AGEC 203: Exam 1
Which of the following best describes why consumers are price takers?
Individual transactions are too small to have much impact on the market price.
If the percentage change in quantity demanded for a good is an increase of 25%, when the price of its substitute increases by 30%, the cross-price elasticity is __________. (Round your response to the nearest hundredth.)
0.83
Jonathan works at a convenience store and makes note of changes to sales after the price of liquid soap unexpectedly increases by 10 percent. He notices that the sale of shampoo increases by 5 percent and the sale of lotion decreases by 2 percent. The cross-price elasticity of demand between liquid soap and shampoo is ______. (Round your answer to one decimal place and enter a "-" if your answer is negative.) Based on the cross-price elasticity of demand, we can infer that liquid soap and lotion are ________.
1. 0.5 2. complements
Mary saw a bangle bracelet at an accessories shop that she liked and told her friend Susan that the most she would pay for it was $37.50. When she found out the price was $20.50, she immediately bought it and gained $__________ in consumer surplus. (Enter your response rounded to two decimal places) If Mary was to buy another bangle bracelet, her additional consumer surplus would ________.
1. 17.00 2. decrease
1. Which of the following factors will cause a movement along the supply curve for coloring books? 2. Which of the following factors will cause a rightward shift in the supply curve for coloring books? (Check all that apply.)
1. An increase in the price of coloring books. 2. A decrease in the price of paper. A more innovative printing machine.
Determine whether the following statements better describe optimization using total value or optimization using marginal analysis. 1. John is attempting to decide on a movie. (All movies have the same ticket price and play at the same time/location.) He determines that the new Batman movie is preferred to the new Spider-Man movie and that both the Batman and Spider-Man movies are preferred to the new Superman movie. 2. Nikki decided to jog 3 miles for exercise by reasoning that a 3-mile jog was better than either a 2-mile jog or a 4-mile jog. 3. At a yard sale, Reagan calculated that she was willing to pay $200 for a queen bed that was being sold for $100 (generating net benefit of $100) and that she was willing to pay $220 for a king bed that was being sold for $300 (generating net benefit of $80).
1. Optimization using marginal analysis, since he is calculating the change in net benefits between alternatives. 2. Optimization using marginal analysis, since she is calculating the difference in net benefits between alternatives. 3. Optimization using total value, since she is comparing the net benefits between alternatives.
1. What happens to the equilibrium price and quantity demanded after the supply curve of solar energy panels shifts? 2. Suppose the quantity demanded of gold has gone up in a country and therefore, the demand curve shifts rightward. On the other hand, due to some restrictions imposed by the government on gold imports, the supply curve of gold in that country shifts leftward. In this case, which of the following statements always holds true?
1. Price decreases and quantity demanded increases. 2. The price of gold increases.
1. Which of the following could be the reason for Richa's change in the quantity purchased? 2. Which of the following is not a possible reason for a change in the demand curve of Zee decorative light fixture, from DD to DD'?
1. The opportunity cost of fluorescent light bulbs increases. 2. The change in the rate of sales tax.
1. Which of the following is not one of the five major factors that shifts the demand curve when it changes? 2. When one of the five major factors changes, causing an increase in demand, the demand curve shifts ______ 3. In which of the following examples, will the demand curve shift to the right?
1. The price of the good itself 2. rightward 3. Jason's demand for butter increases due to a decrease in the price of bread. Ron's demand for an inferior good increases due to a decrease in his income.
Consider the following pair of figures where the light blue line is the original budget line for a consumer and the dark blue line is the new one. 1. In Figure A, the change shown was caused by _________. 2. In Figure B, the change shown was caused by _________.
1. a decrease in the price of good X 2. a decrease in the consumer's income
Anna Jones estimated the price elasticity of demand for new vehicles to be 0.85. If the price of cars increased by 15%, one would expect the quantity of new cars demanded to _________ by ___________%. (Enter your response rounded to two decimal places.)
