Microecon

price elasticity of demand

% change in quantity demanded / % change in price

midpoints to calculating elasticity

((Q2-Q1)/(Q1+Q2)/2)/((P2-P1)/(P1+P2)/2)

IF THE PRICE OF SUSHI DROPS FROM $8 TO $4 AND SALES RISE FROM 20 TO 40, WHAT IS E d (USING THE MIDPOINT METHOD)? A- 0.5 B-0.66 C-1.00 D-2.00 E-2.50

((Q2-Q1)/(Q1+Q2)/2)/((P2-P1)/(P1+P2)/2) E 2 = 20 /30 ÷ -4 / 6 = -1 =| -1 | = 1

Percentage change

((new-old)/old) x 100

the price floor in the figure has caused a(n): A. excess demand. B. equilibrium. C. surplus. D. shortage.

c

consumer surplus/ producer surplus formula

1/2(base x height)

. Which statement is NOT a characteristic of a corporation? A) Its investors face unlimited liability. B) It produces more value of goods and services than any other type of business structure. C) It has the ability to issue stock to raise capital. D) It usually consists of many owners (in some cases, tens of thousands of owners or more)

A

Does an incentive exist to spend four or more years of one's life and tens of thousands of dollars to earn a college degree? A: Yes, everything an individual does involves incentives. B: Yes, the student knows that going to college will help him receive a better paying job. The incentive to go to school involves self-interest. C: No, going to college does not involve an incentive. D: No, an incentive does not exist since the student must pay a price to go to college.

B

2- The additional cost of producing one more unit of a good is: A. average variable cost. B. total cost. C. variable cost. D. marginal cost.

D

Ceteris paribus means: A: all men are created equal. B: wage parity between men and women is a worthy goal. C: there are an infinite number of factors affecting each human decision and they change all the time. D: economists isolate one or two factors that change when analyzing human decisions

D

What is wrong with the statement "Economics is everything to do with money"? A: Yes, money is the basis of economics. The economy cannot thrive without money. B: Yes, all decisions made in the economy involve money. C: No, economics involves satisfying limited wants with unlimited resources. D: No, economics involves satisfying wants by using resources wisely. We must make choices based on limited resources.

D

Which is NOT true about the use of economic models? A) Economic models are simplified representations of the real world. B) Economists sometimes use laboratory experiments to test their theories. B) Economists sometimes use laboratory experiments to test their theories. C) Economists use what has already happened in the real world to test their theories D) Economists are employed to explain economic phenomena but are never used to predict what might happen next.

D

Q1- If oranges cost $4 a bag last year, but they cost $5 a bag this year, the percent change in the price of oranges is: a. 125% b. 80% c. 25% d. 20%

P n - P o 5 - 4 %change= (5-4)/4 x 100 = 0.25 = 25%

slope

Rise over run

1. A straight-line production possibilities curve takes this shape because • A) the opportunity cost of producing a good is constant. • B) the opportunity cost of producing more of a good is decreasing. • C) resources are better suited for producing one output than another. • D) resources are fixed.

a

2. When the market for a good is in equilibrium, there is (are): A. no shortages or surpluses. B. an increase in the quantity demanded of the good. C. forces that induce a decrease in price. D. excess demand.

a

Consumer surplus is defined as the: A. gap between the demand curve and the market price. B. gap between the supply curve and the market price. C. difference between a price floor and the market price. D. difference between a price ceiling and the market price.

a

F YOUR SALARY INCREASES BY 30%, AND IN RESPONSE YOU INCREASE YOUR CLOTHING PURCHASES BY 20%, INCOME ELASTICITY EQUALS ___ AND CLOTHING IS ___. A. 0.67; A NORMAL GOOD B. 0.67; AN INFERIOR GOOD C. 1.5; A NORMAL GOOD D. 1.5; A LUXURY GOOD

a

Q2. The typical PPF is: A. concave (bowed outward) B. convex (bowed inward). C. a straight line. D. a parabola.

a

Q3. If the prices of the two goods the consumer buys increase: A. the budget line shifts closer to the origin. B. the budget line shifts to the right. C. the indifference curve shifts to the right. D. the budget line rotates to the right

a

Q3. Suppose your first cup of coffee each day gives you $4.00 in total benefit. Your second cup gives you an additional $3.00 in benefit and the third gives $2.00 in additional benefit. By the fourth cup of coffee, the caffeine really gets to you and you get no additional benefit. If the coffee shop you go to charges $2.50 for a cup of coffee, based on marginal analysis, how many cups would you drink? A. two B. one C. four D. three

a

Q5. The term "utility" is used by economists to measure : A. consumer well-being. B. product vitality. C. power company activities. D. gains from production.

