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296 Cards in this Set
- Front
- Back
economists believe that scarcity forces everyone to |
make choices |
|
when economists use the term Ceteris paribus, they are indicating that |
all other variables except the ones specified are assumed to be constant |
|
which of the following is a normative statement |
Congress is considering the president's tax plan to increase taxes which is a fair plan |
|
human wants |
can never be fully satisfied |
|
a chain saw is an example of which of the following factors of production |
Capital |
|
Ceteris paribus means |
all other things remain constant |
|
an entrepreneur is |
the person who conceives and starts a business |
|
which phrase is associated with normative statement |
"should be" |
|
the basic difference between macroeconomics and microeconomics is |
microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy |
|
computer programs or software are an example of |
capital |
|
scarcity is a |
subjective concept that human wants can never be satisfied |
|
economics, according to its definition, studies how people |
make choices in the face of scarcity |
|
microeconomics is concerned with |
some specific market in the economic system |
|
the statement, "John buys more of good X as his income increases, Ceteris paribus," means: |
the price of this good is being allowed to change |
|
a positive economic statement must be verifiable |
True |
|
Which of the following is correct regarding relationships? |
ALL OF THESE 1. slope is the ratio of the vertical change to the horizontal change 2. a direct relationship is one in which two variables change in the same direction |
|
the graph of a direct relationship will have a positive slope |
True |
|
which of the following would decrease the supply of airline travel |
higher fuel costs |
|
a decrease in the price of coffee, other things being equal, causes a |
downward movement along the demand curve for coffee
|
|
an increase in the demand for a good means that |
consumers are willing to purchase more of the good at each possible price |
|
the "ceteris paribus" clause in the law of demand does NOT allow which of the following factors to change |
ALL OF THESE 1. consumer tastes and preferences 2. the prices of other goods 3. expectations |
|
assuming that beef and chicken are substitutes, an increase in the price of beef, other things being equal, will
|
increase the demand for chicken |
|
an increase in the demand for a product means that the |
demand curve shifts to the right |
|
a rightward shift of a demand curve is called |
an increase in demand |
|
an improvement in a firm's technology that reduces its production costs will result in a |
ALL OF THESE ARE TRUE 1. rightward shift of the supply curve 2. increase in supply 3. increase in quantity supplied at any given price |
|
the demand schedule for a good shows |
the specific quantity of the good that people are willing and able to buy at different prices |
|
other things being equal, the effect of a decrease in the price of Coca-Cola would cause which of the following |
a downward movement along the demand curve for Coca-Cola |
|
which of the following pairs is the best example of substitutes |
hiking boots and athletic shoes |
|
if consumer incomes go up and Harley Davidson motorcycles are a normal good, the effect on the demand for motorcycles, ceteris paribus, will be a |
rightward shift in the demand curve for motorcycles |
|
if income increases, then with regard to expensive cuts of steak, it is likely that the demand curve |
shifts to the right |
|
when economists say the demand for a product has increased, they mean the |
demand curve has shifted to the right |
|
if two goods are complementary a |
decrease in the price of one product will cause an increase in the demand for the other product
|
|
assume Q(sub s), represents the quantity supplied at a given price and Q(sub d) represents quantity demanded at the same price. which of the following market conditions produces an upward movement of the price |
Q(sub s) = 750, Q(sub d) = 1000 |
|
if pork and beans is an inferior good, other things being equal, in increase in consumer income will decrease the demand for pork and beans |
True |
|
which of the following situations results from a ticket price to a concert set below the equilibrium price |
a long line of people wanting to purchase tickets to the concert |
|
if a chemical factory causes noxious fumes to be emitted in the neighborhood, a third party would be |
local homeowners |
|
Bobby's neighbor is growing a tree that is blocking Bobby's ocean view. Bobby is considering taking his neighbor to court. This is most likely an example of |
negative externality |
|
Cindy discovers that when she goes to the beach, she does NOT have to bring her radio. She can put her blanket near someone who has a radio and listen all day (w/o having to carry her radio, get sand in the speakers, or buy new batteries). This is an example of |
a positive externaility |
