micro midterm 2021
Artificially low runs caused by rent control undercut the allocative function of price by
sending a false signal to investors about the need for additional housing. Under rent controls, apartment builders are in less than they could investing their money elsewhere.
in recent years the cost of producing organic produce in the United States has decreased largely due to technological advancement. At the same time, more and more Americans prefer organic produce over conventional produce. Which of the following best explains the effect of these events in the organic produce market?
both of supply and demand curves have shifted to the right. As a result, there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price.
Research estimates at the short run price elasticity of demand for gasoline in the United States is -0.3 in the long run price elasticity of demand is -1.4. What happens if government increases the federal gasoline tax?
consumer expenditures on gasoline increase over the short run in decline over the long run
Supposed to consumer only purchase his food and clothing, and food as part of the long a horizontal axis of the consumers in difference mat. If the price of clothing increases in the price of food in income do not change, than the budget line changes by rotating
counter clockwise about the fixed horizontal axis intercept
The Internet has created a new category in the book selling market, namely, the barely used book. How does the availability of barely used books affect the market for new books?
demand curve for new books shifts to the left
Most economists are against rent control because it
discourages the building of new apartments
when a demand curve is completely elastic, any price higher than P, the quantity demanded ________ and for any price lower than P the quantity demanded ______
drops to zero; increases without limit
Pablo is the man for pizza is elastic. If the price of pizza Decreases, we can predict that Pablo will
eat more pizza and spend more on pizza than he did before the price decrease
Price price for establishes a minimum price for a market. Which of the following results from a binding price floor?
excess supply
If close substitutes are difficult to find in the short run, what would the demand curve look like
highly inelastic (steep)
Bob use apples and oranges is perfect substitutes and his consumption, and MRS = 1 for all combinations of the two goods and his indifference mat. Suppose the price of apples is $2 per pound, the price of oranges is $3 per pound, and Bob's budget is $30 per week. What is Bob's utility maximizing choice between these two goods?
15 pounds of apples and no oranges
two of use hotdogs and hotdog buns is perfect compliments in her consumption, in the corners of her indifference curve follow the 45° line. Suppose the price of hotdogs is $5 per package (8 hot dogs), the price of buns is $3 per package (hot dogs buns) , And Sue's budget is $48 per month. What is her optimal choice under the scenario?
6 packages of hot dogs and 6 packages of buns
what happened to the market demand curve if a consumers income decreases; consumers now demand a _______ quantity
Shift to the left; smaller
Difference cars are convex to the origin because of
The assumption of convexity
microeconomics is the branch of economics that deals with
The behavior of individual firms and how economic units interact form markets
suppose you only consume food and clothing, and clothing is plotted on the vertical axis. Also, you purchase food out of fixed price, but the price of clothing declinesAs you buy in larger quantities. What does the budget line look like in this case?
The budget line is now convex to the origin
A few years ago, the city of Seattle, Washington, considered imposing a specific tax on all espresso based coffee drink sold in the city. The extra tax revenue generated would have been used to fund after school programs for low income children. The coffee house owners agreed that this would be a good program to fund, but they argue that the tax with sharply reduce their sales volume and they would pay most of the tax burden. This claim is true if
The demand for espresso base coffee is more elastic then supply
The burden of a tax per unit of output will fall heavily on consumers when demand is relatively ______ and supply is relatively _______
inelastic; elastic
If price and quantity or not at their equilibrium positions, then
it is possible to reallocate so some people are better off without harming others
When Joe maximize utility, he finds that his MRS of X for Y is greater than PX/ PY. It is most likely that
joe is not consuming good Y
The price of coffee is always equal to 1/2 the price of tea. When we plot the budget line for coffee and tea, coffee pot it on the horizontal axis. What is the slope of this budget line
-1/2
For US consumers, the income elasticity of demand for fruit juice is 1.1. If the economy enters a recession next year and consumer income declines by 2.5% what is the expected change in the quantity of fruit juice demanded next year?
-2.75%
Can a set of indifference curves be upward slope in? If so, what would this tell you about the two goods?
A Sullivan difference curves cannot be upward slope in because it violates the assumption that more is better than less, indicating that one of the goods is bad
which of the following would cause equilibrium price to decrease and The equilibrium quantity of white bread to increase?
A decrease in the price of flour
The price of chocolate increases, then there will be
A decrease in the quantity of chocolate demanded
Demand is elastic, and increase in price leads to
A decrease in total expidentures
if current market price is below the equilibrium, The market achieve equilibrium by
A price increase, increasing the quantity supplied and decreasing the quantity demanded
Ordinal utility refers to
A ranking of market baskets in order of the most to least preferred, while cardinal utility indicates how much one market basket is preferred to another
From 1970 to 2017, the real price of eggs decreased. Which of the following would cause an unambiguous decrease in the real price of eggs?
A shift to the right in the supply curve for eggs in a shift to the left and the demand curve for eggs
in 2004, hurricanes damaged a large portion of Florida is orange crap. As a result of this, many orange growers we're not able to supply fruit to the market. After the hurricane, what would we expect to see happen in the market at the pre-hurricane (initial) equilibrium price?
A shortage of oranges
Jane is trying to decide which courses to take next semester. She has narrowed down her choices to two courses, economics one in economics too. Now she is having trouble and cannot decide which of the two horses to take. It is not that she is in different between the two courses. She just cannot decide. An economist would say that this is an example of preferences that
Are incomplete
Indifference curves for two guys that are perfect complements
Are shaped as right angles
If demanding a perfectly competitive market is perfectly in elastic and supply is upward slope in, a specific tax placed on suppliers will
Be paid entirely by consumers, and there will be no dead weight loss
Based on his preferences, bill is willing to trade six movie tickets for one movie take it to a basketball game. Of movie tickets cost $12 each and take it to the basketball game to cost $76, should build trade movie tickets for basketball tickets? Why or why not?
Bill should not trade movie tickets for basketball tickets because it's marginal utility per dollar spent on movie tickets is greater than his marginal utility per dollar spent on basketball tickets
Cardinal utility is not needed in order to rank consumer choices because economists
Can instead he's ordinal utility to show how consumers rank different baskets
A decrease in taster preference would be represented by a change from
D2 to D1 (shift to the left)
A vertical distance of the shift in supply from a specific tax of t amount on producers will
Equal T
When the optimal point on indifference curve and budget line diagram is a corner solution,
I wanna write a substitution usually does not equal the ratio of prices for the two goods
If price is an income and the two good society double, what will happen to the budget line
I will be no effect on the budget line
in the case of a specific tax, tax incidence is Independent of who pays
In all cases
Demand is an elastic, and increase in price causes the sellers total revenue to
Increase
Measuring Y on the vertical axis an X on the horizontal axis, convexity of a difference curves imply that the magnitude of MRIs of Y for X
Is decreasing as X increases
if Px=Py, Then when the consumer maximize utility,
MUx must equal MUy
In the optimal point on the difference curve and budget line diagram is a corner solution
Marshall write a substitution does not necessarily equal the ratio of prices for the two goods
To simplify our consumption models, suppose you as consumers only purchase food and all other goods were food is part of the long the horizontal axis of the indifference map. If the US Congress passes an economic stimulus package that pays $300 to each person, how does this affect the budget line for each consumer?
Parallel rightward shift
suppose the US demand curve for gasoline shift right word in the US supply curve for gasoline remains unchanged. As a result, the price of gasoline increases by 9% in the equilibrium quantity increases by 3%. Which of the following statements is true based on this information?
Price elasticity of supply for gasoline is roughly 0.33
Is the allocative function of price?
Process is a signal that guides resources away from the production of goods his prices label low cost towards the production of goods his prices exceed cost
And different skirt shows all combinations Of two goods that
Provide the consumer with the same level of satisfaction
Oscar consumes only two goods, X and Y. Assume that Oscar is not at a corner solution, but he is maximizing utility. Which of the following is NOT necessarily true?
Px/Py = money income.
Olive oil producers want to sell more olive oil at a higher price. Which of the following events would have this effect
Research find the consumption of olive oil reduce his risk of heart disease
let D = demand, S = supply, P = equilibrium price, and Q = equilibrium quantity. What happens in the market for tropical hardwood trees if the governments restrict the amount of forest land that can be logged?
S decreases, D no change, P increases, Q decreases
An increase in the number of firms in the market would be represented by movement from
S1-S2 (rightward shift and supply)
The slope of an inch difference curve reveals
The marginal write a substitution of one good for another good
at the optimal point on indifference difference curve in the budget line diagram (assuming an interior solution)
The optimal a difference curve is tangent to the budget line, the marginal write a substitution between the two goods equals the ratio of the prices, the consumer spends his or her entire budget on the two goods
The income elasticity of demand refers to
The percentage change in quantity demanded resulting from a 1% increase in income
When different in different curves are placed in the Cartesian plane,
The result is called in indifference math, the curves that occupyA place farther away from the origin yelled more utilities and curves closer to the origin, the curves cannot intersects
Assume that the Price for swimming pool maintenance services has risen and sales over these services have fallen. One can conclude that
The supplier swimming pool maintenance services has decreased
In the market for oranges the supply has increased, then
The supply curve for oranges a shifted to the right
Assume that food is measured along the horizontal axis and clothing on the vertical axis. If the price of food falls relative to that of clothing, the budget line will
become flatter
True or false? The steeper the demand curve for A good relative to the supply curve for that good, the greater the proportion of a tax on that good will fall on buyers
True
Which of the following is a microeconomic question?
