Microeconomics

The principle that your best choice depends on your other choices, the choices others make, developments in other markets, and expectations about the future is known as the ____ principle.

Interdependence

A business manages to become more efficient. What would happen to its supply curve if it improved its efficiency?

It would shift to the right

The cost-benefit principle states that ___ are the incentives that shape decisions.

costs and benefits

An individual's supply curve is the same as...

individual's marginal cost curve.

A rational buyer will....

keep buying a product until the marginal benefit equals the price

Michelle is a shopper that follows the rational rule and is searching for a credenza to go in her living room. her willingness to pay is 600. She is interested in a particular credenza from a local shop. if she decides not to buy the credenza, you can conclude that the benefit is _____ the cost.

less than

Dr. Chang is buying shirts online and has to decide how may shirts to buy. He should buy another shirt if the.....

marginal benefit of the next shirt is at least as high as the price of the shirt.

The opportunity cost principle states that the true cost of something is the ....

next best alternative you have to give up to get it

According to the cost-benefit principle, framing effects -- or how a choice is described-- should....

not affect a decision.

The law of demand refers to...

the inverse relationship between price and quantity demanded

Describe the graph that illustrates what will happen in the market for roses if the price of roses falls?

the price moves from a higher to a lower point on the demand curve, there is no shift

Lacy is in the market for a used lawn mower. she is willing to pay 500. What is Lacy's economic surplus if she buys a lawn mower for 350?

150

Benjamin is willing to pay 700 for a new iPad, Apple is selling new ones for 600. It costs apple 400 to produce this ipad. How much eeconomic surplus does apple receive and how much does benjamin receive>

200, 100

What is the primary difference between a change in supply and a change in quantity supplied?

A change in quantity supplied is a movement along the supply curve, whereas a change in supply is a shift of the supply curve

If ramen noodles are an inferior good, then an increase in income will lead to what affect on the demand curve?

A leftward shift

For normal goods, what would result from an increase in income?

An increase in the equilibrium price and equilibrium quantity

What best describes the use of the marginal rule?

Breaking down a choice into a series of smaller choices and comparing the additional costs and additional benefits of each action.

What would cause a demand curve to shift to the left?

Decrease in demand (W to P)

What would cause a movement down a supply curve?

Decrease in quantity supplied (E to F)

If rice is an inferior good, when incomes rise, the equilibrium price will ____, and the equilibrium quantity will _____.

Decrease; decrease

If Ducati lowered the price of its motorcycles, what would happen to Yamahas supply/demand?

Demand curve would shift to the left, causing the price to lower

What are the four different types of things you should consider using the interdependence principle?

Dep between your own choices Other people or other businesses Markets Over time

_____ is a measure of how much your decision has _______ your well-being.

Economic surplus; increased

Nerida can either commute to work using a bus or purchase a new car. The bus fare each way is 2. Nerida works five days a week for 50 weeks a year. Based solely on the benefit of avoiding the cost of her bus tickets, Nerida should purchase a care if the cost of the car is _______ than ______ per week.

Less; 20

Using the rational rule in conjunction with the marginal principle allows a decision-maker to.....

Maximize their economic surplus

What do shifts in supply cause?

Price and quantity to move in the opposite directions

Dell and apple are competitors, describe the graph that illustrates the effect of the rise in the price of dell computers on the demand for apple computers.

The demand curve would move to the right

Describe the graph that illustrates the affect on Apple computers if there was a rise in the price of Dell computers, since they are competitors.

The demand curve would shift to the right

Recent evidence suggests exercise promotes longevity and reverses aging. Based on this information, what might happen in the market for exercise-related goods and services?

The demand for exercise machines and/or gyms will increase

If Tesla cars become less expensive, what will happen in the market for other electric cars?

The demand for other electric cars will fall.

What happens to the equilibrium price and quantity when demand decreases and at the same time supply increases, but the demand shift is relatively larger than the supply shift?

The equilibrium price falls, and the equilibrium quantity rises

What happens to the equilibrium price and quantity when demand decreases and at the same time supply increases and the demand shift is relatively smaller than the supply shift?

The equilibrium price falls, but the equilibrium quantity rises

Suppose the cost of lithium-ion batteries, an input in the production in electric vehicles, has dropped more steeply than expected. How would the supply/demand curve shift and how would it effect the equilibrium price/quantity?

The supply curve would shift right, increasing quantity and lowering price.

Describe the graph that illustrates what would happen in the market for processed industrial steel bars if the price of raw steel fell?

The supply curve would shift to the right.

If the price of jet fuel rises, what happens to the supply of airline flights?

The supply of airline flights decreases

A large amount of harvested grain used to make flour grows mold due to flooding. How will this affect the supply of the floour in the market?

The supply of flour will decrease in the market

According to the law of demand....

a decrease in price increases quantity demanded

An individual supply curve is....

a graph with quantities of a product that a seller is willing to supply at different price points

The marginal benefit of consuming an item is the....

additional benefit from buying one more unit of the good

Substitutes in production....

allow a business to manufacture alternative products, using the same inputs

Substitutes-in-production....

allows a business to have alternative uses of its resources by manufacturing other products using the same inputs.

The key to using the cost-benefit principle is to think about ______ aspect of a decision.

both financial and nonfinancial

In a voluntary economic transaction between a buyer and a seller, ____ can earn economic surplus from the transaction.

both the buyer and seller

Diminishing marginal benefit implies that....

buying an additional unit of an item yields a smaller benefit than the previous unit purchased.

