Micro Practice Questions

12) If you are willing to pay $40 for Top Hat access, but a guy in an alley sells you a black market access code for $3, your consumer surplus is...

$37

In your spare time you drive for Uber. You pick up a passenger and take her to Madison Social, for which you are paid $15. You would have been willing to drive her there for $9. Your producer surplus is...

$6

Suppose I buy a nice dinner for $15. I was willing to pay $25 for it, and the restaurant would have been willing to sell it for as little as $11. What is the total gain to both sides?

14

If the opportunity cost of watching one episode of your favorite show on Netflix is the $5 you would have earned from working for half an hour, then the opportunity cost of working for an hour is... watching ______ episodes of your favorite show on Netflix.

2

Arc Income Elasticity of Demand

E>0 normal good E=0 necessity E<0 Inferior good

arc cross price elasticity of demand

E>0 substitutes E=0 unrelated E<0 complements

Arc-Own Price Elasticity of Demand

E>1 demand is elastic E=1 demand is unit elastic E<1 demand is inelastic

arc price elasticity of supply

E>1 elastic supply E=1 Unit elastic E<1 inelastic supply

A $1 per pound tax is imposed on cucumbers. The own-price elasticity of demand for cucumbers is 1.5, and the elasticity of supply for cucumbers is 0.7. Which of the following is correct? a) The burden of the tax will fall mostly on consumers. b) The burden of the tax will fall mostly on producers. c) The burden of the tax will fall equally on consumers and producers. d) The burden of the tax will be zero.

b) The burden of the tax will fall mostly on producers.

Of the following goods, which is likely to have the most elastic demand? a) candy b) heroine c) antiretroviral drugs for treating HIV d) gasoline

a) candy

Equilibrium is efficient because... a) Total surplus is maximized. b) Marginal benefit equals marginal cost. c) Every unit that is produced has a benefit to consumers greater than (or equal to) the cost of its production. d) All of the above.

d) All of the above.

What is the title of the official in charge of making sure markets reach equilibrium? a) Secretary of the Treasury b) Chairman of the Federal Reserve c) President of the Chamber of Commerce d) None of the above

d) None of the above

9) Qualcomm and Crucial are two companies making computing components: memory and processors. According to their production possibilities frontiers above, which of the following is correct? a) Qualcomm has a comparative advantage in memory. b) Crucial has a comparative advantage in processors. c) Both businesses have a comparative advantage in processors. d) Qualcomm has a comparative advantage in Processors, and Crucial has a comparative advantage in memory.

d) Qualcomm has a comparative advantage in Processors, and Crucial has a comparative advantage in memory.

Consumer Surplus is... a) The area above the supply curve and below the price. b) The area above the demand curve and below the price. c) The difference between the price and the cost of production. d) The difference between what consumers are willing to pay and what they actually pay.

d) The difference between what consumers are willing to pay and what they actually pay.

Suppose the government imposes a maximum annual tuition on bachelor's degree-granting institutions of $2,000 per year. Which of the following is not likely to occur? a) Universities will cut costs, resulting in a lower-quality educational experience. b) There will be more people trying to get into colleges and universities than these schools can handle, resulting in long wait-lists for admissions. c) Some people will set up fake or fraudulent bachelor's degree programs to attempt to make money off of the increased number of would-be students. d) Universities will compete for students more intensely, resulting in more and larger scholarships.

d) Universities will compete for students more intensely, resulting in more and larger scholarships.

In equilibrium... a) total surplus is maximized. b) quantity supplied equals quantity demanded. c) supply intersects demand. d) all of the above

d) all of the above

10) Suppose the price of tomato sauce is $4 per jar, but then rises to $7 per jar. The Law of Demand states that... a) demand will rise. b) demand will fall. c) quantity demanded will rise. d) quantity demanded will fall.

d) quantity demanded will fall.

The value of the best thing you give up to get something is... a) marginal cost. b) sunk cost. c) fixed cost. d) opportunity cost.

d. Opportunity cost

If a person's income goes up, and that person buys more chicken sandwiches, then we can conclude that for this person... a) chicken sandwiches are a normal good. b) chicken sandwiches are an inferior good. c) chicken sandwiches are substitutes. d) chicken sandwiches are complements.

a) chicken sandwiches are a normal good.

