Econ 201 practice midterm

You have a coupon for a free item at Starbucks. You can have either a cookie, a cappuccino, or an iced tea. You choose the cookie because that is your favorite item. Your second choice would have been the iced tea. What is the opportunity cost of the cookie you chose? A) An iced tea B) Nothing, because it was free C) A cappuccino D) A cookie E) An iced tea and a cappuccino

A) An iced tea

The price of AirPods goes from $100 to $105 dollars. Following this change, consumption goes from 10 million units to 8 million units. What is the elasticity of demand? A) -4 B) -2.5 C) -0.4 D) -5 E) -0.25

A) -4

Which of the following statements is true: A) Demand for mint chocolate chip ice cream is more elastic than the demand for ice cream. B) As consumers get more time to plan their purchases, demand becomes more inelastic. C) When it became easy to search for car insurance online, demand for car insurance became more inelastic. D) Goods considered necessities typically have elastic demand.

A) Demand for mint chocolate chip ice cream is more elastic than the demand for ice cream.

The price elasticity of demand for a good with a horizontal demand curve is: A) Perfectly elastic B) Perfectly inelastic C) Ineleastic, but not perfectly inelastic D) Not enough information to determine

A) Perfectly elastic

Consider the market for sunglasses. Demand increases and supply decreases. Which of the following is true? A) Price increases. The effect on quantity is indeterminate. B) Price decreases. The effect on quantity is indeterminate. C) Price decreases. Quantity decreases. D) The effect on price is indeterminate. Quantity decreases. E) Price increases. Quantity decreases.

A) Price increases. The effect on quantity is indeterminate.

Jan has determined that her "Serenity by Jan" candles have an elasticity of demand of -0.35. Which of the following is true: A) Raising the price would increase revenues. B) Decreasing price would increase revenues. C) Demand is elastic. D) A 10% decrease in price would result in a 35% increase in quantity sold.

A) Raising the price would increase revenues.

Sarah runs a snowplow business. Usually, she charges $30 per hour and works 40 hours per week. After a big blizzard, she finds that she has lots more people wanting to hire her than usual. Based on what we've learned in class, what do we expect to happen? (Hint: Think about how the equilibrium price and quantity for Sarah's services will change.) A) She increases her hourly rate and works more hours. B) She keeps her hourly rate the same and works fewer hours. C) She keeps her hourly rate the same and works more hours. D) She increases her hourly rate and works the same number of hours.

A) She increases her hourly rate and works more hours.

The price of beer goes up. Following this price increase, you observe an increase in the amount of bottled water sold. This suggests that beer and bottled water are: A) Substitutes B) Complements C) Normal goods D) Inferior goods

A) Substitutes

Demand slopes down. This implies that: A) There is an inverse (negative) relationship between the price of a good and the quantity demanded. B) There is a positive relationship between the price of a good and the quantity demanded. C) When demand increases, the curve shifts to the left. D) Supply is equal to demand.

A) There is an inverse (negative) relationship between the price of a good and the quantity demanded.

Which of the following is an example of a reason why the supply curve for an oil company slopes up? A) When the company produces a lot of oil, it has to pay its employees overtime, which increases the marginal cost of making oil. B) Oil is a normal good with lots of substitutes. C) Oil is heavily taxed. D) When the price of oil increases, people switch to hybrid cars that use less gasoline, which is made from oil. E) Suppliers know that people need to use oil in order to commute to work, so demand is inelastic.

A) When the company produces a lot of oil, it has to pay its employees overtime, which increases the marginal cost of making oil.

The opportunity costs of attending college include the: A) potential income that could be earned working. B) cost of room and board. C) cost of clothes to wear at school. D) effort and hard work.

A) potential income that could be earned working

A survey of 100 people finds that, when the price of a hat is $15, the people in the survey will buy a total of 75 hats. Suppose the total market size is 10,000 people. When the price of a hat is $15, what is the total number of hats that will be sold in the market? A) 0.75 B) 7,500 C) 1,500 D) 75 E) 10,750

B) 7,500

The diagram above shows three supply curves for apples. Which of the following would cause the supply of apples to shift from S1 to S3? (to the left) A) A decrease in the price of fertilizer that is used to grow apples. B) A new bacteria that destroys apple crops. C) An increase in the price of apples. D) A decrease in the price of apples.

B) A new bacteria that destroys apple crops.

The diagram above shows three supply curves for apples. Apples and peaches are substitutes in production. Which of the following would cause the supply of apples to shift from S1 to S3? (to the left) A) An increase in the price of apples. B) An increase in the price of peaches. C) A decrease in the price of apples. D) A decrease in the price of peaches.

