ECON Midterm

You are thinking about traveling to visit friends in Atlanta. You can fly or take the bus. A round-trip plane ticket costs $300, and it takes three hours to get from your house to your friend's house if you fly (so six hours round-trip). A round-trip bus ticket costs $150 and it takes 10 hours to get door-to-door using the bus (so 20 hours round-trip).What is the minimum value of your time necessary to induce you to buy the plane ticket instead of taking the bus?

$10.71/hour

For a good, imagine that price increases by 2 percent and quantity demanded decreases by 1 percent. What is the price elasticity of demand?

-0.5

Imagine that country A produces pens and scissors. If it dedicates all of it's resources to pens, it can produce 1000 pens. If country A dedicates all of it's resources to scissors, it can produce 3000 scissors. What is the opportunity cost of scissors in this country?

1/3 pens per scissor

You are selling orange for $3 per pound. In a given day, you sell 100 pounds of oranges. What was your total revenue for that day? Enter the number below and do not include a "$" sign.

300 (with margin: 0)

Imagine that country A produces pens and scissors. If it dedicates all of it's resources to pens, it can produce 1000 pens. If country A dedicates all of it's resources to scissors, it can produce 3000 scissors. How many pens does Country A have to give up to produce 1500 scissors? Enter the number of pens in the box.

500 (with margin: 0)

What does it mean to an economist to be rational?

A rational person will do something if they believe marginal benefit of it is greater than the marginal cost

You have to decide between going on a cruise with friends or going on a service trip with Alternative Spring Break; both of which cost the same amount. You could also work over the break and earn some extra money, but this would be less valuable to you than either experience. If you choose the cruise, what is your opportunity cost?

Alternative Spring Break

Which of the following events will increase the quantity supplied (movement along the curve) of pencils?

An increase in the price of pencils

Consider the demand curve for Good A. Of the things listed below, which is the only one that does NOT cause the demand curve to shift?

Change in the price of Good A

Imagine there are two countries: A and B. These countries have the same amount of resources and both produce two goods, pens and scissors. If country A dedicates all of it's resources to pens, it can produce 1000 pens. If country A dedicates all of it's resources to scissors, it can produce 3000 scissors. If country B dedicates all of it's resources to pens, it can produce 500 pens. If country B dedicates all of it's resources to scissors, it can produce 1000 scissors. What is true about the absolute advantage between these two countries?

Country A has an absolute advantage in both goods

Imagine there are two countries: A and B. These countries have the same amount of resources and both produce two goods, pens and scissors. If country A dedicates all of it's resources to pens, it can produce 1000 pens. If country A dedicates all of it's resources to scissors, it can produce 3000 scissors. If country B dedicates all of it's resources to pens, it can produce 500 pens. If country B dedicates all of it's resources to scissors, it can produce 1000 scissors. What is true about the comparative advantage between these two countries?

Country A has an comparative advantage in scissors, Country B in pens

Imagine there are two countries: A and B. These countries have the same amount of resources and both produce two goods, pens and scissors. If country A dedicates all of it's resources to pens, it can produce 1000 pens. If country A dedicates all of it's resources to scissors, it can produce 3000 scissors. If country B dedicates all of it's resources to pens, it can produce 500 pens. If country B dedicates all of it's resources to scissors, it can produce 1000 scissors. Which of these countries would accept and/or not accept a trade of 100 pens for 100 scissors (i.e. the trade would benefit them)?

Country A would accept this trade and Country B would not accept this trad

What will happen to current demand for a good when consumers expect the future price of that good to decrease?

Current demand will decrease

Consider a demand curve with a constant slope. What is true about price elasticity of demand along that curve?

It gets more elastic as price increases

If a good is inferior, what will happen to demand for that good when income increases?

It will decrease

The price elasticity of demand for a good is -2.5. If the price of this good increases by 5 percent, what will happen to the quantity demanded?

It will decrease by 12.5 percent.

What do you expect to happen to price elasticity of demand for a product over time?

It will get more elastic

From the following attributes, choose the ones (there's more than one) that describe a perfectly competitive market

Many buyers and sellers Identical products Low barriers to entry

Which of the following statements is normative?

Microeconomics is a great class.

The donut market is in equilibrium. The price of a complement, coffee, increases and everything else is held constant. What will happen to the equilibrium price and quantity of DONUTS?

P* decreases, Q* decreases

What is true about the relationship between price and quantity demanded for a typical market demand curve?

Price and quantity demanded are negatively related

Note this question is slightly different: The price elasticity of demand for a good is -0.5. What would have to happen to the price of this good for quantity demanded to INCREASE by 5 percent?

Price would have to decrease by 10%

What would we have to assume before constructing a society's production possibilities frontier?

