MicroEconomics 2314 Test 1

Mike's opportunity cost of delivering an extra pizza is producing ___ pizzas.

2/3

Price elasticity of demand is a measure of

consumer response to a change in a good's price

If the price elasticity of demand for a good is greater than one, then the demand for that good, with respect to price, is

elastic

To increase total revenues, firms with ___ demand should lower price and firms with ___ demand should increase price.

elastic; inelastic

If both supply and demand increase simultaneously, the new equilibrium price is _____ and the new equilibrium quantity is _____

indeterminate; higher

If the consumers cannot switch to a close substitute when the price of a good increases, the demand for that good is likely to be

inelastic

Suppose a 10% increase in the price of pain relievers leads to a 5% decrease in quantity demanded of pain relievers. The demand for pain relievers, with respect to price, is

inelastic

The fallowing data represent the production values for two goods, (M,N): (10,0): (9,2):(8,4):(7,3):(6,6). The data is

not consistent with a production possibilities curve

Of the labeled points, ____ are efficient

only w, x, y, z and v

Of the labeled points, _____ are attainable

only w, x, y, z, v and t

If the percent change in quantity demanded is zero for any percent change in the price, demand is classified as

perfectly inelastic

The production possibilities curve shows

the maximum production of one good for every possible production level of the other good

The opportunity cost of an activity is the value of

the next-best alternative forgone

According to the data, Lorie has an absolute advantage in

the production of pizza

At the very least, Joe Average and Bill Gates are both identically limited by

their influence

Having a comparative advantage in a particular task means that

you give up less to accomplish that task than do others

Amy is thinking about going to the movies tonight. A ticket costs $7 and she will have to cancel her dog-sitting job that pays $30. The cost of seeing the movie is

$37

If the slope of the demand curve is -1.4, price is $5 and quantity demanded is 13 units, the price elasticity of demand is

0.27

Lorie's opportunity cost of producing an extra pizza is delivering ___ pizzas.

1/2

What might cause a demand function to shift to the right?

An increase in the price of a substitute

If Leslie can produce two pairs in an hour while Eva can make one pair an hour, then it must be the case that

Leslie has an absolute advantage

The comparative advantage for pizza production belongs to ___ and the comparative advantage for pizza delivery belongs to _____.

Lorie; Mike

Almost every holiday season at least one gift idea achieves fad status. When that happens, prices tend to increase dramatically. Why?

Quantity demanded exceeds quantity supplied

Failure to apply the principle of comparative advantage will result in

Smaller total output

What is the opportunity cost of living in a house that you already own?

The rent you could receive if you rented the house out to someone else

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?

Your marginal grades were lower than your overall GPA

A shift to either the left or right of a demand curve is called

a change in demand

A movement along a demand curve from one price-quantity combination to another is called

a change in quantity demanded

Whether or not a good can be classified as a complement depends on whether

an increase in demand for one good follows a decrease in the price of the other

A market comprised of a downward sloping demand curve that intersects an upward sloping supply curve is said to be stable because

at any price other than equilibrium, forces in the market move price towards the equilibrium

The logical implication of the scarcity principle is that

choices must be made

In a free market, if the price of a good is below equilibrium price, then

demanders, to acquire the good, will bid the price higher

"As the price of personal computers continues to fall demand increases. This headline is inaccurate because

falling prices for personal computers increases quantity demanded, not demand.

Shelly purchases a leather purse for $400. One can infer that

her reservation price was at least $400

Big-ticket items such as refrigerators have a ___ price elasticity of demand compared to low budget items such as paper towels.

higher

Economics is best defined as the study of

how people make choices under the conditions of scarcity and the results of the choices

The cost-benefit principle indicates that an action should be taken

if the extra benefit is greater than or equal to the extra cost

The supply curve illustrates that firms

increase the quantity supplied of a good when its price rises

A decrease in the demand for bananas with no concurrent change in the supply of bananas will result in a ______ equilibrium price and a(n)_____ equilibrium quantity

lower, indeterminate

If the demand for a good is elastic, that good is likely to have

many close substitutes

On a linear demand curve, at high prices demand is ___ that at low prices.

more elastic

Clothing (including all brands) has fewer close substitutes than a specific brand of clothing such as Abercrombie and Fitch, Gap, or Levis. Therefore the demand for clothing would be ______ than the demand for a specific brand

more inelastic

Demand tends to be ____ in the short run than in the long run.

more inelastic

The slope of any production possibilities curve is ____ because ____.

negative; to produce more of one good means less production of the other

According to the principle of increasing opportunity cost, expanding production requires using resources in which order?

start with the resource with the lowest opportunity cost and proceed to the higher opportunity cost resources

The cost that we can not avoid whether or not an action is taken, is called

sunk cost

"Holding all other relevant factors constant, consumers will purchase more of a good as its price falls. "This statement reflects the behavior underlying"

the demand curve

Suppose the price of gasoline increases and that sport utility vehicles get poor gas mileage compared to other available cars. One would expect

the demand for sport utility vehicles to decrease

Supply curves are generally ____ sloping because _____

upward; of the principle of increasing opportunity costs

Janie must either mow the lawn or wash clothes, earning her a benefit of $30 or $40, respectively. She dislikes both equally and they both take the same amount of time. Janie will therefore choose to ____ because the economics surplus is ____.

wash; greater