Microeconomic Principles study

Suppose Alexandra is willing to pay $200 for a tablet and she has $53 worth of consumer surplus. What is the market price of the tablet?

$147

Suppose Keisha decides to miss a day of work to attend a concert in another town. Keisha could earn $80 that day if she went to work instead. The concert ticket cost her $40, and she can expect to spend another $40 on food and beverages. What is the opportunity cost of going to the concert?

$160

Suppose the price of a tablet is $179. Ereaders Inc. produces tablets and has no producer surplus. How much is Ereaders Inc.'s willingness-to-sell?

$179

Suppose Keisha decides to go to a concert. It is being held on a day that she would not have worked anyway, but her daily earnings are usually $80. The concert ticket costs her $40, and she can expect to spend another $40 on food and beverages. What is the opportunity cost of going to the concert?

$80

Suppose the price of a tablet is $129 and there are three suppliers of tablets. Kimdle Co. is willing to sell the tablet for $129, and Maxis Tech is willing to sell the tablet for $129. The producer surplus is $30. For how much is Dexus Co. willing to sell the tablet?

$99

Determine which economic principle is illustrated by each scenario. 1. the owner of a snow cone trailer realizes that the demand for snow cones is low during the winter, and thus, closes shop until the temperature warms back up near summertime 2. the local river has so much pollution that three-eyed fish are forming. the government responds by regulating the amount of chemicals that can be dumped into the river 3. at a high end restaurant, the restaurant owner has one chef at a meat station, one chef at a vegetable station and one chef, who has an artistic eye, plate the food they are given. The result is increased speed, as more custoers get services during an evening 4. during the summer, a bumper crop of oranges in Florida causes a surplus in the supply of oranges nationwide. As a result, prices fall to copensate for the surplus and civilians enjoy the fruits of the farmers labor.

(1) market efficiency (2)government intervention (3)specialization (4)equilibrium

The figures illustrate the production possibilities available to Kate and Sarah with eight hours of labor in their bakery. Answer the questions according to these figures. 1. Kate has a comparative advantage in 2. Sarah has a comparative advantage in

1. Cake 2. Bread

Vincent can bake 1010 cakes or make 55 pizzas in an hour. Jean can bake 1212 cakes or make 88 pizzas in an hour. Please answer the four questions. 1. Which cook has the absolute advantage in baking cakes? 2. Which cook has the absolute advantage in making pizzas? 3. Which cook has the comparative advantage in baking cakes? 4. Which cook has the comparative advantage in making pizzas?

1. Jean 2. Jean 3. Vincent 4. Jean

Each farmer in Sweden can produce 10 t of grain or 5 t of dates in a season. Each farmer in Libya can also produce 10 t of grain or 25 t of dates. Please answer the four questions. 1. Which country has the absolute advantage in producing dates? 2. Which country has the absolute advantage in producing grain? 3. Which country has the comparative advantage in producing dates? 4. Which country has the comparative advantage in producing grain?

1. Libya 2. Neither 3. Libya 4. Sweden

The scenarios each illustrate a principle of economics. Classify each scenario according to the principle that best fits it. 1. On Black Friday, there are huge sales for electronics at many retail stores. David must decide between buying a camera at one store or a flat screen TV at another store, and buying one means losing out on the ability to purchase the other. 2. An educational software company wants to expand the number of economics questions that it offers and is considering hiring another economist. The company compares how much adding another worker will improve the product to the additional cost. 3. Ava finds that there is not enough time after work to have dinner, exercise, and watch TV, and she must make choices about how to use her limited time.

1. Opportunity cost 2. Marginal decisions 3. resource scarcity

These figures illustrate the production possibilities available to Kate and Sarah with eight hours of labor in their bakery. Answer the questions according to these figures. 1. Kate has an absolute advantage in 2. Sarah has an absolute advantage in

1. neither good. 2. both goods.

If Brad buys a textbook costing $100 for which he is willing to pay $110, then his consumer surplus is:

10

Suppose that Ned can produce either potato chips or computer chips. If he only produces potato chips he can produce 25 in a day. If he only produces computer chips, he can produce 50 in a day. Drag the endpoints of the line to plot his production possibilities frontier (PPF) on the graph.

