Microeconomics Mid Term Q’s

Microeconomics and macroeconomics use different types of analysis.

Which of the following represents positive economics?

People are forced to make choices because of:

The sun is an example of:

A chain saw is an example of which of the following factors of production?

Economics, according to its definition, studies how people:

Ceteris paribus means:

Economists believe that scarcity forces everyone to:

"Ceteris paribus" is a Latin expression that essentially means "holding everything else constant."

When economists say goods are scarce, they mean:

Which of the following is an example of a positive economic statement?

Economists use models to:

The Ceteris paribus assumption is important when building economic models.

The statement "Cutting government spending is the best way to boost consumer confidence" is an example of normative economics.

An economic model is defined as:

In Exhibit 1A-2, as X increases along the horizontal axis, corresponding to points C-D on the line, the Y values increase. The relationship between the X and Y variables is:

An upward-sloping straight line exhibits a direct relationship between two variables:

A downward-sloping straight line exhibits a direct relationship between two variables.

Direct relationships are illustrated using upward-sloping lines and curves:

Which of the following would not cause a shift in the supply curve for a good?

The law of demand says that the lower the price charged for a good, ceteris paribus, the:

The curve that shows the relationship between the price of a good and the quantity that consumers are willing to purchase at each price is the:

Assume that eggnog and cookies are complements. If the price of eggnog goes up, what happens to the demand for cookies?

Compared to higher-income families, low-income families would demand proportionately more of which of the following kinds of goods?

Assume Congress passes a new tax of $2.00 per pack on cigarettes. The effect on the supply curve is a(n):

Complementary goods are goods:

Assume that consumers expect the price of gasoline to rise sharply in the future.

Which of the following is most likely to increase the supply of corn?

A curve that depicts the relationship between price and quantity demanded is the:

A rightward shift of a demand curve is called a(n):

Assume Qs represents the quantity supplied at a given price and Qd represents the quantity demanded at the same given price. Which of the following market conditions produce a downward movement of the price?

Substitute goods are goods that are:

When the price of a good is above its equilibrium price, a:

The price of a good will fall if:

If movies are an inferior good, movie attendance will rise when consumer incomes fall.

According to the law of demand, if the price of a good increases, other things being equal, the quantity demanded will decrease:

Which of the following is true about the market equilibrium?

In Exhibit 3-9, if the market price is $50:

The equilibrium price is best defined as the price at which:

The excess supply created when governments impose a price floor is:

Which of the following is a property of a public good?

Collusive action among producers creates higher prices for consumers because it:

A technological breakthrough lowers the cost of manufacturing DVDs. As a result, the market changes to a new equilibrium because of a(n):

In Exhibit 4-10, the equilibrium price is:

If the government imposes a price ceiling below the market equilibrium price, then:

Suppose a new law requires all piercing studios to pass tougher licensing tests and to begin using more costly sterilization methods. Other things constant, this law would cause:

Which of the following is an example of market failure?

If the demand for a good decreased, what would be the effect on the equilibrium price and quantity?

Which of the graphs in Exhibit 4-4 represents a decrease in the price of a factor of production?

If each of us relied exclusively on the market to determine what to buy, we would probably end up with few, if any:

Which of the following would be a private cost to a cigarette manufacturer?

Externalities get their name from the fact that they are:

In Exhibit 4-8, a movement from A to C is best described as a(n):

In Exhibit 4-9 the equilibrium price and quantity in the market are:

In Exhibit 4-1, suppose that a reduction in the price of an important input used to produce the good causes an increase in quantity supplied of 150 units at every price level. Assuming that demand does not change, the new equilibrium price will be: $2.00.

A side effect of a price floor set above the equilibrium price is:

An increase in demand and a decrease in supply cause which of the following?

A black market may arise when government imposes a price ceiling.

Negative externalities result in unfair, excessively high prices.

Price elasticity of demand refers to the:

If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units, then demand is:

Along the elastic range of a demand curve, a decrease in price causes:

As shown in Exhibit 5-8, the price elasticity of supply for good X between points E and X is:

If Sam, the Pizza Man, lowers the price of his pizzas from $6 to $5 and finds that sales increase from 400 to 600 pizzas per week, then the demand for Sam's pizzas in this range is:

If the percentage change in the quantity demanded of a good is greater than the percentage change in price, price elasticity of demand is:

If the percentage change in the quantity demanded of a good is less than the percentage change in price, price elasticity of demand is:

Elasticity has which special meaning for economists?

The more inelastic the demand for a product, the more the actual burden of a tax on the product will:

Suppose the Good Food supermarket increases the price of a pound of bananas from $.75 to $1.25 and finds that the quantity of bananas it sells per month drops from 1,500 to 1,000. The price elasticity of demand coefficient for bananas in this price range is:

Elasticity is a measure of:

The price elastic portion of the linear demand curve lies:

According to Exhibit 5-7, the demand for concert tickets is:

If a good is inferior in an economic sense:

If a tripling of price triples the quantity of a good supplied, the price elasticity of supply for this good is

A product would be more demand price elastic:

Suppose the quantity demanded of steak is 200 million pounds per year when the price is $6 per pound and 400 million pounds per year when the price is $2 per pound. The price elasticity of demand for steak over this range is:

A public transit company finds that when it reduces the price of a bus ticket, total revenues remain the same. One can conclude from this that:

When the government imposes a tax, sellers raise their price by the full amount of the tax.

