ECO 203 @ UD Ruggiero HW 1-4

The figure above shows Diane's demand curve for soda. The price of a soda is $1.00. Diane's consumer surplus from her 10th soda is A. $0.00. B. $1.50. C. $1.00. D. $0.50. E. $2.50.

$0.50

Lauren and Katy each bought a new bike lock for $20. Both Lauren and Katy would have paid $25 for the lock. The total consumer surplus for Lauren and Katy taken together equaled

$10

In the figure above, at the market price of $15, the total consumer surplus equals A. $10,000. B. $30,000. C. 2,000 units. D. $40,000. E. $20,000.

$10,000

The figure above shows Lauren's demand curve for Barbie dolls and the market price for Barbie dolls. Using the area of the consumer surplus triangle, Lauren's total consumer surplus from purchasing 3 dolls is A. $45.00. B. $5.50. C. $10.00. D. 3 dolls. E. $22.50.

$22.50

Samantha was willing to pay $10 for a hamburger because she was hungry but she only paid $2.50. What is the marginal benefit (i.e. value) Samantha gained from the hamburger? $2.50 B. $12.50 C. $7.50 D. $10.00 E. None of the above answers is correct.

$7.50

In the above figure, what is the marginal cost of the 4th pizza? A. $4 B. 4 pizzas C. $9 D. $0 E. $36

$9

On a production possibilities frontier, 500 pounds of apples and 1,200 pounds of bananas can be produced while at another point on the same frontier, 300 pounds of apples and 1,300 pounds of bananas can be produced. Between these points, what is the opportunity cost of producing a pound of bananas?

.5 a pound of apples

The table above shows a production possibilities frontier for an economy. Which of the following combinations is unattainable?

0 loaves of bread and 0 books

If the price of a movie ticket increases by 4 percent and the quantity of movies demanded falls by 2 percent, the price elasticity of demand is

0.5

The figure shows the demand curve for popsicles. The price elasticity of demand when the price of a popsicle increases from $0.30 to $0.50 is

1

In the above table, for Mary the opportunity cost of producing a dress is ________ and the opportunity cost for Mark of producing a dress is ________.

1 1/2 jackets; 2/3 of a jacket

Using average price and average quantity, calculate the price elasticity of demand if a price rise from $8 to $10 and decreases the quantity demanded from 20 units to 15 units. The price elasticity of demand equals

1.29

The table above presents the production possibilities frontier for a nation. Using the information in the table, when moving from possibility C to D, the cost of 1 unit of a capital good in terms of the consumption goods forgone is ________ consumption goods per capital good.

10

The table above gives the demand schedule for snow peas. The price elasticity of demand between $6.00 and $7.00 per bushel is

2.6

The figure above shows the marginal benefit and marginal cost curves for pizza. In the figure, what is the efficient quantity of pizza? A. 0 pizzas B. 30,000 pizzas C. 10,000 pizzas D. 20,000 pizzas E. The efficient quantity cannot be determine without more information.

20,000 pizzas

The table above shows a nation's production possibilities frontier. If the nation chooses to increase the production of robots from 2 to 3 and it is on its PPF, it will have to forgo ________ pizzas.

3

Deb and Pete have volunteered to help their favorite charity mail out fundraiser information. The figure above shows their production possibilities frontiers for assembling packets and stuffing envelopes. What is Deb's opportunity cost of assembling 1 packet?

4 envelopes

Using the data in the table above, the equilibrium quantity and equilibrium price for a cellular telephone is

60,000 and $50

To maximize its revenue A. a firm facing elastic demand should always raise its price. B. a firm facing inelastic demand should always raise its price. C. a firm should always charge the highest price possible regardless of the elasticity of demand. D. None of the above answers is correct.

B. a firm facing inelastic demand should always raise its price

The increase in the demand for widgets, shown in the figure above, is the result of a decrease in the price of McBoover devices from $11 to $9. Therefore, the cross-price elasticity for these two products is A. -0.5. B. -2.0. C. 2.0. D. 0.5.

C. 2.0.

Deb and Pete have volunteered to help their favorite charity mail out fundraiser information. The figure above shows their production possibilities frontiers for assembling packets and stuffing envelopes. Which of the following statements is correct?

