Econ Exam

A beach resort in Bali builds 24 villas with private pools and two restaurants that use state-of-the-artequipment, such as multipurpose ovens, freezers, and food processors. Meals are prepared using organic, locally sourced vegetables and meat. The hotel also uses water from the town supplier. Based on this scenario, what are the beach resort's variable costs? a. the costs of the organic vegetables and water b. the costs of the multipurpose ovens and freezers c. the costs of the food processors d. the costs of the villas

A

If income rises by 10% and the quantity demanded of an item rises by 20%, the income elasticity of demandfor this item is: a. 2. b. -2. c. 0.5. d. -0.5.

A

Amul Food Factory in India makes ice cream and produces processed and condensed milk. In the factory,the firm's employees use milk and sugar. The firm runs on electricity and purchases raw milk every day. Largerobotic assembly lines fill and package the ice cream containers. Large industrial freezers store the ice cream.Which of these are variable costs for Amul Food Factory? (i) the costs of raw milk (ii) the costs of the robotic assembly lines (iii) the electricity costs (iv) the costs of the industrial freezers (v) the costs of sugar a.(i), (ii), (iii), and (iv)b. (iii) and (v)c. (i), (iii), and (v)d. (ii) and (iv)

C

Asking "What else?" allows the _____ principle to be boiled down to a simple question. a. cost-benefit b. opportunity cost c. marginal d. interdependence

D

Consider the market for iPads. What happens if a fantastic new alternative tablet is developed by Samsung and, at the same time, a factory that makes iPads catches fire, destroying 3 million iPads? a. Price decreases, and quantity increases. b. Price increases, and quantity increases. c. The change in price is indeterminate, and quantity decreases. d. Price increases, and the change in quantity is indeterminate.

C

If Monica is building computers under conditions of diminishing marginal product, the marginal cost will: a. equal the average total cost. b. be decreasing. c. be increasing. d. be constant.

C

Because demand curves are usually downward sloping, the price elasticity of demand is: a. usually positive. b. usually greater than 1. c. positive or negative. d. usually negative.

D

A supply schedule shows how: a. much of a good or service would be demanded at different prices. b. supply is derived. c. much of a good or service would be supplied, given the demand. d. much of a good or service would be supplied at different prices.

D

Consider your decision to attend class each day or skip it. Which of the four core principles of economics applies to the notion that attending class will MOST likely help you understand the material better and perform well on future exams? a. the cost-benefit principle b. the opportunity cost principle c. the marginal principle d. the interdependence principle

D

Economists convert costs and benefits into money equivalents by evaluating an individual's: a. sunk costs. b. marginal benefits. c. opportunity costs. d. willingness to pay.

D

If the economy booms and people's incomes rise, then the demand curve for a normal good, such as a new automobile, will _____, and the equilibrium quantity of new automobiles produced will _____. a. shift to the right; increase b. not shift; not change c. not shift; increase d. shift to the left; decrease

A

Your aunt enjoys woodworking and recently started to selling her handmade pieces. She works a full-timejob then works on her creations in a small space in her garage in the evenings. She normally works 1 hour per evening, but when orders increase she chooses to work 1.5 hours per evening. She currently doesn't know another skilled woodworker she could employ to meet increased demand. Her workspace cannot expand beyond her garage. Your aunt's elasticity of supply in the short run is: a. inelastic. b. elastic. c. neither elastic nor inelastic. d. perfectly elastic.

A

When the marginal benefit of an activity is equivalent, in the rational buyer's mind, to the price of the activity,the rational buyer should do _____ of the activity. a. less b. the same amount c. more d. none

B

The tendency for quantity demanded to be higher when the price is lower is known as the law of: a. unintended consequences. b. increasing returns. c. demand. d. supply.

C

Uchenna, a market researcher at Planters Nut and Chocolate Company, is tasked with determining what pricePlanters should charge for a canister of salted peanuts. Based on a survey, she concludes that, though thePlanters brand is iconic, buyers choose their peanuts based solely on price—hence, the market is perfectly competitive. While this result suggests that it should charge the market price, if Planters tries to undercut the market by pricing its peanuts slightly below the market price, its profits will: a. rise. b. remain unchanged. c. fall dramatically, perhaps to zero. d. fall somewhat.

D

You calculate price elasticity of demand by dividing the percent change in _____ by the percent change in_____. a. price; quantity demanded b. price; quantity supplied c. quantity demanded; income d. quantity demanded; price

D

If the price elasticity of supply is greater than 1: a. supply is elastic. b. supply is inelastic. c. supply is neither elastic nor inelastic. d. the quantity supplied is relatively unresponsive to price changes.

