Microeconomics Final Exam

Price of Resources

Which variable is not one of the 8 given in class that affect the demand for a product?

a simple four-function calculator

According to the syllabus, the only type of calculator allowed in class is

Monday, Tuesday, 3:00-4:00

What are my office hours?

an increase in the price of shoes causes a decrease in the quantity of shoes demanded

Which of the following is consistent with the law of demand?

Production

Which of the following is not one of the categories of resources that I gave you in class

Prices

To decide how to use our scarce resources to satisfy economic wants, our economy primarily relies on

efficiency and equity

Microeconomics covers which two goals?

the opportunity cost in terms of reduced income is too great

Which of the following is an economic explanation for why so many basketball players leave college after one year to play in the NBA?

abstraction

Political candidates are asked questions about many topics but they try to persuade the media to report on only one of their favorite issues. This is an example of concept:

opportunity cost

Evan opened and ran a gas station in a small town. Although he made a profit, he decided that $10,000 per year was not worth it and shut down. The concept best illustrated here is:

True

True or False. When we draw demand curves, we employ the ceteris paribus. This is an example of abstraction.

normative statement

"If unemployment reaches 8%, the government needs to implement a spending program that replaces bridges and roads nationwide." this is a ___________ statement

False

True or False. This is a positive statement: The Bison football team will win another national championship this year.

Capital

Steven's company just bought a new forklift. This example best fits which concept?

must be decreased

Assume an economy is operating at some point on its production possibility curve which shows civilian and military goods. If the output of military goods is increased, the output of civilian goods

8%

There are four investment opportunities available to a company with excess cash to invest: an investment that pays 8%; 6%; 4% ; and 2%. If the company were to choose the 6% option what would their opportunity cost be?

True

True or False. Most production possibility curves are concave to the origin.

markets

In class, we constructed a list of concepts that you could see illustrated in the PPC. All of the following concepts made it on to the list except one. Which one?

Absolute scarcity

Sweden does not have the climate to produce bananas. This is an example of:

A decrease in the independent variable will cause an increase in the dependent variable.

When the slope of a curve is negative this means

the high temperature for the day

A study is conducted involving the variables, number of people attending a water park, and the high temperature for the day. Which variable is independent?

when the independent variable is zero, the dependent variable = 1,000

The vertical intercept for a graph is $1,000. This means:

True

True or False. Market prices provides incentives for companies to produce goods and services.

False

True or False. Ceteris paribus means slopes down to the right.

Irvin Tucker

According to the syllabus, the author of your text book is:

True

True or False. Shoes and sandals would be examples of substitute goods.

all of the above are correct

When a demand schedule is drawn on a graph

tells us that demand curves slope down to the right

The Law of Demand ...

their marginal satisfaction decrease with each unit consumed

Our theory tells us that consumers buy less of a good at higher prices because:

if the price of the good increases, their purchasing power decreases

Very simply, the Income Effect means:

abstraction

Anna is trying to decide on a major. She has boiled her decision down to only considering which building the majors are housed in, is the closet to her dorm. This example best fits which concept?

-28

Quantity. Total Utility Marginal Utility
1 -2
2 -6
3 ? -20
4 -50
5 -100

total

As Evan plays more video games, his _______ utility increases.

a typical consumer will receive less extra satisfaction from consuming the fourth hamburger per week than the third hamburger per week.

Which statement best illustrates the concept of diminishing marginal utility?

decreasing the price

If a product's current price is in the elastic portion of the demand curve, then total revenue could be increased by

Normal goods

Ellie earned a pay raise at work and decided to purchase some additional shoes. This example fits which concept?

False

True or False. There are many Giffen goods in our economy.

Technology

Which one of the 5 variables given in class that affects supply?

economies of scale

Ben's Bikes and Tom's Racing Gear announce plans to merge, to increase profitability for both businesses. This is an example of the concept:

False

True or False. The law of supply means that if consumers want a product, it must be supplied.

True

True or False. In the long run, if a firm experienced increasing returns to scale it is possible to see an downward sloping supply curve.

constant returns to scale

In my office, a secretary with one computer can type 200 pages in a day. After expansion, three secretaries with three computers can type 600 pages in a day. This represents

Substitute goods

Howard went to the store to buy donuts but didn't like the higher price, so he purchased bagels. This example best fits which concept?

there is at least one fixed input of production.

The law of diminishing returns only applies in the cases where

Substitutes

If a price increase of good A causes the demand for good B to increase, then good A and B are

True

True or False. The difference between the complete market supply fuction and single market supply function is the use of the concept ceteris paribus.

-The supply curve will shift to the left
-Equilibrium price will rise
-Equilibrium quantity will fall

The market for printed newspapers changes due to a prince increase in ink. This change causes the following:

-The demand curve will shift to the left
-Equilibrium price will fall
-Equilibrium quantity will fall

The market for Dodges baseball caps changes due to the Dodgers losing 100 games in a row, causing fans to lose interest. This change causes the following:

-neither curve shifts
-equilibrium price will not change
-equilibrium quantity will not change

The market for iphone 36s changes due to a price decrease in iPhone 36s. This change causes the following:

-Relatively elastic
-Consumers would decrease their purchases by more than 10%
-Decrease the price

Recent studies have shown the price elasticity of demand for snow mobiles at current prices is approximately 3.000

False

True or False. If the price of a good increases, supply would increase.

True

True or False. An increase in resource prices will tend to decrease supply.

These two goods are substitutes.

If we were to calculate Cross Price Elasticity and derive the answer .763, what would be the answer?

