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intermediate microeconomics
Microeconomics 10th Edition Stephen Slavin - Solutions
If food were free in your school cafeteria, you would keep eating until . ( LO2 )a) your total utility was zerob) your marginal utility was zeroc) your consumer surplus was zerod) you were sick
Price gouging will . ( LO6 )a) raise consumer surplusb) lower consumer surplusc) have no effect on consumer surplus
Price gouging can take place only when. ( LO1 , 6 )a) there is a natural disasterb) buyers are poorly informed about market conditionsc) some buyers are willing to pay the asking price, however highd) the forces of supply and demand are not operating
Which statement is true? ( LO1 )a) The utility of a plasma TV is greater than the utility of a 2001 Honda Accord.b) A $50 ticket to a Broadway show provides the ticket-holder with more utility than a $100 ticket to a different Broadway show.c) No one would pay for a service that provided him with
If a 10-dollar bill was found lying on the sidewalk,. ( LO1 )a) if a rich person found it, she would get more utility from what she could buy with it than a poor personb) if a poor person found it, she would get more utility from what she could buy with it than a rich personc) there is no way to
If the marginal utility you derived from the last video game you played was $1.75 and the game cost 50 cents to play, . ( LO1 , 2 )a) you have been playing the game too longb) you haven’t been playing the game long enoughc) there is no way to determine whether you have played the game long enough
In Figure 2 (price is JK) consumer surplus is bounded by . ( LO6 )a) JKMNc) JLNb) KLMd) none of these
Doug Horn will buy more and more of a good or service until . ( LO4 )a) marginal utility is greater than priceb) price is greater than marginal utilityc) price is equal to marginal utility
Which statement is false? ( LO2 , 5 )a) The water–diamond paradox can be resolved with the help of the law of diminishing marginal utility.b) We will consume a service when its marginal utility is equal to its price.c) The law of diminishing marginal utility has little validity today.d) None is
In Figure 1 (price is OA) consumer surplus is bounded by . ( LO6 )a) OBDc) ABCb) OACDd) none of these
As the price of a service rises, . ( LO6 )a) the consumer surplus decreasesb) the consumer surplus increasesc) the consumer surplus may increase or decrease
A product’s utility to a buyer is measured by. ( LO1 )a) its usefulnessb) its pricec) how much the buyer is willing to pay for itd) none of the above
If we know Olivia King’s demand schedule, we can fi nd . ( LO1 , 3 )a) her marginal activity, but not her total utilityb) her total utility, but not her marginal utilityc) both her total utility and her marginal utilityd) neither her total utility nor her marginal utility
What is a consumer surplus? ( LO6 )
Explain the law of diminishing marginal utility. ( LO2 )
Defi ne marginal utility. ( LO1 )
State the general utility formula. ( LO4 )
If Matthew Avischious were to purchase fi ve drinks at $1 each, he would enjoy a consumer surplus. ( LO6 )
As increasing amounts of a product are consumed, marginal utility will decline. ( LO2 )
Utility is measured by a product’s usefulness. ( LO1 )
We are maximizing our utility when the marginal utility of each good or service we purchase is equal to its price. ( LO1 , 2 )
Total utility is at a maximum when marginal utility is zero. ( LO1 , 3 )
The concept of consumer surplus was formulated by Alfred Marshall. ( LO6 )
Total utility will rise as long as marginal utility is rising. ( LO1 , 3 )
The water– diamond paradox has never been resolved. ( LO5 )
Practical Application: What if you could walk into a music store and get as many CDs as you wanted for free, provided that you listened to 30 seconds of each song on each CD? Question: How many CDs would you listen to? Explain your answer in terms of marginal utility.
Why would Tommy Watson eventually reach the point of negative marginal utility at an all-you-can-eat restaurant?
