Eco
If the demand for cucumbers falls when the price of tomatoes rises, then we know that tomatoes and cucumbers are:
complements.
Marginal cost is calculated as:
the change in total cost divided by the change in output.
Which of the following statements about implicit costs is true?
They measure the forgone opportunities of the firm's owners.
Ted can wax a car in 20 minutes or wash a car in 60 minutes. Tom can wax a car in 15 minutes or wash a car in 30 minutes. Who has a comparative advantage in washing cars?
Tom
Suppose we observe an increase in both the equilibrium price and quantity of bread. This is best explained by:
a decrease in the price of butter, a complement to bread.
Suppose that the equilibrium price of french fries rises while the equilibrium quantity falls. The most likely explanation for these changes is:
a decrease in the supply of french fries.
Suppose Mary is willing to pay up to $15,000 for a used Ford pick-up truck. If she buys one for $12,000, her ______ would be ______.
economic surplus; $3,000
If price is above the equilibrium price, then there will be:
excess supply.
The championship game will be held next weekend in your college's 40,000-seat stadium. The supply of tickets to the game:
is perfectly inelastic.
A variable factor of production:
is variable in both the short run and the long run.
Suppose farmers in a given market can either grow soy beans or corn on their land. In addition, suppose an increase in the demand for corn causes the price of corn to increase. In the long run, this increase in the demand for corn is likely to ______ the price of soy beans.
lead to an increase in
If Terry's total utility is maximized when he owns 10 pairs of shoes, then Terry's total utility from owning 7 pairs of shoes is ______ Terry's total utility from owning 8 pairs.
less than
Moe divides his time between studying Physics and studying Economics. His production possibilities curve for his final grade in each class is shown in the accompanying figure. If Moe moves from Point A to point C, his grade in Physics will go down by ______ his grade in economics.
less than the increase in
Refer to the accompanying figure. At P = 8 and Q = 4, D1 is ______ elastic than D2, which is shown graphically as D1 being _____ D2.
less; steeper than
Moe divides his time between studying Physics and studying Economics. His production possibilities curve for his final grade in each class is shown in the accompanying figure. The Principle of Increasing Opportunity Cost is reflected in the fact that the opportunity cost going from 70 to 80 in economics is:
lower than the opportunity cost of going from 80 to 90 in economics.
Efficiency is an important goal because when markets are efficient:
there are more resources available to achieve other goals.
If the marginal utility of the 3rd cup of coffee is 23 and the marginal utility of the 4th cup is 15, then:
there is evidence of diminishing marginal utility.
If marginal utility is positive, then as consumption increases:
total utility will increase.
Suppose that total expenditures for coffee reach a maximum at a price of $5 per pound. At this price, the demand for coffee is: Multiple Choice
unit elastic.
Suppose that in an effort to help single parents, the government decides to pay part of the cost of childcare. This measure would increase ______ in the market for childcare
consumer surplus
The accompanying graph shows the cost curves for Moe's mushroom gathering business, which is perfectly competitive. Moe's short run supply curve is:
curve A above curve C.
Refer to the accompanying figure. An increase in demand is represented by a shift from:
curve C to curve D.
Suppose Cathy and Lewis work in a bakery making pies and cakes. Suppose it takes Cathy 1.5 hours to make a pie and 1 hour to make a cake, and suppose it takes Lewis 2 hours to make a pie and 1.5 hours to make a cake. What is the opportunity cost to Cathy of making a cake?
2/3 of a pie.
If the quantity demanded of a good is Q when the price for the good is P, the price elasticity of demand for that good at that point is:
(P/Q) × (1/slope)
If the absolute value of slope of the demand curve is 2.5, price is $6 per unit, and the quantity demanded is 8 units, then the price elasticity of demand is:
0.3.
Refer to the accompanying graph. What is the price elasticity of demand when the price of rice is $3 per pound?
0.5
Dent 'n' Scratch Used Cars and Trucks employs 3 salesmen. Data for their sales last month are shown in this table: Cars Sold Larry 10 Joe 9 Ralph 3 Trucks Sold Larry 5 Joe 9 Ralph 12 Based on last month's data, Joe's opportunity cost of selling a truck is selling:
1 car.
Refer to the accompanying figure. When the price is equal to 8, the price elasticity of demand for the demand curve D1 is ______ and for D2 the price elasticity of demand is _____.
1; 4
The accompanying table below shows how total donations, average donations, total labor costs and average labor costs vary depending on the number of employees State U hires for its fundraising activities. Number of EmployeesTotal DonationsAverage DonationsTotal Labor CostsAverage Labor Costs1$30,000 $8,0002$42,426 $17,000 3 $17,321$27,000 4$60,000 $9,5005 $13,416$50,000 The net benefit of hiring fundraisers is largest when ______ employees are hired.
