ECON 222 Midterm 1 Werner

Maria can purchase shirts for ​$24.5024.50 each. She considers the benefit of one shirt to be ​$45.0045.00​, but with each additional shirt she purchases the benefit decreases by ​$55. According to the Principle of Optimization at the​ Margin, Maria will purchase shirts.

5

Suppose your total benefit from eating slices of pizza​ (value in​ dollars) is 1212xminus−x squaredx2​, where x is the number of slices of pizza. Pizza is sold by the slice and costs ​$22 per​ slice, and so the total cost of pizza is 22x. Using optimization in​ levels, what is the optimal amount of pizza for you to​ eat?

5

11) If the net benefit of Project A is $20 and that of Project B is $15, switching from Project A to Project B ________. A) increases the net benefit by $15 B) reduces the net benefit by $15 C) increases the net benefit by $5 D) reduces the net benefit by $5

D

12) If Project X has a cost of $6 and provides a benefit of $10 and Project Y has a cost of $25 and provides a benefit of $27, which of the following statements is true? A) Switching from Project X to Project Y increases net benefit by $2. B) An individual can optimize by choosing Project Y. C) Switching from Project Y to Project X decreases net benefit by $2. D) An individual can optimize by choosing Project X.

D

10) To calculate the ________ of an alternative, an individual needs to estimate ________ of the alternative. A) net benefit; both the cost and the benefit B) marginal cost; the total benefit C) marginal benefit; the total costD) opportunity cost; the total benefit

A

38) Which of the following is likely to shift the market demand curve for school textbooks to the right? A) A fall in the total income of all consumers B) An increase in school tuition fees C) A fall in the price of school textbooksD) An increase in the enrollment rates in high schools

A

39) A fall in the price of flour, used in making cakes, is likely to ________ of cakes. A) increase the supply B) decrease the supply C) decrease the quantity supplied D) increase the quantity supplied

A

46) Which of the following will be included in the calculation of GDP using the expenditure method? A) Services purchased by the government B) Dividends paid by firms to shareholders C) Interest paid by households for loans D) Wages paid to labor by firms

A

5) Which of the following is true of equilibrium? A) Equilibrium refers to a situation where all economic agents simultaneously optimize after considering one another's actions. B) Equilibrium refers to a situation where all economic agents are making suboptimal choices and have an incentive to change their behavior. C) Equilibrium refers to a situation where an economic agent can be made better off without making anyone else worse off. D) Equilibrium refers to a situation where the government allocates resources among economic agents.

A

If Honda decided to increase the price of its Honda CRV SUV then the demand for the Toyota Rav4 SUV would​ __________. A. nbsp increase left parenthesis shift right right parenthesis increase (shift right). B. remain unchanged. C. decrease left parenthesis shift left right parenthesisdecrease (shift left).

A

If​ Jay's Fruit Stand is able to charge considerably higher prices than other fruit stands with the same​ produce, it is likely that A. there are no fruit stands in close proximity to​ Jay's. B. ​Jay's is a price taker. C. ​Jay's accepts the market prices. D. there are a lot of fruit stands in close proximity to​ Jay's.

A

John has to choose between two jobs: one that offers him $50 per hour and one that offers him 1) $35 per hour. The opportunity cost of choosing the job that offers him $50 per hour is ________.A) $35 per hour B) $85 per hour C) $1.5 per hour D) $15 per hour

A

The concept of diminishing marginal benefits means that​ __________. A. each additional unit consumed is worth less to you than the previous one. B. each additional unit consumed is worth more to you than the previous​ one, but the additional benefit grows at a diminishing rate. C. the more of a good that you​ consume, the lower is your overall benefit from that good. D. as you consume more of a​ good, your willingness to pay for that good increases faster than the benefit you receive.

A

The supply curve represents​ ___________. A. the minimum price sellers are willing to accept to sell an extra unit of a good. B. the maximum price sellers are willing to accept to sell an extra unit of a good. C. the minimum price buyers are willing to pay to buy an extra unit of a good. D. the maximum price buyers are willing to pay to buy an extra unit of a good.

