MICROECON CHP.6
Chevron drills for oil in the United States and sells this oil to refineries in Brazil and Mexico.
export
When there are fewer substitutes, demand tends to be
less elastic
unit elastic
if the price elasticity of demand is exactly 1
A farmer in Iowa sells corn to a food processing plant in China.
export
Contain Yourself!, a plastic container company, raises the price of its signature Lunchbox container from $3.00 to $4.00. As a result, the quantity sold drops from 20,000 to 15,000.
unit elastic
Which of the choices is an example of offshore outsourcing?
Toyota, a Japanese car manufacturer, employs around 40,000 autoworkers in the United States.
oversees trade agreements among over 150 members nations & arbitrates trade disagreements among member countries
world trade organization
import
goods and services sold in a country that are produced in other countries
inelastic
if the price elasticity of demand is less than 1
Glen lives in the United States and purchases a video game produced in Japan.
import
Economists working for the United States have determined that the elasticity of demand for gasoline is 0.5.
inelastic
Michelle lives in Tennessee and buys an orange grown in Florida.
neither
elastic
price elasticity of demand is greater than 1
Mauricio has a circus act, and he has a budget of $720 to spend on monkeys and unicycles. The cost of a unicycle is $120 and the cost of a monkey is $90. What is the budget constraint
($720/$120)= 6 Unicycles ($720/$90)= 8 Monkeys
What is the primary difference between economic profit and accounting profit?
Accounting profits ignore implicit costs; economic profits consider them.
The table lists historical data concerning trade in goods and services for the United States. What was the trade balance in goods in 2002?
exports - imports= trade balance
A Chinese consumer purchases a television produced in China.
neither
Noah produces hand‑blown light bulbs out of his garage and has a steady customer base. As his business grows, he realizes that selling packs of light bulbs instead of selling them individually is more profitable. He must decide how many bulbs to include in each pack. Each light bulb costs $1.00 to produce. The graph depicts the marginal benefit received from each additional bulb that he includes in the pack. Place Point A on the optimal point of production on the graph.
5If Noah initially put seven light bulbs in each pack, which of the following would increase his profit?Include fewer light bulbs in each pack.
Suppose that Swaziland decides to open trade with the world market for carbonated beverages and becomes an importer. The accompanying graph depicts Swaziland's domestic supply and demand for carbonated beverages . Please adjust the accompanying graph to depict this new reality. Then, answer the questions, After the opening of trade, the price per can of carbonated beverage for the domestic consume, After trade opens, how many millions of cans of carbonated beverages will Swaziland import?
move world place below once, decreases, 7-3=4
Capital Metro decides to increase bus fare rates from $2.00 to $2.21/ Consequently, the number of passengers who decide to take the bus in Austin drops from an average of 70,000 riders a day to an average of $61,000 riders a day.
elastic
When Bluebox, a DVD rental kiosk, increases its prices by 45%, total revenue increases by 25%.
inelastic
perfectly inelastic
quantity does not respond at all to changes in price, when demand curve is perfectly inelastic, the demand curve is a vertical line
marginal utility
the extra satisfaction a person obtains from consuming one more unit of a good or service
Russ owns a fried chicken stand that operates at the local beach. In calculating how much he earns from his business, Russ notices a difference between his economic and accounting profits. Why would Russ' economic profit differ from his accounting profit?
He may have implicit costs associated with operating the chicken stand in addition to explicit costs.
Bright Ideas increase its production of light bulbs by 15% after a 400% increase in the price of fluorescent bulbs.
Inelastic Supply
Although both tariffs and quotas are tools used to restrict or reduce trade, which of the statements best describes their differences?
Tariffs are a tax on imported goods, and quotas are limits on the number of imported goods.
Poppy likes to eat hot peppers. A coworker brought Poppy a jar of extremely hot ghost peppers. The accompanying graph illustrates Poppy's total utility for these peppers. Use the graph to answer the question and assume that Poppy seeks to maximize her utility. Poppy asks if she should consume seven peppers. What would your advice be?Marginal utility becomes negative with the consumption of which pepper?
