ECO 2305 Exam 1 TTU

The Cost-Benefit Principle indicates that an action should be taken if, and only if:

Its benefits exceed its costs

For the Fall semester, you had to pay a nonrefundable fee of $600 for your meal plan, which gives you up to 150 meals. If you eat 100 meals, your marginal cost of the 100th meal is:

$0

The table below shows the relationship between the number of times you get your car washed each month and your total monthly benefit from car washes. Each car wash costs $15. # of washes per month total monthly benefit 0 $0 1 $20 2 $36 3 $48 4 $56 5 $60 What is the marginal benefit of the 3rd car wash each month?

$12

Refer to the table below. The marginal cost of the 3rd unit of this activity is: units of activity total cost total benefit 0 . $0 . $0 1 . $30 . $100 2 . $40 . $160 3 $60 $190 4 $100 $210 5 $150 $220 6 $210 $225

$20

Jack has a ticket to see Daughtry for which he paid $30 yesterday. He takes an unpaid day off from work to get ready for the concert. When he arrives at the concert, five different people offer him $70 for his ticket. Jack decides to keep his ticket. At the time he makes this decision, his opportunity cost of seeing Daughtry is:

$70

Refer to the table below. According to the Cost-Benefit Principle, how many units of this activity should be carried out? units of activity total cost total benefit 0 . $0 . $0 1 . $30 . $100 2 . $40 . $160 3 $60 $190 4 $100 $210 5 $150 $220 6 $210 $225

3

Suppose the total benefit of watching 1 baseball game is 100, the total benefit of watching 2 games is 120, and the total benefit of watching 3 games is 125. In this case, the marginal benefit of watching the 3rd game is:

5

All else equal, relative to a person who earns minimum wage, a person who earns $30 per hour has:

A higher opportunity cost of taking the day off work

Chris has a one-hour break between classes every Wednesday. Chris can either stay at the library and study or go to the gym and work out. The decision Chris must make is:

An economic problem because Chris has only one hour, and engaging in one activity means giving up the other

The price of bananas will increase in response to:

An excess demand for bananas

Suppose that the technology used to manufacture laptops has improved. The likely result would be:

An increase in supply of laptops

What might cause a demand curve to shift to the right?

An increase in the price of a substitute

When a slice of pizza at the student union sold for $2, Moe did not purchase any. When the price fell to $1.75, Moe purchased a slice each day for lunch. Thus, we can infer that Moe's reservation price for a slice of pizza is:

At least $1.75 but less than $2

When the price of a good changes, the amount of that good that buyers wish to buy changes:

Because of both the substitution effect and the income effect

To understand how the price of a good is determined in a free market, one must account for the interests of:

Buyers and sellers

When the current price of a good is below the equilibrium price:

Buyers have an incentive to offer to pay sellers more than the current price

If a country's economic decisions are made by an individual or small number of individuals, then it has a:

Centralized economy

If the demand for cucumbers falls when the price of tomatoes rises, then we know that tomatoes and cucumbers are:

Complements

A demand curve is ______ sloping because ______.

Downward; fewer people are willing to buy an item at higher prices

Suppose the cost to Tim of a third glass of soda is zero because he's at a restaurant that gives free refills. According to the Cost-Benefit Principle Tim should:

Drink a third glass of soda if the benefit of doing so is positive

Suppose Mary is willing to pay up to $15,000 for a used Ford pick-up truck. If she buys one for $12,000, her ______ would be ______.

Economic surplus; $3000

Suppose that when the price of oranges is $3 per pound, the quantity demanded is 4.7 tons per day and the quantity supplied is 3.9 tons. In this case:

Excess demand will lead the price of oranges to rise

If price is above the equilibrium price, then there will be:

Excess supply

Which branch of economics is most likely to study differences in countries' growth rates?

Macroeconomics

The extra cost that results from carrying out one additional unit of an activity is the _____ of the activity.

Marginal cost

Which of the following is NOT a characteristic of a market in equilibrium?