2
Refer to the accompanying table below. According to the Cost-Benefit Principle, how many units of this activity should be carried out? Units of Activity 0 1 2 3 4 5 6 7 Total Cost 0 2 6 12 20 30 42 56 Total Benefit 0 12 22 30 36 40 42 43
3
If Jane works for 6 hours she can rent out 9 apartments, and if she works for 7 hours she can rent out 12 apartments. The marginal benefit of Jane's 7th hour of work equals:
3 apartments
Refer to the accompanying figure. For Chris, the opportunity cost of removing one bag of trash is planting:
3 bulbs.
Refer to the accompanying table. As the firm increases the number of employees per day each day from 1 to 2, output increases by: Output Per DayNumber of Employees Per Day00331662994132716511
33 units.
If a one percent increase in the price of oranges leads to a five percent increase in the quantity supplied, the price elasticity of supply for oranges is ______.
5
The accompanying graph depicts demand. The price elasticity of demand at point A is:
5/2.
The figure below depicts the short-run market equilibrium in a perfectly competitive market and the cost curves for a representative firm in that market. Assume that all firms in this market have identical cost curves. The long-run market equilibrium quantity in this industry is:
500.
What might cause a demand curve to shift to the right?
An increase in the price of a substitute
Refer to the figure below. When the market is unregulated, consumer surplus is represented by the area:
ABC
Which of the following is a defining characteristic of all perfectly competitive markets?
All firms sell the same standardized product.
Suppose Sansa and Arya divide their time between making daggers and shields. It takes Sansa 6 hours to make a dagger and 3 hours to make a shield, and it takes Arya 3 hours to make a dagger and 1 hour to make a shield. Sansa and Arya each work 30 hours a week. d. Who has the absolute advantage in making daggers?
Arya
Suppose that, in an attempt to entice citizens to conserve energy, the government enacted regulations requiring that all air conditioners be more efficient in their use of electricity. After this regulation was implemented, government officials were then surprised to discover that people used even more electricity than before. Using the concept of price elasticity, which of the following statements best explains how this increase might have occurred?
Because the regulation effectively reduced the price of cool air, consumers with sufficiently elastic demand might have bought substantially more of it.
The accompanying graph shows the cost curves for Moe's mushroom gathering business, which is perfectly competitive. In the graph above, the average variable cost curve is labeled _____, the average total cost curve is labeled _____, and the marginal cost curve is labeled ______.
C; B; A
Suppose it takes Dan 5 minutes to make a sandwich and 15 minutes to make a smoothie, and it takes Tracy 6 minutes to make a sandwich and 12 minutes to make a smoothie. Which of the following statements is correct?
Dan should specialize in sandwiches, and Tracy should specialize in smoothies.
let MUc denote the marginal utility that Pablo receives from a cup of coffee, and let Pc denote the price of a cup of coffee. We typically expect that as Pablo buys more coffee:
MUc/Pc will fall.
The cross-price elasticity of demand between two goods that are substitutes can never be:
negative.
Is the demand for a particular brand of car, like a Chevrolet, likely to be more or less price-elastic than the demand for all cars?
It's likely to be more price-elastic because of the availability of substitutes .
Suppose Martha and Julia both work at a bakery making bread and muffins. In an hour, Martha can either make 10 loaves of bread or 40 muffins, while Julia can either make 12 loaves of bread or 60 muffins. Both Martha and Julia work 8 hours a day. f. Who has the absolute advantage in making bread?
Julia
Suppose Martha and Julia both work at a bakery making bread and muffins. In an hour, Martha can either make 10 loaves of bread or 40 muffins, while Julia can either make 12 loaves of bread or 60 muffins. Both Martha and Julia work 8 hours a day. e. Who has the comparative advantage in making bread?
Martha
Suppose Martha and Julia both work at a bakery making bread and muffins. In an hour, Martha can either make 10 loaves of bread or 40 muffins, while Julia can either make 12 loaves of bread or 60 muffins. Both Martha and Julia work 8 hours a day. c. What is the opportunity cost to each of making one loaf of bread?
Martha's opportunity cost of making a loaf of bread: 4 muffins Julia's opportunity cost of making a loaf of bread: 5 muffins
When Joe's Gas raises its price for regular unleaded gasoline, total revenue from regular unleaded gas falls to zero. It must be the case that
the demand for Joe's regular unleaded gasoline is perfectly elastic.
Calculate the price elasticity of demand (in absolute value) at points A, B, C, D, and E on the demand curve below.
