Micro-Economics - Assignment Essays

question

In the first chapter of The Wealth of Nations, Smith introduces the idea of the __________, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers.

answer

Division of Labor

question

Which of the following is most likely a topic of discussion in macroeconomics?

answer

a decrease in the unemployment rate

question

Macroeconomic topics do not usually include:

answer

the profit-maximizing decisions of an individual manufacturer.

question

In a command economy, the __________ either makes most economic decisions itself or at least strongly influences how the decisions are made.

answer

government

question

In a _______________________, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers.

answer

Market-oriented economy

question

Sunk Cost:
Arnold Kim began blogging about Apple products during his fourth year of medical school. Kim's Website, MacRumors.com ,became so successful that he decided to give up his medical career and work full time on his Website, despite the nearly$200,000 he had invested in his education. In making his decision, the $200,000 he spent on his education

answer

should be ignored since it represents a sunk cost.

question

Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be.

answer

normative statement

question

Refer to Figure 2 above. An economy is operating at full employment, and then workers in the bread industry are laid off. This change is portrayed in the movement from:

answer

C to F

question

For each bottle of wine that Italy produces, it gives up the opportunity to make 10 pounds of cheese. France gives up the opportunity to produce 1 bottle of wine for every 25 pounds of cheese it produces. Which of the following is true about the comparative advantage between the two countries?

answer

Italy has the comparative advantage in Wine

question

Refer to Figure 1 above. At Point A in the production possibilities graph shown above, the economy:

answer

is not using its resources efficiently.

question

Refer to Figure 1. When the economy moves from Point A to Point B in the diagram above:

answer

All are Correct

question

In figure 1 above, at which point the economy achieves productive efficiency? Select the best answer.

answer

Both points B and C

question

As a person receives more of a good, the _______________ from each additional unit of the good declines.

answer

Marginal Utility

question

Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is:

answer

the benefit to his grades from studying for an hour

question

"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour. "The opportunity cost of attending class this evening is:

answer

$44

question

The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good.

answer

Budget Constraint

question

The choice on a production possibilities set that is socially preferred, or the choice on an individual's budget constraint that is personally preferred, will display

answer

Allocative Efficiency

question

Paul goes to Dick's Sporting Goods to buy a new tennis racquet. He is willing to pay $200 for a new racquet, but buys one on sale for $125. Paul's consumer surplus from the purchase is

answer

$75

question

Suppose that instead of a rent ceiling, the government imposed a price floor of $2,000 per month for apartments. What is the quantity of apartments demanded at the new price?

answer

200

question

Figure 4 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. What is the value of the deadweight loss after the imposition of the ceiling?

answer

$100,000

question

Figure 4 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. What is the value of the portion of producer surplus transferred to consumers as a result of the rent ceiling?

answer

$100,000

question

Figure 4 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. What is the value of producer surplus after the imposition of the ceiling?

answer

$50,000

question

Figure 4 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. What is the value of consumer surplus after the imposition of the ceiling?

answer

$250,000

question

Figure 4 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. With rent control, the quantity supplied is 200 apartments. Suppose apartment owners ignore the law and rent this quantity for the highest rent they can get. What is the highest rent they can get per month?

answer

$2,000

question

In October 2005, the U.S. Fish and Wildlife Service banned the importation of beluga caviar, the most prized of caviars, from the Caspian Sea. What happened in the market for caviar in the United States?

answer

The supply curve shifted to the left.

question

Refer to Figure 3. An increase in the number of firms in the market would be represented by a movement from

answer

S1 to S2

question

Refer to Figure 3. An increase in price of inputs would be represented by a movement from

answer

S2 to S1

question

Suppose that when the price of strawberries decreases, Simone not only buys more strawberries but also increases her purchase of whipped cream. To Simone

answer

strawberries and whipped cream are complements.

question

If a decrease in income leads to an increase in the demand for sardines, then sardines are

answer

an inferior good

question

If a demand curve shifts to the right, then

answer

demand has increased

question

The demand by all the consumers of a given good or service is the ________ for the good or service.

answer

market demand

question

What is the difference between an "increase in demand" and an "increase in quantity demanded"?

answer

An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve

question

The term "ceteris paribus" means that:

answer

all variables except those specified are constant.

question

The price elasticity of demand measures the:

answer

responsiveness of quantity demanded to a change in price.

question

A 25 percent decrease in the price of breakfast cereal leads to a 20 percent increase in the quantity of cereal demanded. As a result:

answer

total revenue will decrease.

question

Demand is said to be __________ when the quantity demanded changes at the same proportion as the price.

