Final Review
The table below shows the total benefit and total cost associated the barneys consumption of pizza. The marginal benefit, MB, of the fourth pizza is... Number of pizzas 0-1-2-3-4-5-6 Total Benefit(TB)0-24-45-60-70-75-75 Total Cost(TC) 0-5-15-30-50-75-105
$10
If a 5% increase in the price of gasoline decreases the quantity demanded by 3%, then what is the price elasticity of demand?
0.6 (Ed=Qd/P) .03/.05
If a shortage of eggs exists at the price of P0, then P0 is _____ the equilibrium price P*and as the price adjusts to P*, the quantity demanded, Qd, will _____ and the quantity supplied, Qs, will _____. (answer given with above, below, increase, or decrease)
Below, decrease, increase
What are the four basic economic resources?
Land, labor, capital, and entrepreneurial ability/human capital
Law of supply
Price effect quantity supplied. (P^=Qs^)
If Bo Bob's sells 750 burritos at $4 and 250 burritos at $6, what is the price elasticity of demand?
Using the midpoint formula, 2.5
When does a market equilibrium for good X exist with P1 and Q1?
When quantity supplied, Qs, and quantity demanded, Qd are equal (Qd=Qs=Q1 at P1)
An upward sloping SR supply curve for a perfectly competitive firm is the portion of the... a. MC curve that lies above the AVC curve b. AVC curve that lies above the MC curve c. MR curve that lies above the AVC curve d. MC curve that lies above the ATC curve e. MC curve that lies below the ATC curve
a. MC curve that lies above the AVC curve
Which of the following would increase the supply of cheese? a. a decrease in the price of ice cream, assuming that ice cream and cheese are substitutes in production b. an increase in the wages of cheese production workers c. an increase in the price of cheese d. an increase in the demand for cheese
a. a decrease in the price of ice cream, assuming that ice cream and cheese are substitutes in production
Which of the following would shift the U.S. PPF outward, ceteris paribus a. an increase in capital b. an income tax cut for consumers c. a decrease in education (human capital) d. the development and use of a new production technology in California
a. an increase in capital
If ramen noodles are an inferior good and consumer income decreases, then in the ramen noodle market... a. both P* and Q* increase b. both P* and Q* will decrease c. P* will increase and Q* will decrease d. P* will decrease and Q* will increase
a. both P* and Q* increase
If wine and cheese are complements in consumption and the price of wine decreases, then in the cheese market... a. both P* and Q* will increase b. both P* and Q* will decrease c. P* will increase and Q* will decrease d. P* will decrease and Q* will increase
a. both P* and Q* will increase
An increase in the supply of a good will... a. decrease price and increase quantity b. increase price and decrease quantity c. increase price and increase quantity d. decrease price and decrease quantity
a. decrease price and increase quantity
The relationships between the quantity of pizza consumed by an individual and the various possible prices of pizza, the consumers' tastes and preferences, the consumers income, and the price of beer, soda, and ice cream are represented by the consumers a. demand for pizza b. quantity demanded of pizza c. opportunity cost for pizza d. production possibility frontier (PPF) for pizza e. law of diminishing marginal utility
a. demand for pizza
If pizza is a NORMAL GOOD and consumer income increases, then the... a. demand for pizza will increase b.quantity demanded for pizza will increase c. demand for pizza will decrease d. quantity demanded of pizza will decrease
a. demand for pizza will increase
The demand for good X is MORE ELASTIC the... a. greater the number of substitutes there are for good X b. more of a necessity and the less of a luxury good c. less expenditures on good X absorb as a share or portion of a consumer's budget d. ALL of the above make the demand for good X MORE INELASTIC
a. greater the number of substitutes there are for good X
Which of the following will DECREASE the QUANTITY DEMANDED of beer? a. in increase in the price of beer b. a decrease in the price of wine c. an increase in the income of consumers d. a medical study that indicates beer consumption causes brain cancer
a. in increase in the price of beer
