Micro - Exam 2
The government of Healthyland imposes a tax on sellers of salt. The tax is $0.10 per pound. With no tax, the price of salt is $0.40 per pound. The demand for salt is perfectly inelastic and the elasticity of supply is 1.5. With the tax, the price of salt paid by buyers in Healthyland is
$0.50 per pound
A used car was recently priced at $20,000.00. Seeing the car, Bobby thought, "It's nice, but if I have to pay more than $19,500 for this car, then I would rather do without it." After negotiations, Bobby purchased the car for $19,250.00. His consumer surplus was equal to
$250.00
Nick can purchase each milkshake for $2. For the first milkshake purchased Nick is willing to pay $4, for the second milkshake $3, for the third milkshake $2 and for the fourth milkshake $1. What is the value of Nick's consumer surplus for the milkshakes he buys?
$3
The figure above shows the demand for and supply of rental housing in Smallton. If a rent ceiling is set at $400, what is the rent?
$400
Stefano has just completed an original oil painting. After considering the costs for brushes, paint, canvas, and the value of Stefano's labor time, the marginal cost of the painting is $1,000. Lucky Stefano. One art lover paid him $1,500. How much producer surplus did Stefano obtain?
$500
Jane is willing to pay $80 for a pair of shoes. The actual price of the shoes is $50. Her marginal benefit is
$80
A fall in the price of X from $12 to $8 causes an increase in the quantity of Y demanded from 900 to 1,100 units. What is the cross elasticity of demand between X and Y?
-0.5
Florida State University has just lowered the price of its season football tickets from $350.00 to $300.00. As a result, there was an increase in the number of season tickets purchased from 43,000 to 47,000. The price elasticity of demand for season tickets equals
-0.58
Julie's total utility from cheeseburgers is given in the table above. What is the marginal utility of the third cheeseburger?
20
Cindy's Sweaters' production function is shown in the above table. Cindy rents two knitting machines for $30 a day each and hires workers at a wage rate of $40 a day. What is the marginal cost of the 19th sweater?
20.00
When the price of perfume changes from $24 to $26, the quantity supplied increases from 100 jars to 150 jars. What is the elasticity of supply of perfume?
5.0
The above table shows the total product of producing baseball hats. The average product of 3 workers is equal to
6
The figure above shows the demand for and supply of labor of students in Smallville. If the minimum wage is set at $8 per hour, how many hours of students' labor are unemployed?
6,000 hours
The price of an effective price floor goes from P1 to P2 (an increased price of 25%). Assume that the elasticity of supply is 2 and the elasticity of demand is -3 What is the percentage change in quantity demanded?
75% (-3=____/25%)
The figure above shows the demand for and supply of labor of students in Smallville. If the minimum wage is set at $4 per hour, how many hours do students work?
9,000 hours
In the above figure, the marginal cost curve is curve
A
Fred's income has just risen from $940 per week to $1,060 per week. As a result, he decides to purchase 9 percent more steak per week. The income elasticity of Fred's demand for steak is
0.75
The above table shows the total product schedule for the campus book store. If employees are paid $6 per hour and there are no other variable costs, then what is the marginal cost (MC) per book of increasing book sales from 83 to 87 books per hour?
1.50
A rise in the price of cabbage from $14 to $18 per bushel increases the quantity supplied from 4,000 to 6,000 bushels. The elasticity of supply is
1.6
The table above shows the total utility from the two goods Freddy likes to consume. Suppose that Freddy has already eaten 5 bags of Fritos. If he consumes one more bag, his marginal utility will
15
The above table gives some production and cost information for Flaming Fernando's, a restaurant that sells Fiery Frijoles. What is the average total cost of producing 4,500 frijoles?
2
The increase in the demand for widgets, shown in the figure above, is the result of an increase in the price of McBoover devices from $9 to $11. Therefore, the cross-price elasticity for these two products is
2.0
The government has an effective price ceiling in place. The government then decides to decrease the price ceiling by 20%. Describe 1) what will happen to quantity demanded and quantity supplied with this change, 2) how elasticity relates to the changes, and 3) the resulting effect on the market. Where is price relative to where the equilibrium price would be if there were no price controls?