A

If the price of bananas is greater than the marginal cost of bananas, then: a. society's well-being can be improved if production increases. b. society's well-being can be improved if production decreases. c. society's well-being cannot be improved by changing production. d. the market is producing too many bananas.

A

On the listing page for each item, Amazon often suggests additional purchases, including items "Frequently bought together" with the product the buyer is viewing. How are the current item and the suggested items related? The suggested items are: a. complementary goods. b. substitute goods c. inferior goods. d. inelastic goods.

A

Pacific Gas and Electric burns coal to generate electricity. If the price of coal decreases, we expect a shift to the _____ of the _____ curve for _____ and a _____ price for electricity. a. right; supply; electricity; lower b. left; supply; electricity; higher c. right; demand; oil; higher d. left; demand; oil; lower

A

The increased use of robotics has made the production of naval vessels more efficient. This represents a(n): a. increase in supply. b. decrease in supply. c. increase in quantity supplied. d. decrease in quantity supplied.

A

The market supply curve is upward-sloping because, at higher prices:(i) individual sellers have an incentive to increase the output they supply.(ii) more sellers have an incentive to supply output to the market.(iii) the government has an incentive to supply output to the market. a. (i) and (ii) b. (i) and (iii) c. only (iii) d. (ii) and (iii)

A

The percentage change in quantity demanded divided by the percentage change in price is the _____. a. price elasticity of demand b. quantity elasticity of demand c. income elasticity of demand d. cross-price elasticity of demand

A

The primary difference between a change in supply and a change in quantity supplied is that: a. a change in quantity supplied is a movement along the supply curve, whereas a change in supply is a shift of the supply curve. b. both a change in quantity supplied and a change in supply are movements along the supply curve, only in different directions. c. a change in supply concerns the supply curve, whereas a change in quantity supplied concerns shifts in the demand curve that shift the supply curve. d. a change in supply is a movement along the supply curve, whereas a change in quantity supplied is a shift of the supply curve.

A

Which factor will NOT cause an increase in the supply of Rice Krispies? a. an increase in the price of Rice Krispies b. a cost-saving improvement in the technology of cereal production c. a reduction in the price of sugar d. expectations among producers that the price of Rice Krispies will fall in the future

A

Which statement is TRUE? a. The law of demand pertains to both individual and market demand curves. b. Individual demand curves are usually flatter than market demand curves. c. Identical factors shift both individual and market demand curves. d. If the price of a good changes, the quantity demanded changes at all prices.

A

A decrease in the price of raw fish will result in a(n): a. increase in the quantity of sushi supplied. b. increase in the supply of sushi. c. decrease in the quantity of sushi supplied. d. decrease in the supply of sushi.

B

Amul Food Factory in India makes ice cream and produces processed and condensed milk. In the factory,the firm's employees use raw milk and sugar. The firm runs on electricity and purchases raw milk every day.Large robotic assembly lines fill and package the ice cream containers. Large industrial freezers store the icecream. Based on this scenario, what are Amul Food Factory's fixed costs? a. the costs of raw milk b. the costs of the factory, the robotic assembly lines, and the industrial freezers c. the costs of labor and the packages containing ice cream d. the costs of electricity, raw milk, and sugar

B

Demand for a particular fast-food chain inside an airport is less elastic than outside of the airport because: a. necessities have less elastic demand. b. fewer choices mean more inelastic demand. c. specific brands tend to have more elastic demand than categories of goods. d. consumer search makes demand more elastic.

B

Suppose the price elasticity of demand for lemons is 1.8. If a fall frost destroys one-third of the nation's lemon crop, how will that affect total revenue from lemons, all other things equal? a. Total revenue will rise. b. Total revenue will fall. c. Total revenue will remain unchanged. d. The information is insufficient to answer the question.

B

A social media influencer is quickly gaining followers, and he's offered his first brand deals. Each deal offers a$200 payment. In exchange, the influencer must advertise the brand by creating posts and responding tocomments. He would use his personal time for each brand deal. To accept the first deal, he would give up hisFriday night, which he values at $150. For the second and third deals, he would give up his Saturdayafternoon and Sunday afternoon, which he values at $200 and $250, respectively. He has already acceptedtwo brand deals. Should he accept a third deal?a. Yes, because marginal benefit would exceed marginal cost. b. Yes, because marginal cost would exceed marginal benefit. c. No, because marginal cost would exceed marginal benefit. d. No, because marginal benefit would exceed marginal cost.

C

The price of product A is cut by 30%. As a result, the quantity demanded of product B rises by 40%. Thecross-price elasticity of demand between product A and product B is _____, and they are _____. a. -0.75; substitutes b. -1.25; complements c. -1.33; complements d. 1.25; complements

C

The relationship between price expectations and current demand is: a. negative; when future prices are expected to rise, current demand falls. b. negative; when future prices are expected to fall, current demand rises. c. positive; when future prices are expected to rise, current demand rises. d. positive; future prices are generally expected to rise.