For an inferior good, the income elasticity of demand is negative.

If a consumer is indifferent between 5 units of A and 8 units of B, then the consumer would:

Refer to Exhibit 6-8. Diminishing returns set in after which telephone call?

John loves to travel. He would never turn down the opportunity to go on a trip. This means that, for John:

Refer to Exhibit 6-5. Each dessert is priced at $1. If you had $10 to spend on desserts, which of the following combinations of goods would you buy?

Assume the price of good X increases. As a result, your real income decreases and you decrease the quantity of good X purchased each month. This is an example of the:

The statement "as more of a good is consumed, the utility a person derives from each additional unit diminishes" is known as the:

If total utility is falling, marginal utility is:

A utility-maximizing consumer is currently spending all of his/her income on two products, A and B. The MU of the last unit of A consumed is 50, the price of A is $25, and the price of B is $10. The MU of the last unit of B consumed is:

The ability of a good to satisfy a want refers to its:

Typically, total utility derived decreases as more of a good is consumed.

If good A has a marginal utility of 30 and a price of $5, and good B has a marginal utility of 10 and a price of $2, then:

Suppose that an individual consumes just two goods: Big Macs and milkshakes. In order to reach consumer equilibrium, the individual must arrange the consumption of Big Macs and milkshakes so that the:

If total utility increases from 10 to 15 for the second unit of a good consumed, the marginal utility of the second unit is 5.

Consumer equilibrium requires that the marginal utility per dollar spent be the same for all goods.

The utility of a good measures its usefulness.

Total utility is maximized in the consumption of two goods by equating the:

The law of diminishing marginal utility indicates that the marginal utility curve is:

Suppose a consumer is spending his or her entire budget. In order to obtain the most satisfaction from his or her purchases, all goods should:

A rational consumer should not consume more of a good when:

Marginal utility is defined as:

A young chef is considering opening his own sushi bar. To do so, he would have to quit his current job, which pays $20,000 a year, and take over a store building that he owns and currently rents to his brother for $6,000 a year. His expenses at the sushi bar would be $50,000 for food and $2,000 for gas and electricity. What are his explicit costs?

When the cost curves have U-shapes, at the point where marginal cost equals average total cost:

In the long run, all costs are fixed costs.

Which of the following is true if the total variable cost curve is rising?

If the firm represented in Exhibit 7-15 is operating with a plant whose size corresponds to short-run average total cost curve A, the level of output that would minimize its short-run average total cost is:

By filling in the blanks in Exhibit 7-8, the variable cost of producing 4 pizzas is shown to be equal to:

When the curve that envelops the series of possible short-run average total cost curves is horizontal, this means that there are:

Constant returns to scale exist over the range of output for which the long-run average cost is:

Explicit costs would include:

Since the 1980s, Wal-Mart stores have appeared in almost every community in America. Wal-Mart buys their goods in large quantities and therefore at cheaper prices. Wal-Mart also locates its stores where land prices are low, usually outside of the community business district. Many customers shop at Wal-Mart because of low prices and free parking. Local retailers, like the neighborhood drug store, often go out of business because they lose customers. This story demonstrates that:

Which of the following is true at the point where diminishing returns set in?

Sam quits his job as an airline pilot and opens his own pilot training school. He was earning $40,000 as a pilot. He withdraws $10,000 from his savings where he was earning 6 percent interest and uses the money in his new business. He uses a building he owns as a hanger and could rent it out for $5,000 per year. He rents a computer for $1,200, buys office supplies for $500, rents an airplane for $6,000, pays $1,300 for fuel and maintenance, and hires one worker for $30,000. Sam's total revenue from pilot training classes this year equaled $90,400. Sam's explicit costs this year equals:

In Exhibit 7-13, ATC is shown by the graph labeled:

In the long run, total fixed cost will:

By filling in the blanks in Exhibit 7-8, the marginal cost of the fourth pizza is shown to be equal to:

If fixed cost is $200,000 and variable cost is $30 per unit over the relevant range of output, when 10,000 units are produced, the average total cost will be:

If average fixed costs equal $60 and average total costs equal $120 when output is 100, the total variable cost must be:

In Exhibit 7-7, by filling in the blanks it can be determined that the fixed costs are:

...

If the units of variable input in a production process are 1, 2, 3, 4, and 5, and the corresponding total outputs are 30, 34, 37, 39, and 40, respectively. The marginal product of the fourth unit is:

The law of diminishing returns causes a firm's short-run marginal cost curve to be s-shaped.

Has a horizontal individual demand curve

False

it is not earning the maximum potential profit

Average variable cost curve

Short-run average variable cost

Wheat farming

Free entry to reduce short-run profits, or free exit to reduce short-run losses

Minimum short-run average total cost

$10

p5

During which the firm can vary its plant size

400 units per week

marginal cost cruve

MR = MC

Extra profit is enough to cover all of the variable cost on your next two trips

Neither a nor b

is at its profit-maximizing point

The same as the firm's demand curve

$2.00 per week

$5

Increase price and decrease output

impossible or difficult to resell