question
Which of the following is an example of a normative economic statement?
answer
An increase in social security benefits will increase the welfare of all economic agents.
question
John has to choose between two jobs: one that offers him $50 per hour and one that offers him $35 per hour. The opportunity cost of choosing the job that offers him $50 per hour is ________.
answer
$35 per hour
question
An omitted variable is a variable that ________.
answer
has been left out, and if included, would explain why the variables considered in a study are correlated.
question
Which of the following is a feature of the scientific method?
answer
The scientific method allows improvisation and correction of inconsistent models.
question
Which of the following statements is true of models?
answer
It is more important for a model to be simple and useful than to be precisely accurate.
question
Which of the following statements correctly indicates a property of good economic questions?
answer
A good economic question addresses topics that are important to economic agents and/or to society.
question
Which of the following is a feature of models?
answer
Models help making predictions for the future.
question
Which of the following statements is true?
answer
As the rental prices of downtown apartments rise, only workers with the highest opportunity cost of time will be willing to rent them.
question
John has to choose between a camping holiday and a holiday in Las Vegas. If he evaluates the total net benefit of both alternatives before coming to a decision, he is using the technique of ________.
answer
optimization using total value
question
When optimizing using total value, if the ________ exceed the ________, Project A is chosen over Project B.
answer
net benefits of Project A; net benefits of Project B
question
If an individual's opportunity cost of commute is $300 per month and his monthly commuting time is 60 hours, his opportunity cost of time is ________.
answer
$5 per hour
question
In choosing between apartments in two different locations, the marginal commuting cost is given by ________.
answer
the difference between the commuting cost from two different apartments to the destination
question
A cost-benefit calculation that focuses on the difference between a feasible alternative and the next feasible alternative is called ________.
answer
marginal analysis
question
To carry out an optimization analysis, ________.
answer
all costs are required to be converted to the same unit of measurement
question
The analysis of how a customer's taste for cars will change when her wealth triples falls under the scope of ________.
answer
before and after comparisons
question
If the ________ minus the ________ is positive, Project A is chosen over Project B.
answer
net benefit of Project A; net benefit of Project B
question
Optimization using total value calculates ________.
answer
the total net benefits of different alternatives
question
Consider a market where the demand curve is downward sloping and the supply curve is upward sloping (so they are neither vertical nor horizontal). If the consumers' willingness to pay for the hundredth unit is $7.00 and the seller's willingness to accept for the hundredth unit is $10.00, then the equilibrium ________.
answer
quantity is less than 100 units
question
Scenario: Suppose that the government imposes a price control on gasoline where the legal price is set at $1.50 per gallon while the equilibrium price would be $2.25. A shortage ensues. Worried that you may not have enough gas to commute to school and do errands, you get up before dawn to go to a gas station to fill up the tank. But you find yourself waiting in a long line. Fortunately, the station did not run out of gas before your turn came up, and you were happy to drive away with a full tank.
Refer to the scenario above. The shortage results because ________.
Refer to the scenario above. The shortage results because ________.
answer
consumers demand more than sellers are willing to supply at the legal price
question
Which of the following does NOT have a market in the real world?
answer
None of these
question
Which of the following is not a required characteristic of a market?
answer
Government setting the price of the good or service
question
Suppose Apple raises the cost of downloading a song from iTunes from $0.99 per song to $1.49 per song. This price increase will cause a(n) ________.
answer
decrease in quantity demanded
question
Consider a market where the demand curve is downward sloping and the supply curve is upward sloping (so they are neither vertical nor horizontal). If the consumers' willingness to pay for the hundredth unit is $9.00 and the seller's willingness to accept for the hundredth unit $9.00, then the ________.
answer
willingness to pay exceeds the willingness to accept for the ninety-ninth unit
question
Assume that an individual spends her income on sweaters and shirts. If the price of a sweater increases, ________.
answer
the opportunity cost of buying sweaters increases
question
Lily wants to maximize her benefit of consuming apples and bananas, given her fixed budget of $10 for these two fruits. The price of an apple is $1, and the price of a banana is $0.50. In order to derive Lily's demand curve for bananas, we need to ________.
