ECO 211 Unit 1 Homework

The long-run supply curve in a perfectly competitive market is ______ A. vertical B. horizontal C. sloping

B. horizontal isn't it vertical? and demand is horizontal? because MC=supply?

Imagine you are a buyer in a double oral auction with a reservation value of $ 16 and there is a seller asking for $ 10. If you accept this offer, you will gain $____ If you are the only buyer, and you know that the lowest ask price is $3, should you accept this offer? A. Yes, accepting an offer from any other seller will reduce your surplus. B. No, as the only buyer you can extract a lower ask price. C. Yes, since you will gain $ 13. D. Both A and C are correct.

$6 D. Both A and C are correct.

Two manufacturing plants operate at Acme​ Corporation: Plant A and Plant B. If Plant A uses older technology than Plant​ B, it is likely to have 1.______ marginal cost than Plant B. In this​ case, Plant A requires a market price that is 2._______ Plant B in order to produce. At the market​ price, Plant A will produce 3._______ plant B and will earn 4._______ economic profit. 1. a higher or a lower? 2. higher than, lower than, or the same as? 3. more than, less than, or the same as? 4. a higher, a lower, or the same?

1. a higher 2. higher than 3. less than 4. a lower

The International Space Station​ (ISS) is a habitable satellite that was launched by NASA and space agencies of other countries. In​ 2009, NASA was considering shutting down the ISS within the next 5 to 6 years. Among those who were opposed to this idea of​ de-orbiting the ISS was Senator Bill​ Nelson, who was quoted as saying​ "If we've spent a hundred billion​ dollars, I​ don't think we want to shut it down in​ 2015." The "hundred billion dollars" that Senator Nelson is referring to is known as ______. Given this information, the senator's comment is ______, since these types of costs ______ affect current and future decisions A. _______; accurate; should B. _______; accurate; should not C. _______; flawed; should D. _______; flawed; should not

A sunk cost D. _______; flawed; should not

Suppose the university is trying to determine the most efficient way to allocate the rooms such that those who value the rooms the most get them. Which of the following would you suggest as the most​ efficient? A. Auctioning the rooms to the highest bidders. B. Using a random lottery to allocate​ rooms, with each student having equal odds of receiving a room. C. Allocating rooms based on​ grades, with students with the highest GPAs getting first choice. D. Allocating rooms based on seniority. Seniors get first​ choice, then​ juniors, and so on.

A. Auctioning the rooms to the highest bidders.

The government of a certain country decides that all its citizens should be equally well off. It decides to redistribute money so that each person has a roughly equal share of the total income. How would this policy affect economic activity in the​ country? A. It would be adversely affected since incentives to work or seek profits would be greatly diminished. B. It would be enhanced by the euphoria and sense of unity brought about by the creation of an egalitarian society. C. It would be boosted since the poor will now be spending funds the rich would have otherwise saved. D. It would be adversely affected since the poor are generally incapable of wisely investing money.

A. It would be adversely affected since incentives to work or seek profits would be greatly diminished.

Assume there are only two goods. The associate income effect of an increase in the price of one good _____ the quantity of that good and _____ the quantity of the other good, but the quantities of the two goods in the new consumption choice cannot simultaneously _____ as a result of the income effect. A. may decrease or increase; may decrease or increase; increase B. may decrease or increase; may decrease or increase; decrease C. definitely increases or decreases; definitely increases or decreases; increases D. definitely increases or decreases; definitely increases or decreases; decreases E. definitely increases or decreases; may increase or decrease; increase F. may increase or decrease; definitely increases or decreases; increase

A. may decrease or increase; may decrease or increase; increase

While at a​ Subway® in your​ neighborhood, you notice that a single employee completes an​ order, right from helping you choose your​ bread, veggies, and meat to making your sub the way you want it.​ However, over at Pizza​ Hut®, each task in a pizza order is completed by a different worker. Why do you think Subway and Pizza Hut have chosen these different ways to produce​ meals? Pizza production is mostly standardized, so Pizza Hut _____ take advantage of specialization and the division of labor, while sandwich production is more customized so Subway _____ take advantage of specialization and the division of labor A. can; cannot B. cannot; can C. can; can D. cannot; cannot

A. can; cannot

In a perfectly competitive​ market, sellers​ _________ and buyers​ _________ A. cannot charge more than the market​ price; cannot pay less than the market price. B. are able to charge more than the market​ price; are able to pay less than the market price. C. cannot charge more than the market​ price; are able to pay less than the market price. D. are able to charge more than the market​ price; cannot pay less than the market price.