Neither buyers nor sellers want the price to change

If all the world's resources were to magically increase one hundredfold, then:

People would still have to make trade-offs

If there is an excess supply of sport utility vehicles, then:

Quantity supplied is greater than quantity demanded

Jessica's marginal cost for producing a pitcher of lemonade is $0.25. Therefore, $0.25 is her:

Reservation price

In a free market, if the price of a good is above the equilibrium price, then;

Sellers, dissatisfied with growing inventories, will lower their prices

Jen spends her afternoon at the beach, paying $1 to rent a beach umbrella and $11 for food and drinks rather than spending an equal amount of money to go to a movie. Her opportunity cost of going to the beach is:

The value she places on seeing the movie

You have noticed that there is a persistent shortage of teachers in an inner-city school district in your state. Based on this observation, you suspect that:

The wage for teachers in that district is lower than the equilibrium wage

Suppose you bought a concert ticket from Ticketmaster for $50, but when you get to the concert, there are a large number of people waiting outside who offer to pay you more than $50 for your ticket. What is probably true?

There is an excess demand for tickets at the Ticketmaster price

When a market is in equilibrium:

There is neither excess demand nor excess supply

Economists recognize that because people have limited resources:

They have to make trade-offs

Refer to the table below. The marginal benefit of the 5th unit of activity is: units of activity total cost total benefit 0 . $0 . $0 1 . $30 . $100 2 . $40 . $160 3 $60 $190 4 $100 $210 5 $150 $220 6 $210 $225

$10

Suppose you camped out in front of an electronics store to be one of the 200 lucky people able to purchase the latest gaming system. You bought the system for $350. Two weeks later you see that the same system can be sold on e-Bay for $600, so you sell your system. Your market role was as a:

Consumer at the electronics store and a seller on e-Bay

The marginal benefit of an activity is the:

Extra benefit associated with an extra unit of the activity

Gertie saw a pair of jeans that she was willing to buy for $35. The price tag said they were $29.99. Therefore:

Gertie should buy the jeans because the price is less than her reservation price

If an increase in the price of good X leads to a decrease in the demand for good Y, then:

Good X and good Y are complements

Suppose that the market price for hot dogs sold by street vendors has just risen from $4.50 to $5.00, and that in response Curly has now begun operating a hot dog cart. We can assume that Curly's reservation price for hot dogs is:

Greater than $4.50 but no more than $5.00

As the price of cookies increases, firms that produce cookies will:

Increase the quantity of cookies supplied

The quantity that sellers wish to sell tends to ______ as price increases, and so the supply curve is ______ sloping.

Increase; upward

If an increase in income leads to a decrease in the demand for ground beef, then ground beef is a(n):

Inferior good

According to the Cost-Benefit Principle, you should spend an additional hour studying for an exam if, and only if,:

The benefits of studying for an additional hour exceed the costs of studying for an additional hour

Microeconomics differs from macroeconomics in that microeconomics focuses on:

The choices made by individuals the implications of those choices

If one fails to account for implicit costs in decision making, then applying the cost-benefit rule will be flawed because:

The costs will be understated

"All else constant, consumers will purchase more of a good as the price falls." This statement reflects the behavior underlying:

The demand curve

When a market is not in equilibrium:

The economic motives of sellers and buyers will move the market to its equilibrium

You can spend $10 for lunch and you would like to purchase two cheeseburgers. When you get to the restaurant, you find out the price for cheeseburger has increased from $5 to $6, so you decide to purchase just one cheeseburger. This is best described as:

The income effect of a price change

The opportunity cost of an activity includes the value of:

The next-best alternative that must be foregone

Alex received a four-year scholarship to State U. that covered tuition and fees, room and board, and books and supplies. If Alex becomes a full-time student, then:

The opportunity cost of attending State U. includes the money Alex could have earned working for four years

A seller's reservation price is generally equal to:

The seller's marginal cost

Suppose that as the price of apples rises, people switch from eating apples to eating oranges. This is known as:

The substitution effect of a price change

Suppose that the price of doughnuts decreases. Given that doughnut-holes are a by-product of producing doughnuts, one would expect:

The supply of doughnut holes to decrease

If the price of rubber (an input to the production of tires) increases:

The supply of tires will decrease

Excess demand occurs:

When the price is below the equilibrium price

A rational person is someone:

With well-defined goals who tries to fulfill those goals as best he/she can