The quantity demanded will increase since the price ceiling is lower, meaning the highest price a producer can charge has decreased by 20%. The Quantity supplied will probably not change much, it could increase because of the need to make up for the lack of profit. The market will be pretty elastic. The price is higher that where the equilibrium price would be, that is why it is a ceiling.
To help pay for the cost of sport related injuries, the government imposes a tax on sellers of all sports equipment. Using the above figure, how much producer surplus is lost from this tax on sports equipment?
P0P1da (trapezoidal shape from equilibrium to y-axis)
The long run is a period of time in which
all factors of production are variable.
Economists define the short run as a period of time so short that
at least one factor of production cannot be varied.
The short run is a time period during which
at least one factor of production is fixed.
If as output increases, average product increases, then ___________.
average variable cost decreases
If a 5 percent increase in the price of good A leads to a 4 percent decrease in the demand for good B, then ________.
the goods are complements
If the price of milk increased by 5 percent because of an increase in the demand for milk, and the quantity of milk supplied increased by 7 percent
the price elasticity of supply of milk is greater than one.
The average product of labor is equal to the
total product divided by the total number of workers hired.
A decrease in consumption will result in
total utility decreasing, but marginal utility increasing.
A measure of all the satisfaction you receive from all the coffee that you consume is your
total utility from coffee.
The output at which average variable cost is a minimum is ________ than the output at which ________ is a minimum.
less than; average total cost
According to the paradox of value, expensive goods, such as gemstones, provide consumers with
low total utility and high marginal utility.
What does this outcome mean for the firm? Marginal costs are now ____, meaning their average cost has ___.
lower, decreased
________ is the additional satisfaction a person receives from consuming an extra unit of a good.
marginal utility
Total product is
maximum output that a given quantity of labor can produce.
A firm's average total cost is $80, its fixed cost is $1000, and its output is 100 units. Its average variable cost
more than 60
In the above figure, a rent ceiling of $500 per month would
not affect the equilibrium quantity
Bobby consumes only chocolate ice cream and vanilla ice cream. He is spending all of his income. His marginal utility of chocolate is 100 and his marginal utility of vanilla is 200, and the price of chocolate is $1.00 per scoop and the price of vanilla is $2.00 per scoop. To maximize his utility, Bobby should
not change his purchases between chocolate ice cream and vanilla ice cream.
If goods A and B are complements, then
the cross elasticity of demand between A and B is negative.
If the government decreases the tax on cell phones, ________.
the deadweight loss decreases
In the long run, a firm can vary
both its labor and its capital
In the above figure, at which point on the demand curve is the price elasticity of demand equal to 1?
c (middle)
Goods and services that can be produced by using commonly available resources that could be allocated to a wide variety of alternative tasks have a supply that is
elastic
If a 5 percent change in the price of a good leads to a 10 percent change in the quantity supplied, then the supply of the good is ________ and the elasticity of supply is ________.
elastic; 2.0
The amount of a tax paid by the sellers will be larger the more ________ the demand and the more ________ the supply.
elastic; inelastic
In the figure above, the marginal utility of the third crate of tomatoes for the person with total utility curve C is
13 units of utility
The income elasticity of demand for vacations is 5. If incomes increase by 3 percent next year, the quantity of vacations demanded at today's price will increase by ________ percent.
15
The table above gives Cathy's total utility from Mt. Dew. Cathy's marginal utility from the 4th Mt. Dew is ________ units.
15
In the market for CDs, the producer surplus will decrease if ________.
The price of a CD decreases
The figure above shows the housing market in the city of Appleville. A rent ceiling of $650 per month is imposed. With the rent ceiling, the deadweight loss in the Appleville housing market is
at least $15,000 per month
The short run is a time frame in which
at least one factor of production is fixed.
Liz loves to eat popcorn. Still, the more she eats, the less she wants each additional bite. Her marginal utility from popcorn is
diminishing
The fact that the fourth plate from the "All You Can Eat Country Buffet" generated more satisfaction than the fifth plate is an example of
diminishing marginal utility.
The diamond-water paradox of value can be explained by
distinguishing between total utility and marginal utility.
