Econ midterm

After the price of Revlon nail polish increased, Jen stopped buying Revlon nail polish and started buying a cheaper brand of nail polish instead. This is called:

the substitution effect of a price change.

A 4.5 percent increase in the price of milk causes a 9 percent reduction in the quantity demanded of chocolate syrup. What is the cross-price elasticity of demand for chocolate syrup with respect to the price of milk? Are the two goods complements or substitutes?

-2, complements

Suppose that Tom bought a bike from Helen for $195. If Helen's reservation price was $185, and Tom's reservation price was $215, the buyer's surplus from this transaction was:

. $20

If Les can produce two pairs of pants per hour while Eva can produce one pair per hour, then it must be true that:

. Les has an absolute advantage in producing pants.

Suppose it takes Dan 5 minutes to make a sandwich and 15 minutes to make a smoothie, and it takes Tracy 6 minutes to make a sandwich and 12 minutes to make a smoothie. What is the opportunity cost to Dan of making a sandwich?

1/3 of a smoothie

Assume that Dusty has $30 in income, the price of a loaf of bread is $1.50, and the price of a jar of peanut butter is $3. Dusty can buy a maximum of ______ loaves of bread or a maximum of ______ jars of peanut butter.

20; 10

Suppose wildfires in California destroy a number of major wineries. At the same time, suppose consumers' incomes fall. If wine is a normal good, then how will both of these factors (the destruction of the wineries and the decrease in consumers' incomes) affect the equilibrium price and quantity of wine?The equilibrium price of wine _____________________________, and the equilibrium quantity of wine ____________________.

Could either increase or decrease, will decrease

What will happen to the equilibrium price and quantity of beef, if the price of chicken feed increases? (Assume that chicken and beef are substitutes.)

Equilibrium price will decrease and equilibrium quantity will increase.

The price elasticity of supply for basmati rice (an aromatic strain of rice) is likely to be which of the following?

Higher in the long run than the short run, because farmers cannot easily change their decisions about how much basmati rice to plant once the current crop has been planted.

Suppose that each week Fiona buys 16 peaches and 4 apples at her local farmer's market. Both kinds of fruit cost $1 each. From this we can infer that:

If Fiona is maximizing her utility, then her marginal utility from the 16th peach she buys must be equal to her marginal utility from the 4th apple she buys.

An Arizona student claims to have spotted a UFO over the desert outside of Tucson. How will this claim affect the supply (not the quantity supplied) of binoculars in Tucson stores?

Supply will not change. The demand for binoculars is likely to increase, leading to an increase in price and quantity supplied (but no change in supply).

If country A can produce more of practically everything than can country B, then which of the following statements is true? Country A has no incentive to trade with country B. B. Country B cannot have a comparative advantage in the production of any good that country A wants to buy. C. Trade can benefit both countries. D. Country B has no incentive to trade with country A.

Trade can benefit both countries.

Suppose you and your friend go out for dinner. Your friend orders a cheeseburger and fries. When your food first arrives, you ask your friend if you can have one of his fries. He looks at you like you are crazy and says, "No!" Then a few minutes later, after you both have started eating, you ask again, and your friend reluctantly says, "Sure. Go ahead."An economist's explanation for your friend's change of heart is most likely to be that:

Your friend's marginal utility from eating additional fries declines as he eats more of them, so he's more likely to share with you after he's eaten a few.

any combination of goods that can be produced with currently available resources is an:

attainable point

If the cross-price elasticity of demand between lettuce and salad dressing is negative, then when the price of lettuce rises, the demand for salad dressing will ______.

decrease

Suppose that when the price of broccoli is $4 per pound, buyers wish to buy 500 pounds per day and sellers wish to sell 800 pounds per day. In this case:

excess supply will lead the price of broccoli to fall.

According to the law of demand, when the price of shoes ______, people will consume ______ shoes.

falls, more

If demand stays constant, but the price in a market increases, which of the following happens? (Total) consumer surplus

goes down

How will an increase in the birth rate affect the equilibrium price of land? (Assume the supply of land is fixed.)The equilibrium price of land will _________________ because ________________ for land shifts to the ________________.

increase, demand, right

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

marginal utility

Is the demand for a particular brand of car, like a Chevrolet, likely to be more or less price-elastic than the demand for all cars?It's likely to be ______________________ price-elastic because of the availability of ________________.

more, substitutes

At a price of $20 each, the demand for t-shirts from a group's fundraising activity is unit elastic. Thus, the group's total revenue from selling t-shirts ______ at a price of $20 each.

reaches its maximum

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

An increase in an economy's productive resources will lead the production possibilities curve to:

shift outward

Efficiency occurs if the:

socially optimal quantity of goods and services is being produced.

The price elasticity of demand is a measure of:

the change in quantity demanded of a good that results from a change in its price.

Suppose that if the price of plane tickets increased, more people would choose to travel by train. If this happened, you would know that:

the cross-price elasticity between plane tickets and train tickets is positive.

Individual supply curves generally slope ______ because ______.

upward; of increasing opportunity costs.