economic midterm 1 pt. 2
they have to make tradeoffs
economists recognize that because people have limited resources...
higher than
if the local slaughterhouse gives off an unpleasant stench, then the equilibrium quantity of meat will be _____ the quantity that maximizes total economic surplus.
an increase in demand and an increase in quantity supplied
refer to the figure below. assume the market is originally at point W. movement to point X is the result of...
an excess supply of 5 units
refer to the figure below. at a price of $9, there will be...
40 cups are sold per hour at a price of $2.00 each
refer to the figure below. at the original market equilibrium...
the demand curve
"all else constant, consumers will purchase more of a good as the price falls." this statement reflects the behavior underlying...
normative economics
an editorial in the paper argues that a person only should be allowed to attend school if the marginal cost of educating that person is less than the marginal benefit of educating that person. the writer's reasoning is an application of...
the substitution effect of a price change
as coffee becomes more expensive, joe starts drinking tea instead of coffee. this is called...
the equilibrium price of coffee will rise
assume the demand for coffee increases and the supply of coffee decreases. what outcome is certain to occur?
its benefits exceed its costs
the cost-benefit principle indicates that an action should be taken if, and only if...
$13,000
pat earns $25,000 per year (after taxes), and pat's spouse, chris, earns $35,000 (after taxes). they have two pre-school-aged children. childcare for their children costs $12,000 per year. given that Chris doesn't want to stay home with the kids, regardless of what pat does, pat should stay home with the kids if, and only if, the value of pat spending more time with the kids is greater than...
increase the quantity supplied of a good when its price rises
the supply curve illustrates that firms...
5; $17,080
the table below shows how total donations, average donations, total labor costs and average labor costs vary depending on the number of employees state u hires for its fundraising activities. number of employees/total donations/average donations/total labor costs/average labor costs 1 $30,000 x x $8,000 2 $42,426 x $17,000 x 3 x $17,321 $27,000 x 4 $60,000 x x $9500 5 x $13,416 $50,000 x the president of state u decides to hire fundraising employees as long as their average benefit exceeds their average cost. this results in ______ employees being hired and a net benefit (total donations minus total labor costs) of ______.
2
the table below shows the relationship between the number of times you get your car washed each month and your total monthly benefit from car washes. each car wash costs $15. number of car washes per month/total monthly benefit from car washes 0 $0 1 $20 2 $36 3 $48 4 $56 5 $60 how many times a month should you get your car washed?
$15
the table below shows the relationship between the number of times you get your car washed each month and your total monthly benefit from car washes. each car wash costs $15. number of car washes per month/total monthly benefit from car washes 0 $0 1 $20 2 $36 3 $48 4 $56 5 $60 what is the marginal cost of the 5th car wash each month?
lower; uncertain
if supply increases and demand decreases, the new equilibrium price will be ______ and the new equilibrium quantity will be ______.
inferior good
if the demand curve for bologna shifts to the right as income falls then bologna is a(n)...
the performance of national economies and ways to improve that performance
macroeconomics differs from microeconomics in that macroeconomics focuses on...
normative principles tell us how people should behave, and positive principles tell us how people will behave
one thing that distinguishes normative economic principles from positive economic principles is that...
neither buyers nor sellers want the price to change
what is not a characteristic of a market in equilibrium?
greater availability of apartments
what is not a characteristic of rent controls?
the supply of gasoline
what is not a determinant of the demand for gasoline?
it is fair in the sense that everyone can afford basic goods and services
what is not true of the equilibrium price?
whether the federal budget should be balanced
what would would not be studied in microeconomics?
microeconomics
a study that deals with the salaries of university professors would be considered...
the benefits of seeing the movie are greater than the costs of seeing the movie
according to the cost-benefit principle, you should go see the latest star wars movie with your friends this weekend if...
84
frank owns an apple farm and plans to spend 4 hours today picking apples. the number of apples he can pick per hour depends on the total number of hours he spends working in either the east orchard or the west orchard in the manner shown in the table below. hours in east orchard/number of apples per hour/hours in west orchard/number of apples per hour 1 40 1 10 2 32 2 10 3 25 3 10 4 20 4 10 if frank spends 2 hours picking apples in the east orchard and 2 hours picking apples in the west orchard, how many apples in total will frank be able to pick today?
