Midterm 1

how responsive quantity demanded is to a change in price.

price elasticity of demand measures

the increase in quantity sold is large enough to offset the lower price.

When demand is price​ elastic, a fall in price causes total revenue to rise because

product market.

When you purchase a new pair of jeans you do so in the

vertical; downward sloping

A demand curve which is​ ________ represents perfectly inelastic​ demand, and a demand curve which is​ ________ represents inelastic demand.

a change in the price of toothpaste.

A movement along the demand curve for toothpaste would be caused by

increasing opportunity costs as more and more of one good is produced.

A production possibilities frontier with a​ bowed-outward shape indicates

the process by which individuals acting in their own self−interest bring about a market outcome that benefits society as a whole.

Adam​ Smith's invisible hand refers to

the marginal utility from the consumption of each unit of the good falls and the total utility from consuming larger quantities increases.

Along a downward−sloping linear demand​ curve,

economic growth

An outward shift of a​ nation's production possibilities frontier represents

declines.

As a consumer consumes more and more of a product in a particular time​ period, eventually marginal utility

the equilibrium price of MP3 players will​ increase; the equilibrium quantity will decrease.

Assume that the demand curve for MP3 players shifts to the right and the supply curve for MP3 players shift to the​ left, but the supply curve shifts more than the demand curve. As a result

the price of sports magazines has to fall.

Avner is maximizing total utility by buying sports magazines and protein supplements. For him to buy more sports​ magazines,

linear

If the production possibilities frontier is​ ________, then opportunity costs are constant as more of one good is produced.

0.5

Calculate the income elasticity if an 8 percent increase in income leads to a 4 percent increase in quantity demanded for organic produce.

at a lower opportunity cost than any other producer.

Comparative advantage means the ability to produce a good or service

sunk costs.

Costs that have already been​ incurred, and which cannot be​ recovered, are known as

percentage change in quantity demanded of one good divided by percentage change in price of a different good.

Cross−price elasticity of demand is calculated as the

make themselves as well off as possible.

Economists assume that the goal of consumers is to

consumers make choices that will leave them as satisfied as possible given their​ incomes, tastes, and the prices of goods and services available to them.

Economists usually assume that people act in a​ rational, self−interested way. In explaining how consumers make choices this means that economists believe

restaurants

For which of the following products is social influence likely to have the greatest​ impact?

ignores the fact that the purchase price is now a sunk cost and has no bearing on whether she should give it away or not

Grace Makutsi finally bought a pair of blue shoes that she had been coveting for a long time. In less than a week she discovered that the shoes were uncomfortable. Grace went back to wearing her old pair and stashed away the new pair. When asked by her​ boss, Mme​ Ramotswe, why does she not simply give away the new​ pair, she​ said: "But I paid so much for​ it."

the endowment effect

Harvey Miller owns a baseball that was hit for a home run by Ted Williams.​ Harvey, a long−time Boston Red Sox​ fan, recently refused to sell his baseball for​ $75,000 even though he would not have paid someone more than​ $10,000 for the baseball if he did not already own it. Harvey explained his decision not to sell the baseball by noting​ that: "Ted Williams was my hero. This baseball has a great deal of sentimental value for​ me." Which of the following can explain​ Harvey's behavior?

Some people are overly optimistic about their future behavior.

Health clubs typically experience an increase in one−year memberships in​ January, but many new customers cancel their memberships before the end of the year. Which of the following is the best explanation for this​ behavior?

1.62

If 50 units are sold at a price of​ $20 and 80 units are sold at a price of​ $15, what is the absolute value of the price elasticity of​ demand? Use the midpoint formula.

MUP has decreased and Callum should buy less of this good.

If Callum is consuming his utility maximizing bundle and the price of one good​ rises, what happens to the marginal utility per dollar spent on this good MUP​, and what should Callum​ do?

should buy more apples and fewer oranges.

If Marlowe obtains 9 units of utility per dollar spent on apples and 6 units of utility per dollar spent on​ oranges, then Marlowe

wants to consume more ankle socks and fewer bandanas.

