micro

Demand is to utility as supply is to

production

Suppose the supply curve is given by P= 10+3Q. How much producer surplus is generated at a price of 40?

150

For Jill's bakery, which of the following costs is most likely to be a fixed cost? Rent for the bakery building The cost of electricity The cost of yeast The cost of flour

Rent for the bakery building

Which of the following is most valuable ? saving 20% off an item priced at $40. saving $10 off an item priced at $500. saving $3 off an item marked at $4. Saving 50% off an item priced at $10.

Saving $10 off an item priced at $500

Currently, firms in the market for widgets are making positive economic profits. In the long run, the supply curve for widgets will ___ and price will ___

Shift right; fall

Samantha is the owner of a small bus company that has permits to run two routes daily in the city. The company has six buses and, currently, Samantha has three buses on each route. On route 1, the average daily revenue per bus is $75 and the third bus on the route takes in $50 in fares per day. On route 2, the average daily revenue per bus is $60, and the third bus on the route takes in $60 in fares per day. To efficiently allocate the buses between the two routes, Samantha should?

Shift the third bus from route 1 to route 2

Sonya is employed at a stock brokerage firm where she earns $25 per hour. The office she works at is located downtown. To get to work each day, she must either ride a series of buses that take her one-and-a-half hours at a cost of $2, or take a cab that 30 minutes and costs $20. In order to maximize her income, Sonya should

Take the cab

Suppose there are 10 people playing cards in a room. One of them wants to smoke a cigar; nine of them dislike the smell of cigar smoke. The smoker values the privilege of smoking at $5, and each of the other nine occupants of the room would be willing to pay fifty cents for clean air in the room. The rules governing the use of the room state that smoking is not allowed unless everyone agrees to allow smoking. Which outcome is consistent with the Coase Theorem?

The cigar smoker will pay each other occupant 55 cents, and they will agree to allow smoking

When of the following is an example of the rationing function of price? Lower prices discourage some producers from selling. Higher prices encourage entrepreneurs to enter a market. The highest bidder in an auction wins the item being bid upon. Higher prices discourage some customers from buying.

The highest bidder in an auction wins the item being bid upon

Which of the following is an example of human capital? The knowledge of debits and credits the accountant learned in college. The software system used by an accountant to keep track of expenses. The computer used by an accountant to run reports. The building in which the accountant works.

The knowledge of debits and credits the accountant learned in college.

The concept of scarcity applies equally to Bill Gates and a homeless person because

There are only 24 hours in the day for both of them

Ann and Brad are two siblings arguing over how to split three candy bars. Which of the following splits is Pareto Efficient? One candy bar for Ann and one candy bar for Brad Three candy bars for Ann and no candy bars for Brad Two candy bars for Brad and no candy bars for Ann

Three candy bars for Ann and no candy bars for Brad

T or F: At Nash equilibrium, every player is choosing their best strategy, given what the other players are choosing.

True

T or F: If a firm has market power, it has the ability to raise the price for its goods and not lose all of its sales.

True

T or F: In the short run, at least one of the firm's factors of production is fixed

True

T or F: When demand is inelastic, an increase in price will cause total expenditure to increase as well.

True

T or F: When economists say a firm has market power, they mean the firm has some ability to raise price without losing all of its sales.

True

If one person can perform a task in fewer hours than another, you know the person has ___ in performing the task.

an absolute advantage

Dead weight loss occurs when

an allocation is not Pareto Efficient

The three components of a game are

players, strategies and payoffs

You bought season tickets to football games at your university for $240. There are six home games during the season. After attending the first five games of the season, you know that you absolutely hate going to football games. You are deciding whether to go to the sixth game or to skip it. Your opportunity cost of skipping the game is

$0

Suppose the Charleston City Council decides to impose a tax of $1 per gallon of gasoline. Before the tax was imposed, the price of a gallon of gas was $2.75, after the tax, consumers pay $3.50 per gallon, leaving sellers with $2.50 per gallon net of the tax. The economic burden of the tax is ___ for sellers and ___ for buyers.

$0.25; $0.75

Suppose the demand relationship is given by P= 12-2Q. What is the elasticity of demand as a price of 2?

0.2

Which of the following deals is most valuable? $10 off an item priced at $200 $4 off an item priced at $8 25% off an item priced at $20

$10 off an items prices at $200

The sixth worker produces an additional 4 widgets. Each widget can be sold at the market price of $5 each. What is the sixth worker's value of marginal product of labor?

