Micro Test 1
An inferior good
A good with an income elasticity that is negative is _______
Indicates the quantity supplied does NOT respond to a change in price
A perfectly inelastic supply curve:
Achieves the greatest benefit over cost for the person making the choice
A rational choice _____
Whether a tomato is a fruit or a vegetable
All of the following are consequences of scarcity faced by people in the US except deciding _____ a. whether to play the piano or study for the next hour b. whether to go skiing during break or catch up on your course work c. whether a tomato is a fruit or vegetable d. how to study for both econ exam and a chem exam that take place on the same day
Is constant; changes from one point to another
Along a linear demand curve, the slope __________ while the price elasticity of demand __________.
a reward that encourages an action or a penalty that discourages an action
An incentive is ____
shortage;rise
An increase in the demand for ski trips together with a decrease in the supply of ski trips brings a ______ of ski trips at the original price and a ______in their price.
an increase; positive
An increase in the price of a substitute for iPads will lead to __________ in the quantity demanded of iPads so the cross-price elasticity of demand will be __________.
decrease;increase
An increase in the price of lawn fertilizer, a complement in production of nylon, will________ the equilibrium price of nylon and ________ the equilibrium quantity of nylon
the wages you could earn if you took a job
By remaining in school, you are paying an opportunity cost that includes ____
does not eliminate scarcity because we still must give up production of one good to increase production of a second good and remain on the new production possibilities frontier
Capital accumulation and technological change bring economic growth: production that was unattainable yesterday becomes attainable today; production that is unattainable today will become attainable tomorrow. Why doesnt economic growth bring an end to scarcity one day?
Growth of capital resources; human
Capital accumulation is the ______, including_______ capital.
A. entrepreneurs bear the risks that arise from business decisions
Choose the correct statement: A. entrepreneurs bear the risks that arise from business decisions B. entrepreneurship includes the tools and instruments that we work with C. entrepreneurship is not a factor of production D. entrepreneurship is the knowledge and skill that people obtain from education, on-the-job training, and work experience
Increases because cream and low-fat milk are complements in production
Dairies make low-fat milk from full-cream milk, and in the process they produce cream, which is made into ice cream. If the price of cream rises, the supply of low-fat milk_______
Does not change because the relationship between price and quantity supplied does not change
Dairies make low-fat milk from full-cream milk, and in the process they produce cream, which is made into ice cream. If the price of low-fat milk rises, the supply of low-fat milk _______(this question asks about supply, not quantity supplied)
Decrease because the cost of producing low-fat-milk increases
Dairies make low-fat milk from full-cream milk, and in the process they produce cream, which is made into ice cream. If the wage rate of dairy workers rises, the supply of low-fat milk_______
the relationship between the quantity demanded of a good and the price of the good
Demand is ________, when all other influences on buying plans remain the same
elastic
If a 20 percent increase in the price of Red Bull energy drinks results in a decrease in quantity demanded of 25 percent, we say the demand for Red Bull is __________ in this range.
-25/20= -1.25
If a 20 percent increase in the price of Red Bull energy drinks results in a decrease in the quantity demanded of 25 percent, the price elasticity of demand is:
sustained expansion of production possibilities
Economic growth is defined as the____.
percentage changes
Economists avoid confusion over units in the computation of elasticity by using:
We cant afford to buy all the things we'd like
Every day, we make many choices. We cant avoid having to make choices because_____
Whole foods and starbucks make decisions in their self-interest. Seat belts are in the social interest, but people decide whether to wear them in their self-interest .
Explain how the following headlines concern self-interest and the social interest" 1. Whole foods, a US supermarket is opening in Britain, and starbucks is expanding in asia 2. All automobiles must be fitted with seat belts.
B. elastic; 2.0
If a 5% change in the price of a good leads to a 10% change in the quantity supplied, then the supply of the good is _______ and the elasticity of supply is ________.
Elastic;inelastic
If a price cut increases total revenue, demand is _______. if a price cut decreases total revenue, demand is ________.
unit elastic
If a price cut leaves total revenue unchanged, demand is ______.
the longer the time that elapses
If prices rise the quantity supplied will be greater:
Complements
If the cross-price elasticity of demand between two products is -3.0, then the two products are:
a luxury
If the income elasticity of SUVs is greater than 1, what is the good considered?
inelastic
If the price elasticity of demand is 0.33 then demand is __________ over that price range.
increase; 8% because .4*20%= 8%
If the price elasticity of supply is 0.4, then a 20% increase in price will __________ the quantity supplied by __________ %.