A country with a comparative advantage in producing a good... a) has the lowest opportunity cost of production. b) has the highest opportunity cost of production. c) can produce more of the good than any other country. d) will be poorer as a result of trading with its neighbors for other goods

a) has the lowest opportunity cost of production

Consider the supply curve for sour cream. If the price of sour cream falls, then... a) the quantity supplied will fall. b) the quantity supplied will rise. c) the supply will rise. d) none of the above.

a) the quantity supplied will fall.

Suppose you are willing to pay up to $70 for a new pair of shoes. You find a pair you like for $40 and buy them. The store that sold you those shoes would have been willing to sell them for as little as $35. Which of the following is correct? a. You are $30 better off, and the store owner is $5 better off. b. You are $5 better off, and the store owner is $30 better off. c. You are $35 better off, and the store owner is not better off at all. d. You are $40 worse off, and the store owner is $40 better off.

a. You are $30 better off, and the store owner is $5 better off.

The price of internet access rises from $50 per month to $70 per month. The quantity of streaming service subscriptions falls from 200 million to 175 million. What is the Arc Cross-Price Elasticity of Demand? a) 0.4 b) -0.4 c) -0.3125 d) 0.3333

b) -0.4

Your height is 60 inches, but you lose your shins in a tragic gardening accident. As a result, your new height is 48 inches. The percent change in your height is... a) -25% b) -20% c) -12% d) 12%

b) -20% (new-old)/old

The opportunity cost for you to prepare a decent meal is one hour of work, which would earn you $10. The opportunity cost for Chef Enzo to prepare a decent meal is five minutes of work, which would earn him $2. Which of the following terms of trade would benefit you and Chef Enzo? a) Chef Enzo prepares a meal for you for $1. b) Chef Enzo prepares a meal for you for $8. c) Chef Enzo prepares a meal for you for $20. d) You prepare a meal for Chef Enzo, who pays you $5.

b) Chef Enzo prepares a meal for you for $8

If the surgeon general announces that wearing shoes is bad for your posture, which of the following will occur? a) Demand for shoes will shift to the right. b) Demand for shoes will shift to the left. c) Quantity of shoes demanded will rise. d) The supply of shoes will fall.

b) Demand for shoes will shift to the left.

Which of the following goods (or services) is likely to have inelastic supply? a) Memory chips, which are produced in big factories that can also produce central processors and graphics processors b) Higher education, which requires instructors with a PhD (which usually take 4 to 6 years to complete) c) Bawdy stories in army barracks or a sports locker room d) Mass produced notebook paper

b) Higher education, which requires instructors with a PhD (which usually take 4 to 6 years to complete)

If the price of chicken feed (which is fed to chickens) goes up, which of the following will happen in the market for chicken sandwiches? a) Supply will shift to the right, and price will fall. b) Supply will shift to the left, and price will rise. c) Demand will shift to the right, and price will rise. d) Demand will shift to the left, and price will fall.

b) Supply will shift to the left, and price will rise.

Suppose the market for smartphones is in equilibrium. A new battery technology is invented which makes phones last a week without needing to be recharged. What happens in the market for smartphones? a) Demand shifts to the right, price rises, quantity rises. b) Demand shifts to the left, price falls, quantity falls. c) Supply shifts to the right, price falls, quantity rises. d) Supply shifts to the left, price falls, quantity rises.

a) Demand shifts to the right, price rises, quantity rises.

Which one of these functions is the most inelastic? a) Graph A b) Graph B c) Graph C

a) Graph A

Producer Surplus is... a) The area above the supply curve and below the price. b) The area above the demand curve and below the price. c) The difference between the demand and supply. d) The difference between what consumers are willing to pay and what they actually pay.

a) The area above the supply curve and below the price.

Your income rises by 10%, and the quantity of raisins that you purchase falls by 5%. Which of the following is correct? a) The income elasticity of demand for raisins is -0.5, and raisins are an inferior good. b) The income elasticity of demand for raisins is 0.5, and raisins are a normal good. c) The income elasticity of demand for raisins is -2, and raisins are an inferior good. d) The income elasticity of demand for raisins is 2, and raisins are a normal good

a) The income elasticity of demand for raisins is -0.5, and raisins are an inferior good.

