Worksheetsmicro exam 2
Total questions: 72
Worksheet time: 36mins
If Ayana's willingness to pay for a sweater is $37, which one of the following prices would she have to observe in the market in order to buy a sweater?
$37.01
$38.00
$37.00
$38.01
At prices above a consumer's willingness to pay,
the opportunity cost of buying the good is less than the benefit received from having the good.
the opportunity cost of buying the good is greater than the benefit received from having the good.
the buyer will purchase the good and attempt to resell it after receiving due benefit.
the buyer needs more income in order to buy the good.
If the price of a good is less than a buyer's willingness to pay, then the buyer will ________ the good because the opportunity cost of buying the good is ________ than the benefit received from consuming the good.
purchase; less
purchase; more
not purchase; less
not purchase; more
Each seller's opportunity costs are
determined monetarily, which is why they can never be zero.
determined by a number of factors, none of which is monetary.
determined by a number of factors, including monetary considerations.
Suppose Sam's opportunity cost of producing a sweater is $37. Which one of the following prices would he have to observe in the market in order to sell a sweater?
$36.99
$30
$36
$39
When someone's willingness to pay is the same as the actual price paid for an item, which of the following is true?
the individual will not purchase the item.
the individual's surplus is zero.
surplus cannot be maximized.
the individual experiences negative surplus.
Refer to the first graph. Assume the market depicted in the graph is in equilibrium. Total surplus consists of area(s):
A
A + B + C
A + B + C + D + E
D + E
Assume the market depicted in the graph is in equilibrium. Total surplus consists of area(s):
A
A + B + C
B + C
A + B
Consider a market that is currently in equilibrium. If the demand curve shifts to the right and a new equilibrium is reached, then
total surplus will decrease.
consumer surplus may increase or decrease.
producer surplus will increase.
producer surplus will decrease.
When a perfectly competitive, well-functioning market is in equilibrium,
consumer surplus is minimized.
producer surplus is minimized.
total surplus is maximized.
total surplus is zero.
When a market is efficient,
any additional changes to make someone better off will make someone else worse off.
a central planner must be involved.
total surplus is zero.
any additional changes to make someone better off will reduce the deadweight loss.
When the market price is set above the equilibrium price,
total surplus increases.
consumer surplus increases for some consumers but falls for others.
there are no exchanges that can make some better off without others becoming worse off.
the market is not efficient.
When the market price is set below the equilibrium price, which of the following is true?
total surplus increases.
the market is efficient.
deadweight loss is zero.
producer surplus falls.
Assume a market price is set artificially high. In other words, the price is set above the equilibrium price. How will the market be affected?
Every consumer loses surplus, and it all gets transferred to producers.
Every producer gains surplus, due to the higher price now being charged.
Some consumers drop out of the market, and those left lose some surplus.
The market will continue to operate efficiently due to the situation of excess supply.
Assume a market price is set artificially low. In other words, the price is set below the equilibrium price. How will the market be affected?
Every producer loses surplus, and it all gets transferred to consumers.
Some producers drop out of the market, and those left lose some surplus.
Every consumer gains surplus, due to the lower price now being charged.
The market will continue to operate efficiently due to the situation of excess demand.
When a market is missing, which of the following is true?
deadweight loss will increase, but only if more units are exchanged.
the government must create the market artificially.
total surplus could increase through the creation of a new market.
consumers' willingness to pay is too low to sustain the efficient quantity.
Total surplus can be increased if
new markets are created.
new technology is banned.
deadweight loss is increased.
all surplus goes to producers.
Suppose the market for kidneys is depicted in the graph shown. Kidneys can only be donated and cannot be sold (meaning price is zero). How many kidneys are donated in this hypothetical situation?
0
900
2,000
1,200
Which statement is true of surplus?
Surplus can accrue both to consumers (on the demand side) and to producers (on the supply side).
Consumer surplus is more important than producer surplus.