A. perfectly inelastic
If the price of a good increases from $3 to $4, and the quantity demanded remains unchanged, then the demand is_______ A. perfectly inelastic B. somewhat elastic C. infinite D. perfectly elastic
movement down along; shift of
If the price of a milkshake falls, a _____ the demand curve occurs. If any factor that influences buying plans other than the price changes, then a _____ the demand curve occurs.
B. 2/3, Substitutes
If the price of one good increases by 3% and the quantity demanded of another goof increases by 2%, the cross elasticity is _______ and the two goods are _______. A. 3/2, compliments B. 2/3, substitutes C. 3/2, substitutes D. 2/3, compliments
elastic
If the quantity of dental services demanded increases by 15% when the price of dental service falls by 10%, is the demand for dental services inelastic, elastic, or unit elastic?
fall to 0
If the supply of Good B is perfectly elastic and price falls the quantity supplied will:
a normal good
If, as adrienne's income increases, her demand for vacation increases, then for adrienne, vacations are _______
1. Normative 2. Normative 3.Normative 4.Normative
Indicate whether each of the following news items is a positive or normative statement 1. the poor pay too much for housing 2. teenagers shouldn't be permitted to buy cigs 3. The united states should spend more on the environment and less on space exploration 4. we need more police on inner-city streets
Capital
Interest is the income paid for the use of ______
20;200 50;100
Kim can produce 40 pies per hour or 400 cakes per hour Liam can produce 100 pies per hour or 200 cakes per hour. Kim spends 30 minutes producing pies and 30 minutes producing cakes, kim produces ____ pies and _____cakes. If Liam spends 30 min producing pies and 30 min producing cakes, he produces ____ pies and ____cakes .
10 (400/40)
Kim can produce 40 pies per hour or 400 cakes per hour Liam can produce 100 pies per hour or 200 cakes per hour. Kims opportunity cost of producing a pie is ____cakes
2 (200/100)
Kim can produce 40 pies per hour or 400 cakes per hour Liam can produce 100 pies per hour or 200 cakes per hour. Liams opportunity cost of producing a pie is _____cakes
Liam;Kim
Kim can produce 40 pies per hour or 400 cakes per hour Liam can produce 100 pies per hour or 200 cakes per hour. _____ has the comparative advantage in producing pies; ____has the comparative advantage in producing cakes.
complements
Personal computers and computer display monitors are:
people's likes and dislikes and the intensity of those feelings
Preferences are _____
elasticity of supply=(%change in quantity supplied)/(% change in price) = [(11-9)/((11+9)/2)]/[(23-17)/((23+17)/2)]= 0.2/0.3= 0.67
Price($ per dozen): 17 23 Quantity supplied(dozens per day): 9 11 When the price rises from $17 a dozen to $23 a dozen, the elasticity of supply is _______.
$3.62
Prior to the 1997 federal tobacco settlement a pack of cigarettes sold for $2.48. The terms of the settlement required a decrease in teenage smoking of 60 percent. If the elasticity of cigarette demand for teenagers is about 1.3 then the price of cigarettes should rise to __________ in order to achieve the target reduction of 60 percent.
Cannot;less
Production efficiency is the situation in which the economy is getting all that it can from its resources and ______ produce more of one good or service without producing ______ of something else
Income
Profit (or loss) is the ____ earned by an entrepreneur for running a business
[(25-15)/((25+15)/2)]/[(0.5-0.3)/((0.5+0.3)/2)]= 0.5/0.5= 1
Quantity of popsicles per day: 15 25 Price in dollars per popsicle: 0.3 0.5 The price elasticity of demand when the price of a popsicle increases from $0.3 to $0.5 is ________
3.5 (400/(600+200))/(2/(6+8)) elastic
Rain spoils the strawberry crop, the price of strawberries rises from $6 to $8 a box, and the quantity demanded decreases from 600 to 200 boxes a week. Over the price range of $6 to $*8 the price elasticity of demand is_______. Over this price range, the demand for strawberries is_______.
Land
Rent is the income paid for the use of ______
it is not possible to make someone better off without making someone else worse off
Resource use is efficient when ____
the decrease in the current production of other goods and services
SpaceX CEO elon musk announced that spaceX plans to send 2 citizens on a one week 350,000 mile trip around the moon in 2018. The opportunity cost of creating the technology for trips around the moon is ____.
