Microeconomics questions to focus on

Increases, decreases

The U.S. government has subsidised ethanol production since 1978. With the advent of affordable electric cars, policymakers are considering allowing the subsidy to expire. The accompanying graph represents the supply/demand curves to show how reducing the subsidy will affect the ethanol market, Equilibrium price____ Equilibrium quantity___

c) consumer surplus decreases

What happens as a result of the organizers refunding Fiona, taking the pizza cutter from her, and letting Tim buy it at the market price? a) Consumer surplus increases b) Producer surplus increases c) Consumer surplus decreases d) consumer surplus decreases

Decreases may Increase, decrease, or stay the same

Determine how the equilibrium price and the equilibrium quantity in the market for the coffee change if -The price of tea, a substitute for coffee, decreases, -And due to better weather, the price of coffee beans also decreases Equilibrium price____ Equilibrium quantity ___

1) complements 2) Substitutes 3) complements 4) substitutes 5) substitutes

Identify the relationship between each of the Paris of goods.

a) Markets b) Property rights c) Firms d) Money

Match the institution with the roles it plays in the coordination of resources in decentralized economics. Answer Bank: Markets, Firms, Property Rights, Money a) Brings buyers and sellers together to carry out mutually beneficial exchanges b)Established rules for ownership of resources and create incentives for innovation c) Organizes resources in order to produce goods and services d) Allows for the exchange of goods and services using a common unit as a measure of value that is generally accepted as payment.

Consumer surplus = Every individual's willingness to pay - the lowest price they can find, added together Consumer surplus = (500-150) + (400-150) + (300-150) = 750

Consumer surplus: $

Increases Increases

Stone and brick are substitutes in home construction. Consider the market for brinks depicted in the graph. Suppose the price of stone increases due to new regulations for the stone quarrying industry. Equilibrium price___ Equilibrium quantity ___

The production quota is a vertical line at the quantity determined by the quota. In this case, it is 4,000 crabs per month. The new price is found on the vertical axis where the production quota line meets the demand curve. In this case, it is $7 per crab.

The hypothetical country of Crabby Island has imposed a production quota of 4,000 crabs per month. Use the line segment in the graph to show this production quota, and then answer the questions. What is the price of crab after the introduction of the quota?

Without the price floor, the equilibrium price is determined by the interaction of buyers and sellers and occurs at the intersection of the supply and demand curves. The model predicts an equilibrium price of $2.50 When the price floor of $3.50 is implemented, buyers will buy 1 billion bushels. However, firms are willing to sell 2 billion bushels at this price. The difference between these two quantities is the surplus. Therefore, the price floors cause a surplus of 1 billion bushels.

Without the pricer floor, what would the equilibrium price per bushel be? equilibrium price: $____ With the price floor in place, what is the surplus amount? Surplus: ___ billion bushels

c) Coordination and incentives to direct output.

What is the biggest problem facing command economics (socialism)? a) Private property b) The Invisible Hand c) Coordination and incentives to direct output. d) Free enterprise

The total consumer surplus for five students is 800 If the price increases from $150 to $350, what is the change in total consumer surplus is -600

What is the consumer surplus for the five students____ If the price increases from $150 to $350, what is the change in total consumer surplus___

Elasticity of demand of sugar-free gummy bears is given by elasticity = (159-177)/ ((177+159)/2) / (2.95-2.55)/ ((2.55+2.95) /2) = -0.7 Elasticity of demand of regular gummy bears is given by elasticity = (275-381)/ ((381+275)/2) / (2.95-2.55)/ ((2.55+2.95) /2) = -2.2

As the price of gum bears rises from $2.55 to $2.95, what is the price elasticity of demand for sugar-free and ordinary gummy bears? Use the midpoint method and specify answers to one decimal place. Elasticity of demand of sugar-free gummy bears: Elasticity of demand of regular gummy bears:

a) movement along the demand curve b) movement along the demand curve c) shift in the demand curve d) shift in the demand curve

Categorize each scenario as describing a movement along a demand curve or a shift of the demand curve. a) College students reduce how much detergent they use for each load of laundry in response to higher detergent prices. b) College students rush and buy discount furniture to take advantage of an unexpected price drop. c) College students purchase many more energy drinks during finals week than during the rest of the semester d)Students eat out more often as the federal government increases the grant money it provides students.

Either-or decisions a) After graduation from law school, Frank is offered one job in Chicago and another in New York. Where should Frank work? d)Bella is accepted to four graduate school programs. Where should she go to school? Marginal decisions b)Marvin arrives at his favorite buffet to eat Chinese food. Sometimes, he overeats and leaves the budget with a stomach ache. c) Jake needs to stay awake while he studies for his midterm tomorrow. What quantity of coffee should Jake drink?

