Econ STUDY

Suppose the price of a TV is $600. Joe is willing to pay $700 and Isaac is willing to pay $550. How much consumer surplus exists in this market?

$100

Instead of attending class, one could have worked an extra hour at the café for $10 or watched a neighbor's child for $15. The opportunity cost of attending class is:

$15

Suppose Kelly buys a washing machine for $450 that she was willing to pay $600 for. What is the amount of consumer surplus?

$150

At the end of the term, Bill is willing to sell his chemistry lab equipment for no less than $30, while Janice, who is taking chemistry next term, is willing to pay no more than $50. If Bill sells the lab equipment to Janice for $45, how much total surplus in generated?

$20

Suppose you search for a used bicycle online, and are willing to pay at most $100. You successfully find one for sale for $80. What is the value of consumer surplus?

$20

If Avery is willing to pay $10 for a pizza, Pia is willing to pay $13, and Sylvio is willing to pay $15, how much consumer surplus is achieved when the price of pizza is $12?

$4

Suppose a friend invites you to attend the opening day game for your favorite baseball team. You will have to miss a day of work in order to go. You would have earned $40 that day. Your ticket to the game cost your friend $10, and your friend treats you to another $10 worth of food and beverage. What is the opportunity cost of this choice?

$40

If the equilibrium price for an airline ticket is $300 and Southwest Airlines is willing to sell their tickets for $250, how much producer surplus exists?

$50

When the price of hot dogs increased by 40%, the demand for hot dog buns decreased by 30%. The cross elasticity between hot dogs and hot dog buns is:

-0.75

Which of the following could be a possible cross elasticity of demand measure for two products such as peanut butter and jelly?

-0.8

Suppose that Michael's Bowling Alley offers 50% off bowling on Mondays, and as a result, drink sales increase by 40%. What is the cross elasticity of demand between bowling and drinks?

-0.80

If the following demand elasticities, 0.05 and 0.6, are given for a particular good or service, then:

0.05 is probably the short-run demand elasticity and 0.6 is the long-run demand elasticity.

When the increase in price for a new video game is 10%, the increase in quantity supplied of that new video game is 10%. What is the price elasticity of supply for that video game?

1

If a 30% change in the price of grape soda leads to a 45% change in quantity demanded, the price elasticity of demand for grape soda is:

1.5

If the price falls from $3 to $2, and the quantity demanded rises from 200 to 400 units, compute the price elasticity of demand using the midpoint method.

1.67

If the Sunset Café reduces prices by 20%, and the number of customers increases by 40%, what is the elasticity of demand?

2.0

If grapefruit have a price elasticity of 4, then that means for every 1% decrease in price, the quantity demanded will increase by:

4%

Lisa is choosing between three alternatives: a) working on her job that pays her 60 dollars; b) writing a term paper which she values at 40 dollars; or c) going out with a friend, which she values at 80 dollars. The opportunity cost of writing the term paper is:

80 dollars

What would cause a movement from one point on the demand curve for socks to a point farther down on the same curve?

A big sale on socks

If an economy moves from a point on a PPF line to a point to the right of that PPF, what event might have occurred?

A discovery of a new technology that expands production possibilities

Which of the following is an example of a price ceiling?

A law states that gasoline cannot be sold for more than $3 per gallon.

The quantity supplied of sugar has increased due to a change in price. How would this change in quantity supplied be represented on the supply curve?

A movement from one point on the line to a higher point on the line.

Advances in technology can make it less costly to produce a good or service. How would this be illustrated on a graph?

A new supply curve to the right of the original curve

Which point in the following production possibilities frontier (PPF) is unattainable?

A point outside the curve

Which of the following would cause the demand curve for ice cream to shift to the right?

A rise in the price of popsicles, a substitute for ice cream.

The state of Florida caps the price of homeowners insurance. As a result State Farm pulled out of the homeowner's insurance market in Florida. What was the likely result of this price ceiling?

A shortage of homeowner's insurance coverage

If the government guarantees sugar farmers a price of $1 per pound when the market equilibrium price is actually $0.50 per pound, which of the following will occur?

A surplus of sugar will occur, increasing inefficiency.

Which of the following is most likely to shift the supply curve for pet grooming services leftward?

