principles of microeconomics final exam
wanda makes $30 an hour as a welder. She must take two hours off work (without pay) to go to the dentist. The dentist charges $40. The opportunity cost of her visit to the dentist is
$100
A decrease in the supply of popcorn will result in
a lower price and lower quantity
a decrease in the demand for popcorn will result in
a lower price and lower quantity
Net benefit can be maximized by equating
a marginal benefit to marginal cost
Which of the following is likely to benefit producers at the expense of consumers?
a price floor
Assuming that pizza is a normal good, if students income at Armstrong decreases substantially, there would be:
a reduction in the demand for pizza
An economic model is
a simplified version of some aspect of economic life used to analyze an economic issue.
The cross-price elasticity helps us understand whether a good is
a substitute or complement
the principle that, for virtually all goods and services, there is a negative relationship between price and quantity demanded, all other things unchanged, is the law of:
demand
An example of a normative statement is
everyone in the country needs to be covered by national health service
when deciding whether or not to get a flu vaccination, people tend to ignore the _____ and as a result _____.
external benefit: too few vaccinations are given.
ceteris paribus means
holding other things unchanged
The income elasticity helps us understand whether a good is
inferior or normal
When a positive externality is present in a market marginal social benefit _____ marginal cost, resulting in a market that is producing ____.
is greater than; less than the effective quantity
A vertical demand curve is
perfectly inelastic
in a market economy, the determination of which goods are produced is primarily based on
profitability
If the demand for a good is inelastic, the firm should
raise the price
the unintended consequences of rent control include
reduced ability of housing for the poor and higher rents in non-controlled rents.
the expenditure that is least appropriate to include in the opportunity cost of attending college is
room and board
in the field of economics the starting point for discussion of human behavior is
scarcity
Assume MUx=20, MUy=12, Px=$2, and Py= $1. This consumer
should buy less of X and more of Y
An externality can be a cost or benefit arising from the production of a good that falls upon
someone other than the consumer or producers
the term quantity demanded refers to
the amount of a good consumers are willing to buy at a specific price
which of the following tends to cause the elasticity of demand for a good to be higher?
the availability of close substitutes
Researchers demonstrate conclusively that drinking 4-6 ounces of ginger ale each day reduces life expectancy by 3 years. What happens in the market for ginger ale?
the equilibrium price and quantity fall
Allocative efficiently in producing a good occurs when
the marginal benefit equals marginal cost
The price elasticity of demand is equal to
the percentage change in quantity demanded divided by the percentage change in price
On a diagram of production possibility frontier, opportunity cost is represented by
the slope of the production possibility frontier
the opportunity cost of a choice is
the value of the forgone activity not chosen
the opportunity cost of a choice is
time
The benefit John gets from all the goods he consumes this week is called
total utility
According to the table above, as the individual consumes each additional slice of pizza
total utility increases at a decreasing rate
The basis for trade is absolute advantage. This statement is
true
In economics, utility is
A numerical measure of individual preferences
A budget line, or budget constraint, shows
A persons consumption possibilities
If the current price in a market is above the equilibrium price, we would expect to see
A surplus of goods in the market
Suppose country B wants to be able to produce more radishes and more bicycles. To do this, it must
Acquire more capital, more labor, more natural resources, and/or better technology
In which type of auction does the price start higher than anyone is expected to pay, and fall until a single individual ends the auction by bidding
Dutch Auction
Which auctions generally results in higher selling prices?
Dutch and sealed bid
If the decrease in marginal utility is very slow relative to the increase in the quantity of the good, then the demand for the good is most likely to be
Elastic
Suppose country A discovered a new technology that greatly increased its ability to produce bicycles. this would
Increase the opportunity cost of producing radishes in country A
Which of the following correctly expresses the utility- maximization rule when a consuming only two goods, X and Y?
MUx/Px= MUy/Py
The benefit john gets from one more item is called
Marginal utility
Whenever MB> MC, improving efficiency would require us to do ____ of the activity
More
The price of oranges falls. what happens in the market for apples, which are a substitute for oranges?
The equilibrium price and quantity fall
Questions 14-16 are based on the exhibit below
...
John is making beef and broccoli for a party. Beef is $6/lb and broccoli is $2/lb. The recipe uses two pounds of broccoli for each pound of beef. What quantities will his $25 budget allow?
2.5 lb beef and 5lb broccoli
which of the following will not cause the demand for milk (a normal good) to increase in the current time period?
a decrease in the price of milk
As the consumption of a good increases, the marginal utility of additional units consumed
almost always decreases
Suppose the elasticity of demand for peanut butter is -0.5. A decrease in the price of peanut butter by 6 percent will cause
an increase in Qd of 3 percent
given that meat and potatoes are complementary goods, if the price of meat decreases substantially, there would be
an increase in the demand for potatoes
The auctions that generally result in higher selling prices do so because
bidders have less information than in the other auction types.
a factor of production that has been produced for use in the production of other goods and services is:
capital
the equilbrium price in a market is defined as the price at which
consumers and firms agree on quantity
the opprotunity cost of producing an additional ton of radishes would be greater in
country B
the sum of producer and consumer surplus created by the production of a good is also called
net benefit
The free rider problem associated with a public good often leads to inefficacy is because
no one has the incentive to pay for the good
A public good is defined by two key characteristics:
non-excludable and non-rival
A common resource is defined by two key characteristics:
non-excludable and rival
Efficient production exists when the economy is
operating on the production possibilities curve
