Econ 201-Exam 1

In the long run, in a perfectly competitive industry economic profit tends to persist. the number of firms in the industry will increase. economic loss tends to persist. economic profit and loss are driven to zero by entry and exit.

economic profit and loss are driven to zero by entry and exit.

If the cross-price elasticity of demand between lettuce and salad dressing is negative, then when the price of lettuce rises, the demand for salad dressing will ______. increase decrease remain the same become more inelastic

decrease

Refer to the accompanying figure. Suppose the dairy lobby convinces the government to impose price controls in this market. If the government requires cheese to be sold for a price of $8 per pound, then, relative to before the price controls, total consumer surplus in the market would increase. decrease. not change. increase and then decrease.

decrease.

An increase in the price a firm receives for its output will lead the firm to expand output. leave output unchanged and earn greater profits. leave output unchanged and earn smaller losses. reduce output.

expand output.

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the accompanying table. What is the lowest price per window that would induce John to spend at least one hour per day cleaning windows? $7 $1 $3 $2

$1

Sejal's reservation price for her economics textbook is $100. The week before the semester begins, Sejal finds a copy of her textbook online for $75. Sejal's consumer surplus from buying the textbook online is $125. $100. $75. $25.

$25.

The accompanying figure shows Isabella's daily production possibilities curve for dresses and skirts. (a) attainable. (b) efficient. (c) both attainable and efficient. (d) neither attainable nor efficient.

(a) attainable.

If the firms in a market have negative accounting profits, then, in the long run, the market ______ curve will shift to the ______. supply; right demand; left supply; left demand; right

Supply; left

The short run is best defined as one year or less. a period of time sufficiently short that all factors of production are variable. the period of time between quarterly accounting reports. a period of time sufficiently short that at least one factor of production is fixed.

a period of time sufficiently short that at least one factor of production is fixed.

The accompanying graph shows the cost curves for Mei's mushroom gathering business, which is perfectly competitive. If mushrooms sell for $10 per bushel, and Mei chooses the profit-maximizing quantity, she will gather 50 bushels. 20 bushels. 30 bushels. zero bushels.

zero bushels.

At his current level of consumption, Evan gets twice as much marginal utility from an additional bottle of water as that from an additional bottle of soda. If the price of soda is $1.00 per bottle, then Evan is maximizing utility if the price of a bottle of water is $1. $1.50. $2. $0.50.

$2.

The accompanying table shows a pizzeria's fixed cost and variable cost at different levels of output. Pizzas sell for $20 each. When the pizzeria makes 25 pizzas, its average fixed cost is ______. $5 $6 $10 $20

$20

When the price of hot dogs is $2.00 each, 100 hot dogs are sold every day. After the price falls to $1.50 each, 125 hot dogs are sold every day. At the original price, what is the price elasticity of demand for hot dogs? 1 25 50 0

1

The accompanying figure shows the supply and demand curves for oranges in Smallville. At the price of $4 per pound, sellers offer ______ pounds of oranges per day, and buyers want to purchase ______ pounds of oranges a day. 10; 30 10; 20 20; 20 30; 10

10; 30

Fran runs a doughnut shop in a tiny 3-person town. The accompanying table shows the quantity demand by the three townspeople at various prices: When the price of a doughnut is 25 cents, what is the market demand for doughnuts? 9 doughnuts 13 doughnuts 16 doughnuts 20 doughnuts

16 doughnuts

For a given seller, the accompanying figure shows the relationship between the number of units produced and the opportunity cost of producing an additional unit of output. If the market consists of 50 identical sellers, each with the same opportunity cost as the seller depicted in the figure, then how many units would be supplied in the market at a price of $14 per unit? 350 1,750 17,500 175,000

17,500

Refer to the accompanying table. As the firm increases the number of employees each day from 1 to 2, output increases by 33 units. 66 units. 99 units. 132 units.

33 units.

