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Microeconomics 201 > Econ Exam: Final May 13 ( tests 1 & 2) > Flashcards

Econ Exam: Final May 13 ( tests 1 & 2) Flashcards

1
Q

The law of demand:

A

tells us that demand curves slope down to the right

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2
Q

When the slope of a curve is positive, this means:

A

an increase in the independent variable will cause an increase in the dependent variable

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3
Q

When the slope of a curve is negative, this means

A

a decrease in the independent variable will cause an increase in the dependent variable

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4
Q

What are the three economic agents?

A

firms, government, household

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5
Q

what are the 4 economic questions?

A

How to produce? How much to produce? Who are we producing for? what are we producing?

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6
Q

Which of these 4 concepts are illustrated in the ppc curve?

a. scarcity
b. equity
c. efficiency
d. choices

A

scarcity, efficiency, choices

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7
Q

What are variables that affect the demand of a product?

A

price of substitutes, price of compliments, price of good x

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8
Q

What are variables that affect the demand of a product?

A

expectations of consumers, income of consumers, price of good x

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9
Q

What are reasons for the law of demand holding true?

A

the substitution effect, the income effect, law of diminishing marginal utility

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10
Q

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

A

an increase in the price of salads will cause a decrease in the quantity of salads demanded

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11
Q

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

A

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

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12
Q

which statement best illustrates the concept of diminishing marginal utility?

A

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

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13
Q

the term economic scarcity in economics refers to the fact that

A

no country can produce enough to satisfy everyone’s wants

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14
Q

The main difference between the long run and short run is that

A

in the short run, at least one input is fixed

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15
Q

which expression is another way of saying marginal benefit?

A

extra benefit

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16
Q

the law of supply is illustrated by a supply curve that is

A

upward sloping

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17
Q

economic scarcity is:

A

a problem every economy must deal with

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18
Q

an example of capital is :

A

an office computer

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19
Q

when a demand schedule is drawn on a graph:

A

the resulting curve has a negative slope, price is measured on the vertical axis, other variable are held constant

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20
Q

When the price of good (j) decreases the demand for good (k) increases. this means that j and k are:

A

complements

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21
Q

microeconomics covers which two goals?

A

efficiency and equity

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22
Q

the law of diminishing marginal utility means that as a typical consumer consumes units of a product:

A

total utility increases and marginal utility decreases

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23
Q

Which of the following is not held constant when a demand curve is drawn?

A

the price of the product itself

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24
Q

Which is an example of a normal good?

A

steak

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25
Q

which is a variable that affects supply?

A

technology

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26
Q

the law of demand is illustrated by a demand curve that is

A

downward sloping

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27
Q

There are four job offers available to you: a job that pays $80,000, $70,000, $65,000, and $55,000. If you were to choose the $70,000 option what would your opportunity cost be?

A

$80,000

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28
Q

A normative statement is one which

A

is based on value judgements

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29
Q

assume an economy is operating at some point on its ppc which shows civilian and military goods. If the output of military goods is increased, the output of civilian goods

A

must also be decreased

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30
Q

The demand curve shows the relationship between

A

price and quantity demanded

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31
Q

the relationship between quantity supplied and price is ____ while the relationship btwn quantity demanded and price is____.

A

direct, inverse

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32
Q

camera and film are

A

complementary goods

33
Q

utility refers to the

A

satisfaction which a consumer receives from a good or service

34
Q

we would see an upward sloping demand curve for a

A

giffen good

35
Q

T or F. economic scarcity deals with the fact that our economy runs out of certain resources.

A

FALSE

36
Q

T or F. This is an example of a positive statement. Students should come to class everyday.