$20/worker

The current interest rate is 10% per year. The present value of $2200 to be received in one year is:

$2000

If your reservation price for a precooked meal is $15 and the opportunity cost of the precooked meal is $12, the economic surplus of having a precooked meal equals

$3

Zenith Inc. is currently earning accounting profits of $50 million per year. There are 100 million shares of Zenith stock. If the current interest rate is 10%, what is the price of a share of Zenith stock?

$5

Supposed the most you would be willing to pay for a plane ticket home is $250, but you buy one online for $175. The economic surplus of buying the online ticket is:

$75

If price increases from $8 to $10, then price has increased by ___ %

25%

When price increases from $10 to $12, quantity demanded falls from 5 to 2. What is the elasticity of demand for this price change?

3

Victor enjoys consuming both tacos and calzones. Each taco costs $2, while each calzone cost $5. Victor has $20. Which combinations of tacos and calzones can Victor not afford

3 tacos and 3 calzones

A 5% increase in price causes a 15% increase in the quantity supplied. The elasticity of supply is calculated to be __, which makes supply __.

3; elastic

Suppose a monopolist faces a market demand of P = 48 - 4Q. The monopolist has a constant marginal cost of 8 per unit. If the monopolist can only charge a single price to consumers, how many units should the monopolist produce to maximize profits?

5

Suppose the demand relationship is given by P= 12-2Q. What is the quantity demanded at a price of 2?

5

Suppose the market for widgets can be described by the following supply and demand relationships: Supply: P = Q; Demand: P = 12 - Q; where P is the price and Q is the quantity. Now suppose a $2 per unit tax is imposed. The new quantity traded in this market will be:

5

Suppose in the market for widgets the demand relationship is given by P= 12-2Q, where P is the price and Q is the quantity. Supply is given by P=4Q. The equilibrium price in this market will be:

6

Suppose the market for widgets can be described by the following supply and demand relationships: Supply: P = Q; Demand: P = 12 - Q; where P is the price and Q is the quantity. What is the equilibrium quantity in this market

6

Which of the following is an example of a negative externality? Your neighbors enjoying the loud music you play. Bees pollinating flowers on adjacent property. Whales swimming in international waters. A firm emitting noxious gas from its factory.

A firm emitting noxious gas from its factory

In the US, the average professional football player makes less than the average professional basketball player. A possible explanation for this pattern of data is

Although there are roughly the same number of professional teams, basketball teams require 15 players while football teams require 53 players.

Economic rent is defined as the

Amount by which the payment to a factor of production exceeds the supplier's opportunity cost

Which of the following would cause an increase in supply?

Cheaper raw materials for suppliers

Which of the following are most likely to be complements?

Coffee and cream

Shane is consuming 3 bananas and 4 hamburgers. The marginal utility of the third banana is 12 utils, while the marginal utility of the 4th hamburger is 18 utils. The price of a banana is $1, while the price of a hamburger is $3. In order to maximize his utility, Shane should

Consime more bananas and fewer hamburgers

Sondra has plans to go to an opera and already has a $100 nonrefundable, nonexchangeable, and nontransferable ticket. Now Victor, whom Sondra has wanted to date for a long time, asks her to a party. Sondra would prefer to go to the party with Victor and forgo the opera, but she doesn't want to waste the $100 she spent on the opera ticket. From the perspective of an economist, if Sondra decides to go to the party, she has just:

Correctly ignored a sunk cost

When market price is such that the quantity supplied exceeds the quantity demanded, the price will:

Decrease

The minimum wage can be considered a binding price floor. Compared to a labor market that does not have a minimum wage, the imposition of a minimum wage will

Decrease the number of people working

The the price of a substitute good increases, then:

Demand for the original good increases

Which of the following statements would be classified as a normative statement?

Doctors should encourage women aged 60 to 69 to be screened for breast cancer.

Demand curves typically slope __, supply curves typically slope ___

Downward, upward

Which of the following is not an example of an explicit cost? Wages paid to workers Office space rent Fees paid for maintenance on the firm's website Personal savings of the owner invested in the firm

Personal savings of the owner invested in the firm

Which statement about trade is correct? Economists tend to discourage policies that encourage international trade because trade mostly benefits foreigners. Economists tend to discourage policies that encourage international trade because trade lowers prosperity for everyone. Economists tend to favor policies that encourage international trade because trade generates more overall prosperity for countries that allow it.

Economists tend to favor policies that encourage international trade because trade generates more overall prosperity for countries that allow it.

A 5% increase in price causes a 20% increase in quantity supplied. Supply would then be:

Elastic

If a 1 percent increase in price causes a 2 percent decrease in quantity demanded, then demand is:

Elastic

The elasticity of demand for Starbucks coffee has been measured to be 3. The demand for Starbucks coffee is:

Elastic

When consumers are very sensitive to price, we say their demand is very ___.

