MICRO exam 1 Study for final
Equality means distributing society's resources in the most efficient manner.
False
When the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A rises to $70, the quantity demanded of good A falls to 400 units. Using the midpoint method, the price elasticity of demand for good A is
0.67, and an increase in price will result in an increase in total revenue for good A.
A manufacturer produces 350 units when the market price is $10 per unit and produces 460 units when the market price is $14 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about
0.81
Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year, and a worker in Oatland can grow either 5 bushels of corn or 50 bushels of oats per year. There are 20 workers in Cornland and 20 workers in Oatland. If the two countries do not trade, Cornland will produce and consume 400 bushels of corn and 100 bushels of oats, while Oatland will produce and consume 60 bushels of corn and 400 bushels of oats. If each country made the decision to specialize in producing the good in which it has a comparative advantage, then the combined yearly output of the two countries would increase by
380 bushels of corn and 100 bushels of oats
Table 3-2 Assume that England and France each has 10 labor hours available. If each country divides its time equally between the production of pastrami and milk, the the total production is
6 units of pastrami and 3.75 units of milk
If the price elasticity of supply is 0.6, and a price increase led to a 3.7 percent increase in quantity supplied, then the price increase is about
6.17 percent
Tuition is the single-largest cost of attending college for most students.
False
Demand is said to be inelastic if
The quantity demanded changes only slightly when the price of the good changes
T/F An economy can produce at any point on or inside its production possibilities frontier, but it cannot produce at points outside its production possibilities frontier.
True
a group of buyers and sellers of a particular good or service is called
a market
The gains from trade are
a result of more efficient resource allocation than would be observed in the absence of trade
A payroll tax is a
a tax on the wages that firms pay their workers
Trade between countries
allows each country to consume at a point outside its production possibilities frontier
trade
allows specialization, which reduces costs.
Both Ryan and Daunuta produce hair scarves and brooches. However, Ryan is better at producing both goods. In this case, trade could
benefit both Danuta and Ryan
A shortage results when a
binding price ceiling is imposed on a market
A surplus results when a
binding price floor is imposed on a market.
equilibrium quantity must decrease when
both demand and supply decrease
Under rent control, bribery is a potential mechanism to
bring the total price of apartment including the bribe closer to the equilibrium price.
A good will have more inelastic demand, the
broader the definition of the market
Price ceilings and price floors that are binding
cause surpluses and shortages to persist since price cannot adjust to the market equilibrium price
the law of demand states that, other things equal, when the price of a good
falls, the quantity demanded of the good rises
The goal of rent control is to
help the poor by making housing more affordable
Microeconomics is the study of
how individual households and firms make decisions.
The "invisible hand refers to
how the decisions of households and firms lead to desirable market outcomes
When two variables have a positive correlation,
if the x-variable decreases, the y-variable decreases.
in the circular flow diagram
income payments flow from firms to households,
a decrease in the price of a good will
increase in quantity demanded
An increase in the price of a good will
increase quantity supplied
suppose an increase in the price of rubber coincides with an advance in the technology of tire production. as a result of these two events, the demand for tires
is unaffected, and the supply of tires could increase, decrease, or stay the same.
Goods with many close substitutes tend to have
more elastic demands
The burden of a luxury tax usually falls
more on the middle class than on the rich.
Where can an economy not produce?
outside its production possibilities frontier
Resources are
scarce for households and scarce for economies
quiz 4 question 15 table 4-6 If the price were $4, a
surplus of 25 units would exist, and price would tend to fall
A rational decisionmaker
takes an action only if the marginal benefit of that action exceeds the marginal cost of that action
The production possibilities frontier illustrates
the combination of output that an economy can produce
what would happen to the equilibrium price and quantity of lattes if the cost of producing steamed milk , which is used to make lattes, rises?
the equilibrium price would increase , and the equilibrium quantity would decrease
in the circular flow diagram in the market for
the factors of production, households are sellers and firms are buyers.
The price elasticity of supply measures how much
the quantity supplied responds to changes in the price of the good
When a country has a comparative advantage in producing a certain good,
then specializing in the production of that good and trading for other goods could allow that country to consume at a point beyond its production possibilities frontier.
Scarcity means that there is less of a good or resource available than people wish to have.
true
opportunity cost of an item
what you give up to get that item