Deb has a comparative advantage in stuffing envelopes.

Which figure above shows the effect if research is published claiming that eating pizza is healthy?

Figure A

Which figure above shows the effect of an increase in the cost of the tomato sauce used to produce pizza?

Figure C

Which figure above shows the effect of a technological advance in the production of pizza?

Figure D

Consumers eat salsa with taco chips. The price of salsa rises. How does the increase in the price of salsa affect the demand for taco chips?

It decreases the demand for taco chips

In one hour John can produce 20 loaves of bread or 16 cakes. In one hour Phyllis can produce 30 loaves of bread or 15 cakes. Which of the following statements is true? :End of HW1

John has a comparative advantage in producing cakes

What is gained when people engage in specialization and trade?

Specialization and trade allow people to consume outside their individual production possibilities frontiers.

Plywood is used in the construction of houses. If the price of plywood rises, what happens to the supply of houses?

The supply decreases so that the supply curve shifts leftward

Which of the following is the best definition of economic growth?

The sustained expansion of production possibilities.

If Wendy can produce more of all goods than Tommy in an hour, then

Wendy has an absolute advantage in all goods.

In the above figure, the shift in the demand curve from D to D1 can be the result of

a change in quantity demanded

A change in the demand for apples could result from any of the following EXCEPT

a change in the price of an apple.

In the above figure, the shift in the supply curve from S to S2 reflects

a decrease in the supply of pizza and a simultaneous decrease in the quantity of pizza supplied

A demand curve

a graph of the relationship between the price of a good and the quantity demanded

If the demand for digital cameras increases when consumers' incomes rise, then digital cameras are

a normal good

Using the data in the table above, at the price of $80 a phone,

a surplus of 25,000 cellular telephones occurs

Bill and Krista sell potted plants from a roadside stand. The figure above shows Bill and Krista's marginal cost curve and the market price. If Bill and Krista sell 60 plants per week, their producer surplus from the 60th plant will equal A. $0. B. $20. C. $8. D. $480. E. More information is needed to answer the question.

a. $0

In the figure above, suppose that $20 is the market equilibrium price. Which area is the consumer surplus? A. A B. B C. B - A D. A + B E. B ÷ A

a. A

The figure above shows the competitive market for slices of key lime pie. If the production is 40 slices per day, someone is willing to buy another slice of pie for A. more than it costs to produce the slice. B. an amount equal to the cost of producing the slice. C. less than it costs to produce the slice. D. an amount equal to the cost of producing all 40 slices. E. an amount that is not comparable to the cost of producing the slice.

a. more than it costs to produce the slice

The figure above shows the production possibilities frontier for a country. A combination of 3 million gallons of milk and 3 million gallons of ice cream is

attainable and production efficient.

A straight-line demand curve with negative slope intersects the horizontal axis at 100 tons per week. At the midpoint on the demand curve (corresponding to 50 tons per week) the price elasticity of demand is A. 0. B. 1.0. C. 0.5. D. unknown without more information.

b. 1.0.

Apple, the consumer electronics giant, on Tuesday rolled out new versions of its popular iPhone. The CEO decided to decrease the price of iPhones in an attempt to increase total revenue from iPhone sales. One of his employees, Jess, disagrees and suggests that an iPhone price increase will increase total revenue. Who is CORRECT? A. Jess is correct if demand is unit elastic. B. The CEO is correct if demand is price elastic. C. Jess is correct if demand is price elastic. D. The CEO is correct if demand is price inelastic.

b. The CEO is correct if demand is price elastic

The production possibilities frontier is the

boundary between the combinations of goods and services that can be produced and the combinations that cannot be produced when technology is changing

If income increases and the demand for bus rides decreases,

bus rides are an inferior good

Consumers' total benefit from consuming a good is equal to the A. consumer surplus on the quantity purchased. B. total amount spent on the good divided by the number of units purchased. C. consumer surplus minus the total amount spent on the good. D. consumer surplus plus the total amount spent on the good. E. total amount spent on the good.

consumer surplus plus the total amount spent on the good

Consumer surplus exists when

consumers value the good more highly than what they must pay to buy it.