A. cannot charge more than the market​ price; cannot pay less than the market price.

For a consumer with a given level of income, the combinations of goods for the budget set will be ____ than for the budget constraint A. higher B. lower C. the same

A. higher

If an increase in the immigration of unskilled labor leads to a fall in the wages of wine minus grape pickers​, then the supply curve for sparkling wine would​ __________ A. increase (shift right) B. decrease (shift left) C. remain unchanged

A. increase (shift right)

If new irrigation technology improves the average yield of a vineyard​, then the supply curve for sparkling wine would​ __________. A. increase (shift right) B. decrease (shift left) C. remain unchanged

A. increase (shift right)

How will the invisible hand move corn prices in response to: A rise in the price of wheat (a substitute for corn) This will ______ corn prices by shifting the demand curve for corn ______ A. increase; rightward B. increase; leftward C. decrease; rightward D. decrease; leftward

A. increase; rightward

How will the invisible hand move corn prices in response to: An increase in the number of demanders in the corn market This will ______ corn prices by shifting the demand curve for corn ______ A. increase; rightward B. increase; leftward C. decrease; rightward D. decrease; leftward

A. increase; rightward

In a perfectly competitive​ market, if one seller chooses to charge a price for its good that is slightly higher than the market​ price, then it will​ _________ A. lose all or almost all of its customers. B. see no change in its number of customers. C. see a small decrease in its number of customers. D. all of the above are equally likely.

A. lose all or almost all of its customers.

Which of the following is not a characteristic of a​ market? A. markets are physical locations where trading occurs B. there are rules and arrangements for trading C. flexible prices D. voluntary exchanges between economic agents

A. markets are physical locations where trading occurs

The more elastic a supply curve is the ____ responsive the quantity supplied is to changes in the price level A. more B. less

A. more more makes sense because, think about it, the supply curve has a positive slope, so as x goes from 1 towards infinity, the y value moves up on the supply curve meaning it moves up the y-axis which is price

Suppose a new​ off-campus university apartment complex could rent its rooms on the open market for​ $900 a month. ​If, instead, the university chooses to cap the price of rooms to​ $500 a month for​ students, the result would be that​ ____________. A. quantity demanded would exceed the quantity​ supplied, resulting in a shortage. B. quantity supplied would exceed the quantity​ demanded, resulting in a surplus. C. quantity supplied would exceed the quantity​ demanded, resulting in a shortage. D. quantity demanded would exceed the quantity​ supplied, resulting in a surplus.

A. quantity demanded would exceed the quantity​ supplied, resulting in a shortage.

Utility measures​ ____________. A. the happiness or satisfaction that comes from consuming a good. B. a​ consumer's preference for good A compared to good B. C. how responsive a consumer is to changes in prices or income. D. the number of goods or services that consumers can buy with a given level of income.

A. the happiness or satisfaction that comes from consuming a good.

The long-run supply curve in a perfectly competitive market states that _____. A. the long-run quantity can vary while the equilibrium price returns to the price at the minimum of the average total cost B. both the long-run quantity and the equilibrium price decrease C. both the long-run quantity and the equilibrium price increase D. the long-run quantity remains the same while the equilibrium price varies

A. the long-run quantity can vary while the equilibrium price returns to the price at the minimum of the average total cost

Charley spends all of his income on soft drinks and pizza. Suppose he is currently buying these products in amounts such that his marginal benefit from an additional soft drink is $ 100 and his marginal benefit from an additional slice of pizza is $ 40. If the price of a soft drink is $ 3 and the price of a slice of pizza is $ 2​, is Charley maximizing his total​ benefits? A. Yes, there is no other consumption choice that will make his total benefits greater. B. No, he should shift consumption toward soft drinks and away from pizza to maximize total benefits. C. No, he should shift consumption toward pizza and away from soft drinks to maximize total benefits. D. No, he should increase his consumption of both goods.

B. No, he should shift consumption toward soft drinks and away from pizza to maximize total benefits.

In the market for backpacks​, suppose​ Green's price elasticity of demand is 0.5​, ​Smith's price elasticity is 1.5​, and the price elasticity of all the other consumers is greater than 0.5 but less than 1.5. Could the market price elasticity be less than 0.5 or greater than 1.5​? A. Yes, it can be a multiple or fraction of the average of the elasticities of individual consumers. B. No, it must lie between 0.5 and 1.5.

B. No, it must lie between 0.5 and 1.5.

Which of the following is not one of the four major factors that shifts the supply curve when it​ changes? A. The scale of sellers. B. The income of consumers. C. Sellers' beliefs about the future. D. Technology used in production.

