(Chapters 1-5 quizzes) Microeconomics Test 1
Ticket prices to a Kayne west concert increase from $40 to $60. As a result, ticket sales decrease from 50,000 to 40,000. The elasticity of demand for Kayne West ticket equals _____ and demand is ______.
0.55 ; inelastic
Suppose the current price of barley is $7 per bushel and at that price 100,000 bushels are grown by a Colorado farmer. If the price of barley rises $8 and quantity supplied increases to 130,000 bushels, then using the midpoint method, the price elasticity of supply for barley equals
1.96
When the price of a burrito increases from $2 to $4, the quantity demanded decreases from 50 to 40. Using the midpoint method, the price elasticity of demand equals
1/3
What would be an example of capital good?
Antonio, the manager of the local Taco Hut, purchases a new deep fryer.
What would happen to the equilibrium price and quantity of lattes if consumers incomes rise and lattes are a normal good?
Both the equilibrium price and quantity would increase.
Aaron locked himself out of his house and had to pay $40 to Brianna, who works for Lucky Locksmith, to open his door. Based on this transaction in the economy and using concepts from the circular flow model, which one of the following is true?
Brianna earned income from supplying her labor services.
What would be an example of a consumption good?
Jake buys an Iphone.
What would happen to the equilibrium price and quantity of peanut butter if the price of peanuts went up, the price of jelly fell, fewer firms decided to produce to produce peanut butter, and health officials announced that eating peanut butter was good for you?
Price will rise, and the effect on quantity is ambiguous.
What will happen to the equilibrium price and quantity of new cars if the price of gasoline rises, the price of steel rises, public transportation becomes cheaper and more comfortable, and auto-workers negotiate higher wages?
Quantity will fall, and the effect on price is ambiguous.
Why does a nation experience increasing opportunity cost?
Resources are not equally productive in producing different kinds of goods and services.
What happens to the equilibrium price and quantity of automobile tires if rubber prices increase and the price of automobiles falls?
The equilibrium price rises, but the change in equilibrium quantity is unknown.
Which of the following increases the supply of gasoline?
a decrease in the price of a resource used to produce gasoline, such as crude oil
"Comparative advantage" is defined as a situation in which one person can produce
a good for lower opportunity cost than another person.
An incentive is
a reward or penalty that encourages or discourages an action.
A student at NYU used to take the Redhound bus when she visited her grandmother in Boston. After graduating, although the bus was fare and the plane fare were the same as they were when she was a student, with a well-paid job on Wall street she now takes the plane to Boston to visit. For this student, travel by redhound bus is
an inferior good.
In the market for oil in the short run, demand
and supply are both inelastic
A market is defined as
any arrangement that brings buyers and sellers together.
Production efficiency occurs
at all points on the production possibilities frontier.
Microeconomics includes the study of
choices made by individuals and businesses.
Advances in productivity increase supply because they might
decrease the cost of production.
If the price elasticity of demand for a good is 2, then a 10% increase in the price of that good ____ the quantity demanded by _____ percent.
decreases; 20
Suppose the price of leather used to produce shoes increases. The higher price of leather ____ the supply of shoes, and the supply curve of shoes ____.
decreases; shifts leftward
Moving downward along a linear (straight-line) downward-sloping demand curve, the
demand becomes less elastic
The discovery of new hybrid wheat would increase the supply of wheat. As a result, wheat farmers would realize an increase in total revenue if the
demand for wheat is elastic
Demand curves slope ____ because as the price increases and other things remain the same, the quantity demanded ____.
downward; decreases
Millions of people from Mexico have migrated to the United States. This has reduced the supply of labor in Mexico and increases the supply of labor in the United States. Assume that the demand for labor in Mexico and the United States is unchanged. The wages in the United States ____ and wages in Mexico _____.
fall; rise
If demand is inelastic and the price falls, the total revenue
falls
Assume a market is at equilibrium. There is an increase in supply, but no change in demand. As a result the equilibrium prices _____ and the equilibrium quantity _____.
falls; increases
In the circular flow model with the government sector, transfers
flow in the opposite direction as do taxes.
