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Microeconomics studies the allocation of
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b) Scarce resources.
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Society faces trade-offs because of
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d) Scarcity.
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What links the decisions of consumers and firms in a market?
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b) Prices
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The purpose of making assumptions in an economic model is to
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c) Simplify the model while keeping important details.
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Which of the following is an example of a normative statement?
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a) Since the good is bad for you, you should not consume it.
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Which of the following is an example of a positive statement?
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c) If you consume this good, you will get sick.
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Economists make simplifying assumptions to
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d) A and C A- Understand extremely complex phenomenon. C- Focus on the variables that are important to an economic theory.
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Economic models are only applicable to free-market countries.
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a) False. Economic models are applicable wherever there is scarcity.
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Firms do NOT use micro-economic models to
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d) None of the above. A- Determine what inputs will be made for production. B- Determine whether they should advertise in the newspaper or on the radio. C- Strategically raise profits over competitors.
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According to the Law of Demand, the demand curve for a good will
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c) Slope downward
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Assuming plasma TVs are a normal good, an increase in consumer incomes will lead to
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a) A rightward shift of the demand curve for plasma TV's.
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Consider the demand function Qd= 150-2P. The effects of other determinants of Qd is reflected in
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a) The intercept of the function
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As the price of a good increases, the change in the quantity demanded can be shown by
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d) Moving up along the same demand curve.
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If the price of automobiles were to increase substantially, the demand curve for gasoline would most likely
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a) Shift leftward.
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The term "inverse demand curve" refers to
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b) Expressing the demand curve in terms of price as a function quantity.
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If the demand for oranges is written as Q = 100 - 5p, then the inverse demand function is
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d) p=20-.2Q
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Which of the following would not change demand?
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a) The price of a product.
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If the price of a gasoline were $5, many people would stop buying gasoline while others would continue to do so. This would indicate
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a) Those who are buying gasoline value it at least $5 per gallon.
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Suppose the market demand curve for pizza can be expressed as QD = 100 - 2P + 3Pb, where QD is the quantity of pizza demanded, P is the price of pizza, and Pb is the price of a burrito. What is the relationship between burritos and pizza, from the point of view of consumers?
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c) They are substitutes.
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Assume the price of a movie is $10. Jenna demands 2 movies per week, Sam demands 3 movies per week, and Jordan demands 8 movies per week. From this information we can conclude that.
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a) The market quantity demanded at a price of $10 is at least 13 movies per week
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The demand function for tickets to Ireland is expressed as Qd = 1600 - 0.005P + 2 PEngland + 3rain + 2Y, where P is the price for tickets to Ireland, PEngland is the price of tickets to England, rain is the inches of rain Ireland receives annually, and Y is annual household income. Assuming PEngland is $1000, rain is 30 inches per year, and income is 40,000, how much would the price of tickets to Ireland have to fall for consumers to be willing to buy one more trip per year?
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d) $200
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Suppose the demand curve for a good shifts rightward, causing the equilibrium price to increase. This increase in the price of the good results in
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b) An increase in quantity supplied.
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Supply curves
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d) Can have many shapes.
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If the supply curve of a product changes so that sellers are now willing to sell 2 additional units at any given price, the supply curve will
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b) Shift rightward by 2 units.
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The supply curve is influences by
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c) The prices of the inputs required to produce the product.
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Once an equilibrium is achieved, it can persist indefinitely because
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d) In the absence of supply/demand shocks no one applies pressure to change the price.
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If the price is initially above equilibrium level
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c) Excess supply exists.
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The supply and demand model assumes
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d) All of the above. A- No buyer or seller can unilaterally influence the price of the product. B- Each unit is sold at the same price. C- Suppliers and demanders know the price of the product
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Lionfish is an aquatic invasive species in the southeastern U.S. and the Caribbean. Current removal policies focus on harvesting the lionfish for human consumption. However, a fishing license is required to fish in most southern states. Assume the supply of fishing licenses is Qs = 50 + 0.05L + 40P, where L = lionfish population and P = price of a fishing license, and the demand for fishing licenses is Qd = 1400 - 60P. What is the equilibrium price and quantity of fishing licenses when L = 1,000?
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P = $13, Q = 620
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A drought in the Midwest will raise the price of wheat because of a
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a) Leftward shift in the supply curve.
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If government regulations increase the cost of producing gasoline while at the same time government regulations reduce the cost of driving a relatively inefficient sport utility vehicle (SUV),
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c) The price of gasoline is expected to increase, whereas the total consumption of gasoline can increase, decrease, or stay the same.
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If the demand for high definition televisions increases and the supply of high definition televisions increases, then
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c) It is clear that the quantity sold will increase, the change in the price of television is ambiguous.
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Government actions can cause
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d) All of the above. A- A shift in the supply curve. B- A shift in the demand curve. C- Reaction from firms in other countries.
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) Municipalities that have adopted the policy of "rent control" typically set the rentals on certain apartments well below equilibrium. As a result,
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b) Prospective tenants have a difficult time finding available apartments.
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When "rent controls" result in a shortage of housing, landlords
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a) Use criteria other than price to allocate housing.
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If a government-imposed price ceiling causes the observed price in a market to be below the equilibrium price,
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a) There will be excess demand.
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Quotas are mostly supported by
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d) domestic producers.
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It is appropriate to use the supply-and demand-model if, in a market
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d) All of the above. A- Everyone is a price taker with full information about the price and quality of the good. B- Firms sell identical products. C- Costs of trading are low.
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One of the biggest benefits of the Internet auction site eBay
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d) Is that it reduces transaction costs for both sellers and buyers.
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Costs that pertain to finding a trading partner and making a trade are called.
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a) Transaction costs.
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