Econ Midterm 2

. If the price of mangoes increases by 15% and the quantity demanded of mangoes decreases by 20%, then the price elasticity of demand is equal to:

1.33

If the price of a good increases by 10%, and the quantity demanded changes by 15%, then the price elasticity of demand is equal to: Chapter 6

1.5 (quantity demand change/ price of a good)

(Table: The Utility of California Rolls) Use Table: The Utility of California Rolls. The marginal utility of the second roll is: Chapter 10

15

(Table: Utility from Pasta and Wine) Use Table: Utility from Pasta and Wine. At Jenny's Sports Bar, a bottle of wine costs $4, and a slice of pasta costs $2. Denisov has $10 to spend on wine and pasta. To maximize his utility, Denisov will consume _____ slice(s) of pasta and _____ bottle(s) of wine.

1; 2

(Figure: Rent Controls in the Market for Apartments in New York City) Use Figure: Rent Controls in the Market for Apartments in New York City. Without rent controls, the equilibrium quantity of rental units is: Chapter 5 or 6

2.0 million (just look at middle point)

. (Table: The Market for Kombucha) Use Table: The Market for Kombucha. The table shows the quantity demanded (Qd) and quantity supplied (Qs) of kombucha at various prices. If the government does NOT impose a price control, the price of a bottle of kombucha will equal:

2.75

Economists refer to the satisfaction a person derives from the consumption of goods and services as Chapter 10

utility

(Figure: Rent Controls in the Market for Apartments in New York City) Use Figure: Rent Controls in the Market for Apartments in New York City. Without rent control, the equilibrium rent is: Chapter 5 or 6

$1,000.

. Suppose the demand equation is given by P = 100 - 2Q, and the supply equation is given by P = 20 + 2Q. If a quantity restriction is set at Q = 10, what is the deadweight loss associated with this quantity control?

$200

Suppose the demand equation is given by P = 100 - 2Q, and the supply equation is given by P = 20 + 2Q. If the quantity bought and sold under a price floor is Q = 10, what is the price floor?

$80

(Figure: Rent Controls in the Market for Apartments in New York City) Use Figure: Rent Controls in the Market for Apartments in New York City. Suppose that rent controls are imposed. If the government wants a rent control ceiling to be effective immediately, what is one possible price it could set? Chapter 5 or 6

$900

Each month Jamie buys exactly 15 McWraps, regardless of the price. Jamie's price elasticity of demand for McWraps is: Chapter 6

0

If the price of a good increases by 15%, and quantity demanded changes by 5%, then the price elasticity of demand is equal to:

0.33

. Suppose a rise in the price of pears from $5.50 to $6.50 per basket at your local market causes you to decrease your purchases of pears from 12.5 baskets per month to 11.5 baskets per month. With this information, the price elasticity of demand for pears is:

0.5

(Table: Optimal Choice of Yogurt and Cheese) Use Table: Optimal Choice of Yogurt and Cheese. The price of yogurt is $2 per unit, and the price of cheese is $4 per pound. Hailey's income is $16. Assuming that Hailey spends all of her income on cheese and yogurt, the combination of yogurt and cheese that will maximize her total utility is _____ pounds of cheese and _____ yogurt(s).

2:4

Topher spends all of his income on chimichangas and prickly pear margaritas. His income is $100, the price of chimichangas is $10, and the price of prickly pear margaritas is $2. Put chimichangas on the horizontal axis and prickly pear margaritas on the vertical axis. The vertical intercept of Topher's budget line is _____ prickly pear margaritas. Chapter 10

50

the government imposes a price ceiling below the equilibrium price.

6 (price floor must be higher than equilibrium price)

. (Table: The Market for Kombucha) Use Table: The Market for Kombucha. The table shows the quantity demanded (Qd) and quantity supplied (Qs) of kombucha at various prices. If the government imposes a price ceiling of $2.50 per bottle of kombucha, the quantity of soda demanded will be _____ bottles.

8 bottles

Use Figure: Budget Lines for Bottled Water and Biscotti. For months now, Angela has had $20 per month to spend on bottled water and biscotti. The price of each cup of bottled water and each biscotti is $1. Which chart shows what will happen to her budget line if her income increases to $25?

A

(Figure: Budget Lines for Bottled Water and Biscotti) Use Figure: Budget Lines for Bottled Water and Biscotti. For months now, Angela has had $20 per month to spend on bottled water and biscotti. The price of each cup of bottled water and each biscotti is $1. Which chart shows what will happen to her budget line if the price of biscotti rises to $2?

B

(Figure: Budget Lines for Bottled Water and Biscotti) Use Figure: Budget Lines for Bottled Water and Biscotti. For months now, Angela has had $20 per month to spend on bottled water and biscotti. The price of each cup of bottled water and each biscotti is $1. Which chart shows what will happen to her budget line if her income decreases to $10?

C

(Figure: Budget Lines for Bottled Water and Biscotti) Use Figure: Budget Lines for Bottled Water and Biscotti. For months now, Angela has had $20 per month to spend on bottled water and biscotti. The price of each cup of bottled water and each biscotti is $1. Which chart shows what will happen to her budget line if the price of both a cup of bottled water and biscotti increase to $2?

