Microeconomics Exam 2 Review - Assignment Essays

question

A market economy answers the question "what" goods will be produced by focusing on

answer

dollar votes and consumer sovereignty.

question

A market economy answers the question "how" will goods be produced by focusing on

answer

least-cost method of production.

question

In a market economy, the goods produced go to those who(m):

answer

have sufficient income and are willing to pay the price asked for those goods.

question

The economic system of which of the following countries can be treated as an example of a command economy?

answer

Cuba

question

In a market economy, resources are allocated:

answer

by individual decision makers responding to market prices.

question

The use of large amounts of labor relative to capital in an economy indicates:

answer

labor-intensive production.

question

Countries with high labor costs tend to:

answer

use more capital rather than labor in the production process.

question

The circular flow of economic activity is a model of the:

answer

flow of goods, services, and payments between households and firms.

question

Which of the following is not a resource exchanged in the factor markets?

answer

Land, capital, labor, and entrepreneurship.

question

An economy is producing two goods, ice cream and cookies, and is currently operating efficiently. This economy can produce more cookies if:

answer

it produces less ice cream.

question

The production possibilities curve illustrates:

answer

that when resources are currently being used efficiently, it is possible to increase production of one good only by sacrificing some of another good.

question

A candidate for president made the following campaign promise: "My administration will increase national defense without requiring sacrifices elsewhere in the economy." The promise can be kept if:

answer

either b. or c. occur, but not as a result of a.
Save

question

An economist defines efficiency as:

answer

the maximization of output from available resources.

question

Inefficiency is best illustrated by which of the following?

answer

High levels of unemployment of labor and other resources that could be productively employed

question

If the economy of Taiwan is growing more rapidly than the economy of Japan, most likely:

answer

compared to Japan, Taiwan foregoes a greater proportion of consumption goods in favor of capital investment

question

When economic growth occurs it will:

answer

often result from improved technology.

question

The bowed production possibilities curve represents:

answer

increasing opportunity costs.

question

Improving the level of education of the labor force will:

answer

shift the production possibilities curve outward.

question

Which of the following is not an example of a consumption good?

answer

tractor

question

The private ownership of property and the use of the market system to direct and coordinate economic activity is most characteristic of:

answer

a market economy.

question

When economists speak of markets, they primarily mean:

answer

process of buyers and sellers voluntarily agreeing upon prices and quantities of goods and services.

question

In a simple circular flow model,

answer

all of the above are true.

question

Assume that the production possibilities for Badlands are the following combinations of kegs of beer and sides of beef:

answer

The opportunity cost of the fourth keg of beer is 6 sides of beef.

question

Workers in the 1800s building railroads by hand was an example of a(n) ____ intensive form of production.

answer

labor

question

In a command economy, economic resources are allocated by

answer

a central planning board.

question

Price elasticity of demand is defined as:

answer

the percentage change in quantity demanded divided by the percentage change in price.

question

Total revenue represents the amount that:

answer

sellers receive for a good or service which is computed as P ´ Q.

question

Demand is said to be ____ when the quantity demanded is very responsive to changes in price.

answer

elastic

question

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

answer

unit elastic

question

Shanequa and Mya have a business that provides personal fitness training services. They know that after raising their prices from $50 to $75 per hour, the quantity of hours they spent delivering training services only fell from 45 to 40 hours per week. The demand for their services is:

answer

inelastic, with a price elasticity coefficient less than one.

question

A steel mill RAISES the price of steel by 7%, which results in a 20% reduction in the quantity of steel demanded. The demand curve facing this firm is:

answer

elastic and revenues will decrease.

question

If the demand is perfectly elastic, what would happen to the quantity demanded if there is a tiny increase in price?

answer

quantity demanded will fall to zero

question

If makers of snake anti-venom implement significant price increases, it is unlikely to significantly affect the use of anti-venom for treating poisonous snakebites. The demand for anti-venom among users is:

answer

inelastic

question

A movie theatre lowers its admission prices by 10%, which results in a 20% increase in the quantity of tickets demanded. The demand curve facing this firm is:

answer

elastic and revenues will increase.

question

Refer to Exhibit 6-2. Elasticity varies along a linear demand curve. Graph A represents the section of the curve where:

answer

all are correct

question

Refer to Exhibit 6-3. The graph that best illustrates a perfectly inelastic demand curve is:

answer

Graph D.