An increase in the cost of pet grooming supplies.

Suppose that the city of Rentville sets a price ceiling of $800 a month on all apartments, despite the market equilibrium rent being $1,000. Which of the following is least likely to occur?

An increase in the quality of existing apartments in Rentville

Which of the following is a decision that follows the net marginal benefit principle?

Deciding whether to spend one more hour studying for an exam.

If a technology company introduces a new gadget to the market which creates long lines of eager customers at stores, what is true about this market?

Demand exceeds supply and a shortage occurs

Because nearly all smartphones have built-in cameras, what happens to the market for traditional cameras?

Demand for cameras falls, pushing prices lower.

If the Aspen ski lodge doubles its room rates, what is likely to happen to the demand for lift tickets sold by the lodge?

Demand for lift tickets, a complement good, will fall.

For most automobile manufacturers, what happens to the elasticity of supply over time?

Elasticity of supply increases.

The demand for guitars increases but supply stays the same. What would happen to the equilibrium price in this situation?

Equilibrium price would increase.

The demand for skateboards increases but supply stays the same. What would happen to the equilibrium price in this situation?

Equilibrium price would increase.

Which of the following factors would most likely cause a shift in the demand curve for candles?

Falling incomes due to a weakening economy.

The supply curve is upward sloping because at higher prices ________

Firms perceive that the marginal benefit of producing the good has increased.

Which of the following would be most closely related to microeconomics?

How rising wages affects the choice of working instead of going to school

Suppose you have a very efficient study system. Then, as you increase the hours that you study for an economics exam, the opportunity costs of studying for the exam:

Increase

If Japan can produce 3 rice cakes or 6 seaweed salads in an hour, while Indonesia can produce 2 rice cakes and 5 seaweed salads in an hour, which of the following is true?

Indonesia has a comparative advantage in producing seaweed salads.

Many new restaurants have opened in Collegetown in recent years. Given this change in supply, what type of demand would result in a larger drop in prices for restaurant meals?

Inelastic demand

Because Shannon just got a significant raise at work, she has started to eat less macaroni and cheese. In this example, macaroni and cheese is what type of good?

Inferior good

Sally can type 100 words per minute and David can type 200 words per minute. Given these numbers, society would be better off if which one of the two was employed as a typist?

It depends (need to know opportunity cost)

In order to reduce the effects of a shortage caused by a price ceiling, what must a government do?

It should raise the price ceiling.

If the price of apples causes quantity demanded to fall on the elastic portion of the demand curve, what will a decrease in price do to total revenue?

It will rise.

If demand for a good is inelastic, what would the demand curve for this good look like?

It would be downward sloping and relatively steep

If more states legalize recreational marijuana, what is the likely effect on the supply of marijuana?

It would increase as the risk of prosecution falls.

Jan is most efficient at making braided bracelets, Martin is most efficient at making clay pots, and Marcus is most efficient at making beaded necklaces. If these three people engage in trade in a mutually beneficial manner, who will benefit from the exchange?

Jan, Martin, and Marcus

________ is (are) concerned with how high unemployment will get during a recession.

Macroeconomics

What is the main problem addressed with scarcity?

Making sure that critical resources such as oil and forests do not run out.

Which of the following products has (approximately) the lowest price elasticity of demand?

Medical care

Miranda and Jason are in the tutoring business. Miranda is willing to tutor as long as she gets $20, while Jason won't tutor unless he gets $35. If the most that someone would pay for tutoring is $30, how much producer surplus is earned?

Miranda = $10; Jason = $0

Which of the following is the correct expression for the price elasticity of demand?

Percentage change in quantity demanded divided by the percentage change in price

Which of the following would be possible to illustrate on a production possibilities frontier?

Production possibilities for eggs and butter

As the price of copper continues to rise, which of the following is a consequence that may result?

Profits of copper producers decrease.

Market equilibrium price exists when:

Quantity supplied and quantity demanded are equal.

Alex loves candy and could eat it all day long. However, his weekly allowance of $5 allows him to buy only a small bag of candy. Which of the following key ideas of economics does this illustrate?

Scarcity

Suppose that the price of beef rises significantly. What happens in the market for fast-food hamburgers?

