Econ Final

Suppose the market demand curve is given by P = 42 - 4QD and the market supply curve is given by P = 2QS, where P = Price and Q = Quantity. In this market, equilibrium price is __ and quantity is ____.

14, 7

Suppose the market supply curve is given by P = 4+ 2QS . The marginal cost to produce the 10th unit is:

24

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

3

Which of the following is the most likely to be a fixed factor of production at a pizza restaurant?

The size of the seating area

You are trying to decide whether to purchase the latest 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:

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

The equilibrium price and quantity of any good or service is established by:

both demanders and suppliers

When the Wall Street Journal compared the performance of stocks picked by mutual fund managers to randomly picked stocks

both sets of picks were equally bad. there was no difference in the returns to both sets of picks.

A consumer's maximum willingness to pay for one widget is $5. If the price of the widget is $3, she will

buy the widget and earn $2 of consumer surplus

In the 1970s, the Federal Energy Commission imposed a maximum price (price ceiling) on sales by operators of natural gas wells to distributors of natural gas. If this policy had any effect on the market for natural gas, we would have expected it to

cause a shortage of natural gas, because the price is below the equilibrium price

In general, individuals and nations should specialize in producing those goods for which they have a(n):

comparative advantage

Long run equilibrium occurs when a firm's ___ profit is equal to zero.

economic

Suppose Mary is willing to pay up to $15,000 for an used Ford pick-up truck. If she buys one for $12,000, her ________ would be ________.

economic surplus; $3,000

The invisible hand principle implies that markets tend to

generate the most economic surplus possible

The demand for a good is elastic if the price elasticity of demand is:

greater than one

If a production process exhibits diminishing returns, then as output rises:

marginal cost will eventually increase

Deadweight loss is the

reduction in total surplus that results from a government intrusion into a market

In a competitive labor market, if a firm pays a worker less than that worker's value marginal product, then in the long run:

competing firms will hire the workers away

Suppose the market supply curve is given by P = 10 + 2QS. How much producer surplus will be generated if the market price is 30?

$100

A monopolist can only charge a single price to all of its customers. Market demand for the monopolist's product is given by: P = 60 - 3QD, where P stands for price per unit and Q stands for quantity. Each unit costs the monopolist 6 to produce. If the monopolist maximizes his/her profit, s/he will produce ___ units. If the monopolists maximizes his/her profit, s/he will charge:

9 33

Which of the following is not an example of the hurdle method of price discrimination?

A going-out-of-business sale

Which of the following scenarios best illustrates the allocative function of price?

A rise in the wages of computer programmers causes more people to major in computer science.

Why does your grocery store sell day-old bakery goods but not day-old canned goods?

An excess supply of bakery goods will quickly spoil, but excess canned goods will not

Economists have measured the elasticity of supply and demand for widgets. The supple elasticity is estimated to be 2.1, while the demand elasticity is estimated to be 1.5. If a tax were imposed on the sale of widgets, we would expect

Buyers to bear more of the economic burden of the tax

For which of the following products is demand likely to be least elastic with respect to price?

Food

Kai brings 20 cookies to his class Easter party, but only 18 people show up. Which of the following allocations of cookies is Pareto efficient?

Kai gets all of the cookies.

A friend points out an article in the newspaper describing how cost decreases are increasing profits in the market for eggs. He says this sounds like a great investment opportunity. What does economic theory predict will likely happen to the egg market?

More firms will enter egg production until the price falls enough for each firm's economic profits to reach zero.

You paid $35 for a ticket (which is non-refundable) to see SPAM, a local rock band, in concert on Saturday. Assume that $35 is the most you would have been willing to pay for a ticket. Your boss called, and she is looking for someone to cover a shift on Saturday at the same time as the concert. You would have to work 4 hours and she would pay you $11/hr. The psychic cost to you of working is $2/hr. Should you go to the concert instead of working Saturday?

No, the benefit of going to the concert is less than the cost.

The administration at What'sAMatterU rejected charging a price for parking spaces on the grounds it would favor the wealthier student. Which of the following types of students does the first come, first served allocation favor?