B. The income of consumers

A firm is expecting economies of scale when its ________ declines as more output is produced. A. marginal cost B. average total cost C. marginal revenue D. average total revenue

B. average total cost

Consider a market where there are many firms with different cost structures. When determining which firms enter the market​ first, we look at​ ____________. A. marginal cost B. average total cost C. average variable cost D. fixed costs

B. average total cost.

If people expect the price of SUVs to decrease in the future​, then the demand for the Toyota Rav4 SUV would​ __________. A. increase (shift right) B. decrease (shift left) C. remain unchanged

B. decrease (shift left)

Everything else the same, as the price of a good increases, quantity demanded _____ A. increases B. decreases C. remains the same

B. decreases ??? isn't it increasing?

Assume there are only two goods. The substitution effect of an increase in the price of one good always _____ the amount of that good in the individual's new consumption choice (bundle) and _____ the amount of the other good A. increases; decreases B. decreases; increases

B. decreases; increases

A price ceiling set below the natural equilibrium price would cause the quantity _____ to exceed the quantity _____ A. supplied; demanded B. demanded; supplied

B. demanded; supplied

A decrease in a consumer's income causes her budget constraint to encompass ___ bundles A. more B. fewer C. the same

B. fewer

How will the invisible hand move corn prices in response to: A flood that destroys a great deal of the corn crop. This will ______ corn prices by shifting the supply curve for corn ______ A. increase; rightward B. increase; leftward C. decrease; rightward D. decrease; leftward

B. increase; leftward

The more inelastic a supply curve is the ____ responsive the quantity supplied is to changes in the price level A. more B. less

B. less

Suppose Louis Corporation could increase its profits considerably if it decided to shift from the clothing industry to the IT industry. In this​ case, the economic profits of Louis Corporation in the clothing industry are _______. A. positive B. negative C. zero

B. negative

Consider a market where there are many firms with different cost structures. The last firm to enter the market earns​ ___________. A. the greatest economic profits B. zero economic profits C. average economic profits D. positive economic profits

B. zero economic profits.

Which of the following statement regarding producer surplus are NOT true? (check all that apply) A. it arises from selling units at a price that is higher than the marginal cost B. it is not possible to calculate the total producer surplus in the market C. It is the area below the marginal cost curve D. It is the difference between totally cost and total revenue

B., C., D.

How does a​ consumer's budget set differ from his budget​ constraint? A. A budget set is simply the collection of the many budget constraints a consumer faces at different points in time. B. A budget constraint refers to all of the possible bundles of goods and services a consumer can​ purchase, while a budget set is limited to the bundles he can purchase using all of his income. C. A budget set refers to all of the possible bundles of goods and services a consumer can​ purchase, while a budget constraint is limited to the bundles he can purchase using all of his income. D. There is no difference at all- the terms​ "set" and​ "constraint" are interchangeable.

C. A budget set refers to all of the possible bundles of goods and services a consumer can​ purchase, while a budget constraint is limited to the bundles he can purchase using all of his income.

The price elasticity of demand shows the percentage change in the quantity demanded of a good due to ______ change in the​ good's price.

a percent

You are planning to build an apartment building. Your market research department estimates that your revenues will be ​$850 comma 000. Your engineering department estimates the cost will be ​$550 comma 000. You started construction and spent ​$200 comma 000 to build the foundation when the recession begins. This causes the market research department to revise its revenue estimates downward to ​$349 comma 950. Should you complete the apartment​ building? A. No, the cost to build is still ​$550 comma 000 ​(which includes the ​$200 comma 000 you spent already and the ​$350 comma 000 ​remaining) and you only expect to earn ​$349 comma 950. B. Yes, since you have already spent ​$200 comma 000​, you cannot stop construction since that money would be wasted. C. No, the remaining cost to build is ​$350 comma 000 and you only expect to earn ​$349 comma 950​; you will ignore the ​$200 comma 000 spent since it is a sunk cost. D. Yes, the ​$200 comma 000 is a fixed cost of production so you must complete the building to cover these fixed costs.

C. No, the remaining cost to build is ​$350 comma 000 and you only expect to earn ​$349 comma 950​; you will ignore the ​$200 comma 000 spent since it is a sunk cost.

Which of the following is true about how a firm in a competitive market decides what level of output to produce in order to maximize its​ profit? A. Produce up to the point where price equals average total cost. B. Produce until marginal cost is furthest below average total cost. C. Produce at the point where price is equal to marginal cost. D. All of the above.

C. Produce at the point where price is equal to marginal cost.

If widespread unemployment leads to a drop in incomes​, then the demand for the Toyota Rav4 SUV would​ __________. A. remain unchanged. B. increase (shift right) C. decrease (shift left)

C. decrease left parenthesis shift left right parenthesis.

Consider a market where there are many firms with different cost structures. If demand shifts to the left​ (decreases), the last firm that entered the market​ ____________. A. earns positive economic​ profits, leading to new firms entering the market B. earns negative economic profits and thus undertakes​ cost-cutting measures to return to profitability C. earns negative economic profits and so exits the market D. is indifferent between producing or exiting the market and so the outcome is indeterminate

C. earns negative economic profits and so exits the market

The competitive equilibrium price equates A. price to quantity supplied. B. price to quantity demanded. C. quantity supplied to quantity demanded. D. supply to demand.

