Microeconomics Exam 1
Consider Luis's decision to go to college. If he goes to college, he will spend $21,000 on tuition, $11,000 on room and board, and $1,800 on books. If he does not go to college, he will earn $16,000 working in a store and spend $7,200 on room and board. Luis's cost of going to college is
$42,600.
Which of the following changes would not shift the supply curve for a good or service?
A change in the price of the good or service
Which of the following changes would not shift the demand curve for a good or service?
A change in the price of the good or service.
If consumers often purchase muffins to eat while they drink their lattés at local coffee shops, what would happen to the equilibrium price and quantity of lattés if the price of muffins rises?
Both the equilibrium price and quantity would decrease.
If scientists discover that steamed milk, which is used to make lattés, prevents heart attacks, what would happen to the equilibrium price and quantity of lattés?
Both the equilibrium price and quantity would increase.
Which of the following transactions takes place in the markets for the factors of production in the circular-flow diagram?
Dylan receives a salary for his work as a financial analyst for an investment firm.
Which of the following would increase in response to a increase in the price of ironing boards?
None of the above is correct.
Suppose that a decrease in the price of good X results in fewer units of good Y being demanded. This implies that X and Y are
Substitute goods
Law of Supply
Tendency of suppliers to offer more of a good at a higher price
What would happen to the equilibrium price and quantity of lattés if the cost of producing steamed milk, which is used to make lattés, rises?
The equilibrium price would increase, and the equilibrium quantity would decrease.
Which of the following is not held constant in a supply schedule?
The price of the good
Which of the following would cause a movement along the supply curve for cupcakes?
a decrease in the price of cupcakes
When we move along a given demand curve,
all nonprice determinants of demand are held constant.
When we move along a given supply curve,
all nonprice determinants of supply are held constant.
Ryan produces hair clips and earrings. Celia also produces hair clips and earrings, but Ryan is better at producing both goods. In this case, trade could
benefit both Celia and Ryan.
The economy of the former Soviet Union is best described as a
centrally-planned economy
Law of Demand
consumers buy more of a good when its price decreases and less when its price increases
Suppose you like to make, from scratch, pies filled with bananas and vanilla pudding. You notice that the price of bananas has increased. As a result, your demand for vanilla pudding would
decrease.
Which of the following events must cause equilibrium quantity to fall?
demand and supply both decrease
Economists make assumptions to
focus their thinking on the essence of the problem at hand.
If a decrease in income increases the demand for a good, then the good is a(n)
inferior good
If the price of ice cream rose to $30 per gallon, consumers would purchase fewer gallons of ice cream than if the price were $4 per gallon. If the price of chocolate sauce fell to $0.50 per can, consumers would purchase more chocolate sauce than if the price were $5 per can. These relationships illustrate the
law of demand.
Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight. If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300, the airline should
sell the ticket because the marginal benefit exceeds the marginal cost.
positive statement
statements that describe or explain a phenomenon or relationship in the world. They are based on factual observations or evidence and can be tested
normative statement
subjective statements that express value judgments, opinions,
You have driven 800 miles on a vacation and then you notice that you are only 15 miles from an attraction you hadn't known about, but would really like to see. In computing the opportunity cost of visiting this attraction you had not planned to visit, you should include
the cost of driving the next 15 miles, but not the cost of driving the first 800 miles.
If something happens to alter the quantity demanded at any given price, then
the demand curve shifts.
Mina decides to spend three hours working overtime rather than going to the park with her friends. She earns $20 per hour for overtime work. Her opportunity cost of working is
the enjoyment she would have received had she gone to the park.
equillibrium price
the price at which the quantity demanded equals the quantity supplied
A production possibilities frontier is bowed outward when
the rate of trade-off between the two goods being produced depends on how much of each good is being produced.
If something happens to alter the quantity supplied at any given price, then
the supply curve shifts.
A decrease in the number of sellers in the market causes
the supply curve to shift to the left.
Suppose there are only two people in the world. Each person's production possibilities frontier also represents his or her consumption possibilities when
they choose not to trade with one another.
equillibrium quantity
when there is no shortage or surplus of a product in the market.