answer

unit elastic

question

Billy Bob's Barber Shop knows that a 5 percent increase in the price of their haircuts results in a 15 percent decrease in the number of haircuts purchased. What is the elasticity of demand facing Billy Bob's Barber Shop?

answer

3.0

question

If the demand curve for a life-saving medicine is perfectly inelastic, then a reduction in supply will cause the equilibrium price to:

answer

rise and the equilibrium quantity to stay the same.

question

Suppose that Bobo purchases 1 pizza per month when the price is $19 and 3 pizzas per month when the price is $15. What is the price elasticity of Bobo's demand curve?

answer

4.25

question

A price cut will increase the total revenue a firm receives if the demand for its product is:

answer

elastic

question

The price elasticity of demand for tickets to local baseball games is estimated to be equal to 0.89. In order to boost ticket revenues, an economist would advise:

answer

increasing the price of game tickets because demand is inelastic.

question

If cola and iced tea are good substitutes for consumers, then it is likely that:

answer

their cross price elasticities are greater than zero.

question

Supply is said to be ____________ when the quantity supplied is very responsive to changes in price.

answer

elastic

question

Utility is

answer

subjective and difficult to measure.

question

Suppose Joe is maximizing total utility within his budget constraint. If the price of the last pair of jeans purchased is $25 and it yields 100 units of extra satisfaction and the price of the last shirt purchased is $20, then, using the rule of equal marginal utility per dollar spent, the extra satisfaction received from the last shirt must be

answer

80 units of utility.

question

As a utility maximizer, if Valerie purchases ankle socks at $5 and gets 25 units of marginal utility from the last unit, and bandanas at $3 and gets 12 units of marginal utility from the last bandana purchased, she

answer

should consume more ankle socks and fewer bandanas.

question

If Ewan is consuming his utility-maximizing bundle and the price of one good falls, what happens to the marginal utility per dollar spent on this good (MU/P), and what should Ewan do?

answer

MU/P has increased and Ewan should buy more of this good.

question

The demand curve for canned peas is downward sloping. If the price of canned peas, an inferior good, rises, then

answer

the income effect which causes you to increase your canned peas purchases is smaller than the substitution effect which causes you to reduce your purchases, resulting in a net decrease in quantity demanded.

question

Marv Pilson has $50 worth of groceries in a shopping cart at his local Shop 'n Save. Assume that the marginal utility per dollar of the liter bottles of soft drink in Marv's cart equals 50. The marginal utility per dollar of the boxes of cereal in Marv's cart equals 20. Marv has only $50 to spend, but has not yet paid for his groceries. How can Marv increase his total utility without spending more than $50?

answer

Marv should buy fewer boxes of cereal and more bottles of soft drink.

question

The substitution effect of a decrease in the price of movie tickets results in

answer

an increase in the quantity of movie tickets demanded.

question

Marginal Utility is

answer

extra satisfaction received from consuming one more unit of a product.

question

If a consumer receives 22 units of marginal utility for consuming the first can of soda, 20 units from consuming the second, and15 from the third, the total utility of consuming the three units is

answer

57 units

question

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.

question

Which of the following is likely to occur as the result of the law of diminishing marginal utility?

answer

Wesley enjoyed his second bottle of iced tea less than his first bottle, other things constant.

question

Consumers have to make tradeoffs in deciding what to consume because

answer

they are limited by a budget constraint.

question

Suppose your marginal utility from consuming the 3rd slice of cake is zero, then your total utility from consuming cake is

answer

maximized

question

Keegan has $30 to spend on Pita Wraps and Bubble Tea. The price of a Pita Wrap is $6 and the price of a glass of Bubble Tea is $3. The table above shows his total utility from different quantities of the two items. What is Keegan's optimal consumption bundle?

answer

3 pita wraps and 4 bubble teas

question

answer

6 glasses

question

Which of the following is true?

answer

Economic profit = total revenue - explicit costs - implicit costs

question

Refer to the figure above. The marginal product of the 3rd worker is

answer

question

Economists divide factors of production into several categories, including (select all that apply):

answer

natural resources, labor, technology, entrepreneurship

question

____________________________ occur when the marginal gain in output diminishes as each additional unit of input is added.

answer

Diminishing marginal returns

question

The term _____________ is used to describe the additional cost of producing one more unit.

answer

marginal cost

question

If a producer is not able to expand its plant capacity immediately, it is

answer

operating in the short run

question

Which of the following is the best example of a short-run adjustment?

answer

Your local Walmart hires two more associates.

question

Economic costs of production differ from accounting costs in that

answer

economic costs add the opportunity costs of a firm using its own resources while accounting costs do not.

question

Implicit costs can be defined as

answer

the opportunity cost of using the firm's own resources.