B) An increase in the price of peaches.

You want to get a new iPhone, but you don't want to have the color phone as your friends - you want yours to be unique. All of your friends feel the same way. This suggests that yellow iPhones are: A) Network goods B) Congestion goods C) Inferior goods D) Normal goods

B) Congestion goods

When cell phones first came out, the technology used in them was extremely advanced and made producing cell phones very expensive. Over time, the cost of cell phone components has gone down drastically. Based on what we've learned in class, how do we expect this to affect the price and quantity of cell phones? A) Price decreases and quantity decreases. B) Price decreases and quantity increases. C) Price increases and quantity decreases. D) Price increases and quantity increases.

B) Price decreases and quantity increases.

The cross-price elasticity of demand for good X and good Y is 3.5. This means that: A) X and Y are complements. B) X and Y are substitutes. C) X and Y are both normal. D) X and Y are both inferior.

B) X and Y are substitutes.

It costs $9 to make 5 coffee mugs and $12 to make 6 coffee mugs. What is the marginal cost of the sixth coffee mug? A) $.50 B) $2 C) $3 D) $1.33

C) $3

You are deciding whether to live with your parents in their house or in an on-campus apartment. You can live with your parents for free, but the apartment costs $500 per month. You will have less privacy if you live with your parents. Both places are a 30 minute drive from campus, and you commute to campus every day. Which of the following is an opportunity cost of living in the apartment? A) Having less privacy B) The time you spend commuting C) $500 in rent D) Your college tuition

C) $500 in rent

Use the following graph of the demand for coffee to answer the question below. Refer to the three demand curves for coffee and assume that coffee is a normal good. Which of the following would shift the demand for coffee from D1 to D2? (to the right) A) A decrease in consumer incomes. B) A decrease in the price of coffee. C) An increase in consumer incomes. D) An increase in the price of coffee.

C) An increase in consumer incomes.

n the graphs we saw in class, surpluses occur: A) At the equilibrium price. B) At prices below the equilibrium price. C) At prices above the equilibrium price. D) When quantity demand exceeds quantity supplied.

C) At prices above the equilibrium price.

The Gap increases the price it charges for sweatshirts. As a result, fewer people buy sweatshirts from The Gap. What happened? A) Demand shifted left. B) Demand shifted right. C) Movement up and to the left on the demand curve. D) Movement down and to the right on the demand curve.

C) Movement up and to the left on the demand curve.

The __________ suggests that decisions about quantities are best made incrementally (a little bit at a time). A) cost-benefit principle B) opportunity cost principle C) marginal principle D) interdependence principle

C) marginal principle

Alton is deciding whether to commute to work via Uber or purchase a new car. If he commutes by Uber, he will spend $50 per week in Uber fares. All else equal, Alton prefers the convenience of owning a car and values this convenience at $10 per week. Based on this information, Alton should purchase a car if the cost of a car is _____ than ____ per week. A) More; $40 B) More; $60 C) Less; $40 D) Less; $60

D) Less; $60

Peanut butter and jelly are complements. Due to poor growing conditions, not many strawberries are grown this year, and the price of strawberries increases. Strawberries are an input good used in making jelly. What happens to the market for peanut butter? A) Price increases and quantity increases. B) Price increases and quantity decreases. C) Price decreases and quantity increases. D) Price decreases and quantity decreases. E) Quantity decreases and price is unaffected.

D) Price decreases and quantity decreases.

Sasha has diminishing marginal utility for hot wings. Which of the following must be true: A) She would rather have 10 hot wings than 11 hot wings. B) She does not like hot wings. C) She will eat the number of hot wings that maximizes her marginal benefit. D) She receives more enjoyment from the 10th hot wing than from the 11th hot wing E) The hot wing eaten gives a marginal benefit of zero.

D) She receives more enjoyment from the 10th hot wing than from the 11th hot wing

this problem concerns the market for used electric scooters. At a price of $100 per scooter, there are 100 people wanting to buy scooters and 50 people wanting to sell scooters. According to what we learned in class, what do we expect to happen? A) 50 scooters will be sold at a price of $100 per scooter. B) The price will increase until 100 people are willing to sell scooters. C) Some sellers will offer to sell at a price of less than $100 per scooter. D) Some buyers will offer to pay more $100 per scooter.

D) Some buyers will offer to pay more $100 per scooter.

According to the opportunity cost principle, the true cost of something is: A) The total number of dollars you pay for it. B) The marginal number of dollars you pay for it. C) The benefits you get from it. D) What you give up to get it.

D) What you give up to get it.