A tax cut supply. ( LO7 )
A perfectly elastic supply curve can be shown graphically as . ( LO5 )
A tax on a service that has a relatively elastic demand and a relatively inelastic supply will be borne mainly by the . ( LO7 )
Over time the elasticity of supply for a particular good or service tends to become . ( LO5 )
Elasticity of demand is a measure of the responsiveness of to changes in price. ( LO1 )
The fi rm with this demand curve shown in Figure 4 would receive the highest total revenue at point. ( LO3 )a) Ab) Bc) Cd) De) E
Total revenue would be maximized when elasticity is . ( LO3 )a) above 10b) risingc) fallingd) 1e) 0
Movie tickets and DVD rentals are services. ( LO4 )a) inferiorb) complementaryc) substituted) highly inelastic
A fi rm seeking to maximize its total revenue would lower its price until price elasticity of demand was . ( LO3 )a) a maximumb) a minimumc) one
Figure 3 shows . ( LO1 , 5 )a) a perfectly inelastic supply curveb) a perfectly inelastic demand curvec) a perfectly inelastic demand curve or a perfectly inelastic supply curved) none of the above
Which is the most accurate statement? ( LO7 , 5 )a) The demand for gasoline is very elastic.b) The demand for home heating oil is very inelastic.c) The seller of a perishable commodity has a relatively elastic supply.d) Most fi rms can double their output in the short run.
Supply is most elastic in . ( LO6 )a) the market periodb) the short runc) the long run
The imposition of a tax . ( LO7 )a) raises both supply and demandb) lowers neither supply nor demandc) lowers only supplyd) lowers only demand
As a result of the tax, the consumption of this good falls by about . ( LO7 )a) 4d) 7b) 5e) 8c) 6
About how much of the tax is paid by the sellers? ( LO7 )a) 80 centsd) 35 centsb) 65 centse) 10 centsc) 50 cents
About how much of the tax is paid by consumers in the form of higher prices? ( LO7 )a) 10 centsd) 50 centsb) 20 centse) 65 centsc) 35 cents
How much is the tax? ( LO7 )a) $.35d) $1.00b) $.50e) $1.50c) $.65
A tax will . ( LO7 )a) lower price and raise supplyb) lower price and lower supplyc) raise price and lower supplyd) raise price and raise supply
If supply is perfectly inelastic, a tax increase is borne. ( LO7 )a) only by the buyerb) only by the sellerc) mostly by the buyerd) mostly by the seller
When demand is perfectly elastic, a tax increase is borne . ( LO7 )a) only by the buyerc) mostly by the buyerb) only by the sellerd) mostly by the seller
Statement I. When demand is inelastic and price is lowered, total revenue will rise.Statement II. Demand is unit elastic when elasticity is one. ( LO3 )a) Statement I is true, and statement II is false.b) Statement II is true, and statement I is false.c) Both statements are true.d) Both statements
Statement I. A perfectly elastic demand curve has an elasticity of zero.Statement II. When demand is elastic and price is raised, total revenue will fall. ( LO1 )a) Statement I is true, and statement II is false.b) Statement II is true, and statement I is false.c) Both statements are true.d) Both
A 5 percent increase in the price of sugar causes the quantity demanded to fall by 15 percent. The demand for sugar is . ( LO1 )a) perfectly elasticd) inelasticb) elastice) perfectly inelasticc) unit elastic
A perfectly elastic supply curve is . ( LO1 )a) a horizontal lineb) a vertical linec) neither a horizontal nor a vertical line
Over time the supply of a particular good or service tends to . ( LO5 )a) become more elasticb) become less elasticc) stay about the same
If demand is elastic and price is lowered, total revenue will . ( LO3 )a) riseb) fallc) stay the samed) possibly rise or possibly fall
If demand is inelastic and price is raised, total revenue will . ( LO3 )a) riseb) fallc) stay the samed) possibly rise or possibly fall
Draw a demand curve with unitary elasticity everywhere. (Hint: Think about total revenue.)
Estimate your elasticity of demand for (a) gasoline; (b) cigarettes; (c) video rentals.
Then draw a second demand curve, D 2 , that illustrates a decrease in demand. ( LO7 )
Draw a demand curve, D 1 , in Figure
Equilibrium price is $ ; equilibrium quantity is . ( LO7 , 8 )
Given the information in Table 2 , draw a graph of the demand and supply curves on a piece of graph paper. ( LO7 )
Equilibrium price is $ ; equilibrium quantity is . ( LO7 , 8 )
Given the information in Table 1 , draw a graph of the demand and supply curves on a piece of graph paper. ( LO7 )
If business owners expected a steep drop in prices, they would take action which would tend to supply. ( LO5 )
The main reason for changes in supply is changes in the . ( LO5 )
An increase in supply is shown graphically by a shift of the supply curve to the . ( LO5 )
As price falls, quantity demanded . ( LO4 )
At , quantity demanded equals quantity supplied. ( LO8 )
As price rises, quantity supplied . ( LO4 )
If demand falls and supply rises, then equilibrium quantity .
