Economics Midterm TTT - Assignment Essays

question

The production possibilities curve shows:

answer

the maximum amount of one good that can be produced for every possible production level of the other good.

question

Points that lie outside the production possibilities curve are ______, and points that lie inside the production possibilities curve are ______.

answer

unattainable; attainable

question

Which of the following is NOT true of a demand curve?

answer

It reflects sellers' reservations prices.

question

The economic surplus of an action is:

answer

the difference between the benefit and the cost of taking an action.

question

You are trying to decide whether to purchase the latest Harry Potter book online or borrow it from the library. There is no charge for borrowing a book from the library, but going to the library takes more time than ordering a book online. Regardless of how you get the book, its benefit to you is the same. If the cost of buying the book online is $13, then you should:

answer

borrow the book from the library if the cost of doing so (in terms of the extra time it takes) is less than $13

question

Excess demand occurs:

answer

when price is below the equilibrium price.

question

Moe has a big exam tomorrow. He considered studying this evening, but decided to hang out with Curly instead. If neither activity involves any explicit costs, and Moe always chooses rationally, it must be true that:

answer

Moe gets more benefit from spending time with Curly than from studying.

question

The marginal benefit of an activity is the:

answer

extra benefit associated with an extra unit of the activity.

question

Amy is thinking about going to the movies tonight. A movie ticket costs $15, and she'll have to cancel a $20 dog-sitting job that she would have been willing to do for free. The opportunity to Amy cost of going to the movies is:

answer

$35.

question

The emergence of English as the de facto world language _____ a comparative advantage in the production of books, movies and popular music

answer

has given English-speaking countries

question

Suppose the total benefit of watching 1 baseball game is 100, the total benefit of watching 2 games is 120, and the total benefit of watching 3 games is 125. In this case, the marginal benefit of watching the 3 rd game is:

answer

question

Matt has decided to purchase his textbooks for the semester. His options are to purchase the books online with next day delivery at a cost of $175, or to drive to campus tomorrow to buy the books at the university bookstore at a cost of $170. Last week he drove to campus to buy a concert ticket because they offered 25 percent off the regular price of $16. The benefit to Matt of buying his books at the university bookstore instead of online is:

answer

question

If price is above the equilibrium price, then there will be:

answer

excess supply

question

If individuals are rational, they should choose actions that yield the:

answer

largest economic surplus.

question

If one fails to account for implicit costs in decision making, then applying the cost benefit rule will be flawed because:

answer

he costs will be understated.

question

The opportunity cost of an activity includes the value of:

answer

the next-best alternative that must be foregone.

question

Jen spends her afternoon at the beach, paying $1 to rent a beach umbrella and $11 for food and drinks rather than spending an equal amount of money to go to a movie. Her opportunity cost of going to the beach is:

answer

the value she places on seeing the movie

question

If Les can produce two pairs of pants per hour while Eva can produce one pair per hour, then it must be true that:

answer

Les has an absolute advantage in producing pants

question

Dean should play golf instead of preparing for tomorrow's exam in economics if:

answer

the economic surplus from playing golf is greater than the economic surplus from studying.

question

In general, individuals and nations should specialize in producing goods ______ other individuals or nations.

answer

for which they have a lower opportunity cost compared to

question

Suppose the most you would be willing to pay for a plane ticket home is $250. If you buy one for $175, then your economic surplus is:

answer

$75.

question

The buyer's reservation price for a particular good or service is the:

answer

largest price the buyer would be willing to pay for it.

question

The demand curve illustrates the fact that consumers tend to purchase:

answer

more of a good as its price falls.

question

The quantity that sellers wish to sell tends to ______ as price increases, and so the supply curve is ______ sloping

answer

increase; upward

question

The slope of a production possibilities curve is ______ because ______.

answer

negative; producing more of one good requires producing less of the other

question

Suppose Cathy and Lewis work in a bakery making pies and cakes. Suppose it takes Cathy 1.5 hours to make a pie and 1 hour to make a cake, and suppose it takes Lewis 2 hours to make a pie and 1.5 hours to make a cake. What is the opportunity cost to Cathy of making a cake?

answer

2/3 of a pie.

question

Suppose it takes Dan 5 minutes to make a sandwich and 15 minutes to make a smoothie, and it takes Tracy 6 minutes to make a sandwich and 12 minutes to make a smoothie. Which of the following statements is correct?

answer

Dan should specialize in sandwiches, and Tracy should specialize in smoothies.