2

Which panel below shows an absolute advantage in the production of sugar?

A

A change in tastes that decreases people's desire for a good will cause:

A leftward shift in the demand curve.

An economic institution that facilitates interaction between buyers and sellers is called

A market

Professor Green teaches environmental economics at the local university. Students learn that the professor has also written books about labor laws. It is most likely that the professor is:

A microeconomist.

Suppose the equilibrium price in a market is $10. The government sets a price floor of $13. What is most likely to occur?

A surplus is most likely to occur.

items represent an example of positive economics or normative A. The richest 11% of Americans should pay more taxes than the rest of the 9999%. B. A decrease in the supply of coconut will increase the price of German chocolate cake, a good which requires coconut shavings as a key ingredient. C. The higher the minimum wage, the higher the price of goods and services is likely to be.D. Social welfare spending in Sweden occupies too large a portion of the national budget. D. Social welfare spending in Sweden occupies too large a portion of the national budget.

A. Normative Economics B. Positive Economics C. Positive Economics D. Normative Economics

The table presents information about the productivity of digital cameras and personal computers in the United States and Japan. The data are presented in units of output per hour of work. Use this information to answer the question.

Absolute, personal computers

Which of the following describes the equity-efficiency trade-off

Actions intended to make economic outcomes fairer may cause efficiency to decrease.

Both the former Soviet Union and China (until quite recently) were highly centrally planned, and virtually all resources were government-owned. Although Russia and China have moved toward market economies, a large portion of each country's resources is still owned by the state. Which of these economies must answer the three basic economic questions?

All of the economies must answer the three basic questions.

Which demonstrates a scenario with no opportunity cost?

All of these scenarios have an opportunity cost.

Which point(s) in the following figure showing a production possibilities frontier (PPF) is(are) unattainable?

All three points are attainable.

Flour, which can be used to make many products, is used to make waffles and muffins because of the high demand for each product.

Allocative efficiency

Herb Farmer decides to use his flour and sugar to make three cakes and three loaves of bread, which his customers have demanded.

Allocative efficiency

Suppose the equilibrium price for bicycle tires is $42 but the market price falls to $37. Jerry is still able to make a profit at this lower price, so he stays in business. Anat, who was able to make a small profit by selling tires at $42, goes out of business as prices fall. Madison bought the tires at the higher price from Anat and is delighted to buy them at a lower price from Jerry. Marcus, who previously did not purchase tires, is willing to pay the lower price, so he buys new tires from Jerry. Which individual's situation contributes to a reduction in total surplus?

Anat's

Starting from point E, which point is the most likely outcome of a decrease in the price of soda pop, holding all else constant?

B

Which panel below shows a comparative advantage in the production of sugar?

B 5, 500

__________ occurs when one country has a lower opportunity cost of producing a good than another country.

Comparative advantage

Starting from point E, which point is the most likely outcome of an increase in taxes levied on the sale of soda pop, holding all else constant?

D

Starting from point E, which point is the outcome of an increase in price, holding all else constant?

D

Which panel below shows a comparative advantage in the production of coal?

D

_____ is a loss in net benefit that results from the inefficiency of a market not in equilibrium.

Deadweight loss

_____ study of how people make decisions to allocate scarce resources.

Economics

In 2010, experts said that the demand for rare earth metals (which are critical in the manufacturing of hybrid cars, cell phones, large wind turbines, missiles, and computer monitors) would increase exponentially, while little increase in supply would occur outside of China (which already was producing about 95% of the global supply). Based on this information, which of the following is likely to occur?

Equilibrium price would increase.

Two important factors influencing the wealth of nations are good institutions and:

Human creativity.

Which scenario would least likely change an individual's behavior?

In an effort to make people eat healthier, the city of Bakersville tells its residents to eat wheat bread instead of white bread.

in a market economy, there is ___________ relationship between the price of a good and the amount of a good that buyers are willing and able to purchase.

