Micro econ- exam one (chp. 1,2,4,5,6,7)
unit-elastic demand
Demand is ______ when the percentage change in quantity demanded is equal to the percentage change in price, so the price elasticity is equal to 1 in absolute value.
Elastic demand
Demand is _______ when the percentage change in the quantity demanded is greater than the percentage change in price, so the price elasticity is greater than 1 in absolute value.
Time; technology
The two main determinants of the price elasticity of supply are __________ and ___________
Law of supply
A rule that states that, holding everything else constant, increases in price cause increases in the quantity supplied, and decreases in price cause in the quantity supplied.
marginal analysis
Analysis that involves comparing marginal benefits and marginal costs. For example, in business, they decide whether the additional revenue received from increasing production is greater or less than the additional cost of the production
B
At a price of $100, Tangi Canoe Rentals rented 11 canoes. When it increased its rental price to $125, 6 canoes were rented. Calculate the absolute value of the price elasticity of demand for canoe rentals, using the midpoint formula. Select one: a. 0.75 b. 2.65 c. 2.0 d. 0.9
The demand for blu-ray players would increase and the equilibrium price of blu-ray players would increase.
Positive technological change in the production of LCD televisions caused the price of LCD televisions to fall. Holding everything else constant, how would this affect the market for blu-ray players (a complement to LCD televisions)?
C
Question text Positive technological change in the production of LCD televisions caused the price of LCD televisions to fall. Holding everything else constant, how would this affect the market for blu-ray players (a complement to LCD televisions)? Select one: a. The demand for blu-ray players would increase and the equilibrium price of blu-ray players would decrease. b. The supply of blu-ray players would increase and the equilibrium price of blu-ray players would decrease. c. The demand for blu-ray players would increase and the equilibrium price of blu-ray players would increase. d. The demand for blu-ray players would decrease because consumers could afford to buy fewer LCD televisions and blu-ray players.
D
Rank these three items in terms of the elasticity of the demand for them at any given price, from most elastic to least elastic: beverages, coffee and PJ's Coffee. Select one: a. coffee, beverages, PJ's Coffee b. coffee, PJ's Coffee, beverages c. beverages, coffee, PJ's Coffee d. PJ's Coffee, coffee, beverages
Few
Scarcity is the fundamental economic problem in which the goods available are too ________ to satisfy individuals' desires.
D
Seth is a competitive body builder. He says he has to have his 12-oz package of protein powder to "feed his muscles" every day. On the basis of this information, what can you conclude about his price elasticity of demand for protein powder? Select one: a. It is elastic. b. The price elasticity coefficient is 0. c. It is perfectly elastic. d. It is perfectly inelastic.
The demand curve for new books shifts to the left
The Internet has created a new category in the book selling market, namely, the "barely used" book. How does the availability of barely used books affect the market for new books?
he demand curve for new books shifts to the left.
The Internet has created a new category in the book selling market, namely, the "barely used" book. How does the availability of barely used books affect the market for new books?
A
The Internet has created a new category in the book selling market, namely, the "barely used" book. How does the availability of barely used books affect the market for new books? Select one: a. the demand curve for new books shifts to the left. b. the demand curve for new books shifts to the right. c. the supply curve for new books shifts to the left. d. the supply curve for new books shifts to the right.
comparative advantage
The ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors.
absolute advantage
The ability of an individual, a firm, or a country to produce more of a good or service than competitors, using the same amount of resources.
Marginal benefit
The additional or extra enjoyment you receive from an activity instead of being productive
inefficient on the PPF
combinations inside the frontier are _____ because maximum output is not being obtained from the available resources- perhaps because the assembly line is not operating at its capacity
"No such thing as free lunch"
it means that people face tradeoffs
Technological change on the PPF
makes it possible to produce more goods with the same number of workers and the same amount of machinery, which also shifts the PPF outward.
many; many
n a perfectly competitive market, there are ________ buyers and ________ sellers. many; few few; many many; many few; few
technology
(shift outward) Firms use production cost process that allows more units to be sold at the same price, so more are sold
Patients; providers
A 3rd part payer scheme in healthcare leads to an overconsumption of medical services. This is because ________ do not bear the entire costs of services, and ________ have no incentive to avoid unnecessary procedures. Procedures must be rationed by the 3rd party payer rather than by the price system.