Elastic

T or F: A dominant strategy is a strategy that allows one players to always beat another player

False

T or F: To produce 100 units costs Acme Inc. $500, while to produce 200 units costs Acme Inc. $1200. Therefore, Acme Inc. has economies of scale.

False

Oligopolies are characterized by __ sellers and __ entry

Few; barriers to

Economic models are intended to

Generalize about patterns in decision making

Assume I bring 36 cookies to a class with 30 students. Which of the following situations is not Pareto efficient? I let the best 18 students have two cookies each. I divide all the cookies equally among the female students. I give one cookie to each student. I give all 35 cookies to one student.

I give one cookie to each student

Which of the following can be a source of comparative advantage for an individual?

Inborn talent, education, training

Tony notes that an electronics store is offering a flat $20 off all prices in the store. Tony reasons that if he wants to buy something with a price of $50 that is a good offer, but if he wants to buy something with a price of $500 it is not a good offer. This is an example of

Inconsistent reasoning: saving $20 is saving $20

Between 2008 and 2009, the equilibrium price of laptops remained constant, but the equilibrium quantity of laptops increased. From this, you can conclude that between 2008 and 2009, the supply of laptops ___ and the demand for laptops ___.

Increased, increased

Consider the market for carrots, which is characterized by millions of buyers and sellers. Suppose that new research indicates that carrot consumption significantly increases health AND that the weather in California, where the majority of carrots are grown, is poor and reduces the carrot crop. The likely impact on the market for carrots will be that the equilibrium price ___ and the equilibrium quantity ___.

Increases; could increase or decrease

Consider the market for carrots, which is characterized by millions of buyers and sellers. Suppose that the weather in California, where the majority of carrots are grown, is poor and reduces the carrot crop. The likely impact on the market for carrots will be that the equilibrium price ___ and the equilibrium quantity ___.

Increases; decreases

Which of the following statements would an economist label as a normative statement?

It's too hot in this room

Which of the following statements are true concerning long run equilibrium? I: Price equals marginal cost. II: Price equals average total cost. III: Economic profits are greater than zero.

Just l and ll

In the short run, a firm will shut down if

Price is less than average variable cost

An increase in the price of a good will cause the __ for that good to __ as well

Quantity supplied; increase

The average cost of 5 units is 6. The marginal cost of the sixth unit is 4. The average cost of the sixth unit is __ 6.

Less than

The demand curve is most similar to the

Marginal benefit curve

Curly told Larry about his new business venture. Curly pays Acme Inc. $1000 per month for supplies and access to Acme's network, works out of his own apartment on his own computer and earns monthly revenues of $1500. Should Larry quit his job and do what Curly is doing? Yes, if Larry has at least $1000 in savings to get started. Yes, if Larry can borrow the $1000 monthly payment for less than 3% interest. Yes, if Larry already owns a computer. No, not if Larry is earning more than $500 per month at his current job.

No, not if Larry is earning more than $500 per month at his current job

Suppose a monopolist faces a market demand of P=48-4Q. If the monopolist can only charge a single price to consumers, the monopolist's marginal revenue function is

P=48-8Q

Soybeans are a standardized commodity, bought and sold on exchanges involving millions of producers and consumers. Which of the following market models is the market for soybeans most like? Monopoly Perfect competition Monopolistic competition Oligopoly

Perfect competition

Two countries, Eastland and Westland, can both produce rice and machines. The opportunity cost of a machine in Eastland is 50 bushels of rice. The opportunity cost of a machine in Westland is 200 bushels of rice. If the two countries sign a trade agreement, what should each country produce?

Westland should produce rice and Eastland should produce machines.

In general, the optimal quantity of an activity that generates a negative externality is

Where the marginal benefit of the activity is equal to the marginal cost of the activity, inclusive of the external cost of the externality

Before you started applying for college, a job recruiter offered you a full-time cashier position at a doctor's office, earning an after-tax salary of $28,000 per year. However, you turn down this offer and attend your first year of college. The additional monetary cost of college to you, including tuition, supplies, and additional housing expenses, is $35,000. You decide to go to college, probably because

You value a year of college at more than $63,000

Jack has a lower opportunity cost for producing apples than Jill. Therefore, Jack has ___ in producing apples.

a comparative advantage

Adam's Smith's Invisible Hand Theory says that

actions of independent, self-interested buyers and sellers will often result in the most efficient allocation of resources.