Inverse or negative

Why, if at all, is the ceteris paribus condition important in economic analysis?

It allows the analysis of how a single change affects an economic environment.

Which of these statements is WRONG about market efficiency?

It occurs when total surplus increases after markets deviate from equilibrium.

_____ occurs when a good or service is not consumed by the person who values it the most and typically results when a price ceiling creates an artificial shortage in the market.

Misallocation of resources

For each example listed, decide if the good is a normal good or an inferior good. Make sure you answer from the perspective of the individual or individuals doing the buying or consuming.

Normal good - smartphone apps - smoothies Inferior good - generic cereal - Frozen pizzas

Which production possibilities frontier (PPF) reflects increasing opportunity costs? Determine what causes the PPF to take that shape.

PPF 4 Factors of production can be used in either widget or gizmo production, but some are more productive at producing widgets and some are more productive at producing gizmos.

Studies of the retail industry have shown that salespeople who are paid on commission tend to sell more merchandise than those who are paid a straight salary. Which of the following key ideas of economics can explain these results?

People follow incentives

To produce one more bagel, the output of donuts must fall.

Productive efficiency

Categorize each scenario as describing a movement along a demand curve or a shift of the demand curve.

Shift of the demand curve 1. College students purchase many more energy drinks during finals week than during the rest of the semester. 2. Students eat out more often as the federal government increases how much grant money it provides students. Movement along the demand curve 1. College students reduce how much detergent they use for each load of laundry in response to higher detergent prices. 2. College students rush and buy discount furniture to take advantage of an unexpected price drop.

According to the following figure, how would the supply and demand curves need to shift in order to move from market equilibrium (E) to point A?

Supply and demand shift to the left, demand shifting farther than supply.

According to the following figure, how would the supply and demand curves need to shift in order to move from market equilibrium (E) to point A?

Supply and demand shift to the right, supply shifting farther than demand.

Airline ticket prices typically increase during the holidays. Madeline paid $800 for a ticket to San Francisco over the holiday break. Four months ago, she paid $450 to fly to San Francisco. Who benefits from this price increase?

The airlines still able to sell tickets during the holiday season benefit.

Currently, the country of Lauronia is at full production of sweatshirts and applesauce. What would it look like on the production possibilities frontier if production of both of those goods changed while full production was still maintained?

The point would move from one part of the curve to another part of the curve.

According to the law of supply, if the price decreases, what will happen to the quantity supplied?

The quantity supplied will decrease.

There was a decrease in the quantity of gasoline exchanged in the market, but the price remained the same. What had to have happened to supply and demand?

There was a decrease in demand and a decrease in supply.

There is an increase in price for ice cream cones, but quantity demanded and quantity supplied stayed the same. What had to have happened to supply and demand?

There was an increase in demand and a decrease in supply.

Many of the decorative items made in China are hand-painted. China has a large labor supply, and workers earn relatively low wages. Which of these basic economic questions does this illustrate?

This scenario illustrates how to produce, which in China's case is using its relatively cheap labor.

Suppose the equilibrium price for bicycle tires is $42 but the market price rises to $67. What has happened to total surplus in this market?

Total surplus decreases.

The resource category land refers to all natural resources, including fertile land, forest, mineral deposits, solar and wind energy, and water

True

Which of these would cause a country's production possibilities frontier (PPF) to shift inward?

a civil war

Which of these is an example of a macroeconomic topic?

a government program that is designed to lower the unemployment rate

The quantity demanded for bread has increased due to a decrease in price. How would this change in quantity demanded be represented on the demand curve?

a movement from one point on the demand curve to a lower point on the demand curve

The quantity of gaming apps that producers will offer for sale increases as the price of gaming apps increases. How would this change in quantity supplied be represented on the supply curve?

a movement from one point on the line to a higher point on the line

The increased demand for corn for ethanol production has resulted in record-high corn prices. As a result, more farmers have planted acreage in corn. The effect on the supply of corn would be shown as:

a new curve to the right of the original supply curve.