question

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

answer

elastic

question

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

answer

elastic

question

The larger the proportion of income spent on a product, other things equal, the:

answer

more elastic is a consumer's demand.

question

The longer the time period considered, the price elasticity of demand tends to:

answer

increase

question

The longer the time period considered, the elasticity of supply tends to:

answer

increase

question

Elasticity of demand will ____ as the availability of substitutes ____.

answer

increase; increases

question

Put the following products in order from the least to the most elastic demand: Domino's pizza, pizza, and pizza from Domino's on the corner of Main Street and 8th Avenue.

answer

pizza; Domino's pizza; pizza from Domino's on the corner of Main Street and 8th Avenue

question

The government proposes a tax on flowers in order to boost its revenue. Consumers will bear all of this tax if the:

answer

demand for flowers is perfectly inelastic.

question

Taxes on goods with ____ demand curves will tend to raise more tax revenue for the government than taxes on goods with ____ demand curves.

answer

inelastic; elastic

question

The difference between the value of a good to consumers and its price is known as:

answer

consumer surplus.

question

The difference between the value of a good to sellers and its price is known as:

answer

producer surplus.

question

Total welfare gains from trade to the economy can be measured:

answer

as the sum of consumer and producer surpluses.

question

Refer to Exhibit 7-1. If the price of the jazz CDs equals $15, the total consumer surplus Miles receives from purchasing jazz CDs is:

answer

$30

question

Refer to Exhibit 7-7. When the price falls from P2 to P1, consumer surplus

answer

increases by area B + C

question

Refer to Exhibit 7-7. When the price is P2, the consumer surplus is equal to area:

answer

question

Refer to Exhibit 7-8. When the price is P2, the producer surplus is equal to area:

answer

A + B

question

Private costs are those borne by:

answer

the producer of an item.

question

An example of a positive externality is:

answer

beautiful trees on property along a parkway.

question

An externality occurs when:

answer

people other than those making the demand and supply decisions share the benefits or the costs of an activity.

question

Negative externalities are costs incurred by:
i. buyers
ii. sellers
iii. someone other than buyers or sellers

answer

(iii) only

question

Which of the following will most likely generate positive externalities?

answer

public education

question

An negative externality is present whenever:

answer

the social marginal cost of an activity exceeds the private marginal cost.

question

An example of a negative externality is:

answer

the sleep you lose when your neighbor throws a loud party next door that keeps you awake.

question

The reason why national defense is commonly provided by the government, while food is not, is that food:

answer

can easily be withheld from those who refuse to pay for it.

question

A free-rider problem arises whenever:

answer

goods cannot be provided exclusively to those who pay for them.

question

Public goods are those that are consumed:

answer

by the paying and nonpaying public alike.
Save

question

An example of a public good is:

answer

national defense.

question

When a good is nonrivalrous in consumption, then:

answer

consumption by an additional individual does not prevent others from benefiting from a public good.

question

The tendency of those who are insured to take more risks is a problem of:

answer

moral hazard.

question

Which of the following is an example of moral hazard?

answer

An individual drives less cautiously after obtaining automobile insurance.

question

If the production of a good creates large spillover benefits on others, the government might correct for the:

answer

underallocation of resources to its production by subsidizing it.

question

If there are important spillover benefits from consumption of a good,

answer

the market demand curve for the good understates the value of the product to society and resources are therefore underallocated to its production.

question

The free rider problem suggests that a producer will tend to:

answer

produce less than the optimal quantity of a public good.

question

Which of the following is most likely to be an example of asymmetric information?

answer

a collectible baseball card purchased on eBay

question

The U.S. government establishing a policy that it will bail out troubled financial institutions and a resulting increase in the number of bank failures is an example of:

answer

the moral hazard problem.

question

Which of the following is most likely to be an example of the winner's curse?

answer

a baseball team offering the highest contract to a free agent player

question

The key explanation for the prevalence of waterway pollution is:

answer

that waterways are not private property and can be used free of charge.

question

A tax on pollution would:

answer

decrease the quantity of pollution generated.

question

A system of transferable pollution rights:

answer

provides firms with an incentive to develop new pollution-abatement technologies.

