Microeconomics Quiz 2

Choose the CORRECT one. A vertical demand curve implies

a perfectly inelastic demand

When Chandra is hiking on a hot day without any water, she is willing to pay up to $6 for a bottle of water. When she does her grocery shopping, she is not willing to pay more than $3.60 for a case of 36 bottles of water. If Chandra buys a case of 36 bottles for $3.60, or $.10 per bottle, her consumer surplus is _____ on the first bottle and is _____ on the 36th bottle.

$5.90;$0

If the price of strawberries increases by 20%, and the quantity of strawberries demanded decreases by 15%, then the price elasticity of demand is equal to:

0.75

The price of turkey breast rises from $3.00 per pound to $3.60 per pound. In response to this price change, the quantity demanded for turkey breast falls by 40%. What is the absolute value of the price elasticity of demand for turkey breast?

2

Delilah's income rises by 8%. She decides to increase the number of movie tickets she purchases by 20%. Her income elasticity of demand for movie tickets is:

2.5

The price of a dozen eggs falls from $3 to $2.70. In response to this price change, the quantity supplied of eggs falls from 100,000 dozen eggs to 75,000 dozen eggs. What is the price elasticity of supply for eggs based on the midpoint formula?

2.7

The price of chicken breast rises from $3.30 per pound to $3.63 per pound. In response to this price change, the quantity demanded for chicken breast falls by 40%. The absolute value of the price elasticity of demand for chicken breast is _____, and the price elasticity of demand is _____.

4 ; Elastic

Substitution effect tells me to do what?

Consumer more of the good that is relatively cheaper & stay on your original indifference curve.

Along a given upward-sloping supply curve, a decrease in the price of a good will _____ producer surplus.

Decrease

26. Consider the supply curve for wool sweaters. An increase in the price of wool will:

Decrease the supply of wool sweaters

Which of the following statements is FALSE regarding economic efficiency?

Efficiency means minimizing surplus.

Which statement makes use of normative analysis?

Health care is a right to all citizens

What is not true regarding the income and substitution effect?

Income & substitution effect always go in the same direction.

30. Businesses would benefit from a demand curve which is

Inelastic

Suppose that in the market for new furniture, sales are allocated to the sellers who are willing and able to produce the good at the lowest cost. The market would thereby maximize:

Producer Surplus

Suppose you have this demand curve, Qd = 150 - 3P. Suppose your supply curve is Qs = 50 + 2P. What should be true about the equilibrium quantity and price?

Q=90, P=20

Which of the following is NOT a factor that can shift supply?

The market price of the product

Suppose you manage a convenience store. If macaroni and cheese is an inferior good, what do you suppose would happen to the price and quantity sold of macaroni and cheese as incomes fall during a recession?

The price & quantity would both increase.

Positive analysis is about:

What is

If a firm expects lower prices in the future

it will increase supply today

The economic surplus in a market is the:

sum of consumer surplus and producer surplus

The price elasticity of demand is computed as the percentage change in the _____ divided by the percentage change in _____.

Quantity demanded; the price

Use Table: Martinez Family Household Income and Expenditures. The Martinez's income elasticity of demand for falafels, computed using the midpoint method, is:

Approx. -0.7

If Monica is building computers under conditions of diminishing marginal product, the marginal cost will:

Be increasing

It is very easy for Evelyn to find inexpensive inputs for her business. Evelyn's supply is therefore likely to be:

Elastic

The price elasticity of demand for snowboarding lessons at Jay Peak resort in Vermont is greater than 1. This means that the demand for snowboarding lessons is _____

Elastic

In 2018, Hurricane Michael hit Florida and destroyed some shrimp wholesale facilities. Which graph correctly depicts the effect of the hurricane on the equilibrium price and quantity in the shrimp market?

See Picture for answer