Micro Final
How does the equilibrium price and quantity change for lobsters if the price of butter, a complement in consumption to lobsters, decreases?
Price increases, and quantity increases
Game theory is _____. An equilibrium in which the choice that each player makes is a best response to the choices other players are making is the definition of a ________.
The science of making good decisions in situations involving strategic interaction; Nash equilibrium.
A tax designed to induce people to take account of the negative externalities that they cause is referred to as ________, and it is typically set at an amount equal to the _______ in order to resolve a negative externality problem.
a corrective tax; marginal external cost
An inferior good is
a good whose demand increases when income rises
When a market transaction has a beneficial effect on bystanders who were not involved in the transaction, this effect is called:
a positive externality
An externality is defined as:
a side-effect of an activity that affects bystanders whose interests are not taken into account.
When quantity supplied exceeds quantity demanded,_______exists.
a surplus
The market power of a firm is its
ability to raise its price without losing many of its customers to competing businesses.
A binging price floor is:
always above the equilibrium price
A characteristic of oligopoly that is not present in any other market structure is that there
are a small number of sellers with considerable market power
You have a comparative advantage if you can complete a task:
at a lower opportunity cost than anyone else
Graphically, shortages will always occur:
at prices below the equilibrium price.
The nash equilibrium is where_______.
both Maria and Jose charge $4 per jar
perfect price discrimination consists of
charging each customer their reservation price.
The cost-benefit principle that that_____are the incentives that shape decisions
costs and benefits
Damon's wage rises. The substitution effect would cause him to _____ his work hours, and the income effect would cause him to _____ his work hours.
decrease; increase
A tax on buyers shifts the:
demand curve to the left
A compenstaing differential is an:
difference in wages that offsets the desirable or undesirable aspects of a job.
The marginal private benefit is the:
extra benefit enjoyed by the buyer of one extra unit of a good or service.
When a good is nonrival and nonexcludable, it suffers from the _____ problem.
free-rider
Stevia is a natural sweetener that is used as a sugar substitute. Which of the following graphs illustrates the impact of a rise in the price of stevia on the demand of sugar?
graph D
Price discrimination by charging different prices to different groups of people is called
group pricing
Suppose the percentage change in newspapers demanded for any price change is infinite. The price elasticity of demand for newspapers is _____, and demand is _____.
infinity; perfectly elastic
The law of demand refers to
inverse relationship between price and quantity demanded
Diminishing marginal benefit:
is when buying an additional item yields a smaller marginal benefit than the previous item.
Consumer surplus equals:
marginal benefit minus price
The marginal private benefit plus the marginal external benefit equals the ____ benefit.
marginal social
A measure of how responsive buyers are to price changes in the:
price elasticity of demand
The figure shows four different demand curves for four products: A, B, C, and D. Which of the products has a perfectly inelastic demand curve?
product A
income elasticity of demand measure how responsive the:
quantity demanded of a good is to change in income
Taling the absolute value of the cross-price elasticity of demand is incorrect because it would:
remove the ability to tell whether the two products are substitutes or compliments
Comparative advantage explains why people
specialize and trade
A tax on sellers shits the:
supply curve to the left
In a labor market, workers_____labor, and employers_____labor demanded.
supply; demand; derived
The marginal benefit (MB) of consuming an item is
the additional benefit from buying one more unit of that item
If tesla cars become less expensive, what will happen in the market for other electric cars?
the demand for other electric cars will fall
Paint and paintbrushes are complements. If the price of paint rises, we can expect:
the demand for paintbrushes to decrease
When you are a seller who offers lower prices only to people who are willing to overcome some obstacle to get the lower price, you are using_______ to get consumers to reveal their reservation price.
the hurdle method
A reservation price is
the lowest price at which a seller is willing to make a sale
Equilibrium is the
the point at which there is no tendency for change
The percent change in insulin demanded for any price change is zeros. The damnd curve for insulin is_______, and the price elasticity of demand is_______.
vertical; perfectly inelastic
In a labor market graph, ____ is measured on the vertical axis, and ____ is measured on the horizontal axis.
wage; hours of labor
In which market structure do the actions of a rival have a significant impact on your operation?
Oligopoly
If maria charges $8 per jar, then Jose should charge_____per jar. If Maria charges $4 per jar, then Jose should charge____per jar.
$4, $4
If Jose charges $8, then Maria should charge ____ per jar. If Jose charges $4 per jar, then Maria should charge _____ per jar.
$4, $8
Uber cuts the price of ride in Starkville by 10%. Thereafter, the quantity of rides demanded rises by 20%. What is the price elasticity of demand for Uber rides?
2
In the market shown, the original equilibrium price is 60 cents. A tax is then implemented on the buyer. After the implementation of the tax, the seller receives______cents per unit of the product.
58
Consider your decision to attend class each day or skip it. Which of the four core principles of economics applies to the notion that by attending class you are not doing the next best activity you would prefer to do, such as napping or going to the gym?
Cost-benefit principle
Which graph shows the scenario where the substitution effect dominates labor supply decision?
Graph A
Production Possibility Frontier (PPF) shows the different sets of output that are attainable with your scarce resources, visualizing the opportunity cost. What is the if an economy produces a combination of goods that is inside (or below) its production possibilities frontier (ppf)?
More of one good cannot be produced without giving up some of the other good
