MICRO ECON EXAM 1

If both the supply and the demand curves shift to the right:

equilibrium quantity increases and the effect on equilibrium price is indeterminate.

in the market for eggs, a removal of a binding price ceiling results in:

farmers supplying more eggs to the market.

If Daniel buys 3 slices of pizza, according to the principle of diminish marginal utility (PDMU), his marginal utility is greatest for the _____ slice and his total utility is greatest for the _____ slice.

first; third.

If the price of a complement increases and, at the same time, the minimum wage is increased, then the effect on the equilibrium price is _____ and the equilibrium quantity is _____ .

indeterminate; a decrease

Consider the market for sedans (four door cars). If a major automaker experiences a strike, and, at the same time, consumers increasingly prefer SUVs (which are not sedans), then the predicted effect on equilibrium price is _____ and on quantity it is _____ .

indeterminate; a decrease.

Consider the market for launching commercial satellites. If Facebook decides to increase its coverage of Africa via satellite, and, at the same time, SpaceX is able to recycle the rockets that it uses to deliver satellites into space, then the effect on the equilibrium price will be _____ and the effect on equilibrium quantity will be ____

indeterminate; an increase

Given PX, PY and I, if income increases, the opportunity cost of X

stays the same

Demand curves best reflect

the principle of diminishing marginal utility

Margarine and butter can both be used as a spread on toast. This means that they are:

substitute goods.

A change in demand for three cheese pizza would NOT be caused by a change in:

the price of three cheese pizza.

The slope of the budget constraint is given by _____ and the opportunity cost of the good on the y-axis is _____ .

-PX/PY; PY/PX.

Which of the following relations captures the concept of "too much of a good thing"?

0<MB<MC.

If Dr. Susan can see 12 patients a day on tele-health or 8 a day in- person, her opportunity cost of seeing a patient in-person is

1.5 tele-health patients.

For Jackson and Tahoe to benefit from specialization and trade, the terms of trade PC/PW need to lie in-between

1/2 and 4

If PX = 4, PY = 20 and I = 40, the Y-intercept of the consumer's budget constraint is

2

Betsy has $25 dollars to spend and can buy either tacos at $2.50 each or buntini's at $5 each. Her opportunity cost of a buntini is

2 tacos.

Consider the production possibilities data below. For both countries to benefit from specialization and trade, the terms of trade need to satisfy Oranges Guayaberas (O) (G) Spain 25 20 Cuba 15 10

2/3 < PO/PG < 4/5

Referring to the PPFs below, both countries can benefit from specialization and trade if

2/3<PW/PC<1

Given the data below, if marginal cost equals $7, how many units should a profit-maximizing firm produce? q. (TR) 1. 20 2. 34 3. 42 4. 48

3

If the marginal cost of a pie is $10, how many pies will Susan bake in order to maximize her profit? Price Quantity 15 1 14 2 13 3 12 4

3

Susan can sell 3 units of her product for $5 each or 6 units for $4 each. By selling 6 units her marginal revenue is

3

If PX =4,PY =20andI=40,the opportunity cost of Y is

5 units of X.

Suppose that Betsy has an income of $24, brisket costs $12, and gyros cost $4. If Betsy buys TWO units of brisket, then the opportunity cost of doing so is

6 gyros.

Given the data below, if Dennis elects to buy two units, what must the marginal cost of the second unit be? q. Total Benefit 1 25 2 34 3 42 4. 48

9

Which of the following will have no impact on the demand for ice cream?

A change in the price of ice cream

Consider a budget constraint for goods X and Y. If the price of Y increases then the opportunity cost of Y _____

PY/PX increases

Which of the following statements is consistent with how economists think about fixed/sunk costs?

Don't cry over spilt milk

When the price of Y decreases, its relative price, _____

PY/PX, decreases.

Which economic concept is the closest to the saying "There's no free lunch"?

Opportunity costs

In Canada, the average worker can produce 10 computers or 6 cars a year. In the United States, the average worker can produce 12 computers or 10 cars a year. Based on the given information, which statement is correct?

The United States has a comparative advantage in producing cars.

If, in the market for gasoline, the price of diesel fuel falls and consumers buy more hybrid cars.

The equilibrium price falls, but the equilibrium quantity is indeterminate

Which statement is a CORRECT description of the law of demand

There is a negative relationship between the price of a good and the quantity demanded.

Economics is _____ science.

a positive.

If a price ceiling lies below the equilibrium price,

a shortage exists and the market will clear to the short side, QS

if the current market price lies below the equilibrium price,

a shortage exists and the price will rise.

If prices are falling this is indicative of

a surplus in the market.

When a member leaves your team at work and a new member is assigned to the team,

all members of the team should be reassigned tasks according to their comparative advantages.

If firms exit an industry and the price of a substitute decreases, the effect on equilibrium price is ______ , and that on quantity is _____ .

ambiguous; a decrease.

An emphasis on producing capital goods in the present will lead to the PPF shifting further out in the future because

capital goods are used to produce other goods.

