Microecon Final

You decide to take a vacation and the trip costs you $2,000. While you are on vacation, you do notreport to work where you could have earned $750. The opportunity cost of the vacation is (a) $2,750. (b) $2,000. (c) $750. (d) $1,250.

$750

Suppose that you are willing to pay $20 to see a movie on Saturday night. A ticket costs $10, and thenext-best alternative use of your time would be to go to dinner with a friend. The cost of the dinneris $20 and you value the experience of having dinner with your friend at $60. The opportunity cost ofseeing the movie is equal to: (a) $50. (b) $30. (c) $20. (d) $10.

(a) $50.

Consider the market for capes (admit it: you have been waiting for such a fashion statement to comeback). The current market price for your standard black cape is $5. Two consumers, Bruce and Dick,are willing to pay $7.25 and $8, respectively, for a cape. Two cape manufactures, O.C. CobblepotIndustries and Dent Enterprises, are willing to sell a black cape for a minimum price of $4 and $4.15,respectively. What is the social surplus? (a) $7.10. (b) $5.25. (c) $1.85. (d) $23.40. (e) 4.50.

(a) $7.10

The following table shows the production combinations on a country's production possibilities curve(I recommend that you draw out the curve for your own benefit). Which of the following is an example of a production point is IMPOSSIBLE ? (a) 4 units of good alpha and 26 units of good beta. (b) 2 units of good alpha and 27 units of good beta. (c) 6 units of good alpha and 18 units of good beta. (d) 7 units of good alpha and 10 units of good beta.

(a) 4 units of good alpha and 26 units of good beta.

Suppose the following umbrella market data exists: The deadweight loss is at its minimum when umbrellas are produced and sold. (a) 40 (b) 20 (c) 80 (d) 60

(a) 40

Sam's production possibilities frontier has good A on the horizontal axis and good B on the verticalaxis. If Sam is producing at a point inside his frontier, then he (a) can increase production of both goods with no increase in resources. (b) values good A more than good B. (c) values good B more than good A. (d) is fully using all his resources.

(a) can increase production of both goods with no increase in resources.

If price rises and total revenue rises, then the price elasticity of demand over that range is (a) inelastic. (b) elastic. (c) unit-elastic. (d) equal to 1.

(a) inelastic

If price rises and total revenue rises, then the price elasticity of demand over that range is (a) inelastic. (b) elastic. (c) unit-elastic. (d) equal to 1.

(a) inelastic

At a price of $50.00 per doll, most stores cannot keep the Miraculous Ladybug dolls in stock becauseconsumers buy them all as soon as shipments arrive. This implies that there (a) is an excess demand for Ladybug dolls, and the price must fall for equilibrium to be reached, (b) is an excess supply of Ladybug dolls, and the price must fall for equilibrium to be reached, (c) will be a downward shift in the demand curve for Ladybug dolls. (d) will be an upward shift in the supply curve for Ladybug dolls. (e) is an excess demand for Ladybug dolls, and the price must rise for equilibrium to be reached

(a) is an excess demand for Ladybug dolls, and the price must fall for equilibrium to be reached

Johnny Dio is a hitman (read: he assassinates people for money) for an organized crime syndicate.Johnny purchases a gun in order to perform the service of assassination; hence, the gun for Johnny isa/an: (a) kapital good or service. (b) consumer/consumption good or service. (c) export good or service. (d) government good or service.

(a) kapital good or service.

Which would be an example of a government price ceiling? (a) limits on interest rates charged by credit card companies (b) subsidies for apartment rent in major cities (c) minimum-wage laws for unskilled workers (d) price supports for agricultural products

(a) limits on interest rates charged by credit card companies

Cable television and air-traffic control are similar to each other because both of them are (a) nonexcludable. (b) nonrivalrous. (c) excludable. (d) rivalrous. (e) private services.

(a) nonrivalrous

If you pay a price exactly equal to your willingness to pay, then (a) your consumer surplus is $0. (b) your willingness to pay is less than your consumer surplus. (c) your consumer surplus is negative (d) you place little value on the good.

(a) your consumer surplus is $0

A old lagoon front property was recently priced at $200, 000. Seeing the property, the Creature fromthe Black Lagoon thought, "It's nice, but if I have to pay more than $195, 000 for this property, thenI would rather do without it". After negotiations, the Creature from the Black Lagoon bought theproperty for $192, 500. His CONSUMER SURPLUS was equal to (a) $7, 500 (b) $2, 500 (c) $5, 000 (d) can't give a decisive answer with the limited information given.