Consume fewer than seven peppers and you will be better off.the consumption of the sixth pepper
negative marginal utility
when the consumption of an additional unit of a good or service makes a person worse off
With the school semester starting for both high school and college, Papermate chooses to increase production of pens from 38 million to 42 million after global prices of writing instruments increase from $1.90 a package to $2.10 a package.
Unit-elastic Supply
Classify each of the scenarios as an "either-or" decision or a "how much" decision.~ either-or decisions~ how much decisions
~ either-or decisions:After graduation from law school...Bella is accepted to four graduate school...~ how much decisions:Jake needs to stay awake while he studies...Marvin arrives at his favorite buffet to eat chinese food...
Please categorize each tax structure as either progressive or regressive.
progressive: federal tax system, overall us tax structure, regressive: state tax structures, local tax structures
Match the definitions with the terms that most closely align with the description.1.) the cost of producing one more unit of a good or service2.) the situation where an additional unit of a good or service costs the same as each of the former units3.) the benefit experienced from undertaking one more unit of an activity4.) a situation where the expense of producing one more unit of a good or service is greater than that of producing the previous unit5.) the amount that, when produced or consumed, results in the greatest possible net gain6.) the situation where the gain from an additional unit of a good or service is less than the gain from producing the previous unit
1.) Marginal Cost2.) Constant Marginal Cost3.) Marginal Benefit4.) Increasing Marginal Cost5.) Optimal Quantity6.) Decreasing Marginal Cost
If Good C increases in price by 50% a pound, and this causes the quantity demanded for Good D to increase by 60%, what is the cross-price elasticity of the two goods? Round your answer to one decimal place.
1.2 substitutes
When two goods are substitutes, like hot-dogs and hamburgers, the cross-price elasticity of demand is positive:
: a rise in the price fo thot dugs increases the demand for hamburgers-that is, it causes a rightward shift of the demand curve for hamburgers, if the goods are close. substitutes, the cross-price elasticity will be positive and large: if they are not close substitutes, the cross-price elasticity will be positive and small, so when the cross-price elasticity of demand is positive, its size is a measure of how closely substitutable the two goods are, with a higher number meaning the goods are closer substitutes
The graph depicts a market where a tariff is introduced. PW represents the world price, and PT represents the domestic price that results from the introduction of the tariff, with the tariff equal to the difference between PT and PW .
What areas represent the deadweight loss associated with the tariff C & F, what areas represent the government revenue generated by the tariff, E, quantity of imports, 4
exports
goods and Services sold to other countries
Suppose that the nation of Micronesia decides to participate in the international trade of timber. Shift the line representing the world price in a way that results in Micronesia exporting timber. Place the shaded area, PS, so that it correctly represents producer surplus for Micronesia's firms once the country is open to international trade. If the world price is higher than than the domestic price, the nation will become an exporter of the good. At the world price, domestic quantity supplied exceeds domestic quantity demanded. This surplus timber is sold by Micronesian firms to buyers in other countries. In contrast, when the world price is lower than the domestic price, domestic quantity demanded exceeds domestic quantity supplied and the difference represents impor
world price up to 7, world price goes up one, above domestic demand line
Answer the questions based on the data in the table. Round all answers to two places after the decimal. EarnerAnnual income amountIncome tax amountSally$91391.00$30159.03Steve$161393.00$46803.97Jamie$231395.00$57848.75Pat$301397.00$72335.28
What is Sally's tax rate? sally tax rate =33%, What is Pat's tax rate? =24%, regressive income tax system
Please match each of the following scenarios with the term below that best fits the description provided
-Jackson manages his father's fruit stand. He takes an accounting of all the company's assets, including equipment, tools, financial assets and inventory. These items are examples of: CAPITAL-Abe owns a candy shop and at year end calculates his revenue minus his explicit cost. the result is an example of: ACCOUNTING PROFIT-Hailey decides to buy a pretzel from the cart outside her office. She pays 3.25 in cash for her lunch. The 3.25 is an example of : EXPLICIT COST ~ SUNK COST-Annabelle runs a tutoring company. In determining her costs and benefits from the venture, she includes her opportunity costs from choosing to open the tutoring business. She is evaluating the firm's ECONOMIC PROFIT-Sacha leaves his job as a nuclear engineer to become a train conductor. One day, while riding the rails, he considers the salary he could have earned had he remained an engineer. This is an example of: IMPLICIT COSTGinny works for an investment firm an after reviewing the investment decisions her firm made last year, considers other ways the funding could have used. She is considering her: IMPLICIT COST OF CAPITAL.