Suppose that demand for Kringle is ELASTIC and the supply of Kringle is INELASTIC. If the government imposes a $2 per Kringle TAX on production of Kringle, then the consumers price will... a. increase by less than $1 b. increase by more than $2 c. decrease by less than $1 d. decrease by more than $1 but less than $2 e. increase by more than $1 but less than $2
a. increase by less than $1
If sweaters and sweatshirts are SUBSTITUTES IN CONSUMPTION, then in increase in the price of sweaters will... a. increase demand for sweatshirts b. increase quantity demanded of sweatshirts c. decrease the demand for sweaters d. decrease the demand for sweatshirts
a. increase demand for sweatshirts
If wine and cheese are COMPLEMENTS IN CONSUMPTION, then a decrease in the price of cheese will... a. increase demand for wine b. increase quantity demanded of cheese c. decrease demand for wine d. decrease demand for cheese
a. increase demand for wine
According to the Law of Comparative Advantage, if two countries specializing in the production of the good which they have a comparative advantage, then a. total production will increase and both countries can mutually benefit from free trade b. one country can benefit from trade, but only at the expense of the other country c. all goods will be produced at a higher opportunity cost d. neither country will benefit from free, unrestricted trade because both countries will loose jobs
a. total production will increase and both countries can mutually benefit from free trade
If the gov't imposes an excise subsidy of $2 per pizza on the consumption of pizza, then from the perspective of pizza producers, the "effective" or after-subsidy demand curve for pizza will shift... a. up vertically by exactly $2 b. down vertically by exactly $2 c. up vertically by less than $2 d. up vertically by more than $2
a. up vertically by exactly $2
If the gov't imposes a $50 excise tax on the production of smartphones, then from the consumers perspective, the "effective" or after-tax supply curve for smartphones will shift... a. up vertically exactly $50 b. down vertically by less than $50 c. left horizontally by exactly $50 d. right horizontally by more than $50
a. up vertically exactly $50
If a surplus of milk exists at the price P0, then P0 is ______ the equilibrium price P* and as the price adjusts to P*, the quantity demanded, Qd, will ______ and the quantity supplied, Qs, will_______. (answers given in above/below, increase/decrease)
above, increase, decrease
If a 5% increase in price increases the quantity supplied by 3%, then the price elasticity of supply, Es, is... a. 0.2 b. 0.6 c. 1.5 d. 1.67 e. 8
b. 0.6
Given 100 hours of labor, suppose that Fred can produce 100 sweaters or 200 kringles and Wilma can produce 120 sweaters of 480 kringles, MUTUAL GAIN is possible for both Fred and Wilma if _____ would produce and trade away ____ in exchange for _____ a. Fred, 3 kringles, 1 sweater b. Fred, 1 sweater, 3 kringles c. Fred, 1 sweater, 6 kringles d. Wilma, 1 kringle, 5 sweaters e. Wilma, 1 sweater, 3 kringles f. Wilma, 1 kringles, 1.5 sweaters
b. Fred, 1 sweater, 3 kringles
Which of the following are an example of a capital good? a. a $10 million lottery jackpot b. a bulldozer c. a deposit of iron ore d. a pine forest in northern Wisconsin
b. a bulldozer
If the consumption of good X INCREASES by 3% when the price of good Y DECREASES by 6%, then the... a. cross-price elasticity of good X demand with respect to the price of good Y is 0.5 and goods X and Y are substitutes in consumption b. cross-price elasticity of good X demand with respect to the price of good Y is 0.5 and goods X and Y are compliments on consumption c. income elasticity of good X demand in0.5 and good X is a normal good d. cross-price elasticity of good X demand with respect to the price of good Y is 2.0 and goods X and Y are substitutes in consumption e. cross-price elasticity of good X demand with respect to the price of good Y is 2.0 and goods X and Y are compliments on consumption
b. cross-price elasticity of good X demand with respect to the price of good Y is 0.5 and goods X and Y are compliments on consumption
A firms implicit costs... a. include the costs of purchasing tools and equipment used for production b. include the opportunity costs of the owner's labor, capital, land, and entrepreneurial ability c. include the wages and salaries of employees and the costs of utilities and internet service d. all of the above statements are correct
b. include the opportunity costs of the owner's labor, capital, land, and entrepreneurial ability