|
Albert, Betty, Christine and David are all very good students. When they hold their study sessions, they often discuss very difficult concepts in great detail. Christine's roommate, Elizabeth, who takes completely different classes, still learns from the discussions of the others. This is the case of a ____, which ____ a ____ |
externalities, benefits, third party |
|
price ceilings set below the equilibrium create |
shortages |
|
an externality is |
unintended benefits or costs imposed on third parties as a result of economic activity |
|
an increase in both supply and demand causes which of the following |
equilibrium price change is indeterminate |
|
a side effect of a price floor set above the equilibrium price is |
an excess supply of the good is created |
|
The Yankee Candle Company, in Hatfield, Massachusetts, makes thousands of scented candles each day. The factory emits the odor of the candles it produces, some of which smell quite nice. On days when they make strawberry candles the townspeople really enjoy the smell. On days when they make potpourri scented candles, people close their windows and don't go outside. What can we infer about the scented candle market? |
B AND C 1. potpourri candles are priced too low to be socially optimum 2. candle production generates only negative externalities |
|
which of the following is a public good |
clean air |
|
the possibility of a free rider exists |
only in the presence of external benefits |
|
which of the following would decrease the price of packaged hot dogs |
ALL OF THESE |
|
which of the following is the BEST example of a public good |
air traffic control |
|
if the government imposes a price ceiling, the |
the price offered by producers must be at or below the ceiling price |
|
which of the following would raise both the equilibrium price and the equilibrium quantity of strawberries
|
an increase in demand for strawberries |
|
examples of market failure include lack of competition, externalities, public goods, and income inequality |
True |
|
a public good is any good or service that users collectively consume and there is no way to bar free riders |
True |
|
over the elastic portion of a demand curve, a decrease in price causes |
an increase in total revenue |
|
if the government wants to raise tax revenue and shift most of the tax burden to the consumers, it would impose a tax on a good with a |
steep (inelastic) demand curve and a flat (elastic) supply curve |
|
if the cross-elasticity of demand for two goods is negative, this means that |
the goods are complements |
|
if Coke and Pepsi are close substitutes, then if |
Coke raises its price, some customers will switch to Pepsi |
|
Suppose there is no change in total revenue when the price changes. the demand curve for this good is |
unitary elastic |
|
If John purchases 10 percent more compact discs when his income increases 5 percent, then |
compact discs would be income elastic |
|
there is no change in total revenue when the demand curve for a good is |
unitary elastic |
|
demand sensitivity depends on all of the following except |
the sensitivity of firms' output to changes in its price |
|
the price elasticity of demand between milk and soda is likely to be |
positive, because the goods are substitutes |
|
an increase in the price of good X causes the demand for good Y to shift inward. One can conclude that X and Y are |
complements |
|
If Jackie needs special firm to go with her new camera, then for her these two goods have what type of relationship |
complementary |
|
price elasticity of demand is defined as the ratio of the |
percentage change in quantity demanded to the percentage change in price, other things being equal |
|
the cross elasticity of demand for substitute products must |
exceed zero |
|
suppose you are the manager of a local water company, and you are instructed to get consumers to reduce their water consumption by 10 percent. If the price elasticity of demand for water is 0.25, by how much would you have to raise the price of water |
40 percent |
|
if a 10 percent cut in price causes a 15 percent increase in sales, then |
demand is price elastic in this range |
|
if a 10 percent price increase causes the quantity demanded for a good to decrease by 20 percent, demand is elastic |
True |
|
the substitution effect is the concept that changes in consumption of a good result from changes in the relative price of a jointly consumed good |
False |
|
Assume the price of good X increases. As a result, you real income decreases and you decrease the quantity of good X purchased each month. This is an example of the |
income effect |
|
according to the income effect, lower prices give people more purchasing power with which to increase the quantity demanded of goods |
True |
|
Marginal utility (MU) equals: |
TU/Q |
|
a util represents a unit of measurement for the |
happiness a person obtains from consuming a good |
|
suppose that the price of telephones decreases. if more are purchased then |