Sylvia's annual salary increases from $100,000 to $109,500, and she decides to increase the number of vacations she takes per year from three to four. Calculate her income elasticity of demand for vacations.
3.15, vacations are a normal good, as a good, vacations are income-elastic
Sylvia's annual salary increases from $102,750 to $109,500. Sylvia decides to increase the number of vacations she takes per year from three to four. Use the midpoint method to calculate her income elasticity of demand for vacations. Round your answer to two decimal places.
4.49, the good is a normal good & income elastic
Below is a demand curve for DVDs for a monopoly currently producing at point b. Specify answers to the nearest dollar, and use a negative sign to indicate decreases in revenue.A) If the firm lowers DVD prices from $16 to $14, what is the change in revenue assuming quantity remains the same? In other words, focus only on the price effect.B) What is the change in revenue that results just from the increased quantity at $14? In other words, focus only on the quantity effect.C) What is the overall net effect of this price decrease on the firm\'s total revenue?D) What is the price elasticity of demand here?
A) $-400B) 1400C) 1000D) Elastic, The price effect This is the change in revenue due solely to the change in price. If the price drops from $16 to $14, the firm loses $2 per DVD. Ignoring the quantity increase that the price change would cause, you should focus on the revenue change moving from point 𝐵 to point 𝐶, where quantity is fixed at 200 DVDs. The calculation is then −$2 per DVD × 200 DVDs=−$400 Graphically, the total revenue was originally represented by the rectangle 𝐴𝐵𝐻𝐺, and was then shifted to rectangle 𝐷𝐶𝐻𝐺, so the loss is represented by the area of rectangle 𝐴𝐵𝐶𝐷. The quantity effect This is the change in revenue due to a change in quantity demanded. A lower price means more people will be purchasing DVDs, meaning a gain in revenue from the higher sales volume. Ignoring the decrease in revenue from the lower price means looking at the revenue change moving from point 𝐶 to point 𝐸. The calculation is then $14 per DVD × 100 DVDs=$1400 Graphically, this is represented by the rectangle 𝐷𝐶𝐻𝐺 changing to the rectangle 𝐷𝐸𝐻𝐹, so the gain is represented by the area of rectangle 𝐶𝐸𝐺𝐹. The net effect Adding these two effects gives the net change in revenue for the price drop, an increase of $1,000. Note that the rectangle 𝐶𝐸𝐺𝐹, representing the gain, is larger than the rectangle 𝐴𝐵𝐶𝐷, representing the loss.
Identify which principle applies to each scenario and place the appropriate terms in the corresponding spaces.
After spending hours researching his choices, Mark decides on a laptop that will cost him $799. As he walks into his local retailer, a salesman presents him a laptop with marginally better features at the same price. However, Mark would have to do further research to verify that the new alternative is in fact better. As a result, he decides that the laptop he previously decided on is good enough and buys it. Mark's decision is an example of- bounded rationality b. Charlotte delivers food for a fried chicken restaurant. When Charlotte delivers a meal to a household during a major icestorm, the family, feeling sorry that Charlotte has to work in extreme weather, decides to give her a $20 tip for a $10 delivery. The family's decision is an example of-fairness c. Cathy is a very good driver. In fact, she has never been in an accident in her life. However, she still takes out a comprehensive car insurance policy every year, rather than just the liability coverage the state requires. Cathy's decision is an example of-risk aversion
The table shows information on the conditions of demand for ordinary gummy bears and their sugar-free version. Price ($ per kg)Sugar-free Gummy Bears Demanded (thousands of kg)Regular Gummy Bears Demanded (thousands of kg)$2.20183.00487.00$2.60177.00381.00$3159275.00$3.40139.00157.00 As the price of gummy bears rises from $2.60 to $3, what are the price elasticities of demand of sugar-free gummy bears and of ordinary gummy bears? Use the midpoint method and specify answers to one decimal place.
