Econ 201 Test 1
If Major League Baseball ticket prices rise by 15%, the number of tickets sold falls by 5%. The elasticity of demand is:
-1/3
If the price of ice cream changes by 30% and the quantity demanded changes by 75%, what is the absolute value of demand elasticity?
2.5, so demand is elastic
Recall the discussion in your textbook about the supply curve for oil. What explains why the supply curve for oil is positively sloped?
As the price of oil rises, more producers enter the market.
An increase in the price of a good will typically increase demand for that good
False
Which best illustrates the concept of diminishing marginal utility?
Gladys is hungry and the first piece of pizza she eats tastes wonderful! The fifth piece of pizza she eats makes her sick.
Mark values his drum set at $800 and Ella values her guitar at $1,000. Suppose that Mark trades his drum set for Ella's guitar.
Mark must value Ella's guitar for at least $800, and Ella must value Mark's drum set for at least $1,000.
Which of the following factors causes a demand curve to become more elastic over time?
New substitutes for the product are discovered
Which of the following best describes the principle of comparative advantage?
Someone has the ability to produce the same good for the lowest opportunity cost
Suppose it is widely believed that the price of flat-screen, high-definition televisions will be lower next year. What will happen as a result of such beliefs?
The demand for flat-screen TVs will decrease now.
Utilizing comparative advantage can best be exemplified as
a world-renowned chef hiring someone to cook meals for his family
Both Maria and Jorge bake cookies and bread, but Maria spends less time baking each batch of cookies and each loaf of bread than Jorge does. Specialization and trade between them can benefit:
both Maria and Jorge.
The movie trilogy The Lord of the Rings was hugely successful, and, as a result, the demand for fantasy novels, action figures, and online role-playing games surged. The increase in demand can be explained by a(n):
change in tastes
If the price of swimming pools decreases, we would expect the demand for:
chlorine, a complement good, to increase.
The quantity demanded of a good of service is the amount that:
consumers are willing and able to buy at a given price.
Demand slopes down because:
consumers will choose to use goods only in their most valuable uses when prices are high.
A good with many substitutes will have a _____ curve that is relatively _____ elastic than a good with few substitutes.
demand; more
Only a very small portion of people who use microwaves know how they work. This is an example of:
division of knowledge.
At the consumer's utility-maximizing bundle that uses all of her budget, the slope of the budget constraint is ______ the slope of the indifference curve.
equal to
An inferior good is one that:
experiences decreased demand when income increases.
A grocery store is running a "buy-one-get-another-at-one-half-off" promotion on a dozen doughnuts. So the first dozen is $6 and the second would be $3. A person would buy the second dozen if their marginal benefit from the second dozen doughnuts is:
greater than $3
Why is the demand curve for oil rather inelastic?
here are few widely available good substitutes for oil
The elasticity of supply measures:
how responsive the quantity supplied is to a change in the price of a good or service.
The law of demand suggests a _____ relationship between price and _____.
negative; quantity demanded
Which statement correctly completes the following definition of a demand curve?
price and quantity demanded
Which variable does NOT shift demand?
price of raw materials
Total revenue is:
price × quantity
A change in which factor would shift the supply curve?
production technology.
The ______ is the change in consumption caused by a change in relative prices holding the consumer's utility level constant.
substitution effect
The elasticity of demand:
tells us how responsive consumer purchases are to price changes.
The supply curve illustrates:
the relationship between the quantity supplied and the price of a good
The opportunity cost of a choice is:
the value of the next best opportunity foregone
A cross-price elasticity value that is positive will indicate goods that are substitutes.
true
In which situation would you expect supply to be less elastic?
when looking at the global supply