If the consumers of tacos increase by 5% when consumer income decreases by 4%, then the... a. income elasticity of taco demand is 0.8 and tacos are a normal good b. income elasticity of taco demand in -1.25 and tacos are an inferior good c. income elasticity of taco demand is -0.8 and tacos are an inferior good d. the cross-price elasticity of taco demand is 1.25 and tacos are an inferior good
b. income elasticity of taco demand in -1.25 and tacos are an inferior good
According to the law of demand, a decrease in price of shoes, will... a. increase demand for shoes b. increase the quantity demanded of shoes c. decrease the demand for shoes d. decrease the quantity demanded of shoes
b. increase the quantity demanded of shoes
According to the law of supply, a(n)______ in the price of good X will ______ of good X. a. increase, increase supply b. increase, increase quantity supplied c. decrease, increase supply d. decrease, increase quantity supplied
b. increase, increase quantity supplied
If demand for a good is elastic, then the price elasticity coefficient Ed... a. equals 0 and so a 50% increase in price will not change the quantity demanded, Qd. b. is greater than 1 and a 10% increase in price will decrease Qd by more than 10% c. is less than 1 and a 5% decrease in price will decrease Qd by less than 5% d. is less than 1 and a 15% increase in price will decrease Qd by more than 15%
b. is greater than 1 and a 10% increase in price will decrease Qd by more than 10%
According to MARGINAL ANALYSIS, the OPTIMAL quantity of T-shirts for society is the quantity at which the... a. total benefit of all T-shirts produced equals the total cost of all T-shirts produced b. marginal benefit of the last t-shirt produced equals the marginal cost of the last t-shirts produced c. average benefit of all t-shirts produced equals the average cost of all t-shirts produced d. marginal benefit of the last t-shirt produced is zero e. marginal cost of the last t-shirt produced is zero
b. marginal benefit of the last t-shirt produced equals the marginal cost of the last t-shirts produced
Wilma maximizes her utility when she spends all her income on goods X and Y and the a. total utility of good X equals the total utility of good Y (TUx=TUy) b. marginal utility of the last $1 spent on good X equals the marginal utility of the last $1 spend on good Y(MUx/Px=MUy/Py) c. marginal utility of good X equals the marginal utility of good Y (MUx=MUy) d. marginal utility of the last $1 spent on each good is zero (0=MUx/Px=MUy/Py)
b. marginal utility of the last $1 spent on good X equals the marginal utility of the last
If demand decreases and supply increases simultaneously, then the equilibrium quantity.... a. may increase, decrease, or remain constant, but the equilibrium price will increase b. may increase, decrease, or remain constant, but the equilibrium price will decrease c. will decrease, but the equilibrium price may increase, decrease, or remain constant d. will increase, but the equilibrium price may increase, decrease, or remain constant
b. may increase, decrease, or remain constant, but the equilibrium price will decrease
The sensitivity or responsiveness of the quantity demanded of apples to changes in price of apples is measured by the..... a. marginal utility of apples b. price elasticity of demand c. opportunity cost of apples d. market price divided by the market quantity of apples, P/Q
b. price elasticity of demand
A market equilibrium for good X exists at price P1 and Q1 if the... a. demand equals supply b. quantity demanded equals quantity supplied c. quantity supplied plus quantity demanded equals zero d. price consumers are willing to pay is greater than the price the producers are willing to accept
b. quantity demanded equals quantity supplied
If steel is an input used in the PRODUCTION of tractors and the price of steel increases, then... a. supply of tractors will increase and so both price and quantity decrease b. supply of tractors will decrease and the price will increase and quantity will decrease c. supply will decrease and the price will decrease and quantity will increase d. both demand and supply will decrease and so price is unidentifiable and quantity will decrease
b. supply of tractors will decrease and so the price will increase and quantity will decrease
