Econ 2305 Midterm #1

Suppose that when the price of oranges is $3 per pound, the quantity demanded is 4.7 tons per day and the quantity supplied is 3.9 tons. In this case:

excess demand will lead the price of oranges to rise

If the demand for steak increases as income increases, then steak is a(n):

normal good.

Refer to the table below. The marginal benefit of the 6th unit of activity is:

$2

Refer to the table below. According to the Cost-Benefit Principle, how many units of this activity should be carried out?

$3

Refer to the figure below. There would be an excess supply of 25 at a price of ______.

$50

Refer to the figure below. The equilibrium price is ______, and the equilibrium quantity is ______.

$6; 4

Refer to the table below. The marginal cost of the 4th unit of activity is:

$8

Suppose the total benefit of watching 1 baseball game is 100, the total benefit of watching 2 games is 120, and the total benefit of watching 3 games is 125. In this case, the marginal benefit of watching the 3rd game is:

5

Office workers and word processing programs are complements if:

a decrease in the wage paid to office workers leads to an increase in the demand for word processing programs.

"As the price of personal computers continues to fall, demand increases." This headline is inaccurate because:

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

When the current price of a good is below the equilibrium price:

buyers have an incentive to offer to pay sellers more than the current price.

If the demand for cucumbers falls when the price of tomatoes rises, then we know that tomatoes and cucumbers are:

complements

Suppose that recent studies conclude that high-fiber diets do not reduce the risk of developing colon cancer as was previously thought. The likely result will be that the:

demand for high-fiber foods will decrease.

A demand curve is ______ sloping because ______.

downward; fewer people are willing to buy an item at higher prices

Suppose that the market price for hot dogs sold by street vendors has just risen from $4.50 to $5.00, and that in response Curly has now begun operating a hot dog cart. We can assume that Curly's reservation price for hot dogs is:

greater than $4.50 but no more than $5.00.

Shelly purchases a leather purse for $400. One can infer that:

her reservation price was at least $400.

At the beginning of the fall semester, college towns experience large increases in their populations, causing a(n):

increase in the demand for apartments.

The supply curve illustrates that firms:

increase the quantity supplied of a good when its price rises.

If an increase in income leads to a decrease in the demand for ground beef, then ground beef is a(n):

inferior good.

According to the Cost-Benefit Principle, you...

the benefits of studying for an additional hour exceed the costs of studying for an additional hour.

Refer to the figure below. Suppose the solid line shows the current demand for coffee. In response to a news story explaining that coffee causes heart disease, you should expect:

the demand curve to shift to D(A) because some people will stop drinking coffee.

Refer to the figure below. Suppose the solid line shows the current demand curve for coffee. In response to an announcement that much of next year's coffee crop has been destroyed by a storm in Brazil, you should expect:

the demand curve to shift to D(B) in anticipation of higher future prices.

Suppose that as the price of apples rises, people switch from eating apples to eating oranges. This is known as:

the substitution effect of a price change.

Jen spends her afternoon at the beach, paying $1 to rent a beach umbrella and $11 for food and drinks rather than spending an equal amount of money to go to a movie. Her opportunity cost of going to the beach is:

the value she places on seeing the movie.

Janie must choose to either mow the lawn or wash clothes. If she mows the lawn, she will earn $30, and if she washes clothes, she will earn $45. She dislikes both tasks equally and they both take the same amount of time. Janie will therefore choose to ______ because it generates a ______ economic surplus.

wash clothes; bigger