Economics Final Test 2

Demand is said to be unit elastic if quantity demanded a. changes by the same percent as the price. b. changes by a larger percent than the price. c. changes by a smaller percent than the price. d. does not respond to a change in price.

a. changes by the same percent as the price.

For a market for a good or service to exist, there must be a a. group of buyers and sellers. b. specific time and place at which the good or service is traded. c. high degree of organization present. d. All of the above are correct.

a. group of buyers and sellers.

Goods with many close substitutes tend to have a. more elastic demands. b. less elastic demands. c. price elasticities of demand that are unit elastic. d. income elasticities of demand that are negative.

a. more elastic demands.

An increase in quantity demanded a. results in a movement downward and to the right along a demand curve. b. results in a movement upward and to the left along a demand curve. c.shifts the demand curve to the left. d. shifts the demand curve to the right.

a. results in a movement downward and to the right along demand curve.

The price elasticity of supply measures how responsive a. sellers are to a change in price. b. sellers are to a change in buyers' income. c. buyers are to a change in production costs. d. equilibrium price is to a change in supply.

a. sellers are to a change in price.

The demand for a good or service is determined by a. those who buy the good or service. b. the government. c. those who sell the good or service. d. both those who buy and those who sell the good or service.

a. those who buy the good or service

The price elasticity of demand measures a. buyers' responsiveness to a change in the price of a good. b. the extent to which demand increases as additional buyers enter the market. c.how much more of a good consumers will demand when incomes rise. d. the movement along a supply curve when there is a change in demand.

a.buyers' responsiveness to a change in the price of a good.

Income elasticity of demand measures how a. the quantity demanded changes as consumer income changes. b. consumer purchasing power is affected by a change in the price of a good. c. the price of a good is affected when there is a change in consumer income. d. many units of a good a consumer can buy given a certain income level.

a.the quantity demanded changes as consumer income changes.

If Max experiences a decrease in his income, then we would expect Max's demand for a. each good he purchases to remain unchanged. b. normal goods to decrease. c. luxury goods to increase. d. inferior goods to decrease.

b. normal goods to decrease.

When a shortage exists in a market, sellers a. raise price, which increases quantity demanded and decreases quantity supplied until the shortage is eliminated. b. raise price, which decreases quantity demanded and increases quantity supplied until the shortage is eliminated. c. lower price, which increases quantity demanded and decreases quantity supplied until the shortage is eliminated. d. lower price, which decreases quantity demanded and increases quantity supplied until the shortage is eliminated.

b. raise price, which decreases quantity demanded and increases quantity supplied until the shortage is eliminated.

When a surplus exists in a market, sellers a. raise price, which increases quantity demanded and decreases quantity supplied, until the surplus is eliminated. b. raise price, which decreases quantity demanded and increases quantity supplied, until the surplus is eliminated. c. lower price, which increases quantity demanded and decreases quantity supplied, until the surplus is eliminated. d. lower price, which decreases quantity demanded and increases quantity supplied, until the surplus is eliminated.

c. lower price, which increases quantity demanded and decreases quantity supplied, until the surplus is eliminated.

A key determinant of the price elasticity of supply is the time period under consideration. Which of the following statements best explains this fact? a.Supply curves are steeper over long periods of time than over short periods of time. b.Buyers of goods tend to be more responsive to price changes over long periods of time than over short periods of time. c. The number of firms in a market tends to be more variable over long periods of time than over short periods of time. d. Firms prefer to change their prices in the short run rather than in the long run.

c. the number of firms in a market tends to be more variable over long periods of time than over short periods of time

Cross-price elasticity of demand measures how a. the price of one good changes in response to a change in the price of another good. b. the quantity demanded of one good changes in response to a change in the quantity demanded of another good. c. the quantity demanded of one good changes in response to a change in the price of another good. d. strongly normal or inferior a good is.

c. the quantity demanded of one good changes in response to a change in the price of another good.

The supply of a good or service is determined by a. those who buy the good or service. b. the government. c. those who sell the good or service. d. both those who buy and those who sell the good or service.

c. those who sell the good or service.

An increase in the price of a good will a. increase demand. b.decrease demand. c. increase quantity demanded. d. decrease quantity demanded.

d. decrease quantity demanded

Most markets in the economy are a. markets in which sellers, rather than buyers, control the price of the product. b. markets in which buyers, rather than sellers, control the price of the product. c. perfectly competitive. d. highly competitive.

d. highly competitive.

Demand is said to be inelastic if the a. quantity demanded changes proportionately more than price. b. price changes proportionately more than income. c. quantity demanded changes proportionately less than price. d. quantity demanded changes proportionately the same as price.

d. quantity demanded changes proportionately less than price.

Total revenue a. always increases as price increases. b. increases as price increases, as long as demand is elastic. c. decreases as price increases, as long as demand is inelastic. d. remains unchanged as price increases when demand is unit elastic.

d. remains unchanged as price increases when demand is unit elastic.

Demand is said to be price elastic if a. the price of the good responds substantially to changes in demand. b. demand shifts substantially when income or the expected future price of the good changes. c. buyers do not respond much to changes in the price of the good. d. buyers respond substantially to changes in the price of the good.

d.buyers respond substantially to changes in the price of the good.