Point Elasticity A Infinity B 3 C 1 D 1/3 or 0.33 E 0
Suppose Sansa and Arya divide their time between making daggers and shields. It takes Sansa 6 hours to make a dagger and 3 hours to make a shield, and it takes Arya 3 hours to make a dagger and 1 hour to make a shield. Sansa and Arya each work 30 hours a week. c. Who has the comparative advantage in making daggers?
Sansa
If fast food is an inferior good then:
the demand for fast food will fall as income rises.
Each day, Ted can wax 4 cars or wash 12 cars, and Tom can wax 3 cars or wash 6 cars. Who has a comparative advantage in washing cars?
Ted
Among the following groups—senior executives, junior executives, and students—which is likely to have the most and which is likely to have the least price elastic demand for membership in the Association of Business Professionals?
The group with the most price elastic demand: students he group with the least price elastic demand: senior executives
Nancy and Bill are auto mechanics. Nancy takes 4 hours to replace a clutch and 2 hours to replace a set of brakes. Bill takes 6 hours to replace a clutch and 2 hours to replace a set of brakes. State whether anyone has an absolute advantage at either task and, for each task, identify who has a comparative advantage.
The opportunity cost of replacing a set of brakes for Nancy is .5 of a clutch replacement. The opportunity cost of replacing a set of brakes for Bill is .33 of a clutch replacement. Bill has a comparative advantage in brake replacement. Nancy has a comparative advantage in clutch replacement. Neither has an absolute advantage in brake replacement. Nancy has an absolute advantage in clutch replacement.
Refer to the accompanying figure. Assume the market is originally at point W. Movement to point X is the result of:
an increase in demand and an increase in quantity supplied.
Suppose you observe an increase in the equilibrium price of coffee and a decrease in the equilibrium quantity of coffee. Of the options listed below, this is most consistent with:
an increase in the cost of producing coffee.
A technological innovation that reduces a firm's cost of producing additional units of output will lead to:
an increase in the firm's supply.
Refer to the accompanying table. The law of diminishing marginal utility: UnitsMarginal Utilityof Good AMarginal Utilityof Good B1304022733315244814
applies to both Good A and Good B.
Susan can pick 4 pounds of coffee beans in an hour or gather 2 pounds of nuts. Tom can pick 2 pounds of coffee beans in an hour or gather 4 pounds of nuts. Each works 6 hours per day. d. The combination of 30 pounds of coffee beans and 12 pounds of nuts per day is
attainable and efficient
As price increases, firms in a perfectly competitive market find that it is:
beneficial to produce more units of output.
Refer to the accompanying figure. Suppose a law is passed requiring restaurants to charge no more than $25 per meal. This law would:
decrease producer surplus.
As the price of flour (an input in the production of cookies) increases, firms that produce cookies will:
decrease the supply of cookies.
As Lynn eats more pizza, we would typically expect her marginal utility from eating pizza to:
decrease.
All else equal, a decrease in the demand for oranges will lead to a(n) ______ in equilibrium price and a(n) ______ in equilibrium quantity.
decrease; decrease
One reason the demand curve slopes ______ is that as prices fall ______.
downward; more people find that the price is now less than their reservation price.
If the owners of a business are receiving total revenues just sufficient to cover all of their explicit and implicit costs, then they are:
earning a normal profit.
A price ceiling that is set above the equilibrium price will result in:
no change in total economic surplus.
If the demand for steak increases as income increases, then steak is a(n):
normal good.
If the demand curve for a good is a vertical line at Q = 1, then a decrease in the price of that good will:
not change the quantity demanded.
the price elasticity of supply for the Hope Diamond is zero because there is only one. Therefore, the supply curve for the Hope Diamond is
perfectly inelastic.
When the supply curve shifts to the left and there is no change in demand:
the equilibrium price will rise.
Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The accompanying table describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day. Employee-Hours Per DayOutput Per Day0014048091201516023200 When the firm uses 9 employee-hours per day, it earns a daily ______ of ______.
profit; $64
Refer to the given table. Price Per Unit 40 45 50 55 60 Column A Units Per Year 110 95 80 65 50 Column B Units Per Year 40 50 60 70 80 Suppose the columns in this table reflect demand and supply. If the current market price is $50, then you would expect:
the market price to rise.
Kamryn is deciding between three potential activities on Saturday evening: 1) Staying at home and watching her favorite television show, an activity that she values at $18 and that entails no out-of-pocket costs. 2) Going to the movies with her sister to see the latest blockbuster action film, an activity she values at $30 and that entails $15 in out-of-pocket costs. 3) Going out to dinner with her best friend, an activity she values at $40 and that entails $23 in out-of-pocket costs. b) What is Kamryn's opportunity cost of going to the movies?
$ 33
The price elasticity of supply for basmati rice (an aromatic strain of rice) is likely to be which of the following?
Higher in the long run than the short run, because farmers cannot easily change their decisions about how much basmati rice to plant once the current crop has been planted.