question

Equilibrium price and quantity are determined by

answer

both supply and demand

question

If a country is producing at point where an increase in the production of one good requires a reduction in the production of another good, then it must be producing at an:

answer

efficient point.

question

The extra cost that results from carrying out one additional unit of an activity is the _____ of the activity.

answer

marginal cost

question

Larry was accepted at three different graduate schools, and must choose one. Elite U costs $50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at $60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000 scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000 per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at $15,000 per year. Larry's opportunity cost of attending State College is:

answer

$35,000

question

As coffee becomes more expensive, Joe starts drinking tea instead of coffee. This is called:

answer

the substitution effect of a price change

question

If there is an excess supply of sport utility vehicles, then:

answer

quantity supplied is greater than quantity demanded.

question

The United States generally has a comparative advantage in the development of technology because it has:

answer

a disproportionate share of the world's best research universities.

question

If the price of cheese falls by 1 percent and the quantity demanded rises by 3 percent, then the price elasticity of demand for cheese is equal to:

answer

question

Casey earns $150 a week and consumes only fish and shrimp. The price of fish is $3 a pound and the price of shrimp is $5 a pound. Suppose the price of fish decreased to $1.50 a pound, and the price of shrimp remains $5 a pound. At Casey's original income of $150 per week, Casey can now buy a maximum of ______ pounds fish or a maximum of ______ pounds shrimp.

answer

100; 30

question

If the absolute value of the price elasticity of demand for cell phone service is 3, then if the price of cell phone service increases by 1 percent, quantity demanded would:

answer

decrease by 3 percent.

question

Consumer surplus measures:

answer

the difference between the most a buyer would be willing to pay for a product and the price actually paid.

question

If the demand for a good is highly elastic, that good is likely to have:

answer

many close substitutes.

question

It is impossible for total utility to be ______ when marginal utility is ______.

answer

decreasing; positive

question

Joe is shopping for a new computer. A computer can be delivered to Joe's home for $1,200. Alternatively, Joe can pick up the same computer at the warehouse for $1,000. How should Joe buy the computer?

answer

Joe should drive to the warehouse if his cost of driving to the warehouse is less than $200.

question

If the price of textbooks increases by one percent and the quantity demanded falls by one half percent, then the price elasticity of demand is equal to:

answer

0.5.

question

The price elasticity of demand for a good measures the responsiveness of:

answer

quantity demanded to a 1 percent change in price of that good

question

A firm that produces a good with many substitutes will most likely find that:

answer

lowering its price will increase total revenue.

question

If the price elasticity of demand for pineapples is 0.75, then a 4 percent increase in the price of pineapples will lead to a:

answer

3 percent decrease in the quantity of pineapples demanded.

question

A perfectly elastic demand curve has a slope of ______ while a perfectly inelastic demand curve has a slope of ______.

answer

0; infinity

question

The reason a brand name item (e.g., Tyson chicken) has a larger price elasticity than a class of items (e.g., chicken) is that:

answer

there are fewer substitutes for chicken generally than for Tyson chicken.

question

According to economists, the satisfaction people get from their consumption activities is called:

answer

utility.

question

Alex wants to maximize his utility. At his current level of consumption, Alex's marginal utility from an additional cup of coffee is 15 utils, and his marginal utility from an additional can of soda is 11 utils. If the price of a cup of coffee is $3 and the price of a can of soda is $2, Alex should:

answer

reallocate his spending away from coffee and towards soda.

question

The goal of utility maximization is to allocate your ______ in order to maximize your ______.

answer

resources; satisfaction

question

The tendency for marginal utility to decline as consumption increases beyond some point is called:

answer

the law of diminishing marginal utility.

question

Joaquin's marginal utility from an additional slice of pumpkin pie is 4 utils and his marginal utility from an additional slice of pecan pie is 6 utils. If a slice of pumpkin pie costs $2.50, and a slice of pecan pie costs $3.00, then Joaquin:

answer

should reallocate his spending towards pecan pie and away from pumpkin pie.

question

The demand for a good is elastic if the price elasticity of demand is:

answer

greater than one.

question

The additional utility gained from consuming an additional unit of a good is called:

answer

marginal utility.

question

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. After the third pie, your total utility:

answer

decreased.

question

When the price of NBA tickets is $25 each, 30,000 tickets are sold. After the price rises to $30 each, 20,000 tickets are sold. At the original price, the demand for NBA ticket is:

answer

elastic

question

If Terry's total utility is maximized when he owns 10 pairs of shoes, then Terry's total utility from owning 7 pairs of shoes is ______ Terry's total utility from owning 8 pairs.

