ECON 2005

Chin purchases 5 protein bars at a price of $3 each. The marginal benefit he receives from each bar is $5 for the first bar, $4.50 for the second bar, $4.00 for the third bar, $3.50 for the fourth bar, and $3.00 for the fifth bar. The marginal cost of producing the bars is $2 each. What is Chin's consumer surplus on the fifth bar? $0 $0.50 $1 $2

$0

The supply curve is upward-sloping because higher prices ________. A. encourage customers to switch to substitute goods B. are needed to cover higher marginal costs C. make customers willing to pay more for a good D. are needed to reflect higher marginal utility

B. are needed to cover higher marginal costs

If more states legalize recreational marijuana, what is the likely effect on the supply of marijuana? A. It would not change. B. It would increase because prices will rise. C. It would decrease as the risk of prosecution rises. D. It would increase as the risk of prosecution falls.

D. It would increase as the risk of prosecution falls.

A buyer gains consumer surplus when they purchase a good: a) At a price below the value of the benefit they receive from the good b) at an equitable price c) At a price above marginal revenue but lower than the cost of production d) With a marginal benefit below the price of the good

a) At a price below the value of the benefit they receive from the good

Rising marginal costs imply a) falling variable costs b) rising fixed costs c) downward sloping demand curve d) an upward sloping supply curve

an upward sloping supply curve

An upward sloping supply curve shows that a) there is an inverse relationship between price and quantity supplied b) there is a positive relationship between price and quantity supplied c) there is no relationship between price and quantity supplied d) sellers are willing to sell less when the prices are higher in the market

b) there is a positive relationship between price and quantity supplied

Which of these determines what the most efficient economic outcome is? a) lowest cost b) Largest surplus c) Smallest Inequality d)Highest total benefit

b) Largest surplus

If demand is _______ , a higher price yields _______ total revenue. a) inelastic; lower b) inelastic; higher c) elastic; higher d) elastic; no change

b) inelastic; higher

Lisa is choosing between three alternatives: a) working at her job that pays 60 dollars; b) writing a term paper which she values at 40 dollars; or c) going out with a friend, which she values at 80 dollars. The opportunity cost of writing the term paper is: 0 dollars. 140 dollars. 20 dollars. 80 dollars.

$80

Instead of attending class, one could have worked an extra hour at the café for $10 or watched a neighbor's child for $15. The opportunity cost of attending class is: $15. $10. $25. $5.

$15

Consider the demand for socks. What would cause a movement from one point on the demand curve to a point further down the curve? A. A big sale on socks. B. An increase in the price of socks. C. Increased demand for a kind of shoe typically worn without socks. D. Decreased demand for a kind of shoe typically worn without socks.

A. A big sale on socks

A binding price ceiling leads to: a) a shortage b) a surplus c) an equilibrium d) a high price

a) a shortage

Suppose that it takes you 2 hours to complete your econ homework and 4 hours to complete your philosophy homework. What is the opportunity cost of completing your econ homework? a) half of your philosophy homework b) 2 philosophy homeworks c) half of your econ homework d) two econ homeworks

a) half of your philosophy homework

Suppose the price of gasoline rises. As time passes, people adjust to the higher price, and the demand for gasoline becomes: a) more elastic b) more inelastic c) steeper d) higher

a) more elastic

Income elasticity of demand measures how responsive the: a) quantity demanded of a good is to change in income b) quantity demanded of one good is to changes in demand for another good c) price of good is to price changes of another good d) quantity supplied of one good is to price changes of another

a) quantity demanded of a good is to change in income

Price elasticity of demand measures how responsive ________ are to __________ changes. a) buyers; quantity b) buyers; price c) buyers; income d) sellers; quantity

b) buyers; price

Which of the following best explains why your favorite brand of popsicles had gone up in price? a) other consumers have decided that you have bad taste and that they should buy different popsicles than you. b) the store you buy your popsicles from got an unexpected shipment of that brand's popsicles that they need to sell quickly c) one of the freezers in the store malfunctioned and melted most of that brands popsicles d) it is getting colder outside, and people buy less popsicles when it is cold.

c) one of the freezers in the store malfunctioned and melted most of that brands popsicles

When four roommates agree to specialize in the chores they are most efficient at, this can lead to: A. a situation in which less time is spent on chores by every roommate. B. some roommates doing many more chores than others. C. one roommate who is most efficient doing all of the chores. D. no chores getting done at all.

