Econ Exam 1

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

marginal cost

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

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. Number of Car Washes Per Month Total Monthly Benefit from Car Washes 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

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.

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

macroeconomics

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.

KAHOOT QUESTION 2: A rational person is someone: a) with well-defined goals; tries to fulfill them as best as she/he can b) who only considers the financial benefits and costs of making a decision c) who does not have well-defined goals d) who doesn't worry about costs and benefits

a) with well-defined goals; tries to fulfill them as best as she/he can

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

its benefits exceed its costs.

QUESTION 41 IN CHAPTER 2 HW: Refer to the figure below. What might cause a shift from the original demand curve to the new demand curve?

An increase in consumers' tastes for coffee.

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

An increase in the price of a substitute.

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

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.

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

Neither buyers nor sellers want the price to change.

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.

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.

KAHOOT QUESTION 10: Attending school cost you $15K in fees, tuition, and textbooks a year. You could instead work 2000 hours a year @ $10/hr a) Your opportunity cost of going to school is $35,000 b) Your opportunity cost of going to school is $20,000 c) Your opportunity cost of going to school is $15,000 d) Your opportunity cost of going to school is $50,000

a) Your opportunity cost of going to school is $35,000

KAHOOT QUESTION 14: The buyer's reservation price for a particular good or service is the: a) largest price the buyer would be willing to pay for it. b) same as the market price c) smallest price the buyer would be willing to pay for it d) price the buyer must pay to ensure he or she gets it

a) largest price the buyer would be willing to pay for it.

KAHOOT QUESTION 17: If the demand for a good decreases as income decreases, then the good is a(n) a) normal good b) complementary good c) inferior good d) substitute good

a) normal good

KAHOOT QUESTION 12: As coffee becomes more expensive, Joe starts drinking tea instead of coffee. This is called: a) the substitution effect of a price change b) a decrease in demand c) a decrease in reservation price d) the income effect of a price change

a) the substitution effect of a price change

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.

The marginal benefit of an activity is the:

extra benefit associated with an extra unit of the activity.

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.

QUESTION 22 IN CHAPTER 2 HW: Refer to the figure below. At a price of $9, there will be:

an excess supply of 5 units.

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

an increase in supply of laptops.

KAHOOT QUESTION 13: Which of the following is NOT true of a demand curve? a) It has a negative slope b) It reflects sellers' reservations prices c) It shows the amount consumers want to buy at various prices d) It relates the price of an item to the quantity demanded of that item

b) It reflects sellers' reservations prices

KAHOOT QUESTION 15: Shelly purchases a leather purse for $400 and she feels she got an unbelievable deal. One can infer that a) she paid too much b) her reservation price was more than $400 c) her reservation price was exactly $400 d) her reservation price was less than $400

b) her reservation price was more than $400

KAHOOT QUESTION 1: Economics is best defined as the study of a) supply and demand b) how economic agents make choices in the face of scarce resources c) inflation, interest rates, and stock market d) financial concerns of business and individuals

b) how economic agents make choices in the face of scarce resources

KAHOOT QUESTION 9: We often say "it's not worth it." This means that we have determined that a) total benefit is negative b) marginal benefit < marginal cost c) marginal benefit > marginal cost d) total cost > total benefit

b) marginal benefit < marginal cost

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.

Economists recognize that because people have limited resources:

they have to make trade-offs.

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

because of both the substitution and the income effects.

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.

KAHOOT QUESTION 6: The most you would be willing to pay for a plane ticket is $250. If you buy one for $175, your economic surplus is a) $175 b) $0 c) $75 d) $250

c) $75

KAHOOT QUESTION 16: "As the price of personal computers continues to fall, demand increases." This headline is inaccurate because a) a change in the price of personal computers shifts the supply curve b) a change in the price of personal computers shifts the demand curve c) a falling price of computers increases the quantity demanded, not demand d) the statement is backwards; increased demand leads to lower prices.

c) a falling price of computers increases the quantity demanded, not demand

KAHOOT QUESTION 5: Suppose Mary is willing to pay up to $15,000 for a used truck. If she buys one for $12,000, her ______ would be _______ a) economic surplus; $12,000 b) cost; $15,000 c) economic surplus; $3,000 d) benefit; $12,000

c) economic surplus; $3,000

KAHOOT QUESTION 8: Total benefit of watching one baseball game is 100, two games is 120, and three games is 125. a) marginal benefit of 3rd game is 125 b) marginal cost of 3rd game is 5 c) marginal benefit of 2nd game is 20 d) 3rd game should be watched, regardless of marginal cost

c) marginal benefit of 2nd game is 20

KAHOOT QUESTION 7: If one fails to account for implicit cost in decision making, then applying the cost-benefit rule will be flawed because a) the costs will be overstated b) the benefits will be understated c) the costs will be understated d) the benefits will be overstated

c) the costs will be understated

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.