If Valerie purchases ankle socks at​ $5 and gets 25 units of marginal utility from the last​ unit, and bandanas at​ $3 and gets 12 units of marginal utility from the last bandana​ purchased, she

relatively elastic.

If a 35 percent increase in price of golf balls led to an 42 percent decrease in quantity​ demanded, then the demand for golf balls is

an inferior good

If a 5 percent increase in income leads to a 10 percent decrease in quantity demanded for a​ product, this product is

the marginal utility per dollar spent on all goods will be equal.

If a consumer always buys goods​ rationally, then

5 utils.

If a consumer receives 20 units of utility from consuming two candy​ bars, and 25 units of utility from consuming three candy​ bars, the marginal utility of the third candy bar is

demand has increased.

If a demand curve shifts to the​ right, then

change price a little bit and observe what happens to total revenue.

If a firm wanted to know whether the demand for its product was​ elastic, unit​ elastic, or​ inelastic, then the firm could

inferior.

If a good has a negative income elasticity of​ demand, this indicates that the good is

Less than 1

If demand is inelastic the price elasticity of demand is

it has to give up some of another good and incur some opportunity costs.

If society decides it wants more of one good and all resources are fully​ utilized, then

remain constant.

If the demand for a lifesaving drug were perfectly price inelastic and the price​ doubled, the quantity demanded would

it falls

If the price elasticity of demand for canned soup is estimated at -1.62. What happens to sales revenue if the price of canned soup rises?

one that sells a luxury good

If you expect the economy is going to boom and average income in the economy will rise in the foreseeable future, the type of firm that would be able to increase its sales if your expectations are met is

If, as a person consumes more and more of a​ good, each additional unit adds less satisfaction than the previous unit​ consumed, we are seeing the workings of

If, as a person consumes more and more of a​ good, each additional unit adds less satisfaction than the previous unit​ consumed, we are seeing the workings of

the price of the product and hold everything else constant.

In order to derive an​ individual's demand curve for​ salmon, we would observe what happens to the​ utility-maximizing bundle when we change

change in​ buyers' incomes.

Income elasticity measures how a​ good's quantity demanded responds to

Demand is likely to be relatively inelastic.

Jonah lives in a small town where there is only one Mexican restaurant. Which of the following is likely to be true about the price elasticity of demand for meals at the Mexican​ restaurant?

S​ decreases, D no​ change, P​ increases, Q decreases.

Let​ D= demand, S​ = supply, P​ = equilibrium​ price, and​ Q= equilibrium quantity. What happens in the market for tropical hardwood trees if the governments restrict the amount of forest lands that can be​ logged?

extra satisfaction received from consuming one more unit of a product.

Marginal utility is the

the marginal utility per dollar spent on the less expensive car is higher than that spent on luxury cars

Most people would prefer to drive a luxury car that has all the​ options, but more people buy less expensive cars even though they could afford the luxury car because

the price of the good changes

One would speak of a change in the quantity of a good​ supplied, rather than a change in​ supply, if

how responsive suppliers are to price changes.

Price elasticity of supply is used to gauge

produce a combination of goods that lie outside its own production possibilities frontier.

Specializing in the production of a good or service in which one has a comparative advantage enables a country to do all of the following except

People measure the value of a good in terms of its purchase price.

Standard economic theory asserts that sunk costs are irrelevant in making economic decisions yet studies conducted by behavioral economists reveal that sunk costs often affect economic decisions. Which of the following could explain this​ observation?

2.69

Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from​ $120 a ton to​ $180 a ton and quantity sold decreased from 800 tons to 240 tons. What is the absolute value of the price elasticity of​ demand? Use the midpoint formula.

A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent.

Suppose the value of the price elasticity of demand is −3. What does this​ mean?

A 1 percent increase in the price of the good causes quantity supplied to increase by 4 percent.

Suppose the value of the price elasticity of supply is 4. What does this​ mean

Since you do not want to go to the movie and the cost of the movie ticket is a sunk​ cost, how much you paid for the ticket should not influence your decision.

