MicroEconomics 2314 Test 1
Mike's opportunity cost of delivering an extra pizza is producing ___ pizzas.
2/3
Price elasticity of demand is a measure of
consumer response to a change in a good's price
If the price elasticity of demand for a good is greater than one, then the demand for that good, with respect to price, is
elastic
To increase total revenues, firms with ___ demand should lower price and firms with ___ demand should increase price.
elastic; inelastic
If both supply and demand increase simultaneously, the new equilibrium price is _____ and the new equilibrium quantity is _____
indeterminate; higher
If the consumers cannot switch to a close substitute when the price of a good increases, the demand for that good is likely to be
inelastic
Suppose a 10% increase in the price of pain relievers leads to a 5% decrease in quantity demanded of pain relievers. The demand for pain relievers, with respect to price, is
inelastic
The fallowing data represent the production values for two goods, (M,N): (10,0): (9,2):(8,4):(7,3):(6,6). The data is
not consistent with a production possibilities curve
Of the labeled points, ____ are efficient
only w, x, y, z and v
Of the labeled points, _____ are attainable
only w, x, y, z, v and t
If the percent change in quantity demanded is zero for any percent change in the price, demand is classified as
perfectly inelastic
The production possibilities curve shows
the maximum production of one good for every possible production level of the other good
The opportunity cost of an activity is the value of
the next-best alternative forgone
According to the data, Lorie has an absolute advantage in
the production of pizza
At the very least, Joe Average and Bill Gates are both identically limited by
their influence
Having a comparative advantage in a particular task means that
you give up less to accomplish that task than do others
Amy is thinking about going to the movies tonight. A ticket costs $7 and she will have to cancel her dog-sitting job that pays $30. The cost of seeing the movie is
$37
If the slope of the demand curve is -1.4, price is $5 and quantity demanded is 13 units, the price elasticity of demand is
0.27
Lorie's opportunity cost of producing an extra pizza is delivering ___ pizzas.
1/2
What might cause a demand function to shift to the right?
An increase in the price of a substitute
If Leslie can produce two pairs in an hour while Eva can make one pair an hour, then it must be the case that
Leslie has an absolute advantage
The comparative advantage for pizza production belongs to ___ and the comparative advantage for pizza delivery belongs to _____.
Lorie; Mike
Almost every holiday season at least one gift idea achieves fad status. When that happens, prices tend to increase dramatically. Why?
Quantity demanded exceeds quantity supplied
Failure to apply the principle of comparative advantage will result in
Smaller total output
What is the opportunity cost of living in a house that you already own?
The rent you could receive if you rented the house out to someone else
Your scholarship depends on your maintaining a 3.5 cumulative GPA. Your GPA for last semester was 3.6 which brought your cumulative GPA down. What must be true?
Your marginal grades were lower than your overall GPA
A shift to either the left or right of a demand curve is called
a change in demand
A movement along a demand curve from one price-quantity combination to another is called
a change in quantity demanded
Whether or not a good can be classified as a complement depends on whether
an increase in demand for one good follows a decrease in the price of the other
A market comprised of a downward sloping demand curve that intersects an upward sloping supply curve is said to be stable because
at any price other than equilibrium, forces in the market move price towards the equilibrium
The logical implication of the scarcity principle is that
choices must be made
In a free market, if the price of a good is below equilibrium price, then
demanders, to acquire the good, will bid the price higher
"As the price of personal computers continues to fall demand increases. This headline is inaccurate because
falling prices for personal computers increases quantity demanded, not demand.
Shelly purchases a leather purse for $400. One can infer that
her reservation price was at least $400
Big-ticket items such as refrigerators have a ___ price elasticity of demand compared to low budget items such as paper towels.
higher
Economics is best defined as the study of
how people make choices under the conditions of scarcity and the results of the choices
The cost-benefit principle indicates that an action should be taken
if the extra benefit is greater than or equal to the extra cost
The supply curve illustrates that firms
increase the quantity supplied of a good when its price rises
A decrease in the demand for bananas with no concurrent change in the supply of bananas will result in a ______ equilibrium price and a(n)_____ equilibrium quantity
lower, indeterminate
If the demand for a good is elastic, that good is likely to have
many close substitutes
On a linear demand curve, at high prices demand is ___ that at low prices.
more elastic
Clothing (including all brands) has fewer close substitutes than a specific brand of clothing such as Abercrombie and Fitch, Gap, or Levis. Therefore the demand for clothing would be ______ than the demand for a specific brand
more inelastic
Demand tends to be ____ in the short run than in the long run.
more inelastic
The slope of any production possibilities curve is ____ because ____.
negative; to produce more of one good means less production of the other
According to the principle of increasing opportunity cost, expanding production requires using resources in which order?
start with the resource with the lowest opportunity cost and proceed to the higher opportunity cost resources
The cost that we can not avoid whether or not an action is taken, is called
sunk cost
"Holding all other relevant factors constant, consumers will purchase more of a good as its price falls. "This statement reflects the behavior underlying"
the demand curve
Suppose the price of gasoline increases and that sport utility vehicles get poor gas mileage compared to other available cars. One would expect
the demand for sport utility vehicles to decrease
Supply curves are generally ____ sloping because _____
upward; of the principle of increasing opportunity costs
Janie must either mow the lawn or wash clothes, earning her a benefit of $30 or $40, respectively. She dislikes both equally and they both take the same amount of time. Janie will therefore choose to ____ because the economics surplus is ____.
wash; greater