Elasticity of demand of sugar-free gummy bears: Elasticity of demand of regular gummy bears:-.7682,-2.2901
The incidence of an excise tax depends on the price elasticity of the taxed good's supply and demand curves.
The economic entity with the least flexibility in terms of their production and consumption substitutes incur the largest burden of excise taxes.
The world price of grapefruits is above the price that currently prevails in Cuba in the absence of trade. Assuming that Cuba is a small economy compared to the rest of the world, what happens if Cuba decides to open up trade with the world grapefruit market?
The price of domestic Cuban grapefruit for consumers will _____. Cuban exports of grapefruits will _____. Lastly, consumer surplus will _____ while producer surplus in Cuba will _____.
When two goods are complements, like hot dogs and hot dog buns, the cross-price elasticity is negative:
a rise in the price of hot dogs decreases the demand for hot dog buns-that is, it causes a leftward shift of the demand curve for hot dog buns, as with substitutes, the size of the cross-price elasticity of demand between two complements tells us how strongly complementary they are: if the the cross-price elasticity is only slightly below zero, they are weak complements, if it is very negative, they are strong complements
The accompanying graphs depict the market for bags of potato chips, which is currently at an equilibrium price of $1.67 per bag and an equilibrium quantity of 3.33 million bags. Suppose that, in an attempt to lower blood pressure and reduce healthcare costs, the government imposes a $1.00 excise (or commodity) tax on potato chips. Scroll down to answer all 6 parts of the question a. Suppose the government levies this tax on manufacturers for each bag of potato chips they produce. Please shift the curve(s) to illustrate this.
b. What is the price paid per bag by consumers (Pc) after the production tax?=2,c. What is the price received net of tax (Pp) per bag by producers after the production tax?=1. d. Suppose the government, instead of levying the tax on producers, levies this tax on consumers for each bag of potato chips they purchase. Please shift the curve(s) to illustrate this.,e. What is the effective price paid per bag by consumers (Pc) after the consumption tax? =2, f. What is the price received net of tax (Pp) by producers after the consumption tax?=1
On your way home from Super Groceries, your car breaks down. It is a hot summer day and you have nobody to call. With little time before the food spoils, you decide to prioritize what to carry on the walk home. You choose to take three items with you. Since you will need all five items today, you will replace the two abandoned items at the corner store near your house, Convenient Grocers. The table contains the prices you paid for each good at Super Groceries and the prices you will need to pay at Convenient Grocers to replace the goods.
beef, fruits, eggs
Use the information in the table to answer the questions about the tax system in the country of Lilliput. Calculate the income tax rate for each person and enter it as a percent.
divide taxes by income paid Progressive means tax rates and income move in the same direction. A regressive tax system is one where tax rates and income move in opposite directions. A proportional system is one where the tax rates across income groups are equal.
Belinda is in school learning to be a welder. She spends long hours studying (and drinking coffee) and long hours practicing in the hot, dirty shop (and therefore takes frequent showers). Belinda has $70.00 per month to spend on the soap and coffee she needs to function properly. In the accompanying graph, move the BC line to correctly depict Belinda's budget constraint, assuming the soap costs $3.50 per bottle, and the coffee costs $14.00 per pound. If a point will not go where you want to put it, try placing the other endpoint there. Then, classify the lettered points according to whether they describe baskets of goods that are unaffordable, affordable and exhaust Belinda's budget, or affordable with money left over.
move line to match with two points, Unaffordable, B , D, H Affordable, C, E and exhausts Belinda's budgetAffordable with money left over, A, F, G
The Acmeville Metropolitan Bus Service currently charges $0.67 for an all-day ticket, and has an average of 472 riders a day. The bus company is not earning a profit, but according to their contract with the city, they cannot cut the number of buses on the road. They must therefore find a way to increase revenues. The bus company is considering increasing the ticket price to $0.78. The marketing department's studies indicate this price increase would reduce usage to 221 riders per day. Calculate the absolute value of the price elasticity of demand for bus tickets using the simple percentage change method. Round your answer to one decimal place.
price elasticity= 3.3 Demand is elastic, so decreasing ticket prices will increase revenue.
