Microeconomics Midterm

Front 1

economists believe that scarcity forces everyone to

Back 1

make choices

Front 2

when economists use the term Ceteris paribus, they are indicating that

Back 2

all other variables except the ones specified are assumed to be constant

Front 3

which of the following is a normative statement

Back 3

Congress is considering the president's tax plan to increase taxes which is a fair plan

Front 4

human wants

Back 4

can never be fully satisfied

Front 5

a chain saw is an example of which of the following factors of production

Back 5

Capital

Front 6

Ceteris paribus means

Back 6

all other things remain constant

Front 7

an entrepreneur is

Back 7

the person who conceives and starts a business

Front 8

which phrase is associated with normative statement

Back 8

"should be"

Front 9

the basic difference between macroeconomics and microeconomics is

Back 9

microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy

Front 10

computer programs or software are an example of

Back 10

capital

Front 11

scarcity is a

Back 11

subjective concept that human wants can never be satisfied

Front 12

economics, according to its definition, studies how people

Back 12

make choices in the face of scarcity

Front 13

microeconomics is concerned with

Back 13

some specific market in the economic system

Front 14

the statement, "John buys more of good X as his income increases, Ceteris paribus," means:

Back 14

the price of this good is being allowed to change

Front 15

a positive economic statement must be verifiable

Back 15

True

Front 16

Which of the following is correct regarding relationships?

Back 16

ALL OF THESE

1. slope is the ratio of the vertical change to the horizontal change

2. a direct relationship is one in which two variables change in the same direction

Front 17

the graph of a direct relationship will have a positive slope

Back 17

True

Front 18

which of the following would decrease the supply of airline travel

Back 18

higher fuel costs

Front 19

a decrease in the price of coffee, other things being equal, causes a

Back 19

downward movement along the demand curve for coffee

Front 20

an increase in the demand for a good means that

Back 20

consumers are willing to purchase more of the good at each possible price

Front 21

the "ceteris paribus" clause in the law of demand does NOT allow which of the following factors to change

Back 21

ALL OF THESE

1. consumer tastes and preferences

2. the prices of other goods

3. expectations

Front 22

assuming that beef and chicken are substitutes, an increase in the price of beef, other things being equal, will

Back 22

increase the demand for chicken

Front 23

an increase in the demand for a product means that the

Back 23

demand curve shifts to the right

Front 24

a rightward shift of a demand curve is called

Back 24

an increase in demand

Front 25

an improvement in a firm's technology that reduces its production costs will result in a

Back 25

ALL OF THESE ARE TRUE

1. rightward shift of the supply curve

2. increase in supply

3. increase in quantity supplied at any given price

Front 26

the demand schedule for a good shows

Back 26

the specific quantity of the good that people are willing and able to buy at different prices

Front 27

other things being equal, the effect of a decrease in the price of Coca-Cola would cause which of the following

Back 27

a downward movement along the demand curve for Coca-Cola

Front 28

which of the following pairs is the best example of substitutes

Back 28

hiking boots and athletic shoes

Front 29

if consumer incomes go up and Harley Davidson motorcycles are a normal good, the effect on the demand for motorcycles, ceteris paribus, will be a

Back 29

rightward shift in the demand curve for motorcycles

Front 30

if income increases, then with regard to expensive cuts of steak, it is likely that the demand curve

Back 30

shifts to the right

Front 31

when economists say the demand for a product has increased, they mean the

Back 31

demand curve has shifted to the right

Front 32

if two goods are complementary a

Back 32

decrease in the price of one product will cause an increase in the demand for the other product

Front 33

assume Q(sub s), represents the quantity supplied at a given price and Q(sub d) represents quantity demanded at the same price. which of the following market conditions produces an upward movement of the price

Back 33

Q(sub s) = 750, Q(sub d) = 1000

Front 34

if pork and beans is an inferior good, other things being equal, in increase in consumer income will decrease the demand for pork and beans

Back 34

True

Front 35

which of the following situations results from a ticket price to a concert set below the equilibrium price

Back 35

a long line of people wanting to purchase tickets to the concert

Front 36

if a chemical factory causes noxious fumes to be emitted in the neighborhood, a third party would be

Back 36

local homeowners

Front 37

Bobby's neighbor is growing a tree that is blocking Bobby's ocean view. Bobby is considering taking his neighbor to court. This is most likely an example of

Back 37

negative externality

Front 38

Cindy discovers that when she goes to the beach, she does NOT have to bring her radio. She can put her blanket near someone who has a radio and listen all day (w/o having to carry her radio, get sand in the speakers, or buy new batteries). This is an example of

Back 38

a positive externaility

Front 39

Albert, Betty, Christine and David are all very good students. When they hold their study sessions, they often discuss very difficult concepts in great detail. Christine's roommate, Elizabeth, who takes completely different classes, still learns from the discussions of the others. This is the case of a ____, which ____ a ____