the marginal utility of telephones will likely decrease |
|
assume the price of Nikes decreases. as a result, consumers increase the quantity of Nikes purchased each year and purchase fewer Reeboks. This is an example of the |
substitution effect |
|
if the price of a good decreases, the resulting increase in the quantity purchased decreases the marginal utility of the good |
True |
|
Typically, total utility derived decreases as more of a good is consumed |
False |
|
Diminishing marginal utility means that as you consume more of a good, other things constant, the |
additional satisfaction you obtain from each additional unit of the good falls |
|
as more Big Macs are consumed each day, the marginal utility that a person gets from each additional Big Mac |
decreases |
|
as we move down a person's demand curve, marginal utility declines |
True |
|
if Allison's marginal utility of her 100th dollar of income is greater than Brad's marginal utility of his 10th dollar, then we can conclude |
nothing, since we can't make interpersonal utility comparisons |
|
Tina's marginal utility of her first piece of cake is 15, while Jerry's marginal utility of his first piece of cake is 24. An economist would conclude that |
we can't make a comparison to see who values cake more |
|
when Pepsi becomes more expensive relative to other beverages, people will purchase less Pepsi. This observation is known as the |
substitution effect |
|
The consumer equilibrium condition for two goods is achieved by equating the |
ratios of marginal utility to the price of both goods for the last dollar spent on each good |
|
the total utilities associated with the first 5 units of consumption of good X are 15, 3, 40, 47, and 50, respectively. what is the marginal utility associated with the third unit |
10 |
|
utils are used by economists to measure the satisfaction a person obtains from consuming a good |
True |
|
the law of diminishing marginal utility states that total utility increases by smaller and smaller increments as more of a good is consumed |
True |
|
The marginal utility curve is downward sloping |
True |
|
Assume the total utilities corresponding to the first four units of a product consumed are 8, 12, 14, and 15, respectively. The marginal utility of the second unit is consumed is |
4 |
|
the change in total utility due to a 1-unit change in quantity consumed is |
marginal utility |
|
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 |
good A is a better buy than good B |
|
a rational consumer will always shift a dollar from a good whose marginal-utility-to-price ratio is lower to one whose marginal-utility-to-price is higher |
True |
|
assume the price of Coca-Cola increases. as a result, your real income decreases and you decrease the quantity of Coca-Cola purchased each month. This is an example of the |
income effect |
|
if the price of a good decreases, the resulting increase in the quantity purchased decreases the marginal utility of the good |
True |
|
a utility-maximizing consumer equalizes marginal utilities per dollar spent across all goods |
True |
|
the utility of a good measures its satisfaction rather than its usefulness |
True |
|
if a consumer is spending all of his/her income in a manner where MU(sub a)/P(sub a) = MU (sub b)/P(sub b), then the consumer |
is maximizing his/her utility |
|
the principle of diminishing marginal utility says that |
the marginal utility of additional units consumed decreases |
|
if finding the last stamp to complete your collection makes you happier than finding the first, then |
marginal utility in not diminishing |
|
the statement "as more of a good is consumed, the utility a person derives from each additional unit diminishes" is known as the |
law of diminishing marginal utility |
|
the statement "It is better to suffer a little more unemployment than a little lower price" is an example of normative analysis |
True |
|
a sub-discipline of economics that looks at the economy as a whole is |
macroeconomics |
|
which of the following is an example of a positive economic statement |
the economy's real output increased at about 3 percent last year and the unemployment rate decreased |
|
which of the following is an example of a normative economic statement |
the minimum wage should be increased so that low income workers can afford to keep up with the cost of living |
|
an economics textbook is an example of |
capital |
|
computer programs or software are an example of |
capital |
|
the statement "it would be better to put up with price controls than to have continuing higher medical care prices" is an example of normative economic analysis |
True |
|
the Latin expression Ceteris paribus means |
everything else being equal |
|
people are forced to make choices because of |
unlimited wants and limited resources |
|
which of the following is the best example of a nonrenewable resource |
oil |
|
which of the following is a statement of positive economics |
government control of rent decreases the number of new apartments constructed |
