ECON 202 - ZHU

Long-run cost curves are U-shaped because? a. of the law of demand. b. of the law of diminishing returns. c. of the economies and diseconomies of scale. d. of the law of supply.

C. of the economies and diseconomies of scale.

Which of the following is an example of a product that is non-excludable and rivalrous? a. Free concert (with limited seating) in a park b. National defense c. Automobiles d. Flu vaccinations

a. Free concert (with limited seating) in a park

If demand is perfectly elastic, the absolute value of the price elasticity of demand is? a. Infinity b. Zero c. More than one d. Equal to the absolute value of the slope of the demand curve

a. Infinity

Opera Estate Girls' School is considering increasing its tuition to raise revenue, If the school believes that raising tuition will increase revenue? a. It is assuming that the demand for attending the school is inelastic b. It is assuming that the demand for attending the school is elastic c. It is assuming that the demand for attending the school is unit-elastic d. It is assuming that the demand for attending the school is perfectly inelastic

a. It is assuming that the demand for attending the school is inelastic

Jennifer Borts moves her office from the premises she rents at a local mall to her home. As a result of this move? a. Jennifer's explicit costs fall and her implicit costs rise. b. Jennifer's total costs fall. c. Jennifer's implicit costs fall. d. Jennifer's opportunity costs fall.

a. Jennifer's explicit costs fall and her implicit costs rise.

Identify the one statement that does not demonstrate how social effects influence consumer choice. a. Students in an Economics class are required to purchase a textbook assigned by the professor. b. There is utility gained from consuming goods or services that others are consuming, c. Some products that people consume are determined by the social popularity of the products. d. Companies such as Zappos.com and Netflix invite their consumers to write reviews about their experience with their products which are then posted on the internet for others to see.

a. Students in an Economics class are required to purchase a textbook assigned by the professor.

Ordinal utility theory states that the utility of consuming a particular good or service ______ be measured using a numerical scale bearing, economic meaning in and of itself. According to Ordinal utility theory, utility _____ be negative. a. cannot, can b. can, cannot c. cannot, cannot d. can, can

a. cannot, can

Which of the following can a firm do in the long run but not in the short run? a. decrease the size of its physical plant. b. reduce its rate of output by laying off workers. c. increase its variable costs. d. increase its use of raw materials.

a. decrease the size of its physical plant.

The demand curve for corn is downward sloping. If the price of con, an inferior good, falls,? a. the income effect which causes you to reduce your corn purchases is smaller than the substitution effect which causes you to increase your corn purchases, resulting in a net increase in quantity demanded. b. the income effect which causes you to increase your corn purchases is larger than the substitution effect which causes you to reduce your corn purchases, resulting in a net increase in quantity demanded. c. both the income and substitution effects reinforce each other to increase the quantity demanded. d. the income and substitution effects offset each other but the price effect of an inferior good leads you to buy less corn.

a. the income effect which causes you to reduce your corn purchases is smaller than the substitution effect which causes you to increase your corn purchases, resulting in a net increase in quantity demanded.

For a demand curve to be upward sloping, the good would have to be an inferior good, and? a. the income effect would have to be larger than the substitution effect. b. the income effect would have to be smaller than the substitution effect. c. the income effect would have to be equal to the substitution effect. d. the income effect and the substitution effect would have to be nonexistent.

a. the income effect would have to be larger than the substitution effect.

Calculate the income elasticity if an 8 percent increase in income leads to a 4 percent increase in quantity demanded for organic produce. a. -0.66 b. 0.5 c. 1.5 d. 2

b. 0.5

Which of the following goods would have the most inelastic demand? a. Ski vacations b. Bread c. Luxury cars d. Big screen TVs

b. Bread

Which of the following products comes closest to having a perfectly inelastic demand? a. Gasoline b. Cholesterol medication in general c. Iphones d. Bus rides

b. Cholesterol medication in general

If a T-Shirt company lowers its price from $6 to $5 and finds that students increase their quantity demanded from 400 to 600 T-Shirts, then the demand for the T-Shirts within this price range is? a. Price inelastic b. Price elastic c. Unit elastic d. Cross elastic

b. Price elastic

Which of the following displays rivalry and excludability in consumption? a. Public goods b. Private goods c. Quasi-public goods d. Common resources

b. Private goods

Suppose a decrease in the supply of bottled water results in a decrease in revenue. This indicates that? a. The demand for bottled water is inelastic in the price range considered. b. The demand for bottled water is elastic in the price range considered. c. The supply of bottled water is inelastic in the price range considered. d. The supply of bottled water is elastic in the price range considered.

b. The demand for bottled water is elastic in the price range considered.

