Micro Final Exam
"holding other things constant"
A commonly-used qualifier noting your conclusions may change if some factor that you haven't analyzed changes.
Which of the following market changes would NOT lead to a shift of the supply curve from Old supply to New supply
A decrease in the market price of the good
La Croix, Polar, and Perrier compete in the seltzer water market. Assume all of their seltzers taste identical. Which of the following suggests that total surplus is not maximized in this market?
The marginal cost of the last unit of production of Polar seltzer is lower than La Croix and Perrier
marginal benefit
the additional benefit to a consumer from consuming one more unit of a good or service
Marginal Principle
Decisions about quantities are best made incrementally. You should break "how many" questions into a series of smaller, or marginal decisions, weighing marginal benefits and marginal costs.
A non-binding price floor has what effect on total surplus?
No effect
Interdependence principle
Your best choice depends on your other choices, the choices others make, developments in other markets, and expectations about the future. When any of these factors changes, your best choice might change.
Cost-Benefit Principle
a guide to decision-making which states that an individual should undertake an activity if and only if the additional benefit of doing so is greater than or equal to the additional cost of doing so.
diminishing marginal benefit
as you consume more of a good, your willingness to pay for an additional unit declines
surplus
benefit - cost
Due to cultural changes, worker productivity in the US declines, resulting in decreased wages. Which graph depicts what happens to demand for luxury vehicles?
demand shift left
Georgia Tech's volleyball team beats the #1 ranked team in the country, leading to sellout crowds. Which of the following depicts this scenario?
demand shift left
where way is the individual curve sloping
downward
Which of the following changes in the above represents a reduction in marginal cost due to a new technological breakthrough?
leftward shift of supply curve
Jeni's Splendid Ice Creams sells ice cream cones for $5 each. Your first ice cream cone gives you a marginal benefit of $7. The second, third, fourth, and fifth ice cream cone gives you a marginal benefit of less than $5, but the exact value is unknown. What is your total surplus if you purchase and consume two ice cream cones?
less than $2
The equilibrium price of golf balls is $2 per ball. This price serves as the
marginal benefit to suppliers and marginal cost to buyers
decrease in price
movement along curve
to maximize economic surplus keep applying the rational rule for buys, continuing to buy until:
price = marginal benefit
when price is lower
quantity of demand is higher
A war in Europe has increased the global price of oil. Which of the following represents the change in the market for oil suppliers?
shift up in supply curve
willingness to pay
the maximum amount that a buyer will pay for a good
what is the opportunity cost of buying a car
the price
Dependencies between your own choices reflect the fact that:
you have limited resources
Doughnut production technology increases in sophistication, causing a shift of the supply curve so that the new equilibrium price is $3 per doughnut. What is the aggregate demand for doughnuts at the new equilibrium?
280 doughnuts
A food truck offers tacos for $6 and doughnuts for $6. You have $10 in your pocket and your willingness to pay for a doughnut is $10 and your willingness to pay for a taco is $3. The opportunity cost of choosing a doughnut is.
$6
15) Calculate the price elasticity of demand in the Kenyan labor market for a price change from 20,000 to 15,000 shillings using the following graph (use a calculator and be careful with rounding):
-1.4
opportunity cost
-whatever must be given up to obtain some item -highlights scarcity
The price of protein powder increases by 10%. In response to the price change, the quantity supplied increases from 5 million units to 7 million units. The absolute value of the price elasticity of supply for protein powder is _____, and the price elasticity of supply is _____.
3.3 elastic
The price elasticity of demand for health care is -0.5. A 50% increase in the price of a medical procedure will result in
A 25% decrease in the quantity of procedures demanded
The MARTA ticket price increases. Which of the following is the most likely impact on the rideshare market (a substitute good)?
Equilibrium price and quantity increases
You know that the price of labor and the cost of building materials such as lumber increased during COVID-19. The equilibrium quantity of homes built
Could have increased if there was a large enough increase in demand for homes at the same time
Rational Rule
If something is worth doing, keep doing it until your marginal benefits equal your marginal costs.