Refer to the accompanying table. To increase output from 99 to 132 units per day requires ______ extra employees; to increase output from 132 to 165 units per day requires ______ extra employees. 11; 18 7; 11 4; 3 3; 4

3; 4

Refer to the accompanying table. If the price of a t-shirt is $6 and the price of a sweater is $80, then the rational spending rule is satisfied when the consumer purchases _____ t-shirts and ______ sweaters. 4; 3 3; 4 4; 4 4; 1

4; 1

Refer to the accompanying figure. What is the equilibrium quantity of bananas in this market? 0 pounds/day 3 pounds/day 4 pounds/day 5 pounds/day

5 pounds/day

Refer to the accompanying figure. The marginal utility of the 6th pizza is 95. 100. 5. 17.5.

5.

The figure below depicts the short-run market equilibrium in a perfectly competitive market and the cost curves for a representative firm in that market. Assume that all firms in this market have identical cost curves. The long-run market equilibrium quantity in this industry is 300. 500. 700. more than 700.

500.

Which of the following will cause a decrease in the supply of jeans? An increase in the wages paid to workers who make jeans. A decrease in the demand for jeans. A decrease in the price of jeans. A decrease in the expected future price of jeans.

An increase in the wages paid to workers who make jeans.

The accompanying graph shows the cost curves for Mei's mushroom gathering business, which is perfectly competitive. In the graph above, the average variable cost curve is labeled _____, the average total cost curve is labeled _____, and the marginal cost curve is labeled ______. A; B; C C; B; A B; C; A C; A; B

C; B; A

Refer to the accompanying table. The law of diminishing marginal utility applies to t-shirts but not sweaters. does not apply to either t-shirts or sweaters. applies to sweaters but not t-shirts. applies to both t-shirts and sweaters.

applies to both t-shirts and sweaters.

Refer to the accompanying figure. At quantities less than 50 doughnuts per day marginal cost is declining. the return to the firm's variable factors of production must be increasing. average cost is declining because marginal cost is increasing. average cost is declining because marginal cost is less than average cost.

average cost is declining because marginal cost is less than average cost.

For a given seller, the accompanying figure shows the relationship between the number of units produced and the opportunity cost of producing an additional unit of output. As the market price of this good increases, the quantity produced by this seller will ______. increase decrease stay the same stay the same until the price rises above $6 per unit, and then it will increase

increase

Suppose farmers in a given market can either grow soybeans or corn on their land. In addition, suppose an increase in the demand for corn causes the price of corn to increase. In the long run, this increase in the demand for corn is likely to ______ the price of soybeans. lead to an increase in lead to a decrease in have no effect on have an ambiguous effect on

lead to an increase in

Suppose you believe that plaid flannel shirts are an inferior good, and you want to test this with economic data. You expect to find that the income elasticity for plaid flannel shirts is close to zero. greater than zero, but less than one. greater than one. less than zero.

less than zero.

A profit-maximizing perfectly competitive firm must decide only what price to charge, taking output as fixed. both what price to charge and how much to produce. only how much to produce, taking price as fixed. only which industry to join, taking price and output as fixed.

only how much to produce, taking price as fixed.

If you were to start your own business, your implicit costs would include the rent that you have paid in advance for the use of a building. opportunity cost of the time you spend working at the business. profit you earn over and above your normal profit. interest that you pay on your business loans.

opportunity cost of the time you spend working at the business.

When calculating price elasticity of demand, if the percentage change in price is negative, then the percentage change in quantity demanded is typically greater than one. positive. less than one. negative.

positive.

If a consumer buys two different goods, the rational spending rule requires that the total expenditure on the two goods be equal. ratio of total utility to price be equal for the two goods. ratio of average utility to price be equal for the two goods. ratio of marginal utility to price be equal for the two goods.

ratio of marginal utility to price be equal for the two goods.

A decrease in the price a firm receives for its output will lead the firm to expand output. cut its payments to its factors of production. leave output unchanged. reduce output.

reduce output.

Subsidies are most likely to reduce consumer surplus. increase total economic surplus. reduce total economic surplus. leave total economic surplus unchanged, but transfer surplus from producers to consumers.

reduce total economic surplus.