Consider a demand curve that has a constant elasticity value of 0. What happens to quantity demanded and total revenue when price increases? a. The quantity demanded and total revenue remain the same. b. The quantity demanded does not change but total revenue increases. c. The quantity demanded and total revenue fall to zero. d. The quantity demanded does not change but total revenue decreases.

b. The quantity demanded does not change but total revenue increases.

When a firm doubles all its inputs, its average cost of production decreases, then production displays? a. diminish returns. b. economies of scale. c. diseconomies of scale. d. declining fixed costs.

b. economies of scale.

The observation that people tend to value something more highly when they own it than when they don't is called the? a. wealth effect. b. endowment effect. c. path dependent effect. d. endorsement effect.

b. endowment effect.

When a firm produces more output using the same inputs or the same output using fewer inputs we say that the firm? a. experiences an increase in demand. b. experiences positive technological change. c. will hire more workers in order to produce more output. d. is operating in the short run.

b. experiences positive technological change.

Economist assume that the goal of consumers is to? a. do as little work as possible to survive b. make themselves as well off as possible c. expend all their income d. consume as much as possible

b. make themselves as well off as possible

Which of the following refers to the increase in the usefulness of a product as the number of consumers who use it increases? a. positive externalities. b. network externalities. c. external marginal utility. d. the impact of celebrity endorsements.

b. network externalities.

Traditionally, economist have considered culture, customs, and religion as? a. very important influences on the choices consumers make. b. relatively unimportant factors in explaining the choices consumers make. c. important influences in explaining consumer choices in command economies but less important in market economies. d. subject to normative economic analysis rather than positive economic analysis.

b. relatively unimportant factors in explaining the choices consumers make.

When the price of audio books, a normal good, falls, causing your purchasing power to rise, you buy more of them due to? a. the substitution effect. b. the income effect. c. the deadweight loss effect. d. the elasticity effect.

b. the income effect.

If Valerie purchases ankle socks at $5 and gets 25 units of marginal utility from the last unit, and bandanas at $3 and gets 12 units of marginal utility from the last bandana purchased, she? a. is maximizing total utility and does not want to change their consumption of ankle socks or bandanas. b. wants to consume more ankle socks and fewer bandanas. c. wants to consume more of bandanas and fewer ankle socks. d. wants to consume less of both ankle sock and bandanas.

b. wants to consume more ankle socks and fewer bandanas.

Which of the following statements about the price elasticity of demand is correct? a. The elasticity of demand for a good in general is equal to the elasticity of demand for a specific brand of the good. b. The absolute value of the elasticity of demand ranges from zero to one. c. Demand is more elastic in the long run than it is in the short run. d. Demand is more elastic the smaller the percentage of the consumer's budget the item takes up.

c. Demand is more elastic in the long run than it is in the short run.

Which of the following is a source of market failure? a. Unforeseen circumstances which leads to the bankruptcy of many firms b. A lack of government intervention in a market c. Incomplete property rights or inability to enforce property rights d. An inequitable income distribution

c. Incomplete property rights or inability to enforce property rights

Which of the following explains why the marginal cost curve has a U shape? a. Initially, the marginal product of labor falls, then rises. b. Initially, the average product of labor rises, then falls. c. Initially, the marginal product of labor rises, then falls. d. Initially, the average cost of production rises, then falls.

c. Initially, the marginal product of labor rises, then falls.