A. a situation in which less time is spent on chores by every roommate.

Quantity demanded is on the horizontal axis when you plot a demand curve and shows the: A. amount of a good that a person is willing to buy at each price B. amount of a good that a person actually buys at the market price C. amount of a good that a seller is willing to sell at a particular price D. amount where opportunity cost is equal to the marginal benefits

A. amount of a good that a person is willing to buy at each price

Which of the following is a decision that follows the net marginal benefit principle? A. Choosing to give up eating meat due to concerns regarding the treatment of animals. B. Deciding whether to spend one more hour studying for an exam. C. Deciding to order a dessert at a non-buffet restaurant more often than you have dessert at a buffet. D. Choosing among different roller coasters based on their distance from the theme park entrance.

B. Deciding whether to spend one more hour studying for an exam.

The Rational Rule for Buyers A. compares the total benefit of all units to the total price of all units purchased B. compares the benefit of buying an additional unit of the item to the cost of that item C. only applies to buyers who are buying necessities as opposed to luxury items D. compares the cost of production of an item to the price of the item

B. compares the benefit of buying an additional unit of the item to the cost of that item

College students often buy cheap pizza because it is more affordable. Suppose after graduating, college students find high-paying jobs. The demand for cheap pizza will likely: A. increase because demand for cheap pizza is negatively related to income. B. decrease because demand for cheap pizza is negatively related to income. C. increase because demand for cheap pizza is positively related to income. D. decrease because demand for cheap pizza is positively related to income.

B. decrease because demand for cheap pizza is negatively related to income.

The rational rule summarizes the marginal principle. It says that if something is worth doing, keep doing it until your marginal.... Benefits equal your marginal costs or Benefits exceed your marginal costs

Benefits equal your marginal costs.

Which of the following factors would most likely cause a shift in the demand curve for candles? A. Improved technology that makes candles less costly to produce. B. An increase in the price of wax used to make candles. C. Falling incomes, due to a weakening economy. D. A decrease in the number of factories making candles.

C. Falling incomes, due to a weakening economy

If the price of copper rises, which of the following may occur? A. The quantity of copper supplied falls. B. The government increases the copper content of pennies. C. The profits of copper producers increase. D. Thefts of copper wire decline.

C. The profits of copper producers increase.

The opportunity costs of a decision may include each of the following types of costs EXCEPT... A. out-of-pocket financial costs B. forgone financial costs C. sunk costs D. nonfinancial costs

C. sunk costs

Which of the following scenarios depicts a rational buyer? A. Mary values a bag of salad at $2, but she buys the bag of salad even when the price is $4. B. John walks into a grocery store and purchases monthly groceries without paying attention to the prices of groceries. C. Darwin buys a can of shoe polish at $4.50 when his marginal benefit from it is $3.75 D. Damien chooses to buy a sandwich for $5 when the marginal benefit of the sandwich to him is $7

D. Damien chooses to buy a sandwich for $5 when the marginal benefit of the sandwich to him is $7

Which of the following is NOT a demand shifter? A. The price of a substitute good B. The price of a complementary good C. The number of buyers in the market D. The price of the market

D. The price of the market

Diminishing marginal benefit: A. is when buying an additional item yields a larger marginal benefit than the previous item. B. is when consumers do not follow the rational rule C. is not important in determining a consumer's purchase decision D. is when buying an additional item yields a smaller marginal benefit than the previous item.

D. is when buying an additional item yields a smaller marginal benefit than the previous item.

Suppose that it takes Pat 15 min to shampoo and 60 min to cut hair. Suppose it takes Alex 10 min to shampoo and 50 min the cut hair. Who should cut hair? Pat? Alex? Neither? Both?

Pat!

Which of the following statements is true? a) Economically efficient outcomes hold the possibility of making everyone better off b) Economically efficient outcomes will make everyone better off c) Economically efficient outcomes will increase equity d) Economically efficient outcomes will always reduce equity

a) Economically efficient outcomes hold the possibility of making everyone better off

The market supply is... a) a graph that plots the total quantity of an item supplied by the entire market at each price b) a graph that plots the quantity supplied at each price by one seller c) a graph that plots the total quantity demanded of an item by the entire market at each price d) the total cost of production of the item for the entire market

a) a graph that plots the total quantity of an item supplied by the entire market at each price

The large amount of harvested grain used to make flour grows mold due to flooding. How will this affect the supply of flour in the market? a) The supply of flour will increase in the market b) the supply of flour will decrease in the market. c) the supply of flour will remain unchanged in the market d)Suppliers of flour will switch to supplying grain

b) the supply of flour will decrease in the market.