The price of the product
A change in all of the following variables will change the market demand for a product except A) the price of the product. B) population and demographics. C) income. D) tastes.
Difference b/w demand (supply) and quantity demanded (supplied)
A change in demand refers to the shift of the demand curve. A shift occurs if there is a change in one of the variables- other than the price of the product- that affects the willingness of consumers to buy the product. A change in quantity demanded refers to a movement along the demand curve as a result of a change in the product's price.
production possibiliteis frontier
A curve showing the maximum attainable combinations of two goods produced with attainable resources and current technology
inferior goods
A good for which the demand increases as income falls and decreases as income rises
Normal goods
A good for which the demand increases as income rises and decreases as income falls
Market
A group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade.
price ceiling
A legally determined maximum price that sellers may charge
price floor
A legally determined minimum price that sellers may receive
Economic efficiency
A market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is @ a maximum.
Law of demand
A rule that states that, holding everything else constant, when the price of a product falls, the quantity demanded of the product will increase, and when the price of a product rises, the quantity demanded of the product will decrease.
voluntary exchange
A situation that occurs in markets when both the buyer and seller of a product are made better off by the transaction
efficient tax
A tax that imposes a small excess burden relative to the tax revenue that it raises is?
Who produces the most output
Absolute advantage measures _________
Their resources are identical
According to the theory of comparative advantage, trade based on comparative advantage between any two countries producing any two goods is mutually beneficial except when:
Benefit to him of an additional beer is less than $1
Alan is sitting in a bar drinking beers that cost $1 each. According to the economic decision rule, Alan will quit drinking when the marginal:
C
Alexandra has determined that studying an hour for her economics quiz will improve her grade on the quiz from 75 to 100. She also determines that this improvement is worth $20. To study for an hour for her economics quiz, however, she will have to work one fewer hour at her part-time job. Alexandra should: Select one: a. not study for the quiz because earning a higher grade cannot have a dollar value. b. study for the quiz only if her hourly wage rate is exactly $20. c. study for the quiz as long as her hourly wage rate is less than $20. d. study for the quiz as long as her hourly wage rate is more than $20.
Attainable on the PPF
All the combinations either on the frontier or inside the frontier are ______ with the resources available
Substitutes in production
Alternative products that a firm could produce
What is the difference between an "increase in supply" and an "increase in quantity supplied"?
An "increase in supply" means the supply curve has shifted to the right while an "increase in quantity supplied" refers to a movement along a given supply curve in response to an increase in price.
The demand for gasoline-powered automobiles would increase and the equilibrium price of gasoline-powered automobiles would increase.
An increase in input costs in the production of electric automobiles caused the price of electric automobiles to rise. Holding everything else constant, how would this affect the market for gasoline-powered automobiles (a substitute for electric automobiles)? The supply of gasoline-powered automobiles would increase and the equilibrium price of gasoline-powered automobiles would decrease. The demand for gasoline-powered automobiles would increase and the equilibrium price of gasoline-powered automobiles would increase. The demand for gasoline-powered automobiles would decrease because consumers could afford to buy fewer gasoline-powered automobiles. The demand for gasoline-powered automobiles would increase and the equilibrium price of gasoline-powered automobiles would decrease.
B
An increase in the demand for green tea raises its price from $15 a pound to $21 a pound. As a result, quantity supplied increases by 30 percent. Using the midpoint formula, calculate the value of the price elasticity of supply? Select one: a. 1.35 b. 0.90 c. 0.22 d. 0.33
C
Bringing oil to the market is a relatively long and costly process. The whole process from exploration to pumping significant amounts of oil can take years. What does this indicate about the price elasticity of supply for oil? Select one: a. The elasticity coefficient is likely to be low and supply is highly elastic. b. The elasticity coefficient is likely to be very high and supply is inelastic. c. The elasticity coefficient is likely to be low and supply is highly inelastic. d. The elasticity coefficient is likely to be close to zero and supply is perfectly elastic.