Back 39

externalities, benefits, third party

Front 40

price ceilings set below the equilibrium create

Back 40

shortages

Front 41

an externality is

Back 41

unintended benefits or costs imposed on third parties as a result of economic activity

Front 42

an increase in both supply and demand causes which of the following

Back 42

equilibrium price change is indeterminate

Front 43

a side effect of a price floor set above the equilibrium price is

Back 43

an excess supply of the good is created

Front 44

The Yankee Candle Company, in Hatfield, Massachusetts, makes thousands of scented candles each day. The factory emits the odor of the candles it produces, some of which smell quite nice. On days when they make strawberry candles the townspeople really enjoy the smell. On days when they make potpourri scented candles, people close their windows and don't go outside. What can we infer about the scented candle market?

Back 44

B AND C

1. potpourri candles are priced too low to be socially optimum

2. candle production generates only negative externalities

Front 45

which of the following is a public good

Back 45

clean air

Front 46

the possibility of a free rider exists

Back 46

only in the presence of external benefits

Front 47

which of the following would decrease the price of packaged hot dogs

Back 47

ALL OF THESE

Front 48

which of the following is the BEST example of a public good

Back 48

air traffic control

Front 49

if the government imposes a price ceiling, the

Back 49

the price offered by producers must be at or below the ceiling price

Front 50

which of the following would raise both the equilibrium price and the equilibrium quantity of strawberries

Back 50

an increase in demand for strawberries

Front 51

examples of market failure include lack of competition, externalities, public goods, and income inequality

Back 51

True

Front 52

a public good is any good or service that users collectively consume and there is no way to bar free riders

Back 52

True

Front 53

over the elastic portion of a demand curve, a decrease in price causes

Back 53

an increase in total revenue

Front 54

if the government wants to raise tax revenue and shift most of the tax burden to the consumers, it would impose a tax on a good with a

Back 54

steep (inelastic) demand curve and a flat (elastic) supply curve

Front 55

if the cross-elasticity of demand for two goods is negative, this means that

Back 55

the goods are complements

Front 56

if Coke and Pepsi are close substitutes, then if

Back 56

Coke raises its price, some customers will switch to Pepsi

Front 57

Suppose there is no change in total revenue when the price changes. the demand curve for this good is

Back 57

unitary elastic

Front 58

If John purchases 10 percent more compact discs when his income increases 5 percent, then

Back 58

compact discs would be income elastic

Front 59

there is no change in total revenue when the demand curve for a good is

Back 59

unitary elastic

Front 60

demand sensitivity depends on all of the following except

Back 60

the sensitivity of firms' output to changes in its price

Front 61

the price elasticity of demand between milk and soda is likely to be

Back 61

positive, because the goods are substitutes

Front 62

an increase in the price of good X causes the demand for good Y to shift inward. One can conclude that X and Y are

Back 62

complements

Front 63

If Jackie needs special firm to go with her new camera, then for her these two goods have what type of relationship

Back 63

complementary

Front 64

price elasticity of demand is defined as the ratio of the

Back 64

percentage change in quantity demanded to the percentage change in price, other things being equal

Front 65

the cross elasticity of demand for substitute products must

Back 65

exceed zero

Front 66

suppose you are the manager of a local water company, and you are instructed to get consumers to reduce their water consumption by 10 percent. If the price elasticity of demand for water is 0.25, by how much would you have to raise the price of water

Back 66

40 percent

Front 67

if a 10 percent cut in price causes a 15 percent increase in sales, then

Back 67

demand is price elastic in this range

Front 68

if a 10 percent price increase causes the quantity demanded for a good to decrease by 20 percent, demand is elastic

Back 68

True

Front 69

the substitution effect is the concept that changes in consumption of a good result from changes in the relative price of a jointly consumed good

Back 69

False

Front 70

Assume the price of good X increases. As a result, you real income decreases and you decrease the quantity of good X purchased each month. This is an example of the

Back 70

income effect

Front 71

according to the income effect, lower prices give people more purchasing power with which to increase the quantity demanded of goods

Back 71

True

Front 72

Marginal utility (MU) equals:

Back 72

TU/Q

Front 73

a util represents a unit of measurement for the

Back 73

happiness a person obtains from consuming a good

Front 74

suppose that the price of telephones decreases. if more are purchased then

Back 74

the marginal utility of telephones will likely decrease

Front 75

assume the price of Nikes decreases. as a result, consumers increase the quantity of Nikes purchased each year and purchase fewer Reeboks. This is an example of the

Back 75

substitution effect

Front 76

if the price of a good decreases, the resulting increase in the quantity purchased decreases the marginal utility of the good

