Econ H

10. Which of the following is LEAST likely to have a reverse causality problem? a. Higher wind speed is correlated with higher windmill rotation speed. Therefore, increased windmill rotation causes an increase in wind speed. b. Higher crime is correlated with increased police staffing. Therefore, increased police staffing causes increased crime. c. Higher Netflix prices are correlated with decreased Netflix subscribers. Therefore, increased Netflix prices causes a decrease in Netflix subscriptions. d. Higher time spent watching TV by children is correlated with higher levels of child violence. Therefore, watching TV makes children more violent.

c. Higher Netflix prices are correlated with decreased Netflix subscribers. Therefore, increased Netflix prices causes a decrease in Netflix subscriptions

The opportunity costs of going to a movie is: a. The price of the ticket b. The price of the ticket plus the cost of any soda and popcorn you buy at the theater c. The total cash expenditure needed to go to the movie plus the value of your time. d. Zero, as long as you enjoy the movie and consider it a worthwhile use of time and money.

c. The total cash expenditure needed to go to the movie plus the value of your time.

When a tax is imposed on a product for which the demand is perfectly inelastic, the burden of the tax falls entirely on ______________.

Consumers

When a tax is imposed on a product for which the supply is perfectly elastic, the burden of the tax falls entirely on ________________.

Consumers

(T/F) As the equilibrium price decreases, additional sellers will likely enter the market.

False

(T/F) Economists define efficiency as the allocation of resources that maximizes consumer surplus.

False

(T/F) Minimum wage laws have an equal impact on both high and low skilled labor markets.

False

(T/F) Price elasticity of demand measures how much the quantity supplied responds to a change in price.

False

(T/F) Supply is usually more inelastic in the long run than in the short run.

False

(T/F) The actions of buyers and sellers naturally move the market for a good toward a point where suppliers face excess supply.

False

(T/F) When a tax on buyers is imposed, the market demand curve shifts upwards.

False

[T/F] A good economic theory must have realistic assumptions.

False

[T/F] If all students who attend college pay the same tuition and room & board, and have the same daily expenses, economists would say that they all have the same opportunity cost of attending college.

False

[T/F] The slope of the production possibilities curve can be positive or negative.

False (must be negative)

nonbinding price celiling

If the equilibrium price is already lower than the price ceiling, the price ceiling is ineffective and called a non-binding price ceiling

Elastic supply/demand leads to a (larger or smaller?) dead weight cost of taxes

Larger

complement

One buys something and its compliment together. Decrease in ice cream price may increase ice cream and sprinkles sales.

substitute

One buys this instead of another thing. If hamburger prices go up, hot dog sales go up.

Do small or large taxes lead to less dead weight?

Small

Inelastic supply/demand leads to a (larger or smaller?) dead weight cost of taxes

Smaller

Nirvana fallacy

The logical error of comparing the actual situation with its idealized counterpart rather than the actual alternative

What is a production possibilities curve?

a graph that shows the maximum number of possible units a company can produce if it only produces two products using all of its resources efficiently

price ceiling

a legal maximum on the price at which a good can be sold

Reverse causality

a situation in which the researcher believes that A results in a change in B, but B, in fact, is causing A

Indicate whether the short-run elasticity of supply is likely to be inelastic or elastic: a) A six pack of mechanical pencils b) Apartments facing Central Park in New York City c) Cans of Busch Light

a) elastic b) inelastic c) elastic

When the price elasticity of demand is inelastic, a ___________ in price causes a(n) ___________ in total revenue. a) increase, increase b) increase, decrease

a) increase, increase

Ken and Traci are two woodworkers who both make tables and chairs. In one month, Ken can make 3 tables or 18 chairs, whereas Traci can make 8 tables or 24 chairs. Given this, we know that the opportunity cost of 1 chair is a. 1/6 table for Ken and 1/3 table for Traci. b. 1/6 table for Ken and 3 tables for Traci. c. 6 tables for Ken and 1/3 table for Traci. d. 6 tables for Ken and 3 tables for Traci.

a. 1/6 table for Ken and 1/3 table for Traci.

Suppose a gardener produces both tomatoes and squash in her garden. If she must give up 8 bushels of squash to get 5 bushels of tomatoes, then her opportunity cost of 1 bushel of tomatoes is a. 0.63 bushels of squash. b. 1.6 bushels of squash. c. 3 bushels of squash. d. 5 bushels of squash

b. 1.6 bushels of squash.

When the price elasticity of demand is elastic, a___________ in price causes a(n) ___________ in total revenue. a) decrease, increase b) decrease, decrease

b) decrease, increase

Microeconomics is defined as the study of...

how households and firms make decisions and how they interact in markets.

Consider this change in the price of a T-shirt: Point A: price = $10 quantity = 220 Point B: price = $14 quantity = 180 Using the midpoint method, a)calculate the price elasticity of demand: b)Indicate whether the price elasticity of demand you calculated is (1) elastic, (2) inelastic, or (3) unitary elastic.

.6, inelastic

(T/F) If there were a substantial disruption in the supply of oil, a nonbinding price ceiling on the price of gasoline could become a binding price ceiling.

True

(T/F) Price elasticity of demand measures how much the quantity demanded responds to a change in price.