Suppose that the market demand for gasoline is perfectly inelastic in the short run. A disruption to the global oil supply chain will do what to equilibrium prices and quantities of oil?
Increase the price, not change the quantity
Suppose demand for gasoline is perfectly inelastic in the short run and supply is elastic. A tax of $1 per gallon is levied on gasoline, which will be paid by producers. How much does the price of gasoline change?
It increases by $1 per gallon
After college, you graduate with a degree in chemical engineering. You are also a highly sophisticated economic decisionmaker who uses the cost-benefit principle, opportunity cost principle, marginal principle, and rational rule, and interdependence principle to make decisions. After you have your degree, when deciding whether to take a job as a chemical engineer or as an Uber driver, which piece of information are you most likely to ignore?
The time and effort it took for you to complete your degree
Which of the following market scenarios suggests a shortage?
Traffic is bad and travel times are slow during rush hour in Atlanta
Law of Demand
consumers buy more of a good when its price decreases and less when its price increases
After an additional subsidy of $1 per gallon of milk, the new equilibrium quantity of milk consumed is _____.
between 5 & 7
Rational Rule for Buyers
buy more of an item if its marginal benefit is greater than (or equal to) the price
Dependencies between markets
changes in prices and opportunities in one market affect the choices you might make in other markets
individual demand curve
illustrates the relationship between quantity demanded and price for an individual consumer
Banning natural gas electricity production will do what to equilibrium electricity prices and quantities?
increase prices; decrease quantities
An alien spaceship lands in Georgia and 10,000 new alien workers enter the unskilled labor market. The equilibrium wage drops and total surplus in the labor market _____.
increases
In a competitive labor market, a barista at a coffee shop quits after being denied a wage raise. The choice of the barista to quit working ____.
is Pareto improving and efficiency improving
Imagine a market of 50 identical solar energy suppliers who have a perfectly inelastic supply curve. When the market price of electricity drops from 20 cents per kilowatt hour to 10 cents per kilowatt hour, the market supply curve will
no change
After you graduate, you are the CEO of a mobile app startup you invented called TikTak. Your director of marketing notes that the average cost of acquisition of new users in the past was lower in the high school student market than in the college student market. Based on this information, she recommends stopping your advertisements targeting college students and buying additional advertisements targeting high school students. This plan is
not necessarily a good idea because you should advertise in the market with the lowest marginal cost of acquisition, not average cost
Everybody has unique preferences, but using the law of demand, which of the following is true, even for a person you've never met?
-The marginal willingness to pay for a third computer is less than or equal to the marginal willingness to pay for the first computer -The marginal willingness to pay for a fourth computer is less than or equal to the marginal willingness to pay for the first computer -The marginal willingness to pay for a second computer is less than or equal to the marginal willingness to pay for the first computer
Two products have a cross-price elasticity of demand of -0.3. Based on this value of cross-price elasticity, which of the following products are they most likely to be?
A brand of cell phone and a matching cell phone case
Which of the following is likely to be most elastic?
A long run supply elasticity
Scarcity
A situation in which unlimited wants exceed the limited resources available to fulfill those wants
At Joe's Generic Bar, raising all prices by 10% reduces demand for food items by 20% and reduces demand for alcoholic drinks by 5%. Which of the following is true?
Demand for food is more elastic relative to alcohol
marginal cost
Extra cost of producing one additional unit of production.
Demand for Starbucks pumpkin spice lattes (PSLs) is very elastic. The government decides to tax PSLs by making every buyer pay $1 per PSL they buy. Who do we expect will pay most of the burden of the tax?
The producer (Starbucks)
dependencies between people
your best choice depends on the choices others make - this arises because you are competing for society's resources
Dependencies over time
your choices are linked through time by investments you make
diminishing marginal benefit explains what
your demand curve is downward sloping