Assume that the production technology required to produce goods X and Y is very similar. If a firm that is producing good X notices that the market price of good Y is rising, it will intensify its production of good X. shift into producing good Y. anticipate a price increase for good X. charge a higher price for good X.

shift into producing good Y.

The price elasticity of demand is a measure of the change in quantity demanded of a good that results from a change in its price. the change in price of a good that results from a change in its quantity demanded. the demand for a good. how consumers respond to excess demand.

the change in quantity demanded of a good that results from a change in its price.

Refer to the accompanying figure. If the price of a latte increases from $2.00 to $2.50 total expenditure would increase. total expenditure would stay the same. total expenditure would decrease. the change in total expenditure, if any, would depend on the supply curve.

total expenditure would decrease.

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the accompanying table. The first hour John spends cleaning windows costs him ______ that he could have earned in the grocery store. $2 $7 $14 $18

$7

Suppose Juliana owns a small business making handbags. Each month she makes 18 handbags, which she sells for $100 each. The materials used to make each handbag cost $50. In addition, Juliana uses a spare room in her house to make the handbags and store her supplies. If she were not using the spare room for her business, she would use it as a guest room, an option that Juliana would value at $250 per month. If Juliana weren't making handbags, she would work at Trader Joe's earning $800 per month. What is Juliana's accounting profit each month? $150 $900 $650 $750

$900

Lauren was accepted at three different graduate schools, and she must choose one. Elite U costs $50,000 per year and did not offer Lauren any financial aid. Lauren values attending Elite U at $60,000 per year. State College costs $30,000 per year and offered Lauren an annual $10,000 scholarship. Lauren values attending State College at $40,000 per year. NoName U costs $20,000 per year and offered Lauren a full $20,000 annual scholarship. Lauren values attending NoName at $15,000 per year. Lauren's opportunity cost of attending State College is (a) $35,000. (b) $30,000. (c) $20,000. (d) $15,000.

(a) $35,000.

Chris has a one-hour break between classes every Wednesday. Chris can either stay at the library and study or go to the gym and work out. The decision Chris must make is (a) not an economic problem because neither activity costs money. (b) not an economic problem because it's an hour that Chris has no matter what he does. (c) an economic problem because the tuition Chris pays covers the cost of both the gym and the library. (d) an economic problem because Chris has only one hour, and engaging in one activity means giving up the other.

(d) an economic problem because Chris has only one hour, and engaging in one activity means giving up the other.

Refer to the accompanying figure. Assume demand remains unchanged at D1. If supply shifts from S1 to S2, then the equilibrium price will ______ and the equilibrium quantity will ______. (a) rise; fall (b) rise; rise (c) fall; fall (d) fall; rise

(d) fall; rise

If the demand curve for bologna shifts to the right as income falls then bologna is a(n) (a) normal good. (b) complementary good. (c) substitute good. (d) inferior good.

(d) inferior good.

If the demand for cucumbers and tomatoes both fall when income rises, then we know that tomatoes and cucumbers are (a) substitutes. (b) inferior goods. (c) complements. (d) normal goods.

(d) normal goods.

A market equilibrium might not maximize total economic surplus because (a) efficiency is not an important social goal. (b) in a market equilibrium individuals do not act rationally. (c) in a market equilibrium individuals do not exploit all opportunities for individual gain. (d) sometimes goods entail costs and benefits that do not fall on buyers and sellers.

(d) sometimes goods entail costs and benefits that do not fall on buyers and sellers.

Suppose that as the price of apples rises, people switch from eating apples to eating oranges. This is known as (a) the normal effect of a price change. (b) the income effect of a price change. (c) a decrease in the demand for apples. (d) the substitution effect of a price change.

(d) the substitution effect of a price change.