Suppose that the ingredients required to bring a slice of pizza to market and their respective costs are as listed in the table: IngredientsCostPaper plate2 centsFlour8 centsTomato sauce20 centsCheese30 centsLabor (3 minutes @ $12/hour)60 cents
If these proportions remain the same no matter how many slices are made, and the inputs can be purchased in any quantities at the stated prices, then the supply of slices is perfectly elastic Correct, and the price elasticity of supply is infinite Correct.
Lou and Alex live together and share household chores. They like to cook some meals ahead of time and eat leftovers. The accompanying table shows the number of rooms they can each clean and the number of meals they can each cook in an hour. Rooms Cleaned Per HourMeals Cooked Per HourLou54Alex33 Which of the following is true?
Lou has a comparative advantage over Alex in cleaning.
Suppose Martha and Julia both work at a bakery making bread and muffins. In an hour, Martha can either make 10 loaves of bread or 40 muffins, while Julia can either make 12 loaves of bread or 60 muffins. Both Martha and Julia work 8 hours a day. g. Suppose you are the owner of the bakery. If Julia and Martha are currently both spending all of their time making muffins, then which of them should you ask to start making bread?
Martha because her opportunity cost of making bread is lower than Julia's.
Susan can pick 4 pounds of coffee beans in an hour or gather 2 pounds of nuts. Tom can pick 2 pounds of coffee beans in an hour or gather 4 pounds of nuts. Each works 6 hours per day. b. Now suppose Susan and Tom were gathering the maximum number of pounds of nuts when they decided that they would like to begin picking 8 pounds of coffee beans per day.
Who would pick the coffee beans? Susan How many pounds of nuts would they still be able to gather? 32 pounds of nuts per day.
To earn extra money in the summer, you grow tomatoes and sell them at a local farmers' market for $0.30 per pound. By adding compost to your garden, you can increase your yield as shown in the accompanying table. Pounds of compost 0 1 2 3 4 5 6 Pounds of tomatoes 100 120 125 128 130 131 131.5 Additional pounds of tomatoes - 20 5 3 2 1 .5 Additional revenue (or marginal benefit) 6 If compost costs $0.50 per pound and your goal is to make as much profit as possible, how many pounds of compost should you add?
You should add 4 pounds of compost.
Refer to the given table. The equilibrium price in this market is: Price Per Unit 20 30 40 50 60 Column A Units Per Year 100 95 80 65 50 Column B Units Per Year 40 50 60 70 80
between $40 and $50.
Suppose a cup of tea costs $0.60 and a scone costs $1.20. If Edith spends all of her income on these two goods, and at her current level of consumption, she receives a marginal utility of 6 utils from the last cup of tea she buys and a marginal utility of 24 utils from the last scone she buys, then Edith should:
buy less tea and more scones.
If the demand for gadgets increases as a result of a decrease in the price of widgets, the widgets and gadgets are:
complementary goods.
If the cross-price elasticity of demand between blueberries and yogurt is negative, then the two goods are:
complements.
Refer to the accompanying figure. Assume the slopes of the two demand curves are the same. Let eA denote the price elasticity of demand at point A, and let eB denote the price elasticity of demand at point B. Which of the following statements is correct?
eA > eB
If the absolute value of the slope of the demand curve is 0.25, price is $8 per unit, and quantity demanded is 12 units, then demand for this good is:
eastic.
Suppose farmers in a given market can either grow soy beans or corn on their land. In addition, suppose an increase in the demand for corn causes the price of corn to increase. As a result of the increase in the price of corn, farmers who were already growing corn will earn an:
economic profit in the short run.
When the demand curve shifts to the right and supply doesn't change:
equilibrium quantity will rise.
Suppose that when the price of broccoli is $4 per pound, buyers wish to buy 500 pounds per day and sellers wish to sell 800 pounds per day. In this case:
excess supply will lead the price of broccoli to fall.
Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive. If the market supply curve is given by S3, then in the long run firms will:
exit the market, leading the market supply curve to shift back to S2.
In a free market economy, the decisions of buyers and sellers are:
guided by prices.
An imperfectly competitive firm is one that:
has at least some influence over the market price.
Mary Jane is willing to babysit for $6 an hour. Her neighbor has asked her to babysit for $8 an hour. Assuming Mary Jane accepts the offer:
her economic rent will be $2 per hour.
During Thanksgiving you participated in a pumpkin-pie eating contest. You really enjoyed the first two pies, the third one was okay, but as soon as you ate the fourth one you became ill and lost the contest. Your total utility ______ with the first three pies you ate.
increased
If the demand curve for bologna shifts to the right as income falls then bologna is a(n):
inferior good.
