question
The price elasticity of demand measures
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The responsiveness of quantity demanded to changes in price
question
Doug wants to start up his own business, and needs $25,000 to get it off the ground. He can either withdraw it from his savings account, where he currently earns 3%, or he can take a loan for $25,000 and pay 5% interest. Doug should compare:
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The implict cost of $750 to the explicit cost of $1,250 and choose to use his savings
question
When a persons income increases,
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More bundles of goods and services become affordable
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Given the marginal-utility-to-price ratio equalization principle, MU1/P1=MU2/P2. What will happen if P1 decreases?
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The consumer should consume more of good 1 and less of good 2.
question
After eating four slices of pizza, you are offered a fifth slice for free. You turn down the fifth slice. Your refusal indicates that the
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Marginal utility is positive for the fourth alive and negative for the fifth slice.
question
Heidi attends baseball games and goes to movie theaters. Assume that baseball and movie tickets are normal goods. After the price of baseball tickets goes, what will happen to Heidi's consumption?
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The quantity of baseball tickets that Heidi consumes will decrease
question
According to the law of diminishing marginal returns
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The additional output generated by additional units of input will diminish
question
In a two-nation world, comparative advantage in the production of a particular product means that one nation can produce
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The lower domestic opportunity cost than the other nation
question
France and Italy can produce two goods, fish and chicken. These cost ratios for two goods are constant and given by France: 1F=2C and Italy: 1F=4C. If these two countries specialize based on their comparative advantage,
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Italy will produce chicken and France will catch fish.
question
Suppose the government has decided to impose a tax on sellers. Which of the following is true?
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A. If supply were less elastic, the deadweight loss would be larger
B. If supply were less elastic, the tax revenue would be larger
C. If demand were less elastic, the deadweight loss would not be affected
D. If demand were less elastic, the tex revenue would be smaller.
B. If supply were less elastic, the tax revenue would be larger
C. If demand were less elastic, the deadweight loss would not be affected
D. If demand were less elastic, the tex revenue would be smaller.
question
The supply of product X is inelastic (but not perfectly inelastic), if the price of X rises by
answer
A. 5% and quantity rises by 7%
B. 8% and quantity supplied rises by 8%
C. 10% and quantity supplied remains the same
D. 7% and quantity supplied rises by 5%
B. 8% and quantity supplied rises by 8%
C. 10% and quantity supplied remains the same
D. 7% and quantity supplied rises by 5%
question
Which of the statement is correct?
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A. When MP is higher than AP, AP is increasing. When MP is less than AP, AP is decreasing.
B. When MP is higher than AP, AP is decreasing. When MP is less than AP, AP is decreasing.
C. When MP is higher than AP, AP is increasing. When MP is less than AP, AP is increasing.
D. When MP is higher than AP, A is decreasing. When MP is less than AP, AP is increasing.
B. When MP is higher than AP, AP is decreasing. When MP is less than AP, AP is decreasing.
C. When MP is higher than AP, AP is increasing. When MP is less than AP, AP is increasing.
D. When MP is higher than AP, A is decreasing. When MP is less than AP, AP is increasing.
question
Mary's income increases by 10% and her demand for books decreases by 5%, all else constant. Mary's income elasticity of demand for books is __________. Thus books are a/an __________ good and __________ for Mary.
answer
-2.0, normal, neither a luxury or a necessity.
question
Maggie decides to become a full-time fashion blogger and quits her job. Her previous job paid her $45,000 a year. She spent $10,000 buying a camera and fashion apparel. She earns $80,000 in her first year being a blogger. What is Maggie's economic profit as a blogger?
answer
$25,000
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Suppose a firm's marginal product of labor of producing the 3rd unit of a good is equal to 2. Additionally, suppose a firm pays its workers $10, what is the the firms's marginal cost of producing the 3rd unit?
answer
$5
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Assume that we know that the cross price elasticity of demand between goods A and B is 0.5. If the price of B increases, the demand for A ________ because A and B are _________.
answer
A. Increases, substitutes
B. Decreases, substitutes
C. Increases, complements
D. Decreases, complements
B. Decreases, substitutes
C. Increases, complements
D. Decreases, complements
question
Which of the following makes supply more elastic?
answer
A. The product is complex to manufacture.
B. The producer has little time to respond to price changes
C. The producer has unused capacity when price change happens.
D. There is limited availability of input goods
B. The producer has little time to respond to price changes
C. The producer has unused capacity when price change happens.
D. There is limited availability of input goods
question
The long-run average total cost curve:
answer
A. will rise if diminishing returns are encountered
B. will fall if diminishing returns are encountered
C. will rise if economies of scale are incurred
D. is based on the assumption that all resources are variable
B. will fall if diminishing returns are encountered
C. will rise if economies of scale are incurred
D. is based on the assumption that all resources are variable
question
At a price of $10, the quantity demanded of wine is 1,250 bottles. When price increases to $30, the quantity demand of wine is 750. The price elasticity of demand for wine is:
answer
-1/2, and demand is inelastic
question
Do we expect to observe the law of diminishing returns i the short run or long run? Why?
answer
We observe law of diminishing returns in the short run because there is sufficient time for inputs to alter in the long run
question
Why is the minimum efficient scale important for a firm's decision making?