A recession can cause some firms in a particular market to go out of business. How would this be illustrated on a supply graph?

a new supply curve to the left of the original curve

According to the following figure, a price of $20 would lead to:

a shortage of 6.

The horizontal distance between the demand curve and the supply curve at a price above the equilibrium point represents:

a surplus.

Producer surplus is shown graphically as the area

above the supply curve and below the market price.

To find the market supply of a good or service, economists:

add together the quantities each producer would produce at each price.

Current Major League Baseball team owners get to vote on the sale of ball clubs to prospective new owners. Sometimes this means that the highest bidder may not win the bidding process. This is a violation of:

allocative efficiency.

Miami has a large Cuban population. As a result, it has many stores and restaurants that cater to Cuban tastes. This is an example of:

allocative efficiency.

On July 8, 2010, LeBron James, a star in the National Basketball Association, announced that he was going to sign with the Miami Heat. The Heat was not the team that was willing to pay the most for LeBron's services, but it acquired him anyway. This is a violation of:

allocative efficiency.

a maket will

always move towards equilibrium

A parent offers to pay a child $5 for each A received on a school report card. The money offered for each A is an example of:

an incentive.

The basic proposition of the law of demand is that

as the price of a good increases, buyers are willing and able to purchase less.

Suppose Cho is willing to pay $200 for a tablet and she has no consumer surplus. What is the market price of the tablet?

at least $200

Bolivia has about 50% of the world's reserves of lithium. It is also a major producer of zinc. Suppose that Bolivia produced only those two goods and that its linear production possibilities frontier had the following endpoints: 20,000 tons of lithium and zero zinc or 10,000 tons of zinc and no lithium. A combination of 10,000 tons of lithium and 5,000 tons of zinc would be:

attainable and efficient.

A country that does not engage in international trade is known as a(n):

autarky

Suppose the equilibrium price in a market is $10. The government sets a minimum price of $12. This price of $12 is an example of a(n):

binding price floor.

Which of these leads consumers to buy more of a good as the price of that good decreases?

both the substitution effect and the income effect

A medical imaging facility recently purchased a new open MRI machine to cater to patients who find the older closed machines claustrophobic. This new machine is an example of:

capital

The figure shows the market for portable DVD players. Assume the government sets a price ceiling at $20. This price ceiling will:

cause a shortage.

The difference between what a consumer is willing to pay and what he or she actually pays for a good or service is known as:

consumer surplus

Suppose you are trying to understand the effect that an increase in the price of grapes will have on the market for wine.

d) no other change takes place.

According to the following figure, a decrease in demand will:

decrease price only.

Assume the market for DVD movies is initially at equilibrium. A decrease in the price of streamed movies, a substitute for DVD movies, will __________ the equilibrium price and ___________ the equilibrium quantity of DVD movies.

decrease; decrease

The typical demand curve is:

downward sloping

Suppose the school sells all of its vaccines at the market price of $20.00. What has it managed to maximize?

effciency

Brea is a business owner who is in charge of ensuring that her business earns enough money to pay the rent, pay the employees, and purchase new manufacturing machines when the old ones wear out. Which of these resources best describes Brea?

entrepreneurial ability

In the late 1800s, Cecil Rhodes took the money he made from renting water pumps to miners and used it to buy up the claims of small mining operations. In time and with the help of funding from the Rothschild family, he formed De Beers Consolidated Mines, which would become the largest diamond mining company in the world. Which of these best describes the role Cecil Rhodes played for De Beers?

entrepreneurial ability

Tax cuts are a contentious political issue. Some politicians have the subjective opinion that tax cuts tend to benefit people with higher incomes more than those with lower incomes. An economist would say that those who are opposed to tax cuts are concerned with the _____ of the tax cuts.

equity

Sixteen slices of pizza are distributed in a society of four people so that one person receives eight slices, the second person receives six slices, the third receives two, and the last receives no pizza. If no person wants to give up the pizza he or she has but they all agree that the fair outcome would be the one where each person gets four slices, then _____ could be improved at the expense of _____.

