principles of microeconomics final exam

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wanda makes $30 an hour as a welder. She must take two hours off work (without pay) to go to the dentist. The dentist charges $40. The opportunity cost of her visit to the dentist is

$100

A decrease in the supply of popcorn will result in

a lower price and lower quantity

a decrease in the demand for popcorn will result in

a lower price and lower quantity

Net benefit can be maximized by equating

a marginal benefit to marginal cost

Which of the following is likely to benefit producers at the expense of consumers?

a price floor

Assuming that pizza is a normal good, if students income at Armstrong decreases substantially, there would be:

a reduction in the demand for pizza

An economic model is

a simplified version of some aspect of economic life used to analyze an economic issue.

The cross-price elasticity helps us understand whether a good is

a substitute or complement

the principle that, for virtually all goods and services, there is a negative relationship between price and quantity demanded, all other things unchanged, is the law of:

demand

An example of a normative statement is

everyone in the country needs to be covered by national health service

when deciding whether or not to get a flu vaccination, people tend to ignore the _____ and as a result _____.

external benefit: too few vaccinations are given.

ceteris paribus means

holding other things unchanged

The income elasticity helps us understand whether a good is

inferior or normal

When a positive externality is present in a market marginal social benefit _____ marginal cost, resulting in a market that is producing ____.

is greater than; less than the effective quantity

A vertical demand curve is

perfectly inelastic

in a market economy, the determination of which goods are produced is primarily based on

profitability

If the demand for a good is inelastic, the firm should

raise the price

the unintended consequences of rent control include

reduced ability of housing for the poor and higher rents in non-controlled rents.

the expenditure that is least appropriate to include in the opportunity cost of attending college is

room and board

in the field of economics the starting point for discussion of human behavior is

scarcity

Assume MUx=20, MUy=12, Px=$2, and Py= $1. This consumer

should buy less of X and more of Y

An externality can be a cost or benefit arising from the production of a good that falls upon

someone other than the consumer or producers

the term quantity demanded refers to

the amount of a good consumers are willing to buy at a specific price

which of the following tends to cause the elasticity of demand for a good to be higher?

the availability of close substitutes

Researchers demonstrate conclusively that drinking 4-6 ounces of ginger ale each day reduces life expectancy by 3 years. What happens in the market for ginger ale?

the equilibrium price and quantity fall

Allocative efficiently in producing a good occurs when

the marginal benefit equals marginal cost

The price elasticity of demand is equal to

the percentage change in quantity demanded divided by the percentage change in price

On a diagram of production possibility frontier, opportunity cost is represented by

the slope of the production possibility frontier

the opportunity cost of a choice is

the value of the forgone activity not chosen

the opportunity cost of a choice is

time

The benefit John gets from all the goods he consumes this week is called

total utility

According to the table above, as the individual consumes each additional slice of pizza

total utility increases at a decreasing rate

The basis for trade is absolute advantage. This statement is

true

In economics, utility is

A numerical measure of individual preferences

A budget line, or budget constraint, shows

A persons consumption possibilities

If the current price in a market is above the equilibrium price, we would expect to see

A surplus of goods in the market

Suppose country B wants to be able to produce more radishes and more bicycles. To do this, it must

Acquire more capital, more labor, more natural resources, and/or better technology

In which type of auction does the price start higher than anyone is expected to pay, and fall until a single individual ends the auction by bidding

Dutch Auction

Which auctions generally results in higher selling prices?

Dutch and sealed bid

If the decrease in marginal utility is very slow relative to the increase in the quantity of the good, then the demand for the good is most likely to be

Elastic

Suppose country A discovered a new technology that greatly increased its ability to produce bicycles. this would

Increase the opportunity cost of producing radishes in country A

Which of the following correctly expresses the utility- maximization rule when a consuming only two goods, X and Y?

MUx/Px= MUy/Py

The benefit john gets from one more item is called

Marginal utility

Whenever MB> MC, improving efficiency would require us to do ____ of the activity

More

The price of oranges falls. what happens in the market for apples, which are a substitute for oranges?

The equilibrium price and quantity fall

Questions 14-16 are based on the exhibit below

...

John is making beef and broccoli for a party. Beef is $6/lb and broccoli is $2/lb. The recipe uses two pounds of broccoli for each pound of beef. What quantities will his $25 budget allow?

2.5 lb beef and 5lb broccoli

which of the following will not cause the demand for milk (a normal good) to increase in the current time period?

a decrease in the price of milk

As the consumption of a good increases, the marginal utility of additional units consumed

almost always decreases

Suppose the elasticity of demand for peanut butter is -0.5. A decrease in the price of peanut butter by 6 percent will cause

an increase in Qd of 3 percent

given that meat and potatoes are complementary goods, if the price of meat decreases substantially, there would be

an increase in the demand for potatoes

The auctions that generally result in higher selling prices do so because

bidders have less information than in the other auction types.

a factor of production that has been produced for use in the production of other goods and services is:

capital

the equilbrium price in a market is defined as the price at which

consumers and firms agree on quantity

the opprotunity cost of producing an additional ton of radishes would be greater in

country B

the sum of producer and consumer surplus created by the production of a good is also called

net benefit

The free rider problem associated with a public good often leads to inefficacy is because

no one has the incentive to pay for the good

A public good is defined by two key characteristics:

non-excludable and non-rival

A common resource is defined by two key characteristics:

non-excludable and rival

Efficient production exists when the economy is

operating on the production possibilities curve


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