Suppose Vivek owns a small company that makes kites. The market for kites is perfectly competitive, and kites sell for $25 each. Vivek's total production costs vary depending on the number of kites he makes each day, as shown in the accompanying table. What is Vivek's economic profit at his profit-maximizing level of output? −$72 −$73 −$75 −$100

-72

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the accompanying table. How many hours a day should John spend cleaning windows? 1 2 3 4

2

Refer to the accompanying figure. What is the price elasticity of demand when the price of rice is $6 per pound? 0.5 0.67 2 3

2

Taylor's marginal utility from watching movies and from eating out (in utils) is shown in the accompanying table. Taylor spends exactly $100 every month on these two forms of entertainment; the price of each movie is $10 and the price of each dinner is $20. Taylor's optimal combination of movies and eating out is 3 movies and 3 dinners. 4 movies and 3 dinners. 3 movies and 4 dinners. 2 movies and 4 dinners.

2 movies and 4 dinners.

The accompanying figure shows a single consumer's demand for ice cream at the student union: Zoe is one of the students whose demand curve for ice cream is shown above. When price is $4, Zoe demands ______ scoops per week, and when price is $2, Zoe demands ______ scoops. 1; 3 2; 5 2; 4 2; 6

2; 6

If 20 percent increase in the price of a good leads to a 60 percent decrease in the quantity demanded, then what is the price elasticity of demand? 30 3 1/3 1/6

3

Fran runs a doughnut shop in a tiny 3-person town. The accompanying table shows the quantity demand by the three townspeople at various prices: When the price of a doughnut is 50 cents, what is the market demand for doughnuts? 31 doughnuts 20 doughnuts 9 doughnuts 5 doughnuts

9 doughnuts

If a price ceiling were imposed at point G, then producer surplus would be represented by the area ______. DBC DGF 0GFQ2 0DFQ2

DGF

Suppose that in an effort to help single parents, the government decides to pay part of the cost of childcare. This measure would increase ______ in the market for childcare. efficiency consumer surplus total economic surplus producer surplus

consumer surplus

Refer to the accompanying figure. Assume the slopes of the two demand curves are the same. Let eA denote the price elasticity of demand at point A, and let eB denote the price elasticity of demand at point B. eA > eB eA < eB eA = eB eA ÷ eB < 0

eA > eB

To increase total revenue, firms with ______ demand should lower price, and firms with ______ demand should increase price. elastic; unit elastic; inelastic inelastic; elastic unit; inelastic

elastic; inelastic

Suppose that there is only one small clothing store in the remote village of Green Acres, and until recently the townspeople bought their shirts there. As more people in Green Acres become connected to the Internet, the price elasticity of demand for shirts at the Green Acres store will increase because the Internet offers more substitutes. decrease because the Internet offers more substitutes. remain the same, but the quantity demanded will decrease as more people shop online. remain the same, but the demand will decrease as more people shop online.

increase because the Internet offers more substitutes.

If it is possible to make a change that will help some people without harming others, then the situation is efficient. inefficient. fair. unfair.

inefficient.

Sienna gets 18, 23, and 25 units worth of total utility from consuming 10, 11, and 12 raw oysters, respectively, and the price per oyster is 25 cents. Thus, one can infer that Sienna is not maximizing her utility. is experiencing diminishing marginal utility. should not consume any more oysters. has consumed too many oysters.

is experiencing diminishing marginal utility.

Suppose Lando Calrissian owns a smuggling business whose total revenue is $30,000 per month. The accompanying table shows Lando's monthly expenses. If Lando weren't a smuggler, he would earn $6,000 per month working for the Rebel Alliance. Apart from pay, Lando is indifferent between working as a smuggler and working for the Rebel Alliance. In the long run, we would expect Lando to join the Rebel Alliance since his accounting profit from smuggling is negative. continue smuggling since his accounting profit from smuggling is positive. continue smuggling since his economic profit from smuggling is positive. join the Rebel Alliance since his economic profit from smuggling is negative.

join the Rebel Alliance since his economic profit from smuggling is negative.