C

The gas stations in your town form a competitive market. In other words, there are _____ gas stations and_____ people with cars in your town. a. few; few b. few; many c. many; few d. many; many

D

You run an electronics store that sells, among other items, big screen televisions. As the market price of bigscreen televisions decreases, the: a. supply of big screen televisions increases. b. quantity of big screen televisions supplied increases. c. supply of big screen televisions decreases. d. quantity of big screen televisions supplied decreases.

D

In which scenario are you NOT part of a market transaction? a. You take a photo of flowers in bloom in a city park. b. You pay $5 to pick apples at a pick-your-own apples orchard. c. You buy meat and produce from a local farmer. d. You sell vegetables at a local fruit and vegetable stand.

A

Ripley Entertainment is the owner of multiple attractions, ranging from museums to mini golf, in the mountain town of Gatlinburg, Tennessee. In the off-season, the price of a Ripley's experience is $9 per ticket, and the quantity supplied is 2,000 per week. However, when some weeks are busier than others, the director of Ripley's can easily adjust the company's offerings. At a price of $12 per ticket, the quantity supplied rises to3,500 weekly tickets. Using the midpoint formula, Ripley's supply during the off-season is _____, which is relatively _____. a. 1.9; elastic b. 1.9; inelastic c. 2.3; elastic d. 2.3; inelastic

A

Samsung Electronics uses its resources to produce tablet computers and cell phones. The _____ of manufacturing more phones is manufacturing fewer tablets, which Samsung can illustrate with its _____. a. opportunity cost; production possibility frontier b. marginal benefit; willingness to pay c. productivity; production possibility frontier d. opportunity cost; voluntary exchange

A

Which statement explains why a seller might charge a high price when a new video game console is firstreleased and then lower the price over time? a. The seller can charge a high price to consumers who want to be the first ones to own a newly released product. b. The seller wants to test the market to see how consumers react to the product. c. The buyers want to buy the new video game console only if the price is high because a high price signals goodquality. d. The seller can sell the newly released video game console only at the government-mandated price.

A

While attending college, you are also working as a freelance writer, writing product descriptions for catalogues for $40 per piece. You start each morning writing product descriptions when your mind is fresh. However, at a certain point, you recognize that the more product descriptions you write, the less quality time you can devote to your studies, worsening your grades and somewhat dampening your long-term income prospects. You should stop writing product descriptions when: a. the perceived opportunity cost of writing another product description in terms of foregone long-termincome rises above the $40 you could earn writing another product description. b. the perceived opportunity cost of writing another product description in terms of foregone long-termincome falls below the $40 you could earn writing another description. c. you've fully exhausted your creative powers for the day and so can write no more product descriptions. d. you'd prefer studying to writing product descriptions.

A

Charles is a manager at a coffee shop and is making hiring decisions. With one worker, he can make 15 drinksthat sell for $3 on average in a single hour. With a second worker, he can make an additional 12 drinks in asingle hour. The marginal benefit of each additional worker decreases by three drinks with each additional hire.Assuming that workers are paid $12 per hour and work eight hours, how many employees should Charleshire for each hour? a. three b. four c. five d. six

B

German firms import machinery from the United Kingdom. What would happen to the supply of Germangoods manufactured using machinery from the United Kingdom if the euro were to fall in value against theBritish pound?a. The quantity supplied would rise. b. The supply curve would shift to the left. c. The supply curve would shift to the right. d. There would be no effect on the supply.

B

If quantity supplied does not respond substantially to a relatively large change in price, supply is: a. elastic. b. inelastic. c. negatively sloped. d. insensitive to changes in price.

B

If the price elasticity of supply is greater than zero but less than one, then supply is: a. elastic. b. inelastic. c. neither elastic nor inelastic. d. very responsive to price changes.

B

Shifts in demand: a. always lead to increases in the equilibrium price. b. cause price and quantity to move in the same direction. c. always lead to increases in the equilibrium quantity. d. cause price and quantity to move in opposite directions.

B

In the market for chimichangas, a normal good, you observe that the equilibrium price and quantity have decreased. This can be caused by: a. a decrease in the price of hamburger meat. b. a decrease in the salaries of chimichanga shop workers. c. more chimichanga shops opening up. d. a decrease in the incomes of people who love to eat chimichangas.

D

The local grocery store cuts the price of milk by 15%. In response to the price cut, the quantity of milkdemanded falls by 5%. The absolute value of the price elasticity of demand for milk is _____, and the priceelasticity of demand is _____. a. 3; elastic b. 3; inelastic c. 0.33; elastic d. 0.33; inelastic

D