Michigan State University EC 201 Midterm #1

C. If Blake starts to vape, he will have to pay the monetary cost of $20 per week on Juul pods and he is faced with the cost of his girlfriend breaking up with him.

1) Blake is considering vaping. One of his friends just quit vaping and has offered Blake his Juul for free, but only if Blake is going to use it himself. If Blake does start vaping, he will spend $20 per week on Juul pods. Additionally, Blake's girlfriend will break up with him if he starts vaping. What is the opportunity cost of vaping for Blake? A) $20 per week B) Zero, because he got the Juul for free C) $20 per week and his girlfriend

D. A large portion of peanut crop is destroyed, so the supply decreases. Graphically, the supply curve shifts inward. Graph 1, the demand curve shifts outward, the demand increases. Graph 2, the demand curve shifts inward, the demand decreases. Graph 3, the supply curve shifts outward, the supply increases. The correct answer is D.

100) In the diagrams below, the subscript "1" refers to the initial position of the curve, while the subscript "2" refers to the final position after the curve shifts. Which diagram above illustrates the effects on the peanut butter market, if severe flooding destroys a large portion of the peanut crop in the economy? A) (1) B) (2) C) (3) D) (4)

B. As customers who paid lower prices didn't feel the need to "get their money's worth" they only ate pizza for which they enjoyed. We would expect Customers who paid the lower price, because they didn't eat as many slices and therefore avoided the slices that gave a lower marginal utility

12) After the researchers conducted this part of the experiment, they did another analysis. They surveyed the customers after they ate and asked them to rate the taste of the pizza. Based on what we have learned about diminishing marginal benefits, who would we expect to give the pizza a higher rating? A) Customers who paid the higher price, because the pizza is worth more to them B) Customers who paid the lower price, because they didn't eat as many slices and therefore avoided the slices that gave a lower marginal utility

B. There are only so many resources in the world and limited time, money, and attention coupled with Demand prevents us from obtaining everything we want.

2) The main reason why you cannot have everything you want is that: A) Taxes are too high B) Resources are limited C) Opportunity costs are equal to zero

B) He believes that most situations quickly move toward equilibrium

77) This is an old economics joke: A hundred-dollar bill is lying on the ground. An economist walks past it. A friend asks: "Didn't you see the money there?" The economist replies: "I thought I saw something, but I must've imagined it. If there had been $100 on the ground, someone would've picked it up."1 Which of the following would best explain why the economist doesn't believe that there is a $100 bill on the ground? A) He believes that supply slopes up B) He believes that most situations quickly move toward equilibrium C) He believes that picking up a $100 bill would not be rational behavior D) He believes that the marginal benefit of picking up a $100 bill is negative

D) Quantity of margarine increases

86) Suppose the price of butter increases. Assume that butter and margarine are substitutes in consumption. Which of the following responses is likely? (Note: that we are looking for what happens after the price changes, not for what caused the price change) A) Quantity of margarine decreases B) Quantity of butter sold increases C) Price of margarine decreases D) Quantity of margarine increases

A) Price decreases. The effect on quantity is ambiguous

93) Dimensional lumber (wooden boards) and paper are complements in production because the sawdust produced by cutting trees into lumber can be used to make paper. Paper and pencils are complements in consumption. Suppose that demand for dimensional lumber increases and the price of pencils increases. How will this affect the price and quantity of paper? A) Price decreases. The effect on quantity is ambiguous B) Price increases. Quantity decreases C) The effect on price is ambiguous. Quantity increases D) Price decreases. Quantity decreases.

C) When there are lots of drivers and very few riders

94) Suppose Uber decided to implement "negative surge" pricing, where during certain times they would offer discounted rides while also cutting driver pay. When would we expect them to do this? A) When there are lots of drivers and lots of riders B) When there are very few drivers and lots of riders C) When there are lots of drivers and very few riders D) When there are very few drivers and very few riders

B) After the shift in demand, there would be a surplus at price 𝑷𝟏

95) Which of the following would be explain why the shift in supply from 𝑆1 to 𝑆2 would cause price to fall from 𝑃1 to 𝑃2? A) After the shift in demand, there would be a shortage at price 𝑃1 B) After the shift in demand, there would be a surplus at price 𝑃1 C) After the shift in demand, there would be a shortage at price 𝑃2 D) After the shift in demand, there would be a surplus at price 𝑃2

B. In a competitive market, if either shortage or surplus exists, price will adjust to achieve equilibrium. Notably, C is incorrect because supply curve (and demand curve) does not shift, rather the equilibrium is achieved through price changes.

96) In competitive markets, a surplus or shortage will A) never exist because the markets are always at equilibrium. B) cause changes in the quantities demanded and supplied that tend to eliminate the surplus or shortage. C) cause shifts in the demand and supply curves that tend to eliminate the surplus or shortage. D) cause changes in the quantities demanded and supplied that tend to intensify the surplus or shortage.

C. When price is $4, there exists a surplus (represented by segment A). And when a surplus exists, in a competitive market, suppliers that are unable to sell their goods will undercut the suppliers who can, driving prices down.

97) Use the following diagram for the corn market to answer the question below. If the price in this market is $4 per bushel, there will be a A) surplus, and the price will tend to rise. B) shortage, and the price will tend to rise. C) surplus, and the price will tend to fall. D) shortage, and the price will tend to fall.

C. After the outward shift of demand curve (an increase in demand), at the original priceP1, quantity demanded is larger than quantity supplied. A shortage in the market leads to an increase in price. Buyers who are unable to purchase a good will offer more money to the sellers, driving prices up.

98) Use the following graph for a market to answer the question below. Which of the following would best explain why the shift in demand from D1 to D2 would cause price to rise from P1 to P2? A) After the shift in the demand, there would be a surplus at price P2. B) After the shift in the demand, there would be a shortage at price P2. C) After the shift in the demand, there would be a shortage at price P1. D) After the shift in the demand, there would be a surplus at price P1.

D. You should try to draw a graph on your own. Graphically, an inward shift of the demand curve leads to both lower equilibrium price and quantity (consider D2 shifts to D1 in Question 4.). The answer cannot be A or B since an increase in supply/demand (outward shift of supply/demand curve) leads to higher equilibrium quantity. The answer cannot be C since it leads to a higher equilibrium price.

99) Which of the following will cause a decrease in market equilibrium price and decrease in equilibrium quantity? A) an increase in supply B) an increase in demand C) a decrease in supply D) a decrease in demand

A. In this situation, you valued your class time more than the $20 you would have to pay for leaving your scooter on a walkway. If you believed your class time was worth less than $20, then you would have parked your scooter in the correct area in order to prevent yourself from being fined.