What factors determine the price of carrots?
Farmers complain that they cannot make a living selling sugar at the current market clearing price. They successfully lobby the government to initiate price controls on the seal of sugar. The government says a price floor substantially above the equilibrium price, and no one is allowed to sell sugar for a price less than the price for. As a result,
Will be a surplus of sugar
The price elasticity of demand along a completely inelastic demand curve is equal to
Zero
Macro economics examines
aggregate economic quantities such as interest rates
In 1994, the state of California suffered a devastating earthquake. To help pay for the damages, the state raised in sales tax by one cent per dollar of expenditure on most consumer goods. This state sales tax is an example of what economist call
an ad valorem tax
What is Pareto improvement?
an improvement to a system and a change in allocation of goods harms no one in benefits at least one person
What is the difference between an increase in supply in an increase in quantity supplied
an increase in supply means the supply curve is shifted to the right while increase in quality supply refers to a movement along a given supply curve in response to an increase in price
an increase in demand for lobster due to changes in consumer tastes, accompanied by a decrease in the supply of lobster as a result of Bad weather reducing the number of fisherman trapping lobster, will result in
an increase in the equilibrium price of lobster; the equilibrium quantity may increase or decrease.
which of the following Will result in a decrease in the consumers purchasing power
an increase in the price of the good on the vertical axis, a decrease in the consumers income, and increase in the price of the good on the horizontal axis
The indifference curves for two goods that are perfect substitutes
are downward-sloping straight lines
Cross price elasticity of demand refers to
percentage percentage change in the quantity demanded of one good resulting from a 1% increase in the price of another good
Two goods or substitutes, the cross price elasticity of demand must be
positive
A change and all the following variables will change the market demand for a product except
price of the product
Market economy price serves to
ration goods and allocate production resources
satisfaction from consumption is maximized when
regional benefit equals marginal cost
The endpoints (horizontal and vertical intercepts) of the budget line:
represent the quantity of each good that could be purchased if all of the budget were allocated to that good
In economics, choices must be made because we live in a world of
scarcity
to protect the cod fishery off the north east coast of the United States, the federal government may limit the amount of fish that each boat can catch in the fishery. The result of his public policy is to
shift the cod supply curve to the left
Supposed unusually cold weather causes the demand curve for ice cream to shift the left. Why will the price of ice cream fall to a new market clearing level? The cold weather will
shift the demand curve to the left, initially creating a surplus until the price falls to where quantity supplied again equals quantity demanded
assume that steak and potatoes are compliments. When the price of state goes up, the demand curve for potatoes
shift to the left
What happened to the market supply curve if the cost of production increases; according to the graph for a given price firm supply supply a _______ quantity
shift to the left; smaller
Assume there's a shortage in the market for digital music players. Which of the following statements correctly describes the situation?
some consumers will be unable to obtain digital music players at the market price and will have an incentive to offer to buy the product at a higher price
when the price of a normal good falls, consumers buy a larger quantity because of the __________ effect and the _________ effect
substitution; income
2004, hurricanes destroyed a large portion of Florida is orange and grapefruit crops. In the market for citrus fruit,
supply curve shifted to the left resulting in an increase in the equilibrium price
Show the effect of an increase in the price of milk in the market for butter
supply curve shifts to the left
Marginal utility measures
the additional satisfaction from consuming one more unit of a good
Consumers in California pay half as much for grapes as they do for oranges however grapes and oranges are the same price in South Carolina. If consumers in both states maximize utility, will be marginal right of substitution of oranges for grapes be the same for consumers in both states? If not, which will be higher?
the marginal rate of substitution of oranges for grapes will be higher in California
Elasticity measures
the percentage change in one variable in response to a one percent increase in another variable.
Along any downward sloping straight-line demand curve:
the price elasticity varies, but the slope is constant
Sugar can be refined from sugar beets. When the price of those beets falls,
the supply curve for sugar would shift right
Daniel ocean pays for monthly pool maintenance for her home swimming pool. Last week, the owner of the pool service inform Danielle that he will have to raise his monthly service fee because of increases in the Price of pool chemicals. How is the market for pool maintenance service is affected by this?
there is a decrease in the supply of pool maintenance services
In an effort to get more Americans to drink milk, the government set a price ceiling on milk that is substantially below the equilibrium price. Which of the following will occur
there will be a shortage of milk
Consumer says he prefers a Toyota automobile to afford and afford to a jeep. He also says he prefers a jeep to a Toyota which basic assumption about preferences does this consumer violate?
transitivity
The price of lemonade is $.50; the price of popcorn is one dollar. If Fred has maximizes utility by purchasing lemonade and popcorn, his marginal rate of substitution will be
two lemonades for each popcorn
assume that the current market price is below the market clearing level. We would expect
upward pressure on the current market price.