(b) 2,500

The basic goal of economics is (a) controlling the effects of government actions (b) determining how to distribute all that is produced in an economy (c) addressing the scarcity problem created because the population's desire for goods exceeds the ability to produce them (d) matching limited resources to people's limited wants and needs (e) controlling tastes and wishes so that there will be enough resources to produce all the goods andservices that people want

(c) addressing the scarcity problem created because the population's desire for goods exceeds the ability to produce them

Economists believe that optimal decisions are made up to the point where (a) marginal benefit is zero (b) marginal benefit is greater than marginal cost (c) marginal benefit is equal to marginal cost (d) marginal cost is greater than marginal benefit (e) marginal cost is zero

(c) marginal benefit is equal to marginal cost

A rational person does not act unless (a) the action is ethical. (b) the action produces marginal costs that exceed marginal benefits. (c) the action produces marginal benefits that exceed marginal costs. (d) the action makes money for the person. (e) none of the above.

(c) the action produces marginal benefits that exceed marginal costs.

Martin is selling his guitar. The minimum amount he needs to be paid for the guitar is $15,500. Hefind a buyer for who is willing to pay $22,400, but this buyer insists that Martin pays for delivery ofthe guitar. The cost of delivery is $700. Martin's producer surplus from selling his guitar is equal to. (a) $14,800. (b) $7,600. (c) $6,900. (d) $6,200.

(d) $6,200

Jean-Luc loves his earl grey tea and his nautical books. If the price of earl grey tea increases by 25%and Jean-Luc decreases his consumption of nautical books by 10%, then the two goods are (a) substitutes. (b) inferior (c) normal. (d) complements.

(d) complements

In the goods market (recall the circular-flow chart) (a) and the factors market, firms sell to households. (b) households sell to firms. In factor markets, firms sell to households. (c) and in factor markets, households sell to firms. (d) firms sell to households. In factor markets, households sell to firms.

(d) firms sell to households. In factor markets, households sell to firms.

Which one of the following goods exhibits nonexcludability? (a) cable TV (b) air-traffic control (c) rides on the U.S. Space Shuttle (d) the Internet (e) a cheeseburger

(d) the Internet

For any quantity, the supply curve shows the minimum supply price of the product. Why? For anyquantity, (a) the supply curve shows the maximum price suppliers must receive in order to produce the lastunit of the good. (b) the increasing slope of the supply curve reflects the increase in suppliers' fixed costs. (c) the increasing slope of the supply curve reflects the decrease in suppliers' fixed costs. (d) the supply curve shows the minimum price suppliers must receive in order to produce the lastunit of the good.

(d) the supply curve shows the minimum price suppliers must receive in order to produce the lastunit of the good.

Suppose you are producing two products: Baja Hoodies and Surf Boards. Given the productionschedule illustrated below, what is the marginal cost of producing the 9th Baja Hoodie? (a) 2.25 surf boards. (b) 0.44 surf boards. (c) 0.67 surf boards. (d) 1.5 baja hoodies.

2.25 surf boards

True or False: A dead weight loss is the loss in consumer surplus and producer surplus from an inefficient level of production.

False

True or False: Consumer surplus is the difference between the minimum amount a consumer is willing to pay, andwhat he or she actually pays.

False

True or False: Labor and human kapital are examples of public goods; that is, G/S that are freely aquired and can be used my multiple people at the same time.

False

True or False: Opportunity costs are the explicit, physical costs of a productive process.

False

True or False: Points outside the production possibilities frontier are attainable but inefficient

False

True or False: The market for any good or service is the physical location of where exchange happens.

False

True or False: Under a price ceiling, the market price will drop due to competition amongst consumers.

False

True or False: A Search Time Cost is the implicit price consumers pay for a good or service once a price ceiling hasbeen set.

True

True or False: As a consumer increases her consumption of some good/service, her willingness to pay for eachadditional unit increases.

True

True or False: Economics is the social science that studies how individuals, groups, firms, governments and entire societies deal with notion of scarcity.

True

True or False: If an agent is operating on its production possibilities curve, it must produce less of one good if it produces more of another

True

True or False: Increasing opportunity cost is due to the fact that resources are not equally suited for different types of production.

True

True or False: Rational people act only when the marginal benefit of the action exceeds the marginal cost.

True

True or False: The Price Elasticity of Demand is ALWAYS negative

True

True or False: When the marginal benefit of producing a one of a specific good is greater than the marginal cost, the producer needs to increase the level of production.

True

The government has been considering doing away with the minting of pennies because they are rarelyused for purchases. How would an economist best explain this? (a) More people are using credit cards and debit cards, so they are not in the habit of using monetarychange (b) Prices have increased over time, and the opportunity cost of carrying around large quantities ofpennies has become too large (c) Prices have increased over time, and it would take far too many pennies to buy anything of value (d) Prices have increased over times, and the opportunity cost of carrying around pennies has fallen (e) People who use pennies probably aren't spending enough money; removing the penny will forcepeople to spend more.