equity; Pareto efficiency

Suppose now that the school wishes to make sure no students with diabetes or asthma go without the drug because they cannot afford it. Because it does not know the budget of each student, the Health Center decides to offer vaccines free to students who can provide a doctor's note stating they have a pre‑existing condition. The school is now seeking a greater degree of

fairness

The resource category capital refers to financial assets, such as bank accounts, bonds, certificates of deposits, and stocks.

false

The _____ consumers there are who would be likely to purchase a given product, the lower its market demand will be, and the demand curve will shift _____.

fewer; leftward

Utility Experts Inc. is a sole local provider of electrical power to a small town in North Carolina. The most efficient way to ensure that everyone in the town receives electricity at a fair price is to allow for:

government regulation.

Increased demand has driven up helium prices dramatically over the past several years. Because of this, the cost of helium-filled birthday balloons has quadrupled. Who might benefit from this price increase?

helium producers still able to sell helium at the higher price

During the summer, the largest computer game retailer has a massive sale. As prices for computer games fall, consumers purchase more games, ceteris paribus. What does the term ceteris paribus mean in this context?

holding all else equal (unchanged)

Which of these is an example of a microeconomic topic?

how a gas station changes pricing in response to a new competitor

A shortage in the market for economics textbooks will ___________ the price of textbooks.

increase

Point A in the diagram represents a production situation that is:

inefficient

A good for which an increase in income results in declining demand is called a(n) _____ good.

inferior

When a person graduates from college and her income rises, her consumption of ramen noodles will fall. This is an example of a(n):

inferior good

Prices are used to provide _____ between buyers and sellers.

information

An ASE (Automotive Service Excellence) certification is an example of:

labor

Economists refer to the payment to ________ as rent.

land

Much of the world's supply of textiles is now manufactured in China. This has led to textile factories closing in part of the United States. A textile firm choosing to move its manufacturing to China would argue that it is doing so to improve:

ld's supply of textiles is now manufactured

Megan has a 11 hr gap in her course load for the fall semester. There are two courses available for her to take at that time: reading piano sheet music and beginning rock climbing. She does not have any experience with piano or rock climbing. In the end, she decides to enroll in the rock climbing course, despite her fear of heights. Identify which activity exhibits a potential trade-off with enrolling in rock climbing.

learning to read piano sheet music

When trading with more developed countries,

less developed countries have a comparative advantage in the production of some goods or services.

As a result of a severe recession, the total output, or gross domestic product, of a nation falls by 4 percent.

macroeconomics

Increased consumer spending causes the national unemployment rate to fall.

macroeconomics

Increased consumer spending causes the rate of inflation to rise.

macroeconomics

Lindsay is an inventory planner at a local retailer. She is currently making a decision as to how many units she should stock in the store based on projected demands of consumers. She has determined that she should keep 200 units in the store because an additional unit would not sell. This is an example of:

marginal analysis

A tax on tires increases the price of tires paid by car owners.

microeconomics

Optimism about future car sales leads General Motors to hire more auto workers.

microeconomics

Robotic technology reduces the demand for auto workers.

microeconomics

A change in price that increases the quantity demanded of a good will cause a:

movement downward along the demand curve.

A change in price that decreases the quantity demanded of a good will cause a:

movement upward along the demand curve.

Suppose the equilibrium price for bicycle tires is $42 but the market price falls to $37. Jerry is still able to make a profit at this lower price, so he stays in business. Anat, who was able to make a small profit by selling tires at $42, goes out of business as prices fall. Madison bought the tires at the higher price from Anat and is delighted to buy them at a lower price from Jerry. Marcus, who previously did not purchase tires, is now willing to pay the lower price, so he buys new tires from Jerry. Which individual's actions contribute to a reduction in consumer surplus?

no one's actions

Herb Farmer decides to use his ingredients to make cakes, but his customers prefer donuts.

not efficient

Herb Farmer makes two cakes and two loaves of bread but uses enough flour to make three cakes and four loaves of bread.

not efficient

A market exists when

people exchange money for goods and services

Politicians in Washington, D.C., recently instituted a policy that requires stores to charge their customers for bags, either paper or plastic. The purpose is to reduce pollution. Which of the following key ideas of economics can explain the reasoning behind this policy?

people follow incentives

Of all the points in the diagram, ________ represents a situation where the opportunity cost of producing one more unit of Good X is highest.

point A

Suppose the following represents the Canadian production possibilities frontier for two of its most important exports: maple syrup (in millions of bottles) and tree logs (in millions). Please choose the best answer for each question.

point H is possible, but not efficient. Point M is possible and efficient. Point Y is unobtainable through production, but it may be possible for Canada to consume at point Y if international trade occurs.