Angus works as a dairy farmer and loves his work. Because the dairy business hasn't been doing well lately, Angus is considering changing careers. He could work as a technician at the local dairy plant, and earn $27,000 a year. Angus decides to make a list of the costs of staying in business as a farmer and asks you for help. Please sort Angus' costs below according to whether they are explicit costs or implicit costs.
Explicit costs: The wages he pays to his hired hand, the feed he buys for his cows, the gas he uses for his farm truck, the cost of veterinary care for his cows. Implicit costs: The time is takes him to milk all of his cows, the $27,000 annual salary he would receive from working at the dairy plant
an agreement between over 25 nations, which abolished tariffs among members countries and standardized policies on agriculture, transportation, and business practices
the European uUnion
Please identify the mistake made in regard to economic decision-making in each scenario.1.) Alexander is heavily invested in the stock of Nortel, a telecommunications giant...Alexander's mistake is an example of2.) Jim is washing his laundry and, as he checks his pockets, finds an unexpected windfall of $50...Jim's mistake is an example of3.) Geneva is a researcher at a biotech firm, and faces decision paralysis every time a big question is posed to her...Geneva's mistake is an example of4.) Tiffany lives in Alameda, California...Tiffany's mistake is an example of5.) Steve is trying to diet...Steve's mistake is an example of
1.) Loss Aversion2.) Mental Accounting3.) Status Qua Bias4.) Misperceiving Opportunity Costs5.) Overconfidence
Cookie Monster loves cookies! The table shows how his utility varies with cookie consumption, but the table is missing some numbers Cookie Monster's marginal utility from the fourth cookie is What is Cookie Monster's total utility when he eats 6 cookies? Cookie number __ tastes the best to Cookie Monster.
140, 705, 2
When Ruko, a device used to stream movies at home, increase prices by 48%, total revenue decreases by 67%.
elastic
Bertrand is an avid supporter of protectionism. His primary political principle is the idea that the United States imports too many foreign goods. He dislikes that many of his clothes are made in China instead of the United States because clothing is a basic need, even for babies. He would prefer that the United States drill in the Arctic National Wildlife Refuge (ANWR) instead of importing oil from Kuwait because oil powers our military's tanks and planes.
the national security argument
Suppose that the isolated nation of Turkmenistan decides to open up trade with the world market and becomes an importer of wheat. Please shift the price on the accompanying graph to reflect this new reality and answer the questions that follow.
price of wheat moves down line, after opening up trade, domestic consumer surplus=increases, after opening up trade, domestic producer surplus=decreases
Kimiko is planning a party to celebrate her birthday. She has decided to serve sushi and yakitori meat skewers. Each serving of sushi is $8 and each yakitori is $2. Kimiko has $240 to spend on the party, and her budget line is shown below. Her friend Barry thinks there will not be enough food, so he gives Kimiko $80 more to spend on the party (she now has $320). Show Kimiko's new budget line in the graph below and answer the question., Which good will Kimiko buy more of?
shift up 80 on both ends like add 80 to both axesOnly Kimiko knows; the question does not provide enough information.