HW1 starts here: The study of economics is best described as a study of

coping with scarcity, and choices made as a result of scarcity in a society

End of HW3: If goods are complements, then their

cross elasticities are negative

The figure above shows the supply curve for soda. The market price is $1.00 per soda. The producer surplus from the 10,000th soda is A. $1.00. B. $0.00. C. more than $1.00. D. $0.50. E. None of the above answers is correct.

d. $0.50

In the above figure, if the quantity is equal to 500,000 units, the deadweight loss is equal to A. area D + area I. B. area G + area H. C. area C. D. area B + area F. E. None of the above answers is correct because the deadweight loss is equal to zero.

d. area B + area F

End of HW4: When underproduction occurs, A. producers gain more surplus at the expense of consumers. B. consumer surplus increases to a harmful amount. C. marginal cost is greater than marginal benefit. D. there is a deadweight loss that is borne by the entire society. E. the deadweight loss harms only consumers.

d. there is a deadweight loss that is borne by the entire society

What do economists call the loss society experiences when there is market failure and the production of a good is less than the efficient amount? A. price floor B. deadweight loss C. subsidy D. quantity restriction E. tax

deadweight loss

Computer chips are a normal good. Suppose the economy slips into a recession so that income falls. As a result, the demand for computer chips ________ so that the price of a computer chip ________

decreases; falls

Along a straight-line demand curve, as the price falls the

demand becomes less elastic

In the figure above, if the market is at equilibrium, then the total consumer surplus equals the area ________ and the total producer surplus equals the area ________. A. A; C B. C; B C. B; C D. A + B; C E. A; B

e. A; B

In the above figure, if the quantity is restricted to 500,000 and the price is allowed to rise to set the quantity demanded equal to the quantity supplied, then area C + area E is equal to A. total surplus. B. producer surplus. C. consumer surplus. D. total revenue. E. deadweight loss.

e. deadweight loss

According to the total revenue test, a price cut increases total revenue if demand is

elastic

Dan sells newspapers. Dan says that a 4 percent increase in the price of a newspaper will decrease the quantity of newspapers demanded by 8 percent. According to Dan, the demand for newspapers is

elastic

The figure above illustrates a linear demand curve. In the price range from $8 to $6, demand is ________ and in the price range $4 to $2, demand is ________. A. inelastic; elastic B. inelastic; inelastic C. elastic; elastic D. elastic; inelastic

elastic; inelastic

If good weather conditions result in a larger than normal crop of peaches, then the

equilibrium price of peaches falls and the equilibrium quantity of peaches increases

Suppose that the demand for corn is price inelastic. If a technological advance makes corn farms more productive, the equilibrium price of corn will ________ and the farmers' total revenue will ________. A. rise; increase B. fall; decrease C. fall; increase D. rise; decrease

fall; decrease

When Sam's annual income was only $15,000, he purchased 50 pounds of bananas a year. When his income rose to $18,000, he purchased 55 pounds a year. Therefore A. his income elasticity of demand for bananas is negative. B. for Sam, bananas are an inferior good. C. his income elasticity and price elasticity of demand for bananas are both greater than one. D. for Sam, bananas are a normal good.

for Sam, bananas are a normal good

The law of supply states that, other things remaining the same,

if the price of a good increases, the quantity supplied increases

Peter's monthly income increases from $1,500 to $1,600. As a result, he increases the number of DVDs he buys per month from 2 to 3. Peter's demand for DVDs is

income elastic

Bus rides and canned soup are inferior goods, so the ________ elasticity of demand is ________. A. income; positive B. cross; positive C. cross; negative D. income; negative

income; negative

Researchers have found a hybrid of corn that is cheaper to grow. This technological breakthrough

increases the supply of corn

Moving from one point to another on a production possibilities frontier implies

increasing the production of one good and decreasing the production of another.

To say that turnips are inferior goods means that the income elasticity

is negative

As an economy grows,

its PPF shifts outward.