Supply decreases, pushing prices higher.

Suppose that an especially harsh winter blankets a town in snow all winter, what would happen in the market for snow-clearing services?

The demand for snow-clearing services would increase, causing prices to rise.

Industry experts predicted that the price of gasoline would rise above $4 a gallon, even if the Organization of Petroleum Exporting Countries (OPEC) increased its output. What must be true in this case?

The increase in demand must have been greater than the increase in supply.

If the market equilibrium wage for entry-level fast-food workers is $10 an hour, while the minimum wage is $8, what impact does the minimum wage have in this industry?

The minimum wage has no effect in this market.

Suppose that the local food store lowers the price of hot dogs. Which of the following would likely to occur as a result?

The quantity demanded of hot dogs will increase and the demand for hot dog buns will shift to the right.

Because of increased competition in the late 1990s and early 2000s the price of cell phones dropped dramatically. According to the law of demand, what will happen to the quantity of cell phones demanded based on this price change?

The quantity demanded will increase.

If the government offers a tax deduction to companies producing solar panels, what will happen in the market for solar panels?

The supply curve will shift to the right, increasing supply.

Suppose that the price of foam blanks used in surfboard production falls. What will happen in the market for surfboards?

The supply of surfboards would rise, putting downward pressure on prices.

There is an increase in the price of gasoline, but the quantity exchanged in the market remained the same. What had to have happened to supply and demand?

There was an increase in demand and a decrease in supply.

Can a PPF ever shrink inwards?

Yes, if new regulations restrict a country's capacity to produce goods.

Assume that the population of Lauronia increased and so did its total production, since more people can produce more things. What would this look like on a graph of the production possibilities frontier?

a new curve that is to the right of the original curve

The demand for theme park tickets has decreased, even though their price has stayed the same, because people are taking fewer vacations. The change in demand is represented by:

a new curve to the left of the original curve.

Frank recently lost his job as a photo lab technician. To get by while he searches for a new career, he increases his purchases of spaghetti. For Frank, spaghetti is:

a normal good

When Lindsay recently received a 50% increase in pay because of a major promotion at her consulting firm, she increased her consumption of sushi by 25%. This indicates that Lindsay considers sushi to be:

a normal good.

The Green Bay Packers, an NFL team, have over 90,000 names on its waiting list for season tickets. This situation is referred to as:

a shortage.

When four roommates agree to specialize in chores they are most efficient, this can lead to:

a situation in which less time is spent on chores by every roommate.

In a single day, the United States can produce more lobsters than Mongolia because the United States has the extensive coastline that is necessary for trapping lobsters. In terms of lobsters, the United States has a(n) ________ over Mongolia.

absolute advantage

An outward parallel shift of the PPF signals:

an expansion of the productive capacity of the economy.

Producer surplus is represented by the area:

below the market price and above the supply curve.

A surplus is represented by the distance:

between the demand curve and the supply curve above the equilibrium point.

Suppose the equilibrium price in a market is $10. The government sets a maximum price of $7. This is an example of a(n):

binding price ceiling.

A country that does not have an absolute advantage in producing any good:

can benefit from trade by specializing in its comparative advantage.

To study the effect of price on Brett's demand for rock climbing lessons we hold his monthly income constant. This is an example of a(n) _______ assumption.

ceteris paribus

Which of the following words best describes what economics is about?

choices

Carolina is trying to sell her car; the lowest amount she is willing to accept is $2,000. Abdul is interested in buying the car, and although he's willing to pay $2,500, he negotiates a price of $2,100. How much consumer surplus does Abdul achieve, and what is total surplus?

consumer surplus = $400; total surplus = $500

Whether two goods are substitutes or complements can be determined by computing the:

cross elasticity of demand.

College students often buy cheap pizza because it's more affordable. Suppose after graduating, college students find high paying jobs. The demand for cheap pizza will likely:

decrease because demand for cheap pizza is negative related to income.

All else equal, when market price rises, consumer surplus:

decreases.

If Switzerland can produce more watches in a year than Austria, we know that Switzerland:

definitely has an absolute advantage in producing watches.

In some countries it is legal for people to sell their human organs, particularly kidneys. Those who would favor this argue that it results in ____.

efficiency.