Back 76

True

Front 77

Typically, total utility derived decreases as more of a good is consumed

Back 77

False

Front 78

Diminishing marginal utility means that as you consume more of a good, other things constant, the

Back 78

additional satisfaction you obtain from each additional unit of the good falls

Front 79

as more Big Macs are consumed each day, the marginal utility that a person gets from each additional Big Mac

Back 79

decreases

Front 80

as we move down a person's demand curve, marginal utility declines

Back 80

True

Front 81

if Allison's marginal utility of her 100th dollar of income is greater than Brad's marginal utility of his 10th dollar, then we can conclude

Back 81

nothing, since we can't make interpersonal utility comparisons

Front 82

Tina's marginal utility of her first piece of cake is 15, while Jerry's marginal utility of his first piece of cake is 24. An economist would conclude that

Back 82

we can't make a comparison to see who values cake more

Front 83

when Pepsi becomes more expensive relative to other beverages, people will purchase less Pepsi. This observation is known as the

Back 83

substitution effect

Front 84

The consumer equilibrium condition for two goods is achieved by equating the

Back 84

ratios of marginal utility to the price of both goods for the last dollar spent on each good

Front 85

the total utilities associated with the first 5 units of consumption of good X are 15, 3, 40, 47, and 50, respectively. what is the marginal utility associated with the third unit

Back 85

10

Front 86

utils are used by economists to measure the satisfaction a person obtains from consuming a good

Back 86

True

Front 87

the law of diminishing marginal utility states that total utility increases by smaller and smaller increments as more of a good is consumed

Back 87

True

Front 88

The marginal utility curve is downward sloping

Back 88

True

Front 89

Assume the total utilities corresponding to the first four units of a product consumed are 8, 12, 14, and 15, respectively. The marginal utility of the second unit is consumed is

Back 89

4

Front 90

the change in total utility due to a 1-unit change in quantity consumed is

Back 90

marginal utility

Front 91

if good A has a marginal utility of 30 and a price of $5, and good B has a marginal utility of 10 and a price of $2, then

Back 91

good A is a better buy than good B

Front 92

a rational consumer will always shift a dollar from a good whose marginal-utility-to-price ratio is lower to one whose marginal-utility-to-price is higher

Back 92

True

Front 93

assume the price of Coca-Cola increases. as a result, your real income decreases and you decrease the quantity of Coca-Cola purchased each month. This is an example of the

Back 93

income effect

Front 94

if the price of a good decreases, the resulting increase in the quantity purchased decreases the marginal utility of the good

Back 94

True

Front 95

a utility-maximizing consumer equalizes marginal utilities per dollar spent across all goods

Back 95

True

Front 96

the utility of a good measures its satisfaction rather than its usefulness

Back 96

True

Front 97

if a consumer is spending all of his/her income in a manner where MU(sub a)/P(sub a) = MU (sub b)/P(sub b), then the consumer

Back 97

is maximizing his/her utility

Front 98

the principle of diminishing marginal utility says that

Back 98

the marginal utility of additional units consumed decreases

Front 99

if finding the last stamp to complete your collection makes you happier than finding the first, then

Back 99

marginal utility in not diminishing

Front 100

the statement "as more of a good is consumed, the utility a person derives from each additional unit diminishes" is known as the

Back 100

law of diminishing marginal utility

Front 101

the statement "It is better to suffer a little more unemployment than a little lower price" is an example of normative analysis

Back 101

True

Front 102

a sub-discipline of economics that looks at the economy as a whole is

Back 102

macroeconomics

Front 103

which of the following is an example of a positive economic statement

Back 103

the economy's real output increased at about 3 percent last year and the unemployment rate decreased

Front 104

which of the following is an example of a normative economic statement

Back 104

the minimum wage should be increased so that low income workers can afford to keep up with the cost of living

Front 105

an economics textbook is an example of

Back 105

capital

Front 106

computer programs or software are an example of

Back 106

capital

Front 107

the statement "it would be better to put up with price controls than to have continuing higher medical care prices" is an example of normative economic analysis

Back 107

True

Front 108

the Latin expression Ceteris paribus means

Back 108

everything else being equal

Front 109

people are forced to make choices because of

Back 109

unlimited wants and limited resources

Front 110

which of the following is the best example of a nonrenewable resource

Back 110

oil

Front 111

which of the following is a statement of positive economics

Back 111

government control of rent decreases the number of new apartments constructed

Front 112

microeconomics is the branch of economics in which you study inflation and unemployment in the economy

Back 112

false

Front 113

the finite nature of the economy's resource base

Back 113

will always be with us

Front 114

financial capital by itself is NOT a factor of production; instead it is only a paper claim on economic capital

Back 114

true

Front 115

a model (or theory)