24 apples
frank owns an apple farm and plans to spend 4 hours today picking apples. the number of apples he can pick per hour depends on the total number of hours he spends working in either the east orchard or the west orchard in the manner shown in the table below. hours in east orchard/number of apples per hour/hours in west orchard/number of apples per hour 1 40 1 10 2 32 2 10 3 25 3 10 4 20 4 10 what is the marginal benefit to frank of the 2nd hour he spends picking in the east orchard?
the demand for fast food will fall as income rises
if fast food is an inferior good then...
the equilibrium price and quantity of pencils to fall
if pencils and paper are complements for most consumers, then if the price of paper increases, you would expect...
coffee and tea are substitutes
it is most likely for people that...
wash clothes; bigger
janie must choose to either mow the lawn or wash clothes. if she mows the lawn, she will earn $30, and if she washes clothes, she will earn $45. she dislikes both tasks equally and they both take the same amount of time. Janie will therefore choose to ______ because it generates a ______ economic surplus...
only the entertainment value of the concert
jody has purchased a non-refundable $75 ticket to attend a miley cyrus concert on friday night. subsequently, she is asked to go to out dinner at no expense to her. if she uses cost-benefit analysis to choose between going to the concert and going out to dinner, the opportunity cost of going out to dinner should include...
$35,000
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 state college is...
$1
matt has decided to purchase his textbooks for the semester. his options are to purchase the books online with next day delivery at a cost of $175, or to drive to campus tomorrow to buy the books at the university bookstore at a cost of $170. last week he drove to campus to buy a concert ticket because they offered 25 percent off the regular price of $16. assume the minimum that matt would be willing to accept to drive to campus is equal to the $4 he saved on the concert ticket. what would his economic surplus be if he bought his textbooks at the university bookstore rather than online?
$4
matt has decided to purchase his textbooks for the semester. his options are to purchase the books online with next day delivery at a cost of $175, or to drive to campus tomorrow to buy the books at the university bookstore at a cost of $170. last week he drove to campus to buy a concert ticket because they offered 25 percent off the regular price of $16. the benefit to matt of driving to campus to buy the concert ticket last week was...
curve c to curve d
refer to the figure below. an increase in demand is represented by a shift from...
the equilibrium quantity will increase and the equilibrium price will increase
refer to the figure below. if demand shifts from D1 to D2, and at the same time, supply shifts from S1 to S2, then according to the figure...
the price ceiling would have no effect
refer to the figure below. if the government imposed a price ceiling of $40, what would happen in this market?
the demand curve to shift to d(a) because some people will stop drinking coffee
refer to the figure below. suppose the solid line shows the current demand for coffee. in response to a news story explaining that coffee causes heart disease, you should expect...
an decrease in supply
refer to the table below. relative to column c, column d represents...
$80
refer to the table below. the average benefit of 2 units of activity is... units of activity/total cost/total benefit 0 $0 $0 1 $30 $100 2 $40 $160 3 $60 $190 4 $100 $210 5 $150 $220 6 $210 $225
$6
refer to the table below. the average cost of 5 units of activity is... units of activity/total cost/total benefit 0 $0 $0 1 $2 $12 2 $6 $22 3 $12 $30 4 $20 $36 5 $30 $40 6 $42 $42 7 $56 $43
$2
refer to the table below. the marginal benefit of the 6th unit of activity is: 0 $0 $0 1 $2 $12 2 $6 $22 3 $12 $30 4 $20 $36 5 $30 $40 6 $42 $42 7 $56 $43
her reservation price was at least $400
shelly purchases a leather purse for $400. one can infer that...
excess supply will lead the price to fall
suppose demand decreases, but there is no change in supply. as the market reaches its new equilibrium...