All the decisions made by people who operate firms have one overriding objective, which is to ________.
make maximum attainable profit
On December 10 the price of a Christmas tree is $50 and 100 trees are purchased. On December 20 the demand for Christmas trees decreases so that the price falls to $30 and 20 trees are purchased. From this set of facts, the
supply of Christmas trees is elastic.
The principle of diminishing marginal utility says that
total utility increases by smaller and smaller amounts as the quantity of the good consumed increases.
In the above figure, if the price is $2, then the total consumer surplus is
triangle abc
When a minimum wage is set above the equilibrium wage rate, ________.
unemployment increases
The paradox of value refers to the fact that
water costs little, while diamonds cost a lot.
The figure shows the market for books before and after a sales tax is introduced. The tax on books is ________ a book, buyers pay ________ of tax per book, and the government's tax revenue is ________ a week.
$1.20; $0.80; $12
Suppose there are four firms that are each willing to sell one unit of a good. Each firm has a different minimum price that they are willing to sell for: Firm A $6, Firm B $7, Firm C $10, and Firm D $12. If the market price is $11, then the total producer surplus is
$10
n the table above, what is the level of unemployment (in millions of workers) if the minimum wage is set at $8 per hour?
0
The market for unskilled labor is illustrated in the figure above. The market is in equilibrium and then a minimum wage of $3 per hour is imposed. Unemployment will equal
0 hours per year
Which of the following is NOT an assumption of marginal utility theory?
As more of a good is consumed, the decrease in the marginal utility from the good means that the total utility from the good decreases also.
The government of Healthyland imposes a tax on sellers of salt. The tax is $0.10 per pound. With no tax, the price of salt is $0.40 per pound. The demand for salt is perfectly inelastic and the elasticity of supply is 1.5. How is the salt tax burden shared between buyers and sellers in Healthyland?
Buyers will pay the whole tax
In the above figure, the total fixed cost curve is curve
C
The above table shows the short-run total product schedule for the campus book store. At what levels of books sold per hour will the marginal product of labor be greater than the average product of labor?
Both 40 books sold per hour and 73 books sold per hour are correct.
The price of an effective price floor goes from P1 to P2 (an increased price of 25%). Assume that the elasticity of supply is 2 and the elasticity of demand is -3 Which party is more elastic? The producers or the consumers?
Consumers The consumers have a greater absolute value of elasticity. In other words, they have a greater response to the price change.
A straight-line demand curve along which the price elasticity of demand equals 0 is one that
Is vertical
Which of the following is a result of a rent ceiling set below the equilibrium rent? I. equity in the housing market II. efficient allocation of resources III. a shortage of housing units.
III only
Consider a tax on individuals. Under which of the following circumstances would the tax cause the least effect on economic efficiency?
If the demand for the product is inelastic.
When the waiter comes to take their order, he tells them they are running a special on spanakopita (spinach pies), and they are the same price as the Greek salads (before the price change they were more expensive). Instead of a Greek salad, they decide to order a spinach pie. What must be true about the marginal utility of spinach pie relative to Greek salads?
Marginal utility of spinach pie is greater than Greek salads
The table above shows Mary's utility from chips and soda. The table shows that
Mary's marginal utility decreases as she consumes more chips.
A tax on producers would result in the _______ (supply/demand) curve moving _____ (right/left). A tax on consumers would result in the _____ (supply/demand) curve moving to the _____ (right/left).
Supply ; left ; demand ; right
At a local ice cream parlor, when the price of half-gallons of chocolate ice cream was lowered by fifty cents per half-gallon, total revenue from the sale of chocolate ice cream decreased. This result indicates that
The demand for chocolate ice cream is inelastic
When you chose to buy the second cup of coffee instead of the third bagel, which of the following is necessarily CORRECT?
The marginal utility per dollar from the third bagel is less than the marginal utility per dollar from the second coffee.
The price elasticity of demand for purses is measured in what units?
The price elasticity of demand is a unitless measure
Supply is elastic if
a 1 percent change in price leads to a larger percentage change in quantity supplied.
Which of the following statements is TRUE?
When marginal product is less than average product, average product is decreasing.