Which of the following activities creates a negative externality? a. Cleaning up the sidewalk on your block b. Graduating from college c. Keeping a junked car parked on your front lawn d. Repainting the house you live in to improve its appearance

c. Keeping a junked cat parked on your front lawn

In the long run which of the following is true? a. total cost = fixed cost + variable cost. b. The size of a firm's physical plant can be changed but the firm cannot adopt new technology. c. There are no fixed costs. d. The firm can vary its explicit costs but not its implicit costs.

c. There are no fixed costs.

Which of the following items is likely to have the highest income elasticity of demand? a. a bus ride b. a meal at Taco Bell c. a vacation home in the Swiss Alps d. a tank of gasoline

c. a vacation home in the Swiss Alps

If an airport decides to expand by building an additional passenger terminal, and in doing so it lowers its average cost per airplane landing, it was previously operation at? a. minimum efficient scale. b. more than minimum efficient scale. c. less than minimum efficient scale. d. minimum capacity.

c. less than minimum efficient scale.

In the short run, which of the following costs will not change as output changes? a. marginal cost b. total variable cost c. total fixed cost d. average fixed cost

c. total fixed cost

The demand curve for a Giffen good is? a. non-linear but downward-sloping. b. vertical. c. upward-slopping. d. non-excistent.

c. upward-slopping.

When a firm produces 50,000 units of output, its total cost equals $6.5 million. When it increases its production to 70,000 units of output, its total cost increases to $9.4 million. Within this range, the marginal cost of an additional unit of output is? a. $41.43 b. $134.29 c. $135 d. $145

d. $145

Jonah lives in a small town where there is only one Mexican restaurant. Which of the following is likely to be true about the price elasticity of demand for meals at the Mexican restaurant? a. Demand is likely to be perfectly inelastic. b. Demand is likely to be perfectly elastic. c. Demand is likely to be relatively elastic. d. Demand is likely to be relatively inelastic.

d. Demand is likely to be relatively inelastic.

The demand or gasoline in the short run is? a. Elastic because people can easily switch to public transportation b. Perfectly inelastic because people have no choice but to buy gasoline c. Unit-elastic because people tend to consume a stable amount of gasoline per period d. Inelastic because there are no good substitutes for gasoline

d. Inelastic because there are no good substitutes for gasoline

In economics, the term "free rider" refers to: a. A person who evades taxes b. A supervisor who delegates menial time-consuming activities to others c. one who volunteers her services d. One who waits for others to produce a good and then enjoys its benefits without paying for it

d. One who waits for others to produce a good and then enjoys its benefits without paying for it

The formula for total fixed cost is? a. TFC=TC+TVC b. TFC=TVC-TC c. TFC=TC/TVC d. TFC=TC-TVC

d. TFC=TC-TVC

According to a study of the price elasticities of products sold in supermarkets, the price elasticity of demand for toothpaste is estimated at -0.45. Which of the following could explain why the price elasticity of demand for toothpaste is so low? a. The toothpaste industry is highly competitive b. Toothpaste is relatively inexpensive c. Toothpaste is heavily endorsed by dentists d. There are few close substitutes for toothpaste

d. There are few close substitutes for toothpaste

Which of the following is likely to occur as the result of the law of diminishing marginal utility? a. Petra's utility from her second apple was less than her satisfaction from her first orange. b. Hudson enjoyed his second slice of pizza more than his first. c. Sabine's utility from her first granola bar is greater than Rachel's utility from her second granola bar. d. Wesley enjoyed his second bottle of iced tea less than his first bottle, other things constant.

d. Wesley enjoyed his second bottle of iced tea less than his first bottle, other things constant.

The substitution effect of an increase in the price of Raisin Bran refers to? a. the decrease in the demand for Raisin Bran when its price rises. b. the result that consumers will now switch to a substitute good such as Cheerios, and the demand curve for Raisin Bran shifts to the left. c. the fact that the higher price of Raisin Bran lowers consumer's purchasing power, holding money income constant. d. the fact that the higher price of Raisin Bran relative to its substitutes, such as Cheerios, cause consumers to buy less Raisin Bran.

d. the fact that the higher price of Raisin Bran relative to its substitutes, such as Cheerios, cause consumers to buy less Raisin Bran.