The figure describes the Laotian market for cheese where free trade is allowed. Suppose the world price of cheese is $6 per pound and that Laos imposes an import tariff of $2 per pound on foreign cheese. Move the price line to describe the new price with the tariff and place the consumer surplus (CS) and producer surplus (PS) areas to describe the new welfare situation.
price line at 8, ps at 8 and below, cs above 8 to 18 & hits 20 million pounds
Suppose that Sam allocates his income between milk and cereal. Milk costs $2.50/gallon and cereal costs $5.00/box. Sam has $50/week to spend on these two goods. The table shows Sam's preference for consumption bundles as well as how Sam's marginal utility (𝑀𝑈) for milk and cereal, respectively, varies as consumption varies. Given the information provided here, how should Sam allocate his income between milk and cereal? As this is his optimal consumption bundle, Sam should purchase
4 gallons of milk, 8 boxes of cereal
The graph below shows the market for office rental space. A $400 per month excise tax is imposed on firms selling office space. D is the demand curve, S1 is the supply curve in the absence of the tax, and S2 represents the supply curve that includes the tax.
Who has the larger tax incidence?Answer= Producers (suppliers)This excise tax falls on the above people because:Answer= The supply of office rentals is more inelastic than the demand for office rentals.
Mauricio has a circus act that involves monkeys on unicycles. Mauricio has a fixed amount to spend on unicycles and monkeys. The graph shows Mauricio's initial budget constraint. The price per unicycle is $120 and per monkey is $90. Using the graph, show what happens to Mauricio's budget line when the price of unicycles increases to $180.
$720, 4 unicycles, 8 monkeys
Becky only eats out at Macaroni Grill, and she eats out three times per month. She receives a raise from $33,200 per year to $33,500 per year and decides to eat out five times per month. Use the midpoint method to calculate the monthly income elasticity of demand for eating out. Round your answer to two decimal places.
55.58 units, the good is a normal good and income elastic
Suppose that Fozzie consumes cupcakes and pizzas. The price of cupcakes is $5 per unit and the price of pizzas is $10 per unit. The table shows Fozzie's utility from the consumption of each good; each row represents a possible consumption bundle. Currently, Fozzie is consuming 18 cupcakes and 9 pizzas. Calculate the marginal utility per dollar of going from eight to nine pizzas. To increase total utility without increasing spending, should Fozzie change the amount of consumption of either good? What is the total utility at the optimal consumption bundle?
.9 (find marginal utility and then divide by the unit price)Yes, Fozzie should choose fewer cupcakes and more pizzas. 281.3
The price of facial tissues rises from $2.85 per box to $3.15. As a result, P&G increases production from 15 million boxes to 25 million boxes of facial tissue.
Elastic Supply
created a free-trade zone consisting of the Unites States, Canada, & Mexico with the purpose of eliminating trade barriers between these countries
North American free trade agreement
Identify whether the scenarios are examples of regressive or progressive taxes.
a sales tax on food and clothing=regressive, an additional sales tax on cars bought for over $50,000=progressive, a flat income tax of 20% with no additional tax being paid on earning above $1,000,000=regressive, an income tax using tax brackets, in which the percentage tax rate increases with income=progressive, a fixed poll or lump sum, tax on citizens and residents=regressive
Incidence
of a tax is a measure of who really pays it
the satisfaction experienced from consuming a good or service
utility
The total utility (TU) curve shows the total utility provided by the successive consumption of pizza slices. Place points a, b, c and d of the marginal utility curve to depict the marginal utility of pizza slices.
subtract the first two points and then continue to the next two points
The graph shows the domestic demand and domestic supply for soybeans. Assume this country is open to international trade, that soybeans are a perfectly competitive good, and that the world price of soybeans is $30. Suppose a tariff of $10 is imposed. What price will result in this country?After the tariff is imposed, how many units of soybeans will be imported?
