micro chap 6, 7, 9, 10

(Table: Marginal Cost of Sweatshirts) Look at the table Marginal Cost of Sweatshirts. The marginal cost of the fifth sweatshirt is: a. $17. b. $15. c. $13. d. $11.

a. $17.

(Figure: The Market for Hamburgers) Look at the figure The Market for Hamburgers. If the market is originally in equilibrium and the government imposes an excise tax of $0.80 per unit of the good sold, consumer surplus will be reduced by: a. $175. b. $240. c. $105. d. $90.

a. $175.

When the price of chocolate-covered peanuts decreases from $1.10 to $0.95, the quantity demanded increases from 190 bags to 215 bags. If the price is $1.10, total revenue is _____, and if the price is $0.95, total revenue is _____. a. $209; $204.25 b. $209; $236.50 c. $236.50; $209 d. $180.50; $209

a. $209; $204.25

After earning your BA, you have to decide whether to take a job that will pay you $45,000 per year or spend an additional two years earning an MBA. If you decide to pursue the graduate degree, your annual expenses for tuition, books, board, and lodging will be $32,000. You have been offered a scholarship for $10,000 per year, but to pay the remaining $22,000 per year, you would have to cash in savings bonds from your grandparents that have been earning $500 in interest per year. The annual opportunity cost of earning your MBA is: a. $67,500. b. $77,000. c. $99,000. d. $77,500.

a. $67,500.

(Figure and Table: The Market for Taxi Rides) Look at the figure and table The Market for Taxi Rides. If the government imposes an excise tax of $1 per ride (causing the supply curve to shift upward by that amount), then the government will collect tax revenues of _____. However, the tax will cause a _____ deadweight loss to society. a. $9 million; $0.5 million b. $16 million; $1 million c. $45 million; $1 million d. $50 million; $0.5 million

a. $9 million; $0.5 million

The price of gasoline rises 5% and the quantity of gasoline purchased falls 1%. The price elasticity of demand is equal to _____, and demand is described as _____. a. 0.2; inelastic b. 5; inelastic c. 0.2; elastic d. 5; elastic

a. 0.2; inelastic

Suppose at $10 the quantity demanded is 100. When the price falls to $8, the quantity demanded increases to 130. The price elasticity of demand between $10 and $8, by the midpoint method, is approximately: a. 1.17. b. 1.50. c. 0.85. d. 1.00.

a. 1.17.

If the estimated price elasticity of demand for foreign travel is 4: a. a 20% decrease in the price of foreign travel will increase quantity demanded by 80%. b. the demand for foreign travel is inelastic. c. a 10% increase in the price of foreign travel will increase quantity demanded by 40%. d. a 20% increase in the price of foreign travel will increase quantity demanded by 80%.

a. a 20% decrease in the price of foreign travel will increase quantity demanded by 80%.

Use of the midpoint method to calculate the price elasticity of demand eliminates the problem of computing: a. different elasticities, depending on whether price decreases or increases. b. different elasticities, because price and quantity are inversely related on the demand curve. c. total revenue when price falls and demand is inelastic. d. total revenue when price falls and demand is elastic.

a. different elasticities, depending on whether price decreases or increases.

Economic profit is: a. less than accounting profit if implicit costs exist. b. always equal to accounting profit. c. greater than accounting profit if implicit costs exist. d. less than accounting profit if implicit costs are zero.

a. less than accounting profit if implicit costs exist.

The percentage change in quantity demanded of one good or service divided by the percentage change in the price of a related good or service is the _____ of demand. a. price elasticity b. quantity elasticity c. income elasticity d. cross-price elasticity

a. price elasticity

An excise tax that the government collects from the producers of a good: a. shifts the supply curve upward. b. reduces revenue for the government. c. has an effect similar to that of a tax subsidy. d. shifts the supply curve downward.

a. shifts the supply curve upward.

(Table: Market for Pizza) Look at the table Market for Pizza and use the midpoint method. The price elasticity of demand for pizza between $14 and $12 per pizza when income is $1,000 per month is: a. 0.6. b. 1. c. 1.6. d. 2.

b. 1.

(Table: Price Elasticity) Look at the table Price Elasticity. What is the price elasticity of demand (using the midpoint formula) between $2.50 and $2.25? a. 9 b. 19 c. 119 d. 0.5

b. 19

(Table: Marginal and Total Benefit) Look at the table Marginal and Total Benefit. Sed is deciding how many football games he wants to attend this year. His marginal benefit from increasing the number of games that he attends from two to three is: a. 40. b. 30. c. 10. d. 20.

b. 30.

The price elasticity of demand for gasoline in the short run has been estimated to be 0.4. If a war in the Middle East causes the price of oil (from which gasoline is made) to increase, how will that affect total revenue from gasoline in the short run, all other things unchanged? a. Quantity demanded will stay the same; total revenue will fall. b. Quantity demanded will decrease; total revenue will rise. c. Total revenue will remain unchanged. d. Quantity demanded will not change; total revenue will rise.

b. Quantity demanded will decrease; total revenue will rise.

If a good is a necessity with few substitutes, then demand will tend to: a. be more price-elastic. b. be more price-inelastic. c. have price elasticity equal to 1. d. be the same as that of a luxury good.

b. be more price-inelastic.

A men's tie store sold an average of 30 ties per day at $5 per tie but sold 50 of the same ties per day at $3 per tie. The price elasticity of demand, by the midpoint method, is: a. greater than zero but less than 1. b. equal to 1. c. greater than 1 but less than 3. d. greater than 3.

b. equal to 1.

The income elasticity of demand for eggs has been estimated to be 0.57. If income grows by 5% in a period, all other things unchanged, demand will: a. increase by more than 5.7%. b. increase by about 2.9%. c. decrease by more than 5.7%. d. decrease by less than 5.7%.

b. increase by about 2.9%.

Suppose the government levies a $4 per month excise tax on cable TV. If the demand for cable TV is relatively (but not perfectly) inelastic and the supply curve is relatively (but not perfectly) elastic, then the price of cable TV will: a. increase by more than $4. b. increase by exactly $4. c. increase by less than $4. d. remain constant.

b. increase by exactly $4.

(Table: Marginal Cost of Sweatshirts) Look at the table Marginal Cost of Sweatshirts. The marginal cost of producing sweatshirts is an example of ______ marginal costs. a. decreasing b. increasing c. constant d. random

b. increasing

Excise taxes that raise the most revenue and cause the least deadweight loss are likely to be levied on goods for which demand is _____ and supply is _____. a. inelastic; elastic b. inelastic; inelastic c. elastic; inelastic d. elastic; elastic

b. inelastic; inelastic

If the marginal benefit received from consuming a good is less than the marginal cost of production: a. society's well-being can be improved if production increases. b. society's well-being can be improved if production decreases. c. society's well-being cannot be improved by changing production. d. the market is producing too little of the good.

b. society's well-being can be improved if production decreases.

Total revenue is: a. total sales less total cost. b. the price of a good times the quantity of the good that is sold. c. the price effect times the quantity effect. d. the price of a good divided by the amount of the good sold.

b. the price of a good times the quantity of the good that is sold.

Tax incidence refers to: a. who writes the check to the government. b. who really pays the tax. c. the deadweight loss from the tax. d. the total revenue that the government collects from the tax.

b. who really pays the tax.

(Figure: The Market for Productivity Apps) Look at the figure The Market for Productivity Apps. If the government imposes a tax of $1 in this market, consumers will pay _____ more per app and purchase _____ fewer apps. a. $1; 5 b. $1; 25 c. $0.50; 5 d. $0.50; 20

c. $0.50; 5

(Figure: The Shrimp Market) Look at the figure The Shrimp Market. If the government wants to limit shrimp sales to 250 pounds, it can impose a _____ excise tax on sellers, and the total tax revenue generated will be _____. a. $5; $2,500 b. $7.50; $7,500 c. $10; $2,500 d. The answer cannot be determined from the information provided.

c. $10; $2,500

(Figure: The Marginal Benefit Curve) Look at the figure The Marginal Benefit Curve. The total benefit of mowing six lawns is approximately: a. $19. b. $35. c. $154. d. $200.

c. $154.

Rather than put the $100,000 that his grandmother left him in a mutual fund that earns 5% each year, Tommy Wang quit his job, which paid $60,000 per year, and started Wang's Wicker Furniture Store. He rented a showroom for $20,000 for the year, purchased $60,000 in wicker furniture, and incurred costs of $40,000 for sales help and advertising. Instead of using the capital for his own business, he could rent it to a rival firm and earn $5,000 a year. In his first year, his revenue was $150,000. Reference: Ref 9-1 (Scenario: Accounting and Economic Profit) Look at the scenario Accounting and Economic Profit. The accounting profit of Wang's Wicker Furniture Store is: a. $200,000. b. $60,000. c. $30,000. d. $0.

c. $30,000.

Rather than put the $100,000 that his grandmother left him in a mutual fund that earns 5% each year, Tommy Wang quit his job, which paid $60,000 per year, and started Wang's Wicker Furniture Store. He rented a showroom for $20,000 for the year, purchased $60,000 in wicker furniture, and incurred costs of $40,000 for sales help and advertising. Instead of using the capital for his own business, he could rent it to a rival firm and earn $5,000 a year. In his first year, his revenue was $150,000. Reference: Ref 9-1 (Scenario: Accounting and Economic Profit) Look at the scenario Accounting and Economic Profit. The implicit cost of capital for Wang's Wicker Furniture Store is: Select one: a. $0. b. $2,000. c. $5,000. d. $50,000.

c. $5,000.

(Figure: The Marginal Cost Curve) Look at the figure The Marginal Cost Curve. The total cost of mowing four lawns is approximately: a. $10. b. $15. c. $50. d. $100.

c. $50.

Which of the following is a "how much" decision? Select one: a. Mary is trying to decide whether to go to work or go to college after she graduates from high school next month. b. Andrea is trying to decide whether to go to graduate school in economics or go to law school. c. Tim is trying to decide the amount of money to save each month to buy a new car next year. d. Andy is trying to decide whether to take a prep course for the Law School Admissions Test.

c. Tim is trying to decide the amount of money to save each month to buy a new car next year.

To maximize her grade in economics, Stacey should study until: Select one: a. her marginal cost of studying begins to increase. b. her marginal benefit of studying begins to decrease. c. her marginal benefit of studying equals her marginal cost of studying. d. her marginal cost of studying reaches zero.

c. her marginal benefit of studying equals her marginal cost of studying.

If the government imposes a $5 excise tax on leather shoes and the price of leather shoes increases by $2: a. the government will receive less tax revenue than anticipated. b. consumers are paying more of the tax than the producers. c. producers are paying more of the tax than are the consumers. d. the quantity of shoes sold will increase.

c. producers are paying more of the tax than are the consumers.

If your purchases of shoes increase from 9 pairs per year to 11 pairs per year when the price of shirts increases from $8 to $12, for you, shoes and shirts are considered: a. inferior goods. b. luxury goods. c. substitute goods. d. complementary goods.

c. substitute goods.

The implicit cost of capital is: Select one: a. the expense associated with leasing machines. b. the expense associated with buying machines. c. the opportunity cost of capital used by a business. d. irrelevant for determining economic profit.

c. the opportunity cost of capital used by a business.

Profit is the difference between _____ and _____. a. total sales; total revenues b. total profits; total costs c. total revenues; total costs d. marginal costs; marginal revenues

c. total revenues; total costs

(Table: Marginal and Total Benefit) Look at the table Marginal and Total Benefit. Sed is deciding how many football games he wants to attend this year. If tickets to each football game cost $10, then he should attend _____ game(s). a. 0 b. 1 c. 2 d. 5

d. 5

(Figure: Estimating Price Elasticity) Look at the figure Estimating Price Elasticity. Between the two prices, P1 and P2, which demand curve has the lowest price elasticity? a. D1 b. D2 c. D3 d. D4

d. D4 (straight up and down)

Which of the following is an "either-or" decision? Select one: a. Allen must decide how many courses to take this semester. b. Sally must decide how many hours to spend studying for each of the four courses that she is taking this semester. c. Chris must decide how many hours to work each week at his part-time job. d. Dylan must decide whether to major in economics or finance.

d. Dylan must decide whether to major in economics or finance.

A linear demand curve has: a. a constant price elasticity of demand. b. a price elasticity of demand equal to one at all prices. c. a calculated price elasticity of demand that is positive. d. both elastic and inelastic price elasticities of demand.

d. both elastic and inelastic price elasticities of demand.

If the price of chocolate-covered peanuts decreases from $1.15 to $1.05 and the quantity demanded increases from 190 bags to 220 bags, then the price elasticity of demand (by the midpoint method) is: a. 0.5. b. 1. c. 2. d. greater than 1.

d. greater than 1.

If demand is elastic, the _____ effect dominates the _____ effect, and a _____ in price will cause total revenue to rise. a. price; quantity; decrease b. price; quantity; increase c. quantity; price; increase. d. quantity; price; decrease

d. quantity; price; decrease

The deadweight loss from an excise tax comes about because: a. the number of transactions in the market is smaller than the no-tax equilibrium. b. some mutually beneficial transactions do not take place. c. a quota rent exists. d. the number of transactions in the market is reduced and some mutually beneficial transactions do not take place.

d. the number of transactions in the market is reduced and some mutually beneficial transactions do not take place.

When the price goes down, the quantity demanded goes up. The price elasticity of demand measures: a. how much the price goes down. b. how much the equilibrium price goes up. c. the responsiveness of the price change to an income change. d. the responsiveness of the quantity change to the price change.

d. the responsiveness of the quantity change to the price change.

A perfectly price-inelastic demand curve is: a. horizontal. b. downward-sloping. c. upward-sloping. d. vertical.

d. vertical.