That the quantity of resources remains constant. That the technology available for use in production remains constant.

Firms that produces flowers expects that the future price of flowers will increase. What happens currently?

The current supply decreases

Imagine that the following two things occur at the same time in the market for history textbooks: Event 1: History professors decide to no longer require textbooks. Event 2: The technology for producing textbooks improves. What can you say about what will happen to the equilibrium price and quantity of history textbooks.

The effect on equilibrium quantity will be ambiguous; The equilibrium price will decrease

Suppose that in a time of crisis everyone pitches in and works more than full-time. How is this represented by a production possibilities frontier?

The entire PPF shifts out.

You're deciding if you will study one more hour for tomorrow's economics exam. The opportunity cost (marginal cost) of studying is sleeping for an hour. If you decide to study for one more hour, you must believe that:

The marginal benefit of studying one more hour is greater than the marginal cost of studying for one more hour

Which of the following statements refers to a macroeconomic issue?

The national unemployment rate is currently 7.7%.

Imagine a country experiences an increase in the resources used to produce a good depicted on the y-axis of a PPF. How would this change the countries PPF?

The y-intercept would increase but the x-axis would remain the same

What is true about firms in the perfectly competitive market?

They are price-takers -- they have to sell their units at the market price

Which statement best describes why price elasticity of demand is expected to be negative?

When price increases, quantity demanded decreases

Where would you plot unemployment on a production possibilities frontier?

a point inside the PPF

Where would you plot full employment on a production possibilities frontier?

a point on the PPF

Suppose that a politician tells you about a plan to create two expensive but necessary programs to build more production facilities for solar power and wind power. At the same time, the politician is unwilling to cut any other programs. Assuming the resources are already being efficiently used in other programs, where would the point the politician is trying to reach be on the production possibilities frontier?

an impossible point

If good A and good B are substitutes, a price decrease for good A will ____ the demand for good B

decrease

When the price increases and the demand curve is ELASTIC, we expect quantity demanded to ___ .

decrease by a large amount

When the price increases and the demand curve is INELASTIC, we expect quantity demanded to ___ and total revenue to ____.

decrease by a small amount; increase

Jewell attends a wedding reception where dinner is served. For her entrée, she has the option of steak, chicken, or pasta. If she chooses the pasta, then her opportunity cost is

either the chicken or the steak—whichever would have been her second choice to the pasta

A good that has more substitutes will have more ________ price elasticity of demand.

elastic

Judy spent eight hours studying for an exam. Normally, she would have spent that time watching TV instead of studying. She figures she could have made a "B" after only studying four hours, but she really wanted an "A." What is Judy's marginal cost in terms of TV viewing to improve her grade from a "B" to an "A"?

four hours

Which of the following describes Jonathan having a comparative advantage in producing apples?

giving up less production of other goods when producing an apple

Opportunity cost is the ______________ alternative that must be sacrificed in order to get something else.

highest-valued

You order a $20 Seattle Mariners sweatshirt online for a Father's Day gift. There's a standard shipping charge of $10, but you see that orders $25 or more ship for free. You could also order a $5 Mariners sticker, but you're not sure your father would like it. You decide to order the sticker. This is an example of

incentives

Perfectly inelastic SUPPLY would imply

it is impossible for firms to change the amount of production in response to a price change

Economics is the study of how people allocate their ________ resources to satisfy their nearly _________ wants.

limited; unlimited

Think about a country where most economic production comes from factories that create air pollution. What could be a possible trade-off of lower levels of pollution (i.e. what outcome would the country have to accept if it decided to reduce pollution)?

lower incomes

Economists use the concept of ceteris paribus to examine a change in ____________ in a model, while assuming that all other variables remain constant.

one variable

Imagine a good for which consumers will buy the exact same amount, regardless of what the price is. We would call the price elasticity of demand for this good _____________ and the elasticity coefficient is ______________.

perfectly inelastic; equal to zero

Incentives can be classified as

positive or negative direct or indirect

Assume a production possibilities frontier (PPF) with two goods in a country. A production allocation point that lies on the PPF line itself is a production point

that is using all of its resources efficiently

The difference between the study of microeconomics and the study of macroeconomics is a difference between

the study of individual economic units and the study of aspects of the economy as a whole

The opportunity cost of attending college is likely to be highest for a high school graduate

who is capable of playing a well-paid professional sport

Imagine that Sarah has a choice between two productive activities: fixing sprinklers or planting trees. It takes her 1 hour to fix a sprinkler and 2 hours to plant a tree. Assuming that fixing sprinklers is on the x-axis and planting trees is on the y-axis, what is the equation for Sarah's PPF if she works for 10 hours?

y=5-0.5x