If ramen noodles are an inferior good for Kim, then, holding all other things constant, as Kim's income increases, her demand for ramen noodles will....

decrease.

The rational rule for sellers says that a seller should sell one more unit of an item if the price is....

greater than or equal to the marginal cost.

Supply curves typically slope upward because....

higher prices lead businesses to supply more output and more businesses to enter the market

The interdependence principle....

implies that buyers' decisions are affected by many factors other than the price of an item

You are thinking of going out to dinner at a restaurant with your friends. The meal is expected to cost you $50, you typically leave a 20% tip, and round trip Uber ride will cost you 20. You value the restaurant meal at 20, and the time spent with your friends at 30. You should _____ to dinner with your friends because the benefit of doing so it ____ than the cost.

not go, less

You are midway through your work shift when your supervisor asks if you can stay an extra hour today. In order to appropriately apply the rational rule, you should......

only stay if the cost of working that extra hour is less than the benefit you receive for the extra hour of work.

A calculation of marginal cost should include....

only variable costs.

The law of supply refers to the....

positive relationship between price and quantity supplied

The relationship between price expectations and demand is...

positive; when future prices are expected to rise, current demand will rise

The opportunity costs of attending college include the....

potential income that could be earned working

Peanut butter and peanut oil are complements-in-production. When the price of peanut butter rises, the....

supply of peanut oil will rise

The marginal benefit of consuming an item is...

the additional benefit from buying one more unit of that item

The price of coffee at a local coffee shop is 2.50. Cheryl is willing to pay 8 for her first cup of coffee each day. The marginal benefit to her of each additional cup of coffee falls by 2. How many cups of coffee should Cheryl purchase?

three

The market supply is the....

total quantity produced by all sellers in the market at each price.

Economists convert costs and benefits into money equivalents by evaluating an individual's....

willingness to pay

What happens to the equilibrium price and quantity when demand increases and at the same time supply decreases, but the demand shift is larger than the supply shift?

Both the equilibrium price and quantity rise

The cost-benefit principle states that the full set of ___ should be evaluated when making any choice.

Costs and benefits

Which of these scenarios depects a rational buyer?

Damien buys a sandwich for 5 when the marginal benefit of the sandwich to him is 7

What is the difference between a centralized economy and a market economy?

Governments make production decisions in a centralized economy, and individuals make production decisions in a market economy.

Kathleen is a manager at an electronics store, and she has to decide how many workers to hire. If she hires one worker, her rev is 400/day. If she hires another she can make another 350. The marginal ben of hiring another worker decreases by 50 with each hire. Assuming they are payed 20/hour and work 8 hours/day, how many employees should she hire?

Hire 5 and the revenue will be 1500

What would cause an item to move up (as in up and to the left) on the demand curve, without a shift?

Increase in the price of the item (V to W)

How is the economic surplus generated by a decision calculated?

It is the total benefits minus total costs arising from the decision.

Describe the graph that would illustrate what we expect to see in the market for printing paper if the price of printing paper rises?

It would move up the demand curve, causing price to rise.

Explain what would happen in the market for printing paper if the price rose?

It would move up the supply curve

Consider your decision to attend class each day or skip it. Which of the four core principles of economics applies to the notion that by attending class you are not doing the next best activity you would prefer to do, such as napping or going to the gym?

Opportunity cost principle

What do shifts in demand lead to?

Price and quantity to move in the same direction

If someone is only willing to make a purchase if the price they pay is less than or equal to her willingness to pay, she is following the...?

Rational rule

Opportunity cost arises from the fundamental economic problem of.....

Scarcity

If a seller expects prices to rise in the future what action would they take?

Stock up today and sell the goods when the price rises

Saudi Arabia is a member of the (OPEC). What would happen to supply/demand if Saudi Arabia cut oil production?

Supply of crude oil will fall and the price of oil will rice

What is the process that a manager can follow to estimate the total market demand for the United States?

Survey some representative customers, find the total quantity demanded for those customers, scale up the quantities demanded to represent the entire market, and then plot the market demand curve

A new study discovers the health benefits of eating fish regularly. At the same time, some consumers decide to become vegetarians. What is the effect of these events on the equilibrium price and quantity in the fish market?

The change in both the equilibrium price and quantity is ambiguous

What happens to the equilibrium price and quantity when demand and supply increase simultaneously, but the relative size of the shifts are not known?

The equilibrium quantity rises, and the change in the equilibrium price is ambiguous.

Suppose you and a friend are playing a game online. After two rounds your friend says she has to go study for an exam tomorrow and will see you later. Using the rational rule, explain your friends decision using marginal cost/ben.

The marginal cost of the third round was greater than the marginal benefit of the third round.

Describe the graph that shows what would happen in the market for printing paper if the price of it rose?

The price would move up the supply curve, without causing a shift

Describe the graph that illustrates what would happen in the market for processed, industrial steel bars when the price of raw steel falls?

The supply curve shifts to the right

Hydraulic fracturing is an advancement in production techniques that lowers the cost of producing natural gas. What would happen to its supply/demand curve, which would lead to what effect on the equilibrium price and equilibrium quantity?

The supply curve shifts to the right, making the equilibrium price lower and equilibrium quantity higher

Describe how the demand graph would change for jelly if the price of peanut butter rose?

There would be a shift to the left of the demand curve

On a hot sweltering day, you feel thirsty and buy an ice-cold soft drink, which you gulp down. Whether you buy a second drink or not will depend on....

Whether the marginal benefit of the second soft drink exceeds the price of the drink