Students with 8 am classes

Which of the following would cause an increase in quantity supplied of wheat?

The price farmers receive for their wheat rises.

If country A can produce more of practically everything than can country B, then which of the following statements is true?

Trade can benefit both countries

Average variable cost is defined as:

Variable cost divided by total output

The entire group of buyers and sellers of a particular good or service makes up:

a market

The long run is best defined as:

a period of time sufficiently long that all factors of production are variable

Suppose a 10% increase in the price of aspirin leads to a 5% decrease in the quantity demanded of aspirin. The demand for aspirin, therefore, is

inelastic

Suppose you learn that in 1900, households spent about 40 percent of their budget on food, and today, they spend about 10 percent of their budget of food. All else equal, this suggests that the price elasticity of demand for food:

is probably lower now than it was in 1900

According to the law of diminishing returns, when some factors of production are fixed, in order to increase production by a given amount, a firm will eventually need to add successively:

larger and larger quantities of the variable factors of production

Suppose a perfectly competitive firm is producing 1,000 units of output and the marginal cost of the 1,000th unit is $7. If the firm can sell each unit of output for $7 and the firm's revenue is sufficient to cover its variable cost, the firm should:

leave production unchanged

During Thanksgiving you participated in a pumpkin-pie eating contest. You really enjoyed the first two pies, the third one was okay, but as soon as you ate the fourth one you became ill and lost the contest. You got ________ utility from eating the fourth pie than from eating the second pie.

less

As the market price of a service increases, more potential sellers will decide to perform that service because:

more potential sellers will find that the market price exceeds their reservation price

We can say that the allocation of resources is Pareto efficient if

no one can be helped without harming at least one person

If the demand for a good decreases as income decreases, it is a(n):

normal good

One thing that distinguishes normative economic principles from positive economic principles is that:

normative principles tell us how people should behave, and positive principles tell us how people will behave

Production possibilities curves for large economies are generally bow-shaped because:

opportunity costs tend to increase with increases in production

The percentage change in quantity supplied that results from a 1 percent change in price is known as the:

price elasticity of supply

Assume that the supply and demand curves for cars are elastic. If the government imposed a $500/car tax on the seller of each car, then the

price that consumers pay would increase by less than $500

Oil and oil products remain the main fuel for cars, planes, ships, and power plants. The amount of oil still in the earth is finite. Given this information, the supply of gasoline is ________.

relatively inelastic

The present value of the promise of $100 a year from now is equal to

the amount of money you would have to put in the bank today to have a balance of $100 in one year

Economic profit is

the difference between a firm's total revenue and the total of its explicit and implicit costs

According to the Cost-Benefit Principle, you should go see the latest Star Wars movie with your friends this week-end if:

the extra benefits of seeing the movie are greater than the extra costs of seeing the movie.

It is well documented that persons with a college degree earn more over their lifetime than persons with only a high school diploma. According to human capital theory, this earnings differential is due to

the fact that college graduates are more productive

Implicit costs are defined as

the opportunity costs of the resources supplied by the firm's owners

Suppose that the price of doughnuts decreases and that doughnut-holes are a by-product of producing doughnuts. One would expect:

the supply of doughnut holes to decrease

For the Fall semester, you had to pay a nonrefundable fee of $600 for your meal plan, which gives you up to 150 meals. If you eat 100 meals, your marginal cost of the 100th meal is:

$0

Suppose the market supply curve is given by P = 4+ 2QS . The elasticity of supply at a price of 8 is:

2

What might cause a supply function to shift to the left today?

An expectation that the product's price will rise in the future

Suppose that the equilibrium price of DVD players increases and the equilibrium quantity increases. Which of the following best fits the observed data?

An increase in demand with supply constant

Which industry is most likely characterized as perfectly competitive?

Apple production

The additional utility gained from consuming an additional unit of a good is called:

marginal utility

Suppose that at your current consumption of two goods, A and B, MUA/PA = 25 and MUB/PB = 20. In order to maximize, your utility you should:

purchase more of A and less of B

If a consumer buys two goods, the rational spending rule requires that the:

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