question

The Coase Theorem suggests that the efficient solution to an externality problem:

answer

depends on who owns property rights to the resources.

question

Thousands of Japanese fishermen have used gill nets to catch tuna with great efficiency. Many environmentalists have objected to this practice since many other marine animals (such as dolphins and sharks) are killed by the nets and discarded by the fishermen. Which of the following statements is most accurate?

answer

A private solution is not practical due to the large number of individuals affected.

question

Which of the following is NOT an attempt by the government to correct the problem of asymmetric information in the market place?

answer

Food products pay large amounts to movie producers to have their products prominently displayed in a movie.

question

The law of diminishing marginal utility states that:

answer

the increase in total utility from consuming an additional unit decreases as consumption increases.

question

Total utility:

answer

increases as long as marginal utility is positive

question

The total utility from consuming five cups of coffee is 15, 27, 37, 46, and 54 utils, respectively. The marginal utility of the fourth cup of coffee is:

answer

question

For Brent, if the marginal utility of sleeping an extra hour, from 8 a.m. to 9 a.m., is negative:

answer

Brent is better off getting up at 8 a.m.

question

The law of diminishing marginal utility suggests that a demand curve:

answer

has a negative slope.

question

When a consumer allocates her limited budgetary resources to maximize her well-being, ____ is achieved.

answer

consumer equilibrium

question

Consumer equilibrium is reached when:

answer

there is no way a consumer, given the available income, could increase her satisfaction.

question

The price of a pound of sirloin steak is five times the price of a pound of ground beef. You are not in consumer equilibrium unless:

answer

your marginal utility from the last pound of sirloin steak consumed is five times that of the last pound of ground beef consumed.

question

Rebecca consumes both iced tea and coffee. Iced tea is priced at $1.50 per bottle and coffee at $2.00 per 16-ounce cup. Which of the following marginal utility pairs is consistent with Rebecca's consumer equilibrium at these prices?

answer

MU of iced tea = 3; MU of coffee = 4

question

A consumer is faced with choosing between hamburgers and milkshakes that are priced at $2 and $1, respectively. The marginal utility derived from each of the two goods is as follows:

answer

4 hamburgers and 3 milkshakes

question

Total utility can be determined by:

answer

summing the marginal utilities of each unit of a good consumed.

question

Which of the following violates the law of diminishing marginal utility?

answer

The more beer Phil drinks, the more he enjoys the next one.

question

Suppose both goods L and M have a price of $6. To maximize your utility from spending a given amount of income on the two goods you should:

answer

consume them so that consumption of the last unit each good provides the same marginal utility.

1 of 91

question

A market economy answers the question "what" goods will be produced by focusing on

answer

dollar votes and consumer sovereignty.

question

A market economy answers the question "how" will goods be produced by focusing on

answer

least-cost method of production.

question

In a market economy, the goods produced go to those who(m):

answer

have sufficient income and are willing to pay the price asked for those goods.

question

The economic system of which of the following countries can be treated as an example of a command economy?

answer

Cuba

question

In a market economy, resources are allocated:

answer

by individual decision makers responding to market prices.

question

The use of large amounts of labor relative to capital in an economy indicates:

answer

labor-intensive production.

question

Countries with high labor costs tend to:

answer

use more capital rather than labor in the production process.

question

The circular flow of economic activity is a model of the:

answer

flow of goods, services, and payments between households and firms.

question

Which of the following is not a resource exchanged in the factor markets?

answer

Land, capital, labor, and entrepreneurship.

question

An economy is producing two goods, ice cream and cookies, and is currently operating efficiently. This economy can produce more cookies if:

answer

it produces less ice cream.

question

The production possibilities curve illustrates:

answer

that when resources are currently being used efficiently, it is possible to increase production of one good only by sacrificing some of another good.

question

A candidate for president made the following campaign promise: "My administration will increase national defense without requiring sacrifices elsewhere in the economy." The promise can be kept if:

answer

either b. or c. occur, but not as a result of a.
Save

question

An economist defines efficiency as:

answer

the maximization of output from available resources.

question

Inefficiency is best illustrated by which of the following?

