Econ Midterm 1
Alice, Amber, and Andi make and sell pottery. Alice is willing to sell a 5 inch pot for $25, Amber is willing to sell a 5 inch pot for $28, and Andi is willing to sell a 5 inch pot for $52. If each of the ladies is able to sell one 5 inch pot for $55, what is their combined producer surplus?
$60
The Acmeville Metropolitan Bus Service currently charges $0.88 for an all-day ticket, and has an average of 472 riders a day. The bus company is not earning a profit, but according to their contract with the city, they cannot cut the number of buses on the road. They must therefore find a way to increase revenues. The bus company is considering increasing the ticket price to $1.1. The marketing department's studies indicate this price increase would reduce usage to 195 riders per day. Calculate the absolute value of the price elasticity of demand for bus tickets using the simple percentage change method.
2.3
Sylvia's annual salary increases from $102,300 to $109,500. Sylvia decides to increase the number of vacations she takes from three to four. Use the midpoint method to calculate her income elasticity of demand for vacations.
4.20
If the price of a 5 inch pot is $35, which of the ladies will sell their pots?
Alice and Amber
An engine supplier decreases the price it charges Nissan by 50%.
As a result, Nissan's cost of production will decrease, and Nissan should increase its supply.
Workers unionize and demand a 12% across-the-board raise.
As a result, the cost of production will increase, and Nissan should decrease its supply.
examples of price floors
a minimum unit price on alcohol, an agricultural price support
Billy's mom increases his weekly allowance by $55. As a result, Billy increases the number of apps he downloads on his smartphone. Smartphone apps are
a normal good
Hair stylist Molly loses a few of her clients. Molly cuts back on the number of smoothies she buys during the week. Smoothies are
a normal good
price floors create surpluses if they are set
above the equilibrium price
Mike is an appliance salesman. Refrigerator sales in his store have fallen and so has his commission. Mike decides to switch from name brand cereal to generic cereal. Generic cereal is
an inferior good
Susan gets a 1515 percent performance bonus at work. She can finally stop eating so many frozen pizzas and eat something more tasty. Frozen pizzas are
an inferior good
Ilsia is driving home from work. She needs to buy gas and notices an Exxon-Mobil station on one side of the street and a Shell station on the other side of the street. Although run by different companies, the two stations sell gasoline at the same price. The most likely reason that the price is the same is that
consumers view gasoline from different gas stations as perfect substitutes
the price that results when quantity demanded equals quantity supplied
equilibrium price
During the economic downturn of 2008-2009, the unemployment rate increased to nearly 10%. At the same time, the price of college tuition and the number of college enrollees increased. Which statement best explains why more people enrolled in college during this time period even as the price of tuition increased?
if the next best option was unemployment, many individuals may have preferred to enroll in college and gain new skills in hopes of increasing their future employment prospects.
If one station increases its price
it will lose customers to the cheaper station across the street
When the market price of a good increases, the amount that sellers are willing to offer for sale increases.
law of supply
Megan has a 1 hr gap in her course load for the fall semester. There are two courses available for her to take at that time: reading piano sheet music and beginning rock climbing. She does not have any experience with piano or rock climbing. In the end, she decides to enroll in the rock climbing course, despite her fear of heights. Identify which activity exhibits a potential trade-off with enrolling in rock climbing.
learning to read piano sheet music
as a result of a severe recession, the total output of a nation falls by 4 percent
macroeconomics
increased consumer spending causes the national unemployment rate to fall
macroeconomics
increased consumer spending causes the rate of inflation to rise
macroeconomics
a tax on tires increases the price of tires paid by car owners
microeconomics
optimism about future car sales leads general motors to hire more auto workers
microeconomics
robotic technology reduces the demand for auto workers
microeconomics
College students reduce how much detergent they use for each load of laundry in response to higher detergent prices.
movement along the demand curve
College students rush and buy discount furniture to take advantage of an unexpected price drop.
movement along the demand curve
A national consumer products company produces less of its premium quality soap as a result of lower soap prices.
movement along the supply curve
Americans sell their gold and silver jewelry as a result of rising prices.
movement along the supply curve
Social welfare spending in Sweden occupies too large a portion of the national budget.
normative economics
The richest 1% of Americans should pay more taxes than the rest of the 99%.
normative economics
Farmer Andy raises goats. When he can sell his goats for $200/goat he will sell any or all of his goats. He never asks for more than $200/goat and he never sells his goats for less than $200/goat. This is an example of
perfectly elastic supply
A decrease in the supply of coconut will increase the price of German chocolate cake, a good which requires coconut shavings as a key ingredient.
positive economics
As minimum wage increases, the prices of all goods and services also tends to increase.
positive economics
College students purchase many more energy drinks during finals week than during the rest of the semester.
shift in the demand curve
Students eat out more often as the federal government increases how much grant money it provides students.
shift in the demand curve
After discovering that flash-steaming tuna before using mechanical processes to extract meat removes more tuna flesh, more cans of tuna arrive on the shelves at all major grocers.
shift in the supply curve
Amplitude decides to join the smartphone market.
shift in the supply curve
the maximum amount of a product that sellers are willing and able to provide for sale over a relevant range of prices, holding all other factors constant
supply
a surplus exists
when quantity supplied exceeds quantity demanded