Back 115

ALL OF THESE

Front 116

the slope of a line parallel to the horizontal axis is

Back 116

1

Front 117

straight line CD in Exhibit 1A-2 shows that

Back 117

ALL OF THESE

Front 118

straight line AB in Exhibit 1A-3 shows that

Back 118

ALL OF THESE

Front 119

in exhibit 1A-3, as X increases along the horizontal axis, corresponding to points A-B on the line, the Y values decrease. The relationship between the X and Y variables is

Back 119

inverse

Front 120

in Exhibit 1A-6, the slope of the straight line A-D is

Back 120

0

Front 121

financial capital by itself is not a factor of production; instead it is only a paper claim on economic capital

Back 121

True

Front 122

campaign speeches normally include normative economic statements

Back 122

True

Front 123

policies to determine the price of troll dolls are a concern of macroeconomics

Back 123

False

Front 124

Scarcity

Back 124

means we are unable to have as much as we would like to have

Front 125

which of the following represents positive economics

Back 125

if policy A is followed, then outcome B results

Front 126

scarcity means we are unable to have as much as we would like to have

Back 126

True

Front 127

which of the following is included in the study of macroeconomics

Back 127

unemployment in the nation

Front 128

factors that determine the price of corn would be studied in macroeconomics

Back 128

False

Front 129

when building a model, an economist must

Back 129

make simplifying assumptions

Front 130

determining the price of compact discs is a concern of

Back 130

microeconomics

Front 131

which of the following is a statement of positive economics

Back 131

if taxes are reduced, unemployment will drop

Front 132

the term Ceteris paribus means that

Back 132

one influence is changing and everything else is being held constant

Front 133

economic models are of limited use since they cannot be tested empirically with actual data

Back 133

False

Front 134

in Exhibit 1A-3, as X increases along the horizontal axis, corresponding to points A-B on the line, the Y values decrease. The relationship between X and Y variables is

Back 134

inverse

Front 135

In Exhibit 1A-1, the slope of straight line AB is

Back 135

1/2

Front 136

in Exhibit 1A-3, the slope for straight line AB is

Back 136

-1

Front 137

in Exhibit 1A-5, the slope for straight line CD is

Back 137

-1

Front 138

which of the following would cause a shift in the relationship shown in Exhibit 1A-7

Back 138

a rise in the price of air travel

Front 139

assume that oranges and peaches can both be grown on the same type of land, a decrease in the price of peaches, other things being equal, will cause a(n)

Back 139

rightward shift of the supply curve for oranges

Front 140

assuming that chicken and beef are substitutes, a decrease in the price of beef, other things being equal, will

Back 140

decrease the demand for chicken

Front 141

suppose all of the major computer manufacturers announced at the beginning of next month there would be a major price reductions on their computers. this would cause the current demand for computers to

Back 141

decrease

Front 142

which of the graphs in Exhibit 3-3 depicts the effect of a decrease in the price of pizza on the demand curve for pizza

Back 142

graph b

Front 143

a shift occurs in the supply curve for salt when

Back 143

improvements are made in the production process

Front 144

the price of a good will fall when

Back 144

there is a surplus of the good

Front 145

complementary goods are good

Back 145

that are consumed jointly

Front 146

farmers can choose to produce eggs or milk. If there is an increase in price of milk then what will be the effect in the egg market

Back 146

egg supply will decrease

Front 147

assuming that hamburgers and hot dogs are substitutes, an increase in the price of hamburgers, other things being equal, results in a

Back 147

rightward shift in the demand curve for hot dogs

Front 148

if the united auto workers can obtain a substantial wage increase for auto workers, there will be a(n)

Back 148

decrease in the supply of automobiles, which is a shift to the left of the supply curve

Front 149

if a decrease in the price of good Y causes the demand for good Z to decrease, this indicates that

Back 149

Y and Z are substitutes

Front 150

consumes buy less of a good as its price increases because

Back 150

substitute goods are now relatively cheaper

Front 151

an economist has conducted extensive research and has found that Jones Cola is a substitute for Tucker Cola. Ceteris paribus, the price of Jones Cola increases. This impact on the demand curve for Tucker Cola is a(n)

Back 151

increase in demand

Front 152

in Exhibit 3-2, the shift in the demand curve from d1 to d2 could have been caused by which of the following

Back 152

increase in expected future prices

Front 153

other things being equal, the effect of a decrease in the price of Coca-Cola would cause which of the following

Back 153

a downward movement along the demand curve for Coca-Cola

Front 154

in Exhibit 3-6, which of the following is true about the milk market

Back 154

at price .70 there is an excess supply of milk

Front 155

a shortage occurs when the quantity demanded exceeds quantity supplied

Back 155

false

Front 156

other things being equal, an increase in the price of gasoline will decrease the quantity demanded for gasoline

