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Principles of Microeconomics Midterm 1 Quiz

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Questions and Answers

In the figure Consumer Surplus in the Market for Garden Gnomes I, if the good is being given away for free, consumer surplus equals the area:

AFP1 (correct)
BGF
ABP2
AQ30

The statement 'The current trade deficit of $350 billion is too high' is a _____ statement.

positive
normative (correct)
ceteris paribus
marginal

If an economy is producing 12 tons of soybeans and 9,000 bottles of apple cider, we know that the economy:

is using its resources inefficiently (correct)
has unemployment
is producing at an unattainable point
is using its resources efficiently

If the price elasticity of demand for Golden Santa boxes of chocolates is 2, by how much will the company have to reduce its price to sell the additional 500 boxes of chocolate (by the midpoint method)?

<p>25% (C)</p> Signup and view all the answers

The information about the production capabilities of the United States and Canada implies that:

<p>"The United States has a comparative advantage in producing electric cars." (D)</p> Signup and view all the answers

Flashcards

Consumer Surplus (Free Good)

The area above the price and below the demand curve, up to the quantity consumed.

Normative Statement

A statement that reflects an opinion, value judgement, or what 'should be'.

Inefficient Production

Operating inside the Production Possibilities Frontier (PPF).

Price Reduction for Increased Sales

If demand is elastic (greater than 1), price must be decreased by 25% to sell 500 extra boxes. Calculation:% change in quantity = 500/average / % Change in price: 2 = 50%/ % change in price or 25%

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Comparative Advantage

The United States can produce electric cars at a lower opportunity cost than Canada.