Suppose Steven wishes to buy a signed first-edition copy of J.K. Rowling’s Harry Potter and the Philosopher’s Stone. He is willing to pay a maximum of $250 for the book, which is his favorite novel. Which one of the following copies of the book will he not be willing to purchase?
a copy for sale on an antiquarian book website for $300
a copy sold for 25 cents at a garage sale
a copy offered for sale with a minimum $250 bid on eBay
a copy that a local bookstore is selling for $249.99
Maria was willing to pay $35 for a necklace that she really loved. The price was initially listed at $40, but the producer lowered the price of the necklace from $40 to $35 to make the sale. Which statement is true?
Maria receives $5 worth of consumer surplus.
Maria’s consumer surplus is zero.
Maria overpaid for the necklace.
Maria experiences negative consumer surplus.
Government attempts to lower, raise, or simply stabilize prices usually
maintain the distribution of surplus.
create unintended side effects.
improve the efficiency of a market.
lead to equilibrium in the market.
A government might attempt to protect dairy farmers from low milk prices by
banning households from hoarding milk.
setting a minimum price on milk.
Which one of the following is not a reason that government might intervene in a market?
to increase the efficiency of the market
to reduce the consumption of a "bad" product
to correct a market failure
to achieve equity among all citizens
Governments can discourage the consumption of certain goods by
giving a subsidy to consumers in those markets.
taxing substitute goods.
imposing a minimum price above the equilibrium price.
providing additional public funding for the production of those goods.
Which one of the following statements exemplifies a market failure?
One person's consumption of a good imposes costs on others.
A firm selling a product faces competition from many other sellers.
A good is priced too high for poor families to afford.
The distribution of surplus in a market is unfair.
If a good has only one producer, with no threat of competition, then the market for this good likely
has greater consumer surplus than in a competitive equilibrium.
has the price set inefficiently high.
has the price set below the competitive equilibrium price.
is efficient.
A market failure is most likely to occur when
a sole producer of a good faces no threat of competition.
several producers of a good compete for customers by having price wars.
several producers of a good search for the lowest-cost method of production.
many producers produce identical products, and only the consumers are affected by the transactions.
If a good has only one producer, with no threat of competition, then it is likely that government intervention in the market will
have no impact.
raise prices for consumers.
increase total surplus.
make buyers and sellers better off.
Why might a government impose a minimum wage?
to correct a market failure
to redistribute surplus in a market
to encourage the consumption of inferior goods
to discourage the consumption of inferior goods
In evaluating policy effectiveness, economists rely on
positive analysis.
normative analysis.
both normative analysis and positive analysis.
Economists can never fully analyze any real-world policy effectiveness.
For a price ceiling to be binding, it must be set ________ the equilibrium price, and it will likely cause ________.
above; a shortage
below; a shortage
above; excess supply
below; excess supply
Why do governments tend to set price ceilings?
to ensure that everyone can afford certain goods
to encourage producers to make enough for everyone
to help producers make enough profit to stay in the industry
to prevent consumers from choosing the wrong goods
Because a price ceiling causes
a shortage, some form of rationing must occur.
excess supply, some form of rationing must occur.
a shortage, the outcome will be efficient.
excess supply, the outcome will be inefficient.
For a price floor to be binding, it must be set ________ the equilibrium price, and it will likely cause ________.
above; a shortage
below; a shortage
above; excess supply
below; excess supply
Suppose that a price floor is set at $23 in the market shown in the graph. Which area(s) represent consumer surplus?
A
A + B
A + B + C
A + B + C + D
A tax imposed on a good can
discourage consumption of the good.
encourage production of the good.
increase the supply of complementary goods.
decrease prices paid by consumers.
A tax on sellers has what effect on a market?
The supply curve shifts vertically upward by the amount of the tax.
The demand curve shifts vertically downward by the amount of the tax.
Equilibrium price decreases and equilibrium quantity decreases.
A tax on sellers shifts the ________ by the amount of the tax.
supply curve left
demand curve left
supply curve up
demand curve down
The graph shown demonstrates a tax on sellers. Before the tax was imposed, the sellers produced ________ units and received ________ for each unit sold.
15; $16
31; $9
31; $19
15; $6
Does a tax on buyers affect the demand curve?
Yes, it shifts the demand curve downward.