Refer to the accompanying graph. If this firm is a price taker and the price of each unit of output is $9, then at its profit-maximizing level of output, this firm will earn a ______ of ______. loss; $60 loss; $300 profit; $495 profit; $900

loss; $300

Unlike economic profit, economic rent can be less than zero. may not be driven to zero by competition. doesn't involve opportunity costs. only applies to land.

may not be driven to zero by competition.

For two goods, coffee and scones, suppose that MUcoffee / Pcoffee= 4 and MUscones / Pscones = 3. To maximize your total utility from these two goods, you should purchase less coffee and more scones. more coffee and fewer scones. less coffee and fewer scones. more coffee and more scones.

more coffee and fewer scones.

During recessions, when some workers lose their jobs and have lower incomes, sales of durable goods (goods with a life expectancy of 3 years or more) decline. Apparently, durable goods are substitutes. normal goods. complements. inferior goods.

normal goods.

When the price of insulin is $10, consumers demand 100 units; when the price is $15, consumers demand 100 units; and when the price is $20, consumers demand 100 units. Based on this information, the demand for insulin is unit elastic. perfectly elastic. perfectly inelastic. elastic.

perfectly inelastic.

Suppose a market is in equilibrium. The area below the market price and above the supply curve is the loss in total economic surplus. producer surplus. consumer surplus. total economic surplus.

producer surplus.

Suppose the production of cotton causes substantial environmental damage because the pesticides used by cotton farmers often make their way into nearby rivers and streams and are very harmful to fish and other wildlife. Economists would consider the environmental damage that results from the production of cotton to be a(n) relevant cost of production. relevant cost of production only if cotton farmers are charged a fine for the damage done. relevant cost of production only if the environmental damage negatively affects other firms. implicit cost of production that cotton farmers will take into account when determining their profit-maximizing level of output.

relevant cost of production.

If the firms in a market are earning an economic profit, then, in the long run, the market ______ curve will shift to the ______. demand; right supply; right supply; left demand; left

supply; right

Lauren was accepted at three different graduate schools, and she must choose one. Elite U costs $50,000 per year and did not offer Lauren any financial aid. Lauren values attending Elite U at $60,000 per year. State College costs $30,000 per year and offered Lauren an annual $10,000 scholarship. Lauren values attending State College at $40,000 per year. NoName U costs $20,000 per year and offered Lauren a full $20,000 annual scholarship. Lauren values attending NoName at $15,000 per year. Lauren's opportunity cost of attending Elite U is (a) $70,000 (b) $50,000. (c) $20,000. (d) $15,000.

(a) $70,000.

Smith and Jones comprise a two-person economy. Their hourly rates of production are shown in the accompanying table. The opportunity cost of making a calculator for Smith is ______ and for Jones it is ______. (a) 0.10 computers; 0.05 computers (b) 10 computers; 20 computers (c) 1 computer; 0.5 computers (d) 0.6 computers; 1.2 computers

(a) 0.10 computers; 0.05 computers

Ushi owns an apple farm and plans to spend 4 hours today picking apples. The number of apples he can pick per hour depends on the total number of hours he spends working in either the east orchard or the west orchard in the manner shown in the accompanying table: What is the opportunity cost to Ushi of spending an additional hour picking apples in the East orchard? (a) 10 apples (b) 20 apples (c) 30 apples (d) 40 apples

(a) 10 apples

If this market is unregulated, the economic surplus received by consumers is $4. $8. $16. $24.

$16.

The accompanying table shows a pizzeria's fixed cost and variable cost at different levels of output. Pizzas sell for $20 each. Between 25 and 50 pizzas, the pizzeria's marginal cost is ______. $4 $6 $8 $16

$4

The accompanying table shows how total donations, average donations, total labor costs, and average labor costs vary depending on the number of employees State U hires for its fundraising activities: The president of State U decides to hire fundraising employees as long as their average benefit exceeds their average cost. This results in ______ employees being hired and a net benefit (total donations minus total labor costs) of ______. (a) 5; $17,080 (b) 5; $67,080 (c) 4; $60,000 (d) 4; $22,000

(a) 5; $17,080

All else equal, the price elasticity of demand for a good tends to be lower (a )if the good has few close substitutes. (b) if the good represents a large share of a consumer's budget. (c) in the long run. (d) if the good has many close substitutes.