C

(Figure: Optimal Selection of Cola (c) and Sushi Rolls (r)) Use Figure: Optimal Selection of Cola (c) and Sushi Rolls (r). If the consumer is at point B, what should the consumer do to maximize utility?

Consume fewer rolls and less cola

(Figure: Optimal Selection of Cola (c) and Sushi Rolls (r)) Use Figure: Optimal Selection of Cola (c) and Sushi Rolls (r). If the consumer is at point A, what should the consumer do to maximize utility? Chapter 10

Consume more rolls and less cola

(Figure: Optimal Selection of Cola (c) and Sushi Rolls (r)) Use Figure: Optimal Selection of Cola (c) and Sushi Rolls (r). If the consumer is at point A, what should the consumer do to maximize utility?

Consume more rolls and less cola.

(Figure: Budget Lines for Bottled Water and Biscotti) Use Figure: Budget Lines for Bottled Water and Biscotti. For months now, Angela has had $20 per month to spend on bottled water and biscotti. The price of each cup of bottled water and each biscotti is $1. Which chart shows what will happen to her budget line if the price of a cup of bottled water falls to $0.50?

D

(Figure: Optimal Selection of Cola (c) and Sushi Rolls (r)) Use Figure: Optimal Selection of Cola (c) and Sushi Rolls (r). If the consumer is at point C, what should the consumer do to maximize utility?

Nothing, since utility is already maximized.

Topher spends all of his income on chimichangas and prickly pear margaritas. His income is $100, the price of chimichangas is $10, and the price of prickly pear margaritas is $2. If the price of each good doubles, and Topher's income doubles: Chapter 10

Topher's budget line will be unaffected.

If the price elasticity of demand for basketball shoes is 4:

a 20% decrease in the price of shoes will increase quantity demanded by 80%.

A price control is: Chapter 5 or 6

a legal restriction on how high or low a market price may go.

A regulation that restricts quantity is called:

a quota.

Josephine's budget line reflects the _____ available to Josephine if she spends _____ of her income.

consumption bundles; all

The marginal utility of matcha tea consumption for Alannah is the change in _____ generated by consuming an additional cup of matcha tea. Chapter 10

utility

Suppose the Brazilian government sets the price of coffee at $1 per pound when the market price is $10 per pound. The government's action will:

cause a shortage of coffee, even in coffee rich country

Two goods are _____ when the cross-price elasticity of demand is negative and _____ when the cross-price elasticity of demand is positive.

complements; substitutes

When the price of profiteroles increases from $1.55 to $2.00, the quantity demanded of profiteroles decreases from 220 pastries to 160 pastries. In this price range, the demand for profiteroles is _____, and total revenue will _____ when the price increases. Chapter 6

elastic, decrease

All else equal, if a price floor above the equilibrium price is imposed on a market, and the government buys the surplus, consumer surplus will _____, and producer surplus will _____.

fall, rise

(Table: The Utility of California Rolls) Use Table: The Utility of California Rolls. Marginal utility is 0 for the _____ roll.

fifth

(Table: The Utility of California Rolls) Use Table: The Utility of California Rolls. Total utility is maximized with the _____ roll. Chapter 10

fourth

The cross-price elasticity of demand between Fanta and Dr. Pepper has been estimated at 0.61. If the price of Dr. Pepper falls by 10%, the quantity demanded of Fanta will:

increase

. After a price decrease, the quantity effect tends to:

increase total revenue.

If a good is a necessity with few substitutes, demand will tend to be:

inelastic

(Table: Studying and Total Utility) Use Table: Studying and Total Utility. Marginal utility:

initially increases but eventually decreases as hours of studying increase.

The principle of diminishing marginal utility means that, when Justine eats tacos (which she loves), her satisfaction from the second taco is probably _____ that from the first. Chapter 10

less than

For an inferior good, the income elasticity of demand is:

negative

The income elasticity of demand of a normal good is always:

positive

The price elasticity of demand measures the responsiveness of a change in: (Chapter 6

quantity demanded to a change in the price of a good.

The elasticity of supply measures the responsiveness of:

quantity supplied to changes in price.

Utility is the:

satisfaction consumers derive from their consumption of goods and services.

(Table: Market for Fried Ice Cream) Use Table: Market for Fried Ice Cream. As it is a summer favorite, and in the belief that prices are on average too high, the government imposes a price ceiling of $3.70 per cup of Fried Ice Cream. Based on the following table, the price ceiling causes a _____ fried ice creams. Chapter 5 or 6

shortage of 3,000 (quantity demanded-quantity supplied)

(Table: The Utility of Lasagna) Use Table: The Utility of Lasagna. Antoinette loves eating lasagna on Independence Day. Antoinette's marginal utility from eating lasagna becomes negative with the _____ serving. Chapter 10

sixth

If the price elasticity of supply is greater than 1:

supply is elastic.

A binding quota is one in which:

the demand price exceeds the supply price, and the quantity produced is inefficient.

A persistent shortage may occur if

the government imposes a price ceiling below the equilibrium price.

The price elasticity of demand is defined as:

the percentage change in quantity demanded divided by the percentage change in price.

Total revenue is: Chapter 6

the price of a good times the quantity of the good sold.

The price elasticity of demand for gasoline tends to be rather inelastic as:

there are few or no available substitutes.

In economic markets, a quota is a(n):

upper limit on quantity of a good that can be bought or sold.