In the short run, suppose that labor Is variable and capital is fixed. At relatively low levels of labor, the division of labor and labor specialization based upon comparative advantage causes the a. total product of labor to increase at a decreasing rate b. total product of labor to increase at an increasing rate c. marginal product of labor to decrease at an increasing rated. d. total product of labor to decrease at an increasing rate e. total product of labor to increase at a constant rate
b. total product of labor to increase at an increasing rate
Suppose Fred quits his $60,000 per year job and withdraws $100,000 from a. savings account (yielding 5% interest per year) to start his firm FCF, Inc. If FCF annually spends $80,000 on capital equipment, $400,000 on employee wages, $100,000 on supplies, $50,000 on rented office space, and $20,000 on utilities, then FCF's annual IMPLICIT COSTS are ___ and its annual EXPLICIT COSTS are ___ a. $60,000; $650,000 b. $60,000; $750,000 d. $65,000; $655,000 e. $65,000; $750,000 f. $160,000; $650,000
c. $65,000; $650,000
If Pamela's Purses LLC produces 100 purses when the price of a purse is $30 and 900 purses when the price of a purse in $70, then (using the midpoint formula) the price elasticity of purse supply, Es, is... a. 0.048 b. 0.5 c. 2.0 d. 1.5 e. 21
c. 2.0
, then a. Wilma has a comparative advantage in both sweaters and kringles b. Wilma has a comparative advantage in sweaters and should specialize in the production of sweaters c. Fred has a comparative advantage in sweaters and should specialize in the production of sweaters d. Fred has a comparative advantage in kringle and should specialize in the production of Kringle
c. Fred has a comparative advantage in sweaters and should specialize in the production of sweaters
Which of the following would increase the supply of high definition televisions(HDTVs)? a. decrease in producers b. increase in supply of smart phones, assuming that HDTVs and smartphones are substitutes in production c.a decrease in the wages of HDTV production workers d. all of above
c. decrease in wages (allows for the hiring of more workers to produce at a higher rate)
If a firms's total revenue is $500,000, its implicit costs are $400,000 and its implicit costs are $50,000, then the firm's ___profit is___ a. economic, -$50,000 b. accounting, $50,000 c. economic, $50,000 d. economic, $100,000 e. accounting, $450,000
c. economic, $50,000
If the UW-Parkside Econ Club decides to sell 50 "Life is economics" t-shirts for $15 each and 200 students show up at their table to buy, then it must be the case that the... a. demand for shirts equals supply for shirts b. equilibrium price of t-shirts is less than $15 c. equilibrium price of t-shirts is greater than $15 d. equilibrium price of t-shirts is exactly $15
c. equilibrium price is GREATER than $15 (demand increases causing price to rise)
Suppose that the elasticity of demand for video games in 0.75 (Ed=0.75) and the elasticity of supply of video games is 1.8 (Es+1.8). If the government imposes a $4 per video game excise TAX on the production of video games, then the price consumers pay will____ and at the after-tax quantity, Tax, ____ a. increase by less than $2, a dead weight loss results because MB>MC at Qtax b. decrease by less than $2, a dead weight loss results because MB<MC at Qtax c. increase by more than $2 but less than $4, a dead weight loss results because MB>MC at Qtax d. increase by more than $2 but less than $4, a dead weight loss results because MB<MC at Qtax
c. increase by more than $2 but less than $4, a dead weight loss results because MB>MC at Qtax
Suppose that kringle is a pure private good and the kringle market is initially in equilibrium. If the government imposes a $4 per kringle excise subsidy on the production of kringle, the supply of kringle will ______ and at the after-subsidy quantity, Qsub, _________. a. decrease, DWL because MB(Qsub)>MC(Qsub) b. decrease, DWL because MB(Qsub)<MC(Qsub) c. increase, DWL because MB(Qsub)<MC(Qsub) d. increase, DWL because MB(Qsub)>MC(Qsub)
c. increase, DWL because MB(Qsub)<MC(Qsub)
Producers surplus is defined as the difference between the prices... a. consumers are willing and able to pay and the price consumers must pay in the market b. consumers are willing and able to pay and the prices that producers are willing to accept c. producers are willing to accept and prices producers actually receive d. producers are willing to accept and the taxes imposed upon consumers by the gov't