inconsistent reasoning; saving $20 is saving $20
tony notes that an electronics store is offering a flat $20 off all prices in the store. tony reasons that if he wants to buy something with a price of $50, then it is a good offer, but if he wants to buy something with a price of $500, then it is not a good offer. this is an example of...
last semester's grades were lower than your overall gpa
your scholarship depends on your maintaining a 3.5 cumulative gpa. your gpa for last semester was 3.6, which brought your cumulative gpa down. what must be true?
complements
if the demand for cucumbers falls when the price of tomatoes rises, then we know that tomatoes and cucumbers are...
decrease; decrease
all else equal, a decrease in the demand for oranges will lead to a(n) ______ in equilibrium price and a(n) ______ in equilibrium quantity.
legislation cannot alter basic economic incentives
according to the textbook, government price control fails because...
$6
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 average cost for a meal is:
forest has to make tradeoffs
forest lives in complete isolation in montana. he is self-sufficient and feeds himself through hunting, fishing, and farming...
economic surplus; $3,000
suppose mary is willing to pay up to $15,000 for a used ford pick-up truck. if she buys one for $12,000, her ______ would be ______.
total benefit of n units divided by n
the average benefit of n units of an activity is the...
$400
the following table shows the relationship between the speed of a computer's cpu and its benefits and costs. assume that all other features of the computer are the same (that is, cpu speed is the only source of variation), and only the cpu speeds listed below are available for purchase. cpu ghz/total benefit/marginal benefit/total costs/marginal costs 2.0 $1,000 x $900 x 2.5 $1,400 x x $100 3.0 x $300 $1200 x 3.5 $1,900 x $1500 x 4.0 $2,000 x x $400 the marginal benefit of upgrading from a 2.0ghz computer to a 2.5ghz computer is...
a belief that the price of a good or service will go up in the future
what factor will lead to a decrease in the current supply of a good?
an excess demand for bananas
the price of bananas will increase in response to...
increase in the quantity of pizza demanded
a decrease in the price of pizza will lead to a(n)...
3 hours
a firm pays pam $40 per hour to assemble personal computers. each day, pam can assemble 4 computers if she works 1 hour, 7 computers if she works 2 hours, 9 computers if she works 3 hours, and 10 computers if she works 4 hours. pam cannot work more than 4 hours day. each computer consists of a motherboard, a hard drive, a case, a monitor, a keyboard, and a mouse. the total cost of these parts is $600 per computer. if the firm sells each computer for $625, then how many hours a day should the firm employ pam to maximize its net benefit from her employment?
leaves no unexploited opportunities for individuals
a market equilibrium...
the seller's marginal cost
a seller's reservation price is generally equal to...
the seller's opportunity cost of producing an additional unit
a seller's reservation price is generally equal to...
$35
amy is thinking about going to the movies tonight. a movie ticket costs $15, and she'll have to cancel a $20 dog-sitting job that she would have been willing to do for free. the opportunity to amy cost of going to the movies is...
they are useful for describing general patterns of behavior
economists use abstract models because...
socially optimal quantity of goods and services is being produced
efficiency occurs if the...
other people are trying to choose the shortest line too
every time you go to the grocery store, you try to wait in the shortest line. but the lines always seem to be roughly the same length. why?
no single person's benefit from cleaning the park exceeds that person's cost of cleaning it
everyone in the neighborhood has been complaining about the deteriorating condition of the park, but nobody has cleaned it up. why not?
when the price is below the equilibrium price
excess demand occurs...
pat should drive if saving half an hour is worth $0.50 or more
pat can either drive to work, which takes half an hour and uses $1.50 worth of gas, or take the bus, which takes an hour and costs $1.00. how should pat get to work?
p*=20, p*=80
suppose quantity demanded is given by Qd=100-P, and quantity supplied is given by Qs=20+3P. In this case, equilibrium price, P*, and equilibrium quantity, Q*, are as follows...
decrease in the supply of t-shirts
suppose that the equilibrium price of T-shirts increases and the equilibrium quantity of T-shirts decreases. this is best explained by a(n)...
the supply of doughnut-holes to decrease
suppose that the price of doughnuts decreases. given that doughnut-holes are a by-product of producing doughnuts, one would expect...