1. decrease 2. 12.75
1. Consumer surplus is __________. 2. For an individual, consumer surplus is calculated as the difference between the _________ to pay and the price actually paid for a good.
1. the value or total benefits one receives from a good in excess of the price paid for it. 2. willingness
Suppose your total benefit from eating slices of pizza (value in dollars) is 14x−x2, where x is the number of slices of pizza. Pizza is sold by the slice and costs $2 per slice, and so the total cost of pizza is 2x. Using optimization in levels, what is the optimal amount of pizza for you to eat? Your net benefit is maximized at ____ slices of pizza. (Enter your response as an integer.)
6
Which of the following statements is true in the case of an anecdotal argument? (Check all that apply.) Which of the following can be categorized as an anecdotal argument? (Check all that apply.)
It can lead to skeptical and misleading conclusions. & It is appropriate when contradicting a blanket statement. John and Tina, the brightest students in the class, are very poor. Therefore, the conclusion is drawn that every bright student is poor. & Alfred received a promotion when he became the father of a baby girl. Marshall lost his job when he became the father of a baby boy. Therefore, the conclusion is drawn that the gender of a newborn child is related to the fathers' job status.
Suppose your New Year resolution is to get back in shape. How would you evaluate your options and choose an optimal one? When making your decision about which activity to choose, you should consider the monetary cost as well as the opportunity cost of the activities. The goal is to choose the option that offers the greatest net benefit.
Do a cost-benefit analysis to compare the alternatives.
Which of the following is not a characteristic of a market?
Markets are physical locations where trading occurs
Which of the following statements would not be considered a positive statement?
Production in the automotive industry.
Suppose that you are on a date with an economics major, and you want to impress them by talking about economics. Your date challenges you to state your knowledge of positive and normative questions. You say that positive questions ask what is or what will be and normative questions ask what ought to be. Which of the following examples do you provide as a normative question? Which of the following do you provide as a positive question?
Should welfare be repealed? How much is the national debt?
The statement that the U.S. government should increase carbon taxes to $10/ton of carbon dioxide to reduce emissions that cause global warming is ___________.
a normative statement, since it describes what ought to be done and is therefore not possible to confirm with data.
Suppose you had information on the sales of similar homes just east and just west of the boundary between two school districts. Also suppose schools on one side of the school boundary are better than the schools on the other side in terms of test scores. You could estimate the average value that parents place on a one-point increase in test scores by ___________.
dividing the difference in the prices of similar homes between districts by the difference in test scores between districts.
Using the marginal benefits and marginal costs analysis, if Michael studies for two hours, the outcome will be non-optimal because net benefit is not maximized.
graph
For two goods that are complements, the cross-price elasticity of demand will be _________.
negative
A demand curve has a ______ slope due to the Law of Demand. The Law of Demand is based off of a consumer's willingness to pay ______ as marginal units are consumed.
negative less
Making a prediction today about the world's population in twenty years based on current growth trends is an example of _________ economics. Advising the residents of a town to choose a toll road over a freeway extension due to a limited budget and high trucking usage is an example of __________ economics.
positive normative
Aggregation consists of fixing the ____________ and adding up the ___________ by each firm.
price of the good quantity supplied
Suppose the price of apples increases and the demand for plums increases. You determine that these goods must be _____
substitues
The market supply curve is the ______ of all the supply curves of potential producers and would be graphed to the _______ of the individual curves.
sum right
Holding all else constant, if the number of cell phone manufacturers suddenly decreased due to increased regulations, then
supply would shift leftwards, equilibrium price would increase, and equilibrium quantity would decrease.
All of the following statements about means and medians are true, except
the median is more skewed by extreme values.
Suppose one of your friends offered the following argument: A rightward shift in demand will cause an increase in price. The increase in price will cause a rightward shift of the supply curve, which will lead to an offsetting decrease in price. Therefore, it is impossible to tell what effect an increase in demand will have on price. Do you agree with your friend?
No, the increase in price will not cause a shift of the supply curve.