question

Refer to the figure above. Identify the curves in the diagram

answer

E = marginal cost curve; F = average total cost curve; G = average variable cost curve; H = average fixed cost curve.

question

Which of the following is not a characteristic of a perfectly competitive market structure?

answer

There are restrictions on exit of firms.

question

Both individual buyers and sellers in perfect competition

answer

have to take the market price as a given.

question

Jason, a high-school student, mows lawns for families in his neighborhood. The going rate is $12 for each lawn-mowing service. Jason would like to charge $20 because he believes he has more experience mowing lawns than the many other teenagers who also offer the same service. If the market for lawn mowing services is perfectly competitive, what would happen if Jason raised his price?

answer

If Jason raises his price, he would lose all his customers.

question

If the price of a product in a perfectly competitive market is $25, the average revenue of selling five units is:

answer

$25

question

Refer to the figure above. If the firm is producing 700 units,

answer

it should cut back its output to maximize profit.

question

Refer to the figure above. If the firm is producing 700 units, what is the amount of its profit or loss?

answer

There is insufficient information to answer the question.

question

Refer to the figure above. Suppose the prevailing price is P1 and the firm is currently producing its loss-minimizing quantity. Identify the area that represents the loss.

answer

P3cbP1

question

The figure above shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market. Refer to the figure above. If the market price is $30, the firm's profit-maximizing output level is

answer

180

question

The figure above shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market. Refer to the figure above. If the market price is $30 and if the firm is producing the profit-maximizing level of output, what is the amount of its total variable cost?

answer

$3,960

question

The figure above illustrates the cost curves of a perfectly competitive firm. Refer to the figure above. If the market price is P1,

answer

the firm will experience a loss since price is less than ATC

1 of 78

question

answer

Division of Labor

question

Which of the following is most likely a topic of discussion in macroeconomics?

answer

a decrease in the unemployment rate

question

Macroeconomic topics do not usually include:

answer

the profit-maximizing decisions of an individual manufacturer.

question

In a command economy, the __________ either makes most economic decisions itself or at least strongly influences how the decisions are made.

answer

government

question

In a _______________________, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers.

answer

Market-oriented economy

question

answer

should be ignored since it represents a sunk cost.

question

Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be.

answer

normative statement

question

Refer to Figure 2 above. An economy is operating at full employment, and then workers in the bread industry are laid off. This change is portrayed in the movement from:

answer

C to F

question

answer

Italy has the comparative advantage in Wine

question

Refer to Figure 1 above. At Point A in the production possibilities graph shown above, the economy:

answer

is not using its resources efficiently.

question

Refer to Figure 1. When the economy moves from Point A to Point B in the diagram above:

answer

All are Correct

question

In figure 1 above, at which point the economy achieves productive efficiency? Select the best answer.

answer

Both points B and C

question

As a person receives more of a good, the _______________ from each additional unit of the good declines.

answer

Marginal Utility

question

Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is:

answer

the benefit to his grades from studying for an hour

question

"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour. "The opportunity cost of attending class this evening is:

answer

$44

question

The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good.

answer

Budget Constraint

question

The choice on a production possibilities set that is socially preferred, or the choice on an individual's budget constraint that is personally preferred, will display

answer

Allocative Efficiency

question

Paul goes to Dick's Sporting Goods to buy a new tennis racquet. He is willing to pay $200 for a new racquet, but buys one on sale for $125. Paul's consumer surplus from the purchase is

answer

$75

question

Suppose that instead of a rent ceiling, the government imposed a price floor of $2,000 per month for apartments. What is the quantity of apartments demanded at the new price?

answer

200

question

answer

$100,000

question

answer

$100,000

question

answer

$50,000

question

answer

$250,000

question

answer

$2,000

question

answer

The supply curve shifted to the left.

question

Refer to Figure 3. An increase in the number of firms in the market would be represented by a movement from

answer

S1 to S2

question

Refer to Figure 3. An increase in price of inputs would be represented by a movement from

answer

S2 to S1

question

Suppose that when the price of strawberries decreases, Simone not only buys more strawberries but also increases her purchase of whipped cream. To Simone

answer

strawberries and whipped cream are complements.

question

If a decrease in income leads to an increase in the demand for sardines, then sardines are

answer

an inferior good

question

If a demand curve shifts to the right, then

answer

demand has increased

question

The demand by all the consumers of a given good or service is the ________ for the good or service.

answer

market demand

question

What is the difference between an "increase in demand" and an "increase in quantity demanded"?

answer

An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve

question

The term "ceteris paribus" means that:

answer

all variables except those specified are constant.

question

The price elasticity of demand measures the:

answer

responsiveness of quantity demanded to a change in price.