(b) Prices have increased over time, and the opportunity cost of carrying around large quantities ofpennies has become too large

An externality is defined as (a) an additional cost imposed by the government on producers. (b) a cost or benefit that arises from production and falls on someone other than the producer, or acost or benefit that arises from consumption and falls on someone other than the consumer. (c) an additional gain received by consumers from decisions made by the government. (d) the additional amount consumers have to pay to consume an additional amount of a good or service.

(b) a cost or benefit that arises from production and falls on someone other than the producer, or acost or benefit that arises from consumption and falls on someone other than the consumer.

Suppose that the supply curve within the textbook market shifts to the left. Which of the following isa possible reasoning for the shift? (a) Printing technology advances.. (b) A decrease in the number of textbook consumers. (c) An increase in printing costs. (d) Textbook prices are expected to increase in the future. (e) A decrease in excise taxes on textbook suppliers

(b) a decrease in the number of textbook consumers

All of the following except one would increase the amount of a Federation-issued Phaser that buyerswould like to purchase. Which is the exception? (a) an increase in buyers' incomes. (b) an increased price in the cost of steel; a component in Phaser production. (c) increased prices of a Romulan Disruptor, a substitute for a Phaser. (d) an expected future increase in the price of a Phaser. (e) an increase in the total number of Federation employees that are required to purchase a Phaser

(b) an increased price in the cost of steel; a component in Phaser production.

The local Taco truck (Hooray for street meat!) charges the same price for everything on its menu: $3will buy a taco, a burrito, or nachos. You buy the taco and think "if I had not purchased the taco, Iwould have purchased the burrito". The opportunity cost of the taco is: (a) the $3 you paid for the taco. (b) the burrito. (c) the $3 you paid for the taco and the burrito. (d) the $3, the burrito, and the nachos.

(b) burrito

Suppose you are in charge of pricing at Best Buy and you wish to increase revenues from your eMachinesline. Walmart's chief economist informs you that the price elasticity of demand for eMachines isestimated to be E = 1.17. Based on this information, you would (a) increase the price of an eMachine. (b) decrease the price of an eMachine. (c) not change the price of an eMachine. (d) do nothing because there is not enough information to make a rational decision.

(b) decrease the price of eMachine

Suppose the government of requires many highly skilled technicians and scientists to engage in unskilledagricultural labor in order to develop "proper social attitudes." This policy will probably cause theeconomy to produce (a) at an inappropriate point along its production possibilities frontier. (b) inside its production possibilities frontier. (c) outside its production possibilities frontier with respect to food, but inside with respect to high-technology goods. (d) inside its production possibilities frontier with respect to food, but outside with respect to high-technology goods.

(b) inside its production possibilities frontier.

Overtime worked by a JCPenney associate is considered and earns . (a) entrepreneurship; profit (b) labor; profit (c) human capital; interest (d) labor; wages

(b) labor; profit

A public good is a good whose benefits are (a) diminished as it is consumed and whose benefits cannot be withheld from anyone (b) not diminished as it is consumed and whose benefits cannot be withheld from anyone (c) not diminished as it is consumed and whose benefits can be withheld from anyone (d) concentrated among a select few

(b) not diminished as it is consumed and whose benefits cannot be withheld from anyone

A production possibilities frontier does NOT illustrate (a) attainable and unattainable points. (b) the exchange of one good or service for another. (c) the limits on production imposed by our limited resources and technology. (d) opportunity cost.

(b) the exchange of one good or service for another.

At one point along a PPC, 50 tons of coffee and 100 tons of bananas are produced. At another pointalong the same PPC, 30 tons of coffee and 140 tons of bananas are produced. The opportunity cost ofa ton of coffee between these points is (a) 7/5 of a ton of bananas. (b) 5/7 of a ton of bananas. (c) 2 tons of bananas (d) 1/2 of a ton of bananas.

(c) 2 tons of bananas

An individual producer's supply curve for a good is derived from: (a) The preferences of consumers of that good. (b) The income of consumers of that good. (c) The marginal cost of producing that good. (d) All of the above.

(c) The marginal cost of producing that good.

When a parent tells you NOT to study economics because its a pointless discipline, why is he or she incorrect? (a) The government continues to play a role in our daily lives (b) People have the freedom do whatever they want, and economists have nothing to add to theirdecision-making process. (c) There are not enough resources to produce all the goods and services that we wanted and needed (d) Economics has nothing to offer in terms of understanding the stock market (e) Economics has nothing to offer in terms of understanding government programs like Social Security

(c) There are not enough resources to produce all the goods and services that we wanted and needed

Which of the following would not cause the market supply of cell phones to change? (a) Telecommunications are deregulated, and anyone can produce and sell cell phones. (b) A cheaper technology for producing cell phones is developed. (c) A reduction in the demand for cell phones causes the price to fall. (d) Taxes levied on cell phone production are reduced.

(c) a reduction in the demand for cell phones causes the price to fall