No, it only affects the supply curve.
No, it does not affect either curve.
Yes, it shifts the supply curve upward.
If the demand curve is more elastic than the supply curve in a market that is taxed, then
buyers will bear a greater tax burden than sellers.
sellers will bear a greater tax burden than buyers.
the tax burden will be shared equally by buyers and sellers.
the demand curve is horizontal.
If the demand curve is less elastic than the supply curve in a market that is taxed, then
buyers will bear a greater tax burden than sellers.
sellers will bear a greater tax burden than buyers.
the tax burden will be shared equally by buyers and sellers.
the supply curve is vertical.
Does a subsidy to buyers affect the supply curve?
Yes; the supply curve shifts up by the amount of the subsidy.
Yes; the supply curve shifts to the right by the amount of the subsidy.
No; the supply curve does not move; instead, quantity supplied increases.
Does a subsidy to buyers affect the demand curve?
Yes; the demand curve shifts up by the amount of the subsidy.
Yes; the demand curve shifts to the right by the amount of the subsidy.
No; the demand curve does not move; instead, quantity demanded increases.
No; the demand curve does not move; instead, quantity demanded decreases.
Who benefits from a subsidy to buyers?
Only sellers benefit.
Only buyers benefit.
The benefit is shared by sellers and buyers depending on the elasticity of the supply and demand curves.
Only the government benefits.
We expect that a tax on cigarettes will be more effective at discouraging consumption over the ________ because the demand for cigarettes becomes ________ elastic over time.
long run; more
long run; less
short run; more
short run; less
Which one of the following is a reason that government might intervene in a market?
to try to increase the efficiency of the market
to reduce competition
to decrease incentives to work and invest
to achieve distributional equity among all residents
Which one of the following is not a method that the U.S. government has used to encourage or discourage consumption?
banning certain “bad” products, such as street drugs
taxing “bad” products, such as alcohol
subsidizing “good” products, such as electric-powered cars
setting limits on executive pay at large companies
Which one of the following statements is true about individuals and utility?
Individuals seek to maximize utility.
Individuals seek to minimize utility.
Individuals will either minimize or maximize utility depending on the situation.
Individuals focus more on maximizing income than on maximizing utility.
According to revealed preference, a consumer who chooses to smoke cigarettes
derives more utility from smoking than from other goods that could have been purchased with the money spent on cigarettes.
derives more happiness from smoking than from other goods that could have been purchased with the money spent on cigarettes.
is minimizing utility given the options available.
is behaving irrationally.
After browsing the shoe store for a while, Bob buys a pair of Nike running shoes. Economists would say that Bob
is revealing a strong distaste for New Balance running shoes.
will always choose Nike over any other shoe brand.
receives more utility per dollar from the Nike running shoes than from any other pair in the store.
will receive disutility from other pairs of running shoes.
Utility is useful when:
comparing the relative satisfaction different consumers receive from a particular good.
predicting whether a good or service will sell more if the price is lowered.
quantitatively describing a person's preferences for one good over another.
describing exactly how much an individual values one particular good.
Economists assume that an individual chooses the option that:
provides the least utility.
provides the most utility.
creates the most utility for society.
is the most efficient choice.
Mariana has an hour of free time during which she can either go for a run or a swim at the local pool. She decides to swim. Economists conclude that Mariana:
is revealing a preference for swimming over running.
will receive less utility from swimming than from running.
was unable to go for a run at that time.
is more skilled at swimming than she is at running.
Pranav is deciding what to drink from a cooler that contains cans of soda pop and iced tea. When Pranav chooses iced tea, we assume that he will receive more utility from drinking iced tea than from drinking soda pop. Which economic concept is this conclusion based on?
revealed preference
utility minimization
satisfaction scales
irrational behavior
Sadie has just eaten a donut that gave her a utility of 6. If she chooses to eat another donut, then we can assume that
she will receive an increase in utility of more than 6 from the additional donut.
she will receive a decrease in utility from the additional donut.
she will receive an increase in utility of less than 6 from the additional donut.
her total utility will fall because of diminishing marginal utility.