The government sets a price floor for corn which is above the equilibrium price of corn. As a result, ________.
a deadweight loss will be created
As output increases, total cost ________, total fixed cost ________, and total variable cost ________.
increases; does not change; increases
Use the New Output table above to fill in the blanks for the marginal product of each employee.
a:15 ; b:18 ; c:16 ; d:10 ; e:8
Based on the table, find the original marginal cost curve function values when the wage rate is $360 for the indicated cells in the Marginal Cost column of the table above.
a:36 ; b:30 ; c:36 ; d:45 ; e:60
An example of a short-run fixed factor of production is
capital equipment
Marginal utility is the
change in satisfaction that results from a one-unit increase in the quantity of a good consumed.
The marginal utility from the consumption of a good is equal to the
change in total utility divided by the change in the quantity consumed.
In the figure above, D0 is the demand for labor curve. Imposing a minimum wage of $6 per hour will initially
decrease employment from 30 to 20 million hours per year.
If a firm's marginal product of labor is less than its average product of labor, then an increase in the quantity of labor it employs definitely will
decrease its average product of labor.
As the quantity of a good consumed increases, its marginal utility ________ and its total utility ________.
decreases; increases
The marginal benefit curve for a product can be the same as the good's
demand curve
A shift of the supply curve of oil raises the price from $60 a barrel to $75 a barrel and reduces the quantity demanded from 40 million to 20 million barrels a day. You can conclude that the
demand for oil is elastic
Joshua consumes only apples and bread and is in consumer equilibrium. Joshua reads that eating bread is healthy, so his total utility from each loaf of bread increases. To maximize his total utility, Joshua would consume
fewer apples and more bread.
Teddy buys only chocolate chip cookies and hot chocolate and spends all of his income on the two items. Suppose the price of a cookie rises. According to marginal utility theory, Teddy will buy
fewer cookies and more hot chocolate, which increases his marginal utility from cookies and decreases his marginal utility from hot chocolate.
A minimum wage set above the equilibrium wage rate is a price
floor that results in a surplus of low-skilled labor
With respect to water and diamonds, water
has a lower marginal utility than diamonds.
Last year, Jack's income was $15,000 and he bought 50 bags of potato chips. This year his income is $18,000 and he buys 55 bags of potato chips. Therefore, Jack's
income elasticity of demand for potato chips is 0.52
The marginal product of labor is equal to the
increase in the total product that results from hiring one more worker with all other inputs remaining the same.
In the above figure, at point b on the demand curve, a price cut of one dollar will
increase in total revenue
Using your intuition and the Original and New Output tables, we can say the following about the relationship between marginal product of labor (MPL) and marginal cost of output (MC): There is an relationship between MPL and MC. As MPL rises, MC will , and as MPL diminishes, MC will . If there is an overall increase in MPL, there will be an overall in MC.
inverse, fall, rise, decrease
A minimum wage ________.
is a price floor in the labor market
Liane maximizes her total utility when she allocates all of her available income such that the marginal utility per dollar spent on each good ________.
is the same
Because Product X has a very small, positive income elasticity of demand, it is likely that product X is a
necessity
Marginal utility theory is used in the derivation of the
negative slope of demand curves.
If demand is perfectly elastic, a sales tax is paid by
only the sellers
If the supply curve is vertical, then supply is
perfectly inelastic
The producer surplus from a good is equal to the
price of a good minus its opportunity cost of production summed over the quantity sold
In the above figure, a rent ceiling of $300 per month would
result in a shortage of 7000 units
A price floor
results in a surplus if the floor price is higher than the equilibrium price
The demand for corn increases. As a result, the price of corn will ________, and the less elastic the supply of corn, the ________ will be the effect on the price.
rise; greater
Sonya's budget for magazines and chocolate bars is $50. Her marginal utility from these goods is shown in the table above. The price of a magazine is $5 and the price of a chocolate bar is $2.50. Sonya currently buys 3 magazines and 14 chocolate bars. To maximize her utility, she should
stay with the current combination of goods.
The total utility you get from eating slices of pizza on a given night is the
sum of the marginal utilities of all slices eaten.