answer
solve the buyer's problem for her multiple times and find the optimal number of bananas, when price of a bananas is at a different level each time
question
Suppose the prices of a pair of jeans, a shirt, and a tie are $30, $20, and $10, respectively. Which of the following statements is true in this context?
answer
The opportunity cost of buying a shirt is 2 ties.
question
For an individual, consumer surplus measures ________.
answer
willingness to pay minus the price paid for the good
question
Ryan buys 4 pairs of jeans when the price is $25. He buys 3 pairs when the price increases to $50. Ryan's percentage change in quantity demanded is ________, when the price increase by ________ percent, and thus his price elasticity of demand is ________.
answer
-25%; + 100%; -0.25
question
A good is said to have a relatively elastic demand if the value of the price elasticity of demand for the good is ________.
answer
greater than 1
question
The following table shows the marginal benefit that Marcus derives by consuming different quantities of hotdog and soda. The price of a hotdog is $3, and the price of a soda is $1.
Quantity
Soda Hotdog
Marginal Benefits ($) Marginal Benefits ($)
1 10 18
2 8 12
3 6 6
4 4 3
5 2 1
6 1 0.6
Refer to the table above. What is the maximum amount of consumer surplus that Marcus can get, if he has $14 budget to spend on these two goods?
Quantity
Soda Hotdog
Marginal Benefits ($) Marginal Benefits ($)
1 10 18
2 8 12
3 6 6
4 4 3
5 2 1
6 1 0.6
Refer to the table above. What is the maximum amount of consumer surplus that Marcus can get, if he has $14 budget to spend on these two goods?
answer
$52
question
A change in the slope of a consumer's budget constraint indicates a change in the ________.
answer
price of either good purchased by the consumer
question
When the price of milk is $3 per bottle, Steve consumes 20 bottles of milk. When the price increases to $6, Steve's consumption falls to 15 bottles. Therefore, Steve's arc elasticity of demand for milk is ________.
answer
−0.43
question
The demand for a good is elastic. This means that if there is a 10% change in price of this good, ________.
answer
the quantity demanded will change more than 10%
question
The following table shows the marginal benefit that Marcus derives by consuming different quantities of hotdog and soda. The price of a hotdog is $3, and the price of a soda is $1.
Quantity
Soda Hotdog
Marginal Benefits ($) Marginal Benefits ($)
1 10 18
2 8 12
3 6 6
4 4 3
5 2 1
6 1 0.6
Refer to the table above. If Marcus consumes 3 hotdogs and 0 sodas -not necessarily his optimal choice- how much consumer surplus is he enjoying?
Quantity
Soda Hotdog
Marginal Benefits ($) Marginal Benefits ($)
1 10 18
2 8 12
3 6 6
4 4 3
5 2 1
6 1 0.6
Refer to the table above. If Marcus consumes 3 hotdogs and 0 sodas -not necessarily his optimal choice- how much consumer surplus is he enjoying?
answer
$27
question
While making a purchase decision, a buyer should buy the good that yields the highest ________.
answer
marginal benefit per dollar spent
question
Consumer surplus is ________.
answer
the difference between the willingness to pay for a good and the price paid for the good
question
The cross-price elasticity of demand for a good is the ________.
answer
percentage change in the quantity demanded of the good due to a percentage change in the prices of related goods
question
The following table shows the total benefit that Jenny derives from consuming different quantities of chocolate.
Quantity of Chocolate Consumed Total Benefit ($)
0 0
1 10
2 18
3 24
4 29
5 30
Refer to the table above. What is the marginal benefit that Jenny derives from the second unit of chocolate?
Quantity of Chocolate Consumed Total Benefit ($)
0 0
1 10
2 18
3 24
4 29
5 30
Refer to the table above. What is the marginal benefit that Jenny derives from the second unit of chocolate?
answer
$8
question
Which of the following statements best describes an inferior good?
answer
An inferior good is a good whose demand decreases with an increase in consumers' income.
question
In case of a downward-sloping, linear demand curve, the price elasticity of demand for a good ________.
answer
is different at different points on the curve
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