c. producers are willing to accept and prices producers actually receive
The law of demand holds because... a. consumers are willing and able to pay less for a good the scarcer it becomes b. consumers like low prices better than high prices c. the income and substitution effects and law of diminishing marginal utility imply that the quantity demanded of a good is inversely related to its price d. consumer income (wages and salaries) increase when price increase
c. the income and substitution effects and law of diminishing marginal utility imply that the quantity demanded of a good is inversely related to its price
When market price P*=$20, a perfectly competitive firm's SR profit maximization output level is Q*=100 units, its AVC=$12 and its AFC=$3. At Q*=100 the firms marginal cost, MC=_____ and its SR profits are ____ a. $8; $500 b. $9; $800 c. $15; $500 d. $20; $500 e. $20; $800
d. $20; $500
According to the Planet Money podcast on free trade and protectionism a. the economic gains of the "winners" from free trade are sufficient to compensate the economic losses of the "losers" from free trade b. NAFTA contains provisions that provide displaced workers with retraining, additional education, or relocation c. protectionist trade policies such as tariffs reduce innovation and increase consumer prices d. all of the above
d. all of the above
If the pizza industry is perfectly competitive, then... a. taco, brat, and hamburger firms can easily and freely enter the pizza industry b. all pizza firms and price takers and produce identical pizzas c. each pizza firm faces a perfectly inelastic individual demand curve at all market prices of pizza d. all of the above conditions are satisfied in a perfectly competitive industry/market e. none of the above
d. all of the above conditions are satisfied in a perfectly competitive industry/market
If ACME Inc. produces 100 units of output and its total fixed costs, TFC, is $25,000 and its total cost, TC is $75,000, then at 100 units of output its a. average total cost is $1,000 b. marginal cost is $500 c. total variable cost is $100,000 d. average variable cost is $500 e. marginal cost is $750
d. average variable cost is $500
Suppose that good X and good Y are joint products in production. If the demand for good X decreases, then the supply of good Y will_______, and the equilibrium price of good Y will ______, and the equilibrium quantity of good Y will ______. a. decrease, increase, increase b. decrease, decrease, increase c. not change, decrease, decrease d. decrease, increase, decrease
d. decrease, increase, decrease
According to marginal analysis, if Ralph sees a quarter lying on the sidewalk, picks it up, and puts it in his pocket, then for Ralph the marginal benefit of picking up and having a quarter to spend must be... a. greater than 25c b.greater than 50c c. less than the marginal cost of picking it up d. greater than the marginal cost of picking it up
d. greater than the marginal cost of picking it up
In the gas market, an increase in the price of crude oil (an input of gas) will ______ the equilibrium price of gas and will ______ the equilibrium quantity of gas. a. increase, increase b. decrease, decrease c. not change, decrease d. increase, decrease
d. increase, decrease
If Wanda studies ONE-HALF hour for an economics exam, then she'll make a "D". If she studies TWO hours for the exam, then she'll make a "C". If she studies FIVE hours for the exam, then she'll make a "B". If Wanda experiences the LAW OF INCREASING OPPORTUNITY COST when studying for her economics exam, then she must study a total of _____ hours to make an "A" on the exam. a. seven b. between seven and eight c. exactly eight d. more than eight e. at least eleven
d. more than eight
According to the substitution effect, a decrease in the price of gasoline causes a consumer to buy_____ gasoline because the consumer_____...... a. more, experiences an increase in the purchasing power of their income b. less, experiences a decrease in purchasing power of their income c. less, substitutes other forms of transportation, which become relatively more expensive, for driving d. more, substitutes gasoline for driving, which become relatively less expensive, for other forms of transportation
d. more, substitutes gasoline for driving, which become relatively less expensive, for other forms of transportation
