Midterm Econ 202

Which of the following are necessary ingredients to the​ buyer's problem? ​(Check all that apply​.) A. ​Consumer's tastes and preferences. B. Amount of money the consumer has to spend. C. ​Consumer's ability to discern product usefulness. D. Employment status of the consumer. E. Prices of goods and services.

A, B, E

The price of anti−venom serum​, sold to those with snake bites​, increased from​ $45 to​ $52, but consumption has still remained the same. In this​ situation, the Law of Demand​ __________. A. does not​ hold, since the product sold is required for​ survival, so increasing the price did not affect consumption. B. ​holds, since a change in the price of the product resulted in a change in the quantity demanded of the product. C. ​holds, since the Law of Demand must hold for all goods in all instances. D. does not​ hold, since the product is not sold in normal​ markets, so it cannot follow the Law of Demand. The demand curve for anti−venom serum is​ __________ A. ​downward-sloping, since the demand for anti−venom serum reacts the same to changes in price as any other good. B. near​ horizontal, since even a small rise in the price will result in bite victims cutting back on the quantity they demand. C. near​ vertical, since even if the price rises bite victims will be willing to buy the same quantity.

1. A 2. C

Which of the following is not a characteristic of a​ market? A.Markets are physical locations where trading occurs B.There are rules and arrangements for trading C.Flexible prices D.Voluntary exchanges between economic agents

A.Markets are physical locations where trading occurs

A​ consumer's budget constraint refers to the collection of all possible bundles that​ ___________. A. a consumer finds suitable for possible purchase. B. exactly exhaust a consumer's entire budget. C. a consumer can purchase with her income. D. give the consumer the same degree of satisfaction.

B

Which of the following statements are​ true? ​(Check all that apply.​) A. A government price control can be used to bring markets into equilibrium. B. Equilibrium is attained when prices are allowed to respond to market pressure. C. A government price control will always cause the quantity demanded to exceed the quantity supplied. D. A binding price ceiling will always cause the quantity demanded to exceed the quantity supplied.

B,A When the government holds the price of a good below its competitive equilibrium​ price, it is referred to as price ceiling. This will always cause the quantity demanded to exceed the quantity supplied. The government can also hold the price of a good above its competitive​ equilibrium, causing the quantity supplied to exceed the quantity demanded.​ Therefore, the government price control fails to equate quantity demanded and quantity supplied and​ therefore, cannot be used to bring markets into equilibrium.​ However, when prices are free to​ fluctuate, markets will attain equilibrium.

Which of the following statements is true if the supply curve is curve shaped ​(non-​linear)? A. It is difficult to expand production the higher the quantity supplied. B. The price and the quantity supplied are negatively related. C. It is easier to expand production the higher the market price. D. The price does not affect the quantity supplied.

B. The curved ​(non-​linear) supply curve reflects the fact that a producer owns only a limited amount of resources and finds it more and more difficult to expand production the higher the quantity supplied.

Charley spends all of his income on soft drinks and pizza. Suppose he is currently buying these products in amounts such that his marginal benefit from an additional soft drink is $180 and his marginal benefit from an additional slice of pizza is $130. If the price of a soft drink is $4 and the price of a slice of pizza is $5​, is Charley maximizing his total​ benefits? A. ​No, he should increase his consumption of both goods. B. ​No, he should shift consumption toward soft drinks and away from pizza to maximize total benefits. C. ​No, he should shift consumption toward pizza and away from soft drinks to maximize total benefits. D. ​Yes, there is no other consumption choice that will make his total benefits greater.

B. To decrease the marginal benefit of soft drink-> he has to consume it more

In a perfectly competitive​ market, if one seller chooses to charge a price for its good that is slightly higher than the market​ price, then it will​ _________. A.see a small decrease in its number of customers. B.lose all or almost all of its customers. C.see no change in its number of customers. D.All of the above are equally likely.

B.lose all or almost all of its customers.

Are all markets perfectly​ competitive? A.No, in other types of​ markets, sellers offer identical goods and simply accept the market price. B.Yes, any economic system with a market structure is by definition perfectly competitive. C.No, there are other market types where firms have considerable power to control the price. D.No, there are also command and control markets that are run by a central government.

C.No, there are other market types where firms have considerable power to control the price.

Financial incentives can help make people behave in a desired way when the incentives are​ __________. A. enough to satisfy other needs. B. substantial. C. combined with moral suasion. D. provided consistently.

D. Financial incentives lead to changes in the consumer budget constraint provided that consumers behave in the way for which the incentives are designed. If these incentives are not provided​ consistently, changes in the budget constraint will be​ temporary, leading to only​ short-term changes in consumer behavior.

​Chloe's Demand Schedule Price ​($/gallon) Quantity Demanded ​(gallons/year) ​$6 100 5 150 4 200 3 250 2 300 1 350 Chloe's willingness to pay for her 101st gallon of gasoline is ---- and her willingness to pay for her 351st gallon of gasoline is ----

Given that Chloe already has 100 gallons of​ gasoline, you can see from the demand schedule that she would be willing to pay​ $5.98 for a marginal gallon of gasoline​ (one additional​ gallon). ​Similarly, if Chloe already has 350 gallons of​ gasoline, you can see from the demand schedule that she would only be willing to pay​ $0.98 for a marginal gallon of gasoline​ (one additional​ gallon).

the budget curve shifts or pivots

The budget constraint shifts outward when the quantities of both goods that consumers can purchase increases. When the price of both goods decreases or a​ consumer's income​ increases, it enables the consumer to buy more of both​ goods, resulting in an outward shift of the budget constraint. Tastes and preferences have no role in determining the position of the budget constraint. The change in the opportunity cost of one good results from a change in the price of the other​ good, which results in the change of either the x​-intercept or y​-intercept. If either the income or the price of both goods​ changes, both the x​-intercept or y​-intercept must change. The term pivot signifies that one of the intercepts does not change. Tastes and preferences have no role in determining the position of the budget constraint. The change in the opportunity cost of one good results from a change in the price of the other​ good, which results in the change of either the x​-intercept or y​-intercept. When the price of one good​ decreases, the​ consumer's income can buy more units of that good. As a​ result, the budget constraint pivots outward.