Microeconomics Mid-Term Exam Review

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• Unitary Elasticity

• Elastic

• Inelast

• Elasticity

• Unitary Elasticity

• Perfect Elasticity

• Perfect Inelasticity

• Unitary Elasticity

• Perfect Inelasticity

• Perfect Elasticity

• Inelasticity

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• Elasticity

• Inelasticity

• Unitary Elasticity

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• Unitary Elasticity

• Elasticity

• Inelasticity

WHAT TYPE OF SURPLUS IS YELLOW ?

• Consumer Surplus

• Producer Surplus

WHAT TYPE OF SURPLUS IS PURPLE ?

• CONSUMER SURPLUS

• PRODUCER SURPLUS

The Fundamental Theorem of welfare economics states that, given a number of assumptions ( including free and fully competitive markets )

• Welfare payments to the poor will increase economic efficiency

• Welfare payment to the poor will increase economic equity

• Government intervention that reallocates resources will improve economic efficiency, as opposed to letting markets allocate resources

• No other allocation of resources will be more efficient than that obtained when there is a "general equilibrium" in all markets

Suppose there is a technological innovation in the production of pecans, while at the same time there is a decrease in the price of a consumption substitute , walnuts. Ceteris Paribus, what happens to the equilibrium price (P) and quantity (Q) of pecans ?

• P and Q both increase

• P and Q both decrease

• P decreases, but the impact on Q is indeterminate

• P increases, but the impact on P is indeterminate

• Q decreases, but the impact on P is indeterminate

Suppose there is a drop in the price of wool ---- an important ingredient (input) in the production of wooly mittens ---- while at the same time buyers' expectations of a cold winter leads to an increase in the demand for wooly mittens. Everything else held constant, what happens to the equilibrium price (P) and quantity (Q) of wooly mittens?

• P and Q both increase

• P and Q both decrease

• P increases and Q indeterminate

• P decraeses and Q indeterminate

• Q increases , but P is indeterminate