3) Michigan State University decides fine everyone who leaves an electric scooter on a walkway 20dollars. One day, you are in a hurry to get to class and don't have time to park your scooter where itgoes. So, you leave your scooter on the walkway, knowing that you will get fined 20 dollars. Which of the following is most likely to be true: A) The benefit you got from being to class on time was greater than $20 B) Your willingness to pay to get to class on time was less than $20 C) You acted irrationally and didn't follow the cost-benefit principle

B) Point 1 to Point 2

30) Samantha likes to eat Skittles. The grocery store has a sale on Skittles, so Samantha decides tobuy more skittles. This would be illustrated by a change from A) Point 2 to Point 1 B) Point 1 to Point 2 C) 𝐷1 to 𝐷2 D) 𝐷2 to 𝐷1

D) 𝑫𝟐 to 𝑫𝟏

31) Kevin likes to eat Skittles and Starburst. He considers them to be substitutes. The grocery storehas a sale on Skittles. The effect of this sale on the demand for Starburst would be illustrated bya change from A) Point 2 to Point 1 B) Point 1 to Point 2 C) 𝐷1 to 𝐷2 D) 𝐷2 to 𝐷1

D

32) Dustin enjoys drinking coffee. He gets decreasing marginal benefits from coffee. He finds thefirst three cups of coffee per day really enjoyable. Beyond that, he still likes to drink coffee, buthe doesn't enjoy it nearly as much as the first three cups. Which of the following is most likely tobe Dustin's daily demand curve for coffee? A) A B) B C) C D) D

C) Mara's marginal benefit from the fourth novel she buys is more than $11

33) The price of mystery novels is $11 each, and Mara buys 5 novels per year. Which of the following is most likely to be true: A) Mara's total benefit from buying novels is $55 B) If the price of novels went down to $8 each, Mara would buy fewer novels C) Mara's marginal benefit from the fourth novel she buys is more than $11 D) If Mara bought a sixth novel, her marginal benefit from that novel would be negative

C) She has decreasing marginal benefits from Uber rides

34) Julie's demand for Uber rides slopes down. This is because: A) Julie doesn't really like Uber rides B) If Uber rides get too expensive, she will never ride an Uber C) She has decreasing marginal benefits from Uber rides

B) The quantity demanded decreases

35) According to the law of demand, when the price of a good increases A) Marginal cost decreases B) The quantity demanded decreases C) Opportunity costs are zero D) Quantity demanded is unaffected

C) Marco's marginal benefit from the 20th chicken wing was less than $0.75

36) Marco went to Buffalo Wild Wings to watch a football game. Chicken wings there cost $0.75each. Marco bought and ate 20 chicken wings. Afterwards, he regretted his decision anddecided that next time he would buy fewer chicken wings. This means that A) Marco's marginal benefit from the 20th chicken wing was zero B) Marco's marginal benefit from the 20th chicken wing was negative C) Marco's marginal benefit from the 20th chicken wing was less than $0.75

B) Increase from 3 to 8

37) Suppose the three buyers in the table are the only buyers in the market. If the price of ahamburger decreases from $6 to $4, the quantity of hamburgers demanded will: A) Increase from 3 to 6 B) Increase from 3 to 8 C) Decrease from 6 to 3 D) Increase from 0 to 2

D) 18,000

38) Suppose instead that the three buyers in the table were picked from a total market of 9,000people. What is the total market quantity demanded if the price is $5? A) 6 B) 6,000 C) 9,000 D) 18,000

A) Increase demand

39) If Starbucks is able to reduce the time it takes to make complicated drinks (and therefore reducethe amount of time people have to spend in line), how would that directly affect demand? A) Increase demand B) Decrease demand C) Increase quantity demanded D) Decrease quantity demanded

A. we are dealing with a sales tax in a city, not a big national-level question

4) You are interested in learning whether increasing sales taxes would benefit the economy of East Lansing. This would be best described as: A) Microeconomics B) Macroeconomics

C. A shift in demand from D1 to D3 is a decrease in demand because it is a downward and leftwardshift of the demand curve. The answer cannot be B or D, because a change in the price of theelectric car itself is a movement along the demand curve. Gasoline and electric cars areconsidered substitutes because gasoline is used for non-electric cars. So, if the price of gasolinedecreases, more people will want to drive non-electric cars instead of electric cars because it willbe cheaper, so the demand for electric cars decreases. Substitutes are defined as goods that are replacements for one another.

55) Refer to the three demand curves for electric cars. Which of the following would shift the demand for electric cars from D1 to D3? A) an increase in the price of gasoline B) an increase in the price of electric cars C) a decrease in the price of gasoline D) a decrease in the price of electric cars

B. The opportunity cost would be the next alternative you could have chosen in a given situation, so as you can only select one ticket in this case you would miss out on the Jonas Brothers tickets by choosing the Post Malone tickets.

5) You are the fifteenth caller for a contest at your favorite radio station and win your choice of three concert tickets: Post Malone, Taylor Swift, and the Jonas Brothers. You choose Post Malone, because that is your favorite performer. Your second choice would have been the Jonas Brothers. What is the opportunity cost of the concert tickets? A) Zero, because they were free B) The Jonas Brothers tickets C) The Jonas Brothers tickets and the Taylor Swift tickets

B. Again, the income effect is the effect that a change in the price of a good, service, or resource hason the purchasing power of income. Since the price of hamburgers was cheaper than usual,Steve's money has a higher purchasing power, so Steve buys more hamburgers.

50) Steve went to his favorite hamburger restaurant with $3, expecting to buy a $2 hamburger anda $1 soda. When he arrived, he discovered that hamburgers were on sale for $1 each, so Steve bought two hamburgers and a soda. Steve's response to the decrease in the price of hamburgers is best explained by A) the substitution effect. B) the income effect. C) the price effect. D) a rightward shift in the demand curve for hamburgers.

A. The weekly market quantity of hamburgers = Quantity Demanded by Buyer 1 + Quantity Demanded by Buyer 2 + Quantity Demanded by Buyer 3 This weekly demand is at one specific price. Be careful not to add the Quantity Demanded for all prices. The weekly market quantity of hamburgers at a price of $5: 9 + 7 + 8 = 24 The weekly market quantity of hamburgers at a price of $3: 21 + 15 + 16 = 52 So, if the price of a hamburger decreases from $5 to $3, then the weekly market quantity of hamburgers demanded will increase from 24 to 52. Logically this increase makes sense because as the price of a good becomes cheaper, a person will buy more of that good.

