Straighterline Micro Midterm Q's

more price elastic

Antony's Pizza uses the same dough, sauce, and cheese for pizza and calzones. When the price of pizza is low Antony produces more calzones. For Antony, the supply of pizza is ______ compared to the supply at a pizza restaurant that does not serve calzones.

a market

The entire group of buyers and sellers of a particular good or service makes up

faces a downward-sloping demand curve.

The essential feature that differentiates imperfectly competitive firms from perfectly competitive firms is that an imperfectly competitive firm:

solves a commitment problem that is inherent in markets with imperfect information

The existence of long term leases agreements in rental markets

price elasticity of supply

The percentage change in quantity supplied that results from a 1 percent change in price is known as the

According to the equilibrium principle

market equilibrium exploits all opportunities for individual gain, but may not exploit gains possible through collective action.

cannot easily be duplicated

Factors of production are the most likely to earn economic rent when they

increase in quantity demanded

A decrease in the price of pizza will cause a(n)

live in large cities instead of small towns

Conspicuous consumption is a more effective signal of ability for people who

no more than $100

Curly and Moe are considering living alone or being roommates and splitting the rent for the next twelve months. If they live alone, they each rent a one bedroom, one bath apartment for $500 per month, while if they are roommates, they can split a two bedroom, one bath apartment for $800 per month. The one difficulty they have is that Moe snores very loudly. Curly estimates the cost of poor sleep due to Moe's snoring at $150 per month. Moe could obtain a snore-eliminating device for $50 per month. Curly would be willing to pay _____ per month to eliminate Moe's snoring. Select one:

increased

During Thanksgiving you participated in a pumpkin-pie eating contest. You really enjoyed the first two pies, the third one was okay, but as soon as you ate the fourth one you became ill and lost the contest. Your total utility ______ with the first three pies you ate.

marginal revenue.

For all firms, the additional revenue collected from the sale of one additional unit of output is termed:

equals; is less than

For perfectly competitive firms, marginal revenue ______ price; for monopolists marginal revenue ______ price.

$4

For the Fall semester, you had to pay a nonrefundable fee of $600 for your meal plan, which gives you up to 150 meals. If you eat all of the meals, your average cost for a meal is:

ratio of marginal utility to price be equal for the two goods

If a consumer buys two goods, the rational spending rule requires that the

infinite

If a demand curve is horizontal at P = $5, then the price elasticity of demand is

perfectly competitor.

If a firm collects $80 in revenue when it sells 4 units, $100 in revenue when it sells 5 units, and $120 in revenue when it sells 6 units, then one can infer the firm is a(n):

inelastic; increase

If demand is ______ with respect to price, a price increase will ______ total revenue

still exist to solve the commitment problem

Imagine a world in which landlords always fix problems quickly, tenants never damage property and always pay their rent in a timely fashion. In such a world, lease agreements would ______.

decreases; stays the same

Imagine that you are an entrepreneur, making designer t-shirts in your garage. Your total cost (in dollars) is given by the equation TC = 300 + 10Q, where Q represents the number of t-shirts you make. As you increase your production of t-shirts, your average fixed cost ______ and your marginal cost ______.

increased; was reduced

Pepsi One is a close substitute for Diet Coke. When Pepsi introduced Pepsi One, the price elasticity of demand for Diet Coke ______ and Coke's ability to raise revenues through price increases ______.

the marginal benefit of search equals the marginal cost of search

Rationally, search should continue until

a consumer at the electronics store and as a seller on e-Bay

Suppose you camped out in front of an electronics store to be one of the 200 lucky people able to purchase the latest gaming system. You bought the system for $350. Two weeks later you see that the same system can be sold on e-Bay for $600, so you sell your system. Your market role is as:

Subsidies

What is a government actions is intended to generate positive externalities?

imposing an external cost on others

When Brady is driving he throws his cigarette butts out the window, reasoning that other people will clean up the litter on the side of the road. By throwing his cigarette butts out the window, Brady is:

the demand for Joe's regular unleaded gasoline is perfectly elastic

When Joe's Gas raises its price for regular unleaded gasoline, total revenue from regular unleaded gas falls to zero. It must be the case that

The opportunity cost of picking up cans is higher for wealthy people than for poor people.

Which of the following best explains why you are more likely to see a poor person than a wealthy person picking up aluminum cans to sell?

It was at least $300.

A consumer goes to purchase a TV advertised for $300. As he is checking out, the clerk informs him of a $20 rebate offer for the TV, which he fills out and receives in 3 months. What can one can infer about the consumer's reservation price?