A

Which of the following statements are​ true? ​(Check all that apply.​) A. Equilibrium is attained when prices are allowed to respond to market pressure. B. A binding price ceiling will always cause the quantity demanded to exceed the quantity supplied. C. A government price control will always cause the quantity demanded to exceed the quantity supplied. D. A government price control can be used to bring markets into equilibrium.

A, B

18) Which of the following is an example of marginal analysis? A) To determine the optimal output that a firm should sell, the manager calculates the total revenue earned by selling different levels of output. B) To determine the optimal number of workers, a firm calculates the net benefits of hiring an extra worker. C) To choose the optimal apartment to rent, an individual estimates the net benefits of renting an apartment close to his place of work. D) To determine the optimal amount of fertilizer to be used, a farmer calculates the total benefits of using a given amount of fertilizer.

B

19) If the total cost incurred by a firm in hiring ten workers is $45 and the total cost incurred when the eleventh worker is hired is $60, the marginal cost of hiring the eleventh worker is ________. A) $20 B) $15 C) $105 D) $1.33.

B

26) The automobile market in the United States is often said to be highly competitive. But it is not perfectly competitive. What makes this market not perfectly competitive? A) More than three major car companies exist in this market.B) Different car companies make different vehicles with different features. C) An individual car buyer can dictate what price he or she pays for a vehicle. D) An individual seller can dictate what price a consumer pays for a vehicle.

B

27) Which of the following statements correctly describes a competitive market? A) The market price for the same good varies from seller to seller. B) The market price is determined by the interaction of demand and supply. C) Buyers and sellers negotiate prices before making exchanges. D) A single seller sometimes has the ability to dictate the market price.

B

30) Which of the following examples best describes the concept of diminishing marginal benefit? A) If a seller of notebooks in a perfectly competitive market charges above the market price, his profit decreases. B) With each additional pen Jill buys, her willingness to pay for another pen decreases. C) Each additional unit of ice cream that John consumes gives him more and more satisfaction. D) If the weather gets cold, the demand for ice cream will fall.

B

8) Which of the following is an example of a natural experiment? A) A laboratory research on the effectiveness of solar power as an alternative source of fuel B) A research on the effect of air pollution on lung disorders by observing the health conditions of people who stay close to industrial areas and those who stay away from industries C) A study on the benefits of regular exercise by paying for the membership fees at fitness clubs for one-half of the participants D) A research on the effectiveness of a new medicine among some voluntary participants

B

9) Which of the following is NOT a step involved in optimization using total value? A) Converting all costs and benefits into a common value of measurement B) Calculating the marginal consequences of moving between alternatives C) Calculating the total net benefit of each alternative D) Choosing the alternative with the highest net benefit

B

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

B

Scenario: Sarah has to choose between renting a hotel room for 2 days and renting a hotel room for 3 days. 16) Refer to the scenario above. If Sarah is optimizing using marginal analysis, then which of the 16) following statements is true? A) She will rent the hotel room for 3 days if the benefit of staying for the third day exceeds the benefits of staying for the first 2 days. B) She will rent the hotel room for 3 days if the benefit of staying for the third day exceeds the cost of staying for the third day. C) She will rent the hotel room for 3 days if the net benefit of staying for 3 days exceeds the net benefit of staying for 2 days. D) She will rent the hotel room for 3 days if the cost of staying for the first 2 days is less than the cost of staying for the third day.

B

The price of insulin injection kitsinsulin injection kits​, used by diabetic patientsused by diabetic patients​, increased from​ $45 to​ $52, but consumption has still remained the same. In this​ situation, the Law of Demand​ __________. A. ​holds, since the Law of Demand must hold for all goods in all instances. B. does not​ hold, since the product sold is required for​ survival, so increasing the price did not affect consumption. C. does not​ hold, since the product is not sold in normal​ markets, so it cannot follow the Law of Demand. D. ​holds, since a change in the price of the product resulted in a change in the quantity demanded of the product.

