micro economics

According to the marginal decision rule, if the marginal benefit is:

less than marginal cost, an activity should be reduced

The amount by which an additional unit of an activity increases total benefit is:

marginal benefit

Theamount by which an additional unit of an activity increases total cost is:

marginal cost.

According to the optimal output rule, if the marginal benefit is:

more than the marginal cost, an activity should be increased.

(Table: Marginal Cost of Sweatshirts) Look at the table Marginal Cost of Sweatshirts. The marginal cost of producing sweatshirts is an example of ___________ marginal

ncreasing

For a normal good, the income elasticity of demand will be

positive

If the income elasticity of demand for a good is _______, the good is said to be _________.

positive; normal good

if the price elasticity of demand is found to be 6 then demand is

price elastic

Suppose that an increase in the price of a good leads to an increase in total revenue. Ignoring other factors (like supply), at its current price the good must be:

price-inelastic

Paying a tax of $10 on an income of $100, a tax of $20 on an income of $200, and a tax of $30 on an incomeof $300 is an example of a:

proportional tax.

The price elasticity of demand measures the responsiveness of the change in the

quantity demanded to a change in the price.

.When a decision maker chooses the option leading tothe outcome that he or she most prefers, he or she has made a ________ decision.

rational

The government imposes a tax of $1,000 per household to fund a new public swimming pool. This tax is an example of a:

regressive tax

The implicit cost of capital is:

the opportunity cost of the capital used by a business.

Jacquelynis a student at a major state university. Which of the following is notan example of an explicit cost of her attending college?

the salary that she could have earned working full-time

Profit is the difference between ________ and ________.

total revenues; total costs

ax incidence analysis seeks to determine:

who actually pays the extra cost imposed by a tax.

(Figure: The Gasoline Market) Look at the figure The Gasoline Market. An excise tax has been levied on each gallon of gasoline supplied by producers. Based on the graph, the incidence of the tax on suppliers is

$0.75

Prior to any taxes, the equilibrium price of gasoline is $3 per gallon. Then a $1 tax is levied on each gallon of gas. As a result, the price of gasoline rises to $3.75 per gallon. The incidence of the $1 tax is:

$0.75 paid by consumers, $0.25 paid by producers.

Pauli's Pizza offers the following prices: one slice for $2, two slices for $3.50, three slices for $4.50, four slices for $5.00. The marginal cost of the third slice to Hui is:

$1.

Table: Marginal Cost of Sweatshirts) Look at the table Marginal Cost of Sweatshirts. The marginal cost of the second sweatshirt is:

$11

Sarah's accountant tells her that she made a profit of $43,002 running a pottery studio in Orlando. Sarah's husband, an economist, claims Sarah lost $43,002 running her pottery studio. Thismeans her husband is claiming that she incurred ________ in ________ costs.

$86,004; implicit

(Table: Market for Pizza) Look at the table Market for Pizza. In the table, when income changes from $1,000 to $1,400 per month, the income elasticity of demand for pizza at a price of $14 per pizza is:

1.5.

Figure: The Market for Yachts) Look at the figure The Market for Yachts.If the government imposes a $60,000 tax on yachts (collected from the producers), consumers will pay ________ of the tax and producers will pay ________.

40,000; $20,000

Figure: Demand Curves) Look again at the figure Demand Curves. Gala apples are a type of apple that has many substitutes and is not very expensive. Which graph best represents the demand schedule for Gala apples?

B

If the University of Michigan increases the price of football tickets, this will result in increasing revenues if demand:

is price-inelastic.

Figure: A Market with a Tax) Look at the figure A Market with a Tax. The excise tax imposed on this good is equal to:

P1-P3

Which of the following best describes a "how much" decision?

Should I buy a third hot dog?

Lump-sum taxes promote economic efficiency but violate the ability-to-pay principle.

True

An "either-or" decision involves

a choice between two activities.

If the income elasticity of demand for a good is negative, the good is said to be:

an inferior good

Most economic models:

assume that people behave rationally.

The price of coffee increases by 10%, and as a result, Alex purchases fewer doughnuts. For Alex, coffee and doughnuts are:

complements.

The demand for food is very inelastic, so if a tax is levied on the consumers of food, the tax incidence

is typically on consumers more than producers.

For which of the following decisions would marginal analysis be relevant?

deciding how much to spend on a summer vacation

Excise taxes that raise the most revenue and cause the least deadweight loss are likely to be those that are imposed on goods for which:

demand and supply are both inelastic.

If an excise tax is imposed on wine and collected from the consumers, the ________ curve will shift ________ by the amount of the tax.

demand; downward

According to the optimal output rule, if the marginal benefit is:

equal to the marginal cost, net benefit is maximized.

Accountants use only ________ costs in their computations of cost.

explicit

Money that must be paid for the use of factors of production such as labor and capital is an:

explicit cost.

Costs that are included in the economic concept of cost but that are not explicit costs are

implicit costs

Suppose the cross-price elasticity between two goods is 1.5. If the price of one good increases by 10%, then the quantity demanded of the other good will:

increase by 15%.

Total net gain is maximized when marginal benefit ________ marginal cost.

is equal to

Goods A and B have a positive cross-price elasticity of demand. This means goods A and B are:

substitutes

Criteria that economists use in selecting a tax system include:

the ability to pay.

By law, FICA (the Federal Insurance Contributions Act), a payroll tax, is collected equally from the employers and the employees. In reality:

the employees bear almost all of the burden of the tax.

Which of the following taxes reflects the ability-to-pay principle

the federal income tax

what would happen if the market for canned pinto beans if individuals incomes increased

the income elasticity of demand would be positive if beans are a normal good

You own a small deli that sells sandwiches, salads, and soup to the community. Which of the following is an implicit cost of the business?

the job offer you did not accept at a local catering service