answer

High levels of unemployment of labor and other resources that could be productively employed

question

If the economy of Taiwan is growing more rapidly than the economy of Japan, most likely:

answer

compared to Japan, Taiwan foregoes a greater proportion of consumption goods in favor of capital investment

question

When economic growth occurs it will:

answer

often result from improved technology.

question

The bowed production possibilities curve represents:

answer

increasing opportunity costs.

question

Improving the level of education of the labor force will:

answer

shift the production possibilities curve outward.

question

Which of the following is not an example of a consumption good?

answer

tractor

question

The private ownership of property and the use of the market system to direct and coordinate economic activity is most characteristic of:

answer

a market economy.

question

When economists speak of markets, they primarily mean:

answer

process of buyers and sellers voluntarily agreeing upon prices and quantities of goods and services.

question

In a simple circular flow model,

answer

all of the above are true.

question

Assume that the production possibilities for Badlands are the following combinations of kegs of beer and sides of beef:

answer

The opportunity cost of the fourth keg of beer is 6 sides of beef.

question

Workers in the 1800s building railroads by hand was an example of a(n) ____ intensive form of production.

answer

labor

question

In a command economy, economic resources are allocated by

answer

a central planning board.

question

Price elasticity of demand is defined as:

answer

the percentage change in quantity demanded divided by the percentage change in price.

question

Total revenue represents the amount that:

answer

sellers receive for a good or service which is computed as P ´ Q.

question

Demand is said to be ____ when the quantity demanded is very responsive to changes in price.

answer

elastic

question

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

answer

unit elastic

question

answer

inelastic, with a price elasticity coefficient less than one.

question

A steel mill RAISES the price of steel by 7%, which results in a 20% reduction in the quantity of steel demanded. The demand curve facing this firm is:

answer

elastic and revenues will decrease.

question

If the demand is perfectly elastic, what would happen to the quantity demanded if there is a tiny increase in price?

answer

quantity demanded will fall to zero

question

answer

inelastic

question

A movie theatre lowers its admission prices by 10%, which results in a 20% increase in the quantity of tickets demanded. The demand curve facing this firm is:

answer

elastic and revenues will increase.

question

Refer to Exhibit 6-2. Elasticity varies along a linear demand curve. Graph A represents the section of the curve where:

answer

all are correct

question

Refer to Exhibit 6-3. The graph that best illustrates a perfectly inelastic demand curve is:

answer

Graph D.

question

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

answer

elastic

question

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

answer

elastic

question

The larger the proportion of income spent on a product, other things equal, the:

answer

more elastic is a consumer's demand.

question

The longer the time period considered, the price elasticity of demand tends to:

answer

increase

question

The longer the time period considered, the elasticity of supply tends to:

answer

increase

question

Elasticity of demand will ____ as the availability of substitutes ____.

answer

increase; increases

question

Put the following products in order from the least to the most elastic demand: Domino's pizza, pizza, and pizza from Domino's on the corner of Main Street and 8th Avenue.

answer

pizza; Domino's pizza; pizza from Domino's on the corner of Main Street and 8th Avenue

question

The government proposes a tax on flowers in order to boost its revenue. Consumers will bear all of this tax if the:

answer

demand for flowers is perfectly inelastic.

question

Taxes on goods with ____ demand curves will tend to raise more tax revenue for the government than taxes on goods with ____ demand curves.

answer

inelastic; elastic

question

The difference between the value of a good to consumers and its price is known as:

answer

consumer surplus.

question

The difference between the value of a good to sellers and its price is known as:

answer

producer surplus.

question

Total welfare gains from trade to the economy can be measured:

answer

as the sum of consumer and producer surpluses.

question

Refer to Exhibit 7-1. If the price of the jazz CDs equals $15, the total consumer surplus Miles receives from purchasing jazz CDs is:

answer

$30

question

Refer to Exhibit 7-7. When the price falls from P2 to P1, consumer surplus

answer

increases by area B + C

question

Refer to Exhibit 7-7. When the price is P2, the consumer surplus is equal to area:

answer

question

Refer to Exhibit 7-8. When the price is P2, the producer surplus is equal to area:

answer

A + B

question

Private costs are those borne by:

answer

the producer of an item.

question

An example of a positive externality is:

answer

beautiful trees on property along a parkway.

question

An externality occurs when:

answer

people other than those making the demand and supply decisions share the benefits or the costs of an activity.