answer

less than

question

Moe's reservation price for his economics textbook is $100. The week before the semester begins, Moe finds a copy of his textbook online for $75. Moe's consumer surplus from buying the textbook online is:

answer

$75.

question

If the percentage change in quantity demanded is zero for any percentage change in the price of the good, demand is classified as:

answer

perfectly inelastic.

question

If marginal utility is positive, then as consumption increases:

answer

total utility will increase.

question

If consumers respond to a 10% price reduction by buying twice as much of a particular good, we would conclude that:

answer

the price elasticity of demand at the original price was greater than one.

question

According to the law of demand, when the price of shoes ______, people will consume ______ shoes.

answer

falls; more

question

If the absolute value of slope of the demand curve is 2.5, price is $6 per unit, and the quantity demanded is 8 units, then the price elasticity of demand is:

answer

0.3

question

The term marginal utility denotes the amount by which ______ changes when consumption changes by ______ unit(s).

answer

total utility; 1

question

A seller's supply curve shows the seller's:

answer

opportunity cost of producing an additional unit of output at each quantity

question

The primary objective of most private firms is to:

answer

maximize profit

question

A firm's profit equals:

answer

(P − ATC) × Q [(price minus average total cost) times the quantity sold].

question

Which of the following is NOT a characteristic of a perfectly competitive market?

answer

Each firm in the market sells a somewhat different variant of the good.

question

A price-taker faces a demand curve that is:

answer

horizontal at the market price.

question

A profit-maximizing perfectly competitive firm must decide:

answer

only on how much to produce, taking price as fixed.

question

Jenny sells lemonade in front of her house in the summer. Several other kids in Jenny's neighborhood also run lemonade stands in the summer. Suppose that the first week of summer, Jenny charged 25 cents for an 8-ounce cup of lemonade, her next-door neighbor Sam charged 50 cents for an 8-ounce cup of lemonade, and Alex across the street charged 15 cents for an 8-ounce cup of lemonade. Assuming the market for lemonade is perfectly competitive, what is most likely to happen?

answer

Eventually prices will equalize across all three lemonade stands.

question

A fixed factor of production:

answer

is fixed only in the short run

question

Which of the following is the most likely to be a fixed factor of production at a farm?

answer

The land on which the farm is located

question

To produce 150 units of output, a firm must use 3 employees per day. To produce 300 units of output, the firm must use 8 employees per day. Apparently, the firm is:

answer

experiencing diminishing returns.

question

If a firm spends $400 to produce 20 units of output and spends $880 to produce 40 units, then between 20 and 40 units of output, the marginal cost of production is:

answer

$24

question

In general, when the price of a fixed factor of production increases:

answer

marginal cost is unchanged.

question

Explicit costs:

answer

measure the payments made to the firm's factors of production.

question

An example of an implicit cost is:

answer

the value of a spare bedroom turned into a home office.

question

If a firm is earning zero economic profit, then:

answer

the firm's accounting profit is equal to the firm's implicit costs

question

A firm earns a normal profit when its:

answer

economic profit is zero.

question

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. For Christine to earn a normal profit as a consultant, her accounting profit would have to be ______.

answer

$40,000

question

If a firm is earning zero economic profit, then its accounting profit will:

answer

be positive.

question

Suppose Juliana owns a small business making handbags. Each month she makes 18 handbags, which she sells for $100 each. The materials used to make each handbag cost $50. In addition, Juliana uses a spare room in her house to make the handbags and store her supplies. If she were not using the spare room for her business, she would use it as a guest room, an option that Juliana would value at $250 per month. If Juliana weren't making handbags, she would work at Trader Joe's earning $800 per month. What is Juliana's economic profit each month?

answer

−$150

question

Adam Smith's theory of the invisible hand posits that the most efficient allocation of resources is often achieved by:

answer

the actions of independent, self-interested buyers and sellers.

question

Which of the following is an example of the rationing function of price?

answer

Bill Gates purchasing the Mona Lisa for $5 billion

question

Suppose farmers in a given market can either grow soy beans or corn on their land. In addition, suppose an increase in the demand for corn causes the price of corn to increase. In the long run, this increase in the demand for corn is likely to ______ the price of soy beans.

answer

lead to an increase in

question

If all firms in a perfectly competitive industry are earning a normal profit, then:

answer

there is no incentive for firms to enter or exit the industry.

question

The allocative function of price cannot operate unless there is:

answer

both free entry and free exit.