11) Suppose the administration of FSU decides to fire all advisors and administrators, leaving only faculty, cleaning staff, and support staff, and by doing so it manages to cut costs significantly. The price of one year's tuition at FSU falls from $6,500 to $4,000. Which of the following will occur, ceteris paribus? a) The quantity of students who choose to attend FSU will rise. b) The quantity of students who choose to attend FSU will fall. c) Other universities will lower their tuition. d) Cars will become more fuel efficient.

a) The quantity of students who choose to attend FSU will rise.

For every hour you spend studying for your economics exam, you will improve your grade by 3 points. For every hour you spend studying for your Physics exam, you will improve your grade by 4 points. For every hour your friend Albert spends studying for his economics exam, his grade will improve by 8 points. For every hour he spends studying for his physics exam, his grade will improve by 16 points. Which of the following is correct? a) Your opportunity cost of studying enough to improve your grade on your economics exam by 1 point is 1 1/3 points on your physics exam, and you have a comparative advantage in economics. b) Albert's opportunity cost of studying enough to improve his grade on his economics exam by 1 point is 2 points on his physics exam, and he has a comparative advantage in economics. c) You have an absolute advantage in studying for physics. d) You can both benefit by specializing according to comparative advantage and trading points

a) Your opportunity cost of studying enough to improve your grade on your economics exam by 1 point is 1 1/3 points on your physics exam, and you have a comparative advantage in economics.

A new program to teach computer science more effectively graduates its first class of computer scientists, resulting in a significant increase in the number of programmers and software engineers available. Which of the following will occur? a) The wages of programmers will rise. b) The supply of software will shift to the right. c) The supply of software will shift to the left. d) The demand for software will shift to the left

b) The supply of software will shift to the right.

The graph below depicts a tax placed on a good or service. Which of the answers below is correct? a) A + E is deadweight loss, B is consumer surplus, and C is producer surplus. b) A +C is producer surplus, B is consumer Surplus, and E is deadweight loss. c) A is tax revenue, B is consumer surplus, C is producer surplus, and E is deadweight loss. d) A is a rectangle, and B, C, and E are right triangles.

c) A is tax revenue, B is consumer surplus, C is producer surplus, and E is deadweight loss.

Suppose the market for coffee is in equilibrium. An FDA report is released documenting a variety of significant health benefits of drinking coffee every day. What happens in the market for coffee (the drink—not the bean)? a) Supply shifts to the right, price falls, quantity rises. b) Supply shifts to the left, price rises, quantity falls. c) Demand shifts to the right, price rises, quantity rises. d) Demand shifts to the left, price falls, quantity falls.

c) Demand shifts to the right, price rises, quantity rises.

Suppose the market for potato chips is in equilibrium, and then two things happen at the same time: The price of potatoes (which are used to make potato chips ) goes up, and a big sporting and social event occurs. Eating lots of potato chips is traditional at this big sporting event. Which of the following is correct? a) Price rises, quantity falls. b) Price falls, quantity is indeterminate. c) Price rises, quantity is indeterminate. d) Price is indeterminate, quantity rises.

c) Price rises, quantity is indeterminate.

A tornado destroys several carpet factories in North Georgia. Which of the following occurs? a) The quantity of carpet supplied rises. b) The price of carpet falls. c) The carpet supply curve shifts to the left. d) The carpet supply curve shifts to the right.

c) The carpet supply curve shifts to the left.

Suppose the equilibrium price of toilets is $250. The government imposes a $600 minimum price for each toilet. Which of the following is not likely to occur? a) Toilet manufacturers produce more toilets than consumers are willing to buy. b) Consumers prefer to keep old, inefficient, unreliable toilets rather than replacing them with new ones. c) Toilet manufacturers produce the lowest-quality toilets possible, while also complying with regulations. d) The market in used toilets (removed from renovation projects or demolition sites) grows larger (meaning more buyers and sellers).

c) Toilet manufacturers produce the lowest-quality toilets possible, while also complying with regulations.

Your 3rd grade lunch buddy is willing to take a container of apple sauce from your lunch box in exchange for something in his or her lunch box. Your options are: Food item Value to you in number of apple sauce 1 orange = 1 as 1 jello cube = 1.5 as 1 cookie = 2 as Which should you choose to maximize your utility? a. the orange b. the Jello cube c. the cookie d. None of the above; you will be happiest eating your applesauce.

c. the cookie