51) Refer to the table. If the price of a hamburger decreases from $5 to $3, then the weekly market quantity of hamburgers demanded will A) increase from 24 to 52. B) decrease from 52 to 24. C) increase from 120 to 156. D) increase from 29 to 55.

C. Since it is an increase in QUANTITY DEMANDED, that means the change is a MOVEMENT ALONG the demand curve, not a shift of the demand curve. This is because of The Law of-demand (principle in economics which states that as the price of a good increases, the quantity demanded will decrease, all else held constant.) So, you can rule out any answers that involve moving from one demand curve to another. This include answers A and B We know that it is answer C instead of D because an increase in quantity demanded leads to movement downward and to the right, on the curve.

52) Refer to the three demand curves. An "increase in quantity demanded" caused by a change in price would be illustrated by a change from A) point 4 to point 6. B) point 5 to point 1. C) point 4 to point 1. D) point 2 to point 5.

B. A normal good is a good for which there is a direct (positive) relationship between the demand for the good and income. This means that as your income increases, your demand for a normal good increases, and vice versa. A shift from D1 to D2 is a rightward shift, meaning an increase in demand. Since coffee is a normal good, and the curve shifts to the right, the answer has to be B because a decrease in consumer income would shift the curve to the left, as well as a change in the price of the coffee affects movement along the curve not a shift.

53) 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? A) an increase in the price of coffee B) an increase in consumer incomes C) a decrease in consumer incomes D) a decrease in the price of coffee

C. Blu-Ray movies and Blu-Ray players are considered compliments. Compliments are goods thatare used with one another. So if the price of Blu-Ray movies decreases, then the demand for Blu-Ray players will increase. If the price of one complimentary good decreases, then the demand for the other good will increase. If the price of one complimentary good increases, then the demand for the other good will decrease.

56) How would a decrease in price of Blu-Ray movies affect the demand for Blu-Ray players? A) Increase in supply B) Increase in quantity demanded C) Increase the demand D) Decrease the demand

C. Since the demand curve is the demand for electric cars, a change in the price of an electric car would be a movement along the demand curve, not a shift of the demand curve. As electric cars become less expensive, then there would be a movement down and to the right on the demand curve (from point a to point b).

57) Which of the following would occur if electric cars became less expensive? A) D3 to D1 B) D2 to D1 C) Point a to point b D) Point b to point A

A) Marginal costs are increasing

58) Supply slopes up because A) Marginal costs are increasing B) Marginal benefits are decreasing C) Demand slopes down D) Price and quantity are inversely related

B) If price increases from $2 to $3, the quantity supplied will increase, but the supply curve will not move

59) This table shows the weekly supply for protein bars in a market where there is just one seller. Use thistable to answer the next two questions Which of the following statements is true? A) If price increases from $2 to $3, the supply curve will shift to the right B) If price increases from $2 to $3, the quantity supplied will increase, but the supply curve willnot move C) The eighth unit supplied has a marginal cost of $0

D. In some instances, it is possible that actions like those above could be in the best interest of an individual. A drug addict may need heroin to prevent symptoms of withdrawal, a criminal may need to rob a bank in order to obtain money, and a person buying an expensive car may enjoy how fast it is compared to other cars.

6) Which of the following is definitely an example of someone not acting in their self-interest? A) A drug addict using heroin B) A criminal robbing a bank C) A person buying an expensive car D) None of the above; each of these could be an instance where someone is acting rationally and in their own best interest.

C) $3

60) This table shows the weekly supply for protein bars in a market where there is just one seller. Use thistable to answer the next two questions What is the marginal cost of producing the ninth protein bar? A) $0 B) $2 C) $3 D) $4

A) A shift from 𝑺𝟏 to 𝑺𝟐

61) Suppose a new technology is invented that allows for beer to be produced at a lower marginalcost. This could be illustrated by A) A shift from 𝑆1 to 𝑆2 B) A shift from 𝑆2 to 𝑆1 C) Movement from point 1 to point 2 D) Movement from point 2 to point 1

D) Movement from point 2 to point 1

62) The price of beer falls. As a result, Pabst sells less beer. This could be illustrated by A) A shift from 𝑆1 to 𝑆2 B) A shift from 𝑆2 to 𝑆1 C) Movement from point 1 to point 2 D) Movement from point 2 to point 1

G) Movement from point 1 to point 2

63) Apple juice and apple sauce are substitutes in production. How would an increase in the price ofapple juice affect the supply curve for apple juice? A. A shift from 𝑆1 to 𝑆2 B. A shift from 𝑆2 to 𝑆1 C. Movement from point 1 to point 2 D. Movement from point 2 to point 1

B) A shift from 𝑺𝟐 to 𝑺𝟏

64) Apple juice and apple sauce are substitutes in production. How would an increase in the price ofapple juice affect the supply curve for apple sauce? A) A shift from 𝑆1 to 𝑆2 B) A shift from 𝑆2 to 𝑆1 C) Movement from point 1 to point 2 D) Movement from point 2 to point 1

C) No, some people will switch from the highway to the Waze-recommended route.Eventually, both routes will take less than 30 minutes

76) Alphatown is 10 miles from Bravoville. At first, everyone travelling from Alphatown to Bravoville takes the highway. There is a lot of traffic on the highway, so it takes 30 minutes to get there. Then people start using Waze, and Waze finds a non-highway route from Alphatown to Bravoville that only takes 20 minutes. Is this an equilibrium? Note: suppose everyone has easy access to Waze. A) Yes B) No, people will switch from the highway to the Waze-recommended route. Eventually,nobody will ever take the highway, even though the Waze-recommended route now takes longer than the highway because of all the extra traffic C) No, some people will switch from the highway to the Waze-recommended route. Eventually,both routes will take less than 30 minutes D) No, some people will switch from the highway to the Waze recommended route. Eventually,both routes will take more than 30 minutes

C. An improvement in production technology allows suppliers to produce and supply more of agood. This leads to an increase in supply, which is a rightward shift of the supply curve.

74) An improvement in production technology will A) increase equilibrium price. B) shift the supply curve to the left. C) shift the supply curve to the right. D) shift the demand curve to the left.

D. An increase in the price of fertilizer is considered an increase in resource costs for the supply.This means that the supply of apples, since they need fertilizer to grow, will decrease. A decrease in the supply of apples means that the amount of apples that will be available at various prices will decline.

