EC 111 Final Review Slideshow PDF

Welcome! EC 111 Final Review Session ________________________ Presented by Geek Squad 8 December 2024 1  Geek Squad — Who We Are We are a team of Office of Student Success Peer Tutors who collaborate with academic departments to create re...

Welcome! EC 111 Final Review Session ________________________ Presented by Geek Squad 8 December 2024 1  Geek Squad — Who We Are We are a team of Office of Student Success Peer Tutors who collaborate with academic departments to create review material for the following courses: AC 115, AC 201, EC 111, FI 118, and MA 105 We present comprehensive review sessions in a question-and-answer format to help prepare students for their exams 2 Opportunity Cost 3 Opportunity Cost 1. Suppose you paid $300 to take an economics course, which meets 30 times for one hour each class during the course of the semester. Instead of attending class you could have either flipped hamburgers for $8 an hour or waited tables for $5 an hour. Given this information, the opportunity cost of attending each class session is: A. $ 30. B. $ 18. C. $ 8. D. $ 13. 4 Opportunity Cost 1. Suppose you paid $300 to take an economics course, which meets 30 times for one hour each class during the course of the semester. Instead of attending class you could have either flipped hamburgers for $8 an hour or waited tables for $5 an hour. Given this information, the opportunity cost of attending each class session is: A. $ 30. B. $ 18. C. $ 8. D. $ 13. 5 Opportunity Cost 2. If the opportunity costs associated with producing either of the two products are constant, the production possibility curve would be: A. bowed outward. B. bowed inward. C. a horizontal line. D. a downward-sloping straight line. 6 Opportunity Cost 2. If the opportunity costs associated with producing either of the two products are constant, the production possibility curve would be: A. bowed outward. B. bowed inward. C. a horizontal line. D. a downward-sloping straight line. 7 Comparative Advantage 3. The following table shows the number of donuts or cupcakes that John and Tony can produce in one day. Who has the comparative advantage in producing donuts? A. Tony B. John 8 Comparative Advantage 3. The following table shows the number of donuts or cupcakes that John and Tony can produce in one day. Who has the comparative advantage in producing donuts? A. Tony B. John 9 Price Elasticity of Demand 10 Elasticity and Demand 4. If at a price of $24, Octavia sells 36 home-grown orchids and at $30 she sells 24 home-grown orchids, the demand for her orchids is: A. elastic. B. inelastic. C. unit-elastic. D. perfectly elastic. 11 Elasticity and Demand 4. If at a price of $24, Octavia sells 36 home-grown orchids and at $30 she sells 24 home-grown orchids, the demand for her orchids is: A. elastic. B. inelastic. C. unit-elastic. D. perfectly elastic. 12 Price Elasticity 5. If the percentage increase in price is 15 percent and the value of the price elasticity of demand is 3, then quantity demanded: A. will increase by 45 percent. B. will increase by 5 percent. C. will decrease by 45 percent. D. will decrease by 5 percent. 13 Price Elasticity 5. If the percentage increase in price is 15 percent and the value of the price elasticity of demand is 3, then quantity demanded: A. will increase by 45 percent. B. will increase by 5 percent. C. will decrease by 45 percent. D. will decrease by 5 percent. 