Econ 101 Midterm 2

As Mary's income increases by 20 percent, her demand for tickets to National Hockey League games increases by 10 percent. Mary's demand for tickets is income ________; for Mary, hockey tickets are ________ good.

A) inelastic; a normal

Each point on a supply curve represents

A) the lowest price for which a supplier can profitably sell another unit.

Suppose there are four firms that are each willing to sell one unit of a good. Each firm has a different minimum price that they are willing to sell for: Firm A $6, Firm B $7, Firm C $10, and Firm D $12. If the market price is $11, then the total producer surplus is

B) $10.

A used car was recently priced at $20,000.00. Seeing the car, Bobby thought, "It's nice, but if I have to pay more than $19,500 for this car, then I would rather do without it." After negotiations, Bobby purchased the car for $19,250.00. His consumer surplus was equal to

B) $250.00.

A 10 percent increase in income increases the quantity of orange juice demanded from 19,200 to 20,800 gallons. The income elasticity of demand for orange juice is

B) 0.8.

A change in which of the following shifts the demand curve for hamburgers?

B) a fall in the price of french fries, a complement for hamburgers

An increase in the demand for computers and a decrease in the number of sellers of computers will definitely _______

B) increase the price of a computer

For consumers, goods A and B are complementary goods. The cost of a resource used in the production of A decreases. As a result

B) the equilibrium price of B will rise and the equilibrium price of A will fall.

Jane is willing to pay $80 for a pair of shoes. The actual price of the shoes is $50. Her marginal benefit is

C) $80.

If a 20 percent increase in the price of a used car results in a 10 percent decrease in the quantity of used cars demanded, then the price elasticity of demand equals

C) 0.5.

If a fall in the price of good A increases the quantity demanded of good B

C) A and B are complements.

Which of the following is TRUE?

C) When a market price allocates resources, all people who are willing and able to pay that price get the resource.

Which of the following raises the price of a used car and increases the equilibrium quantity sold?

C) a new 8 percent federal excise tax placed on all new car purchases

If the quantity demanded exceeds the quantity supplied, then there is

C) a shortage and the price is below the equilibrium price.

Goods and services that can be produced by using commonly available resources that could be allocated to a wide variety of alternative tasks have a supply that is

C) elastic.

Currently tire producers must receive a price of $50 per tire to produce 5000 tires. If the supply curve of tires is upward sloping, then to produce one additional tire, tire producers will need to receive a price of

C) more than $50.

Suppose tennis shoes cost $50 per pair and firms supply 50,000 pairs of shoes. If the price decreases to $45 and firms decide to supply 48,000, the elasticity of supply equals

D) 0.39.

When the Smiths were shopping for their present home, the asking price from the previous owner was $250,000.00. The Smiths had decided they would pay no more than $245,000.00 for the house. After negotiations, the Smiths actually purchased the house for $239,000.00. Therefore, the previous owner earned a producer surplus of

D) an amount unknown given the information in the question.

In the summer 2012 the lobster catch in Maine was especially large, but instead of celebrating the fisherman were suffering from a lower total revenue. (Source: New York Times, July 28, 2012) We learn from the article that despite the larger quantity of lobster caught, the total revenue of the fisherman decreased. This fact means that the demand for lobster is

D) inelastic.

If the supply for a good is elastic, that means that when price increases, the

D) quantity supplied will increase by a greater percentage than the price increased.