Which of the following is NOT true regarding discrimination in labor markets? a. Any differences in wages between members of different racial or age groups is due to discrimination. b. Groups may differ in wages, due to differences in human capital or the types of jobs held. c. Differences in effort or bargaining power across groups can lead to differences in wages across groups. d. Discrimination may result in some workers being underpaid.

a. Any differences in wages between members of different racial or age groups is due to discrimination.

When earnings reflect compensating differentials, workers with _____ human capital earn _____ salaries because _____. a. similar; different; their jobs differ in things like risk or enjoyment b. different; the same; they show different work effort c. similar; the same; adjustments are made to equalize the salaries d. different; different; salaries are based on individual productivity

a. similar; different; their jobs differ in things like risk or enjoyment

The _____ wage resulting from an employer with monopsony power can be offset through _____. a. low; minimum wage laws b. low; discrimination c. high; minimum wage laws d. high; discrimination

a. low; minimum wage laws

Why is a "Nash equilibrium" called an equilibrium? a. The market is at maximum profits, with quantity demanded equal to supply. b. No players can do better by changing his or her own choice alone, so the situation is relatively stable. c. It overcomes market failure to provide the optimum social welfare outcome. d. Costs are minimized, and profits are maximized.

b. No players can do better by changing his or her own choice alone, so the situation is relatively stable.

What changes in a labor market graph if the workers of a company form a union? a. The labor market supply curve shifts to the right. b. The labor market supply curve shifts to the left. c. The labor market demand curve shifts to the right. d. The labor market demand curve shifts to the left.

b. The labor market supply curve shifts to the left.

A company is the only one producing its type of product. The company's owner is able to set price at the most profitable level. This company is in what type of market? a. Oligopoly b. Monopolistic competition c. Monopoly d. Perfect competition

c. Monopoly

Benefits from social safety net programs may come in the forms of: a. cash assistance, expense reimbursements, or in-kind transfers. b. expense reimbursements, tax breaks, or cash assistance. c. cash assistance, tax breaks, or in-kind transfers. d. tax breaks, in-kind transfers, or expense reimbursements.

c. cash assistance, tax breaks, or in-kind transfers.

Price is equal to: a. marginal revenue divided by the quantity sold. b. total revenue divided by average revenue. c. total revenue divided by the quantity sold. d. the quantity sold divided by total revenue.

c. total revenue divided by the quantity sold.

What happens in the labor market for biologists when wages in other occupations fall? a. There is movement along the supply curve to a larger quantity. b. There is movement along the supply curve to a smaller quantity. c. There is a leftward shift of the supply curve. d. There is a rightward shift of the supply curve.

d. There is a rightward shift of the supply curve.

The basic logic behind the Rational Rule for Sellers is that a company owner should increase output as long as the extra output a. moves the company toward maximum total revenue. b. leads to a larger gap between price and average total costs. c. leads the company toward minimum average total costs. d. adds more to revenue than it adds to costs.

d. adds more to revenue than it adds to costs.

An interaction between two or more persons is considered a strategic interaction when: a. all people involved are working together to achieve a common goal best achieved through joint action. b. all people involved have a clear path or action that will give them optimal results regardless of what any other person chooses. c. there is no optimum result possible for anyone in the group, so each person tries to avoid a worst- case scenario. d. an individual's best choice may depend on what the others choose, and others' best choice may depend on what the individual chooses.

d. an individual's best choice may depend on what the others choose, and others' best choice may depend on what the individual chooses.

Education level positively correlates with: a. reliance on transfer payments. b. custodial work. c. job loss. d. average annual income.

d. average annual income.

Market power determines the shape of a firm's: a. market equilibrium. b. marginal revenue curve. c. supply curve. d. demand curve.

d. demand curve.

When an increase in demand for stand-up paddleboards rises, then the demand for skilled paddleboard shapers _____, and their marginal revenue product _____. a. falls; falls b. falls; rises c. rises; falls d. rises; rises

d. rises; rises

The labor demand curve in a labor market a. is based on the workers demanding jobs in the market. b. is based on the firms selling jobs in the market. c. slopes upward. d. slopes downward.

d. slopes downward.

Multiple equilibria exist when: a. there are many different product markets, each with its own equilibrium. b. a market splits in two, so that there are two markets, each with its own equilibrium. c. there are multiple products but one market with one equilibrium for these products. d. there is more than one equilibrium.

d. there is more than one equilibrium.

The opportunity cost of working is a. what you can buy because you worked. b. too high to even consider not working. c. the wage you earn for the time spent working. d. what you would have done during the time if you were not working.

d. what you would have done during the time if you were not working.