C. Inelastic
Suppose Sandy's candies wants to increase its total revenue. If sandy increases the price of her candy, she must be assuming that the demand for candy is ______ A. Unit elastic B. Elastic C. Inelastic D. Income elastic
The development of; of better ways
Technological change is _____new goods and of _______of producing goods and services
price elasticity of demand
The __________ is a measure of responsiveness of the change in quantity demanded of a good to the change in its price.
a 5 percent rise in the price of plums results in a 5 percent decrease in the quantity of plums demanded.
The demand for plums is unit elastic if ______.
inelastic;inelastic
The fewer the substitutes for a good or service, the more_____is the demand for it. The smaller the proportion of income spent on a good, the more______is the demand for it.
attainable;unattainable does; the firm cannot produce points outside the frontier and as the firm moves along the PPF, it cannot produce more dog biscuits without producing less cat food.
The figure shows a PPF for a firm that produces pet food. point A is on the PPF and point B is outside the PPF. Point A is _____ and point B is _____. This PPF ______ illustrate scarcity because____.
An inferior good
The income elasticity for peanut butter is -3. This defines peanut butter as what type of good?
Marginal benefit from a good and the quantity consumed of that good
The marginal benefit curve is a curve that shows the relationship between the ______
Benefit received from consuming one more unit of it
The marginal benefit of a good or service is the _____
resources are not all equally productive in all activities
The marginal cost curve is upward sloping becasue_____
opportunity cost of producing one more unit of it
The marginal cost of a good or service is the_____
Greater
The more substitutes that exist for a particular product, the ______ the price elasticity of demand.
Faced a tradeoff between a higher test score and an evening watching TV; the 5% fall in your grade
The night before an econ test, you decide to watch TV instead of studying. You get an 80% on your test compared with the 85% that you normally score. You _____, and the opportunity cost of your evening watching TV was ____
the quantity demanded of a good to a change in its price when all other influences on buying plans remain the same
The price elasticity of demand is a units-free measure of the responsiveness of _________
Percentage change in the quantity demanded; percentage change in the price
The price elasticity of demand is calculated by dividing the ______ by the _______
positive value
The price elasticity of supply always has a:
can be produced and the combinations that cannot be produced
The production possibilities frontier is the boundary between the combinations of goods and services that ______, given the available factors of production and the state of technology .
less elastic;more elastic
The supply of apples in the short run will be______than the supply in the long run and ______than the momentary supply today.
Labor
Wages are income paid for the services of ______
zero
What is the cross-price elasticity of demand for two goods that are unrelated?
rises; decreases the quantity demanded and increases the quantity supplied
When a shortage arises, the price_______ to its equilibrium, which ________
falls; increases the quantity demanded and decreases the quantity supplied
When a surplus arises, the price_______ to its equilibrium, which ________
The demand curve shifts rightward; the demand curve shifts leftward
When an event occurs that changes the demand for coffee makers, ______ if demand increases and ______ if demand decreases
A how; a what: a for whom
When apple computers decides to produce ipods by using more labour and less capital, it is answering ___ question. When sony decides to produce computers rather than DVD players, it is answering _____ question. Whether sony gets a larger profit or its workers get higher wages is ______ question.
money flow; real flow
When apple inc pays the designers of the ipad, the flows are a _______ from firms to households and a ______ from households to firms
money flow; real flow
When you buy a new e-book from amazon, the flows are a ______from households to firms and a _______ from firms to households.
a tradeoff
When you choose to spend more on yoga classes and less on piano lessons, your choice illustrates _____
negative
When you compute a price elasticity of demand the answer is always:
A-Macro B-Micro C-Macro D-Micro
Which items have macro issues and which have micro issues? A. why are incomes growing much faster in china and india than the US? B. Would California's proposed tobacco tax hike reduce smoking? C. US inflation expectations at highest level since 2015 D. More police, managed more effectively, really can reduce time
C. Private education
Which of the following goods is probably the most highly income elastic? A.salt B.food C.private education
The things you would have bought with what you spent on the ticket and bus fare getting to the game plus the things you would alternatively have done with your time
Which of the following is the opportunity cost of attending a ball game?
The demand curve on the left
Which of these demand curves shows a perfectly inelastic demand? Left curve: vertical line Right curve: horizontal line
decrease the quantity of DVD players demanded and results in movement up along the demand curve for a DVD player
Why does demand not change when the price of a good changes with no change in the other influences on buying plans? An increase in the price of a DVD player______.
The price of a DVD player
Why does demand not change when the price of a good changes with no change in the other influences on buying plans? The demand for DVD players does not change when a change in _____occurs.
increases. Resources are not equally productive in all activities.