$40, 20
The budget set, or budget constraint, in the graph shows the possible combinations of brownies and ice cream cones that can be purchased. Assume that this person has a total of $18 to spend on brownies and ice cream cones. How much does a brownie cost? Assume that at point A, the marginal utility from a brownie is 10 and the marginal utility for an ice cream cone is 18. This person
brownie costs 1 dollar, should consumer more brownies and fewer ice cream cones
Corey receives some utility from consuming a frozen dinner (an inferior good) but would much rather purchase healthier food (a normal good). Suppose the price of a frozen dinner increases and the quantity that Corey purchases increases. Assume that a frozen dinner is not a Giffen good.Which effect causes Corey's quantity demanded of a frozen dinner to decrease?Which effect causes Corey's quantity demanded of a frozen dinner to increase?
substitution effect, income effect
The World Trade Organization (WTO) has an important role in international trade. From the list, select all statements about the WTO that are true. It is possible that more than one statement is true.
the WTO attempts to minimize barriers to trade, the WTO asses complaints of unfair trading from member countries
The accompanying graphs depict the market for bags of potato chips, which is currently at an equilibrium price of $1.67 per bag and an equilibrium quantity of 3.33 million bags. Suppose that, in an attempt to lower blood pressure and reduce healthcare costs, the government imposes a $1.00 excise (or commodity) tax on potato chips. Scroll down to answer all 6 parts of the question.1. Suppose the government levies this tax on manufacturers for each bag of potato chips they produce. Please shift the curve(s) to illustrate this.2. What is the price paid per bag by consumers (Pc) after the production tax?3. What is the price received net of tax (Pp) per bag by producers after the production tax?4. Suppose the government, instead of levying the tax on producers, levies this tax on consumers for each bag of potato chips they purchase. Please shift the curve(s) to illustrate this.5. What is the effective price paid per bag by consumers (Pc) after the consumption tax?6. What is the price received net of tax (Pp) by producers after the consumption tax?
1. Supply curve moves up by $1 from the equilibrium price2. 23. 14. Demand curve moves down by $1 from the equilibrium price5. 26. 1
Use the table below to calculate the accounting and economic profit for Abner's Apple Art. What is Abner's Apple Art's accounting profit?
1. subtract all the costs except the forgone wages 2. subtract all costs plus minus the forgone wages
Blake eats two bags of generic potato chips each day, and does not purchase any name-brand chips. Blake's hourly wage increases from $7 to $15, and he decides to eat one name-brand bag and one generic-brand bag each day. Calculate Blake's income elasticity of demand for generic potato chips.
-.92, generic potato chips are a inferior good, as a good, generic potato chips are neither income elastic nor income inelastic
Lauren's salary decreases from $37,000 to $30,000. She decides to reduce the number of outfits she purchases each year from 20 to 19. Use the midpoint method to calculate the income elasticity of demand for new outfits. Round your answer to two decimal places.
.25 units, the good is a normal good and income inelastic
The graph shows the demand and supply of bungee jumps in Xtremeland. The government decides to impose an excise tax on bungee jumps to help pay for the high number of back and neck injuries.1. What would the government's tax revenue be if it imposes a tax of $80 on each jump?2. What would the government's tax revenue be if it imposes a tax of $40 on each jump?3. What would the government's tax revenue be if it imposes a tax of $120 on each jump?4. What principle of taxation does the graph help demonstrate? 1. 16000002. 12000003. 12000004. setting too high a tax rate can reduce tax revenue
1. 16000002. 12000003. 1200000 4. setting too high a tax rate can reduce tax revenue
Suppose that a city government introduces a $0.50 excise (commodity) tax on consumers of bottles of soda to improve the health of its citizens. Manipulate the accompanying graph to demonstrate the impact of the tax on the market for soda What would be the new equilibrium quantity if instead of taxing consumers, the city taxed producers?
4 thousand bottles, shift demand below
Patrick has chosen to double major in finance and microbiology and studies 14 hours a day as a result. To make it through his studies, Patrick relies on GreenCow energy drinks. Consider the chart of his marginal costs (MC) and marginal benefits (MB) from consuming GreenCow. What is the optimal quantity of GreenCow drinks for Patrick?
5 cans, What occurs if Patrick consumes more than the optimal quantity?-the extra energy benefits Patrick gets from another can are no longer worth the cost.
The graph shows two budget lines and six consumption points (A, B, C, D, E, and F) for Pepsi and Dr Pepper. Note that budget line 1 is before the increase in Fred's income, whereas budget line 2 is after the increase in Fred's income. Assume that the consumer, Fred, attempts to maximize his utility and exhausts his budget on the two goods.