|
microeconomics is the branch of economics in which you study inflation and unemployment in the economy |
false |
|
the finite nature of the economy's resource base |
will always be with us |
|
financial capital by itself is NOT a factor of production; instead it is only a paper claim on economic capital |
true |
|
a model (or theory) |
ALL OF THESE |
|
the slope of a line parallel to the horizontal axis is |
1 |
|
straight line CD in Exhibit 1A-2 shows that |
ALL OF THESE |
|
straight line AB in Exhibit 1A-3 shows that |
ALL OF THESE
|
|
in exhibit 1A-3, as X increases along the horizontal axis, corresponding to points A-B on the line, the Y values decrease. The relationship between the X and Y variables is |
inverse |
|
in Exhibit 1A-6, the slope of the straight line A-D is |
0 |
|
financial capital by itself is not a factor of production; instead it is only a paper claim on economic capital |
True |
|
campaign speeches normally include normative economic statements |
True |
|
policies to determine the price of troll dolls are a concern of macroeconomics |
False |
|
Scarcity |
means we are unable to have as much as we would like to have |
|
which of the following represents positive economics |
if policy A is followed, then outcome B results |
|
scarcity means we are unable to have as much as we would like to have |
True |
|
which of the following is included in the study of macroeconomics |
unemployment in the nation |
|
factors that determine the price of corn would be studied in macroeconomics |
False |
|
when building a model, an economist must |
make simplifying assumptions |
|
determining the price of compact discs is a concern of |
microeconomics |
|
which of the following is a statement of positive economics |
if taxes are reduced, unemployment will drop |
|
the term Ceteris paribus means that |
one influence is changing and everything else is being held constant |
|
economic models are of limited use since they cannot be tested empirically with actual data |
False |
|
in Exhibit 1A-3, as X increases along the horizontal axis, corresponding to points A-B on the line, the Y values decrease. The relationship between X and Y variables is |
inverse |
|
In Exhibit 1A-1, the slope of straight line AB is |
1/2 |
|
in Exhibit 1A-3, the slope for straight line AB is |
-1 |
|
in Exhibit 1A-5, the slope for straight line CD is |
-1 |
|
which of the following would cause a shift in the relationship shown in Exhibit 1A-7 |
a rise in the price of air travel |
|
assume that oranges and peaches can both be grown on the same type of land, a decrease in the price of peaches, other things being equal, will cause a(n) |
rightward shift of the supply curve for oranges |
|
assuming that chicken and beef are substitutes, a decrease in the price of beef, other things being equal, will |
decrease the demand for chicken |
|
suppose all of the major computer manufacturers announced at the beginning of next month there would be a major price reductions on their computers. this would cause the current demand for computers to |
decrease |
|
which of the graphs in Exhibit 3-3 depicts the effect of a decrease in the price of pizza on the demand curve for pizza |
graph b |
|
a shift occurs in the supply curve for salt when |
improvements are made in the production process |
|
the price of a good will fall when |
there is a surplus of the good |
|
complementary goods are good |
that are consumed jointly |
|
farmers can choose to produce eggs or milk. If there is an increase in price of milk then what will be the effect in the egg market |
egg supply will decrease |
|
assuming that hamburgers and hot dogs are substitutes, an increase in the price of hamburgers, other things being equal, results in a |
rightward shift in the demand curve for hot dogs |
|
if the united auto workers can obtain a substantial wage increase for auto workers, there will be a(n) |
decrease in the supply of automobiles, which is a shift to the left of the supply curve |
|
if a decrease in the price of good Y causes the demand for good Z to decrease, this indicates that |
Y and Z are substitutes |
|
consumes buy less of a good as its price increases because |
substitute goods are now relatively cheaper |
|
an economist has conducted extensive research and has found that Jones Cola is a substitute for Tucker Cola. Ceteris paribus, the price of Jones Cola increases. This impact on the demand curve for Tucker Cola is a(n) |
increase in demand |
|
in Exhibit 3-2, the shift in the demand curve from d1 to d2 could have been caused by which of the following
|
increase in expected future prices
|
|
other things being equal, the effect of a decrease in the price of Coca-Cola would cause which of the following |
a downward movement along the demand curve for Coca-Cola |
|
in Exhibit 3-6, which of the following is true about the milk market |
at price .70 there is an excess supply of milk |
|
a shortage occurs when the quantity demanded exceeds quantity supplied |
false |
|