In the farm tractor market, if a tariff increases the price of steel (input of tractors), then the... a. quantity supplied of tractors will increase b. quantity supplied of tractors will decrease c. supply of tractors will increase d. supply of tractors will decrease
d. supply of tractors will decrease
If the supple of chocolate is inelastic, then the (short Run) chocolate supply curve in____ and a 10% increase in the price of chocolate will____ a. downward sloping and relatively steep, decrease the quantity supplied by less than 10% b. upward sloping and relatively flat, increase the quantity supplied by more than 10% c. upward sloping and relatively steep, increase the quantity supplied by more than 10% d. upward sloping and relatively steep, increase the quantity supplied by less than 10%
d. upward sloping and relatively steep, increase the quantity supplied by less than 10%
If demand and supply both increase simultaneously, then the equilibrium quantity... a. may increase, decrease, or stay constant, but price will increase b. may increase, decrease, or stay constant, but price will decrease c. will decrease, but the price may increase, decrease, or stay constant d. will increase, but the price may increase, decrease, or remain constant
d. will increase, but the price may increase, decrease, or remain constant
According to the law of supply, a(n)_____ in the price of gas will_____, ceteris paribus
decrease, decrease the quantity supplied of gas
A perfectly competitive firm maximizes SR profits at the output level that satisfies the condition a. TR=TC b. MR=Pmkt c. Pmkt=minAVC d. Pmkt= min ATC e. MR=MC provided that Pmkt≥ minimum AVC
e. MR=MC provided that Pmkt≥ minimum AVC
A concave outward PPF for food and clothing illustrates... a. the combos of food and clothing that the economy is capable of producing b. the quantity of food that must be sacrificed to produce an additional unit of clothing c. that the opportunity cost of food increases as more food is produced d. that the inputs used in the production of food and clothing are specialized e. all of the above
e. all of the above
Economic scarcity implies that... a. people must compete for scarce resources, goods, and services b. something may be sacrificed to obtain more of something else c. people face tradeoffs and when the people make choices, other alternatives must be forgone d. a rationing mechanism must be used to allocate resources, goods and services e. all of the above
e. all of the above
Which one of the following is not economically scarce? a. sub sandwiches b. smartphones c. shoes d. clean, drinkable water e. all of the above
e. all of the above
According to MARGINAL ANALYSIS, if Ralph sees a quarter lying on the sidewalk, picks it up, and puts it in his pocket, then for Ralph the marginal benefit of picking up and having the quarter to spend must be a. greater than $0.25 b. equal to at least $0.15 c. greater than $0.50 d. less than the marginal cost of picking it up e. greater than the marginal cost of picking it up
e. greater than the marginal cost of picking it up
The opportunity cost of going to see a movie at the movie theater is the... a. cost of the movie ticket plus the cost of refreshments b. Income that the movie-goer could have earned had they been working c. total monetary cost or value of all alternatives that are sacrificed d. average monetary cost or value of all alternatives that are sacrificed e. value of the next best alternative that is sacrificed
e. value of the next best thing that is sacrificed
If human wants, needs, and desires exceed an economy's ability to satisfy them given its available resources and current technology, what is the result?
economic scarcity
If apples and bananas are substitutes in consumption and the price of apples increases, then in the banana industry the price will_____ and quantity will_____. (answer given in increase and/or decrease)
increase, increase
If tomato soup is an inferior good and consumer income decreases, then, ceteris paribus, the equilibrium price of tomato soup will ______ the equilibrium quantity of tomato soup will______. (answers given with increase and/or decrease)
increase, increase.
Why does the supply curve slope upward? a. law of decreasing opportunity cost b. law of increasing opportunity cost c. income and substitution effects d. law of demand
law of increasing opportunity cost
If Morgan buys a coffee mug for $10, what is her opportunity cost?
the value of the next best alternative that Morgan sacrificed when she bought the mug