Limits on what insurance companies can charge customers is an example of a(n):

price ceiling.

Suppose the equilibrium price in a market is $10. The government sets a minimum price in the market of $8. This price of $8 is an example of a(n):

price floor.

Jeishca is a purveyor of hot tubs. When a customer purchases a hot tub, Jeishca's employees deliver and install the hot tub at the buyer's home. Jeishca recently purchased new better-mileage trucks in order to bring down his cost of delivering hot tubs. What type of efficiency are the new trucks allowing Jeishca's business to achieve?

production efficiency

If Herb Farmer wants to produce one more cake, he needs to give up two loaves of bread.

productive efficiency

Market equilibrium quantity exists where:

quantity supplied and quantity demanded are equal.

The market equilibrium price exists when:

quantity supplied and quantity demanded are equal.

The market price would be likely to fall when:

quantity supplied is greater than quantity demanded.

Please select the economic term that is best described by each statement. People have limited resources. Everything you do requires giving up something (time, money, etc.).

scarcity tradeoffs

When the number of sellers of a product falls, there is a decrease in the _____ that product.

supply of

The maximum amount of a product that sellers are willing and able to provide for sale over a relevant range of prices, holding all other factors constant, is called

supply.

A(n) _____ occurs when the price is above market equilibrium.

surplus

Select the correct definition of the term "comparative advantage."

the ability to produce a good or service at a lower opportunity cost than another

Madeline normally flies to San Francisco to visit family over the holidays, but airline ticket prices have increased by $400. Madeline no longer can afford this ticket, so she decides to stay home for the holidays. Who benefits from this price increase?

the airlines still able to sell tickets during the holiday season

The output that results when the quantity demanded is equal to the quantity supplied is known as:

the equilibrium quantity.

When the market price of a good increases, the amount that sellers are willing to offer for sale increases. This statement is best described as

the law of supply

Producer surplus is the difference between

the market price and the minimum price a seller is willing to accept.

Consumer surplus is equal to the difference between

the maximum price a buyer is willing to pay and the market price.

If clearly some units were not being used on the production possibility curve, then:

the point would move from the curve to the inside of the curve.

What are the points that are attainable in the production possibility frontier?

the points on the curve and those to the left of the curve

The concept of demand is best described as

the quantity of a good or a service that people are willing and able to purchase at different possible prices.

Suppose the University Health Center receives flu vaccinations at the beginning of each flu season, and that they offer these vaccines for the market price of $20.00 each. Assume that college students have varying budgets. Some have some money to spare, some are on a very tight budget. Keep in mind that some students have pre‑existing conditions, such as asthma and diabetes, that place them at high risk for the flu. Who will receive the vaccines if the University Health Center sells them for the $20.00 market price?

the students who will pay $20.00 for them

Markets work most efficiently when:

there are many buyers and sellers.

When sellers expect prices of a good to rise in the future, the supply curve of that good in the current period will shift:

to the left.

More sellers of a product would cause the supply curve for that product to shift:

to the right.

The resource category entrepreneurial ability refers to business skills such as the management of resources, the drive to innovate, and the willingness to bear risk

true

The resource category labor refers to the mental and physical productivity of workers

true

How many combinations of goods would be possible to illustrate on a production possibilities frontier?

two

Consumer surplus is shown graphically as the area

under the demand curve and above the market price.

Which of these is an example of a microeconomic topic?

why a movie theater charges different prices to different groups of people

Producer surplus is the difference between market price and:

willingness-to-sell.