If a demand curve is horizontal at P = $5, then the price elasticity of demand is:
infinite.
Suppose you drive a car that gets good gas mileage, and you notice that more and more people are driving gas-guzzling cars. Their increased demand for gas:
is likely to cause the price you pay for gas to increase.
If supply increases and demand decreases, the new equilibrium price will be ______ and the new equilibrium quantity will be ______.
lower; uncertain
A firm that produces a good with many substitutes will most likely find that:
lowering its price will increase total revenue.
In general, perfectly competitive firms maximize their profit by producing the level of output at which:
marginal cost equals price.
During Thanksgiving you participated in a pumpkin-pie eating contest. You really enjoyed the first two pies, the third one was okay, but as soon as you ate the fourth one you became ill and lost the contest. You got ______ utility from eating the first pie than from eating the third pie.
more
Points that lie below the production possibilities curve are inefficient because:
more of one good could be produced without producing less of the other.
Refer to the accompanying figure. If the market for doughnuts is perfectly competitive, and the price of a doughnut is 25 cents, then at this firm's profit maximizing level of output, the firm will earn an economic ______ of ______ per day.
profit; $8
Ingrid has been waiting for the show "Mamma Mia!" to come to town. When it finally does come, tickets cost $60. Ingrid's reservation price is $75. But when Ingrid tries to buy a ticket, they are sold out. Ingrid decides to try to buy a ticket from a scalper (a person who purchased extra tickets at the box office with the intent to resell them at a higher price). If Ingrid finds someone who is willing to sell her a ticket for $70, she should:
purchase the ticket because doing so will make her $5 better off.
If there is an excess supply of sport utility vehicles, then:
quantity supplied is greater than quantity demanded.
If the supply curve and the demand curve both shift to the left, then the new equilibrium:
quantity will be lower, but the direction of the price change is uncertain.
Jessica's marginal cost for producing a pitcher of lemonade is $0.25. Therefore, $0.25 is her:
reservation price.
Refer to the accompanying figure. Suppose that James' initial budget constraint shifts from BC1 to BC2, and as a result, his best affordable bundle moves from point A to point B. According to this figure:
spinach and potatoes are substitutes.
The figure below shows the supply and demand curves for jeans in Smallville. At a price of $60 per pair, there will be an excess ______ of ______ pairs of jeans per day.
supply; 16
The idea that tradeoffs have to be made when resources are scarce is reflected in the fact that:
the production possibilities curve has a negative slope.
Jen spends her afternoon at the beach, paying $1 to rent a beach umbrella and $11 for food and drinks rather than spending an equal amount of money to go to a movie. Her opportunity cost of going to the beach is:
the value she places on seeing the movie.
Growing rice requires extensive irrigation in California. Economists consider water to be a ______ for rice farmers in California.
want
A price ceiling that is set above the equilibrium price:
will have no effect on the market.
Susan can pick 4 pounds of coffee beans in an hour or gather 2 pounds of nuts. Tom can pick 2 pounds of coffee beans in an hour or gather 4 pounds of nuts. Each works 6 hours per day. Assume that Tom and Susan specialize according to their comparative advantage to produce coffee beans and nuts. Using the world market and the prices described above, would it be possible for Susan and Tom to consume 40 pounds of nuts and 8 pounds of coffee beans each day?
yes
Kamryn is deciding between three potential activities on Saturday evening: 1) Staying at home and watching her favorite television show, an activity that she values at $18 and that entails no out-of-pocket costs. 2) Going to the movies with her sister to see the latest blockbuster action film, an activity she values at $30 and that entails $15 in out-of-pocket costs. 3) Going out to dinner with her best friend, an activity she values at $40 and that entails $23 in out-of-pocket costs. c) Relative to her next best alternative, what is Kamryn's economic surplus from going to the movies?
$ -3
You have two options for how to spend the afternoon. You can either go see a movie with your roommate or work as a tutor for the Math Department. From experience, you know that going to see a movie gives you $20 worth of enjoyment, and with your student discount, a movie ticket only costs $12. If you spend the afternoon working as a math tutor, you will get paid $45. On a typical day, you wouldn't be willing to spend the afternoon working as a math tutor for less than $35. What is your opportunity cost of seeing a movie this afternoon?
$22
Refer to the figure below. If a price ceiling were imposed at $4, total economic surplus would be ______, which is ______ less than when the market is unregulated market.
$24; $8
Refer to the accompanying table below. The average cost of 4 units of this activity is: Units of Activity 0 1 2 3 4 5 6 Total Cost 0 30 40 60 100 150 210 Total Benefit 0 100 160 190 210 220 225
$25
Moe's reservation price for his economics textbook is $100. The week before the semester begins, Moe finds a copy of his textbook online for $75. Moe's consumer surplus from buying the textbook online is:
$25.
