Microeconomics Unit 1//The allocation of resources, given scarce wants

1. scarcity forces choices
2.People are generally ration but sometimes irrational
3. Margins and cost/benefits
- Only the next unit matters

to get one thing, you lose the opportunity to get something else.

marginal cost of big item - marginal cost of small item = marginal cost of big item. Marginal benefit is its size, color, flavor, value etc.

finding out the result of cause and effects within the economic system.

economists assume that all other variables except the ones they are studying are constant

models used by economists without all the complicated bs of real life.

recognizes that theories and data can be turned into policies

1. State the goal
2. Determine policy options
3. Implement and see how well the policy worked

Economic growth
Full employment (for those who want to work)
Economic efficiency (get things to those who want them without draining the resources
Price level stability - avoid inflation & deflation
Economic freedom
Equitable distribution of income
Economic security
Balance of trade (w the rest of the world)

Looks at specifics - details of econ unit, small segment of economy - household, specific product
Some stuff is micro and macro ex. Unemployment

focuses on facts and cause-and-effect relationships

value judgements, subjective stuffs (ought or should)

biased, stereotypical diction that should be avoided

thinking that what is true for one person/group is true for another person/group

Fallacy that since one thing happened before another thing, the first thing caused the second.

A correlation in data does not mean that there is a causation (that one thing caused the other)

What is NOT a source of inequality in the distribution of personal income?

An outward shift in the production possibilities curve of an economy can be caused by an increase in...

What is true when the production of a good results in negative externalities?

Economic growth can be depicted using a production possibilities curve by what?

What is the basic economic problem of all countries?

An individual's labor supply curve is derived from that person's preferences about the tradeoff between income and ______

marginal benefit

A country can consume beyond its present production possibilities curve when it

Opportunity cost of switching to Good Y from Good X is

Private supply of public goods will most likely result in:

What law explains that as a person consumes more and more of a good or service, each additional unit will become less valuable to them and they won't want to pay as much for each unit?

What is a good example of a negative externality?

A straight-line ppc is different from a concave ppc because a straight ppc has a ...

The law of increasing opportunity cost is reflected in the shape of the production possibilities curve being

what would cause a leftward shift of the production possibilties curve?

What would cause a rightward shift in the production possibilities curve?

According to the theory of comparative advantage, a good should be produced where its

"if you want to have anything correctly, you have to do it yourself" this quote violates what law?

Land, labor, capital, and entrepreneurial talent are often referred to as. . .

A ____ tax is one that taxes income at an average rate that increases with the level of income

A rational consumer eating GS cookies will stop eating when the price of the next cookie is greater than the. . .

"If you want to have anything done correctly, you have to do it yourself." This quote violates the principle of:

Most of my grades are B minuses, but in fluid dynamics I have an A. Studying only for fluid dynamics violates the law of:

Trading based on opportunity costs

In what economy is freedom of enterprise critical and does the price system allocate resources in the most efficient way.

When the production or consumption of a good creates a positive externality, it is deemed a market failure at the market quantity
Hint: a benefit people don't pay for should not exceed someone else's cost.

Governments discourage and regulate monopolies because

Which of the following is the best example of a negative externality and the appropriate plan for eliminating it?

What is a fundamental aspect of the free market system?

The price elasticity of demand coefficient measures:

The price of an airline ticket is typically lower if a traveler buys the ticket several weeks before the flight's
departure date rather than on the day of the departure. This pricing strategy is based on the assumption that

A commodity that is inelastic has. . .

The larger the coefficient of price elasticity of demand for a product, the:

Suppose the price elasticity coefficients of demand are 1.43, 0.67, 1.11, and 0.29 for products W, X, Y, and Z respectively. A 1 percent decrease in price will increase total revenue in the case(s) of:

Promoters of a rock group know that if they charged $8 a ticket, 400 people would buy tickets for a concert, and if they charged $4 a ticket, 800 people would buy tickets. Over this price range, the demand for the concert tickets for the rock group is

An increase in the effective minimum wage will have less of an impact on employment if the demand for labor is

To alleviate a financial crisis, a university increases student fees. This action will increase university
revenues if the price elasticity of demand for university education is

If the demand for good Y increases as the price of good X decreases, it can be concluded

We would expect:

The main determinant of elasticity of supply is the:

If the price of hand calculators falls from $10 to $9 and, as a result, the quantity demanded increases from 100 to 125, then

If cross-price elasticity between goods X and Y is positive, then

An antidrug policy which reduces the supply of heroin might:

The elasticity for teenage workers is relatively inelastic. This means that:

Suppose the income elasticity of demand for toys is +2.00. This means that:

If the income elasticity of demand for lard is -3.00, this means that:

Assume a consumer finds that his total expenditure on compact disks stays the same after the price of
compact disks declines, other things being equal. Which of the following is true for this price change?

If a 5 percent wage increase in a particular labor market results in a 10 percent decrease in employment, the
demand for labor is

If the market demand for a good is inelastic and the supply is elastic, which of the following is true when there is an increase in sales tax?

If a severe drought destroys a significant portion of the peanut crop and peanut farmers' revenues increase,
which of the following is true over the observed range of prices?

The income effect indicates that:

If the price of a product falls, that product becomes cheaper and people will want to purchase more of it in
place of other goods. This statement best describes:

In a given time period, a person consumes more and more of a good or service and, as a result, enjoys each
additional unit less and is willing to pay less for each additional unit. This behavior is consistent with the
law of

Assume that Clark spends his entire income on the purchase of two goods, X and Y. If his income and the
prices of good X and Y all double, Clark will

Refer to the above data. The value for X is:

Units Total Marginal
consumed utility utility
0 0 N/a
1 W 20
2 35 X
3 Y 10
4 40 Z

Refer to the above data. The value for Z is:

Units Total Marginal
consumed utility utility
0 0 N/a
1 W 20
2 35 X
3 Y 10
4 40 Z

Utility refers to the:

Suppose that MUx/Px exceeds MUy/Py
To maximize utility the consumer who is spending all her money, she should buy:

Every day Molly spends her lunch money consuming apples, at $1 each, and oranges, at $2 each. At her current level of consumption, Molly's marginal utility of apples is 12 and her marginal utility of oranges is 18. If she has already spent all of her lunch money, how should Molly change her consumption decision to maximize utility?

Ben is exhausting his money income consuming products A and B in such quantities that MUa
/Pa = 5 and MUb/Pb = 8. Ben should purchase:

Assume MUc and MUd represent the marginal utility that a consumer gets from products C and D, the respective prices of which are Pc and P d. The consumer will increase his total utility from a specific money outlay by spending more on C and less on D if initially:

What do the income effect, the substitution effect, and diminishing marginal utility have in common?

At her current level of consumption, a consumer is willing to pay up to $1.50 for a bottle of water and up to $1,500 for a diamond ring because the

According to the law of diminishing marginal utility, which of the following is true?

Gasoline prices increase by 50 percent and other things remain the same. As a result, there is

A demand schedule

The law of supply states that, other things remaining the same,

Which of the following increases the quantity supplied of compact discs but does NOT increase the supply of compact discs?

Oil refiners can refine a barrel of petroleum so that it yields either more home heating oil or more diesel fuel. If the price of diesel fuel falls, there is

Suppose that the equilibrium price and quantity of new houses both increase. Which of the following could be a cause of this change?

The equilibrium price of a normal good could rise if

Assume that consumers consider popcorn and pretzels to be substitutes. A significant decrease in the supply of popcorn will affect the pretzel market by

Assume that people like onions on their hamburgers. If the supply of hamburgers decreases, the demand for onions will most likely

Which of the following will occur if the government imposes a price ceiling below the equilibrium price of a good?

Which of the following will decrease the demand for beef?

Which of the following would cause the equilibrium price of good X to increase?

Leather and beef are jointly produced such that an increase in the production of one results in an
equal increase in the production of the other. An increase in the demand for leather will most likely
cause

The graph below illustrates the labor marker for teenage workers. The current minimum wage for
all workers is W1. If Congress introduced a sub-minimum wage, W2 that applies only to teenagers,
what is the most likely effect on teenage employment?

Suppose the market for roses is currently in equilibrium. If the supply of roses falls, while at the same time the demand for roses rises, what can you say about the price and quantity of roses in the market?

What is the definition of total consumer surplus?

As e increases, demand gets

What is one thing that makes things more elastic?

e =

e midpoint formula

If price and total revenue either both increase or both decrease, the good is

if price and total revenue are different (i.e. one is increasing & the other is decreasing), than it is

If cross price elasticity (change in Qx/change in Py) is less than zero,