$1,240

A firm pays Pam $40 per hour to assemble personal computers. Each day, Pam can assemble 4 computers if she works 1 hour, 7 computers if she works 2 hours, 9 computers if she works 3 hours, and 10 computers if she works 4 hours. Pam cannot work more than 4 hours day. Each computer consists of a motherboard, a hard drive, a case, a monitor, a keyboard, and a mouse. The total cost of these parts is $600 per computer. What is the marginal cost of producing the computers that Pam can assemble during her 3rd hour of work?

fair gamble

A gamble that offers a 1 percent chance of winning $699.93 and a 99 percent chance of losing $7.07 would be classified as a(n)

New York City's rent control

A good example of central planning at work in the U.S. would be

of many firms that sell products that are close but not perfect substitutes

A monopolistically competitive firm is one:

producer surplus to fall

A price ceiling that is set below the equilibrium price will cause

if the cost of making another unit is less than the revenue gained from selling another unit

A rational seller will sell another unit of output

will have no effect on the market

A regulated maximum price that is above the equilibrium price

macroeconomics

A study of the impact of various government policies on economic growth would be considered

it would cost the seller too much to honor a warranty on a low-quality car

A warranty on a used car is a credible signal of quality because

economies of scale.

According to the textbook, the most important and enduring source of market power is:

"wants"

After subsistence levels of food, shelter, and clothing have been provided, economists refer to all other goods and services as:

$10

Alex, who is risk-neutral, is looking for an one-bedroom apartment to rent for the month of August while he's on vacation in Seattle. All of the one-bedroom apartments in the neighborhood where he wants to stay are of equal quality, but 70 percent rent for $700 per month, 20 percent rent for $600 per month, and 10 percent rent for $500 per month. The first apartment Alex finds rents for $700 per month. If the cost to Alex of searching for an apartment is $30, then searching for another apartment is a gamble with an expected value of

$150

Curly and Moe are considering living alone or being roommates and splitting the rent for the next twelve months. If they live alone, they each rent a one bedroom, one bath apartment for $500 per month, while if they are roommates, they can split a two bedroom, one bath apartment for $800 per month. The one difficulty they have is that Moe snores very loudly. Curly estimates the cost of poor sleep due to Moe's snoring at $150 per month. Moe could obtain a snore-eliminating device for $50 per month. The actual monthly gain in surplus to Curly and Moe from living together after addressing the snoring problems in the least costly way is:

each resident will fail to adequately consider the external cost of his or her own water use

Early settlers in the town of Dry Gulch drilled wells to pump as much water as they wanted from the single aquifer beneath the town. (An aquifer is an underground body of water.) As more people settled in Dry Gulch, the aquifer level fell and new wells had to be drilled deeper at higher cost. The residents of Dry Gulch will overuse water relative to the social optimum because ______.

discourage residents from using too much water.

Early settlers in the town of Dry Gulch drilled wells to pump as much water as they wanted from the single aquifer beneath the town. (An aquifer is an underground body of water.) As more people settled in Dry Gulch, the aquifer level fell and new wells had to be drilled deeper at higher cost. The town council has proposed putting a meter on each household's pump, and charging residents for each gallon of water used. This would:

Other people are trying to choose the shortest line too

Every time you go to the grocery store, you try to wait in the shortest line. But the lines always seem to be roughly the same length. Why?

small number of large firms.

Industries in which firms have high fixed costs and low marginal costs are likely to have a:

300; 10

Imagine that you are an entrepreneur, making designer t-shirts in your garage. Your total cost (in dollars) is given by the equation TC = 300 + 10Q, where Q represents the number of t-shirts you make. Your fixed cost is $______, and your marginal cost is $______.

State U and CheapFizz

In exchange for a share of the revenues earned on campus, State U has granted CheapFizz the exclusive right to sell soft drinks in the student union and in vending machines on campus. Prior to the deal, three soft drink companies sold beverages on campus; now no other soft drink company is allowed to sell its products on campus. The beneficiaries of this deal is/are _______.

greater than or equal to its variable cost

In the short run, a profit-maximizing firm will not shut down if its total revenue is:

inefficient because Steven and Ingrid could have made a mutually beneficial trade

Ingrid has been waiting for the show "Mamma Mia!" to come to town. When it finally does come, tickets cost $60. Ingrid's reservation price is $75. But when Ingrid tries to buy a ticket, they are sold out. Suppose Steven was able to purchase a ticket at the box office for $60. Steven's reservation price for the ticket is $65. If Steven attends "Mamma Mia!" and Ingrid does not, then this situation is:

total economic surplus to increase by $300

Judy is planning to sell an antique grandfather clock that she values at $200. If she sells the clock on Craigslist, it will be bought by someone who values it at $450. If she uses an antique dealer to sell the clock, it will be bought by someone who values it at $850. The antique dealer will charge Judy $100 to sell the clock, which just covers the antique dealer's opportunity cost of selling the clock. Relative to selling the clock on Craigslist, selling the clock through an antique dealer will lead:

$40,000

Last year Christine worked as a consultant. She hired an administrative assistant for $15,000 per year and rented office space (utilities included) for $3,000 per month. Her total revenue for the year was $100,000. If Christine hadn't worked as a consultant, she would have worked at a real estate firm earning $40,000 a year.

only select an item if its marginal benefit is greater than or equal to its price

Lunch in Jamie's dorm is an all-you-can-eat buffet, served from 11 a.m. until 1 p.m. By noon, the buffet is picked over, and by 12:30, there are very few popular items left. The garbage bins, though, are full of food. If the cafeteria changed its policy so that students had to pay for each item chosen, students would:

the tragedy of the commons.

Lunch in Jamie's dorm is an all-you-can-eat buffet, served from 11 a.m. until 1 p.m. By noon, the buffet is picked over, and by 12:30, there are very few popular items left. The garbage bins, though, are full of food. The buffet in Jamie's dorm is an example of:

the performance of national economies and ways to improve that performance

Macroeconomics differs from microeconomics in that macroeconomics focuses on

only buy trip insurance if it costs less than $780

Mel is thinking of going on a cruise. Mel values a cruise in nice weather at $2,000 and values a cruise in bad weather at $50. The probability of nice weather is 60% and the probability of bad weather is 40%. Trip insurance is sometimes available. If purchased, it allows travelers to delay the cruise until the weather is nice. Suppose that the price of the cruise is $1,200. If Mel is risk-neutral, then Mel should

producer surplus

Suppose a market is in equilibrium. The area below the market price and above the supply curve is

increases; decreases

Relative to a monopoly charging a single price to all consumers, perfect price discrimination ______ producer surplus and ______ consumer surplus.

they have unique talents that they can sell to the highest bidder

Superstar professional athletes can sustain their economic rents because:

inefficient point

Suppose Colin brews beer and makes cheese. If Colin can increase his production of beer without decreasing his production of cheese, then he is producing at an:

the marginal benefit from selling an additional unit of output is $5 for the competitive firm and less than $5 for the monopolist.

Suppose a perfectly competitive firm and a monopolist are both charging $5 for their respective products. From this, one can infer that:

purchase less than 20 units of good X and more than 25 units of good Y

Suppose that Cathy spends all of her income on 20 units of good X and 25 units of good Y. Cathy's marginal utility from the 20th unit of good X is 9 utils, and her marginal utility from the 25th unit of good Y is 19 utils. If the price of good X is $0.50 per unit and the price of good Y is $1.00 per unit, then to comply with the rational spending rule, Cathy should:

The U.S.'s production possibilities curve to shift outward faster than Nepal's

Suppose that Nepal invests less in new factories and equipment than does the United States. This will likely cause

below-average salaries

Suppose that the salary range for recent college graduates with a bachelor's degree in economics is $30,000 to $50,000, with 25 percent of jobs offering $30,000 per year, 50 percent offering $40,000 per year and 25 percent offering $50,000 per year and that in all other respects, the jobs are equally satisfying. Assume that in this market, a job offer remains open for only a short time so that continuing to search requires an applicant to reject any current job offer. If this scenario describes job searches in general, the segment of the population that is most risk-averse will tend to earn:

$40,000

Suppose that the salary range for recent college graduates with a bachelor's degree in economics is $30,000 to $50,000, with 25 percent of jobs offering $30,000 per year, 50 percent offering $40,000 per year and 25 percent offering $50,000 per year and that in all other respects, the jobs are equally satisfying. Assume that in this market, a job offer remains open for only a short time so that continuing to search requires an applicant to reject any current job offer. The expected starting salary for a college graduate with a bachelor's degree in economics is ______.

No, your benefit is less than your cost

Your classmates from the University of Chicago are planning to go to Miami for spring break, and you are undecided about whether you should go with them. The round-trip airfares are $600, but you have a frequent-flyer coupon worth $500 that you could use to pay part of the airfare. All other costs for the vacation are exactly $900. The most you would be willing to pay for the trip is $1400. Your only alternative use for your frequent-flyer coupon is for your trip to Atlanta two weeks after the break to attend your sister's graduation, which your parents are forcing you to attend. The Chicago-Atlanta round-trip airfares are $450. Should you use the frequent flyer coupon to go to Miami?

each student's final grade depends on his or her relative standing.

Your economics professor has announced that he or she will assign final grades as follows: the top 20 percent of students will get an A, the bottom 20 percent of students will get an F, and everyone else will get a C. This grading scheme generates a positional externality because: