ECON FINAl

f the price of cheese falls by 1 percent and the quantity demanded rises by 3 percent, then the price elasticity of demand for cheese is equal to:

3

The Scarcity Principle states that

with limited resources, having more of one thing means having less of another

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

$70,000

Which of the following is NOT a characteristic of a market in equilibrium?

All consumers are able to purchase as much as they wish.

The supply curve illustrates that firms:

increase the quantity supplied of a good when its price rises

Choosing to study for an exam until the extra benefit (e.g., improved score) equals the extra cost (e.g., the value of foregone activities) is:

An application of the Cost-Benefit Principle. (Because: Considering the extra benefits and extra costs of an action is an example of using the Cost-Benefit Principle.)

What might cause a demand function to shift to the right?

An increase in the price of a substitute

Cost-Benefit Principle

An individual (or a firm or a society) should take an action if, and only if, the extra benefits from taking the action are at least as great as the extra costs.

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

Comparative Advantage

Which of the following is NOT true of a demand curve?

It shows how an increase in price leads to an increase in quantity demanded of a good.

If you have a comparative advantage in a particular task, then

You give up less to accomplish that task than do others

In a free market, if the price of a good is below the equilibrium price, then

demanders, to acquire the good, will bid the price higher.

A price-taker faces a demand curve that is

horizontal at the market price

comparative advantage

the ability to produce a good at a lower opportunity cost than another producer

Suppose the price of gasoline increases and that sport utility vehicles get poor gas mileage compared to other available cars. One would expect:

the demand for sport utility vehicles to decrease