Refer to the accompanying figure. The equilibrium price in this market is ______ and the equilibrium quantity is ______.
$30; 25
You paid $35 for a ticket (which is non-refundable) to see SPAM, a local rock band, in concert on Saturday. Assume that $35 is the most you would have been willing to pay for a ticket. Your boss called, and she is looking for someone to cover a shift on Saturday at the same time as the concert. You would have to work 4 hours and she would pay you $11/hr. The psychic cost to you of working is $2/hr. What is your opportunity cost of going to work on Saturday?
$35
Amy is thinking about going to the movies tonight. A movie ticket costs $15, and she'll have to cancel a $20 dog-sitting job that she would have been willing to do for free. The opportunity to Amy cost of going to the movies is:
$35.
You paid $35 for a ticket (which is non-refundable) to see SPAM, a local rock band, in concert on Saturday. Assume that $35 is the most you would have been willing to pay for a ticket. Your boss called, and she is looking for someone to cover a shift on Saturday at the same time as the concert. You would have to work 4 hours and she would pay you $11/hr. The psychic cost to you of working is $2/hr. What is the opportunity cost of going to the concert?
$36
Refer to the figure below. If a price ceiling were imposed at $4, producer surplus would be:
$4.
Last year Christine worked as a consultant. She hired an administrative assistant for $15,000 per year and rented office space (utilities included) for $3,000 per month. Her total revenue for the year was $100,000. If Christine hadn't worked as a consultant, she would have worked at a real estate firm earning $40,000 a year. Christine's opportunity cost of working as a consultant last year was ______.
$40,000
Refer to the accompanying figure. What is the equilibrium price of bananas in this market?
$5/pound
John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the accompanying table. Time cleaning windows (hours/day)Total number of windows cleaned0017211314416517 The first hour John spends cleaning windows costs him ______ that he could have earned in the grocery store.
$7
Refer to the accompanying table below. The marginal cost of the 4th unit of activity is: Units of ActivityTotal CostTotal Benefit0$0$01$2$122$6$223$12$304$20$365$30$406$42$427$56$43
$8
Susan can pick 4 pounds of coffee beans in an hour or gather 2 pounds of nuts. Tom can pick 2 pounds of coffee beans in an hour or gather 4 pounds of nuts. Each works 6 hours per day. Assume that Tom and Susan specialize according to their comparative advantage to produce coffee beans and nuts.a. Suppose that Susan and Tom could buy or sell coffee beans and nuts in the world market at a price of $2 per pound for coffee beans and $2 per pound for nuts. If each person specialized completely in the good for which he or she had a comparative advantage, how much could they earn by selling all they produce (Tom's earnings plus Susan's earnings)?
$96 per day
Consider a society consisting only of Helen, who allocates her time between sewing dresses and baking bread. Each hour she devotes to sewing dresses yields 4 dresses and each hour she devotes to baking bread yields 8 loaves of bread. Suppose that a sewing machine is introduced that enables Helen to sew 8 dresses per hour rather than only 4. c. "An increase in productivity with respect to any one good increases our options for producing and consuming all other goods." Which of the following best explains the meaning of that statement?
An increase in output per hour for any one good frees up resources that can be devoted to the production of other goods.
Suppose Martha and Julia both work at a bakery making bread and muffins. In an hour, Martha can either make 10 loaves of bread or 40 muffins, while Julia can either make 12 loaves of bread or 60 muffins. Both Martha and Julia work 8 hours a day. d. What is the opportunity cost to each of making one muffin?
Martha's opportunity cost of making a muffin: .25 loaves of bread Julia's opportunity cost of making a muffin: .2 loaves of bread
Refer to the accompanying table. ______ has the comparative advantage in making pies and ______ the comparative advantage in making cakes. Time to Make a Pie Martha 60 minutes Julia 50 minutes Time to Make a Cake Martha 80 minutes Julia 60 minutes
Martha; Julia
Susan can pick 4 pounds of coffee beans in an hour or gather 2 pounds of nuts. Tom can pick 2 pounds of coffee beans in an hour or gather 4 pounds of nuts. Each works 6 hours per day.a. Together, what is the maximum number of pounds of coffee beans the two can pick in a day? What is the maximum number of pounds of nuts the two can gather in a day?
Maximum amount of coffee beans: 36 pounds per day Maximum amount of nuts: 36 pounds per day
Suppose the market demand curve is given by Qd = 80 - 10P, and the market supply curve is given by Qs = 10 + 15P. What is the equilibrium price and quantity?
P* = $2.80 and Q* = 52
Pat can either drive to work, which takes half an hour and uses $1.50 worth of gas, or take the bus, which takes an hour and costs $1.00. How should Pat get to work?