Back 156

true

Front 157

when the price of a good in a market is above equilibrium

Back 157

ALL OF THESE

quantity supplied exceeds quantity demanded

surplus is observed

price will fall in the near future

Front 158

if a shortage exists in a market then

Back 158

ALL OF THESE

price is below equilibrium

quantity demanded exceeds quantity supplied

price will rise in the near future

Front 159

in Exhibit 3-4, which of the following could have caused the shift in the supply curve from s1 to s2

Back 159

decrease in wage rates

Front 160

which of the graphs in Exhibit 3-3 depicts the effect of a decrease in the demand curve for pizza

Back 160

graph b

Front 161

the development of new technology typically

Back 161

shifts the supply curve to the right

Front 162

which of the following states the definition of supply

Back 162

there is a positive relationship between the price of a good and the quantity buyers purchase

Front 163

assume the brand X in an inferior good and name brand Y is a normal good. an increase in consumer income, other things being equal, will cause a(n)

Back 163

leftward shift in the demand curve for brand X

Front 164

an increase in the demand for a good means that

Back 164

consumers are willing to purchase more of the goods at each possible price

Front 165

assuming that pepsi- cola and coca-cola are substitutes, a rise in the price of pepsi-cola, other things being equal, results in a(n)

Back 165

rightward shift in the demand curve for coca-cola

Front 166

in exhibit 3-2, which of the following could not have caused the shift in the demand curve from d1 to d2

Back 166

decrease in the number of consumers

Front 167

the law of demand is graphically demonstrated by a(n)

Back 167

downward-sloping demand curve

Front 168

a decrease in quantity demanded is given by a(n)

Back 168

upward movement to the left along the demand curve

Front 169

if income increases, then with regard to expensive cuts of steak, it is likely that the demand curve

Back 169

shifts to the right

Front 170

a demand curve for the The Steel Porcupines' concert tickets would show the

Back 170

number of tickets that will be purchased at various prices

Front 171

which of the following would not cause market demand for normal good to decline

Back 171

an increase in the price of a substitution

Front 172

a leftward shift of a supply curve is called a(n)

Back 172

decrease in supply

Front 173

an increase in the expected future of a good will cause the current demand for the good

Back 173

increase, which is a shift to the right of the demand curve

Front 174

Exhibit 3-8 presents supply and demand data for the video game market. if the price of video games was currently $70, there would be an ___ of ___ video games in the market

Back 174

excess supply; 400

Front 175

if the price of good X increases and this causes an increase in the demand for good Y, then goods X and Y are substitute good

Back 175

true

Front 176

if a shortage exists in a market then

Back 176

ALL OF THE THESE

price is below equilibrium

quantity demanded exceeds the quantity supplied

price will rise in the near future

Front 177

excess quantity demanded for a good creates pressure to push the price of that good down towards the equilibrium price

Back 177

false

Front 178

if the quantity demanded is greater that quantity supplied, the according to the market process

Back 178

the price will rise

Front 179

in order to avoid the free-rider problem, which of the following goods is best provided by the government and paid for with tax dollars

Back 179

lighthouses

Front 180

if the government imposes a price ceiling, then

Back 180

the price offered by producers must be at or below the ceiling price

Front 181

albert, betty,christine, and david are all very good students. when they hold their study sessions, they often discuss very difficult concepts in great detail. christine's roomate, elizabeth, who takes completely different classes, still learns from the discussions of the others. this is the case of a(n) _____, which ____ a _____

Back 181

externalities; benefits; third party

Front 182

price floors are instituted because the government wants to

Back 182

help producers

Front 183

after a hurricane in florida knocked outh the regional water supply for several days, the demand of bottled water increased sharply. in a market economy, how will this increase in demand affect the equilibrium price and quantity of bottled water

Back 183

price will increase, and quantity will increase

Front 184

in Exhibit 4-1, suppose that a reduction in the price of an important input used to produce the good causes and increase in quantity supplied of 150 units at every price level. Assuming that demand does not change, the new equilibrium price will be

Back 184

$2.00

Front 185

which of the following is the best example of a public good

Back 185

national defense

Front 186

from the standpoint of economic efficiency, competitive markets provide

Back 186

less of a public good than would be efficient

Front 187

why do negative externalities like pollution result in inefficiency

Back 187

because producers ignore the external costs they impose on third-parties

Front 188

a decrease in consumer income decreases the demand for compact discs. as a result of the change to a new equilibrium, there is a(n)

Back 188

downward movement along the supply curve

Front 189

in Exhibit 4-9, which of the following would occur at a price of $2.00

Back 189

inventories would put a downward pressure on price

Front 190

an increase in both supply and demand causes which of the following

Back 190

equilibrium price change is indeterminate

Front 191

a public good may be defined as any good or service that

Back 191

NONE OF THESE

Front 192

an increased equilibrium price and a decreased equilibrium quantity results from a(n)