Classify each scenario as an "either-or" or "how much" decision. a) After graduation from law school, Frank is offered one job in Chicago and another in New York. Where should Frank work? b)Marvin arrives at his favorite buffet to eat Chinese food. Sometimes, he overeats and leaves the budget with a stomach ache. c) Jake needs to stay awake while he studies for his midterm tomorrow. What quantity of coffee should Jake drink? d)Bella is accepted to four graduate school programs. Where should she go to school?

A) more elastic B) less elastic C) more elastic D)more elastic

Consider the statements regarding elasticity. Consider if it is less elastic, perfectly inelastic, or more elastic. a) Over more extended periods, demand tends to be ___. b) With fewer substitutes, demand tends to be ___. c)Demand for an item that uses a large portion of your budget tends to be ___ d) Demand for a luxury item tends to be ___

Consumer surplus (CS) = 12500 CS = ((base * height) / 2) The equilibrium quantity is 5,000 bushels. The triangle's height is the difference between the vertical intercept of the demand curve and the equilibrium price, so (9-4) = 5. Plugging these values into the formula for the area of a triangle yields. CS = ((5,000 * 5) / 2) CS= 12500 Producer surplus is the difference between the equilibrium price and the marginal cost of production. It is calculated as the area below the equilibrium price but above the supply (or marginal cost) curve. The triangle's height equals the equilibrium quantity, and the base is the difference between the equilibrium price of $4 and the vertical intercept of the supply curve. So, $4-1= $3 is the vase. Employing the area of a triangle formula again, Producer surplus (PS) = 7500 PS = ((base * height) / 2) PS = ((3 * 5000) / 2) PS = 7500

The accompanying graph reflects equilibrium in the competitive market for corn and answers the following questions. Calculate consumer surplus__ Calculate producer surplus __

Before government regulation, Alaskan king crab's equilibrium price was $3.50/pound, a price at which there were buyers for every supplier. However, due to environmental issues, a quota, or upper limit on Alaskan king crab, is implemented, reducing the amount of Alaskan king crab caught. At 15 million pounds of crab, buyers are willing to pay $4.00/pound, whereas sellers are willing to accept as little as $3.00/pound. Using the proper terminology, the supply price at this quota is $3.00/pound while the demand price is $4.00/pound. Firms receive $4.00/pound even though they would be willing to take the lower price. The difference between these prices is called quota rent. quota rent = demand price-supply price quota rent = $4.00 - $3.00 = $1.00 deadweight loss = 1/2 (4.00-3.00) (18 million - 15 million) = 1.5 million

Alaskan king crab is one of the most prized shellfish. Suppose that, to protect their numbers, the Alaskan government allows only 15 million pounds of crab to be caught during the fishing season so that the Alaskan king population remains at an environmentally sustainable level. The graph includes the supply and demand curves for Alaskan king crab. Please label the graph appropriately. Not all terms will be used. Before the government imposes its regulations, what is the price of crab? What is the demand price after the quota? What is the quota rent for Alaskan king crab?

a) No one

What student will purchase a tablet if the price of a tablet is $550? a) no one b) everyone c) Lily, Amanda, and Anthony, d) Anthony

Because the percentage changes are provided, simply divide the percentage change in the quantity of Product B by the percentage change in the price of Product A. cross-price elasticity = 0/20% = 0 There is no change in quantity demanded for Product B. Thus, the numerator in the cross-price elasticity formula is zero, and the percentage change in price for Product A becomes irrelevant (as is the change in quantity demanded for Product A, which is more useful when calculating the price elasticity of demand for Product A). This indicates that the quantity demanded for Product B is not responsive to price changes in Product A, so the two goods have no relationship.

If a 20% price increase for product A causes a 10% decrease in the quantity demanded but no change in the quantity demanded for product B, what is the cross-price elasticity of these goods? Round your answers to one decimal place. What is the relationship between these goods?

a) Equilibrium quantity must increase, but equilibrium price could increase, decrease, or stay the same

Recently, a series of studies have demonstrated the considerable beneficial health effects of food and drink derived from the amaranth plant. This has affected consumer taste for amaranth flour, pods, roots, etc. At the same time, particularly favorable weather has resulted in a bumper crop of amaranth plants. Show the impact of these changes by properly shifting the appropriate curve or curves in the graph. Which statement is correct? a) Equilibrium quantity must increase, but equilibrium price could increase, decrease, or stay the same b) Equilibrium price must decrease, but equilibrium quantity could increase, decrease, or stay the same c) Equilibrium quantity must decrease, but equilibrium price could increase, decrease or stay the same. d) Equilibrium price must increase, but equilibrium quantity could increase, decrease, or stay the same.

a) inefficient allocation of apartments b) Black markets c) More subletting of apartments d) reductions in apartment quality

Rent controls are a typical example of a price ceiling. Please select all likely consequences of rent controls when the price ceiling is binding. a) inefficient allocation of apartments b) Black markets c) More subletting of apartments d) reductions in apartment quality

Move the excess demand as low as allowed. Excess demand = 4 million bags When the excess demand is moved down to below equilibrium, the price is 3 dollars. The supply quantity is 3, and the demand quantity is 7. Excess demand = Qd - Qs Excess demand = 7-3 Excess demand = 4

Suppose the accompanying graph depicts a market for one-pound bags of candy. Place the line labeled Excess Demand at a price that would generate an excess demand or shortage. Then, determine the size of the excess demand.

