Mircoeconomics Exam 1

The need to study economies would cease to exist if

there were enough resources to produce all the goods and services people would like to obtain

An example of a direct negative incentive is

threatening to fire those who do not perform well

An opportunity cost is the

cost of a purchase or decision as measured by what is given up

An activity’s marginal benefit is____ at the optimal quantity

equal to the marginal cost

At full employment, a society produces

only its PPF

What is mikhail’s opportunity cost of a sculpture?

½ painting

The opportunity cost of increasing production of apple pies from 14 to 16 pies is ___ pies

7 blueberry

A new technology that makes it eaiser to prepare apples will cause

the ppf to rotate outward to a larger maximum quantity of apple pies with no change in maximum blueberry pies

the ability of one producer to produce a good at a lower opportunity cost than another producer is called

comparative advantage

utility theory seeks to measure

satisfaction

the additional satisfaction derived from consuming one more unit of a good or service is called

marginal utility

the marginal utility of the eighth unit is

-30 utils

when marginal utility declines as consumption increases, the consumer is experiencing

diminishing marginal utility

higher prices

lower the marginal utility per dollar spent and cause consumers to buy less of a good

the diamond- water paradox unfairly compares the

amount of marginal utility a person receives from a small quantity of something rare with the marginal utility from a small quantity of something after already consuming a large amount

When the price falls, what happens?

there is an increase in the quantity demanded

assume that the market for iphones has only two consumers; Christy and lori. According the table above, if the price of an iphone is $285, the market will demand

8 iphones

two goods that are used together are called

complements

something is a normal good if the demand for the good

increases as the consumer’s income decreases

which of the following will cause the demand curve for burgerw to shift to the right?

a study is published by the Nation Association for burger research that says eating burgers can reduce the risk of acne

an expectation of a lower price in the future will

decrease current demand

When the price changes from P1 to P2 we will see a

decrease in quantity supplied from Q1 to Q2

the government recently imposed a number of regulations on companies that will make it more expensive for companies to hire workers. What consequence will this have on market?

these regulations raise the cost of labor and shift supply to the left

an improvement in technology

allows a producer to increase output with the same amount of input

if the price is $10, there is a ____ of ____ units

surplus; 15

the equilibrium price and quantity in the market are

$4 and 40 units

the equilibrium price of peanut butter is $5. Study came out saying its good for you. Holding all other factors constant, which of the following scenarios could happen?

the price of peanut butter increases to $7 bc of a demand shift

when supply shifts to the right and demand stays constant, the equilibrium price___ and the equilibrium quantity___.

stays the same; increases

when both supply and demand shift to the left, the equilibrium

quantity always falls

what does the price elasticty of demand measure?

a consumer;s sensitivity to a price change

suppose that when the price of cereal rises 10%, the QD of cereal falls by 5%. Based on this info, what’s the approximate price elasticity of demanded for cereal?

-0.5

when the QD is less sensitive to a change in price, then the absolute value of the price elasticity of demand is

smaller

when the price elasticity of demand is -.6, then a ___ increase in price leads to a ____ in QD

10 percent; 6 percent increase

What is true about demand and the price elasticity of demanded?

when the demand curve has a negative slope, the price elasticity of demand is infinite

how can a firm increase total revenue?

when demand is inelastic and the price increases

income elasticity of demand is defined as

the percentage change in demanded divided by percentage change in income

over time, the price elasticity of supply for sunglasses will become more

elastic