Microeconomics Exam 1

Equilibrium price formula

(ad+bc)/(b+d)

Economics

a social science that studies choices

What are the determinants of supply?

- Own price - Technology - State of nature - Number of firms - Price of inputs - Future price expected - Price of related goods produced

What are the determinants of demand?

- Own price (changes quantity demanded) - Income - Population size - Price of related goods - Tastes and preferences - Future price expected -Future income

At one point along a PPF, 10 pizzas and 7 sandwiches can be produced. At another point along the same PPF, 9 pizzas and 10 sandwiches can be produced. The opportunity cost of a pizza between these points is .......... . a. 7/10 of a sandwich b. 10/7 of a sandwich c. 1/3 of a sandwich d. 3 sandwiches

3 sandwiches

​Surplus ; fall

A decrease in the demand for tank tops brings a​ ______ of tank tops at the original price and the market price will​ ______ .

Unattainable

A point that is off the PPF

Attainable

A point that is on the PPF

consumed in place​ of; consumed together with

A substitute is a good that is​ _____ another​ good, and a complement is a good that is​ _____ another good.

rise; an increase

An increase in the demand for ski trips brings a​ ______ in the price of a ski trip and​ ______ in the quantity of ski trips supplied.

decrease; increase

An increase in the price of soap​, a complement in production of palm oil​, will​ ______ the equilibrium price of palm oil and​ ______ the equilibrium quantity of palm oil.

Surplus; Fall

An increase in the supply of rice brings a​ ______ of rice at the original price and a​ ______ in its price.

At a price of​ $1 bottle, we plan to sell​ 2,000 bottles per day.

Aqua Springs makes the following four statements about bottled spring water. Which statement best describes the​ firm's quantity supplied in the bottled water​ market?

​normative; cannot

Are either or both of these newspaper headlines positive or normative​? 1. The minimum wage should not be increased. nothing 2. Hydrogen is a cleaner fuel than gasoline. nothing Statement 1 is a​ ______ statement because it​ ______ be tested.

positive statement

Can be supported by facts

an inferior good

Complete the following sentence. ​If, as Stephen's income increases​, his demand for hamburgers decreases​, then for Stephen​, hamburgers are ​_______.

A change in the expected future price of laptops changes the supply of laptops.

Consider the influences on selling​ plans, and whether the influence changes supply.

social science that​ studies; cope with scarcity

Economics is the​ _____ the choices that​ individuals, businesses,​ governments, and entire societies make as they​ _____, and the influences on those​ choices, and the arrangements that coordinate them.

Inelastic

Elasticity < 1

Unit elastic

Elasticity =1

Elastic

Elasticity > 1

we don't have enough time to do all the things we'd like to do

Every​ day, we make many choices. We​ can't avoid having to make choices because​ ______

positive​; positive

Indicate whether each of the following news items is a positive or a normative statement. 1. The PlayStation has a larger range of games than the XBox. 2. Higher income taxes will lead to a decrease in work hours. 3. An increase in the gas tax will decrease urban air pollution. 4. Music downloads have decreased CD sales. Statement 1 is a​ ______ statement, and statement 2 is a​ ______ statement.

farmers planned to decrease the quantity of corn supplied in 2017. This fact illustrates the law of supply.

In​ 2016, the price of corn fell and some corn farmers will switch from growing corn in 2017 to growing soybeans. Does this fact illustrate the law of demand or the law of​ supply? As the price of corn fell in​ 2016, _________.

Which of the following is a normative statement? a. Low rents will restrict the supply of housing. b. Low rents are good because they make apartments more affordable. c. Housing costs are rising. d. Owners of apartment buildings are free to charge whatever rent they want.

Low rents are good because they make apartments more affordable.

pasta and pretzels are inferior goods

Maria graduates from college and her income increases by ​$40 comma 000 a year. Nothing else changes. Maria decreases the quantity of pasta and pretzels that she buys and increases the quantity of tickets to orchestra concerts that she buys. For Maria​, ​_______.

​changes; microeconomic

Operators of private dog parks in your city decide to eliminate their fees and allow dog owners to exercise their dogs in the parks at no charge. This statement means that the incentive to exercise dogs at the dog park ​______. The operators' decision is a​ _______ decision.

percentage change in quantity​ demanded; percentage change in price

Price elasticity of demand is equal to the​ ______ divided by the​ ______.

opportunity cost

Quantity given up / Quantity gained

the demand for smartphones increases

Taking a smartphone to the gym when you work out becomes more popular. What is the result of this​ event?

We observe that the equilibrium price of digital cameras has fallen and the equilibrium quantity of digital cameras has increased. Which of the following events could be responsible for this? a. The price of film cameras rose. b. Consumers' preferences changed in favor of digital cameras. c. Technological advances in digital camera production. d. Workers who make digital cameras received a pay rise.

Technological advances in digital camera production.

the movie is produced at the lowest possible​ cost, and the movie gives the greatest possible benefit

The creation of a successful movie illustrates choices made in​ self-interest that also achieve the social interest if​ ______.

the quantity demanded equals the quantity​ supplied; the quantity bought and sold at the equilibrium price

The equilibrium price is the price at which​ _____ and the equilibrium quantity is the​ _____.

negatively sloped.

The existence of the tradeoff along the PPF means that the PPF is

can be produced and the combinations that cannot be produced

The production possibilities frontier is the boundary between the combinations of goods and services that​ _____, given the available factors of production and the state of technology.