The income elasticity of demand measures how a consumer's change in income impacts the demand for a particular good. The formula shown allows you to calculate the income elasticity of demand. income elasticity of demand=(% change in quantity demanded) / (% change in income) By using the midpoint method to calculate percent change, the equation becomes (QDnew − QDold) / ((QDnew + QDold)) /2) /((income new−income old) / ((income new+income old)/2) For Sylvia's vacation demand, income elasticity of demand vacations = (4.3/3.5) / (109,500-102,750)/ ((109,500 + 102,750)/2) = 4.49 Vacations are a(n) normal good Vacations are income-elastic For Blakes's generic potato chip consumption, income elasticity of demand generic chips = (2-1 / 1.5) / (15-9)/ ((15-9)/((15+9)/2))) = -1.33 Generic potato chips are a(n) inferior good As a good generic, potato chips are income-elastic

Sylvia's annual salary increases from $102,750 to $109,500. Sylvia decides to increase the number of vacations she takes from 3 to 4. Use the midpoint method to calculate her income elasticity of demand for vacations. Income elasticity vacations = Vacations are a ___ good. As a good vacation are ___ Blake eats two bags of generic potato chips daily and does not purchase name-brand chips. Blake's hourly wage increases from $9 to $15, and he eats one name-brand and one generic-brand bag daily. Calculate Blakes's income elasticity of demand for generic potato chips. Income elasticity generic chips = Generic potato chips are a(n) ___ As a good generic potato chips are ___

The lower marginal cost of production results in a downward/rightward shift of the supply curve- notice that the 30,000th unit costs $150 to produce instead of $210, which is consistent with lower marginal cost. The value of this new technology to consumers is equal to the change in consumer surplus. The original consumer surplus was the area above Price = $180 and below the demand curve: Original consumer surplus= 0.5 * (240 -180) X 20,000 = 0.5 * 60 * 20,000 = 600,000 New consumer surplus is the area above Price = $150 and below the new demand curve: New consumer surplus 0.5 * (240-150) * 30,000 = 1,350,000 The increase in consumer surplus is 1,350,000 - 600,000 = 750,000 The Increase in producer surplus is 750,000 Change in total surplus = 750,000 + 750,000 = 1,500,000

The accompanying diagram represents the market for violins. Suppose a new technology allows beginner-level violin producers to make violins at a substantially lower marginal cost while retaining the same quality. This causes the market supply to increase from S1 to S2. a) How much does this new technology increase consumer surplus? b) How much does this new technology increase producer surplus? c) How much does this new technology increase total (or social) surplus?

The formula for cross-price elasticity (CPE) between starships and spaceships is CPE a and B =( % change in the quantity of A demanded / %change in the price of B) 0.6 = (% change in the quantity of A demanded / 4.0%) = 0.6 * 4.0% = 2.4% Similarly, the percentage change in the number of bows is -0.3 * 14% = 4.2 %

The cross-price elasticity of starships and spaceships is 0.6, where the percent change in quantity is for starships, and the percentage change in price is measured for spaceships. If the price of spaceships increases by 4.0%, what will the percentage change in the quantity demanded of starships be? Enter the response to one decimal place and enter a negative number if the quantity demanded decreases. Quantity demand for starships : The cross-price elasticity of bows and violins is -0.3, where the percentage change in quantity is for bows, and the percentage change in price is measured for violins. Calculate the percentage that the quantity of bows will change if the price demanded decreases by 14%. Enter the response to one decimal place and enter a negative number if the quantity demanded decreases. Quantity demand for bows:

The income elasticity of demand measures how a consumer's change in income impacts the demand for a particular good. The formula for the income elasticity of demand is: Income elasticity = (19-20)/ ((19+20) / 2) / ((30,000 - 34,000) / ((30,000+34,000 / 2) = 0.41 In this case, income elasticity is 0.41, which is a positive number with a value less than one. This indicates that new outfits are a normal good with income‑inelastic demand. New outfits are a normal good, not an inferior good, because Lauren decreases her consumption when her income decreases. Inferior goods have a negative income elasticity because a decrease in income results in an increase in consumption. The income elasticity is inelastic because Lauren's consumption of new outfits decreased by a smaller percentage change than the percentage change of her income. A good is income-elastic when the income elasticity is greater than one.

When Laurens's salary decreases from $34,000 to $30,000, she reduces the number of outfits she purchases yearly from 20 to 19. Use the midpoint method to calculate Lauren's income elasticity of demand for new outfits. Please round the answer to the nearest hundred. The income elasticity of demand for new outfits is ____ New outfits are _____ suitable with ______ demand