4: $30 Quantity: 5: $25 If we observe that Billy purchases only one ice cream cone, we can conclude that
the marginal cost of the second cone is greater than $10
Some welfare programs offer assistance to families only if there is no father present in the home. What effect would you expect such programs to have on the number of two-parent, low-income families?
the number of two-parent, low-income families is likely to fall
If there is excess demand for burritos, we would expect
the price of burritos to rise
Which of the following would decrease the price of peanut butter?
the price of jelly (a complement) rises
You are considering whether to take one last ski run before going home. You paid $30 for your lift ticket (which gives you the right to ski all day), and have taken nine runs. It is only efficient for you to take a tenth run if
your marginal benefit is greater than 0
If you pay $400 for a season pool pass at a private club, the marginal cost to you of swimming on any given weekday will be
zero