Which of the following is a microeconomic topic? a. The reasons for a decline in average prices. b. The reasons why total employment decreases. c. The effect of the government budget deficit on inflation. d. The reasons why Kathy buys less orange juice.

The reasons why Kathy buys less orange juice.

a​ how; a what

When Starbucks decides to produce coffee by using more labour and less capital​, it is answering​ ______ question. When Gap decides to produce athletic wear rather than business suits​, it is answering​ ______ question.

A. increases the supply of logs B. Decreases the supply of plywood

When a timber mill makes logs from trees it also produces​ sawdust, which is used to make plywood. a. Explain how a rise in the price of sawdust influences the supply of logs. b. Explain how a rise in the price of sawdust influences the supply of plywood.

a for whom

Whether Gap gets a larger profit or its workers get higher wages is​ _______ question.

I will study for my exam instead of going to the movie tonight.

Which of the following illustrates a tradeoff​?

Soybeans and corn can be grown with the same​ resources, so they are substitutes in production.

Why would a corn farmer grow​ soybeans?

When Delta Airlines encourages flyers to book their trips online versus making phone reservations, it is a. answering the what question. b. facing natural resource depletion. c. making a choice in the social interest only. d. answering the how question.

answering the how question.

The study of economics

arises from the fact that our wants exceed available resources

In economics, the term "capital" refers to a. the money in one's pocket. b. buildings and equipment. c. mineral resources. d. consumer goods.

buildings and equipment.

Pizza and sausage are​ ______. Wheat and corn are​ ______.

complements; substitutes

Law of Demand

consumers buy more of a good when its price decreases and less when its price increases

An increase in the price of a gym membership ​_______.

decreases the quantity of gym memberships demanded and results in a movement up along the demand curve for a gym membership

Suppose that the cost of producing aspirin increases and simultaneously, doctors find that one aspirin per day reduces the risk of heart attacks. The supply of aspirin .......... and the demand for aspirin .......... so that the equilibrium price of aspirin .......... . a. increases; increases; rises b. decreases; increases; rises c. increases; decreases; might rise, fall, or stay the same d. decreases; increases; might rise, fall, or stay the same

decreases; increases; rises

Suppose the two goods, A and B, are complements and normal goods. If income increases or the price of good A falls, the a. demand curve for B shifts leftward. b. demand curve for B shifts rightward. c. supply curve for B shifts leftward. d. supply curve for B shifts rightward.

demand curve for B shifts rightward.

If shoes rise in price, the demand curve for shoes .......... and the quantity of shoes demanded .......... . a. shifts leftward; decreases b. shifts leftward; does not change c. does not shift; decreases d. does not shift; does not change

does not shift; decreases

The law of demand states that other things remaining the​ same, the​ _______ the price of a​ good, the​ _______.

higher; smaller is the quantity demanded

The market for frozen burritos is a competitive market​ _______.

if many people buy and many firms sell frozen burritos​, so no single buyer or seller can influence the price

An increase in the number of fast-food restaurants a. increases the quantity demanded of fast-food meals. b. increases the demand for fast-food meals. c. increases the quantity supplied of fast-food meals. d. increases the supply of fast-food meals.

increases the supply of fast-food meals.

If the two goods, A and B, are substitutes and the supply of good A falls, the price of good A .......... and the demand for product B .......... . a. does not change/decreases b. increases/increases c. increases/decreases d. increases/does not change

increases/increases

What are the factors of production

land, labor, capital, entrepreneurship

An economic model includes a. only normative statements. b. no use of marginal concepts. c. all known details in order to increase its accuracy. d. only details considered essential.

only details considered essential.

Law of Supply

producers offer more of a good as its price increases and less as its price falls

If the price of a good A is below its equilibrium price, there will be a .......... of that good and the price will .......... . a. surplus/rise b. shortage/fall c. shortage/rise d. surplus/fall

shortage/rise

A demand curve that illustrates the law of demand​ ______.

shows that the quantity demanded decreases as the price rises

normative statement

subjective or opinion based

Pasta and pizza are​ ______. A video game and a laptop are​ ______.

substitutes; complements

What is macroeconomics?

the part of economics concerned with large-scale or general economic factors, such as interest rates and national productivity.

The demand for gym memberships does not change when a change in​ _______ occurs.

the price of a gym membership

Which of the following is a macroeconomic topic? a. the reasons for a rise in the price of orange juice b. the reasons for the rise in average prices c. why plumbers earn more than janitors d. whether the army should buy more tanks or more rockets

the reasons for the rise in average prices

What is microeconomics?

the study of how households and firms make decisions and how they interact in markets

Which of the following is NOT a factor of production? a. the water used to cool a nuclear power plant b. the efforts of farmers raising cattle c. the wages paid to workers d. the management skill of a small business owner

the wages paid to workers

The "law of demand" refers to the fact that, all other things remaining the same, when the price of a good rises a. the demand curve shifts rightward. b. the demand curve shifts leftward. c. there is a movement down along the demand curve to a larger quantity demanded. d. there is a movement up along the demand curve to a smaller quantity demanded.

there is a movement up along the demand curve to a smaller quantity demanded.

A smartphone and a text message are​ ______. A text message and an email are​ ______.

​complements; substitutes

Coal and oil are​ ______. A skateboard and roller blades are​ ______.

​substitutes; substitutes