D
Calculate the income elasticity if an 6 percent increase in income leads to a 4 percent increase in quantity demanded for organic produce. Select one: a. 1.33 b. 0.5 c. -0.67 d. 0.67
Supply increases leading to lower wine prices.
California vineyards forecast a 30 percent increase in this year's grape harvest. What happens in the California wine market as a result of this announcement?
B
California vineyards forecast a 30 percent increase in this year's grape harvest. What happens in the California wine market as a result of this announcement? Select one: a. Demand increases leading to lower wine prices. b. Supply increases leading to lower wine prices. c. Demand increases leading to lower wine prices. d. Supply increases leading to higher wine prices.
efficient on the PPF
Combinations on the fronteir are _____ because all available resources are being fully utilized, and the fewest possible resources are being used to produce a given amount of output.
Who produces output at the lowest opportunity cost
Comparative advantage measures ________
There is an increase in the supply of pool maintenance services due to falling input prices.
Danielle Ocean pays for monthly pool maintenance for her home swimming pool. Last week the owner of the pool service informed Danielle that he will be able to lower his monthly service fee because of decreases in the price of pool chemicals. How would you best explain this change?
A
Danielle Ocean pays for monthly pool maintenance for her home swimming pool. Last week the owner of the pool service informed Danielle that he will be able to lower his monthly service fee because of decreases in the price of pool chemicals. How would you best explain this change? Select one: a. There is an increase in the supply of pool maintenance services due to falling input prices. b. There is an increase in the supply of pool maintenance services due to technological change. c. There is a increase in the demand for pool maintenance services due to falling input prices. d. There is a decrease in the supply of pool maintenance services due to falling input prices.
inelastic demand
Demand is ____ when the percentage change in quantity demanded is less than the percentage change in price, so the price elasticity is less than 1 in absolute value.
Demand has decreased
If a demand curve shifts to the left, then demand has increased. quantity demanded has increased. demand has decreased. quantity demanded has decreased.
Social
Economcis is classified as a ___________ science since it examines human behavior.
marginal benefit equals the marginal cost from the last unit sold
Economic efficiency in a competitive market is achieved when?
equilibrium price
Economic surplus in any market is always maximized at?
unattainable
Economists believe that trade raises standards of living for all participants since they are able to reach consumption choices that were previously ______ a. inefficient. b. efficient c. attainable. d. unattainable.
D
Economists estimated that the price elasticity of beer is -0.23 and the income elasticity of beer is -0.09. This means that Select one: a. an increase in the price of beer will lead to a decrease in the quantity demanded of beer and beer is a necessity. b. a decrease in the price of beer will lead to an increase in revenue for beer sellers and beer is an inferior good. c. an increase in the price of beer will increase the quantity demanded of beer and beer is a normal good. d. an increase in the price of beer will lead to an increase in revenue for beer sellers and beer is an inferior good.
A
Economists have shown that the burden of a tax is the same whether the tax is collected from the buyer or the seller. Why, then, are gasoline and cigarette taxes imposed on sellers? Select one: a. It is more difficult for buyers to keep track of their purchases, and for the government to verify that the right of amount of tax revenue is collected. b. The demand for both gasoline and cigarettes is very elastic. c. Sellers are more honest than buyers. d. The Equal Protection Clause of the U.S. Constitution prohibits the government from imposing taxes like these on buyers.
Technological change on the PPF
Example: ______ in the automobile industry that increases the quantity of vehicles workers can produce per year while leaving unchanged the maximum quantity of tanks they can produce.
Scarcity
Exists because we have unlimited wants but only limited resources available to fulfill those wants. (requires tradeoffs)
Compliments
Goods and services that are used together.
substitutes
Goods and services that can be used for the same purpose
luxury goods
Goods that are ________ usually have more elastic demand curves than goods that are necessities. For example, the demand for bread is inelastic because bread is a necessity, and the quantity that people buy is not very dependent on its price.
