question
When a competitive equilibrium is achieved in a market...
answer
the total met benefit to society is maximized
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Arthur buys a new cell phone for $150. He receives consumer surplus of $150 from the purchase. What value does Arthur place on his cell phone?
answer
$300
question
Consumers are willing to purchase a product up to the point where...
answer
the marginal benefit of consuming a product is equal to its price
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Suppliers will be willing to supply a product only if...
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the price received is at least equal to the additional cost of producing the product
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The difference between the __________ and the ____________ from the sale of a product is called producer surplus.
answer
lowest price a firm would have been willing to accept; price it actually receives
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In a competitive market equilibrium...
answer
the marginal benefit equal the marginal cost of the last unit sold
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________ refers to the reduction in economic surplus resulting from not being in competitive equilibrium.
answer
deadweight loss
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If, in a competitive market, marginal benefit is less than marginal cost...
answer
the output is greater than the equilibrium quantity
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Marginal utility is the...
answer
extra satisfaction received from consuming one more unit of a product
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If a consumer receives 22 units of marginal utility for consuming the first can of soda, 20 units from consuming the second, and 15 from the third, the total utility of consuming the three units is...
answer
57 utility units
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If consumer receives 20 units of utility from consuming two candy bars, and 25 units of utility from consuming three candy bars, the marginal utility of the third candy bar is...
answer
5 utility units
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If, as a person consumes more and more of a good, each additional unit adds less satisfaction than the previous unit consumed, we are seeing the workings of...
answer
the law of diminishing marginal utility
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If, when you consume another piece of candy, your marginal utility is zero, then...
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you have maximized your total utility from consuming candy
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If your total satisfaction increases when you consume another unit, your marginal utility must be...
answer
positive
question
We can derive the market demand curve for gold earrings...
answer
by adding horizontally the individual demand curves of each gold earring consumer
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The income effect due to a price decrease will result in an increase in the quantity demanded for...
answer
a normal good
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For a demand curve to be upward sloping, the good would have to be an inferior good, and...
answer
the income effect would have to be larger than the substitution effect
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A network externality occurs when...
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the usefulness of a good is affected by how many other people use the good
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For which of the following products is social influence likely to have the greatest impact?
answer
restaurants
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Economic efficiency in a competitive market is achieved when...
answer
the marginal benefit equals the marginal cost from the last unit sold
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The observation that people tend to value something more highly when they own it than when they don't is called the...
answer
endowment effect
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Which of the following is a common mistake consumers commit when they make decisions?
answer
they fail to ignore sunk costs
question
Price elasticity of demand measures...
answer
how responsive quantity demanded is to a change in price
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____________ is maximized in a competitive market when marginal benefit equals marginal cost
answer
economic surplus
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Suppose the value of the price elasticity of demand in -3. What does this mean?
answer
A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent
question
Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from $120 a ton to $180 a ton and quantity sold decreased from 800 tons to 240 tons. What is the absolute value of the price elasticity of demand?
answer
2.69
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Which of the following statements about price elasticity is false?
answer
The value of the price elasticity of demand is the reciprocal of the value of the demand curve's slope
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If the demand for a life-saving drug was perfectly inelastic and the price doubled, the quantity demanded would...
answer
remain constant
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Which of the following good would have the most inelastic demand?
answer
bread
question
Which of the following would result in a higher absolute value of the price elasticity of demand for a product?
answer
a wide variety of substitutes are available for the good
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Rank these items in terms of the elasticity of the demand for them at any given price, from most elastic to least elastic: hot beverages, coffee, and peet's coffee
answer
peet's coffee, coffee, hot beverages
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When demand is elastic, a fall in price causes total revenue to rise because...
answer
the increase in quantity sold is large enough to offset the lower price
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Suppose the demand for milk is relatively inelastic. What happens to sales revenue if the government imposes a binding price floor in the market for milk?
answer
sales revenue rises
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If a firm raised its price and discovered that its total revenues fell, then the demand for its product is...
answer
relatively elastic
question
Which of the following statements about the price elasticity of demand along a downward-sloping linear demand curve is true?
answer
is it elastic at high prices and inelastic at low prices
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