The supply of oil is more elastic than the demand for oil. If oil is taxed $10 per barrel, how will the tax be divided between the buyers and sellers?
the buyers will pay more of the tax than the sellers
The increase in the demand for widgets, shown in the figure above, is the result of an increase in the price of McBoover devices. Therefore
widgets and McBoover devices are substitutes
The above figure shows the market for anti-freeze. The government imposes the sales tax shown in the figure on sellers. What is the amount of the tax?
$3 per gallon
The price of an effective price floor goes from P1 to P2 (an increased price of 25%). Assume that the elasticity of supply is 2 and the elasticity of demand is -3 What is the percentage change in quantity supplied?
0.5 (elasticity of supply = percentage change in quantity supplied / percentage change in price)
The above table gives the total utility that Homer obtains from consuming various quantities of chocolate chip cookies. The marginal utility from the fifth pound of cookies is
1
The above table shows some cost data for Tracey's Tents. What is the average total cost when output is 3?
40
Jessica and Sarah have picked out groceries at the market knowing the prices. They are buying tomatoes and feta cheese. They then find out that the price of feta cheese is twice what it was before. Walk through the change in their preferences.
1. Before the price change‚ the marginal utility per dollar of all goods in their basket are the same. 2. With the price change‚ the marginal utility of each good has not changed‚ but now the marginal utility per dollar of feta cheese is less than tomatoes. 3. They decide to put some of the feta cheese back. 4. This increases the marginal utility of the feta cheese they have. 5. They decide to buy a couple more tomatoes instead‚ which decreases their marginal utility of tomatoes. 6. They settle on a new basket of goods where they have more tomatoes and less feta than before‚ but where the new marginal utility per dollar of feta is equal to the new marginal utility per dollar of tomatoes.
The government creates an effective price floor. Describe how the market adjusts by putting the following statements in order.
1. The new minimum price is now above the equilibrium price. 2. Producers are willing to supply more‚ but consumers would be willing to buy less. 3. The difference between quantity demanded and quantity supplied after the price floor comes into effect creates a surplus in the market. 4. The size of the surplus depends on the elasticity of the producers and consumers‚ the more elastic either party is‚ the greater the surplus.
Betsy's utility depending from her consumption of coffee is shown in the table above. Betsy's marginal utility from the 3rd cup of coffee per day is
10
The table above gives Cathy's total utility from Mt. Dew. If the price of a Mt. Dew is $2, Cathy's marginal utility per dollar from the 3rd Mt. Dew is ________ units per dollar
10
Suppose that you consume only pizza and Diet Pepsi. The table above gives your utility from consuming these two goods. What is the marginal utility you get from the fourth slice of pizza?
12
The table above gives production information for Bob's Baseball Cap Company. Bob's total cost when zero caps are produced is $200 and workers cost $10 per hour. The total fixed cost of producing 10 baseball hats per hour is
200
Using the table above, what is the marginal product of the 5th worker hired at Decent Donuts?
22 dozen donuts per day
Using the data in the above table, if the firm employs 5 workers, total product (measured in units per day) and average product and marginal product of the fifth worker (measured in units per worker) are
25, 5, 2
They need a cab home but have no idea how much it will cost (Uber is not allowed in Athens). They discuss it and agree that between the two of them, they would be willing to pay 40 euros for a taxi. After a few minutes, they are able to flag down a cab. When they get back to their hotel, the cab driver tells them it will be 12 euro. How much is their consumer surplus?
28 (40-12)
The above table shows Tammy's total utility from videos and CDs. If Tammy has $110 to spend on videos and CDs and if the price of a video is $10 and the price of a CD is $20, then Tammy maximizes her utility by purchasing
3 CDs and 5 videos.
The table above gives costs at Jan's Bike Shop. Unfortunately, Jan's record keeping has been spotty. Each worker is paid $100 a day. Labor costs are the only variable costs of production. What is the total variable cost of producing 60 bikes?
300
Gunther rents Nintendo games and videos. The marginal utility from his last Nintendo game is 10 and that from his last video is 5. Nintendo games rent for $2 each. Gunther's demand curve for games is shown in the figure above. How many videos a week does Gunther rent?