C. quantity supplied to quantity demanded

In a competitive market, if economic profits exist, then: A. the market supply curve will shift rightward and the price will increase. B. the market supply curve will shift leftward and the price will increase. C. the market supply curve will shift rightward and the price will decrease. D. the market supply curve will shift leftward and the price will decrease.

C. the market supply curve will shift rightward and the price will decrease.ex

Social surplus is the _______. A. difference between the amount that buyers actually pay and what they wish to pay. B. excess of aggregate demand over aggregate supply. C. total value from trade in a market. D. difference between consumer surplus and producer surplus.

C. total value from trade in a market.

Suppose Louis Corporation​ wouldn't be able to increase its profits if it decided to shift from the clothing industry to the IT industry. In this​ case, the economic profits of Louis Corporation in the clothing industry are ______. A. positive B. negative C. zero

C. zero

Which of the following is not one of the three conditions that characterizes a perfectly competitive​ market? A. Buyers are price takers and cannot influence the price charged. B. There are no barriers to entry or exit in the market. C. Sellers in the market produce identical goods. D. Firms have pricing power and can set their prices freely.

D. Firms have pricing power and can set their prices freely.

Which of the following equations measures price elasticity of​ supply? A. (percentage of change in price) / (percentage change in quantity supplied) B. (price of the good) / (quantity supplied) C. (quantity supplied) / (price of the good) D. (percentage change in quantity supplied) / (percentage change in price)

D. (percentage change in quantity supplied) / (percentage change in price)

Social surplus is maximized when the _______. A. buyers and sellers as distinct groups are doing as well as they possibly can. B. competitive market is in equilibrium. C. highest-value buyers are making a purchase and the​ lowest-cost sellers are selling. D. all of the above.

D. all of the above.

How will the invisible hand move corn prices in response to: A change in consumer tastes away from corn dogs towards hot dogs This will ______ corn prices by shifting the demand curve for corn ______ A. increase; rightward B. increase; leftward C. decrease; rightward D. decrease; leftward

D. decrease; leftward

A​ consumer's budget constraint refers to the collection of all possible bundles that​ ___________. A. a consumer can purchase with her income. B. give the consumer the same degree of satisfaction. C. a consumer finds suitable for possible purchase. D. exactly exhaust a consumer's entire budget.

D. exactly exhaust a consumer's entire budget.

The demand curve shows​ ___________. A. what goods you like compared to other goods and services. B. the possible bundles of goods that can be purchased with a​ consumer's income. C. how the quantity demanded responds to changes in​ consumers' income. D. how the quantity demanded responds to changes in the price of the good.

D. how the quantity demanded responds to changes in the price of the good.

Suppose a market for cheap sunglasses is in a​ long-run competitive equilibrium and that the price is​ $10. Every producer of sunglasses sells​ 5,000 pairs. A cloudy summer decreases the demand for​ sunglasses, which causes the market price to change. As a consequence, in the short run, each firm sell _____ 5,000 pairs of sunglasses, and in the long run each firm will sell _____ 5,000 pairs of sunglasses A. more than; more than B. more than; less than C. more than; exactly D. fewer than; more than E. fewer than; fewer than F. fewer than; exactly G. exactly; more than H. exactly; fewer than I. exactly; exactly

F. fewer than; exactly

If a graph illustrates the supply of smartphones in a country. If the price of inputs used in production increases, how would the supply of smartphones be impacted?

The supply curve would shift down supply would increase?? if price increases??? double check

Suppose​ Hershey's increases the price of its chocolate syrup by 17 percent. In​ response, the quantity demanded of Nesquik chocolate syrup rises by 12 percent and the quantity demanded of​ Breyer's vanilla ice cream falls by 4 percent. The​ cross-price elasticity of demand between​ Hershey's syrup and​ Nesquik's syrup is ________, implying these two goods are ________. The​ cross-price elasticity of demand between​ Hershey's syrup and​ Breyer's vanilla ice cream is ______, implying these two goods are _________. Suppose that incomes rise by 9 percent given the price change cited above. As a​ result, Hershey's experiences a 5 percent increase in sales volume. Given this​ information, Hershey's syrup is a _______ good.

positive; substitutes negative; compliments normal

When one of the four major factors​ changes, causing an increase in​ supply, the supply curve shifts ______

rightward