75) Because of the significant snow fall in the plains this year, the supply of fertilizer to Washington State's apple farmers substantially decreased. As a result, the price of fertilizer has increased in Washington State. This statement indicates the A) supply for apples will necessarily increase. B) price of apples will decrease. C) demand for apples will necessarily decrease. D) amount of apples that will be available at various prices will decline.

A. The answer cannot be C or D because a change in the price of gasoline itself would result in movement along the demand curve, not a shift in the demand curve. This determinant of demandis considered an expectation of future price. Since consumers expect the price of gasoline to behigher in the future, they will buy more now. Their money has a greater purchasing power for gasoline now than it will in the future when the price is expected to be higher.

54) Which of the following would most likely increase the demand for gasoline? A) the expectation by consumers that gasoline prices will be higher in the future B) the expectation by consumers that gasoline prices will be lower in the future C) a decrease in the price of gasoline D) an increase in the price of gasoline

A. Ray's marginal benefit from playing a third hour would be 250. Ray earns 1,750 XP from playing two hours, and 2,000 XP for playing three hours. Therefore, 2,000 - 1,750 = 250, which is the additional XP he gains during that third hour of play.

Ray is deciding how to spend the next four hours. He will use the time to play the computer game Valorant or to study for his math test, or to do some combination of the two. 13) Ray's main goal in playing Valorant is to gain lots of XP (Experience Points), which he earns by playing the game well. The below table shows the total XP Ray earns playing Valorant. Hours played Total XP earned 1 1,000 2 1,750 3 2,000 4 2,200 What is the marginal benefit (in terms of XP) that Ray gets from the third hour of playing Valorant? A) 250 B) 667 C) 1000 D) 2,000

B. The interdependence principle states that to fully understand the consequences of your decisions, you must take account of how decisions interact with other decisions and with other factors. In this case, the school district is likely thinking how this new policy will affect the decisions of the students to attend school, and the resulting consequences from the decisions themselves.

Use the following information to answer the next two questions: As of fall 2022, Lansing School District is no longer providing school bus services to high school students. Instead, they are providing students with city bus passes and gasoline gift cards. See here for more information. 19) The school district is concerned that removing bus services could affect school attendance. This is an example of the A) Marginal principle B) Interdependence principle C) Sunk cost fallacy

C. Ray values a 5% score increase the same as obtaining 500 points of XP. Therefore, using the table above, Ray would play Valorant until his marginal benefit (of XP earned) falls below 500 points. In this case, Ray's marginal benefit of one hour of play is 1,000, for an additional second hour it is 750, and a third hour would be 250, which is below the 500 XP points that he values an hour of study at. Due to this, Ray would play Valorant for two hours and study for two hours.

14) Each hour that Ray studies will improve has score by 5 percentage points. Ray has decided he is indifferent between a 5 percentage point score increase and 500 points of XP. How should Ray spend his next 4 hours? Hours played Total XP earned 1 1,000 2 1,750 3 2,000 4 2,200 A) Spend 4 hours studying B) Spend 1 hour playing Valorant and 3 hours studying C) Spend 2 hours playing Valorant and 2 hours studying D) Spend 3 hours playing Valorant and 1 hour studying

B. Without the discount, Maria pays a marginal cost of $100 for the 1,700th square foot of her home. The marginal benefit she received must have been $100 as well, or else she would have built a bigger home. With the discount, while she only has to pay $50 per square foot for the first 1,000 square feet, Maria would still face a marginal cost of $100 for the 1,700th square foot, so she would stop building after she reached that point.

15) Maria is deciding how big of a house to build. She gets decreasing marginal benefits from house size (so, the marginal benefit of the first square foot is greater than the marginal benefit of the second square foot and so on). The builder charges $100 per square foot. Maria decides to build a 1,700 square foot house. What if, instead, the builder offered a discount, where the first 1,000 square feet were half price ($50 per square foot)? How big of a house would Maria choose to build: A) Less than 1,700 square feet B) Still 1,700 square feet C) More than 1,700 square feet

A. If Lebron James opens a bakery, he would not get his NBA salary, which is a huge opportunity cost he would miss out on.

16) According to what we learned in class, the reason that LeBron James shouldn't own and operate a bakery, even if that bakery is profitable, is because: A) His opportunity costs are high because he will have to forego his NBA salary B) The fixed costs of opening a new business are too high C) Opening a bakery is a sunk cost

B. Opportunity costs are the loss of potential gain from other alternatives when an option is chosen.

17) In class, we said that to find the opportunity cost of an action, ask yourself A) "One more?" B) "Or what?" C) "How many?" D) "What are the benefits?"

A. When marginal benefits are above marginal costs, we gain utility from that action, so we continue doing that action. When marginal benefits are equal to marginal costs, we no longer receive utility from that action, so we stop doing it.

18) The Rational Rule says that, if something is worth doing, keep doing it until A) Marginal benefits are equal to marginal costs B) Marginal benefits are greater than marginal costs C) The opportunity cost is zero D) Your willingness to pay is zero

A. The school district is slowly increasing the amount of money on the gas cards each week, gauging the marginal effects on attendance of each increase. Then, when they no longer see an increase in attendance, they no longer have a need to increase the amount of money on the gas cards

20) Suppose the school district finds that high school attendance drops dramatically. They are willing to increase the amount of their gas cards, but doing so is expensive. They are willing to pay any amount as long as it increases attendance, but they don't want to waste money on gas cards if they don't increase attendance. So, they increase the amount of money on the gas cards by a few dollars per week. As long as attendance keeps increasing, they will continue increasing the amount on the gas cards. Once the attendance stops increasing, they will stop increasing the amount. This is an example of the: A) Marginal principle B) Interdependence principle C) Opportunity cost principle

A. From A to B, the opportunity cost of a unit of steel is 10; in order to get 1 more unit of steel (go from 0 units to 1 unit), you need to give up 10 units of wheat (100 units to 90). From B to C, to get 1 more unit of steel, you have to give up 15 units of wheat (90 to 75) . This trend continues for C to D, D to E, etc.