other things being equal, an increase in the price of gasoline will decrease the quantity demanded for gasoline |
true |
|
when the price of a good in a market is above equilibrium |
ALL OF THESE quantity supplied exceeds quantity demanded surplus is observed price will fall in the near future |
|
if a shortage exists in a market then |
ALL OF THESE price is below equilibrium quantity demanded exceeds quantity supplied price will rise in the near future |
|
in Exhibit 3-4, which of the following could have caused the shift in the supply curve from s1 to s2 |
decrease in wage rates
|
|
which of the graphs in Exhibit 3-3 depicts the effect of a decrease in the demand curve for pizza |
graph b |
|
the development of new technology typically |
shifts the supply curve to the right |
|
which of the following states the definition of supply |
there is a positive relationship between the price of a good and the quantity buyers purchase |
|
assume the brand X in an inferior good and name brand Y is a normal good. an increase in consumer income, other things being equal, will cause a(n) |
leftward shift in the demand curve for brand X |
|
an increase in the demand for a good means that |
consumers are willing to purchase more of the goods at each possible price |
|
assuming that pepsi- cola and coca-cola are substitutes, a rise in the price of pepsi-cola, other things being equal, results in a(n) |
rightward shift in the demand curve for coca-cola |
|
in exhibit 3-2, which of the following could not have caused the shift in the demand curve from d1 to d2 |
decrease in the number of consumers |
|
the law of demand is graphically demonstrated by a(n) |
downward-sloping demand curve |
|
a decrease in quantity demanded is given by a(n) |
upward movement to the left along the demand curve |
|
if income increases, then with regard to expensive cuts of steak, it is likely that the demand curve |
shifts to the right |
|
a demand curve for the The Steel Porcupines' concert tickets would show the |
number of tickets that will be purchased at various prices |
|
which of the following would not cause market demand for normal good to decline |
an increase in the price of a substitution |
|
a leftward shift of a supply curve is called a(n) |
decrease in supply |
|
an increase in the expected future of a good will cause the current demand for the good |
increase, which is a shift to the right of the demand curve |
|
Exhibit 3-8 presents supply and demand data for the video game market. if the price of video games was currently $70, there would be an ___ of ___ video games in the market |
excess supply; 400 |
|
if the price of good X increases and this causes an increase in the demand for good Y, then goods X and Y are substitute good |
true |
|
if a shortage exists in a market then |
ALL OF THE THESE price is below equilibrium quantity demanded exceeds the quantity supplied price will rise in the near future |
|
excess quantity demanded for a good creates pressure to push the price of that good down towards the equilibrium price |
false |
|
if the quantity demanded is greater that quantity supplied, the according to the market process |
the price will rise |
|
in order to avoid the free-rider problem, which of the following goods is best provided by the government and paid for with tax dollars |
lighthouses |
|
if the government imposes a price ceiling, then |
the price offered by producers must be at or below the ceiling price |
|
albert, betty,christine, and david are all very good students. when they hold their study sessions, they often discuss very difficult concepts in great detail. christine's roomate, elizabeth, who takes completely different classes, still learns from the discussions of the others. this is the case of a(n) _____, which ____ a _____ |
externalities; benefits; third party |
|
price floors are instituted because the government wants to |
help producers |
|
after a hurricane in florida knocked outh the regional water supply for several days, the demand of bottled water increased sharply. in a market economy, how will this increase in demand affect the equilibrium price and quantity of bottled water |
price will increase, and quantity will increase |
|
in Exhibit 4-1, suppose that a reduction in the price of an important input used to produce the good causes and 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 |
|
which of the following is the best example of a public good |
national defense |
|
from the standpoint of economic efficiency, competitive markets provide |
less of a public good than would be efficient |
|
why do negative externalities like pollution result in inefficiency |
because producers ignore the external costs they impose on third-parties |
|
a decrease in consumer income decreases the demand for compact discs. as a result of the change to a new equilibrium, there is a(n) |
downward movement along the supply curve |
|
in Exhibit 4-9, which of the following would occur at a price of $2.00 |
inventories would put a downward pressure on price |