If demand rises and supply falls, then equilibrium price .
If demand and supply both fall, then equilibrium quantity .
If demand and supply both rise, then equilibrium price .
An increase in the supply of running shoes will—assuming demand is unchanged—lead to. (LO7)a) an increase in equilibrium price and an increase in equilibrium quantityb) a decrease in equilibrium price and a decrease in equilibrium quantityc) an increase in equilibrium price and a decrease in
If the price of cameras falls, there will be a(n). ( LO2, 3 , 5 )a) decrease in the demand for fi lmb) decrease in the quantity of cameras demandedc) decrease in the supply of camerasd) increase in the demand for camerase) increase in the quantity of cameras demanded
A move from L to J
A move from D 1 to D 2
A move from K to L
A move from J to K
Equilibrium quantity is . ( LO8 )a) below 13c) between 13 and 15b) 13d) above 15a) an increase in demandb) a decrease in demandc) a change in quantity demanded
Equilibrium price is . ( LO8 )a) below $8c) between $8 and $10b) $8d) above $10
When market price is above equilibrium price, the market price will be driven . ( LO6 )a) up by unhappy buyersb) up by unhappy sellersc) down by unhappy buyersd) down by unhappy sellers
Which statement is true? ( LO1 , 2 , 4 )a) A change in demand is the same thing as a change in the quantity demanded.b) The supply curve moves upward to the left.c) The law of demand is no longer valid.d) A rise in income will increase the demand for normal goods.
A decrease in supply can be brought about by. ( LO5 )a) a price increaseb) a price decreasec) a random event like a hurricane or an earthquaked) a change in consumers’ tastes or preferences
The demand for an inferior good is . ( LO1 , 2 )a) positively related to its own priceb) negatively related to incomec) unaffected by consumer tastes and preferencesd) insensitive to changes in prices of its complements
Suppose the price of a service falls and people buy more of that service. What has happened? ( LO 2 )a) Quantity demanded changed.b) Demand increased.c) Demand decreased.
The retail market for gasoline is . ( LO1 )a) localc) nationalb) regionald) international
Changes in supply may be caused by changes in. ( LO5 )a) the cost of factors of productionb) the level of technologyc) the number of suppliersd) all of the abovee) none of the above
Change in which of the following would not quickly cause a shift in demand? ( LO2, 3 )a) Number of buyersb) Tastesc) Buyers’ perception of quality of productd) Incomee) Price
Goods for which demand is directly (positively)related to income are called . ( LO1 )a) substitute goodsb) complementary goodsc) inferior goodsd) normal goods
As price rises . ( LO4 )a) supply risesb) supply fallsc) quantity supplied risesd) quantity supplied falls
Web Activity: Go on eBay.com to fi nd the highest and lowest current auction prices for “Seinfeld complete set seasons 1 through 9.”
Web Activity: Find the cheapest possible round-trip New York–Los Angeles fl ight that leaves New York on December 1st and returns from Los Angeles on December 8th.Try priceline.com and Travelocity.com
Practical Application: You’re moving into a new house one week from today. Checking the local newspaper and the phone book, you fi nd 10 movers. Each one of them gives you a quote at least $1,000 more than you think you should pay. Explain what you will do in terms of demand and supply.
If marijuana were legalized, what do you think would happen to the supply and demand curves and the price? Show this graphically.
If you were a seller, why would you want to limit supply—either by keeping out new market entrants or by establishing production quotas for everyone? Show this graphically.And why would you hate that if you were a consumer?
Use examples from your own experience to illustrate (a) a change in demand; (b) a change in the quantity demanded. Draw a graph for each example showing what happened to prices.
Price fl oors keep prices equilibrium price; price ceilings keep prices equilibrium price. ( LO5 , 6 )
If price were $8, there would be a (shortage or surplus) of units of quantity. ( LO5 , 6 )
If price were $20, there would be a (shortage or surplus) of units of quantity. ( LO5 , 6 )
Equilibrium quantity is about . ( LO3 )
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