ECON 2106: Principles of Microeconomics, Final Exam Study Guide
Wanda makes $30 an hour as a welder. She must take two hours off work (without pay) to go to the dentist. The dentist charges $40. The opportunity cost of her visit to the dentist is
$100 ($30+$30+$40)
Assume P1=40, P2=60, Q1=880 and Q2=720. Using the arc elasticity formula, find the elasticity of demand
-1/2
Suppose the elasticity of demand for peanut butter is -0.5. An increase in the price of peanut butter by 6% will cause
A decrease in Qd of 3%
Which of the following will not cause the demand for milk (a normal good) to increase in the current time period?
A decrease in the price of milk
A decrease in the supply of popcorn will result in
A higher price and lower quantity
A decrease in the demand for popcorn will result in
A lower price and lower quantity
Assuming that pizza is a normal good, if students' income at Armstrong decreases substantially, there would be
A reduction in the demand for pizza
An economic model is
A simplified version of some aspect of economic life used to analyze an economic issue
The cross-price elasticity helps us understand whether a good is
A substitute or complement
If the current price in a market is above the equilibrium price, we would expect to see
A surplus of goods in that market
Given that meat and potatoes are complementary goods, if the price of meat decreases substantially, there would be
An increase in the demand for potatoes
The principle that, for virtually all goods and services, there is a negative relationship between price and quantity demanded, all other things unchanged, is the law of
Demand
A factor of production that has been produced for use in the production of other goods and services is
Capital
The equilibrium price in a market is defined as the price at which
Consumers and firms agree on quantity
An example of a normative statement is
Everyone in the country needs to be covered by national health insurance
The basis for trade is absolute advantage, not comparative advantage. This statement is
False
Assume the demand and supply of a good are described by equations: Qd= 78-3P and Qs= -12+2P
Find the equilibrium price for the good: 18 Find the equilibrium quantity for the good: 24
Ceteris paribus means
Holding other things unchanged
The income elasticity helps us understand whether a good is
Inferior or normal
Which of the following is not a benefit of European monetary integration
None of the above, all are benefits of integration. Increased price transparency benefits firms and travelers, increased investment, eliminate exchange rate uncertainty, eliminates transaction costs for individuals and firms
Efficient production exists when the economy is
Operating on its production possibilities curve
A vertical demand curve is
Perfectly elastic
In a market economy, the determination of which goods are produced is primarily based on
Profitability
If the demand for a good is inelastic, the firm should
Raise the price
The expenditure that is least appropriate to include in the opportunity cost of attending college is
Room and board
In the field of economics the starting point for discussion of human behavior is
Scarcity
In our in-class example of the lawyer and the secretary, the absolute advantage in typing was held by the __________ and comparative advantage in typing was held by the __________
Secretary, lawyer
Suppose a Czech manufacturer makes a large scale to a retailer in the United States. Which of the following statements is true
Supply for Dollars rises and demand for Czech crowns rises
The term quantity demanded refers to
The amount of a good consumers are willing to buy at a specific price
Which of the following tends to cause the elasticity of demand for a good to be higher
The availability of close substitutes
Researchers demonstrate conclusively that drinking 4-6 ounces of ginger ale each day reduces life expectancy by 3 years. What happens in the market for ginger ale?
The equilibrium price and quantity fall
The price of oranges falls. What happens in the market for apples, which are a substitute for oranges?
The equilibrium price and quantity fall
The price elasticity of demand is equal to
The percentage change in quantity demanded divided by the percentage change in price
On a diagram of a production possibility frontier, opportunity cost is represented by
The slope of the production possibility frontier
The opportunity cost of a choice is
The value of the forgone activity not chosen
The opportunity cost of attending college that does not explicitly show up in our expenditures is
Time