Grace has received a utility of 8 from eating a slice of pizza. If she chooses to eat a second slice of pizza, then
she will experience a drop in total utility.
she will not be acting rationally.
she will experience an increase in total utility.
she will experience an increase in marginal utility.
Catarina has just eaten her second bowl of cereal. Which one of the following statements is likely true?
Her second bowl reduced her total utility.
Her second bowl added less to her total utility than the first.
Her third bowl will decrease her total utility.
Her third bowl will increase her total utility by at least as much as the second.
Thinking about the total utility gained from the consumption of a typical good, we can say in general that
total utility will rise, peak, and then decline as more and more units are consumed.
consuming more and more units of a good will eventually cause marginal utility to increase.
total utility will increase by decreasing amounts until it is maximized, after which it declines.
total utility is maximized at the point at which the marginal utility is greatest.
Johnny spends his Saturday doing a variety of activities. In the morning he exercises and does yard work. He reads in the afternoon and meets friends at a local coffee shop in the evening. Economists say that his choice to do a variety of activities instead of spending all of his time on one activity illustrates the concept of:
tastes and preferences.
budget constraints.
diminishing marginal utility.
the income effect.
After watching a movie, Alan chooses to go for a walk rather than watch a second movie. Economists explain his choice using the concept of:
budget constraints.
diminishing marginal utility.
the income effect.
the substitution effect.
One individual's budget constraint
will be the same as another individual's budget constraint if both people have the same income.
will be the same as another individual's budget constraint if both people have the same income and preferences.
will be the same as another individual's budget constraint if both people have the same preferences.
can never be the same as another individual's budget constraint.
The slope of a budget constraint
represents the opportunity cost of the two goods relative to each other.
represents the relative marginal utilities from consuming the two goods.
measures the total utility the consumer gets from consuming the two goods.
is the consumer’s income level.
When a person's income increases, Which statement is correct?
more bundles of goods and services become affordable.
fewer bundles of goods and services become affordable.
there is no change in how many bundles of goods and services become affordable.
more expensive bundles of goods and services become affordable.
When an individual's income increases, the budget constraint
shifts straight out, maintaining the same slope.
shifts straight in, maintaining the same slope.
rotates out and becomes flatter.
rotates in and becomes steeper.
In general, a change in the price of a good Which statement is correct?
causes a substitution effect only.
causes an income effect only.
causes both an income effect and a substitution effect.
Suppose the price of one good changes, while the prices of all other goods stay the same. Which one of the following statements is not true?
The relative change in prices is reflected in a change in the slope of the budget constraint.
The relative change in prices can be thought of as a change in the opportunity costs of each good.
The relative change in prices is reflected in a change in the marginal utility per dollar spent on each good.
The relative change in prices will lead to an income effect but not a substitution effect.
Max is shopping for a new winter jacket. He is deciding between two coats that have identical features but are made by different brands: Columbia and Michael Kors. The Columbia jacket costs 120,andtheMichaelKorsjacketcosts 300. Max decides to buy the Michael Kors jacket. Max’s decision indicates that the Michael Kors jacket may be a(n) ________ good.
normal
inferior
Veblen
Giffen
Sam earns a high income and owns two cars, a trusty old Volvo and a sleek new Lamborghini. On Monday he chooses to drive the Volvo, but on Tuesday he chooses to drive the Lamborghini. Economists will most likely conclude that, between Monday and Tuesday,
Sam’s preferences have changed.
Sam’s preferences have not changed, but other factors, such as the place he expects to park his car, may have changed.
Sam is not acting rationally because both cars provide the same basic service of transportation.
Sam doesn’t understand that choosing to drive the Lamborghini will always maximize his utility.
The table describes the different combinations of goods that Sheryl can consume, given that she has $10 to spend on these two items. Sheryl has already purchased and consumed 4 candy bars and 1 banana. How much of her budget has she spent?
$4
$6
$8
$10
The table describes the different combinations of goods that Dante can consume, given that he has $10 to spend on these two items. Bundle ________ will provide the most total utility for Dante, while bundle ________ will provide the least.
B; F
C; A
D; C
F; A