The cross elasticity of demand measures the responsiveness of the quantity demanded of a particular good to changes in the prices of A. its substitutes and its complements. B. neither its substitutes nor its complements. C. its substitutes but not its complements. D. its complements but not its substitutes.

its substitutes but not its complements

Demand is price inelastic if a relatively ________ price increase leads to a relatively ________ in the quantity demanded

large; small increase

Which of the following increases the supply of a product?

lower prices for the resources used to produce the product

Producer surplus is the ________ summed over the quantity produced. A. marginal benefit of the good minus its price B. price of the good minus the marginal cost of producing it C. marginal cost of the good minus the opportunity cost of producing it D. marginal benefit of the good minus its marginal cost E. None of the above answers is correct

marginal cost of the good minus the opportunity cost of producing it

When efficiency is attained, the sum of the total amount of consumer surplus and producer surplus is A. maximized. B. equal to the deadweight loss. C. minimized. D. undefined. E. equal to zero.

maximized

Start of HW2: An increase in the quantity demanded is shown as a

movement along the demand curve

The cross elasticity of demand for pizza with respect to the price of a soda is A. positive because the goods are complements. B. negative because the goods are substitutes. C. negative because the goods are complements. D. positive because the goods are substitutes.

negative because the goods are complements

Producer surplus definitely exists when the A. price exceeds marginal benefit. B. marginal benefit exceeds the price. C. marginal cost exceeds the price. D. marginal benefit exceeds the marginal cost. E. price exceeds marginal cost.

price exceeds marginal cost

Start of HW4: Value and price can be compared by noting that A. value is what the seller receives when we buy a good and price is what we must pay when we buy a good. B. price is what we must pay and value is what we are willing to pay. C. they are the same thing. D. value is what we must pay while price is what we are willing to pay. E. value is always greater than price.

price is what we must pay and value is what we are willing to pay

The price elasticity of demand for furniture is estimated at 1.3. This value means a one percent increase in the

price of furniture will decrease the quantity of furniture demanded by 1.3 percent.

A country has a comparative advantage in the production of a good if it can

produce the good at the lowest opportunity cost.

In the figure above, the equilibrium market price is $20. Area A is the A. producer surplus. B. marginal benefit of 150th unit. C. marginal cost of 150th unit. D. consumer surplus. E. willingness to pay for the 150th unit.

producer surplus

Market equilibrium occurs when

quantity demanded equals quantity supplied

End of HW2: The graph illustrates the market for bottled water. If the producers of bottled water switch to using improved technology, then the

quantity demanded of bottled water increases

When the demand curve shifts rightward and the market moves to a new equilibrium, then the

quantity supplied increases

The opportunity cost of a good increases as more of it is produced because

resources are not equally productive in all activities.

Gains from trade

result in being able to consume beyond the trading individuals' production possibilities frontiers.

Demand is inelastic when a price ________ results in total revenue ________. A. rise, increasing B. rise; decreasing C. fall, remaining the same D. fall; increasing

rise; increasing

Suppose the equilibrium price of oranges is $2.00 per pound. If the actual price is above the equilibrium price a

surplus exists and the price falls to restore equilibrium

A quantity less than the equilibrium quantity in a competitive market is inefficient because A. too much of the good is being produced. B. the marginal benefit is not maximized. C. the marginal benefit of another unit is greater than its marginal cost. D. the marginal cost of another unit is greater than its marginal benefit. E. the marginal benefit of another unit is not equal to zero.

the marginal benefit of another unit is greater than its marginal cost.

The price of cotton clothing falls. As a result,

the quantity demanded of cotton clothing increases

Start of HW3: The price elasticity of demand measures

the responsiveness of the quantity demanded to changes in price

Opportunity cost is best defined as

the value of the highest-valued alternative that is forgone in making a choice.

If the price is below the equilibrium price

there is a shortage

The primary focus of microeconomics is

to examine the behavior and operation of the individual units or sectors that make up the economy

The figure above illustrates a linear demand curve. If the price falls from $8 to $6 A. the quantity demanded increases by less than 20 percent. B. total revenue remains unchanged. C. total revenue increases. D. total revenue decreases.

total revenue increases

The figure above shows the production possibilities frontier for a country. A combination of 4 million gallons of milk and 4 million gallons of ice cream is

unattainable

To a seller, the cost of a good or service is ________ and the price is ________. A. what is received for the good or service; what must be given up to produce the good or service B. what must be given up to produce the good or service; what is received for the good or service C. the producer surplus the buyer receives; the consumer surplus the seller receives D. the producer surplus the seller receives; the consumer surplus the buyer receives E. None of the above answers is correct.

what must be given up to produce the good or service; what is received for the good or service