21) A) Increases B) Decreases C) Remains Constant D) Increases at first then decreases

B. Based on Alexandra's production possibilities schedule, if she knits 0 sweaters per a day, she can knit 12 scarves in one day. Over a 2-day period, this means that Alexandra could knit 24 scarves if she spent the whole day knitting scarves. 12 scarves per a day X 2 days = 24 scarves

22) If they are given 2 days to work how many scarves could Alexandra make if she spent the whole time knitting scarves? A) 12 B) 24 C) 8 D) 16

A. Based on Natalia's production possibilities schedule, if she knits 0 scarves per a day, she can knit 4 sweaters in one day. Over a 3-day period, this means that Natalia could knit 12 sweaters if she spent the whole day knitting sweaters. 4 sweaters per a day X 3 days = 12 sweaters

23) If they are given 3 days to work how many sweaters could Natalia make if she spent all of her time knitting sweaters? A) 12 B) 4 C) 24 D) 16

B. 4 sweaters for 10 scarves is an acceptable term of trade because of Alexandra's and Natalia's opportunity costs. Alexandra can knit 1 sweater for every 3 scarves she knits, so her opportunity cost of 1 sweater is 3 scarves (this is found by taking her maximum production of scarves divided by maximum production of sweaters; 12/4 = 3). Natalia can knit 1 sweater for every 2 scarves she knits, so her opportunity cost of 1 sweater is 2 scarves (divide her max production of scarves by max production of sweaters; 8/4 = 2). The acceptable terms of trade is any combination where they trade 1 sweater for a number between or equivalent to 2 and 3 scarves.

24) Which of the following is an acceptable term of trade? A) 6 sweaters for 10 scarves B) 4 sweaters for 10 scarves C) 2 sweaters for 7 scarves D) 8 sweaters for 15 scarves

C. 4 scarves for 2 sweaters is an acceptable term of trade because of Alexandra's and Natalia's opportunity costs. Alexandra can knit 1 scarf for every 1/3 sweater she knits, so her opportunity cost of 1 scarf is 1/3 sweaters (divide her max production of sweaters by max production of scarves; 4/12 = 1/3). Natalia can knit 1 scarf for every ½ sweater she knits, so her opportunity cost of 1 sweater is ½ scarf (divide her max production of sweaters by max production of scarves; 4/8 = ½). The acceptable terms of trade is any combination where they trade 1 scarf for a number of sweaters between or equivalent to 1/3 and ½

25) Which of the following is an acceptable term of trade? A) 2 scarves for 2 sweaters B) 6 scarves for 1 sweater C) 4 scarves for 2 sweaters D) 10 scarves for 3 sweaters

C. The combination of sixty-five pounds of corn and sixty-five pounds of green beans is not attainable because you are only able to produce a maximum combined amount of 80 pounds between corn and green beans. Sixty-five pounds of corn plus sixty-five pounds of green beans is equal to 130 pounds, which is greater than 80 pounds. This combination is outside of the production possibilities frontier.

26) Use the above figure to answer this question. The combination of sixty-five pounds of corn and sixty-five pounds of green beans is A) attainable. B) efficient. C) not attainable. D) not efficient.

A. The combination of sixty-five pounds of corn and fifteen pounds of green beans is attainable and efficient. It is attainable because you can produce a maximum combined amount of 80 pounds, and sixty-five pounds of corn plus fifteen pounds of green beans equals 80 pounds, so this would be a point on the PPF curve. This combination is an efficient allocation of resources because to increase the production of one good, you have to decrease the production of another -- you can only produce 80 pounds total, and you're currently producing 80 pounds, so if you want to produce more green beans, you have to produce less corn.

27) Use the above figure to answer this question. The combination of sixty-five pounds of corn and fifteen pounds of green beans is A) attainable and efficient. B) not attainable but efficient. C) not attainable. D) not efficient.

A) 𝑫𝟏 to 𝑫𝟐

28) An increase in demand would be illustrated by a change from A) 𝐷1 to 𝐷2 B) 𝐷2 to 𝐷1 C) Point 1 to Point 2 D) Point 2 to Point 1

B) Point 2 to Point 1

29) A decrease in quantity demanded would be illustrated by a change from A) Point 1 to Point 2 B) Point 2 to Point 1 C) 𝐷1 to 𝐷2 D) 𝐷2 to 𝐷1

A. A lowered production cost for a good leads to an increase in supply because it now costs less to produce and supply that good. An increase in supply is a shift of the supply curve downward and rightward.

73) Suppose that a more efficient way to produce a good is discovered, thus lowering productioncosts for the good. This will cause A) a rightward shift of the supply curve. B) a leftward shift of the supply curve. C) a movement up along the current supply curve. D) a movement down along the current supply curve.

A) An increase in demand due to an increase in the number of buyers

40) Nike often uses major tennis tournaments to showcase interesting clothing designs. At the 2022,U.S. Open, several players wore a shirt the New York Times described as "Maroon, with the palest of pink short sleeves and a horizontal neckline bisected by neon orange zipper, looking little like an apron worn over a blouse." (The below image shows American tennis player Frances Tiafoe wearing the shirt). Suppose seeing the shirt on television and in the New York Times causes many people to become aware that it exists and can be purchased at the Nike website. While lots of these people hate the shirt when they see it, some people like it, and as a result, Nike sells more of these shirts. This is an example of A) An increase in demand due to an increase in the number of buyers B) A decrease in demand due to shifts in income C) An increase in demand due to network effects D) A decrease in demand due to changes in tastes and preferences

A) Demand will increase

41) Suppose Michigan passes a law which will outlaw the sale of gasoline-powered cars starting in2024. Note that, even after the ban goes into effect, existing gasoline-powered cars can still bedriven in the state. How will that affect the demand for gasoline-powered cars today? A) Demand will increase B) Demand will decrease C) Demand will be unaffected

A) An increase in demand

42) Conrad's restaurant is featured on Diners, Drive-Ins, and Dives (a show on the Food Network). Asa result, more people buy Conrad's wraps. This is an example of: A) An increase in demand B) A decrease in demand C) An increase in quantity demanded D) A decrease in quantity demanded

B) network good

43) The following is from the Wikipedia article on the Dvorak keyboard layout (shown here). Note that the letters are located in different locations from the traditional QWERTY keyboard that you are used to. Dvorak is a keyboard layout for English patented in 1936 by August Dvorak and his brother-in-law, William Dealey, as a faster and more ergonomic alternative to the QWERTY layout (the defacto standard keyboard layout). Dvorak proponents claim that it requires less finger motion andas a result reduces errors, increases typing speed, reduces repetitive strain injuries, or is simply more comfortable than QWERTY. According to the Wikipedia article, Dvorak has not replaced QWERTY as the most common keyboard layout because QWERTY was introduced 60 years earlier. This sentence suggeststhat a computer keyboard layout is a ________. A) good with zero marginal benefits B) network good C) congestion good D) normal good

A) Congestion good

44) When you hang out with your friends, you often accidentally grab the wrong cell phone because you all have the same model of iPhone and black phone cases. You decide that you want to purchase a different colored cell phone case to prevent this from happening.This means that you consider a specific color of cell phone case to be a ________. A) Congestion good B) Network good C) Normal good D) Substitute for a cell phone

C) The demand curve shifts right

45) Early in the Covid-19 pandemic, many places had a shortage of toilet paper. Jack is worriedthat that there will be a shortage of toilet paper in his neighborhood in a few days. How willthis affect Jack's demand for toilet paper today? A) Movement up and to the left on the demand curve B) Movement down and to the right on the demand curve C) The demand curve shifts right D) The demand curve shifts left

A) A normal good

46) When Karl gets a raise, his demand for Twix bars shifts to the right. This means that, for Karl, Twix bars are: A) A normal good B) An inferior good C) A network good D) A good with no marginal benefits

D) Decrease in quantity demanded.