A

FALSE

37
Q

T or F. ice cream and chocolate sauce would be examples of substitute goods

A

FALSE

38
Q

T or F. purses and shoes would be examples of substitute goods

A

FALSE

39
Q

T or F. a BMW is an example of a normal good

A

TRUE

40
Q

T or F. a ppc that is a straight line has an increasing opportunity cost as we trade production of one good for another

A

false

41
Q

t or f. there are many good giffen goods in our economy

A

false

42
Q

the difference between the complete market demand function and single market demand function is the use of the concept ceteris paribus

A

true

43
Q

T or F. market prices give us an idea of the relative value of products

A

true

44
Q

the value of the marginal utility for a given unit is the same as the slope of the total utility at that quantity

A

true

45
Q

T or F. the law of diminishing returns is a short run concept because capital can be changed in the long run

A

true

46
Q

T or F. our economy determines the allocation of resources through prices and competitive markets

A

true

47
Q

The market for ragu spaghetti sauce changes due to a price decrease in spaghetti. this change causes the following:

A

the demand curve will shift to the right, equilibrium price will rise, equilibrium quantity will rise

48
Q

the market for wooden shelves changes due to a price decrease in lumber. this change causes the following:

A

the supply curve will shift to the right, equilibrium price will fall, equilibrium quantity will rise

49
Q

the market for galaxy 17s changes due to a tax refund of $1000 going to every resident of Fargo. this change causes the following:

A

the demand curve will shift to the right, equilibrium price will rise, equilibrium quantity will rise

50
Q

recent studies have shown that price elasticity of demand for theatrical plays are at current prices is approximately .150.

A

plays are relatively inelastic

51
Q

if the price of plays increased by 10%:

A

consumers would decrease their purchases by less than 10%

52
Q

to increase total revenue, theaters should

A

increase the price

53
Q

recent studies have shown that the price elasticity of demand for snowmobiles at current prices is approximately 3.00

A

snowmobiles are relatively elastic

54
Q

if the price of snowmobiles increased by 10%

A

consumers would decrease their purchase by more than 10%

55
Q

to increase total revenue, snowmobile dealers should

A

decrease price

56
Q

Calculate cross price elasticity for the following situation. The price of (a) increases from $8 to $9, which causes quantity demanded of (b) to increase from 10 to 11.

A

0.814

57
Q

What is the significance of this?

A

these two goods are substitutes

58
Q

Calculate the income elastic of demand for the following situation. A consumers income falls from $500 per week to $480 per week, which causes q demanded of (f) to decrease from 7 to 5.

A

8.350

59
Q

what is the significance of the answer?

A

this good is normal

60
Q

Want to make up a new elasticity to measure the responsiveness of consumers of ice cream to changes in the daily temperature. What is the formula used to calculate elasticity?

A

Q(new)-Q(old)/Q(new)+Q(old) all divided by T(new)-T(old)/T(new)+T(old)

61
Q

in the previous question, what would be important?

A

the value of the calculated answer

62
Q

if we were to calculate the price elasticity of supply and derive the answer .623, what would be the significance of your answer?

A

it is relatively inelastic

63
Q

an increase in income shifts the consumers:

A

budget line to the right

64
Q

a change in the slope of a budget line is solely the result of a change in

A

the price of one or both goods

65
Q

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

A

marginal utility per dollar spent is the same for all goods

66
Q

cross price elasticity of demand measures how sensitive purchase of a specific product are to changes in:

A

the price of some other product

67
Q

an indifference curve shows all

A

combinations of two products yielding the same total utility to a consumer

68
Q

What are characteristics of indifference curves?

A

they are downsloping, they are convex to origin, their slope diminishes as we move from northwest to southeast on a given curve

69
Q

in class we:

A

discuss concepts

70
Q

t or f. a price ceiling would create a shortage in the market

A

true

71
Q

t or f. most governments would more likely place a tax on an elastic item

A

false

72
Q

eggs would be an example of an inelastic good

A

true

73
Q

t or f. there would be no problem if indifference curves were to cross.

A

false

74
Q

to be realistic, indifference curves have to be represented by straight lines most of the time.

A

false

75
Q

t or f. the solution to the consumer maximization problem given in class is to find the point in which the budget line is just tangent to one indifference curve

A

true

76
Q

t or f. consumer surplus is derived by a consumer that is willing to pay a higher price than the market price for a product

A

true

77
Q

the government might impose a price flor on a market to protect consumers?

A

false

78
Q

in economic models, we assume that consumers will be rational in their decision making

A

true

79
Q

t or f. if a products current price is in the elastic portion of the demand curve, then total revenue could be increased by increasing the price

A

false

Microeconomics 201 (9 decks)

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