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

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.

KAHOOT QUESTION 18: What might cause the demand curve for Nike shorts to shift to the right? a) An increase in the price of Nike shoes b) An increase in the price of Nike shorts c) A decrease in the price of Adidas shorts d) An increase in the price of Adidas shorts

d) An increase in the price of Adidas shorts

KAHOOT QUESTION 11: Buyers and sellers of a particular good make up the a) supply for the good b) demand for the good c) production possibilities curve for the good d) market for the good

d) market for the good

KAHOOT QUESTION 3: Dean should play golf instead of preparing for tomorrow's exam in economics if a) he is irrational b) Dean can play golf for free c) the benefit of golfing is greater than the benefit of studying d) none of the above

d) none of the above

KAHOOT QUESTION 19: If the demand for cheese falls when the price of wine falls, then we know that cheese and wine are a) normal goods b) inferior goods c) substitutes d) none of the above

d) none of the above (complimentary goods)

KAHOOT QUESTION 4: If MB from watching 4th quarter of a football game > MC, Pete should a) not watch the 4th quarter b) watch the 4th quarter only if it his favorite team c) not watch 4th quarter if MB of 4th quarter is less than MB of 3rd quarter d) watch the 4th quarter

d) watch the 4th quarter

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; $3,000

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.

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.

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.

Excess demand occurs:

when price is below the equilibrium price.

A rational person is someone:

with well-defined goals who tries to fulfill those goals as best as he or she can.

QUESTION 21 IN CHAPTER 2 HW: Refer to the figure below. The equilibrium price is ______, and the equilibrium quantity is ______.

$6; 4

QUESTION 42 IN CHAPTER 2 HW: Refer to the figure below. What might cause shift from the original supply curve to the new supply curve?

A new technology that reduces amount of coffee beans needed to make a good cup of coffee.

QUESTION 40 IN CHAPTER 2 HW: Refer to the figure below. Suppose the solid line represents the current supply of Star Wars action figures. If the price of the plastic used to make action figures rises, current supply will:

shift to S(A).

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.

QUESTION 35 IN CHAPTER 2 HW: Refer to the figure below. Suppose the solid line shows the demand for coffee. If coffee and tea are substitutes, and the price of tea falls, then you would expect:

the demand curve to shift to D(A).

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

the demand curve.

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.

The following table shows the relationship between the speed of a computer's CPU and its benefits and costs. Assume that all other features of the computer are the same (that is, CPU speed is the only source of variation), and only the CPU speeds listed below are available for purchase. CPU GHz Total Benefit Marginal Benefit Total Costs Marginal Costs 2.0 $1,000 $900 2.5 $1,400 $100 3.0 $300 $1,200 3.5 $1,900 $1,500 4.0 $2,000 $400 The marginal benefit of upgrading from a 2.0GHz computer to a 2.5GHz computer is:

$400.

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.

Economics is best defined as the study of:

how people make choices in the face of scarcity and the implications of those choices for society as a whole.

QUESTION 36 IN CHAPTER 2 HW: Refer to the figure below. Moving from demand curve D1 to demand curve D2 could be caused by a(n):

increase in the price of a close substitute.

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

increase the quantity of cookies supplied.

QUESTION 34 IN CHAPTER 2 HW: Refer to the figure below. Suppose the solid line shows the current demand curve for coffee. In response to an announcement that much of next year's coffee crop has been destroyed by a storm in Brazil, you should expect:

the demand curve to shift to D(B) in anticipation of higher future prices.

The opportunity cost of an activity includes the value of:

the next-best alternative that must be foregone.

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.

When a market is in equilibrium:

there is neither excess demand nor excess supply.