a

which of the inputs can be altered in the short run? A) The number of hours that existing employees work. B) The amount of heavy machinery used in the plant. C) The capacity of the plant. D) The total number of plants in operatio

a

which statement is true regarding the total product and marginal product curves? A) The total product curve reaches its peak when marginal product is zero. B) The total product curve begins to fall when marginal product begins to fall. C) The marginal product curve is upward sloping whenever total product is rising. D) The total product and marginal product curves both reach their maximum point at the same level of labor

a

Q7. Alvaro pays $40 in tax on a $120 item. Nurul pays $80 in tax on a $240 item. We can conclude that this tax is a: A. flat tax. B. lump-sum tax. C. progressive tax. D. regressive tax

a (40/120)x100 = 33% (80/240)X100 =33 % A FLAT

2. When income is increased, the budget line moves toward the origin. A. True B. False

b

6. Who is MOST likely to bear the biggest burden of taxation? A. consumers who have elastic demand for the good B. consumers who have inelastic demand for the good C. consumers who have unit elastic demand for the good D. high-income individuals

b

AJ plans to attend a retreat on mindfulness. He paid a $500 nonrefundable registration fee, made a reservation at a hotel that costs $200, and budgeted $150 for gas and food. Two days before the retreat, he becomes ill. Assuming he is able to cancel the hotel without penalty, AJ's sunk cost equals: A) $150 B) $500 C) $650 D) $85

b

Amy decides to open a bakery that will specialize in delicious gourmet brownies. Her explicit costs would include all of these EXCEPT the: A) business taxes paid on her earnings. B) monthly lease payment on the building. C) health insurance premiums that she pays for her employees. D) interest earnings Amy forgoes from selling her savings bonds to finance her

b

An effective (or binding) price ceiling is a situation in which: A. the government sets the maximum price for a good above its free market equilibrium price. B. government sets the maximum price for a good below its free market equilibrium price. C. competing firms collude to set the price of a good above its free market equilibrium price. D. consumer unions bargain to set the price of a good below its free market equilibrium price

b

Normative economic analysis involves A) positive analysis. B) value judgments. C) if-then statements. D) objective descriptions of the way things are.

b

Q5. If an increase in income of 10% causes an increase in quantity demanded of 20% for a good, the good is a(n): A. normal good. B luxury good. C inferior good. D abnormal good

b

Q7. Trading off capital goods for increasing amounts of consumer goods today will most likely result in A) increased long-term growth. B) decreased long-term growth. C) decreased prices in consumer goods. D) increases in the quantity of consumer goods.

b

Q8. Absolute advantage is A) producing at a lower opportunity cost. B) producing a good using the fewest inputs. C) producing a good only when demand is high. D) producing a good that requires imported components.

b

Suppose that a customer's willingness to pay for a product is $79, and the seller's willingness to sell is $64. If the negotiated price is $68, how much is consumer surplus? A. $4 B. $11 C. $15 D. $21

b

TAX Q8. If demand is inelastic, the tax burden falls primarily on the _____ and deadweight loss is _____. A. buyer; large B. buyer; small C. seller; large D. seller; small

b

The income effect of a price change suggests that: A. as income increases, a consumer will purchase fewer normal goods and more inferior goods. B. if the price of a good goes down, it will increase a consumer's purchasing power C. consumer demand will decrease if the income tax is increased. D. if the price of a good increases, consumers will be able to purchase more of other goods because of the increase in the purchasing power of income

b

at an amusement park, Sue achieves an enjoyment value of 20 on her first roller coaster ride and an enjoyment value of 12 on her second ride. Her marginal benefit from her second ride is: A) 8. B) 12. C) 16. D) 32.

b

1. The supply and demand model assists in analyzing the: A. relationship between education and employment. B. growth in the overall level of economic activity. C. determinants of market price and quantity. D. connection between trade and U.S. employment levels.