(a) if the good has few close substitutes.

In deciding how many guitars to buy for his shop before the Christmas season, Miguel is making a(n) ______ decision. (a) microeconomic (b) macroeconomic (c) normative (d) irrational

(a) microeconomic

The slope of a production possibilities curve is ______ because ______. (a) negative; producing more of one good requires producing less of the other (b) negative; producing less of one good requires producing less of the other (c) positive; producing more of one good requires producing more of the other (d) positive; producing more of one good requires producing less of the other

(a) negative; producing more of one good requires producing less of the other

Smith and Jones comprise a two-person economy. Their hourly rates of production are shown in the accompanying table. If Smith and Jones are dividing their time efficiently and producing fewer than 10 computers and more than 120 calculators per hour, then Smith will ______ and Jones will ______. (a) split his time between computers and calculators; produce only calculators (b) produce only calculators; split his time between computers and calculators (c) produce only calculators; produce only computers (d) produce only computers; produce only calculators

(a) split his time between computers and calculators; produce only calculators

"All else constant, consumers will purchase more of a good as the price falls." This statement reflects the behavior underlying (a) the demand curve. (b) a change in demand. (c) the supply curve. (d) a change in supply.

(a) the demand curve.

Your classmates from the University of Chicago are planning to go to Miami for spring break, and you are undecided about whether you should go with them. The round-trip airfare is $600, but you have a frequent-flyer coupon worth $500 that you could use to pay part of the airfare. All other costs for the vacation are exactly $900. The most you would be willing to pay for the trip is $1,400. Your only alternative use for your frequent-flyer coupon is for your trip to Atlanta two weeks after the break to attend your sister's graduation, which your parents are forcing you to attend. The Chicago-Atlanta round-trip airfare is $450. What is the opportunity cost of using the coupon for the Miami trip? (a) $100 (b) $450 (c) $500 (d) $550

(b) $450

Refer to the accompanying figure. Moving from point B to point A, the opportunity cost of 25 more salads is (a) 5 pizzas. (b) 10 pizzas. (c) 15 pizzas. (d) 20 pizzas.

(b) 10 pizzas.

Refer to the accompanying figure. For Pat, the opportunity cost of removing one bag of trash is planting (a) 100 bulbs. (b) 5 bulbs. (c) 1/100 of a bulb. (d) 1/5 of a bulb.

(b) 5 bulbs.

Refer to the accompanying figure. At a price of $5, there will be (a) an excess supply of 3.33 units. (b) an excess demand of 1.67 units. (c) an excess demand of 5 units. (d) an excess supply of 5 units.

(b) an excess demand of 1.67 units.

You are trying to decide whether to purchase a Harry Potter book online or borrow it from the library. There is no charge for borrowing a book from the library, but going to the library takes more time than ordering a book online. Regardless of how you get the book, its benefit to you is the same. If the cost of buying the book online is $13, then you should (a) borrow the book from the library because you can get it from the library for free. (b) borrow the book from the library if the cost of doing so (in terms of the extra time it takes) is less than $13. (c) borrow the book from the library if the cost of doing so (in terms of the extra time it takes) is greater than $13. (d) buy the book online because it takes less time.

(b) borrow the book from the library if the cost of doing so (in terms of the extra time it takes) is less than $13.

An individual has an absolute advantage in producing pizzas if that individual (a) has a lower opportunity cost of producing pizzas than anyone else. (b) can produce more pizzas in a given amount of time than anyone else. (c) has a higher opportunity cost of producing pizzas than anyone else. (d) charges the lowest price for pizzas.

(b) can produce more pizzas in a given amount of time than anyone else.

