Mid-Semester Practice Questions Flashcards
Because resources are scarce
People must make choices among alternatives
Suppose a student has an hour before their next class starts. They can either read a book, get something to eat, or take a nap. The opportunity cost of getting something to eat is
Impossible to determine because the most preferred alternative is not known
The income effect refers to the impact of a change in
None of the above
Sugar and honey are viewed as substitutes for each other in many cooking applications. If the price of sugar rises, we would expect
The demand for honey to increase
In 1971, a pocket calculator cost more than $75. In 2010, a calculator of the same quality cost less than $10. Which of the following explanations is most consistent with these facts?
A change in technology cause the supply curve for calculators to shift to the right, depressing the price.
Which of the following statements about the substitution effect of a price change is true
It is caused by a change in relative prices
If the market for beef cattle was initially in equilibrium, an increase in the price of the feed grains used to fatten cattle would cause:
The supply of beef cattle to decrease, driving beef prices upward in the long run
The producer surplus for an individual unit of output sold can be found by
Subtracting marginal cost from the selling price
Consumers derive consumer surplus whenever
The monetary value of total benefit is greater than total expenditure
Suppose there are only two goods: apples and oranges. What happens if the price of each good increases 15%
There is no substitution effect because relative prices have remained constant
If a country is an importer of a particular good, this means that the world price is:
Below what the domestic equilibrium price is
An argument for imposing tariffs on imported goods might be
A new industry requires initial protection from established exporters, jobs will be destroyed without tariffs, Other countries impose tariffs on our goods so we need to reciprocate, the domestic industry is necessary for national security purposes
If a five percent increase in price leads to an eight percent decrease in quantity demanded, demand is
Elastic
In calculating price elasticity of demand, we use average price and average quantity as our base values because
The resulting measure is then not influenced by whether price us rising or falling
If a firm lowers the price of its product, its total revenue will
Decrease only if demand is price inelastic