The circular flow model is used to show the
flow of expenditures and incomes in the economy.
In the circular flow model, there are two types of markets: the _______ market and the _______ market.
goods; factor
Economics is the social science that studies
how people make choices to cope with scarcity.
Scarcity exists because
human wants exceed the resources available to satisfy them.
To calculate the opportunity cost per unit, you divide the decrease in the quantity of the forgone item by the
increase in the quantity of the other item obtained.
A professor changes the penalty for cheating on exams from getting a 0 on the exam to getting an F in the course. The professor has
increased the marginal cost of cheating.
During 2008 the supply of gasoline decreased while at the same time the demand for gasoline increased. If the magnitude of the increase in demand was greater than the magnitude of the decrease in supply, then the equilibrium price of gasoline _____ and the equilibrium quantity ____.
increased; increased
As more time passes, the price elasticity of gasoline
increases
The bowed out (concave) shape of the production possibilities curve implies that as production of one good
increases, society must forgo increasing amounts of another good.
Moving from one point to another on a production possibilities frontier implies
increasing the production of one good and decreasing the production of another.
If a 30 % price increases generates a 20 % decrease in quantity demanded, the demand is
inelastic
The demand for a necessity generally is
inelastic
The fact that there is a very limited amount of land in Hong Kong means the supply of new apartments in Hong Kong is
inelastic
You own a small store. Your cashier thinks you should raise prices to increase your total revenue and your customer thinks you should lower prices to increase your total revenue. The cashier thinks the price elasticity of demand is _____ and the customer believes the price elasticity of demand is ____.
inelastic; elastic
If substitutes for a good are readily available, the demand for that good
is elastic
While moving along a production possibilities frontier, the amount of labor ___, the amount of capital ____ and the level of technology _____.
is fixed; is fixed; is fixed
Taco Bell firm raises the price of its tacos. The price elasticity of demand for Taco Bell tacos equals 5.0. What happens to the Taco Bell's total revenue?
it decreases
Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows. If the demand for milk is relatively inelastic, the discovery will
lower both price and total revenues
The decision to go to graduate school is a rational one for a college student if the
marginal benefit of graduate school exceeds the marginal cost.
"Other things remaining the same, if the price of a good rises, the quantity supplied of that good increases." This sentence describes
movement along a supply curve.
Macroeconomics is the study of
national or global economies.
People must make choices because
of scarcity.
In the production possibilities frontier model, an unattainable point lies
only outside the production possibilities frontier.
If a product is a normal good, then its income elasticity of demand is
positive
The statement that "increases in the tax on gasoline increase the price of gasoline" is an example of
positive statement.
Suppose that tattoos gained immense popularity with retired people as well as college students. This gain in popularity best reflects which of the following influences on buying plans?
preferences
Total revenue equals
price x quantity sold
Factors of production are the
productive resources are used to produce goods and services.
When there is a shortage of parking spaces at your college, the
quantity of parking spaces demanded is greater than the quantity of parking spaces supplied.
Payments to the factors of production are
rent, wages, interest, and profit or loss.
Gains from trade
result in being able to consume beyond the trading individuals production possibilities frontiers.
A reason the production possibilities frontier exists is
scarcity of resources.
If two goods have a cross elasticity demand of -2, then when the price of one good increases, the demand curve of the other good
shifts leftward
If the demand for used cars decreases after the price of a new car falls, used cars and new cars are
substitute goods.
To find the market demand curve for in-line skates, we must
sum horizontally the individual demand curves of all the buyers.
Hot dogs and hot dogs buns are complements. If the price of a hot dog falls, then
the demand for hot dog BUNS will increase.
The opportunity cost of a decision is measured in terms of
the next best thing given up.
Market equilibrium occurs when
the quantity demanded equals the quantity supplied.
A production possibilities frontier shows
the various combinations of output a nation can produce a certain time, given its available resources and technology.
If labor in Mexico is less than labor in the United States in all areas of production,
then both Mexico and the United States still can benefit from trade.
A rational choice is one that
uses the available resources to most effectively satisfy the wants of the person making the choice.