All else equal, a decrease in the demand for oranges will lead to a(n) ______ in equilibrium price and a(n) ______ in equilibrium quantity. (a) increase; decrease (b) decrease; decrease (c) decrease; increase (d) increase; increase

(b) decrease; decrease

If a linear, two-good production possibilities curve has a slope of −2, then (a) having an additional unit of the good measured on the vertical axis means giving up 2 units of the good measured on the horizontal axis. (b) having an additional unit of the good measured on the vertical axis means giving up 1/2 unit of the good measured on the horizontal axis. (c) you have an absolute advantage in the good measured on the vertical axis. (d) you have a comparative advantage in the good measured on the vertical axis.

(b) having an additional unit of the good measured on the vertical axis means giving up 1/2 unit of the good measured on the horizontal axis.

Refer to the accompanying figure. Moving from demand curve D1 to demand curve D2 illustrates a(n) (a) increase in quantity demanded. (b) increase in demand. (c) decrease in demand. (d) decrease in quantity demanded.

(b) increase in demand.

The field of economics that would be most concerned with a recent fall in interest rates is (a) microeconomics. (b) macroeconomics. (c) economic naturalism. (d) marginal economics.

(b) macroeconomics.

The accompanying figure shows Isabella's daily production possibilities curve for dresses and skirts. Relative to point X, at point Y (a) more dresses and more skirts are produced. (b) more skirts and fewer dresses are produced. (c) more dresses and fewer skirts are produced. (d) fewer skirts and fewer dresses are produced.

(b) more skirts and fewer dresses are produced.

If there is an excess supply of sport utility vehicles, then (a) supply is greater than demand. (b) quantity supplied is greater than quantity demanded. (c) demand is greater than supply. (d) quantity demanded is greater than quantity supplied.

(b) quantity supplied is greater than quantity demanded.

An increase in an economy's productive resources will lead the production possibilities curve to (a) shift inward. (b) shift outward. (c) become flatter. (d) stay the same.

(b) shift outward.

The accompanying table shows the relationship between the speed of a computer's CPU and its benefits and costs. Assume that all other features of the computer are the same (that is, CPU speed is the only source of variation), and only the CPU speeds listed in the table are available for purchase. The marginal cost of upgrading from a 2.5GHz to 3.0GHz computer is (a) $400. (b) $300. (c) $200. (d) $100.

(c) $200.

You won a free ticket to see the latest superhero movie this Friday night (which you can costlessly resell for its face value of $15). Your favorite band is also performing on Friday and is your only alternative activity. Friday is your last chance to see either the movie or the band. Tickets to see your favorite band cost $30, and on any given day, you would be willing to pay as much as $50 for a ticket. Based on this information, what is your opportunity cost of going to see the movie on Friday? (a) $0 (b) $30 (c) $35 (d) $50

(c) $35

Assume point A on a linear production possibilities curve represents the combination of 12 coffees and 3 cappuccinos, and point B represents 3 coffees and 6 cappuccinos. Suppose coffees are on the vertical axis and cappuccinos are on the horizontal axis. The opportunity cost of a cup of coffee is (a) 3 cappuccinos. (b) 9 cappuccinos. (c) 1/3 of a cappuccino. (d) 6 cappuccinos.

(c) 1/3 of a cappuccino.

Smith and Jones comprise a two-person economy. Their hourly rates of production are shown in the accompanying table. If Smith and Jones devote all of their resources to producing computers, then the maximum number of computers they can produce in an hour is (a) 120. (b) 6. (c) 16. (d) 10.

(c) 16.

Gertie saw a pair of jeans that she was willing to buy for $35. The price tag, though, said they were $29.99. Therefore (a) Gertie should not buy the jeans because they will be of lower quality than she expected. (b) Gertie should not buy the jeans because the price is not equal to her reservation price. (c) Gertie should buy the jeans because the price is less than her reservation price. (d) Gertie should buy the jeans because the price is more than her reservation price.

(c) Gertie should buy the jeans because the price is less than her reservation price.

The Incentive Principle is an example of (a) an economic decision-making pitfall. (b) overestimating the benefits of an action. (c) a positive economic principle. (d) a normative economic principle.

(c) a positive economic principle.