47) For the past several weeks, the price of ice cream has $4 per pint, and Aviv has bought 2pints per week. This week, the price has increased to $5 per pint, and Aviv only bought 1pint. This is best characterized as a A) Increase in demand B) Decrease in demand C) Increase in quantity demanded D) Decrease in quantity demanded.

B. The income effect is the effect that a change in the price of a good, service, or resource has on the purchasing power of income. For example, as the price of gas increases, you tend to spend less of your income on gas, and you have a lower purchasing power. The substitution effect is the effect that a change in the price of one good has on the demand for another good. If the price of pizza goes up, you may choose to have a slice of pizza and a bagel instead of two slices of pizza. Remember: Demand slopes Downward

48) The income and substitution effects are part of the reason why A) the supply curve is upward-sloping. B) the demand curve is downward-sloping. C) the supply curve is downward-sloping. D) the demand curve is upward-sloping.

A. Again, the substitution effect is the effect that a change in the price of one good has on thedemand for another good. Since Nike soccer balls became cheaper, Ronaldo will now buy moreNike soccer balls and fewer Adidas soccer balls. To Ronaldo, the soccer balls are similar goods,but the price of the soccer balls affects his purchasing decision

49) When the price of Nike soccer balls decreased, Ronaldo purchased more Nike soccer balls and fewer Adidas soccer balls. Which of the following best explains Ronaldo's decision to buy more Nike soccer balls? A) The substitution effect B) The income effect C) An increase in the demand for Nike soccer balls D) The price effect

A) Increase in supply

65) This is from a recent article in the New York Times (which was also featured in the Demand problem set.) In recent months, Starbucks has seen a massive surge in revenues from younger customers ordering elaborate, cold, customized coffees, like venti caramel crunch frappuccinos. These cold drinks now make up 70 percent of Starbucks' revenues. So-called modifiers of these drinks —think, a shot of espresso or three pumps of pumpkin sauce — now account for more than $1billion in sales each year on their own. But the complexity of the drinks, along with order surges at certain times of the day, have made barista jobs more demanding and can sometimes result in delays. To help address that, the company unveiled a new cold beverage system that reduces the number of steps needed to make the drinks, as well as the need for employees to repeatedly bend down and dig into buckets for ice. In a demonstration of the system, two Starbucks employees showed that it took35 seconds to make a mocha frappuccino with whipped cream as opposed to 87 seconds now. The new cold beverage system would represent a A) Increase in supply B) Decrease in supply C) Increase in quantity supplied D) Decrease in quantity supplied

Correct answer: D

66) Avery has started a business making and selling cupcakes. As her business has grown, she has had a difficult time making enough cupcakes. She was able to buy more mixers and hire more workers, but she's having trouble finding somewhere to put all of the equipment, and the workers keep bumping into each other. As a result, each worker is a little bit less productive than the one hired before. The below table shows the total number of cakes made when Avery employs different numbers of workers. 1 Worker = 10 Cakes 2 Worker = 18 Cakes 3 Worker = 24 Cakes 4 Worker = 28 Cakes 5 Worker = 30 Cakes Which of the following would best represent Avery's supply curve? (Note: you don't need to worry about numbers here. Just the general shape of the supply curve)

C) Supply increases Straw and wheat are complements in production. When the price of wheat increases, produce more wheat. This causes more straw to be produced, even if the price of straw is unchanged.Hence, an increase in supply.

67) The following is from the Wikipedia article on straw:Straw is an agricultural byproduct consisting of the dry stalks of cereal plants after the grain andchaff have been removed. It makes up about half of the yield of cereal crops such as barley, oats,rice, rye and wheat. It has a number of different uses, including fuel, livestock bedding andfodder, thatching and basket making How would the supply of straw be affected by an increase in the price of wheat? A) Movement up and to the right on the supply curve B) Movement down and to the left on the supply curve C) Supply increases D) Supply decreases

B. The Law of Supply is a principle that states that as the price of a good rises, the quantity supplied will increase, all else held constant

68) The upward slope of the supply curve reflects the A) principle of specialization in production. B) law of supply. C) fact that price and quantity supplied are inversely related. D) law of diminishing marginal utility.

A. An increase of supply means that the supply curve is shifted downward and to the right. This increase in supply leads to more of a good being supplied, even if the prices of a good stayed the same. That is the case in this example with the music downloads.

69) An increase in the supply of music downloads indicates that more music downloads will be A) supplied, even if prices of music downloads stayed the same. B) supplied, because music download prices have decreased. C) demanded, because sellers are selling more music downloads. D) demanded, because sellers are putting music downloads on sale.

A. Marginal benefit looks at the benefit received by the addition of one unit of something (hiring another worker, eating one more piece of candy, watching one more episode). Therefore, the marginal benefit of watching the last episode of Riverdale would be the enjoyment you received from solely watching that episode.

7) You are binge watching Riverdale on Netflix and have one episode left in the season. Which of the following would be describe the marginal benefit of watching that last episode? A) The enjoyment you get from watching the last episode B) The total enjoyment you received from the first season C) The hour that you could have spent studying economics (your best possible alternative use of the time, of course)

D. A decrease in supply means that there has been an upward and leftward shift of the supplycurve. A change in price is movement along the supply curve.

70) When economists say that the supply for a product has decreased, they mean that the A) supply curve has shifted to the right. B) product has become particularly abundant for some reason. C) product has become more expensive and thus consumers are buying less of it. D) supply curve has shifted to the left.