question

Negative externalities are costs incurred by:
i. buyers
ii. sellers
iii. someone other than buyers or sellers

answer

(iii) only

question

Which of the following will most likely generate positive externalities?

answer

public education

question

An negative externality is present whenever:

answer

the social marginal cost of an activity exceeds the private marginal cost.

question

An example of a negative externality is:

answer

the sleep you lose when your neighbor throws a loud party next door that keeps you awake.

question

The reason why national defense is commonly provided by the government, while food is not, is that food:

answer

can easily be withheld from those who refuse to pay for it.

question

A free-rider problem arises whenever:

answer

goods cannot be provided exclusively to those who pay for them.

question

Public goods are those that are consumed:

answer

by the paying and nonpaying public alike.
Save

question

An example of a public good is:

answer

national defense.

question

When a good is nonrivalrous in consumption, then:

answer

consumption by an additional individual does not prevent others from benefiting from a public good.

question

The tendency of those who are insured to take more risks is a problem of:

answer

moral hazard.

question

Which of the following is an example of moral hazard?

answer

An individual drives less cautiously after obtaining automobile insurance.

question

If the production of a good creates large spillover benefits on others, the government might correct for the:

answer

underallocation of resources to its production by subsidizing it.

question

If there are important spillover benefits from consumption of a good,

answer

the market demand curve for the good understates the value of the product to society and resources are therefore underallocated to its production.

question

The free rider problem suggests that a producer will tend to:

answer

produce less than the optimal quantity of a public good.

question

Which of the following is most likely to be an example of asymmetric information?

answer

a collectible baseball card purchased on eBay

question

The U.S. government establishing a policy that it will bail out troubled financial institutions and a resulting increase in the number of bank failures is an example of:

answer

the moral hazard problem.

question

Which of the following is most likely to be an example of the winner's curse?

answer

a baseball team offering the highest contract to a free agent player

question

The key explanation for the prevalence of waterway pollution is:

answer

that waterways are not private property and can be used free of charge.

question

A tax on pollution would:

answer

decrease the quantity of pollution generated.

question

A system of transferable pollution rights:

answer

provides firms with an incentive to develop new pollution-abatement technologies.

question

The Coase Theorem suggests that the efficient solution to an externality problem:

answer

depends on who owns property rights to the resources.

question

answer

A private solution is not practical due to the large number of individuals affected.

question

Which of the following is NOT an attempt by the government to correct the problem of asymmetric information in the market place?

answer

Food products pay large amounts to movie producers to have their products prominently displayed in a movie.

question

The law of diminishing marginal utility states that:

answer

the increase in total utility from consuming an additional unit decreases as consumption increases.

question

Total utility:

answer

increases as long as marginal utility is positive

question

The total utility from consuming five cups of coffee is 15, 27, 37, 46, and 54 utils, respectively. The marginal utility of the fourth cup of coffee is:

answer

question

For Brent, if the marginal utility of sleeping an extra hour, from 8 a.m. to 9 a.m., is negative:

answer

Brent is better off getting up at 8 a.m.

question

The law of diminishing marginal utility suggests that a demand curve:

answer

has a negative slope.

question

When a consumer allocates her limited budgetary resources to maximize her well-being, ____ is achieved.

answer

consumer equilibrium

question

Consumer equilibrium is reached when:

answer

there is no way a consumer, given the available income, could increase her satisfaction.

question

The price of a pound of sirloin steak is five times the price of a pound of ground beef. You are not in consumer equilibrium unless:

answer

your marginal utility from the last pound of sirloin steak consumed is five times that of the last pound of ground beef consumed.

question

answer

MU of iced tea = 3; MU of coffee = 4

question

A consumer is faced with choosing between hamburgers and milkshakes that are priced at $2 and $1, respectively. The marginal utility derived from each of the two goods is as follows:

answer

4 hamburgers and 3 milkshakes

question

Total utility can be determined by:

answer

summing the marginal utilities of each unit of a good consumed.

question

Which of the following violates the law of diminishing marginal utility?

answer

The more beer Phil drinks, the more he enjoys the next one.

question

Suppose both goods L and M have a price of $6. To maximize your utility from spending a given amount of income on the two goods you should:

answer

consume them so that consumption of the last unit each good provides the same marginal utility.

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