14 Price Elasticity 6. Economists estimated that the price elasticity for apple juice is 0.23. This means that: A. an increase in the price of apple juice will increase the quantity demanded of apple juice B. an increase in the price of apple juice will lead to an increase in revenue for apple juice sellers C. a decrease in the price of apple juice will lead to an increase in revenue for apple juice sellers D. an increase in the price of apple juice will lead to a decrease in revenue for apple juice sellers 15 Price Elasticity 6. Economists estimated that the price elasticity for apple juice is 0.23. This means that: A. an increase in the price of apple juice will increase the quantity demanded of apple juice B. an increase in the price of apple juice will lead to an increase in revenue for apple juice sellers C. a decrease in the price of apple juice will lead to an increase in revenue for apple juice sellers D. an increase in the price of apple juice will lead to a decrease in revenue for apple juice sellers 16 Marginal Utility 17 Marginal Utility 7. Pants cost $10 while shirts cost $5. The below table depicts his utilities from consuming pants and shirts. Fill out the marginal utility and marginal utility per dollar columns. 18 Optimal Bundle 8. Continuing from the previous question, Josh can spend his income of $50 on either pants or shirts. Given the utility breakdown below, how many pants and shirts will he choose to buy (i.e., what is the optimal bundle)? 19 Optimal Bundle 8. Josh can spend his income of $50 on either pants or shirts. Given the utility breakdown below, how many pants and shirts will he choose to buy (i.e., what is the optimal bundle)? 20 Supply and Demand Shocks 21  Energy Blast 9, 10, & 11 The Flex Food & Beverage company produces various drinks and foods. One of its products is EnergyBlast energy drinks, which contains the preservative dycloropoxaphil and is sweetened with stevia. Considering the market for EnergyBlast, illustrate the effects on market price and quantity given different scenarios. price Original Market S P1 D Q1 quantity 22 Shock 1 9. Suppose an independent study is released that claims consumption of dycloropoxaphil is linked with high blood pressure. The report attracts media attention and is reported on national news. Show the effect of this situation on the supply and demand diagram for EnergyBlast. price Original Market S P1 D Q1 quantity 23 Shock 1 Outcome 9. Suppose an independent study is released that claims consumption of dycloropoxaphil is linked with high blood pressure. The report attracts media attention and is reported on national news. Show the effect of this situation on the supply and demand diagram for EnergyBlast. price Diagram Outcome Market Outcome S Consumers become concerned about the presence of dycloropoxaphil and reduce their consumption of EnergyBlast. This causes a negative shift in demand P1 (leftward shift), ultimately resulting in a lower market P2 equilibrium price, and a lower market equilibrium quantity. D2 D1 Demand for EnergyBlast will decrease. Peq: Decreases Q2 Q1 quantity Qeq: Decreases 24 Shock 2 10. Stevia farmers begin using a new fertilizer that significantly increases the crop yield of the plant. Show the effect of this situation on the supply and demand diagram for EnergyBlast. price Original Market S P1 D Q1 quantity 25 Shock 2 Outcome 10. Stevia farmers begin using a new fertilizer that significantly increases the crop yield of the plant. Show the effect of this situation on the supply and demand diagram for EnergyBlast. Market Outcome price Diagram Outcome S1 Stevia is an input for EnergyBlast. If new fertilizer increases the