answer
Minimum efficient scale denotes the point where long-run average total costs are minimized
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A price ceiling represents
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A maximum price
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Productive efficient is achieved when
answer
The economy is producing at the lowest average cost
question
Suppose in the market for iPhones, the cost of iPhone screens has gone up. This will:
answer
Shift the supply curve to the left
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Which of the following is a normative statement?
answer
A. The CPI rose 2% in 2015
B. The interest rate is 0.5% now
C. The tax rate is too low for rich people
D. The unemployment is 5% in August
B. The interest rate is 0.5% now
C. The tax rate is too low for rich people
D. The unemployment is 5% in August
question
The upward-supply curve does NOT reflect:
answer
A. increasing marginal cost
B. diminishing marginal products
C. The positive relationship between price and quantity supplied
D. Increasing willingness today for additional products
B. diminishing marginal products
C. The positive relationship between price and quantity supplied
D. Increasing willingness today for additional products
question
Wendell just read an article that says scientist have proven that processed cheese increases brain power. We would expect Wendell's demand for processed cheese to:
answer
Increase and shift to the right
question
Which of the following is NOT a source of market failure?
answer
A. One firm has a large market power
B. The goods are non-excludable
C. The price of goods are too high
D. If there is a positive externality of a certain good
B. The goods are non-excludable
C. The price of goods are too high
D. If there is a positive externality of a certain good
question
The principle that suppliers will normally offer more for sale at high prices and less at lower prices is:
answer
Law of Supply
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Suppose both the demand and supply for corn increases. What can we say would happen in the market for corn?
answer
Quantity will increases and price cannot be determined.
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Economists deal with how
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Individuals make decisions to use scarce resources in order to satisfy their unlimited wants.
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The excess supply (surplus) will exist whenever
answer
The actual price is above the equilibrium price
question
After graduating high school, Josh received an offer to work at a computer company with an annual salary of $50,000 and another offer to work at an automobile company with an annual salary of $80,000. Josh can also work at his father's firm where he would not receive a salary. In the end, Josh decides to go to college. What is his opportunity cost of going to college?
answer
$80,000
question
Public goods are ________ and _______.
answer
Non-Excludable, non-rival
question
In one hour, George can fix 8 flat tires or type 200 words. HIs opportunity cost for fixing ONE flat tire is:
answer
25 words
question
Which of the following best reflects an increase in quantity demanded and not an increase in demand?
answer
A. A college excepts enrollment to increase, despite no change in tuition.
B. Skiing becomes a fashionable winter sports activity, so people buy more ski lift tickets
C. The price of Jeni's ice cream falls, so people buy more Jeni's
D. Consumers expect lower prices next month for used iPhones, so people buy fewer today.
B. Skiing becomes a fashionable winter sports activity, so people buy more ski lift tickets
C. The price of Jeni's ice cream falls, so people buy more Jeni's
D. Consumers expect lower prices next month for used iPhones, so people buy fewer today.
question
The free-rider problem occurs when
answer
Someone benefits from the consumption of a public goods without paying his or her share
question
A minmum wage set above the equilibrium wage rate is a price __________ that _____________ the quantity of low skilled labor demanded.
answer
A. Ceiling; decreases
B. Ceiling; increases
C. Floor; decreases
D. Floor; does not change
B. Ceiling; increases
C. Floor; decreases
D. Floor; does not change
question
When a positive externality is present in the market, the quantity consumed:
answer
A. is less than the socially optimal quantity
B. is always more than the socially optimal quantity
C. is the same as the socially optimal quantity
D. is often more than the socially optimal quantity
B. is always more than the socially optimal quantity
C. is the same as the socially optimal quantity
D. is often more than the socially optimal quantity
question
As a bakery owner, you use flour and eggs in your cakes. Economists classify these resources as
answer
A. Land
B. Labor
C. Capital
D. Entrepreneurship
B. Labor
C. Capital
D. Entrepreneurship
question
The income and substitution effects account for
answer
A. the upward-sloping supply curve.
B. the downward sloping demand curve.
C. movements along a given supply curve.
D. shifts in the demand curve.
B. the downward sloping demand curve.
C. movements along a given supply curve.
D. shifts in the demand curve.
question
Which of the following event is consistent with the law of demand?
answer
A. A decrease in the price of a gallon of milk causes a decrease in the quantity of milk demanded.
B. An increase in the price of a soda causes a decrease in the quantity of soda demanded.
C. An increase in the price of tape causes an increase in the quantity of tape demanded.
D. A decrease in the price of juice causes no change in the quantity of juice demanded
B. An increase in the price of a soda causes a decrease in the quantity of soda demanded.
C. An increase in the price of tape causes an increase in the quantity of tape demanded.
D. A decrease in the price of juice causes no change in the quantity of juice demanded
question
A supply curve does NOT shift due to:
answer
A. A sudden increase in price along the supply curve
B. changes in government policy
C. technological progress
D. expected changes in resource prices
B. changes in government policy
C. technological progress
D. expected changes in resource prices
question
If an economy is operating at a point inside the PPF then
answer
Society resources are being inefficiently utilized
question
The supply curve is upward-sloping because
answer
A. As the price increases, so do costs.
B. As the price increases, consumers demand less.
C. As the price increases, suppliers can earn higher levels of profit or justify higher marginal costs to produce more.
D. None of the above.
B. As the price increases, consumers demand less.
C. As the price increases, suppliers can earn higher levels of profit or justify higher marginal costs to produce more.
D. None of the above.
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