Pat should drive if saving half an hour is worth $0.50 or more.
Suppose Sansa and Arya divide their time between making daggers and shields. It takes Sansa 6 hours to make a dagger and 3 hours to make a shield, and it takes Arya 3 hours to make a dagger and 1 hour to make a shield. Sansa and Arya each work 30 hours a week. b. What is the opportunity cost to each of making a dagger?
Sansa's opportunity cost of making a dagger: 2 shields Arya's opportunity cost of making a dagger: 3 shields
Suppose that in the last few seconds you devoted to question 1 on your physics exam you earned 4 extra points, while in the last few seconds you devoted to question 2 you earned 10 extra points. You earned a total of 48 and 12 points, respectively, on the two questions, and the total time you spent on each was the same. If you could take the exam again, how—if at all—should you reallocate your time between these questions?
Spend more time on question 2. You'll get more extra points on question 2 than you'll lose on question 1.
Kamryn is deciding between three potential activities on Saturday evening: 1) Staying at home and watching her favorite television show, an activity that she values at $18 and that entails no out-of-pocket costs. 2) Going to the movies with her sister to see the latest blockbuster action film, an activity she values at $30 and that entails $15 in out-of-pocket costs. 3) Going out to dinner with her best friend, an activity she values at $40 and that entails $23 in out-of-pocket costs. a) Which activity should Kamryn choose?
Staying at home and watching her favorite show
Each day, Ted can wax 4 cars or wash 12 cars, and Tom can wax 3 cars or wash 6 cars. What is each man's opportunity cost of washing a car?
Ted's opportunity cost of washing one car is .33 wax jobs. Tom's opportunity cost of washing one car is .5 wax jobs.
Which of the following is the most likely to be a fixed factor of production at a pizza restaurant?
The size of the seating area
Shelly purchases a leather purse for $400. One can infer that:
her reservation price was at least $400.
If your income elasticity of demand for hot dogs is negative, then:
hot dogs are an inferior good for you.
Consider a society consisting only of Helen, who allocates her time between sewing dresses and baking bread. Each hour she devotes to sewing dresses yields 4 dresses and each hour she devotes to baking bread yields 8 loaves of bread. Suppose that a sewing machine is introduced that enables Helen to sew 8 dresses per hour rather than only 4. b. Using the graph above, indicate if the following points are attainable and/or efficient before and after the introduction of the sewing machine.
i. 16 dresses per day, 48 loaves per day: Unattainable before the sewing machine and attainable and efficient after its introduction. ii. 24 dresses per day, 16 loaves per day: Attainable and efficient before the sewing machine and attainable and inefficient after its introduction.
For a given seller, the accompanying figure shows the relationship between the number of units produced and the opportunity cost of producing an additional unit of output. As the market price of this good increases, the quantity produced by this seller will ______.
increase
As the market price of a service increases, more potential sellers will decide to perform that service because:
more potential sellers will find that the market price exceeds their reservation price.
Normative economic principles are concerned with how people ______ make decisions while positive economic principles are concerned with how people ______ make decisions.
should; do
Suppose that when a firm produces the level of output at which price equals marginal cost, the firm's total revenue is less than its variable cost. In this case, the firm should:
shut down.
Refer to the accompanying figure. Suppose the solid line shows the current demand curve for coffee. In response to an announcement that much of next year's coffee crop has been destroyed by a storm in Brazil, you should expect:
the demand curve to shift to D(B) in anticipation of higher future prices.
Susan can pick 4 pounds of coffee beans in an hour or gather 2 pounds of nuts. Tom can pick 2 pounds of coffee beans in an hour or gather 4 pounds of nuts. Each works 6 hours per day. Would it be possible for Susan and Tom in total to gather 26 pounds of nuts and pick 20 pounds of coffee beans each day? If so, how much of each good should each person pick?
yes Coffee Beans Tom 0 pounds Susan 20 pounds Nuts Tom 24 pounds Susan 2 pounds
Suppose that there is only one small clothing store in the remote village of Green Acres, and until recently the townspeople bought their shirts there. As more people in Green Acres become connected to the Internet, the price elasticity of demand for shirts at the Green Acres store will:
increase because the Internet offers more substitutes.
For the fall semester, you had to pay a nonrefundable fee of $600 for your meal plan, which gives you up to 150 meals. If you eat 100 meals, your marginal cost of the 100th meal is:
$0.
Suppose a small island nation imports sugar for its population at the world price of $1,500 per ton. The domestic market for sugar is shown below. If the government provides a subsidy of $500 per ton, the equilibrium price of sugar will be ______ per ton, and the equilibrium quantity will be ______ tons per day
$1,000; 12
Suppose Sarah owns a small company that makes wedding cakes. The accompanying table shows how Sarah's total cost varies depending on the number of wedding cakes she makes each day. Number of Cakes Per DayTotal Cost Per Day0$1001$1802$2203$3004$4005$5206$660 Sarah's fixed cost is ______ per day.