|
an increase in both supply and demand causes which of the following |
equilibrium price change is indeterminate |
|
a public good may be defined as any good or service that |
NONE OF THESE |
|
an increased equilibrium price and a decreased equilibrium quantity results from a(n) |
decrease in supply |
|
in Exhibit 4-7, the equilibrium price of a movie ticket is |
$4 |
|
bobby's neighbor is growing a tree that is blocking bobby's ocean view. Bobby is considering take his neighbor to court. This is most likely an example of a |
negative externality |
|
price ceilings are imposed if the government believes |
the market equilibrium price is too high |
|
when airplanes take off and land at logan airport, residents of east boston complain about the noise. the same planes make the same noise during the trip to boston from paris, but there are no ____ for most of the trip because___ |
externalities; there are no third parties |
|
public goods are overproduced in the marketplace |
false |
|
assuming a price ceiling is set above the equilibrium price. the eventual result is a shortage |
false
|
|
for which of the following medical goods or services is the income elasticity of demand target |
face- lifts |
|
inferior goods have an income elasticity of demand that is |
negative |
|
dana is an art history who needs to travel to italy to do research. art historians usually don't have a lot of money, and therefore are very sensitive to price changes. dana's funding agency pays her a fixed amount to travel. at current exchange rates, dana can stay in italy for 35 days. if the exchange rate improves by 10%, she can stay for 40 days. what is dana's price elasticity of demand for days spent in italy |
it is approx equal to 1.4 |
|
if a supplier faces a perfectly horizontal demand curve and sets his price slightly higher than the demand curve itself, he can expect |
a complete loss of revenues |
|
as the economy recovers from a recession, we should expect that demand for |
inferior goods will fall and demand for non-inferior goods will rise |
|
the more inelastic the demand for a product, the more the actual burden of a tax on the product will |
fall on buyers |
|
if a 1 percent decrease in the price of porduct A brings about a 3% increase in the sales of product b, then |
products A and B are complementary |
|
in Exhibit 5-7, if promoters charge a price of $10 per ticket, then their total revenue is |
$300,000 |
|
the long-run price elasticity of demand is usually larger than the short-run price elasticity of demand because |
people have more time to find substitute goods |
|
the data in Exhibit 5-2 shows that price elasticity of demand is |
decreasing as the quantity increases |
|
in Exhibit 5-5, the total revenue at point B on the demand curve equals |
OABC |
|
suppose an oil company wants to make its total revenue as large as possible. it should charge a price at which the demand for oil is |
unitary elastic |
|
which of the following pairs is most likely to represent complementary goods |
bacon and eggs |
|
if the demand for cigarettes is highly inelastic, this indicates that |
the quantity of cigarettes purchased by consumers is not very responsive to a change in the price of cigarettes. |
|
in Exhibit 5-1, between points a and b, the elasticity of demand measures |
1.0 |
|
if the price elasticity of demand coefficient equals 2 then |
a price decrease will increase total revenue |
|
the number of cds purchased increased by 50% when consumer income increased by 10%. assuming other factors are held constant, cds would be classified as |
normal goods |
|
in Exhibit 5-5, the change in total revenue resulting from a change from price a to d indicates that the demand curve is |
elastic |
|
in response to a price change for good Y, if the cross-elasticity of demand for good Y is negative, good X and good Y are substitutes |
false |
|
if the income elasticity of demand for a good is positive, the good is an normal good. |
true |
|
assume the price of Coca-Cola increases. as a result, your real income decreases and you decrease the quantity of Coca-Cola purchased each month. This is an example of the |
income effect |
|
utility refers to the |
satisfaction a consumer expects to receive from a good or service |
|
in Exhibit 6-4, assume the Multiplex tickets cost $6 each, video rentals cost $2 each, and bags of popcorn cost $1 each. what is the marginal utility of renting a third video |
6 utils |
|
suppose a consumer is spending his or her entire budget. in order to obtain the most satisfaction from his or her purchases, all good should |
provide the same marginal utility per dollar |
|
the statement "as more of a good is consumed, the utility a person derives from each additional unit diminishes" is know as the |
law of diminishing marginal utility |
|
on thanksgiving, jake's mother gives him a huge platter of food. If jake were to keep eating just to please his mother (even when he really wanted to stop), his marginal utility would be |
negative |
|
