ECON 2106: Principles of Microeconomics, Final Exam Study Guide

Wanda makes $30 an hour as a welder. She must take two hours off work (without pay) to go to the dentist. The dentist charges $40. The opportunity cost of her visit to the dentist is

$100 ($30+$30+$40)

Assume P1=40, P2=60, Q1=880 and Q2=720. Using the arc elasticity formula, find the elasticity of demand

-1/2

Suppose the elasticity of demand for peanut butter is -0.5. An increase in the price of peanut butter by 6% will cause

A decrease in Qd of 3%

Which of the following will not cause the demand for milk (a normal good) to increase in the current time period?

A decrease in the price of milk

A decrease in the supply of popcorn will result in

A higher price and lower quantity

A decrease in the demand for popcorn will result in

A lower price and lower quantity

Assuming that pizza is a normal good, if students' income at Armstrong decreases substantially, there would be

A reduction in the demand for pizza

An economic model is

A simplified version of some aspect of economic life used to analyze an economic issue

The cross-price elasticity helps us understand whether a good is

A substitute or complement

If the current price in a market is above the equilibrium price, we would expect to see

A surplus of goods in that market

Given that meat and potatoes are complementary goods, if the price of meat decreases substantially, there would be

An increase in the demand for potatoes

The principle that, for virtually all goods and services, there is a negative relationship between price and quantity demanded, all other things unchanged, is the law of

Demand

A factor of production that has been produced for use in the production of other goods and services is

Capital

The equilibrium price in a market is defined as the price at which

Consumers and firms agree on quantity

An example of a normative statement is

Everyone in the country needs to be covered by national health insurance

The basis for trade is absolute advantage, not comparative advantage. This statement is

False

Assume the demand and supply of a good are described by equations: Qd= 78-3P and Qs= -12+2P

Find the equilibrium price for the good: 18 Find the equilibrium quantity for the good: 24

Ceteris paribus means

Holding other things unchanged

The income elasticity helps us understand whether a good is

Inferior or normal

Which of the following is not a benefit of European monetary integration

None of the above, all are benefits of integration. Increased price transparency benefits firms and travelers, increased investment, eliminate exchange rate uncertainty, eliminates transaction costs for individuals and firms

Efficient production exists when the economy is

Operating on its production possibilities curve

A vertical demand curve is

Perfectly elastic

In a market economy, the determination of which goods are produced is primarily based on

Profitability

If the demand for a good is inelastic, the firm should

Raise the price

The expenditure that is least appropriate to include in the opportunity cost of attending college is

Room and board

In the field of economics the starting point for discussion of human behavior is

Scarcity

In our in-class example of the lawyer and the secretary, the absolute advantage in typing was held by the __________ and comparative advantage in typing was held by the __________

Secretary, lawyer

Suppose a Czech manufacturer makes a large scale to a retailer in the United States. Which of the following statements is true

Supply for Dollars rises and demand for Czech crowns rises

The term quantity demanded refers to

The amount of a good consumers are willing to buy at a specific price

Which of the following tends to cause the elasticity of demand for a good to be higher

The availability of close substitutes

Researchers demonstrate conclusively that drinking 4-6 ounces of ginger ale each day reduces life expectancy by 3 years. What happens in the market for ginger ale?

The equilibrium price and quantity fall

The price of oranges falls. What happens in the market for apples, which are a substitute for oranges?

The equilibrium price and quantity fall

The price elasticity of demand is equal to

The percentage change in quantity demanded divided by the percentage change in price

On a diagram of a production possibility frontier, opportunity cost is represented by

The slope of the production possibility frontier

The opportunity cost of a choice is

The value of the forgone activity not chosen

The opportunity cost of attending college that does not explicitly show up in our expenditures is

Time