question

A 25 percent decrease in the price of breakfast cereal leads to a 20 percent increase in the quantity of cereal demanded. As a result:

answer

total revenue will decrease.

question

Demand is said to be __________ when the quantity demanded changes at the same proportion as the price.

answer

unit elastic

question

answer

3.0

question

If the demand curve for a life-saving medicine is perfectly inelastic, then a reduction in supply will cause the equilibrium price to:

answer

rise and the equilibrium quantity to stay the same.

question

Suppose that Bobo purchases 1 pizza per month when the price is $19 and 3 pizzas per month when the price is $15. What is the price elasticity of Bobo's demand curve?

answer

4.25

question

A price cut will increase the total revenue a firm receives if the demand for its product is:

answer

elastic

question

The price elasticity of demand for tickets to local baseball games is estimated to be equal to 0.89. In order to boost ticket revenues, an economist would advise:

answer

increasing the price of game tickets because demand is inelastic.

question

If cola and iced tea are good substitutes for consumers, then it is likely that:

answer

their cross price elasticities are greater than zero.

question

Supply is said to be ____________ when the quantity supplied is very responsive to changes in price.

answer

elastic

question

Utility is

answer

subjective and difficult to measure.

question

answer

80 units of utility.

question

answer

should consume more ankle socks and fewer bandanas.

question

If Ewan is consuming his utility-maximizing bundle and the price of one good falls, what happens to the marginal utility per dollar spent on this good (MU/P), and what should Ewan do?

answer

MU/P has increased and Ewan should buy more of this good.

question

The demand curve for canned peas is downward sloping. If the price of canned peas, an inferior good, rises, then

answer

question

answer

Marv should buy fewer boxes of cereal and more bottles of soft drink.

question

The substitution effect of a decrease in the price of movie tickets results in

answer

an increase in the quantity of movie tickets demanded.

question

Marginal Utility is

answer

extra satisfaction received from consuming one more unit of a product.

question

If a consumer receives 22 units of marginal utility for consuming the first can of soda, 20 units from consuming the second, and15 from the third, the total utility of consuming the three units is

answer

57 units

question

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.

question

Which of the following is likely to occur as the result of the law of diminishing marginal utility?

answer

Wesley enjoyed his second bottle of iced tea less than his first bottle, other things constant.

question

Consumers have to make tradeoffs in deciding what to consume because

answer

they are limited by a budget constraint.

question

Suppose your marginal utility from consuming the 3rd slice of cake is zero, then your total utility from consuming cake is

answer

maximized

question

answer

3 pita wraps and 4 bubble teas

question

answer

6 glasses

question

Which of the following is true?

answer

Economic profit = total revenue - explicit costs - implicit costs

question

Refer to the figure above. The marginal product of the 3rd worker is

answer

question

Economists divide factors of production into several categories, including (select all that apply):

answer

natural resources, labor, technology, entrepreneurship

question

____________________________ occur when the marginal gain in output diminishes as each additional unit of input is added.

answer

Diminishing marginal returns

question

The term _____________ is used to describe the additional cost of producing one more unit.

answer

marginal cost

question

If a producer is not able to expand its plant capacity immediately, it is

answer

operating in the short run

question

Which of the following is the best example of a short-run adjustment?

answer

Your local Walmart hires two more associates.

question

Economic costs of production differ from accounting costs in that

answer

economic costs add the opportunity costs of a firm using its own resources while accounting costs do not.

question

Implicit costs can be defined as

answer

the opportunity cost of using the firm's own resources.

question

Refer to the figure above. Identify the curves in the diagram

answer

E = marginal cost curve; F = average total cost curve; G = average variable cost curve; H = average fixed cost curve.

question

Which of the following is not a characteristic of a perfectly competitive market structure?

answer

There are restrictions on exit of firms.

question

Both individual buyers and sellers in perfect competition

answer

have to take the market price as a given.

question

answer

If Jason raises his price, he would lose all his customers.

question

If the price of a product in a perfectly competitive market is $25, the average revenue of selling five units is:

answer

$25

question

Refer to the figure above. If the firm is producing 700 units,

answer

it should cut back its output to maximize profit.

question

Refer to the figure above. If the firm is producing 700 units, what is the amount of its profit or loss?

answer

There is insufficient information to answer the question.

question

Refer to the figure above. Suppose the prevailing price is P1 and the firm is currently producing its loss-minimizing quantity. Identify the area that represents the loss.

answer

P3cbP1

question

answer

180

question

answer

$3,960

question

The figure above illustrates the cost curves of a perfectly competitive firm. Refer to the figure above. If the market price is P1,

answer

the firm will experience a loss since price is less than ATC

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