Suppose you pre−ordered a non−refundable movie ticket to ​Avengers: Infinity War. On the day of the movie you decide that you would rather not go to the movie. According to​ economists, what is the rational thing to​ do?

a budget constraint.

The amount of income a consumer has to spend on goods and services is known as

less elastic than

The demand for all carbonated beverages is likely to be​ ________ the demand for Dr. Pepper.

Farm revenues decrease.

The demand for most farm products is relatively inelastic. All else​ constant, what is the effect on farm revenues as a result of the introduction of new and better farm equipment which increases​ productivity?

the extra satisfaction from consuming a good decreases as more of a good is​ consumed, other things constant.

The law of diminishing marginal utility states that

endowment effect

The observation that people tend to value something more highly when they own it than when they​ don't is called the

equal to the highest value of an alternative use of the time and money spent on the class.

The opportunity cost of taking a semester−long economics class is

unattainable.

The points outside the production possibilities frontier are

positive

The price elasticity of an upward−sloping supply curve is always

the percentage change in quantity demanded divided by the percentage change in price

The price elasticity of demand is equal to

the percentage change in quantity supplied divided by the percentage change in price

The price elasticity of supply is equal to

patents and copyrights

The primary purpose of​ ________ is to encourage the expenditure of funds on research and development to create new products.

if all resources are fully and efficiently​ utilized, more of one good can be produced only by producing less of another good.

The production possibilities frontier model shows that

maximum attainable

The production possibilities frontier shows the​ ________ combinations of two products that may be produced in a particular time period with available resources.

The NFL is concerned that raising ticket prices would be considered unfair

The quantity of tickets demanded to the Super Bowl is always greater than the quantity supplied. Which of the following is the best explanation why the National Football League does not raise the price of tickets to the level where the quantity demanded equals the quantity​ supplied?

the ability to exercise control over​ one's own resources within the confines of the law.

The term​ 'property rights' refers to

the study of situations in which people act in ways that are not economically rational

What is behavioral​ economics?

An​ "increase in​ supply" means the supply curve has shifted to the right while an​ "increase in quantity​ supplied" refers to a movement along a given supply curve in response to an increase in price.

What is the difference between an​ 'increase in​ supply' and an​ 'increase in quantity​ supplied'?

This statement is not true. Revenue will increase as the price of the product increases only if demand is inelastic.

Which of the following correctly comments on the following​ statement? "The only way to increase the revenue from selling a product is to increase the​ product's price."

Households devote a very small portion of their income to salt purchases.

Which of the following could explain why the demand for table salt is​ inelastic?

There are many buyers and sellers.

Which of the following describes a characteristic of a perfectly competitive​ market?

The price elasticity of demand allows the firm to calculate how changes in the price of the good will affect the​ firm's total revenue.

Which of the following explains why a firm would be interested in knowing the price elasticity of demand for a good it​ sells?

bread

Which of the following goods would have the most inelastic​ demand?

They fail to ignore sunk costs.

Which of the following is a common mistake consumers commit when they make​ decisions?

$1,000 in cash

Which of the following is not a factor of​ production?

The elastic portion of a​ straight-line, downward-sloping demand curve corresponds to the segment above the

Which of the following statements about price elasticity of demand is​ true?

It is elastic at the highest prices and inelastic at the lowest prices.

Which of the following statements about the price elasticity of demand along a​ downward-sloping linear demand curve is​ true?

Demand is more elastic in the long run than it is in the short run.

Which of the following statements about the price elasticity of demand is ​correct?

an increase the price of peanuts

Which of the following would cause a decrease in the supply of peanut​ butter?

through technological advancement which enables more output with the same quantity of resources

Without an increase in the supply of the factors of​ production, how can a nation achieve economic​ growth?

can produce more of something than others with the same resources.

You have an absolute advantage whenever you

complements

if cross price elasticity of demand for goods X and Y is negative, this means the two goods are

quantity demanded equals quantity supplied. The market price will then equal the equilibrium price.

​If, for a​ product, the quantity supplied exceeds the quantity​ demanded, the market price will fall until