A decrease in the quantity of MP3 players demanded
Holding everything else constant, an increase in the price of MP3 players will result in A) a decrease in the quantity of MP3 players supplied. B) a decrease in the demand for MP3 players. C) an increase in the supply of MP3 players. D) a decrease in the quantity of MP3 players demanded.
Inferior good
If a decrease in income leads to in an increase in the demand for peanut butter, then peanut butter is
An inferior good
If a decrease in income leads to in an increase in the demand for peanut butter, then peanut butter is?
C
If a firm expects that the price of its product will be higher in the future than it is today Select one: a. the firm will go out of business. b. the firm has an incentive to decrease quantity supplied now and increase quantity supplied in the future. c. the firm has an incentive to decrease supply now and increase supply in the future. d. the firm has an incentive to increase supply now and decrease supply in the future.
shape of ppf graph
If opportunity cost is constant than the graph is a straight line and if the opportunity cost is increasing than the graph would be curve bow outward
Rational
If people use all available information about marginal costs and benefits to achieve their goals, then economists say the are:________
Increase the demand for the galaxy
If the Apple iPhone and the Samsung Galaxy are considered substitutes, then, other things equal, an increase in the price of the iPhone will decrease the demand for the iPhone. increase the demand for the Galaxy. increase the quantity demanded for the Galaxy. increase the quantity demanded for the iPhone.
A
If the price elasticity of demand for canned soup is estimated at -1.62. What happens to sales revenue if the price of canned soup rises? Select one: a. It falls. b. It falls by 162 percent. c. It rises by 1.62 percent. d. It rises.
quantity demanded equals quantity supplied
If, for a product, the quantity supplied exceeds the quantity demanded, the market price will fall until
A decrease in quantity demanded
If, in response to an increase in the price of chocolate the quantity of chocolate demanded decreases, economists would describe this as a decrease in demand. a decrease in quantity demanded. a change in consumer income. a decrease in consumers' taste for chocolate.
A shortage of oranges
In 2004, hurricanes damaged a large portion of Florida's orange crop. As a result of this, many orange growers were not able to supply fruit to the market. At the pre-hurricane equilibrium price (i.e., at the initial equilibrium price), we would expect to see a surplus of oranges. the quantity demanded equal to the quantity supplied. a shortage of oranges. an increase in the demand for oranges.
The supply curve shifted to the left resulting in an increase in equilibrium price
In 2004, hurricanes destroyed a large portion of Florida's orange and grapefruit crops. In the market for citrus fruit the supply curve shifted to the right resulting in an increase in the equilibrium price. the supply curve shifted to the left resulting in an increase in the equilibrium price. the demand curve shifted to the right resulting in an increase in the equilibrium price. the demand curve shifted to the left resulting in a decrease in the equilibrium price.
The demand curve shift to the left
In January, buyers of gold expect that the price of gold will fall in February. What happens in the gold market in January, holding all else constant?
The demand curve shifts to the left
In January, buyers of gold expect that the price of gold will fall in February. What happens in the gold market in January, holding all else constant?
The supply curve shifted to the left
In October 2005, the U.S. Fish and Wildlife Service banned the importation of beluga caviar, the most prized of caviars, from the Caspian Sea. What happened in the market for caviar in the U.S.? The supply curve shifted to the left. The supply curve shifted to the right. The demand curve shifted to the right. The demand curve shifted to the left.
The supply curve shifts to the right
In October, market analysts predict that the price of platinum will fall in November. What happens in the platinum market in October, holding everything else constant? The supply curve shifts to the right. The supply curve shifts to the left. The quantity demanded and the quantity supplied of platinum increase. The demand curve shifts to the right.
B
Last year, Sefton purchased 60 pounds of potatoes to feed his family of five when his household income was $30,000. This year, his household income fell to $20,000 and Sefton purchased 80 pounds of potatoes. All else constant, Sefton's income elasticity of demand for potatoes is Select one: a. -1.4, so Sefton considers potatoes to be a normal good. b. -0.71, so Sefton considers potatoes to be an inferior good. c. 1.4, so Sefton considers potatoes to be a normal good. d. 0.71, so Sefton considers potatoes to be an inferior good.