Back 192

decrease in supply

Front 193

in Exhibit 4-7, the equilibrium price of a movie ticket is

Back 193

$4

Front 194

bobby's neighbor is growing a tree that is blocking bobby's ocean view. Bobby is considering take his neighbor to court. This is most likely an example of a

Back 194

negative externality

Front 195

price ceilings are imposed if the government believes

Back 195

the market equilibrium price is too high

Front 196

when airplanes take off and land at logan airport, residents of east boston complain about the noise. the same planes make the same noise during the trip to boston from paris, but there are no ____ for most of the trip because___

Back 196

externalities; there are no third parties

Front 197

public goods are overproduced in the marketplace

Back 197

false

Front 198

assuming a price ceiling is set above the equilibrium price. the eventual result is a shortage

Back 198

false

Front 199

for which of the following medical goods or services is the income elasticity of demand target

Back 199

face- lifts

Front 200

inferior goods have an income elasticity of demand that is

Back 200

negative

Front 201

dana is an art history who needs to travel to italy to do research. art historians usually don't have a lot of money, and therefore are very sensitive to price changes. dana's funding agency pays her a fixed amount to travel. at current exchange rates, dana can stay in italy for 35 days. if the exchange rate improves by 10%, she can stay for 40 days. what is dana's price elasticity of demand for days spent in italy

Back 201

it is approx equal to 1.4

Front 202

if a supplier faces a perfectly horizontal demand curve and sets his price slightly higher than the demand curve itself, he can expect

Back 202

a complete loss of revenues

Front 203

as the economy recovers from a recession, we should expect that demand for

Back 203

inferior goods will fall and demand for non-inferior goods will rise

Front 204

the more inelastic the demand for a product, the more the actual burden of a tax on the product will

Back 204

fall on buyers

Front 205

if a 1 percent decrease in the price of porduct A brings about a 3% increase in the sales of product b, then

Back 205

products A and B are complementary

Front 206

in Exhibit 5-7, if promoters charge a price of $10 per ticket, then their total revenue is

Back 206

$300,000

Front 207

the long-run price elasticity of demand is usually larger than the short-run price elasticity of demand because

Back 207

people have more time to find substitute goods

Front 208

the data in Exhibit 5-2 shows that price elasticity of demand is

Back 208

decreasing as the quantity increases

Front 209

in Exhibit 5-5, the total revenue at point B on the demand curve equals

Back 209

OABC

Front 210

suppose an oil company wants to make its total revenue as large as possible. it should charge a price at which the demand for oil is

Back 210

unitary elastic

Front 211

which of the following pairs is most likely to represent complementary goods

Back 211

bacon and eggs

Front 212

if the demand for cigarettes is highly inelastic, this indicates that

Back 212

the quantity of cigarettes purchased by consumers is not very responsive to a change in the price of cigarettes.

Front 213

in Exhibit 5-1, between points a and b, the elasticity of demand measures

Back 213

1.0

Front 214

if the price elasticity of demand coefficient equals 2 then

Back 214

a price decrease will increase total revenue

Front 215

the number of cds purchased increased by 50% when consumer income increased by 10%. assuming other factors are held constant, cds would be classified as

Back 215

normal goods

Front 216

in Exhibit 5-5, the change in total revenue resulting from a change from price a to d indicates that the demand curve is

Back 216

elastic

Front 217

in response to a price change for good Y, if the cross-elasticity of demand for good Y is negative, good X and good Y are substitutes

Back 217

false

Front 218

if the income elasticity of demand for a good is positive, the good is an normal good.

Back 218

true

Front 219

assume the price of Coca-Cola increases. as a result, your real income decreases and you decrease the quantity of Coca-Cola purchased each month. This is an example of the

Back 219

income effect

Front 220

utility refers to the

Back 220

satisfaction a consumer expects to receive from a good or service

Front 221

in Exhibit 6-4, assume the Multiplex tickets cost $6 each, video rentals cost $2 each, and bags of popcorn cost $1 each. what is the marginal utility of renting a third video

Back 221

6 utils

Front 222

suppose a consumer is spending his or her entire budget. in order to obtain the most satisfaction from his or her purchases, all good should

Back 222

provide the same marginal utility per dollar

Front 223

the statement "as more of a good is consumed, the utility a person derives from each additional unit diminishes" is know as the

Back 223

law of diminishing marginal utility

Front 224

on thanksgiving, jake's mother gives him a huge platter of food. If jake were to keep eating just to please his mother (even when he really wanted to stop), his marginal utility would be

Back 224

negative

Front 225

the conceptual measure of the satisfaction a person obtains by consuming all the units of a good or service during a given time period is