the conceptual measure of the satisfaction a person obtains by consuming all the units of a good or service during a given time period is |
total utility |
|
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 |
20 |
|
the consumer equilibrium condition for two goods is achieved by equating the |
ratios of marginal utility to the price of both good for the last dollar spent on each good |
|
suppose that an individual consumes just 2 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 |
ratio of marginal utility to price is the same for both goods for the last dollar spent on each good |
|
diminishing marginal utility means that as you consume more of a good, other things being constant, the |
additional satisfaction you obtain from each additional unit of the good falls |
|
the income effect refers to a change in |
the quantity demanded of a good because of a change in the buyer's real income |
|
utility is most closely defined by which of the following terms |
satisfaction |
|
assume the price of pizza decreases. as a result, your real income increases and you increase the quantity of pizza purchased each month. this is an example of the |
income effect |
|
if a consumer is maximizing his/her utility for a given income, the |
marginal utility per dollar spent for all goods would be the same |
|
marginal utility is best computed as the ratio of |
the change in total utility to change in quantity consumed |
|
joann considers cola and plain sparkling water to be good substitutes. suppose the price of sugar, a key ingredient used to produce cola, falls. according to the income effect, which of the following is most likely to occur |
joann will purchase more of most goods due to her higher real income |
|
according to the income effect, when the price of automobiles rises, people buy fewer automobiles becasue |
the purchasing power of their income is reduced |
|
the substitution effect is the concept that changes in consumption of a good result from changes in the relative price of a jointly consumed good |
false |
|
the income effect is the concept that changes in consumption of a good result from changes in government spending |
false |
|
the marginal utility curve is downward sloping |
true |
|
when total utility is at a maximum, marginal utility is |
zero |
|
the consumer equilibrium condition for two goods is achieved by equating the |
ratios of marginal utility to the price of both goods for the last dollar spent on each good |
|
assume the total utilities corresponding to the first four units of a product consumed are 8,12,14,15 respectively. the marginal utility of the second unit consumed is |
4 |
|
"i'm tired of eating muffins for breakfast. today, im trying a bagel" these statements most clearly reflect the |
law of diminishing marginal utility |
|
the utility of a good is |
different for different concumers |
|
the ability of a good to satisfy a want refers to its |
utility |
|
the statement "as more of a good is consumed, the utility a person derives from each addtional unit diminishes" is known as the |
law of diminishing marginal utility |
|
as shown in Exhibit 6-3, assume that the price of good X is $1 per unit and the price of good Y is $2 per unit and your budget is $13. if you consume 4 units of good X and 2 units of good Y and maximize utility, you should consume |
more of X and less of Y |
|
if Mr smith thinks the last dollar spent on shirts yields less satisfaction that the dollar spent on cola, and smith is a utility-maximizing consumer, he should |
increase his spending on cola and decrease his spending on shirts |
|
at this point where total utility is at its peak, marginal utility is |
zero |
|
marginal utility is the change in |
total utility when an extra unit of output is consumed
|
|
the conceptual measure of the satisfaction a person obtains by consuming all the units of a good or service during a given time period is |
total utility |
|
diminishing marginal utility means that as you consume more of a good, other things constant, the |
additional satisfaction you obtain each additional unit of the good falls |
|
if total utility increases from 10 to 15 for the second unit of a good consumed, the marginal utility of the second unit is 25 |
false |
|
marginal utility equals |
tu/q |
|
according to the income effect, when the price of automobiles rises, people buy fewer automobiles because |
the purchasing power of their income is reduced |
|
_____ is the subjective measure of the physical that is anticipated from consumption |
utility |
|
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 and example of the |
income effect |
|
which of the following most directly reflects the law of diminishing marginal utility |
after listening to three compact discs, kim decides to go bowling rather than listen to a fourth disc. |
|
in Exhibit 7-7, by filling in the blanks, it can be determined that the marginal cost of the third unit of output is |
1,200 |
|
as shown in Exhibit 7-4, the law of diminishing returns applies in the range of |