When the supply of a good decreases, there will be a(n) (a) decrease in demand. (b) decrease in buyers' reservation prices for the good. (c) decrease in the quantity demanded. (d) increase in the quantity demanded.

(c) decrease in the quantity demanded.

If a person takes an action if, and only if, the extra benefits from taking that action are at least as great as the extra costs, then that person is (a) not following the Cost-Benefit Principle. (b) following the Scarcity Principle. (c) following the Cost-Benefit Principle. (d) not rational.

(c) following the Cost-Benefit Principle.

The buyer's reservation price for a particular good or service is the (a) smallest price the buyer would be willing to pay for it. (b) same as the market price. (c) largest price the buyer would be willing to pay for it. (d) price the buyer must pay to ensure he or she gets it.

(c) largest price the buyer would be willing to pay for it.

All else equal, the jobs that are the least likely to be outsourced are those that (a) do not involve face-to-face contact. (b) can be done by a computer. (c) require face-to-face communication. (d) can be broken down into series of well-defined steps.

(c) require face-to-face communication.

Lauren was accepted at three different graduate schools, and she must choose one. Elite U costs $50,000 per year and did not offer Lauren any financial aid. Lauren values attending Elite U at $60,000 per year. State College costs $30,000 per year and offered Lauren an annual $10,000 scholarship. Lauren values attending State College at $40,000 per year. NoName U costs $20,000 per year and offered Lauren a full $20,000 annual scholarship. Lauren values attending NoName at $15,000 per year. What is Lauren's economic surplus from attending State College instead of her next best alternative? (a) $40,000 (b) $20,000 (c) $10,000 (d) $5,000

(d) $5,000

The accompanying table shows how total donations, average donations, total labor costs, and average labor costs vary depending on the number of employees State U hires for its fundraising activities: The total value of donations raised by three employees is (a) $43,899. (b) $45,000. (c) $48,911. (d) $51,963.

(d) $51,963.

Refer to the accompanying figure. For Pat, the opportunity cost of planting one bulb is removing (a) 20 bags of trash. (b) 5 bags of trash. (c) 1/20 of a bag of trash. (d) 1/5 of a bag of trash.

(d) 1/5 of a bag of trash.

The accompanying figure shows the production possibilities curve for the island of Genovia: The opportunity cost of producing a car in Genovia is (a) 5,000 tons of agricultural products. (b) 500 tons of agricultural products. (c) 5 tons of agricultural products. (d) 50 tons of agricultural products.

(d) 50 tons of agricultural products.

A decrease in both the equilibrium price and the equilibrium quantity of rice is best explained by (a) an increase in the demand for rice. (b) an increase in the supply of rice. (c) a decrease in the supply of rice. (d) a decrease in the demand for rice.

(d) a decrease in the demand for rice.

"As the price of personal computers continues to fall, demand increases." This headline is inaccurate because (a) a change in the price of personal computers shifts the demand curve. (b) a change in the price of personal computers shifts the supply curve. (c)the statement is backwards: increased demand leads to lower prices. (d) a falling price of personal computers increases the quantity demanded, not demand.

(d) a falling price of personal computers increases the quantity demanded, not demand.

The figure below depicts the short-run market equilibrium in a perfectly competitive market and the cost curves for a representative firm in that market. Assume that all firms in this market have identical cost curves. Given that the current equilibrium price is $8, what will happen to the number of firms in this market in the long run? The number of firms in the market will not change unless there is a change in either demand or in the cost of production. The number of firms in the market will fall as firms exit the market in response to negative economic profit. It is impossible to determine whether the number of firms in this market will rise or fall. The number of firms in the market will rise as firms enter the market in response to positive economic profit.

The number of firms in the market will rise as firms enter the market in response to positive economic profit.

Suppose the company that owns the vending machines on your campus has doubled the price of a can of soda. They then notice that they are selling approximately 15 percent fewer sodas. The price elasticity of demand for sodas from the campus vending machines, therefore, is inelastic. unit elastic. elastic. infinite.

inelastic.