$10
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 seller's surplus from this transaction was...
excess supply will lead the price of broccoli to fall
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...
both the purchase at the university ticket window and the sale at the concert entrance were market transactions
suppose you bought three tickets to a concert in advance at the university ticket window. at the last minute one friend cancelled, so you could use only two of the tickets. you sold the third ticket just outside the entrance to the concert for more than the price you had originally paid. which transaction occurred in a market?
increases taxes on cigarettes, effectively raising the price
the cost-benefit principle predicts that people will be less likely to smoke if the government...
marginal cost
the extra cost that results from carrying out one additional unit of an activity is the _____ of the activity.
$200
the following table shows the relationship between the speed of a computer's cpu and its benefits and costs. assume that all other features of the computer are the same (that is, cpu speed is the only source of variation), and only the cpu speeds listed below are available for purchase. cpu ghz/total benefit/marginal benefit/total costs/marginal costs 2.0 $1,000 x $900 x 2.5 $1,400 x x $100 3.0 x $300 $1200 x 3.5 $1,900 x $1500 x 4.0 $2,000 x x $400 the marginal cost of upgrading from a 2.5ghz to 3.0ghz computer is...
higher gas prices increased the cost of driving a suv
the last time gas prices increased drastically, sales of large sport utility vehicles (suvs) fell. why?
at least $1.75 but less than $2
when a slice of pizza at the student union sold for $2, moe did not purchase any. when the price fell to $1.75, moe purchased a slice each day for lunch. thus, we can infer that moe's reservation price for a slice of pizza is...
buyers have an incentive to offer to pay sellers more than the current price
when the current price of a good is below the equilibrium price...
because of both the substitution and the income effects
when the price of a good changes, the amount of that good that buyers wish to buy changes...
both parties will benefit
when two people agree to a price in a negotiation, we can assume that...
the cost of providing 24-hour service is much lower today
with atms, it is possible to retrieve cash from the bank at any time. one hundred years ago, one could only get cash from the bank during business hours, say, 9 am to 3 pm. the present availability of 24-hour service has arisen because...
you should work as a math tutor
you have two options for how to spend the afternoon. you can either go see a movie with your roommate or work as a tutor for the math department. from experience, you know that going to see a movie gives you $20 worth of enjoyment, and with your student discount, a movie ticket only costs $12. if you spend the afternoon working as a math tutor, you will get paid $45. on a typical day, you wouldn't be willing to spend the afternoon working as a math tutor for less than $35. should you go see a movie or work as a math tutor?
$12
you have two options for how to spend the afternoon. you can either go see a movie with your roommate or work as a tutor for the math department. from experience, you know that going to see a movie gives you $20 worth of enjoyment, and with your student discount, a movie ticket only costs $12. if you spend the afternoon working as a math tutor, you will get paid $45. on a typical day, you wouldn't be willing to spend the afternoon working as a math tutor for less than $35. what is your opportunity cost of seeing a movie this afternoon?
$1
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. your economic surplus from going to work instead of seeing spam on saturday is...
$35
you won a free ticket to see the latest star trek movie this friday night (which you can costlessly resell for its face value of $15). your favorite band is also performing on friday and is your only alternative activity. friday is your last chance to see either the movie or the band. tickets to see your favorite band cost $30, and on any given day, you would be willing to pay as much as $50 for a ticket. based on this information, what is your opportunity cost of going to see the star trek movie on friday?
$450
your classmates from the university of chicago are planning to go to miami for spring break, and you are undecided about whether you should go with them. the round-trip airfares are $600, but you have a frequent-flyer coupon worth $500 that you could use to pay part of the airfare. all other costs for the vacation are exactly $900. the most you would be willing to pay for the trip is $1400. your only alternative use for your frequent-flyer coupon is for your trip to atlanta two weeks after the break to attend your sister's graduation, which your parents are forcing you to attend. The chicago-atlanta round-trip airfares are $450. what is the opportunity cost of using the coupon for the miami trip?