The percent change in insulin demanded for any price change is zero. This demand curve for insulin is _______, and the price elasticity of demand is _______. a) vertical: perfectly elastic b) vertical; perfectly inelastic

b) vertical; perfectly inelastic

Scarcity

basic problem of economics. Resources are scarce because we live in a world in which humans' wants are infinite but the land, labor, and capital required to satisfy those wants are limited. This conflict between society's unlimited wants and our limited resources means choices must be made when deciding how to allocate scarce resources.

A binding price floor is: a) the maximum price that a seller can charge in a market b) always at the equilibrium price c) always above the equilibrium price d) always below the equilibrium price

c) always above the equilibrium price

Buyers bear all the economic burden of a tax if the demand is ______ given an upward sloping supply curve. a) perfectly elastic b) relatively inelastic c) perfectly inelastic d) downward sloping

c) perfectly inelastic

Suppose the government has created a price ceiling ABOVE the equilibrium price. How does total surplus change as a result of this policy? a) total surplus increases b) total surplus decreases c) total surplus stays the same d) There is not enough information

c) total surplus stays the same

If farmers begin using better fertilizers to grow corn, we would expect a(n) __________ in the supply of corn. a) small decrease b) no change c) large decrease d) increase

d) increase

Which of the following lists only the factors that would cause a decrease in the supply of an item? a) A fall in the input prices; an increase in productivity, a fall in the price of a substitute in production b) A rise in the price of a substitute-in-production; a rise in the price of a complement in production; an expectation that the price of the item will rise in the future. c)A decrease in the number of sellers in the market; a fall in the price of a complement in production; an increase in productivity d)A rise in input prices; a decrease in the number of sellers in the market; a rise in the price of a substitute-in- production

d)A rise in input prices; a decrease in the number of sellers in the market; a rise in the price of a substitute-in- production

Microeconomics

is the study of choices. Choices are difficult because of scarcity

Economics

is the study of how individuals and societies choose to allocate scarce resources, why they choose to allocate them that way, and the consequences of those decisions.

Which of the following would cause the demand curve for ice cream to shift to the right? A. A rise in the price of popsicles, a substitute for ice cream. B. An unexpected cold and rainy summer season. C. A reduction in the cost of producing ice cream. D. A reduction in the price of ice cream.

A. A rise in price of the popsicles, a subset for ice cream.

The opportunity cost principle states that the true cost of something is the A. Next best alternative you have to give up to get it B. least desired alternative you have to give up to get it C. economic surplus you give up to get it D. economic surplus you receive from getting it

A. Next best alternative you have to give up to get it

The marginal principle breaks quantity decisions into iterative decisions that use the... A. cost-benefit principle B. opportunity cost principle C. interdependence principle D. sunk cost evaluation

A. cost-benefit principle

Which of the following is most likely to shift the supply curve for pet grooming services leftward? A. An increase in the number of pet groomers seeking employment. B. A decrease in the number of owners taking their pets to be groomed. C. An increase in the cost of pet grooming supplies. D. A rise in the price of pet grooming services.

C. An increase in the cost of pet grooming supplies.

Shifts in the market demand can result from a change in A. the price of a product B. the cost of production for an item C. the number producers of an item in the market D. the type and number of buyers

D. the type and number of buyers

You are considering whether you should go out to dinner at a restaurant with your friend. The meal is expected to cost you $50, you typically leave a 20% tip, and a round-trip Uber ride will cost you $15. You value the restaurant meal at $30 and the time spent with your friend at $50. You should ____ to dinner with your friend because the benefit of doing so is _____ than the cost. A. go, greater B. not go, less C. go, less D. not go, greater

go; greater

If an economy is using its resources efficiently then... A. some resources are not being utilized B. more of one good can be produced only if production of another is given up C. it is impossible to produce more than one good D. more of both goods can be produced

B. more of one good can be produced only if production of another is given up. (A trade-off!)

If the government offers a tax deduction to companies producing solar panels, what will happen in the market for solar panels? A. The supply curve will shift to the left, decreasing supply. B. The supply curve will shift to the left, increasing supply. C. The supply curve will shift to the right, increasing supply. D. The supply curve will shift to the right, decreasing supply.