C. Movement along the supply curve from point a to point b, is an increase in the quantitysupplied. Movement along the supply curve is caused by changes in the price of a good, whichin this case is wheat. For the quantity supplied of wheat to increase, that means the price ofwheat would also have to increase, according to the Law of Supply. Law of Supply states that as the price of a good rises, the quantity supplied will increase, all else held constant.

71) The figure above shows three supply curves for wheat. Which of the following would cause thequantity of wheat supplied to increase from point a to point b? A) a tax on wheat production B) a subsidy for wheat production C) an increase in the price of wheat D) a decrease in the price of wheat

C. A shift in supply from S 1 to S 3 is a decrease in supply because the curve shifts leftward and upward. Changes in the supply curve include: -Taxes and Subsidies -Change in resource costs -Change in technology -Seller expectations -Number of sellers Of choices A, B, C, and D, C is the only choice that involves a decrease in supply. A tax is payment made to the government as a result of economic activity. A tax on producers leads to a decrease in supply because this is an additional cost for the supplier.

72) The figure shows three supply curves for apples. If you observe the supply of apples shift fromS1 to S3, which of the following could be responsible for this shift? A) Apple producers are willing to sell more at every price. B) The producers of apples now receive a subsidy. C) The producers of apples now must pay a tax. D) Apple production has increased.

D) There will be a secondary market, where some people who bought the clothes when they were first available will resell them. The equilibrium price will be higher than the original retail price

78) The following question comes from this Wall Street Journal article about Greggs, a fast food chain in the United Kingdom, which has started selling a line of clothes. From the article: The style is "normcore," a fashion built on deliberately mundane duds. Khaki pants, V-neck sweaters and sneakers worn by the likes of comedians Larry David and Jerry Seinfeld have takeoff in the U.S., where Dad style has, in some quarters, gone from dull to de rigueur. Greggs teamed with U.K. budget-clothing chain Primark, a collaboration that in the U.S. would be akin to, say, dressing in 7-Eleven wear by H&M. The deliberately humdrum Greggs collection includes tank tops, cycling shorts, fanny packs, varsity jackets, tote bags and beach hats, all carrying the Greggs blue-and-yellow square logo or sausage-roll imagery... An earlier launch in the spring sold out entirely in some locations. When Greggs sold out of its merchandise, some people who wanted to buy their clothing wereunable to. What would we expect to happen? A) Supply will shift to the left B) Demand will shift to the right C) There will be a secondary market, where some people who bought the clothes when theywere first available will resell them. The equilibrium price will be lower than the originalretail price D) There will be a secondary market, where some people who bought the clothes when they were first available will resell them. The equilibrium price will be higher than the originalretail price

B) Surplus

79) Surya is hoping to buy tickets for the MSU-Ohio State football game. He looks at some onlinemessage boards and it appears that everyone is charging $200 for a ticket. However, he notices thatthe listings have been active for several days, and from what he has heard, most of these peoplehaven't been able to find a buyer. This is an example of a A) Shortage B) Surplus C) Equilibrium

C. While the additional tax revenue could be used to fund a new stadium, there are also many other uses of the funds that could be used to benefit residents in other ways, making these alternatives the opportunity costs that come from the mayor's decision.

8) To keep the local professional football team from leaving, the city of San Diego proposed a tax on hotel rooms that would be used to fund a new football stadium. Many people are opposed to using tax revenues to fund sports stadiums. The mayor argued that, because the tax would be paid by out-of-town visitors, the new stadium would be "free" for residents. Which of the following statements is most accurate? A) The mayor is correct B) The mayor is forgetting about the opportunity cost of having a football team instead of having another sports team C) The mayor is forgetting about the opportunity cost of spending the tax revenue on a new stadium instead of on something else D) The mayor is forgetting about the marginal benefits residents receive from the football stadium

C) Wait for the price to come down

80) Continuing with the example above, what would you recommend Surya do? A) Offer $200 for the tickets B) Buy as many tickets as he can for $200, then plan to sell them for more than $200 on theday of the game C) Wait for the price to come down

A) Price and quantity will increase

81) According to this Wall Street Journal article, it has become common for families to get matching tattoos. From the article: Before the pandemic, around 5% of the roughly 25,000 annual customers of Three Kings Tattoo were ages 50 or older. Owner Matthew Marcus estimated that the 50-plus crowd now make up about 15% of the clients at his seven locations, which include New York, Los Angeles, Denver and London. Many of them arrive with grown children or grandchildren for matching tats. "The pandemic created more of a YOLO mentality in people," said Mr. Marcus, using the you-only-live-once acronym. Diego Martin, owner of Hudson Valley Tattoo Company in Wappinger Falls, N.Y., estimated that the proportion of customers in their 60s and 70s has doubled in the past year to about 10% of some 3,000 men and women served. One of them, a 75-year-old man, is covering an entire arm in what is known as a sleeve. How would we expect this increased interest from older people to affect the tattoo market? A) Price and quantity will increase B) Price and quantity will decrease C) Price will increase and quantity will decrease D) Price will decrease and quantity will increase

B) (2)

82) For the next three questions, consider the market for rental scooters in East Lansing. For each problem,identify which graph best depicts how supply or demand are affected. Due to an increase in accidents caused by inebriated scooter drivers, the city of East Lansing makes it illegal to ride a rental scooter between 1:00 a.m. and 7:00 a.m. A) (1) B) (2) C) (3) D) (4)

A) (1)

83) For the next three questions, consider the market for rental scooters in East Lansing. For each problem,identify which graph best depicts how supply or demand are affected. Gas prices increase A) (1) B) (2) C) (3) D) (4)

D) (4)

84) For the next three questions, consider the market for rental scooters in East Lansing. For each problem,identify which graph best depicts how supply or demand are affected. Electric scooters need to be regularly charged in order to work. The scooter companies do this by paying people to pick up scooters at night, take them home to charge them, and return them the next day. (Click here for an article about this). The people who do this sort of "gig" work are often also Uber drivers. Suppose Uber raises the pay of their drivers. How would this affect the market for scooter rentals? A) (1) B) (2) C) (3) D) (4)

A) The price of oranges decreases

85) Suppose the price of roses decreases. Assume that roses and oranges tend to have similar growingclimates, and that farmland that currently grows one of them can easily grow the other crop instead.Which of the following responses is likely? (Note: that we are looking for what happens after theprice changes, not for what caused the price change) A) The price of oranges decreases B) Quantity of roses demanded decreases C) The quantity of oranges sold decreases