Back 225

total utility

Front 226

a utility-maximizing consumer is currently spending all of his/her income on two products, A and B. The mu of the last unit of A consumed is 50, the price of A is $25, and the price of B is $10. The mu of the last unit of B consumed is

Back 226

20

Front 227

the consumer equilibrium condition for two goods is achieved by equating the

Back 227

ratios of marginal utility to the price of both good for the last dollar spent on each good

Front 228

suppose that an individual consumes just 2 goods: big macs and milkshakes. in order to reach consumer equilibrium, the individual must arrange the consumption of big macs and milkshakes so that the

Back 228

ratio of marginal utility to price is the same for both goods for the last dollar spent on each good

Front 229

diminishing marginal utility means that as you consume more of a good, other things being constant, the

Back 229

additional satisfaction you obtain from each additional unit of the good falls

Front 230

the income effect refers to a change in

Back 230

the quantity demanded of a good because of a change in the buyer's real income

Front 231

utility is most closely defined by which of the following terms

Back 231

satisfaction

Front 232

assume the price of pizza decreases. as a result, your real income increases and you increase the quantity of pizza purchased each month. this is an example of the

Back 232

income effect

Front 233

if a consumer is maximizing his/her utility for a given income, the

Back 233

marginal utility per dollar spent for all goods would be the same

Front 234

marginal utility is best computed as the ratio of

Back 234

the change in total utility to change in quantity consumed

Front 235

joann considers cola and plain sparkling water to be good substitutes. suppose the price of sugar, a key ingredient used to produce cola, falls. according to the income effect, which of the following is most likely to occur

Back 235

joann will purchase more of most goods due to her higher real income

Front 236

according to the income effect, when the price of automobiles rises, people buy fewer automobiles becasue

Back 236

the purchasing power of their income is reduced

Front 237

the substitution effect is the concept that changes in consumption of a good result from changes in the relative price of a jointly consumed good

Back 237

false

Front 238

the income effect is the concept that changes in consumption of a good result from changes in government spending

Back 238

false

Front 239

the marginal utility curve is downward sloping

Back 239

true

Front 240

when total utility is at a maximum, marginal utility is

Back 240

zero

Front 241

the consumer equilibrium condition for two goods is achieved by equating the

Back 241

ratios of marginal utility to the price of both goods for the last dollar spent on each good

Front 242

assume the total utilities corresponding to the first four units of a product consumed are 8,12,14,15 respectively. the marginal utility of the second unit consumed is

Back 242

4

Front 243

"i'm tired of eating muffins for breakfast. today, im trying a bagel" these statements most clearly reflect the

Back 243

law of diminishing marginal utility

Front 244

the utility of a good is

Back 244

different for different concumers

Front 245

the ability of a good to satisfy a want refers to its

Back 245

utility

Front 246

the statement "as more of a good is consumed, the utility a person derives from each addtional unit diminishes" is known as the

Back 246

law of diminishing marginal utility

Front 247

as shown in Exhibit 6-3, assume that the price of good X is $1 per unit and the price of good Y is $2 per unit and your budget is $13. if you consume 4 units of good X and 2 units of good Y and maximize utility, you should consume

Back 247

more of X and less of Y

Front 248

if Mr smith thinks the last dollar spent on shirts yields less satisfaction that the dollar spent on cola, and smith is a utility-maximizing consumer, he should

Back 248

increase his spending on cola and decrease his spending on shirts

Front 249

at this point where total utility is at its peak, marginal utility is

Back 249

zero

Front 250

marginal utility is the change in

Back 250

total utility when an extra unit of output is consumed

Front 251

the conceptual measure of the satisfaction a person obtains by consuming all the units of a good or service during a given time period is

Back 251

total utility

Front 252

diminishing marginal utility means that as you consume more of a good, other things constant, the

Back 252

additional satisfaction you obtain each additional unit of the good falls

Front 253

if total utility increases from 10 to 15 for the second unit of a good consumed, the marginal utility of the second unit is 25

Back 253

false

Front 254

marginal utility equals

Back 254

tu/q

Front 255

according to the income effect, when the price of automobiles rises, people buy fewer automobiles because

Back 255

the purchasing power of their income is reduced

Front 256

_____ is the subjective measure of the physical that is anticipated from consumption

Back 256

utility

Front 257

assume the price of good X increases. as a result your real income decreases and you decrease the quantity of good X purchased each month. this is and example of the

Back 257

income effect

Front 258

which of the following most directly reflects the law of diminishing marginal utility

Back 258

after listening to three compact discs, kim decides to go bowling rather than listen to a fourth disc.