A to D, A to F
Identify whether the tax or payments listed are consistent with the benefits principle or the ability-to-pay principle of tax fairness. Please note that not all items need to be placed.
Benefits (received) principle= gasoline tax, national park fee, cigarette tax, carbon tax: ability to pay principle=luxury tax, income tax, progressive property tax, a lump sum or poll tax goes to neither
Paul owns a Tim Horton\'s, a famous donut and coffee franchise. He is willing to sell as many maple glazed donuts as customers want at a price of $1.00 each, but he refuses to sell any donuts for any price lower than $1.00.
Perfectly Elastic Supply
Marcel Duchamps was a famous artist prior to his death and known for his dada artwork including works such as "Soft Toilet." All the original sculptures and paintings made during his lifetime go on sale.
Perfectly Inelastic Supply
Reggie owns and operates a cheese shop in the village of Somerset. While Reggie has a degree in mechanical engineering and could easily go to work for his brother's company earning $64,000/year, his true passion is for cheese. The table displays Reggie's expenses from 2018. Please use the information provided to answer the questions. Revenue from 2018$75,000Rent$15,000Equipment$3,000Supplies$3,000
What is Reggie's accounting profit?-54000,What is Reggie's economic profit?-10000
Suppose the Canadian government has decided to place an excise tax of $20 per tire on producers of automobile tires. Excise taxes are also called sales or commodity taxes. Previously, there was no excise tax on automobile tires. As a result of the excise tax, producers of tires, such as Bridgestone and Michelin, are going to alter their tire prices. The graph illustrates the demand and supply curves for automobile tires before the excise tax. Please shift the appropriate curve or curves on the graph to demonstrate the new equilibrium.
What is the price consumers pay for a tire post tax? Round to the nearest 10. =100, What is the price producers receive for a tire net of taxes? Round to the nearest 10.=80, supply curve shifts upward by the amount of tax
Miles is three years old and his grandparents have given him money to spend at the toy store as a birthday present...a.) If Miles buys only one toy, which should he buy to maximize his utility?b.) Which relationship between marginal utility (MU) and price (P) indicates that a consumer is maximizing his or her utility regarding spending on two goods?
a.) A fire truckb.) MUx/Px = MUy/Py
Please label each scenario as to whether or not the person is acting rationally and making choices leading to the outcome they desire most.a.) Steven's family is at a Korean restaurant...Steven is actingb.) Jacklyn obtains her first credit card...Jacklyn is actingc.) Brian's economics professor assigns online homework that is due at 11:55 p.m...Brian is actingd.) Julie's friend, Homer, offers her a $250 bet on a popular sporting event...Julie is acting
a.) Rationallyb.) Irrationallyc.) Irrationallyd.) Rationally
Suppose the accompanying graph depicts the market for sugar in a hypothetical country. Suppose the country opens trade with the world sugar market and becomes a sugar exporter. a. In the accompanying graph, adjust the price line to depict how this impacts the market for sugar. Then, shade the area of consumer surplus using CS area and shade the area if producer surplus using the PS area.b. After trade opens, what price will Costa Ricans pay for a pound of sugar?c. How much sugar will Costa Rica export after trade is opened?d. What is the value of producer surplus that exists after trade is opened?As a result of trade, consumer surplus increasesincreasesdecreases , producer surplus decreases, and total surplus increases.
move price line to 21 cs above 21, ps below 21 and fill red line, 21, is 80, 21x140/2=1470 consumer surplus decreases, producer surplus increases and total surplus increases
Over longer periods of time, demand tends to become
more elastic
When Cinema Supreme decreases ticket prices by 5%, total revenue does not change.
unit elastic
perfectly elastic
when any price increase will cause the quantity demanded to drop to zero, demand curve is a horizontal line
diminishing marginal utility
when the consumption of an additional unit of a good or service provides the person with a smaller increase in satisfaction than previous units