An increase in demand
Last year, the Pottery Palace supplied 8,000 ceramic pots at $40 each. This year, the company supplied the same quantity of ceramic pots at $55 each. Based on this evidence, The Pottery Palace has experienced ___________
An increase in demand
Last year, the Pottery Palace supplied 8,000 ceramic pots at $40 each. This year, the company supplied the same quantity of ceramic pots at $55 each. Based on this evidence, The Pottery Palace has experienced?
productive efficiency
Occurs when a good or service is produced @ the lowest possible cost.
allocative efficiency
Occurs when production corresponds with consumer preferences. Every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it.
economic growth
Outward shifts in the PPF represent ______ because they allow the company to increase the production of goods and services, which ultimately raises the standards of living.
B
Over longer periods of time, increases in oil prices provide firms with incentives to explore and recover oil. What does this indicate about the long run price elasticity of supply for oil? Select one: a. The elasticity coefficient is unstable in the long run because oil supplies may be depleted. b. The elasticity coefficient is likely to be higher in the long run than in the short run. c. The elasticity coefficient is likely to be lower in the long run than in the short run. d. The elasticity coefficient approaches 0 in the long run as supplies are depleted.
$15
Paul goes to Sportsmart to buy a new tennis racquet. He is willing to pay $200 for a new racquet, but buys one on sale for $185. Paul's consumer surplus from the purchase is?
comparative advantage
People and countries should specialize in activities where they possess a (an)
Efficient; inefficient
Points found on the Production Possibilities Curve (PPC) are considered ________________ while those inside the curve are ______________.
C
Suppose that the price of a widget increases from $75 to $90 and quantity demanded falls from 11,000 units to 8,000 units. Use the midpoint formula to calculate the absolute value of the price elasticity of demand. Select one: a. 2.89 b. -0.07 c. 1.74 d. 0.67
Hamburgers and chicken nuggets are substitutes
Suppose that when the price of hamburgers decreases, the Landry family decreases their purchases of chicken nuggets. To the Landry family A) hamburgers and chicken nuggets are complements. B) hamburgers and chicken nuggets are inferior goods. C) hamburgers and chicken nuggets are normal goods. D) hamburgers and chicken nuggets are substitutes.
B
Suppose the value of the price elasticity of supply is 4. What does this mean? Select one: a. For every $1 increase in price, quantity supplied increases by 4 units. b. A 1 percent increase in the price of the good causes quantity supplied to increase by 4 percent. c. A 1 percent increase in the price of the good causes the supply curve to shift upward by 4 percent. d. A 4 percent increase in the price of the good causes quantity supplied to increase by 1 percent.
$8
Suppose you paid $300 to take this economics course, which meets 30 times for one hour a class during the course of the semester. Instead of attending class you could have either flipped hamburgers for $8 an hour or waited tables for $5 an hour. Given this information, the opportunity cost of attending each class session is:
Market demand
The demand by all the consumers of a given good or service is the ________ for the good or service. A) market demand B) quantity demanded C) law of demand D) scheduled demand
D
The demand for all carbonated beverages is likely to be ________ the demand for Dr. Pepper. Select one: a. more elastic than b. perfectly inelastic compared to c. perfectly elastic compared to d. less elastic than
consumer surplus
The difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is called?
consumer surplus
The difference between the highest price a consumer is willing to pay for a good or service and the actual price the consumer pays.
producer surplus
The difference between the lowest price a firm would be willing to accept for a good or service and the price it actually receives
Capital
The economic resource that includes all "stuff used to produce other stuff" is called
Entrepreneurial ability
The economic resource that includes management, innovation and risk-taking is known as ________
economic reasoning (cost-benefit analysis)
The expected incremental/additional costs incurred and expected incremental benefits resulted from a decision
Equity
The fair distribution of economic benefits
D
Which of the follow is not a result of imposing a rent ceiling? Select one: a. The marginal benefit of the last apartment rented is greater than the marginal cost of supplying it. b. There is a reduction in the quantity supplied of apartments. c. There is an increase in the quantity demanded of apartments. d. Some consumer surplus is converted to producer surplus.