True

(T/F) Supply is usually more elastic in the long run than in the short run.

True

(T/F) The actions of buyers and sellers naturally move the market for a good toward a equilibrium

True

(T/F)Supply is said to be inelastic if the quantity supplied barely responds to changes in price.

True

[T/F] An example of the nirvana fallacy would be to compare a particular market failure with an unrealistic, idealized alternative.

True

[T/F] Buyers and sellers who cannot dictate the price at which a product is sold are called price-takers.

True

[T/F] Markets are not "efficient" when they do not produce as much as would be produced under conditions of (perfect) competition.

True

[T/F] The decision whether to spend $.75 more to get a Grande size coffee at Starbucks over a Tall size coffee is an example of thinking at the margin.

True

[T/F] The production possibilities frontier shows the maximum output that can be achieved of various combinations of two goods

True

Inferior good

a good for which an increase in income reduces the quantity demanded

Normal good

a good that consumers demand more of when their incomes increase

Suppose that a worker in Freedonia can produce either 6 units of corn or 2 units of wheat per year, and a worker in Sylvania can produce either 2 units of corn or 6 units of wheat per year. Each nation has 10 workers. Without trade, Freedonia produces and consumes 30 units of corn and 10 units of wheat per year. Sylvania produces and consumes 10 units of corn and 30 units of wheat. Suppose that trade is then initiated between the two countries, and Freedonia sends 30 units of corn to Sylvania in exchange for 30 units of wheat. Freedonia will now be able to consume a maximum of a. 30 units of corn and 30 units of wheat. b. 40 units of corn and 30 units of wheat. c. 40 units of corn and 20 units of wheat. d. 10 units of corn and 40 units of wheat.

a. 30 units of corn and 30 units of wheat.

For two individuals who engage in the same two productive activities, it is impossible for one of the two individuals to a. have a comparative advantage in both activities. b. have an absolute advantage in both activities. c. be more productive per unit of time in both activities. d. gain from trade with each other.

a. have a comparative advantage in both activities.

Suppose that in the United States, producing an aircraft takes 10,000 of labor and producing a shirt takes 2 hours of labor. In China, producing an aircraft takes 40,000 hours of labor and producing a shirt takes 4 hours of labor. What will these nations trade? a. China will export aircraft and the United States will export shirts. b. China will export shirts, and the United States will export aircraft. c. The U.S. will export both aircraft and shirts. d. If Chinese workers are paid half the wage of U.S. workers, then both countries will export shirts

b. China will export shirts, and the United States will export aircraft.

The cross-elasticity of demand for two products is positive. This means that a.The goods are complements b. The goods are substitutes c.When the price of one good increases, the price of the other decreases. d.When the price of one good increases, the price of the other increases.

b. The goods are substitutes

A binding price floor will cause _______________ in the market, all else constant. a.A shortage b.A surplus c.Excess demand d.Insufficient information to determine

b.A surplus

An increase in _____________ will cause a movement along a given demand curve, which is called a change in ______________. a.Price, demand b.Price, quantity demanded c.Demand, supply d.Demand, quantity supplied

b.Price, quantity demanded

A change in which of the following will NOT shift the demand curve for hamburgers? a.The price of hot dogs b.The price of hamburgers c.The price of hamburger buns d.The income of hamburger consumers

b.The price of hamburgers

When demanders are unable to buy all that they want at the going price, it is called: a) Excess Supply b) Surplus c) Shortage d) Demand overage

c) Shortage

For each of the following events, indicate (1) which curve will shift on the graph for Lay's potato chips (supply, demand, or both), and (2) what will happen to the market clearing price as a result (rise, fall, or indeterminate): a)New research studies are published that show eating Lay's potato chips is linked to having a high IQ. b)A tornado hits Idaho, destroying a large percentage of potato fields (a key ingredient in Lay's). At the same time, the demand for French Onion Dip (a popular Lay's potato chip complementary good) skyrockets. c)Lay's develops a new technology for slicing potatoes, doubling the speed it takes to produce a bag of chips.

check

Law of demand

conditional on all else being equal, as the price of a good increases, quantity demanded decreases

8.Movie tickets and film streaming services are substitutes. If the price of film streaming increases, what happens in the market for movie tickets? a.The supply curve shifts to the left. b.The supply curve shifts to the right. c.The demand curve shifts to the left. d.The demand curve shifts to the right.

d.The demand curve shifts to the right.

When a payroll tax is imposed in a labor market where the supply of labor by individuals is more elastic than the demand for labor by firms, the burden of the tax falls more heavily on______________.

employers/firms

(Fill in the Blank) The point where supply and demand intersect is called the _____________.

equilibrium/market clearing price

Thinking at the margin

making decisions based on small changes in resources. leads to the optimal decisions being made, subject to preferences, resources and informational constraints.

Comparative advantage

the ability of an individual or group to carry out a particular economic activity (such as making a specific product) more efficiently than another activity.

Opportunity cost

the loss of potential gain from other alternatives when one alternative is chosen.

Cross-elasticity of demand

the responsiveness of the quantity demanded for a good to a change in the price of another good, ceteris paribus. (substitutes? or nah)