B

What does it mean to say that we are running out of​ "cheap oil"? A. That there are declining reserves of​ low-quality oil, but there is still plenty of​ high-quality oil remaining. B. That oil reserves are becoming more expensive to find and extract over time. C. That we will soon deplete all the​ world's oil​ reserves, which will cause the price of oil to increase significantly. D. That world demand for oil is​ declining, which will raise the price of oil in the future.

B

Which of the following statements is true if the supply curve is curve shaped ​(nondash​linear)? A. It is easier to expand production the higher the market price. B.It is difficult to expand production the higher the quantity supplied. C.The price does not affect the quantity supplied. D.The price and the quantity supplied are negatively related.

B

25) Total cost falls when marginal cost is ________, and total cost rises when marginal cost is ________. A) zero; positive B) positive; negative C) negative; positive D) zero; negative

C

29) Which of the following statements is true of the concept of willingness to pay? A) The willingness to pay for a commodity increases exponentially as the consumption of the commodity increases. B) The willingness to pay for a commodity increases linearly as the consumption of the commodity increases. C) If a consumer is consuming 10 units of a commodity and she is ready to pay $2 for the eleventh unit, her willingness to pay for the eleventh unit is $2. D) The willingness to pay is the lowest price that a buyer is willing to pay for an extra unit of a commodity.

C

3) Refer to the scenario above. Maria should choose to ________. A) travel by train, because it is quicker B) drive, as it will give her a real saving of $150 C) drive, as it will save her $120 D) travel by train, as it will save her $30 in travel time

C

32) Which of the following factors will NOT cause a shift in the demand for a good? A) A change in tastes and preferences B) A change in the number of consumers C) A change in the market price of the good D) A change in consumer incomes

C

44. Which of the following is likely to be included in a country's GDP for a particular year? A) The total amount of steel used in the production of automobiles in that year B) An unused stock of goods produced in the previous year C) An unsold inventory of automobiles produced in that year D) The total amount of flour used by bakeries to make bread in that year

C

7) Which of the following pairs of variables is likely to be positively correlated?

C

All else​ equal, an increase in demand will result in​ a: A. lower price B. lower quantity C. higher price D. None of the above.

C

Maria has to choose between driving and taking a train to destination A. Traveling by train will cost her $400 and will take 4 hours. Driving to destination A takes 6 hours, and the required amount of gasoline costs $250. Her opportunity cost of time is $15 per hour. 2) Refer to the scenario above. What is the total cost involved if Maria chooses to travel by train A. 420 B. 400 C. 460 D. 60

C

The demand curve for insulin injection kitsinsulin injection kits is​ __________. A. ​downward-sloping, since the demand for insulin injection kitsinsulin injection kits reacts the same to changes in price as any other good. B. near​ horizontal, since even a small rise in the price will result in diabetics cutting back on the quantity they demand. C. near​ vertical, since even if the price rises diabetics will be willing to buy the same quantity.

C

Which change causes a movement along the demand​ curve? A. ​buyer's beliefs about the future B. number and scale of buyers C. price of the good itself D. tastes and preferences

C

Which of the following is common between the supply schedule and the supply​ curve? A. They give information about the quantity supplied at different time periods. B. They give information about the quantity supplied in different parts of the world. C. They give information about the quantity supplied at different prices. D. They give information about the quantity supplied in a nation.

C

drought in the grape growing regions of the countrydrought in the grape growing regions of the country increases the cost of producing jellyjelly. At the same​ time, we see the price of peanut butterpeanut butter falls. Suppose that after both of these events the consumption of jellyjelly is left unchanged. In this​ situation, the Law of Demand​ __________. A. does not​ hold, since the product sold is a​ necessity, so increasing the price will not likely affect consumption. B. does not​ hold, since there was no change in the quantity of jellyjelly demanded. C. ​holds, since the demand curves for both jellyjelly and peanut butterpeanut butter are​ downward-sloping; it is their shifts that are determining the impact on the quantity consumed. D. ​holds, since the Law of Demand must hold for all goods in all instances

C

28) Which of the following examples best describes the Law of Demand? A) When the price of watches increases, a local manufacturer starts offering more watches for sale. B) When a new anti-tobacco commercial is released, the consumption of tobacco products decreases sharply. C) When John's income doubles, his telephone bill also doubles. D) When the price of bread doubles, John's consumption of bread halves.