An increase in the price of ___ will cause the quantity of apples demanded to fall, while a an decrease in the price of ___ will cause the demand for apples to fall.

apples, oranges

A sunt cost is

beyond recovery at the moment a decision must be made

In general, if the government places a tax on sellers in a market, the economic burden of the tax will fall on

both buyers and sellers

If the city of Charleston enacts binding rent controls, the likely effect will be to

decrease the total number of apartments available for rent

When a tax is imposed, the more ___ side of the market bears less of the ___ burden

elastic; economic

Accounting profits are

equal to total revenues minus explicit costs.

A cost or benefit that falls on people other than those pursuing the activity is called an

externality

The scarcity principle implies that to have more of one thing usually means

having less of another

At the current price, the demand elasticity for apples is estimated to be 0.25. If the price of apples increases, this implies that total spending on apples will

increase

Suppose that the marginal cost of producing widgets decreases for every firm in the widget market. This would cause supply to ___, and the supply curve to move ____

increase; down

Consider the market for carrots, which is characterized by millions of buyers and sellers. Suppose that new research indicates that carrot consumption significantly increases health. The likely impact on the market for carrots will be that the equilibrium price ___ and the equilibrium quantity ___.

increases; increases

During the last recession, when many people's incomes fell, demand for automobile repairs increased. This implies that automobiles repairs are a

inferior good

A dominant strategy is a strategy that

is better to play no matter what the other players in the game choose

In the short run, a firm should shut down if its revenue is:

less than its variable cost

The rational spending rule states that spending should be allocated across goods such that the

marginal utility per dollar is the same for each good

A negative externality will result in an equilibrium quantity of an activity that is __ the Pareto efficient quantity

more than

An allocation is Pareto Efficient if

no one can be made better off without making someone worse off

A Nash equilibrium occurs when:

no player has incentive to change their strategy, given what all the others players have chosen.

The current equillibrium price for widgets is $5. Suppose a price floor of $4 is enacted. The likely impact of this price floor will be

nothing

Sonya is employed at a stock brokerage firm where she earns $25 per hour. The office she works at is located downtown. To get to work each day, she must either ride a series of buses that take her one and a half hours at a cost of $2, or take a cab that's 30 minutes and cost $20. The opportunity cost

of riding the bus is $39.50, and taking the cab is $32.50

If a consumer buys two goods, the rational spending rule requires that the:

ratio of the marginal utility to price be equal for the two goods

The law of diminishing marginal returns occurs when

some factors of production are fixed, causing increased production to require ever larger increases in the variable factor of production

The cost benefit principle

states that an action should be taken only if the extra benefit is greater than the extra cost

One way to reach the Pareto efficient level of an activity that generates a positive externality is to

subsidize the activity

When making decisions in the short run, fixed costs should be treated like

sunk costs

The marginal product of labor is defined as

the additional output produced from one additional worker.

You have paid $10 to eat dinner at an all-you-can-eat buffet. You should continue eating until

the benefit from additional food equals 0

The income effect occurs because the nominal price of a good rises

the consumer's ability to afford that good decreases

Consumer surplus is defined as the difference between

the consumer's maximum willingness to pay and the price actually paid

The primary reason for the law of supply is

the fact that marginal cost tends to increase

On Saturday night after I have watched two college football games, I often decide to go to bed instead of staying up to watch a third game. A likely explanation for my actions is

the law of diminishing marginal utility

The elasticity of demand is defined as

the percentage change in quantity demanded that occurs in response to a 1 percent change in price

You read in the Wall Street Journal that projected accounting profits for Zenith Inc. are expected to rise. According to the Efficient Markets Hypothesis:

the price of Zenith stock has likely already risen to take account of this new information.

According to the law of supply, in order to get more production of a particular good:

the price of that good must increase

The law of demand says that as the price of a good increases

the quantity demanded for that good decreases

You read in the Wall Street Journal that an early freeze in Florida has destroyed much of the orange crop. In the same article, the author mentions that large harvests of apples has driven the price of that product down. Together, these two factors should cause:

the quantity of oranges sold to fall.

For economists, utility is defined as

the satisfaction people derive from consumption activities

If the supply curve is perfectly inelastic, then

the supply curve is a vertical line

Taxes create dead weight loss because

they disort prices

Economics is the study of how people choose

to use limited resources

Rational consumers are assumed to maximize their

total utility

The principle of comparative advantage states that individuals should

trade on the basis of opportunity cost.

Average variable cost is defined as:

variable cost divided by total output.

Suppose that immigration policies in the United States are changed so that it is more difficult for low-skilled immigrants to live and work in this country. A likely impact of this policy is that

wages for low skilled workers in the US will rise