$100
Pat earns $25,000 per year (after taxes), and Pat's spouse, Chris, earns $35,000 (after taxes). They have two pre-school-aged children. Childcare for their children costs $12,000 per year. Given that Chris doesn't want to stay home with the kids, regardless of what Pat does, Pat should stay home with the kids if, and only if, the value of Pat spending more time with the kids is greater than:
$13,000 per year.
Refer to the figure below. If this market is unregulated, the economic surplus received by consumers is:
$16.
Refer to the figure below. If this market is unregulated, the economic surplus received by producers is:
$16.
Refer to the accompanying table below. The marginal benefit of the 6th unit of activity is: Units of Activity 0 1 2 3 4 5 6 7 Total Cost 0 2 6 12 20 30 42 56 Total Benefit 0 12 22 30 36 40 42 43
$2
The accompanying table describes the relationship between the number of workers hired by a call center each hour and the number of calls the call center can make each hour. The call center has only 1 telephone. The telephone costs the firm $5/hour (regardless of how many calls are made), and each worker is paid $10 per hour. Calls Per HourNumber of Telephones Per HourNumber of Workers Per Hour11221461616182211024112 Given the information in the table above, what is the call center's marginal cost when it goes from making 6 to 16 calls an hour?
$2
Refer to the accompanying table below. The marginal cost of the 3rd unit of this activity is: Units of Activity 0 1 2 3 4 5 6 Total Cost 0 30 40 60 100 150 210 Total Benefit 0 100 160 190 210 220 225
$20
Refer to the figure below. If a price ceiling were imposed at $4, consumer surplus would be:
$20.
Refer to the accompanying figure. The equilibrium price is ______, and the equilibrium quantity is ______.
$6; 4
Susan can pick 4 pounds of coffee beans in an hour or gather 2 pounds of nuts. Tom can pick 2 pounds of coffee beans in an hour or gather 4 pounds of nuts. Each works 6 hours per day. Assume that Tom and Susan specialize according to their comparative advantage to produce coffee beans and nuts. b. At the prices just described, what is the maximum amount of coffee beans Susan and Tom could buy each day in the world market with the income they earned? The maximum amount of nuts?
Maximum amount of coffee that could be bought each day: 48 pounds. Maximum amount of nuts that could be bought each day: 48 pounds.
Suppose Sansa and Arya divide their time between making daggers and shields. It takes Sansa 6 hours to make a dagger and 3 hours to make a shield, and it takes Arya 3 hours to make a dagger and 1 hour to make a shield. Sansa and Arya each work 30 hours a week. a. What is the maximum number of daggers each can make in a week?
Sansa:5 daggers per week Arya: 10 daggers per week
Ted can wax a car in 20 minutes or wash a car in 60 minutes. Tom can wax a car in 15 minutes or wash a car in 30 minutes. What is each man's opportunity cost of washing a car?
Ted's opportunity cost of washing one car is 3 wax jobs. Tom's opportunity cost of washing one car is 2 wax jobs.
Suppose the most you would be willing to pay to have a freshly washed car before going out on a date is $6. The smallest amount for which you would be willing to wash someone else's car is $3.50. You are going out this evening and your car is dirty. How much economic surplus would you receive from washing it?
The economic surplus would be $ 2.50
Consider a society consisting only of Helen, who allocates her time between sewing dresses and baking bread. Each hour she devotes to sewing dresses yields 4 dresses and each hour she devotes to baking bread yields 8 loaves of bread. b. Using the graph above, which of the points listed below are attainable and/or efficient?
i. 28 dresses per day, 16 loaves per day: Unattainable ii. 16 dresses per day, 32 loaves per day: Attainable and efficient iii. 18 dresses per day, 24 loaves per day: Attainable and inefficient
Refer to the accompanying figure. If Laura and Chris are the only two consumers in this market, then when the price of hamburger decreases from $2.50 to $2.00 per pound, the quantity demanded in the market will ______ by ______ pound(s) per week.
increase; 1.5
Earth Movers & Shakers operates 3 iron ore mines. The accompanying table shows each mine's total daily production and the current number of miners at each mine. All miners work for the same wage, and each miner in any given mine produces the same number of tons per day as every other miner in that mine. Total Tons Per DayNumber of MinersMother Lode10025Scraping Bottom3010Middle Drift7515 Suppose Earth Movers & Shakers needs to fill an order for 60 tons of ore in a single day. If it has no other orders for that day, it should:
take it all from Middle Drift.