Opportunity cost
The highest-valued alternative of any activity that must be given up to engage in that activity
C
The law of demand implies, holding everything else constant, that Select one: a. as the price of bagels increases, the demand for bagels will decrease. b. as the price of bagels increases, the quantity of bagels demanded will increase. c. as the price of bagels increases, the quantity of bagels demanded will decrease. d. as the price of bagels increases, the demand for bagels will increase.
substitutes
The market for energy drinks has grown rapidly over the past several years. One report predicts that energy drinks might replace coffee for the current generation of teens and young adults. This report implies that energy drinks and coffee are _________
Substitutes
The market for energy drinks has grown rapidly over the past several years. One report predicts that energy drinks might replace coffee for the current generation of teens and young adults. This report implies that energy drinks and coffee are?
deadweight loss
The reduction in economic surplus resulting from a market not being in competitive equilibrium.
marginal cost
The reduction in your test score from having studied a little less
Economics
The study of choices people make to attain their goals given their scarce resources is
Microeconomics
The study of how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices.
Microeconomics
The study of individual buyer and sellers within markets is known as
Macroeconomics
The study of the economy as a whole is known as
economic surplus
The sum of consumer surplus and producer surplus
B
Trade is almost always more efficient than self-sufficiency as long as they Select one: a. are mutually beneficial. b. all of these. c. driven by specialization. d. based on comparative advantage. e. none of these.
Production possibility fronteir
Used to analyze trade-offs. A curve showing the maximum attainable combinations of two goods that can be produced with available resources and current technology.
Unattainable on the PPF
When the points are beyond the frontier they are _______ given the firm's current resources. (company may need more machines and more workers)
Substitution; income
When the price of a good falls, consumers buy a larger quantity because of the ________ effect and the ________ effect.
B
Which of the following best defines rational behavior? Select one: a. Seeking to maximize total gain regardless of cost b. Improving net gain by pursuing decisions as long as the marginal benefits exceed the marginal costs c. Seeking to gain by choosing to undertake actions as long as the marginal costs exceed the associated marginal benefits d. Analyzing the total gains from a decision
At equilibrium, quantity demanded equals quantity supplied
Which of the following is the correct way to describe equilibrium in a market?
A
Which of the following products comes closest to having a perfectly inelastic demand? Select one: a. insulin injections b. shoes c. wifi d. bread
an increase the price of a product that producers sell instead of milk
Which of the following would cause a decrease in the supply of milk? an increase in the price of cookies (assuming that milk and cookies are complements) a decrease in the price of milk an increase the price of a product that producers sell instead of milk an increase in the number of firms that produce milk
A decrease in the price of flour
Which of the following would cause the equilibrium price of white bread to decrease and the equilibrium quantity of white bread to increase? a decrease in the price of flour an increase in the price of flour an increase in the price of rye bread, a substitute for white bread an increase in the price of butter, a complement for white bread
sunk costs
________ are irrelevant to economic decisions.
Opportunity cost
_______________: the highest-valued alternative that must be given up to engage in an activity. Often do not involve actual payments of money.
Positive analysis
________________: analysis concerned with what is.
B
a. More burden is on sellers when the demand curve is more inelastic. b. More burden is on sellers when the supply curve is more inelastic. c. More burden is on buyers when the supply curve is more inelastic. IncorrectIncorrect d. More burden is on the party paying the tax.
a decrease in the supply of cattle
anchers can raise either cattle or sheep on their land. Which of the following would cause the supply of sheep to increase?
The law of demand implies, holding everything else constant, that
as the price of bagels increases, the quantity of bagels demanded will decrease.
Invisible hand
refers to the way in which the individual pursuit of self-interest can lead to good results for society as a whole.
a firm expects that the price of its product will be higher in the future than it is today
the firm has an incentive to decrease supply now and increase supply in the future.
specialization
the result of workers developing a certain skill set in order to increase total productivity