A) There was an increase in demand and an increase in quantity supplied

87) The following is from an article in the New York Times: A single country has accounted for about 80 percent of the fishing in the international waters just off Argentina, Ecuador and Peru this year. And it is not a South American country. It is China. In recent years, hundreds of Chinese fishing vessels have begun to operate almost 24 hours a day,seven days a week, off the coast of South America. The ships move with the seasons, from Ecuador to Peru to Argentina. China has focused on these faraway waters after depleting fish stocks closer to its own shores. China's fishing expansion is part of a much larger story, of course. As the world's most populous country, and one with an economy that has grown rapidly in recent decades, China has a growing global footprint — economically, diplomatically and militarily. It needs so much fish to feed a middle class that has become vastly larger over the past generation. For the purposes of this problem, we can assume that there have been no new technologies making it easier to harvest fish. So, the marginal cost curve for producing fish is unchanged. Which of the following best describes what happened to the market for fish as China's middle classhas grown: A) There was an increase in demand and an increase in quantity supplied B) There was an increase in demand and an increase in supply C) There was a decrease in demand and a decrease in quantity supplied D) There was an increase in demand and a decrease in supply

C) Equilibrium price will decrease

88) The value of the British pound has fallen relative to the dollar. As a result, it has become moreexpensive for residents of the United Kingdom to vacation in the United States.2 Suppose this makespeople less eager to buy tickets on British Airways, so a quick search on Kayak reveals lots of unsoldtickets. What do we expect to happen to tickets next? A) There will be a persistent (long-lasting) surplus B) There will be a persistent (long-lasting) shortage C) Equilibrium price will decrease D) Equilibrium price will increase

C) Price would increase and quantity would decrease

89) Suppose a law is passed increasing the jail sentences for people caught selling illegal drugs. Whatwould be the effect on the price and quantity of illegal drugs sold? A) Price would decrease and quantity would increase B) Price would decrease and quantity would increase C) Price would increase and quantity would decrease D) Price would increase and quantity would increase

B. Jane's marginal benefit is decreasing because her enjoyment of each additional episode watched is less than the episode she watched before while her marginal costs are constant as she does not have to pay to watch the episodes.

9) Jane enjoys streaming The Office, but she finds that, because she has seen every episode several times, she gets bored of them quickly. In fact, in a given binge-watch session, she enjoys each episode less than the one before it. Jane uses her parent's logins for streaming services, so it doesn't cost her any money to watch the episodes. For Jane, watching The Office on has _____ marginal benefits and _____ marginal costs. (Assume the only costs are monetary costs.) A) Decreasing; Increasing B) Decreasing: Constant C) Constant; Increasing D) Increasing; Decreasing

A) Price decreases. The effect on quantity is ambiguous.

90) The demand for pickup trucks shifts left. At the same time, the supply curve for pickup trucks shiftsright. What are the net effects on price and quantity? A) Price decreases. The effect on quantity is ambiguous. B) Price decreases. Quantity increases C) The effect on price is ambiguous. Quantity decreases D) Price increases and quantity decreases

B) It will increase by less than $1 per gallon

91) Crude oil is an important input in the production of gasoline, so it is not surprising that an increase in the price of crude oil increases the price of gasoline. The graph below shows that the prices of the two are highly correlated. (Note that the scale on the left is for gasoline and the scale on the right is for crude oil) for crude oil). Suppose the price of crude oil increases, and as a result, the marginal cost of producing gasoline increases by $1 per gallon. According to the equilibrium model discussed in class, how would this affect the market price of gasoline? A) The price of gasoline will be unaffected B) It will increase by less than $1 per gallon C) It will increase by more than $1 per gallon D) It will increase by exactly $1 per gallon

D) Price decreases and quantity decreases

92) The following is from an article on CNN.com: The Ham burglar is back at McDonald's. But this time, it's just for adults. McDonald's is bringing back its family of recognizable figurines in a new adult Happy Meal, which,yes, includes the toys. Beginning October 3, customers can order a Cactus Plant Flea Market Box — a Big Mac or 10-piece chicken McNuggets, with fries and a drink. The meal is a collaboration between the street wear brand and the fast food chain as it digs deeper into nostalgia. The food will be served in a specially designed box that should trigger memories of Happy Meals from the old days. Toys include redesigned takes on McDonald's famous mascots, including Grimace,Ham burglar and Birdie, plus a new one named Cactus Buddy. How do we expect the introduction of Happy Meals for adults at McDonald's to affect the price and quantity of Burger King value meals? A) Price increases. The effect on quantity is ambiguous B) Price decreases and quantity increases C) Price increases and quantity decreases D) Price decreases and quantity decreases

B. A rational decision is made when the marginal benefit of an action is greater than or equal to the marginal cost. As referenced in the previous question, the marginal cost of eating an additional slice of pizza is $0 once the customer has already paid to gain access to the buffet. Therefore, assuming the marginal benefit of the pizza is the same in both scenarios(no discount and 50% discount), we would not expect a customer to consume less pizza when they are faced with the 50% discount, as they would normally continue to benefit from eating additional slices when they did not receive a discount.

A field experiment at an all-you-can-eat pizza restaurant shows that a 50% discount on the price of the meal led customers to consume 27.9% less pizza. In other words, when people have to pay a higher price for their meal, they want to "get their money's worth" by eating more pizza. 11) This actually does not fit with what we have learned about rational decision making and how people make decisions on the margins. Why? A) The customers are not accounting for the opportunity cost of eating pizza instead of another meal B) The marginal cost of a slice of pizza is zero for all customers, so all customers (whether or not they are receiving a discount) should consume until the point where the marginal benefit of the last slice of pizza is zero. This means that the price paid should not affect consumption C) The marginal cost of a slice of pizza is greater for customers paying the higher price. This means that marginal benefit will equal marginal cost at a lower quantity, so consumers paying a higher price should eat less pizza. D) All-you-can-eat pizza restaurants have bad pizza, and rational people would never go to that type of restaurant

A. The marginal cost would be $0. This is because the customer has already paid to gain access to the buffet, and each additional slice that customer eats does not require additional payment as it is all-you- can-eat.

A field experiment at an all-you-can-eat pizza restaurant shows that a 50% discount on the price of the meal led customers to consume 27.9% less pizza. In other words, when people have to pay a higher price for their meal, they want to "get their money's worth" by eating more pizza. 10) Suppose the regular price of the buffet is $10 and the discounted price is $5. Once a customer has paid for the buffet, what is the marginal cost of eating another slice of pizza? (Assume the only costs are monetary costs.) A) $0 B) $5 C) $10 D) It depends on whether the customer is getting a discount.