1 of 88

question

The production possibilities curve shows:

answer

the maximum amount of one good that can be produced for every possible production level of the other good.

question

Points that lie outside the production possibilities curve are ______, and points that lie inside the production possibilities curve are ______.

answer

unattainable; attainable

question

Which of the following is NOT true of a demand curve?

answer

It reflects sellers' reservations prices.

question

The economic surplus of an action is:

answer

the difference between the benefit and the cost of taking an action.

question

answer

borrow the book from the library if the cost of doing so (in terms of the extra time it takes) is less than $13

question

Excess demand occurs:

answer

when price is below the equilibrium price.

question

answer

Moe gets more benefit from spending time with Curly than from studying.

question

The marginal benefit of an activity is the:

answer

extra benefit associated with an extra unit of the activity.

question

answer

$35.

question

The emergence of English as the de facto world language _____ a comparative advantage in the production of books, movies and popular music

answer

has given English-speaking countries

question

answer

question

answer

question

If price is above the equilibrium price, then there will be:

answer

excess supply

question

If individuals are rational, they should choose actions that yield the:

answer

largest economic surplus.

question

If one fails to account for implicit costs in decision making, then applying the cost benefit rule will be flawed because:

answer

he costs will be understated.

question

The opportunity cost of an activity includes the value of:

answer

the next-best alternative that must be foregone.

question

answer

the value she places on seeing the movie

question

If Les can produce two pairs of pants per hour while Eva can produce one pair per hour, then it must be true that:

answer

Les has an absolute advantage in producing pants

question

Dean should play golf instead of preparing for tomorrow's exam in economics if:

answer

the economic surplus from playing golf is greater than the economic surplus from studying.

question

In general, individuals and nations should specialize in producing goods ______ other individuals or nations.

answer

for which they have a lower opportunity cost compared to

question

Suppose the most you would be willing to pay for a plane ticket home is $250. If you buy one for $175, then your economic surplus is:

answer

$75.

question

The buyer's reservation price for a particular good or service is the:

answer

largest price the buyer would be willing to pay for it.

question

The demand curve illustrates the fact that consumers tend to purchase:

answer

more of a good as its price falls.

question

The quantity that sellers wish to sell tends to ______ as price increases, and so the supply curve is ______ sloping

answer

increase; upward

question

The slope of a production possibilities curve is ______ because ______.

answer

negative; producing more of one good requires producing less of the other

question

answer

2/3 of a pie.

question

answer

Dan should specialize in sandwiches, and Tracy should specialize in smoothies.

question

Equilibrium price and quantity are determined by

answer

both supply and demand

question

If a country is producing at point where an increase in the production of one good requires a reduction in the production of another good, then it must be producing at an:

answer

efficient point.

question

The extra cost that results from carrying out one additional unit of an activity is the _____ of the activity.

answer

marginal cost

question

answer

$35,000

question

As coffee becomes more expensive, Joe starts drinking tea instead of coffee. This is called:

answer

the substitution effect of a price change

question

If there is an excess supply of sport utility vehicles, then:

answer

quantity supplied is greater than quantity demanded.

question

The United States generally has a comparative advantage in the development of technology because it has:

answer

a disproportionate share of the world's best research universities.

question

If the price of cheese falls by 1 percent and the quantity demanded rises by 3 percent, then the price elasticity of demand for cheese is equal to:

answer

question

answer

100; 30

question

If the absolute value of the price elasticity of demand for cell phone service is 3, then if the price of cell phone service increases by 1 percent, quantity demanded would:

answer

decrease by 3 percent.

question

Consumer surplus measures:

answer

the difference between the most a buyer would be willing to pay for a product and the price actually paid.

question

If the demand for a good is highly elastic, that good is likely to have:

answer

many close substitutes.

question

It is impossible for total utility to be ______ when marginal utility is ______.

answer

decreasing; positive

question

answer

Joe should drive to the warehouse if his cost of driving to the warehouse is less than $200.

question

If the price of textbooks increases by one percent and the quantity demanded falls by one half percent, then the price elasticity of demand is equal to:

answer

0.5.

question

The price elasticity of demand for a good measures the responsiveness of:

answer

quantity demanded to a 1 percent change in price of that good

question

A firm that produces a good with many substitutes will most likely find that:

answer

lowering its price will increase total revenue.

question

If the price elasticity of demand for pineapples is 0.75, then a 4 percent increase in the price of pineapples will lead to a:

answer

3 percent decrease in the quantity of pineapples demanded.

