Micro Economics Ch 3,4,19
In Table 19.3 the marginal utility per dollar of the second cola is
4
In Table 19.3, what is the total utility of two units of cola?
72
In Table 3.1, if the price is $4, the market will
Be in equilibrium.
Jessie's demand schedule for candy bars indicates
Her opportunity cost of buying candy bars.
Shifts of Supply and Demand
d
If the price of "X" increases and you buy more "Y," then
"X" and "Y" are substitutes, and the price of "Y" will increase.
In Table 19.3, what is the marginal utility of the fifth unit of cola?
12
Refer to Table 19.3. If Michael has $40 to spend on cola and pretzels, what is his maximum utility possible?
174
Air pollution best illustrates
externality
Suppose that if your income is $50,000, your tax is $5,000, but if your income is $100,000, your tax is $8,000. Such a tax is
regressive
Supply and Demand
20 units shortage
Shifts of Supply and Demand
A
Ceteris paribus, if buyers expect the price of airline tickets to fall in the future, then right now there should be
A decrease in the demand for airline tickets.
Most goods can yield
Both positive and negative marginal utility.
Use the indifference curves and the budget lines in Figure 19.3 to answer the indicated question. Assume the price of Y is $1 per unit. If the price per unit of good X is $1, the optimal consumption is found at point
C
A decrease in the price of bubble gum below equilibrium will
Cause a shortage of bubble gum.
Ceteris paribus, an increase in the number of sellers of running shoes causes equilibrium price to
Decrease and equilibrium quantity to increase.
Assume a series of forest fires reduces the supply of lumber, which is an input in the production of wooden bats. Baseballs and wooden bats are complements. If the price of wooden bats increases, we can expect the
Demand for baseballs to decrease.
One In the News article titled "Persistent Doubts about Government Waste" indicates that people think "the government wastes a lot of tax money." If this is true, this is an example of
Government failure.
Use the indifference curves and the budget lines in Figure 19.3 to answer the indicated question. Assume the price of Y is $1 per unit. Point D on the graph
Is affordable but does not yield the highest utility possible.
Assume Amanda always maximizes her total utility given her budget constraint. Every morning for breakfast she has two eggs and three sausages. If the marginal utility of the last egg is 10 utils and the price of eggs is $1 each, what can we say about the marginal utility of the last sausage if the price of each sausage is $2?
It must be equal to 20 utils.
The law of diminishing marginal utility suggests that
People are willing to buy additional quantities of a good only if its price falls.
A rightward shift of the market demand curve for MP3 players, ceteris paribus, causes equilibrium
Price to increase and equilibrium quantity to increase.
Suppose that if your income is $100,000, your tax is $20,000, but if your income is $200,000, your tax is $45,000. Such a tax is
Progressive.
Suppose a hurricane hits Florida, causing widespread damage to houses and businesses. The governor of Florida places price ceilings on all building materials to keep the prices reasonable. Which of the following is the most likely result?
Shortages of building materials and a slower recovery from the storm.
In 2007 a company sold 35,000 MP3 players at $150 each. In 2008 the same company sold 40,000 MP3 players at $170 each. This information suggests that
The demand for MP3 players increased from 2007 to 2008.
If a good had a zero price (i.e., the good was free), a rational person would consume
The good until the marginal utility of the last unit was zero.
Which of the following is purchased in a factor market?
The labor of a state university professor.
The law of diminishing marginal utility gives us a deeper understanding of the downward-sloping demand curve because
When marginal utility is high, we are willing to pay a higher price.
In Table 19.2, diminishing marginal utility occurs
With all units after the first.
Flat-screen TVs: the technology required for flat-screen TVs production becomes cheaper.
b
Governments usually build highways because it is difficult to exclude individuals who don't pay for the highways from using them. What type of market failure is involved?
public goods
In Table 3.1, if government held the price at $3,
there would be a shortage
Use the indifference curves and the budget lines in Figure 19.3 to answer the indicated question. Assume the price of Y is $1 per unit. If the price per unit of good X is $1, the consumer would maximize utility by consuming
15 units of y
One In the News article in the titled "Students Struggle to Find Final Four Tickets" described how professional scalpers use the Internet to sell hard-to-get tickets to concerts and sporting events. When scalpers resell tickets at prices closer to equilibrium,
A market shortage is made smaller, and the scalpers reap a profit.
When the demand for coffee increases, ceteris paribus, the equilibrium price will also increase because
A shortage exists at the old equilibrium price.
If a price is below equilibrium,
A shortage will cause the price to rise and the quantity supplied to increase.
A World View article titled "Secondhand Smoke Kills 600,000 People a Year: Study" implies the harm caused to nonsmokers is
A source of market failure.
If a price is above equilibrium,
A surplus will cause the price to fall and the quantity supplied to decrease.
Use the indifference curves and the budget lines in Figure 19.3 to answer the indicated question. Assume the price of Y is $1 per unit. In Figure 19.3, given an income of $30 and a price for good Y of $1, which of the following two points represent optimal consumption?
A when the price of X is $3 and C when the price of X is $1.
Which of the following is most likely to occur because of an increase in the price of electricity in California?
An increase in electricity imported into California.
Suppose there are a series of forest fires that affect the lumber industry while, at the same time, consumers demand more wooden furniture. The wooden furniture market would experience
An increase in price and an indeterminate change in quantity.
Ceteris paribus, which of the following is most likely to cause a decrease in the supply of skateboards?
An increase in the cost of materials used to produce skateboards.
Assume that pencils and pens are substitutes. If the price of pencils rises, then we will see
An increase in the demand for pens.
Ceteris paribus, which of the following would you expect to have no effect on the demand curve for new automobiles?
An increase in the price of new automobiles.
Ceteris paribus, which of the following is most likely to cause an increase in the quantity supplied of perfume?
An increase in the price of perfume.
A leftward shift of the market demand curve for HDTVs, ceteris paribus, causes equilibrium price to
Decrease and quantity to decrease.
Assume peanut butter and jelly are complements. Ceteris paribus, an increase in the price of peanut butter will cause the equilibrium price of jelly to
Decrease and the equilibrium quantity of jelly to decrease.
In Table 3.1, if the price is $2, the market will
Experience a shortage of 22 units.
Refer to Table 19.3. If Michael has $48 to spend on cola and pretzels, what combination should he purchase in order to maximize his utility?
Four colas and four pretzels.
The In the News article titled "Men vs. Women: How They Spend" differentiates the spending habits of women and men: "Men spend almost twice as much as women do on electronic equipment ... young women spend twice as much money on clothing, personal care items, and their pets." Which determinant of demand is most likely involved?
Tastes
Which of the following is not held constant when considering a shift in the demand for pizza?
The price of pizza.
The In the News article titled "Seafood Prices Rise on BP Oil Spill" suggests that seafood prices increased because of a decrease in supply. When the availability of seafood worsens, the supply curve of seafood shifts to the left, causing
The price of seafood to move up along the market demand curve.
Suppose both the demand for and supply of salsa increase (although not necessarily by the same amount). What can we conclude about changes in the price and quantity of salsa?
The quantity increases but the change in the price cannot be determined.
An increase in the supply of gasoline, ceteris paribus, will cause equilibrium price
To fall and equilibrium quantity to rise.
Refer to Table 19.3. Suppose Michael has $28 to spend on cola and pretzels. What combination should he purchase in order to maximize his utility?
Two colas and three pretzels.
Which of the following is an example of a progressive tax?
federal income tax