production of Stevia by making it cheaper to produce, S2 it would then become cheaper to buy. When the price of an input goes down, firms produce more of their good, P1 reflected by the positive (rightward), shift in supply. This P2 results in a lower market equilibrium price, and a higher market equilibrium quantity. D Supply of EnergyBlast will increase. Peq: Decreases Q1 Q2 quantity Qeq: Increases 26 Simultaneous Shocks Recently, a study found that coffee is linked with cancer, and simultaneously new government 11. regulations have increased the cost of using the preservative dycloropoxaphil, a key ingredient in EnergyBlast. Show the effect of this situation on the supply and demand diagram for EnergyBlast. price Original Market S P1 D Q1 quantity 27 Simult. Shocks Outcome Recently, a study found that coffee is linked with cancer, and simultaneously new government 11. regulations have increased the cost of using the preservative dycloropoxaphil, a key ingredient in EnergyBlast. Show the effect of this situation on the supply and demand diagram for EnergyBlast. Diagram Outcome S2 Market Outcome Research linking coffee to cancer will decrease its demand, increasing price S1 demand for substitute goods like energy drinks and shifting their demand curve rightward. Increased regulations on dycloropoxaphil will raise P2 production costs, decreasing the supply of energy drinks and shifting the supply curve leftward. Thus, this results in a definitive increase in price and an indeterminate change in quantity depending on the magnitudes P1 of each shift. Supply of EnergyBlast will Decrease and Demand of EnergyBlast will Increase. Peq: Increases D2 Qeq: Indeterminate D1 Q1 quantity 28 Profit Maximization 29 Profit Maximization 12. Describe the point of profit maximization for a firm in perfect competition, monopolistic competition, and a monopoly. A. Perfect Competition: P=AC; Monopoly: MR=MC; Monopolistic Competition: MR=MC B. Perfect Competition: P=MC; Monopoly: MR=MC; Monopolistic Competition: AR=AC C. Perfect Competition: P=MC; Monopoly: MR=MC; Monopolistic Competition: MR=MC D. Perfect Competition: P=ATC; Monopoly: MR=MC; Monopolistic Competition: AR=AC 30 Profit Maximization 12. Describe the point of profit maximization for a firm in perfect competition, monopolistic competition, and a monopoly. A. Perfect Competition: P=AC; Monopoly: MR=MC; Monopolistic Competition: MR=MC B. Perfect Competition: P=MC; Monopoly: MR=MC; Monopolistic Competition: AR=AC C. Perfect Competition: P=MC; Monopoly: MR=MC; Monopolistic Competition: MR=MC D. Perfect Competition: P=ATC; Monopoly: MR=MC; Monopolistic Competition: AR=AC 31 Conceptual Multiple Choice 13. If I were to look at a monopoly graph and a monopolistic competition graph, how can I tell the difference between a monopoly graph and a monopolistic competition graph? A. The monopoly graph would have more elastic MR and AR curves B. The monopolistic competition graph would have more elastic MR and AR curves C. Not possible because their profit maximization points are the same D. The monopoly graph would contain a higher amount of profit 32 Conceptual Multiple Choice 13. If I were to look at a monopoly graph and a monopolistic competition graph, how can I tell the difference between a monopoly graph and a monopolistic competition graph? A. The monopoly graph would have more elastic MR and AR curves B. The monopolistic competition graph would have more elastic MR and AR curves C. Not possible because their profit maximization points are the same D. The monopoly graph