C. The supply curve will shift to the right, increasing supply.

On a hot sweltering day, you feel thirsty and buy an ice-cold soft drink, which you gulp down. Whether you buy the second drink or not, will depend on.... A. how you feel about soft drinks B. the total amount of soft drinks that you have consumed that week C. the price of the soft drink D. that marginal benefit from the second soft drink and if it will outweigh the price of the soft drink

D. that marginal benefit from the second soft drink and if it will outweigh the price of the soft drink

Your friend tells you the following: "The law of demand does not work ALL the time. For example, think about the demand for luxury cars (e.g., BMWs, Porshe, etc.). Demand for such cars increases when the price of the car increases." Your friend is: A. correct; luxury cars are superior goods. B. correct; luxury cars give people a higher status. C. wrong; aggregate demand is not the same as regular demand. D. wrong; demand is not the same as quantity demanded.

D. wrong; demand is not the same as quantity demanded.

Which of the following sellers will achieve their desired result for total revenue? a) A pharmacy raises the price of its store brand pain medication in order to raise revenue from sales. The store brand medication had many brand-name substitutes. b) A florist raises the price of roses before and on Valentines Day and hopes to raise total revenue. The florist is the only flower shop in town c) An airline maintains higher prices in the hopes of maintaining sales. However, a new low-cost competing airline had just entered the market d) In a market with a relatively inelastic demand curve, a coffee shop lowers coffee prices in the hopes of raising total revenue.

b) A florist raises the price of roses before and on Valentines Day and hopes to raise total revenue. The florist is the only flower shop in town

The economic burden of a tax is the: a) government-designated burden of a tax payment b) burden created by the change in after-tax prices faced by buyers and sellers c) percentage increase in the tax on an item d) laws governing sales taxes in a country

b) burden created by the change in after-tax prices faced by buyers and sellers

Which of the following is NOT a way that the government can intervene in markets? a) The government can set minimum wages b) The government can raise taxes on a particular item c) The government can pass laws on sales taxes d) The government can stop the forces of demand and supply from working on markets

d) The government can stop the forces of demand and supply from working on markets

Economic surplus measures the value of a decision's a) total costs minus its net benefits b) net benefits plus externalities c) absolute value of total costs d) Total benefits minus total costs

d) Total benefits minus total costs

If a certain item had any substitutions, its demand curve will be: a) perfectly elastic b) perfectly inelastic c)relatively steep d)relatively flat

d)relatively flat

Let's say you want to watch a 2 hour movie on Netflix. But you also have an hour of Econ work to do and have to do laundry (which also takes 1 hour). You are trying to figure out what to do. You are also sleepy and could just go to bed early but you won't do that. What's the opportunity cost of watching the movie? A. laundry B. sleeping C. sleeping, studying econ, and doing laundry D. studying econ, AND doing laundry E. studying econ

D. studying Econ and doing laundry (Weren't going to sleep anyway)

The price of gasoline is $2.50 per gallon at the closest gas station, but is only $2.30 per gallon at a gas station two miles away. By driving to the farther gas station, the opportunity cost is: A. the cost of filling one's tank at the original price of $2.50 per gallon. B. $0.20 per gallon, the difference in price between the two gas stations. C. non-existent because gas is cheaper at the farther station. D. the value of one's time and expenses to go to the farther gas station.

D. the value of one's time and expenses to go to the farther gas station.

Which of the following lists only factors that would cause an increase in supply of an item? a) a decrease in input prices; a technological innovation, a fall in the price of a substitute-in- production b)A rise in the price of a substitute-in-production, an increase in the price of a complement-in-production; an expectation that the price of the item will increase in the future. c) a decrease in the number of sellers in the market; a fall in the price of a complement in production, a technological setback. d) an increase in input prices, a decrease in the number of sellers in the market, an increase in the price of a substitute in production.

a) a decrease in input prices; a technological innovation, a fall in the price of a substitute-in- production

An individual supply curve is... a) a graph with quantities of a product that a seller is willing to supply at different price points b) a graphs that plots how much a seller produces at different points in time c) a graph that plots the quantities of an item that a buyer plans to buy at different prices. d) the quantity a seller is willing to supply at one particular price

a) a graph with quantities of a product that a seller is willing to supply at different price points