Because there are dozens of brands of tablet computers to choose from, the elasticity of demand for the tablet market is:

elastic

If the price elasticity of demand for ice cream is 1.6, then the price elasticity for ice cream is considered:

elastic.

Economists and policy makers often deal with the tradeoff between efficiency and:

equity.

Many Super Bowl football tickets are resold online for several times their face value. As the game day approaches, unsold tickets will likely:

fall in price to avoid letting the ticket go unsold.

Suppose the government sets the maximum price for a normal doctor's visit at $20, but the current market price is $40. As a result of this government action doctors will see:

fewer patients

The short run is defined as a period of time when plant capacity and the number of __________ cannot change.

firms in an industry

Grapes are an input in the production of wine, and wine and red meat are complements. A decrease in the price of grapes will _________ the total surplus in the market for red meat.

increase

Ceteris paribus, a decrease in the number of businesses selling pizza will cause a(n):

increase in the equilibrium price of pizza.

If gas prices drop significantly and remain low for an extended time, industries that use a lot of gasoline, such as airlines, would likely:

increase supply, which would push airfares lower.

Say the following two events occur at the same time: The Chicago Cubs win the MLB Championship, The team management increases the salaries of all the Chicago Cubs players Holding everything else constant, we would expect the price of next season Cubs' tickets to _____ and the quantity of tickets to _______

increase; increase or decrease

As you move from left to right along a production possibilities frontier that is bowed out from the origin, the opportunity cost of producing the product on the horizontal axis:

increases.

If Susan's income increases by 20% and, as a result, she buys 10% more lattes, then:

lattes are a normal good.

Lindsay is an inventory planner at a local retailer. She is currently making a decision as to how many units she should stock in the store based on projected demands of the consumer. She has determined that she should keep 200 units in the store because an additional unit would not sell. This is an example of:

marginal analysis.

Which of the following goods would likely be very inelastic?

medication for a sick pet

A price floor is a(n) _____ price for a good.

minimum

According to the law of demand, the price of coffee and the quantity of coffee demanded are:

negatively related.

Suppose the equilibrium price in a market is $10. The government sets a minimum price of $8. This is an example of a(n):

nonbinding price floor.

Having a comparative advantage in producing a good means that:

one is able to produce the good at a lower opportunity cost.

According to the law of supply, the price of potato chips and the quantity of potato chips supplied are:

positively related.

Income elasticity of demand measures how responsive:

quantity demanded is to a change in consumer income.

When production technology improves, supply increases and the equilibrium:

quantity rises, and the equilibrium price falls.

If you see a large group of stranded passengers standing next to a disabled bus, and you have only three seats in your car, deciding who to rescue deals with the issue of:

scarcity

When quantity demanded exceeds quantity supplied, a:

shortage occurs and prices are bid up toward equilibrium.

Both Maggie and Angie can make beaded necklaces and clay bowls, but Maggie is most efficient at making necklaces. Therefore, Maggie makes necklaces and trades them for clay bowls. This is an example of:

specialization.

When an economic model is used, it tends to:

start with very few details in order to simplify the model.

As you move left to right on a linear production possibilities frontier (PPF), the opportunity cost of producing the good on the vertical axis:

stays the same

The maximum amount of a product that sellers are willing and able to provide for sale over some period at various prices, ceteris paribus, is called:

supply.

If a public offering of new stock is initially priced too high relative to market demand, the result would be a:

surplus of shares which causes prices to fall.

The price of gasoline is $2.50 per gallon at the closest gas station, but is only $2.30 per gallon at a gas station two miles away. By driving to the farther gas station, opportunity cost is:

the value of one's time and expenses to go to the farther gas station.

Because of scarcity:

we face tradeoffs in nearly every choice we make

Which of the following is an example of a microeconomic topic?

why a movie theatre charges different prices to different groups of people

Demand is defined as the amount of a product that buyers are __________ to purchase over some time period at various prices.

willing and able

Your friend tells you the following: "The Law of Demand does not work ALL the time. As an example, think about the demand for luxury cars (e.g. BMWs, Porshe, etc). Demand for those luxury cars increases when the price of the car increases." Your friend is:

wrong; demand is not the same as quantity demanded.