would contain a higher amount of profit revenue revenue AR MR MR AR output output 33 Conceptual Multiple Choice 14. Using graphs, shade in the profit area for monopoly and monopolistic competition. Additionally, is it ever possible for there to be profit under perfect competition? If yes, create a graph for such a market and shade in the profit area. price Monopoly Monopolistic Competition Perfect Competition price price MC MC MC AC AC AC D=AR=MR D=AR MR D=AR MR MR quantity quantity quantity 34 Conceptual Multiple Choice 14. Using graphs, shade in the profit area for monopoly and monopolistic competition. Additionally, is it ever possible for there to be profit under perfect competition? If yes, create a graph for such a market and shade in the profit area. price Monopoly Monopolistic Competition Perfect Competition MC MC MC AC AC P’ C’ AC P’ P’ D=AR=MR C’ D=AR C’ MR D=AR MR MR Q’ quantity Q’ quantity Q’ quantity 35 Producer and Consumer Surplus, Deadweight Loss 36 Producer Surplus 15. The market for rice is in perfect competition. It is currently at equilibrium. What is the value of producer surplus in dollars? price SR Price per Kilogram ($) A. $ 120,000 6 B. $ 40,000 C. $ 80,000 4 D. $ 40 2 E. $ 80 DR 10 20 30 quantity Kilograms of Rice (in thousands) 37 Producer Surplus 15. The market for rice is in perfect competition. It is currently at equilibrium. What is the value of producer surplus in dollars? price SR Price per Kilogram ($) A. $ 120,000 6 B. $ 40,000 C. $ 80,000 4 D. $ 40 2 E. $ 80 DR 10 20 30 quantity Kilograms of Rice (in thousands) 38 Price Ceiling 16. The market for wheat is in perfect competition. The government imposes a price ceiling on the market at PC. At the new market equilibrium, what is the consumer surplus and the deadweight loss? P 3 SW (𝑃2 −𝑃𝐶 )∙𝑄3 (𝑃2 −𝑃𝐶 )∙(𝑄2 −𝑄1 ) A. -𝐶𝑆 = 𝑃1 − 𝑃𝐶 ∙ 𝑄2 + 𝑎𝑛𝑑 𝐷𝐿 = Price per Bushel 2 2 P2 (𝑃3 −𝑃2 )∙𝑄1 𝑃2 −𝑃𝐶 ∙ 𝑄2 −𝑄1 B. - 𝐶𝑆 = 𝑃2 − 𝑃𝐶 ∙ 𝑄1 + 2 𝑎𝑛𝑑 𝐷𝐿 = 2 (𝑃3 −𝑃2 )∙𝑄1 (𝑃3 −𝑃2 )∙(𝑄3 −𝑄1 ) P1 C. -𝐶𝑆 = 𝑃2 − 𝑃𝐶 ∙ 𝑄1 + 2 𝑎𝑛𝑑 𝐷𝐿 = 2 (𝑃1 −𝑃𝐶 )∙𝑄2 (𝑃3 −𝑃2 )∙(𝑄3 −𝑄2 ) PC D. -𝐶𝑆 = 𝑃3 − 𝑃2 ∙ 𝑄3 + 2 𝑎𝑛𝑑 𝐷𝐿 = 2 DW Q1 Q2 Q3 Bushels of Wheat 39 Price Ceiling 16. The market for wheat is in perfect competition. The government imposes a price ceiling on the market at PC. At the new market equilibrium, what is the consumer surplus and the deadweight loss? P 3 SW (𝑃2 −𝑃𝐶 )∙𝑄3 (𝑃2 −𝑃𝐶 )∙(𝑄2 −𝑄1 ) A. -𝐶𝑆 = 𝑃1 − 𝑃𝐶 ∙ 𝑄2 + 2 𝑎𝑛𝑑 𝐷𝐿 = 2 Price per Bushel (𝑷𝟑 −𝑷𝟐 )∙𝑸𝟏 𝑷𝟐 −𝑷𝑪 ∙ 𝑸𝟐 −𝑸𝟏 P2 B. - 𝑪𝑺 = 𝑷𝟐 − 𝑷𝑪 ∙ 𝑸𝟏 + 𝟐 𝒂𝒏𝒅 𝑫𝑳 = 𝟐 (𝑃3 −𝑃2 )∙𝑄1 (𝑃3 −𝑃2 )∙(𝑄3 −𝑄1 ) P1 C. -𝐶𝑆 = 𝑃2 − 𝑃𝐶 ∙ 𝑄1 + 2 𝑎𝑛𝑑 𝐷𝐿 = 2 (𝑃1 −𝑃𝐶 )∙𝑄2 (𝑃3 −𝑃2 )∙(𝑄3 −𝑄2 ) D. -𝐶𝑆 = 𝑃3 − 𝑃2 ∙ 𝑄3 + 2 𝑎𝑛𝑑 𝐷𝐿 = 2 PC DW Q1 Q2 Q3 Bushels of Wheat 40 Deadweight Loss 17. The market for diamonds is a monopoly. If the diamond monopolist produces at its profit maximizing position, what is the value of deadweight loss in dollars? Price per Carat (thousands of $) 24 A. $ 2,000,000 20 MC B. $ 3,000,000 16 C. $ 4,000,000 12 D. $ 300,000 8 E. $ 200,000 DD 4 MR 1 2 3 4 5 6 Carats of Diamonds (in thousands) 41 Deadweight Loss 17. The market for diamonds is a monopoly. If the diamond monopolist produces at its profit maximizing position, what is the value of deadweight loss in dollars? Price per Carat (thousands of $) 24 A. $ 2,000,000 20 MC B. $ 3,000,000 16 C. $ 4,000,000 12 D. $ 300,000 8 E. $ 200,000 DD 4 MR 1 2 3 4 5 6 Carats of Diamonds (in thousands) 42 Thank you for coming! Please be sure to fill out the Review Form before leaving. Once you submit the form, the slides and answers will automatically be emailed to you. 43