Econ Exam 1

A hurricane is expected to hit the Carolinas. Why might the prices of batteries, candles, and bottled water rise? - The government will raise taxes on these products and cause the prices to rise. - Sellers will hold back the supply of these items to induce a rise in prices. - Buyers will flock to purchase these items, and the excess demand will cause prices to rise. - Sellers will lower the supply of these items, which causes prices to rise.

Buyers will flock to purchase these items, and the excess demand will cause prices to rise.

Suppose supply shifts out and demand shifts back. What happens to the equilibrium price and quantity? Price falls. The effect on quantity is uncertain. Quantity falls. The effect on price is uncertain. Both price and quantity fall. Quantity rises. The effect on price is uncertain. Price rises. The effect on quantity is uncertain. Both price and quantity rise.

Price falls. The effect on quantity is uncertain.

Paper producers can manufacture both printing and drawing paper. What effect would rising prices for printing paper have on the market for drawing paper? The quantity supplied of drawing paper will increase. The supply of drawing paper will decrease. The supply of drawing paper will increase. The supply of drawing paper will double as compared to before.

The supply of drawing paper will decrease.

A rational buyer will: keep buying a product until marginal benefit equals price. buy a product until the marginal benefit of consuming the product is less than the price of the product. buy the product only when the marginal benefit of consuming the product is twice as much as the price of the product. not consider costs versus benefits when purchasing a product.

keep buying a product until marginal benefit equals price.

If demand is _____, a higher price yields _____ total revenue. inelastic; lower inelastic; no change in elastic; higher elastic; lower

elastic; lower

Marie Johnston is a manager at an electronics store and has to decide how many workers to hire. If she hires one worker, her revenue is $800 per day. If she hires another worker, she can make another $600 per day. The marginal benefit of hiring another worker decreases by $200 with each additional hire. Assuming that workers are paid $20 per hour and work eight hours, how many employees should Marie hire, and what will be her total cost for labor? She will hire two workers at a total cost of $160. She will hire three workers at a total cost of $480. She will hire four workers at a total cost of $640. She will hire five workers at a total cost of $2000.

She will hire four workers at a total cost of $640.

Amul Food Factory in India makes ice cream and produces processed and condensed milk. In the factory, the firm's employees use raw milk and sugar. The firm runs on electricity and purchases raw milk every day. Large robotic assembly lines fill and package the ice cream containers. Large industrial freezers store the ice cream. Based on this scenario, can you identify the fixed costs for Amul Food Factory? The cost of the raw milk purchased from the farmers. The cost of building the factory, purchasing the robotic assembly lines, and industrial freezers. The cost of the employees hired and the number of packages purchased. The cost of purchasing electricity, raw milk, and sugar.

The cost of building the factory, purchasing the robotic assembly lines and industrial freezers.

Good M has an income elasticity of demand of -0.7. Which of the following items might good M be? champagne cognac organic, fresh juice generic-brand toothpaste

generic-brand toothpaste

Alan Patel is a college student living alone in a campus apartment. He finished cooking dinner when his friends text him to join them at the dining hall on campus for dinner. He now has to decide whether to eat the dinner he prepared or walk to campus to meet his friends at the dining hall. Alan should consider all the following costs when making this decision EXCEPT the time he spent cooking the dinner. time it will take to walk, meet his friends, and walk back. amount of money he will spend at the dining hall. value he places on eating dinner with his friends.

time he spent cooking the dinner.

For normal goods a tax cut on consumer income will lead to a rise in their demand. a tax cut on consumer income will lead to a fall in their demand. changes in consumer income do not affect their consumption. most consumers will choose to purchase the good regardless of income changes.

a tax cut on consumer income will lead to a rise in their demand.

Kathleen Alvarado is binge-watching her favorite show on Netflix. She is trying to decide how many more episodes to watch. Kathleen should continue watching episodes unless the marginal benefit of watching another episode exceeds the marginal cost. benefit of watching another episode is less than the marginal cost. benefit of watching another episode is positive. cost of watching another episode is positive.

benefit of watching another episode is less than the marginal cost.

According to the interdependence principle, when faced with a decision, you should ask what else might my decision affect? else might affect my decision? else might my decision affect and what else might affect my decision? past decisions might my decision affect?

else might my decision affect and what else might affect my decision?

Nerida Kyle could either commute to work via Uber or purchase a new car. The average cost of her one-way Uber trip is $15. Nerida works five days a week for 50 weeks a year. Based solely on avoiding the cost of an Uber, Nerida should purchase a car if the cost of the car is _____ than _____ per week. less; $150 less; $75 greater; $150 greater; $75

less; $150

Frank is a barley farmer in a perfectly competitive market. The market price of barley is $250 per ton. If Frank charges $245 per ton, he will not sell any barley. You Answered raise his profitability by $5 per ton. sell less barley than other farmers. lower his profitability by $5 per ton.

lower his profitability by $5 per ton.

Holding all else constant, if people eat out more at expensive restaurants when they earn more, then expensive restaurant meals are goods with a congestion-effect. goods with a network-effect. inferior goods. normal goods.

normal goods.

The price elasticity of demand for a good with a vertical demand curve is: elastic. You Answered inelastic. perfectly elastic. perfectly inelastic.

perfectly inelastic.

A shortage occurs when: quantity supplied exceeds quantity demanded. quantity demanded exceeds quantity supplied. there is excess production. when there is insufficient demand.

quantity demanded exceeds quantity supplied.

Sunk costs are costs that are incurred regardless of which decision is made. if a particular decision is made. if a particular decision is not made. only for some decisions.

regardless of which decision is made.

Diminishing marginal product leads to decreased profitability for a seller. increased supply of the item in the market. rising marginal costs for a seller. lower opportunity costs of producing the item.

rising marginal costs for a seller.

The supply curve is upward-sloping because sellers can make more profit per unit if the market prices rise. the government determines the relationship between price and quantity supplied. it follows the law of demand. the number of sellers rises as prices rise.

sellers can make more profit per unit if the market prices rise.