c

7. Justin owns a home entertainment installation company. One employee can complete two installations per month; two employees can complete 5 installations, three employees can complete 9 installations, four employees can complete 12 installations, and five employees can complete 11 installations. Diminishing marginal returns begin with the _____ worker. A) second B) third C) fourth D) fifth

c

Q1 - Human resources that perform the functions of organizing, managing, and assembling the other factors of production are called: A) physical capital. B) venture capital. C) entrepreneurs. D) productive capital

c

Q1. A budget line represents the: A. aggregate spending by the federal government given product prices. B. combinations of goods that an economy can produce utilizing all available resources. C. combinations of goods an individual can purchase given product prices and available income. D. opportunity costs an economy incurs as more of one good and less of another is produce

c

Q2 -The price elasticity of demand for a vertical demand curve: A. depends on where a point is on the demand curve. B. is infinite C. 0 D. 1

c

Q2 . All of the following are examples of physical capital EXCEPT A) buildings. B) machinery. C) company stocks and bonds. D) a hydroelectric power plant.

c

Q2- Which of these pairs are complementary? A) apples and tomatoes B) tea and coffee C) flashlights and batteries D) ponchos and enchiladas

c

Q3. The production possibilities curve represents A) the maximum amount of labor and capital available to society. B) the combinations of goods and services among which consumers are indifferent. C) the maximum combination of goods and services that can be produced with fixed resources and technology, given efficient use of the resources. D) the maximum rate of growth of capital and labor in a country.

c

Q4. movement along the production possibilities curve would imply that A) the labor force has grown. B) productivity has increased. C) society has chosen a different set of outputs. D) productivity has declined because workers are demanding more leisure.

c

Q9. A utility-maximizing consumer will always choose to: A. minimize expenditures. B. maximize marginal utility. C. maximize total utility. D. consume all of the good that provides the highest utility per unit

c

WHICH OF THE FOLLOWING IS AN EXPLICIT COST? A. CAPITAL DEPRECIATION B. REDUCTION IN HOME VALUES C. LOST PROFIT OPPORTUNITIES D. DEPLETION OF BUSINESS ASSETS

c

a wedding planner determines that one waiter can serve 30 guests, two waiters can serve 70 guests, three waiters can serve 120 guests, four waiters can serve 160 guests, and five waiters can serve 180 guests. The marginal product of the third waiter is _____ guests. A) 36 B) 40 C) 50 D) 120

c

4. Dan's Car Wash produces $150,000 in revenues and incurs $120,000 in labor wages, materials, rent, and other explicit costs. Moreover, Dan gave up a $40,000-a-year job as a hotel valet to start his car wash business. Dan's economic profit is _____, and he _____ earning a normal profit. A) $30,000; is B) $30,000; is not C) - $10,000; is D) - $10,000; is not

d

By going to school an individual will obtain which resource? A) Money B) Physical capital C) Knowledge D) Human capital

d

Q1 -The best way to combat illegal drug use is to A) raise the price by enforcing tougher laws. B) provide additional treatments to reduce addiction. C) provide subsidies to dealers so they can give drugs to preschoolers. D) A and B are both correct.

d

Q3- Apple just launched the iPhone 11. Holding all other things constant, how does this affect the demand for the iPhone 10? A) The quantity supplied will decrease. B) The quantity supplied will increase. C) The quantity demanded is not affected by the iPhone 10 rollout. D) The demand for the iPhone 10 decreas

d

Q5. The production possibilities curve can shift inward when A) production increases. B) employment increases. C) the stock of productive capital rises. D) a country experiences a natural disaster.

d

When price ceiling for a good is set below the free market equilibrium the result is a(n): A. supply. B. equilibrium. C. surplus. D. shortage.

d

jonathan purchased coffee for $5 at Jennifer's coffee shop; however, he was willing to pay $9. Jennifer was willing to accept $3 for the coffee. The results of this transaction are a consumer surplus of: A. $12 and a producer surplus of $10. B. $10 and a producer surplus of $12. C. $2 and a producer surplus of $4. D. $4 and a producer surplus of $2.

d

elasticity of demand formula

e(d) = ((Q2-Q1)/Q1) / ((P2-P1)/P1)

is this micro or macro

heelt packard announces that it is lowering the price of its printers by 15% A: Micro the president proposes a tax cut. A: Mac you decide look for a new job. A: mic the economy is in recession, and the job market is bad. A: Macro the federal reserve announces that it is raising interest rates because it fears inflation A: macro you get a nice raise micro A: micro average wages grew by 2% last year A:Macro Lawmakers are discussing how to keep unemployment A: Macroeconomics Executives at general motors are discussing whether raising prices will lead to higher profits A: Micro