The cross-price of elasticity of demand measures how responsive the: a) demand for one good is to change in the price of another good b)demand for one good is to a change in the demand of another good c)price of a good is to a change in the price of another good d)supply of one good is to a change in the price of another good

a) demand for one good is to change in the price of another good

The statutory burden of a tax is the: a) government-designated burden to send a tax payment b) burden created by the change in after-tax prices faced by buyers and sellers c) percentage increase in the tax on an item d) laws governing sales taxes in a country

a) government-designated burden to send a tax payment

A tax on sellers can shift a) supply curve to the left b) supply curve to the right c) demand curve to the left d) demand curve to the right

a) supply curve to the left

Which of the following is NOT a factor that can shift supply? a) The price of the product b) The cost of the raw materials used in the production process c) The state of technology used for production d) The change in the price of a complement in production

a) the price of the product

If income rises by 20% and the quantity demanded of a good falls by 20%, the income elasticity of demand for this good is _______, and this good is an ________ good. a)-1;inferior b)-1; normal c)1; inferior d)1; normal

a)-1;inferior

Which of the following is an example of market failure? a) The market price is too high for some people to pay, so they are unable to purchase the good b) A monopolist sets a price above its marginal cost of production, reducing the quantity sold below that of a market c) The market price is too low for some firms to produce, so they do not produce the good d)Some people don't like the good, so they choose not to purchase it

b) A monopolist sets a price above its marginal cost of production, reducing the quantity sold below that of a market

The Rational Rule for Sellers says that a seller should sell one more unit of an item if the price is: a) less than the marginal cost b) greater than or equal to the marginal cost c) less that the marginal benefit d) greater than or equal to the marginal benefit

b) greater than or equal to the marginal cost

Assuming everything else stays the same, an increase in the price of smartphones will __________ of smartphones. a) increase the supply b) increase the quantity supplied c) decrease the quantity supplied d) decrease the supply

b) increase the quantity supplied

A market consists of ten similar suppliers that are making the same supply decisions. To find the market supply of these ten suppliers, you: a) find the average quantity produced by the ten suppliers b) multiply the individual supply of one of the suppliers by ten c) take the individual supply of one supplier d) take one-tenth of the individual supply of each supplier and add it up.

b) multiply the individual supply of one of the suppliers by ten

Ian's research indicates that at a price of $12, his firm would sell 100,000 units of output. He determines that sales of 100,000 units is too low for his preferences. He then explores his options to increase sales. In order, what types of analysis are used in this three-step chain of events? a) positive, positive, normative b) positive, normative, positive c) normative, positive, normative d) normative, positive, positive

b) positive, normative, positive

Suppose the government has created a price ceiling BELOW the equilibrium price. How does producer surplus change a result of this policy? a) producer surplus increases b) producer surplus decreases c) producer surplus stays the same d) There is not enough information

b) producer surplus decreases

Price elasticity of supply measures how responsive: a) sellers are to changes in the prices of competing goods b) sellers are to price changes c) buyers are to price changes d) sellers are to changes in cost of production

b) sellers are to price changes

If Taylor Swift concert tickets are sold out within 5 minutes of being released, then we can conclude that.... a) There is a control on how high the ticket prices can go b)There is a shortage of Taylor Swift concert tickets in the market c) The price of the tickets is above the equilibrium price in the market d)The quantity supplied of Taylor Swift concert tickets is more than the quantity demanded.

b)There is a shortage of Taylor Swift concert tickets in the market

If an item is a necessity rather than a luxury, its demand curve will be: a) perfectly elastic b) perfectly inelastic c) relatively steep d) relatively flat

c) relatively steep

A subsidy is a a) form of tax b) government regulation of the quantity sold in a market c) a tax designed to encourage particular purchases or productive activities d) a government payment designed to encourage particular purchases or productive activities

d) a government payment designed to encourage particular purchases or productive activities

When the price of elasticity of supply is ________ relative to the price elasticity of demand, then sellers bear _________ of the economic burden of a tax. a) small, all b) small, none c) large, a bigger share d) large, a smaller share

d) large, a smaller share

Price elasticity of demand is calculated by dividing the ________ by the __________. a) percent change in price; percent change in quantity demanded b) percent change in price; percent change in quantity supplied c)percent change in quantity demanded; percent change in income d) percent change in quantity demanded; percent change in price

d) percent change in quantity demanded; percent change in price

If a firm produces a product that had easily available variable inputs, its supply curve will be..... a) perfectly elastic b) perfectly inelastic c) relatively steep d) relatively flat

d) relatively flat

Two products have a cross-price elasticity of demand of 1.5 based on this value of cross-price elasticity, which of the following products are they most likely to be? a) a brand of tea and a brand of sugar b) a brand of hot dog and a brand of hot dog buns c) a brand of juice and a brand of computer d) two competing brands of soft drinks

d) two competing brands of soft drinks