4
In the above table, the marginal product of the third worker is
4
Bobby spends $100 per month on pizza and CDs. His utility from these goods is shown in the table above. The price of a pizza is $10 and the price of a CD is $20. Which of the following combinations of the two goods maximizes Bobby's utility?
4 pizzas and 3 CDs
Based on the attached graph, calculate the consumer surplus if the price is 1.50 euros (this demand is distinct from the above graphing question).
4.5 CS = 1/2 (1.5x6)
In the above table, the marginal product of the 7th worker is 6. What is the total product when 7 workers are employed?
70
The income elasticity of demand for restaurant meals is 1.61. So
Both answers if income increases by 10 percent, the quantity demanded of restaurant meals will increase by 16.1 percent and restaurant meals are an income elastic normal good are correct.
The price ceiling depicted in the above figure results in
Both answers consumer surplus increasing from $30 thousand to $34.5 thousand and producer surplus decreasing from $24 thousand to $6 thousand are correct.
Suppose the price of soda is $2 each and the price of a pizza slice is $4 each. Jean maximizes utility and buys only sodas and slices of pizza. If the price of a soda increases to $3 each, Jean's marginal utility per dollar for soda
Both will decrease and she'll buy fewer sodas. and will decrease and she'll buy more pizza are correct.
They are starving and finish the order of tzatziki dip really quickly. They decide to place another order of tzatziki, but they realize they don't like it as much this time. What is the economic term to describe what happened to their decreased enjoyment of the tzatziki?
Diminishing marginal utility
Using the New Output table above, match the new marginal cost to the cell indicated from the Marginal Cost column.
F:24 ; G:20 ; H:22.5 ; I:36 ; J:45
Doug goes grocery shopping. He sees that each apple is $1 and each banana is 50 cents. His marginal utility for the first apple is 5 and his marginal utility of the first banana is 4. First, what is his marginal utility per dollar of the first apple and the first banana? He has $10 and he spends all of it on apples and bananas. Describe his decision making process for how many apples and bananas he will buy and why. (Note: You will not be able to solve a numeric answer for how many of each he will buy, but you can describe why Doug decides to buy more of one).
His marginal utility per dollar of his first apple is 5 and the marginal utility per dollar of the first banana is 8 (=4/.5). If he only had $1, he would buy two bananas, but since he has $10, he will be able to buy more. For each banana he buys, his marginal utility for that banana goes down. He will continue putting bananas into his basket until his marginal utility per dollar of bananas is less than or equal to 5. At that point, if he still has some of his $10 left, he will put some apples in the basket. With each apple, his marginal utility per apple will go down. He'll continue buying apples and bananas until the bang for buck of each fruit is equivalent and he has spent his whole budget.
Consider a tax on producers. Under which of the following circumstances would the tax cause the least effect on economic efficiency?
If the supply of the product is inelastic.
What effect does the new machine have on the firm's output and why?
Increased output since the new machine adds more resources for production capability.
The price of an effective price floor goes from P1 to P2 (an increased price of 25%). Assume that the elasticity of supply is 2 and the elasticity of demand is -3 In the graph below, what happens to the surplus?
Increases
Now assume that the municipality decides to tax the same percentage of income for everyone regardless of income. Describe the fairness of the tax in terms of the opportunity costs for individuals.
Individuals with a lower income will have higher marginal utilities when they give up spending the percentage of income going to the tax instead.
The price of an effective price floor goes from P1 to P2 (an increased price of 25%). Assume that the elasticity of supply is 2 and the elasticity of demand is -3 If the elasticity of supply was 1.5 instead of 2, would the surplus created by the floor be ______ before?
Less than The price change would not have as much effect on quantity supplied, so the surplus would not be as great if the elasticity of supply was only 1.5
Michelle spends all of her income on mangos and rice. Mangos cost $2 per pound and rice costs $1.50 per pound. If Michelle is spending all of her income and the marginal utility per dollar spent is 20 for the last pound of mangos purchased and 10 for the last pound of rice purchased, then
Michelle should buy more mangos and less rice to maximize utility.