Why does the PPF bow outward and what does that imply about the relationship between opportunity cost and the quantity produced? The PPF bows outward because as we move from point A to point B to point C, the opportunity cost of producing a blanket _______
perfectly inelastic
William loves candy bars. As the price of a candy bar increases from $1 to $1.25 to $1.50, William continues to buy a dozen candy bars every week. William's demand for candy bars is _______.
many buyers and sellers; no single buyer or seller
a competitive market is a market that has _______, so _________ can influence the price
a normal good that is income elastic; a normal good that is income inelastic
a good with an income elasticity greater than one is _______. a good with an income elasticity that is positive and less that one
1. (percent change in quantity demanded)/(percent change in price) = 20/40= .5 2. inelastic
a rise in the price of a smoothie from $2 to $3 results in a decrease in the quantity of smoothies demanded from 220 million to 180 million a day; and at todays price of a muffin $1.50, the quantity of muffins demand increases from 80 million to 100 million a day. 1. The price elasticity of demand for smoothies is _______ 2. Is the demand for smoothies elastic or inelastic?
1. (3-2)/((3+2)/2)*100 =1/2.5*100 =40 2. (180-220/((180+220)/2)*100 =40/200*100 = 20
a rise in the price of a smoothie from $2 to $3 results in a decrease in the quantity of smoothies demanded from 220 million to 180 million a day; and at todays price of a muffin $1.50, the quantity of muffins demand increases from 80 million to 100 million a day. 1. the price of a smoothie changes by _____ percent 2. the quantity demanded of smoothies changes by _____ percent
value most highly;without giving up;value more highly
allocative efficiency in a situation in which the quantities of goods and services produced are those that people______-it is not possible to produce more of a good or service_____some of another good that people _____
D. Mary has a comparative advantage over bill in the production of shelter
an economy produces only food and shelter. There are 2 individuals in the economy: Bill and Mary. Mary's opportunity cost of producing 1 unit of shelter is 2 units of food. Bills Opportunity cost of producing 1 unit of shelter is 4 units of food. A.Bill has a comparative advantage over mary in the production of shelter B. Bill has an absolute advantage over mary in the production of shelter C. Mary has comparative advantage over Bill in the production of food D. Mary has a comparative advantage over bill in the production of shelter
12
if the quantity demanded of meat pies increases by 60% when the price of a meat pie falls by 5% what is the price elasticity of demand for meat pies?
Complements
if the cross elasticity of demand for golf clubs with respect to the price of a golf lesson is negative, then golf clubs and golf lessons are_________.
substitutes
if the cross elasticity of demand for ramen noodles with respect to the price of rice is positive, then ramen noodles and rice are_________.
1. (3/4)= .75
if the quantity demanded for peanuts increases by 3% when the price of peanuts falls by 4%, what is the price elasticity of demand for peanuts? Based on the number you've calculated, the demand for peanuts is ______.
the opportunity cost of 1 pound of tea is .5 (50/100)(slope) pairs of hiking boots. the opportunity cost of 1 pair of boots is 2 (100/50)(slope) pounds of tea.
tea(pounds per month): 300 200 100 0 Hiking boots(pairs per month): 0 50 100 150
true
the change in the price of a printer illustrates the law of demand in action.
price of a substitute or complement
the cross elasticity of demand is a measure of the responsiveness of the demand for a good to a change in the ______, other things remaining the same.
benefit received from consuming one more unit of it
the marginal benefit from a good is the ______the good
income elasticity of demand = (% change in quantity demanded)/(% change in income) = 10/10= 1
when income increases by 10% and all prices remain the same, the quantity of smartphones demanded increases by 10%. The income elasticity of demand of smartphones is ______.
1. cross elasticity= (% change in quantity demanded)/(% change in the price) = -7/10= -0.7 2. Complements
when the price of a smartphone increases by 10%, the quantity of wireless plans demanded decreases by 7%. 1. The cross elasticity of demand for wireless plans with respect to the price of a smartphone is _______. 2. Smartphones and wireless plans are _______.
D. the US gov should increase unemployment benefits
which of the following is a normative macroeconomic statement? a. more generous unemployment benefits will increase the unemployment rate b. state governments should lower taxes on cigs c. a decrease in cig taxes will encourage more people to smoke d. The US gov should increase unemployment benefits
D. The price of an i pad will fall over the next year
which of the following statements is a positive microeconomic statement? a. apple should lower price of i pad to discourage competitors from entering the market b. interest rates will rise as the economy expands c. Lower taxes might increase employment d. The price of an i pad will fall over the next year