D

33) Which of the following pairs of goods is likely to be considered substitutes? A) Coffee and sugar B) Printers and printing inkC) A Nokia cell phone and a Nokia cell phone charger D) A Ford car and public transportation

D

4) Refer to the scenario above. If Maria's opportunity cost of time increases to $80 per hour, the cost 4) of driving to destination A is ________. A) $970 B) $480 C) $800 D) $730

D

43) Suppose Z is a normal good. The equilibrium price and quantity of Z in the year 2013 was $25 and 60 units, respectively. In 2017, the equilibrium price of Z had increased to $35 and theequilibrium quantity had increased to 70 units. Other things remaining the same, which of the following could explain this change? A) A leftward shift of the supply curve of Z B) A rightward shift of the supply curve of Z C) A leftward shift of the demand curve for Z D) A rightward shift of the demand curve for Z

D

45) An apparel manufacturer bought raw materials worth $60,000 in a particular year and earned a total revenue of $90,000. If the manufacturer had no other expenditure, it added a value of________ to the production process. A) $150,000 B) $90,000 C) $12,000 D) $30,000

D

47) The value of a country's exports during a particular year was $120,000 and the value of its imports was $85,000. Which of the following is true? A) The country ran a trade deficit of $35,000 during that year. B) The country ran a fiscal deficit of $205,000 during that year. C) The country ran a budget surplus of $205,000 during that year. D) The country ran a trade surplus of $35,000 during that year.

D

6) Who among the following is an example of a free rider? A) A consumer paying for pollution control B) An individual who buys a ticket for a baseball game C) A housekeeper cleaning a house D) A tax evader enjoying national security

D

Scenario: Sarah has to choose between renting a hotel room for 2 days and renting a hotel room for 3 days. Refer to the scenario above. Which of the following is true if Sarah is optimizing using total 17) value? A) She will rent the hotel room for 3 days if the cost of staying for 2 days exceeds the cost of staying for 3 days. B) She will rent the hotel room for 3 days if the total benefit of staying for 3 days exceeds the total benefits of staying for 2 days. C) She will rent the hotel room for 3 days if the net benefit of staying for the third day is negative. D) She will rent the hotel room for 3 days if the net benefit of staying for 3 days exceeds the net benefit of staying for 2 days.

D

Suppose you have a flashlight that takes three batteries to power it. If you buy the batteries one at a​ time, for which purchase will diminishing benefits set​ in? A. When you buy the first battery. B. When you buy the second battery. C. When you buy the third battery. D. When you buy the fourth battery.

D

What does this imply for the price of oil in the​ future? A. The supply of oil will​ increase, which will lead to lower prices in the future. B. The demand for oil will​ decrease, which will lead to higher prices in the future. C. The demand for oil will​ increase, which will lead to lower prices in the future. D. The supply of oil will​ decrease, which will lead to higher prices in the future.

D

Now assume that you have a job that pays you ​$6 per hour. Would you be optimizing to accept the invitation to play​ golf?

DONT PLAY

The concept of diminishing marginal benefits for goods that you like a lot.

HOLDS TRUE

As a firm produces more of a​ good, the cost of producing each additional unit . This implies that the marginal cost of producing a good as you make more of that good.

INCREASES; INCREASES

You have been invited to play a​ 4-hour round of golf that has a value to you of ​$60. The total price to play the round of golf is ​$45.

NET BENEFIT IS $15

When John determines what choice of walking shoes will give him the best bang for his buck​, he is using optimization based on . When Janet looks at the additional value of purchasing a new laptop to the cost as compared to keeping her old​ one, she is using optimization based on .

TOTAL VALUE, MARGINAL ANALYSIS