Front 259

in Exhibit 7-7, by filling in the blanks, it can be determined that the marginal cost of the third unit of output is

Back 259

1,200

Front 260

as shown in Exhibit 7-4, the law of diminishing returns applies in the range of

Back 260

over 5 workers per day

Front 261

which of the following statements is true

Back 261

tfc= tc-tvc

Front 262

the short run is a time period such that

Back 262

the existing firms in the market do not have sufficient time to increase the size of their existing plant or build a new factory

Front 263

a downward sloping portion of a long run average total cost curve is the result of

Back 263

economies of scale

Front 264

the long run is a period of

Back 264

sufficient length to allow a firm to alter its plant size and capacity and all other factors of production

Front 265

by filling in the blanks in Exhibit 7-8, the total cost of producing 5 pizzas is shown to be equal to

Back 265

$160

Front 266

by filling in the blanks in Exhibit 7-12, the afc of 3 pizzas is shown to be equal to

Back 266

$13.33

Front 267

the long run is a period of time

Back 267

that is long enough to permit changes in all the firm's inputs, both fixed and variable

Front 268

Exhibit 7-1 shows the change in the production of pizzas as more workers are hired. the total output of pizzas after hiring 4 workers is

Back 268

18

Front 269

the opportunity costs associated with use of resources owned by a firm are

Back 269

implicit costs

Front 270

a bus is mostly filled with passengers and ready to travel from Los Angeles to San Francisco. At the last minute, a person comes running up to the bus and takes a seat. the change in the bus company's total cost as a result of transporting one more passenger on this trip is called

Back 270

marginal cost

Front 271

the decreasing portion of a firm's long run average cost curve is attributable to

Back 271

economies of scale

Front 272

in Exhibit 7-6, the total fixed cost is

Back 272

1,000

Front 273

a firm has $200 million in total revenue and explicit costs of $190 million. Suppose its owners have invested $100 million in the company at an opportunity cost of 10% interest rate per year. the firm's economic profit is

Back 273

zero

Front 274

Exhibit 7-1 shows the change in the short run production of pizzas as more workers are hired. the table shows marginal product increasing between the 0 to 2 workers hired. a possible reason for this increased marginal product is

Back 274

increased division of labor as additional workers are hired.

Front 275

marginal cost is calculated by dividing the change in total cost by change in total output

Back 275

true

Front 276

in Exhibit 7-16, which firm's long run average cost curve experiences constant returns to scale

Back 276

firm b

Front 277

which of the following is true

Back 277

when marginal productivity of a variable input is falling then marginal costs of production must be rising

Front 278

payments to nonowners of a firm are called

Back 278

explicit costs

Front 279

Exhibit 7-1 shows the change in the short run production of pizzas as more workers are hired. the table shows the marginal product of the labor input is decreasing with the hiring of the third worker. a possible reason for this diminishing marginal product is

Back 279

decreases in labor productivity

Front 280

the marginal product curve rises when the marginal cost curve rises

Back 280

false

Front 281

Exhibit 7-2 shows the labor, energy, and materials cost of making various quantities of pizzas. the table shows that the energy cost of making pizzas will

Back 281

increase at a decreasing rate

Front 282

suppose a firm earns an accounting profit. this means the firm also earns a positive economic profit

Back 282

false

Front 283

given the short run average total cost curves in Exhibit 7-17, what level of output per week minimizes average total cost

Back 283

q2 units

Front 284

if both the marginal cost and the average variable cost curves are U shaped. at the minimum point on the average variable cost curve, the marginal cost must be

Back 284

equal to the average variable cost

Front 285

implicit costs are best thought of as

Back 285

opportunity costs

Front 286

if economic profit is zero, then a normal profit is earned

Back 286

true

Front 287

bill is an accountant for a small machine shop. his boss has asked him to calculate the shop's total fixed cost. which method will get bill the correct answer

Back 287

C AND D

determining what the shop would pay for if they produced zero output

subtracting the total variable costs from the total costs

Front 288

a firms average fixed cost curve can never be U shaped, even if its other average cost curves are U shaped

Back 288

true

Front 289

as shown in Exhibit 7-3, the marginal product of labor for the last worker hired when 2 workers are employed per day is

Back 289

100

Front 290

which of the following is true if the total cost curve is rising

Back 290

marginal cost is increasing

Front 291

the total fixed cost remains constant as which of the following varies

Back 291

output in a given period of time

Front 292

the maximum point on the marginal cost curve corresponds to the

Back 292

inflection point on the total variable cost curve

Front 293

in Exhibit 7-13, ATC is shown by the graph labeled

Back 293

v

Front 294

an economist left his $100,000 a year teaching position to work full time in his own consulting business. in the first year, he had a total revenue of $200,000 and business expenses of $150,000. he made a(n)

Back 294

economic loss

Front 295

in the long run, total fixed cost

Back 295

does not exist

Front 296

Exhibit 7-1 shows the change in the short run production of pizzas as more workers are hired. the marginal product of the second employee equals

Back 296

6