over 5 workers per day |
|
which of the following statements is true |
tfc= tc-tvc |
|
the short run is a time period such that |
the existing firms in the market do not have sufficient time to increase the size of their existing plant or build a new factory |
|
a downward sloping portion of a long run average total cost curve is the result of |
economies of scale |
|
the long run is a period of |
sufficient length to allow a firm to alter its plant size and capacity and all other factors of production |
|
by filling in the blanks in Exhibit 7-8, the total cost of producing 5 pizzas is shown to be equal to |
$160 |
|
by filling in the blanks in Exhibit 7-12, the afc of 3 pizzas is shown to be equal to |
$13.33 |
|
the long run is a period of time |
that is long enough to permit changes in all the firm's inputs, both fixed and variable |
|
Exhibit 7-1 shows the change in the production of pizzas as more workers are hired. the total output of pizzas after hiring 4 workers is |
18 |
|
the opportunity costs associated with use of resources owned by a firm are |
implicit costs
|
|
a bus is mostly filled with passengers and ready to travel from Los Angeles to San Francisco. At the last minute, a person comes running up to the bus and takes a seat. the change in the bus company's total cost as a result of transporting one more passenger on this trip is called |
marginal cost |
|
the decreasing portion of a firm's long run average cost curve is attributable to |
economies of scale |
|
in Exhibit 7-6, the total fixed cost is |
1,000 |
|
a firm has $200 million in total revenue and explicit costs of $190 million. Suppose its owners have invested $100 million in the company at an opportunity cost of 10% interest rate per year. the firm's economic profit is |
zero |
|
Exhibit 7-1 shows the change in the short run production of pizzas as more workers are hired. the table shows marginal product increasing between the 0 to 2 workers hired. a possible reason for this increased marginal product is |
increased division of labor as additional workers are hired. |
|
marginal cost is calculated by dividing the change in total cost by change in total output |
true |
|
in Exhibit 7-16, which firm's long run average cost curve experiences constant returns to scale |
firm b |
|
which of the following is true |
when marginal productivity of a variable input is falling then marginal costs of production must be rising |
|
payments to nonowners of a firm are called |
explicit costs |
|
Exhibit 7-1 shows the change in the short run production of pizzas as more workers are hired. the table shows the marginal product of the labor input is decreasing with the hiring of the third worker. a possible reason for this diminishing marginal product is |
decreases in labor productivity
|
|
the marginal product curve rises when the marginal cost curve rises |
false |
|
Exhibit 7-2 shows the labor, energy, and materials cost of making various quantities of pizzas. the table shows that the energy cost of making pizzas will |
increase at a decreasing rate |
|
suppose a firm earns an accounting profit. this means the firm also earns a positive economic profit |
false |
|
given the short run average total cost curves in Exhibit 7-17, what level of output per week minimizes average total cost |
q2 units |
|
if both the marginal cost and the average variable cost curves are U shaped. at the minimum point on the average variable cost curve, the marginal cost must be |
equal to the average variable cost |
|
implicit costs are best thought of as |
opportunity costs
|
|
if economic profit is zero, then a normal profit is earned |
true |
|
bill is an accountant for a small machine shop. his boss has asked him to calculate the shop's total fixed cost. which method will get bill the correct answer |
C AND D determining what the shop would pay for if they produced zero output subtracting the total variable costs from the total costs |
|
a firms average fixed cost curve can never be U shaped, even if its other average cost curves are U shaped |
true |
|
as shown in Exhibit 7-3, the marginal product of labor for the last worker hired when 2 workers are employed per day is |
100 |
|
which of the following is true if the total cost curve is rising |
marginal cost is increasing |
|
the total fixed cost remains constant as which of the following varies |
output in a given period of time |
|
the maximum point on the marginal cost curve corresponds to the |
inflection point on the total variable cost curve |
|
in Exhibit 7-13, ATC is shown by the graph labeled |
v |
|
an economist left his $100,000 a year teaching position to work full time in his own consulting business. in the first year, he had a total revenue of $200,000 and business expenses of $150,000. he made a(n) |
economic loss |
|
in the long run, total fixed cost |
does not exist |
|
Exhibit 7-1 shows the change in the short run production of pizzas as more workers are hired. the marginal product of the second employee equals |
6 |