S(new) - S(old) / sum divided by C(new) - C(old) / sum

Let's say we want to make up a new elasticity to measure the responsiveness of scared kids get to changes in the ugliness of your Halloween costume. Create the formula that would be used to calculate the elasticity, using the variables (s=scared) and (c=costume)

Increase the quantity of (X) demanded by less than 15%

If the demand for product (x) is inelastic, a 15% decrease in the price of (x) will

True

True or False. Milk would be an example of an inelastic good.

the price of some other product

Cross price elasticity of demand measures how sensitive purchases of a specific product are to changes in

True

True or False. An example of economics of scale is when firms merge, reducing their need for expensive capital equipment.

2.000

Use the following demand schedule to calculate price elasticity of demand from a price of $7 to $9
($7 to 25 Q) ($9 to 15 Q)

False

True or False. Most governments would more likely place a tax on an elastic item than inelastic.

Increase consumption of product (j) and decrease consumption of product (k)

A consumer is making purchases of products (j) and (k) such that the marginal utility of product (j) is 50 and the marginal utility of product (k) is 80. The price of product (j) is $1 and the price of (k) is $8. The equal marginal rule suggests that this consumer should

False

True or False. Most governments would more likely a tax on an elastic item than inelastic.

negative, but the minus sign is ignored

The answer when calculating price elasticity of demand is

the price of some other product

Cross price elasticity of demand measures how sensitive purchases of specific product are to changes in

trying to maximize their utility, given their budget

THE consumer problem consists of consumers

make no change in consumption

A consumer is making purchases of products (l) and (m) such that the marginal utility of product (l) is 50 and the marginal utility of product (m) is 25. The price of product (l) is $10 and the price of (m) is $5. The equal marginal rule suggests that this consumer should

Increase consumption of product (j) and decrease consumption of product (k)

A consumer is making purchases of products (j) and (k) such that the marginal utility of product (j) is 40 and the marginal utility of product (k) is 100. The price of product (j) is $1 and the price of (k) is $10. The equal marginal rule suggests that this consumer should

to compare products with different prices

When using the equal marginal rule, why do we divide the marginal utility by price?

different at each point

The MRS for an indifference curve is:

would be the same

If you draw multiple indifference curves, their MRS's

of the law of diminishing returns

The reason the marginal cost curve eventrually increases as output increases for the typical firm is because

Look at Exam 3 for graphing examples

marginal cost

The first curve to begin to rise once diminishing returns begin:

13.650, this good is normal

Calculate the Income Elasticity of Demand for the following situation: A consumer's income falls from $500 per week to $480 per week, which causes the quantity demanded of (f) to decrease from 7 to 4. What is the signigicance of your answer?

Marginal utility per dollar spent is the same for all goods

A consumer with fixed income will maximize utility when each good is purchased in amounts such that the:

The chart on exam 3

marginal cost

If we were to draw a graph with the various cost curves, once diminishing returns were to occur, the _____ begin to rise

These two goods are compliments

If we were to calculate Cross Price Elasticity and derive the answer -2.685, what would be the significance of our answer?

one study refers to the market overall, while the other refers to specific brands

One study lists airline travel as a relatively inelastic good while another study lists it as an elastic good. Most likely

This good is inferior

If we were to calculate Income Elasticity of demand and derive the answer -.626, what would be the significance of our answer?

earn a loss but should stay open for the day

Andrew owns a pastry store in downtown Fargo. On Sunday, he expects to bring in $500 in revenue and his costs are projected to be $600 for TFC and $300 for TVC. He will:

has all of the above characteristics

For a perfectly competitive business, total revenue:

quantity is produced at the lowest point of the ATC curve

How do we check to see that a firm is technically efficient?

cannot change their price without permission

A natural monopoly

price equals marginal cost

Perfectly competitive firms are allocatively efficient because:

False

True or False. In perfect competition, there are strong barriers to entry.

logic and problem solving skills

I told you the Wordle story to emphasize that I think that economics is about:

quantity is produced where price = MC

How do we check to see that a firm is allocatively efficient?

demand shift right, supply shift left

For perfect competition in the long run equilibrium, if people suddenly fall in love with the product, first the ________ and then the market will react with ___________

none of the above

For a graph showing a simple monopolist earns a loss and should shut down, at the profit-maximizing quantity, the marginal cost will be:

-$450, stay open because price > average variable cost

The following situation occurs for a firm: marginal cost equals average total cost at 95 units, marginal revenue at 90 units, and average variable cost at 85 units. At the profit-maximizing quantity average total cost is $25, the average variable cost is $15, the average fixed cost is $10, and the price is $20. Calculate profit: ..... Should the firm stay open or shut down?

$550, stay open because price > average variable cost

The following situation occurs for a firm: marginal cost equals average total cost at 130 units, marginal revenue at 110 units, and average variable cost at 90 units. At the profit-maximizing quantity average total cost is $25, the average variable cost is $15, the average fixed cost is $10, and the price is $30. Calculate profit: ..... Should the firm stay open or shut down?

greater than average variable cost

For a graph showing a perfectly competitive firm earning a loss but should stay open, at the profit maximizing quantity, the marginal cost will be:

earn a loss and should shut down for the day

Ellie owns an appliance store. On sunday, she expects to bring in $4,000 in revenue and his costs are projected to be $5,600 for TFC and $4,300 for TVS. He will:

False

True or False. In class, we agreed to producing 300 million plastic novelty hats would be a good use of resources in this country.

no, because price does not equal marginal cost

Are simple monopolies allocatively efficient?

includes the demand for his books

David is an unknown author in Fargo selling his own books. His Demand Curve Facing the Firm:

higher price and produce less output

When compared with a perfectly competitive industry with identical cost curves, a simple monopolist will charge a

higher price and produce less output

Which compared with a perfectly competitive industry with identical cost curves, a simple monopolist will charge a

perfect competition

Which industry would be more favorable to consumers?