question

A perfectly elastic demand curve has a slope of ______ while a perfectly inelastic demand curve has a slope of ______.

answer

0; infinity

question

The reason a brand name item (e.g., Tyson chicken) has a larger price elasticity than a class of items (e.g., chicken) is that:

answer

there are fewer substitutes for chicken generally than for Tyson chicken.

question

According to economists, the satisfaction people get from their consumption activities is called:

answer

utility.

question

answer

reallocate his spending away from coffee and towards soda.

question

The goal of utility maximization is to allocate your ______ in order to maximize your ______.

answer

resources; satisfaction

question

The tendency for marginal utility to decline as consumption increases beyond some point is called:

answer

the law of diminishing marginal utility.

question

answer

should reallocate his spending towards pecan pie and away from pumpkin pie.

question

The demand for a good is elastic if the price elasticity of demand is:

answer

greater than one.

question

The additional utility gained from consuming an additional unit of a good is called:

answer

marginal utility.

question

answer

decreased.

question

When the price of NBA tickets is $25 each, 30,000 tickets are sold. After the price rises to $30 each, 20,000 tickets are sold. At the original price, the demand for NBA ticket is:

answer

elastic

question

If Terry's total utility is maximized when he owns 10 pairs of shoes, then Terry's total utility from owning 7 pairs of shoes is ______ Terry's total utility from owning 8 pairs.

answer

less than

question

answer

$75.

question

If the percentage change in quantity demanded is zero for any percentage change in the price of the good, demand is classified as:

answer

perfectly inelastic.

question

If marginal utility is positive, then as consumption increases:

answer

total utility will increase.

question

If consumers respond to a 10% price reduction by buying twice as much of a particular good, we would conclude that:

answer

the price elasticity of demand at the original price was greater than one.

question

According to the law of demand, when the price of shoes ______, people will consume ______ shoes.

answer

falls; more

question

If the absolute value of slope of the demand curve is 2.5, price is $6 per unit, and the quantity demanded is 8 units, then the price elasticity of demand is:

answer

0.3

question

The term marginal utility denotes the amount by which ______ changes when consumption changes by ______ unit(s).

answer

total utility; 1

question

A seller's supply curve shows the seller's:

answer

opportunity cost of producing an additional unit of output at each quantity

question

The primary objective of most private firms is to:

answer

maximize profit

question

A firm's profit equals:

answer

(P − ATC) × Q [(price minus average total cost) times the quantity sold].

question

Which of the following is NOT a characteristic of a perfectly competitive market?

answer

Each firm in the market sells a somewhat different variant of the good.

question

A price-taker faces a demand curve that is:

answer

horizontal at the market price.

question

A profit-maximizing perfectly competitive firm must decide:

answer

only on how much to produce, taking price as fixed.

question

answer

Eventually prices will equalize across all three lemonade stands.

question

A fixed factor of production:

answer

is fixed only in the short run

question

Which of the following is the most likely to be a fixed factor of production at a farm?

answer

The land on which the farm is located

question

To produce 150 units of output, a firm must use 3 employees per day. To produce 300 units of output, the firm must use 8 employees per day. Apparently, the firm is:

answer

experiencing diminishing returns.

question

If a firm spends $400 to produce 20 units of output and spends $880 to produce 40 units, then between 20 and 40 units of output, the marginal cost of production is:

answer

$24

question

In general, when the price of a fixed factor of production increases:

answer

marginal cost is unchanged.

question

Explicit costs:

answer

measure the payments made to the firm's factors of production.

question

An example of an implicit cost is:

answer

the value of a spare bedroom turned into a home office.

question

If a firm is earning zero economic profit, then:

answer

the firm's accounting profit is equal to the firm's implicit costs

question

A firm earns a normal profit when its:

answer

economic profit is zero.

question

answer

$40,000

question

If a firm is earning zero economic profit, then its accounting profit will:

answer

be positive.

question

answer

−$150

question

Adam Smith's theory of the invisible hand posits that the most efficient allocation of resources is often achieved by:

answer

the actions of independent, self-interested buyers and sellers.

question

Which of the following is an example of the rationing function of price?

answer

Bill Gates purchasing the Mona Lisa for $5 billion

question

answer

lead to an increase in

question

If all firms in a perfectly competitive industry are earning a normal profit, then:

answer

there is no incentive for firms to enter or exit the industry.

question

The allocative function of price cannot operate unless there is:

answer

both free entry and free exit.

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