The above figure shows the apartment market in Big City. If a government policy results in a shortage of 1,500 apartments in the Big City rental market, it is most likely that the Housing Authority has imposed
a rent ceiling of 1000 monthly
Suppose the price of soda is $2 each and the price of a pizza slice is $4 each. David maximizes his utility by buying only sodas and pizza. He buys 5 sodas and 10 slices of pizza. If the price of a soda increases to $3 each, David will
decrease the number of sodas bought and move along the demand curve for soda.
The above figure shows a linear (straight-line) demand curve. Starting at point A and then moving to point B and then point C, the price elasticity of demand
decreases (negative slope)
The price elasticity of supply of laptop computers equals 1.5 if
for every 1 percent that laptop prices increase, computer makers produce another 1.5 percent laptops.
Pizza Hut pizza has more close substitutes than does food in general. The price elasticity of demand for Pizza Hut pizza is ________ the price elasticity of demand for food in general.
greater than
Use the data in the table above and suppose that labor is the only variable factor of production. When 122 dozen donuts are produced at Decent Donuts, the MC curve
has a positive slope.
Imposing a minimum wage that is above the equilibrium wage rate results in
higher job search costs
If the elasticity of supply of TV sets is equal to 3, then a 10 percent increase in the price of a TV will
increase the quantity supplied by 30.0 percent.
Suppose Target decided to lower the price on all shirts as part of its Back to School promotion. The cross elasticity of demand between pants and shirts is negative. Lowering the price on shirts will ________ the demand for pants because shirts and pants are ________.
increase; complements
The above figure shows the demand curve for movie rentals from Redbox. If Redbox lowered its price from $4.00 to $3.50, then total revenue would ________ because demand is ________.
increase; inelastic
In the above figure, if the market price rises from $100 to $125 per ton of wheat, then producer surplus
increases
A period of time in which the quantity of all factors of production used by a firm can be varied is called the
long run
In the figure above, originally the apartment rental market is in short-run and long-run equilibrium with a rent of $600 per month. Then the government imposes a rent ceiling of $500 per month, which causes a shortage. Suppose that apartments are a normal good and incomes rise. The increase in income
increases the shortage
In the figure above, originally the apartment rental market is in short-run and long-run equilibrium with a rent of $600 per month. Then the government imposes a rent ceiling of $500 per month. The loss of producer surplus
is larger than the gain in consumer surplus
When the total product curve is drawn in a figure that measures employment along the horizontal axis, it is a graph that shows the
maximum output attainable for each quantity of labor employed.
Robinson spends all his income on mangos and bananas. Mangos cost $3 per pound and bananas cost $1 per pound. The marginal utility is 30 for the last pound of mangos purchased and 8 for the last pound of bananas. To maximize his utility, Robinson should buy
more mangos and fewer bananas.
The figure above shows the demand for and supply of rental housing in Smallton. If a rent ceiling is set at $800, there is
neither a shortage nor a surplus
Suppose that the equilibrium wage in the low-skilled labor market is $9.25. Further, suppose the federal government raises the minimum wage to $9.00 an hour from its present level of $8.15. The government's action of increasing the minimum wage will result in
neither a shortage nor a surplus of labor in the low-skilled labor market
A $10 per-unit tax on cell phones raises the equilibrium price paid by consumers by $5. Before the tax, 5,000 cell phones were sold per year. The revenue from the tax is
positive but less than $50,000 per year
Assume that the municipality decides to place a tax on individual incomes. Suppose that the tax is a fixed sum for everyone regardless of income. Explain how you might describe the fairness of the tax. Select all that apply.
regressive; would tax a larger percentage of smaller incomes
Water has a ________ marginal utility and brings a ________ consumer surplus; diamonds have a ________ marginal utility and bring a ________ consumer surplus.
small; large; large; small
Danny has $12 to spend on two goods: pies and soda. The price of a pie is $4, and the price of a can of soda is $2. To maximize his utility, Danny buys ________.
the combination that gives him the same marginal utility per dollar spent on pies as on soda
The long run is distinguished from the short run because only in the long run
the quantities of all factors of production can be varied.
In the short run
the size of the plant is fixed
Last year in the United States, the price of snowboards rose by 5 percent and the price rise resulted in a 15 percent increase in the quantity supplied. This outcome is an indication that
the supply of snowboards is price elastic.