Economists refer to the ability of one person or nation to do something with a lower opportunity cost than another as _____.

comparative advantage

In the market for canned pinto beans, _____ will increase if income increases and if pinto beans are a(n) _____ good.

demand;normal

The difference between what can be produced and consumed without specialization and trade and with specialization and trade is called:

gains from trade.

If a price floor is binding, the current price, P, is ____ than the equilibrium price, P*, and the quantity exchanged in the market is _____

greater; QD

In the market for Chinese take-out, suppose that the price of Sushi take- out, a substitute produced by different firms, decreases in price. What will happen in the market for Chinese take-out?

he demand for Chinese take-out will decrease.

If an increase in income leads to an increase in the demand for gadgets, then gadgets are a(n) _____ good.

normal

Susan can choose between peanut butter pretzels and caramel coated popcorn for her evening snack. According to economists, her _____ cost of consuming caramel coated popcorn would be the forgone peanut butter pretzels.

opportunity

When the price of the good on the Y-axis increases, the budget constraint

pivots inward along the Y-axis,

If Betsy buys four pair of yoga pants for $40 each, we know that

she would have been willing to pay more than $40 for the third pair. she would have been willing to pay more than $40 for the second pair. she would have been willing to pay more than $40 for the first pair.

An increase in supply refers to a _____ the supply curve.

shift right in.

If a price ceiling is binding, the market is in

shortage (QD > QS).

In Texas, if the governor declares a state of emergency due to a natural disaster, prices of fuel, food and medicine are prevented from rising to their equilibrium levels. Consequently, many areas run out of these items. This is an example of a ____ because the declaration effectively creates a _____ .

shortage; price ceiling

For a consumer, the cost of something is

the amount of money paid for it. B) what is given up to get it.

When economists use the term 'utility' they are referring to

the benefit from consuming a good or using a service.

If the general education level within a country rises significantly over time, it is likely that:

the country's PPF will shift out.

When there is an increase in demand,

the demand curve shifts to the right

rightward shift of a market supply curve might be caused by:

the entry of new firms in the industry.

The law of demand states that:

the lower the price, the greater the quantity demanded.

The cost of leaving the skating championship before it ends is _____, while the cost of staying for the entire thing is _____.

the opportunity cost of not seeing the perfect 10 performance; the opportunity cost of whatever else you could have done during that time

If the PPF is bowed-out (concave), then

the opportunity cost of producing the third unit of Y is greater than producing the second unit of Y.

If a fast-food chain experiences a shortage of its chicken sandwich at the current price,

the price is an example of a price ceiling.

According to economists, people make decisions at the margin in order to maximize

total benefit minus total cost

Consider the market for principles of economics textbooks. If all of the politicians in the world decide that they should actually learn what economists have to say about trade by reading a textbook, and, at the same time, the price of paper pulp used to make textbooks decreases, the effect on equilibrium price is _____ and on quantity it is _____ .

uncertain; an increase.

The food court on campus has burritos, potatoes, or burgers for lunch, and they all cost $6. You decide to have a burger today, but if they were out of burgers, you would have bought a potato. Your opportunity cost of buying a burger is

your enjoyment of the potato.

After eating two slices of pizza, you decide to eat one more piece. According to the principle of diminishing marginal utility (PDMU),

your satisfaction from the 2nd piece will be greater than that of the 3rd piece.

When considering a purchase of burritos (B) versus tacos (T), the opportunity cost of burritos is

PB/PT

When a market clears,

QD=QS.

Suppose a society begins by producing 3 units of X and 4 units of Y and then alters production to 4 units of X and 4 units of Y. If the quantity and quality of resources and the technology being used remain unchanged, then:

3 units of X and 4 units of Y are a combination best represented by a point inside the PPF

Given the PPF data below, what must the terms of trade lie in between for both countries to benefit from specialization and trade? Good X Good Y CountryA 3 9 CountryB 6 36

3. and. 6.

Which of the following will cause an inward shift in the demand for steaks at a restaurant?

A recession leading to a significant fall in the income levels of consumers

Susan and Dennis work on a team for their firm. Susan can produce either 10 units of X or 10 units of Y and Dennis can produce either 2 units of X or 4 units of Y. Consequently,

Susan should produce X and Dennis should produce Y.

What would be the effect on the equilibrium price and equilibrium quantity of new housing if mortgage interest rates rise and the costs of building a house rise simultaneously?

The effect on equilibrium price is unknown, but the equilibrium quantity will fall.

For an inferior good, higher income results in:

a decrease in demand.

If prices are currently rising, the equilibrium price will be reached by ____ until the market clears.

a decrease in quantity demanded and an increase in quantity supplied.

If the price of an input decreases and the price of a complement increases, the effect on equilibrium price is ______ , and that on quantity is _____ .

a decrease; ambiguous.

Your boss notes that the price of a complement for your firm's product has increased and that several competitors have entered the market. You predict that the effect on equilibrium price will be _____ and on quantity it will be _____ .

a decrease; ambiguous.

