Test 1 and 2 Econ

When the price of a pizza decreases from $6.00 to $4.00, the quantity demanded of pizza increases from 8 pizzas to 12 pizzas. Given this information, the price elasticity of demand is:

1

Suppose after paying bills and setting aside some money for retirement, Joana has $130dollars left to spend on just two goods: concerts and books. Assume that concerttickets cost $55 each, books cost $10 each, and additional units of both goods always provide positive marginal utility. Which of the following combination of goods could possiblybe her utility-maximizing bundle?

2 concert tickets and 2 books

Christine, a rational person, is deciding how many microscopes to buy. Each microscope has a constant marginal cost of $100. The marginal benefit to Christine of the first microscope is $170. However, the marginal benefit of each subsequent microscope is $20 less than the marginal benefit of the previous one. How many microscopes should Christine buy?

4

If someone sells a house they valued at $350,000 and they gained $80,000 in producer surplus from the sale, what was the market price of the house

430,000

Which of the following is an example of a market failure?

A quantity transacted at which marginal social benefit exceeds marginal social cost

All of the following shift the supply of watches to the right except

An increase in the price of watches

For a price ceiling to be a binding constraint on the market, the government must set it:

Below the equilibrium price

Economic models are

Built with assumptions

Which of the following is most likely a "normal" good

Equilibrium quantity to rise and the equilibrium price to remain constant

Which of the following types of goods is non-excludable and rival in consumption?

Common resources

Hamburgers and french fries are _____ in consumption. Therefore, the cross-price elasticity of demand between the two goods will be ____.

Complements,Negative

Assume the consumption of coffee provides a positive marginal benefit. As the quantity of coffee consumed Increases, the marginal utility of coffee____ and the total utility of coffee ____ as additional coffee is consumed.

Decreases, Increases

Assume that during a trip to the Econ-Land theme park, Jennifer is willing to pay $11.00 for her first corn dog but is only willing to pay $8.00 for her second corn dog. This is best explained by the principle of

Decreasing marginal benefit

Which of the following demands is most likely to be price inelastic

Demand for steel next year

The burden of a tax falls more heavily on the sellers in a market when:

Demand is elastic and supply is inelastic

True or false: a public good is defined as a good produced by the public sector.

False

The law of supply states that an increase in the price of a good

Increases the quantity supplied of that good

If supply is price inelastic, the numerical value of the price elasticity of supply must be:

Less than 1

If a nonrival and nonexcludable good was produced by the private sector, then

Less than the efficient quantity would be produced

If an increase in the price of a good has no impact on the total revenue in that market, demand must be

Perfectly price inelastic

Peter can write 10 poems per day or solve 100 economics problems per day. Chris can write 2 poems per day or solve 1 economics problem per day. What can you say about these production possibilities?

Peter has the absolute and comparative advantage at solving economics problems.

Classify the following statement: "laws against price-gouging after natural disasters empirically tend to create local shortages of products such as water and canned food

Positive

Suppose both buyers and sellers of wheat expect the price of wheat to rise in the near future. What would we expect to happen to the equilibrium price and quantity in the market for wheat today?

Price will increase; quantity is ambiguous.

What would likely cause the PPC to shift outwards in future periods?

Producing a high proportion of capital goods relative to consumption goods

Classify the rivalry and excludability of the following good: farm-raised chicken

Rival, excludable

Trade-offs are unavoidable because wants are unlimited and resources are

Scarce

If the price of a good is below the equilibrium price, then there is a [ Select ] ["Shortage", "Surplus"] and market forces will cause the price to [ Select ] ["Increase", "Decrease"] , ceteris paribus.

Shortage, Increase

Assume that politicians are debating whether to place a tax on buyers or sellers, but they are confused about the concept of tax incidence. What fact could you tell the politicians to help them make their decision?

The burden of the tax on each group doesn't depend on who the tax is placed on

A rational person does not act unless

The marginal benefits exceed the marginal costs

The diamond-water paradox (or the "paradox of value") can be resolved through the application of the:

Theory of subjective marginal utility

True or False: In a world with two goods and two individuals, one of the individuals can have an absolute advantage in both goods.

True

Some degree of wealth redistribution is most likely to be supported by which of the following philosophical traditions?

Utilitarianism, Rawlsian liberalism

If your budget is $100, the price of a cup of coffee is $5, and the price of pizza is $10, can youafford to buy 8 cups of coffee and 6 pizzas?

Yes