Consider the market for yoga pants. If yoga pants become unfashionable, and, at the same time, lululemon (a major supplier of yoga pants) creates a new factory, then the effect on the equilibrium price will be _____ and the effect on equilibrium quantity will be _____ .

a decrease; uncertain

Which of the following would cause the demand for hot dog buns to increase?

a fall in the price of hot dogs

Consider the market for tacos around UTD. If Velvet Taco opens a site near campus and Dann (Prof. Arce) recommends eating tacos as "brain food" for studying economics, given that there are 200+ student in this class, the effect on the equilibrium price is ______ , and that on quantity is _____ .

ambiguous; an increase.

If the equilibrium price decreases and the equilibrium quantity increases, this is likely caused by

an increase in supply

A leftward shift of a supply curve is caused by:

an increase in the cost of an input.

Consider the market for transoceanic shipping. If a major shipper goes bankrupt, and, the same time, the U.S. and China sign a free trade agreement, then the effect on the quilibrium price will be _____ and the effect on equilibrium quantity will be ___

an increase; ambiguous

Consider the market for ground coffee. Firms can produce either pod coffee or ground coffee. If the price of pod coffee increases and the price of coffee filters decreases, the effect on the equilibrium price of ground coffee is ______ , and that on quantity is _____ .

an increase; ambiguous.

If the price of a substitute increases and, at the same time, the minimum wage is increased, then the effect on the equilibrium price is _____ and the equilibrium quantity is _____ .

an increase; indeterminate

Which of the following is associated with a bowed-out (concave) production possibilities frontier (PPF)?

an upward-sloping supply curve B) increasing opportunity costs of production C) specialization of resources

If the PPF is bowed-outward,

resources (inputs) are specialized. the marginal cost curve of Y is upward-sloping.. increasing the production of the good on the Y-axis involves increasing opportunity cost.

Other things remaining the same, when a fall in the price of one good is followed by an increase in the demand for another good, both goods are said to be:

complementary goods

Given the PPF data below, good X. Good Y CountryA 3 9 CountryB 6 36

country A has the comparative advantage in X and country B has the comparative advantage in Y.

Consider the market for Little Caesar's pizza. If Little Caesar's spends more on advertising, the effect on equilibrium price is _____ and on quantity it is _____ .

demand increases

Opportunity cost equals

economic cost minus direct cost.

Look at the PPF for Consumer and Capital Goods. The movement from curve 1 to curve 2 indicates:

economic growth.

Firms that produce headphones can also produce ear buds. If the price of headphones falls, we would expect the equilibrium price of ear buds to _____ and the quantity to _____ .

fall; increase.

When tariffs are used to protect jobs, this results in

higher prices for consumers. B) a change in the terms of trade. C) decreased benefits from specialization.

normative The United States should increase the minimum wage to $10 per hour.II. There is a federal minimum wage in the United States.III. The federal minimum wage in the United States is less than $10 per hour.

i

If romaine lettuce and iceberg lettuce are substitutes, a(n) _____ in the price of romaine lettuce will _____ the demand for iceberg lettuce.

increase; increase

Which scenario is the MOST likely effect of a decrease in the price of flashlights on the market for batteries?

increased equilibrium price and increased equilibrium quantity

When the marginal utility derived from a good is diminishing, total utility is ____

increasing

Supply curves best reflect

increasing (opportunity) costs of production.

Look at the PPF for Guns and Butter. On this figure, points A, B, E, and F:

indicate increasing opportunity costs for guns and increasing opportunity costs for butter.

Microeconomics deals with:

individual decision makers in a market.

When prices are rising you know that a market

is currently experiencing a shortage.

In a recent ad, a fast food chain claims that, buying an item at half price makes it twice as good. This claim

is inconsistent with a downward-sloping demand curve for the item.

In a single year, the Netherlands can raise 100 tons of beef or produce 1,000 boxes of tulips. In the same growing season, Belgium can raise 50 tons of beef or produce 750 boxes of tulips. The opportunity cost of beef:

is lower in the Netherlands than in Belgium.

When a country benefits from specialization and trade when

its budget constraint lies above its own PPF

The additional satisfaction that a consumer receives from one more unit of a good or service is known as _____.

marginal utility

In the movie, The Wizard of Oz, when Dorothy comes to a fork in the road she meets a scarecrow that describes the benefits of either choice. This is an example of the economic concept of

opportunity cost.

Betsy's grandparents are excited about finally paying off their mortgage (the loan on their house), because, as they say, "Our cost of housing is now zero." Betsy should explain to them the economic principle of:

opportunity cost: by living in the house, they are giving up the opportunity to sell the house, buy a smaller one, and pocket the difference.

The limits of the terms of trade are determined by the:

opportunity costs in each country.

Suppose that an increase in supply occurs. If regulators require producers to charge the equilibrium price that held before the change in supply occurred, this is an example of a _____ and will result in a _____ .

price floor; surplus.

The supply curve is upward sloping because of _____ and the demand curve is downward sloping because of _____ .

specialization of resources; diminishing marginal utility.

If you are going to make pizzas at home, which of the following should NOT influence your decision about how many to make?

the price of your oven.

If a market is currently experience a shortage, then we should expect

the price to increase.