Micro Econ Exam 2

5. What does a perfectly elastic demand curve look like?

A horizontal line

5. If the price of steel increases drastically, the quantity of steel demanded by the building industry will fall significantly over the long run because A. buyers of steel are more sensitive to a price change if they have more time to adjust to the price change. B. buyers of steel are less sensitive to a price change if they have more time to adjust to the price change. C. sales revenue in the building industry will fall sharply. D. profits will fall by a greater amount in the long run than in the short run.

A. buyers of steel are more sensitive to a price change if they have more time to adjust to the price change.

5. 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.

A. elastic

5. In recent years, a number of cities have enacted taxes on soda and other sweetened beverages. If the policy goal of these city governments is to reduce health care costs and insurance rates for taxpayers by reducing the total amount of soda and sweetened beverages consumed, this would be most successful if the price elasticity of demand for these sweetened beverages is A. elastic. B. inelastic. C. unit elastic. D. perfectly inelastic.

A. elastic

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

5. In recent years, a number of cities have enacted taxes on soda and other sweetened beverages. If the policy goal of these city governments is to raise tax revenue to fund important initiatives such as education programs, this would be most successful if the price elasticity of demand for these sweetened beverages is A. elastic. B. inelastic. C. unit elastic. D. perfectly elastic.

B. inelastic

5. If 50 units are sold at a price of $20 and 80 units are sold at a price of $15, what is the absolute value of the price elasticity of demand? Use the midpoint formula. A. 0.17 B. 0.62 C. 1.62 D. 5

C. 1.62

5. The price elasticity of demand for Stork ice cream is -4. Suppose you're told that following a price increase, quantity demanded fell by 10 percent. What was the percentage change in price that brought about this change in quantity demanded? A. 40 percent B. 25 percent C. 2.5 percent D. 0.4 percent

C. 2.5 percent

5. Price elasticity of demand measures A. how responsive suppliers are to price changes. B. how responsive sales are to changes in the price of a related good. C. how responsive quantity demanded is to a change in price. D. how responsive sales are to a change in buyers' incomes.

C. how responsive quantity demanded is to a change in price.

5. If a 35 percent increase in the price of golf balls led to a 42 percent decrease in quantity demanded, then the demand for golf balls is A. unit elastic. B. perfectly elastic. C. relatively inelastic. D. relatively elastic.

D. relatively elastic

5. If the demand for a life-saving drug was perfectly inelastic and the price doubled, the quantity demanded would A. also double B. decrease by 50% C. be cut in half D. remain constant

D. remain constant

If a consumer receives 22 units of marginal utility for consuming the first can of soda, 20 units from consuming the second, and 15 from the third, the total utility of consuming the three units is a. 57 utils b. 35 utils c. 15 utils d. unknown need more info

a. 57 utils

________ are costs that do not require a monetary payment. a. Implicit costs b. Explicit costs c. Accounting costs d. All opportunity costs

a. Implicit costs

In the short run, ________ factors of production are fixed, while in the long run, ________ of them are. a. some; none b. all; none c. no; at least some d. all; at least some

a. some; none

When the price of summer tank tops falls and you buy more of them because they are relatively less expensive, this is called a. the substitution effect. b. the income effect. c. the deadweight loss effect. d. the elasticity effect.

a. the substitution effect.

Carolyn spends her income on popular magazines and music CDs. If the price of a CD is four times the price of a magazine and if Carolyn is maximizing her utility, she buys a.... both goods until the marginal utility of the last CD purchased is four times the marginal utility of the last magazine purchased. b.... both goods until the marginal utility of the last magazine purchased is four times the marginal utility of the last CD purchased. c... four times as many magazines as CDs. d... four times as many CD's as magazines

a.... both goods until the marginal utility of the last CD purchased is four times the marginal utility of the last magazine purchased.

If a consumer receives 20 units of utility from consuming two candy bars, and 25 units of utility from consuming three candy bars, the marginal utility of the third candy bar is a. 25 utils. b. 20 utils. c. 5 utils. d. unknown as more information is needed to determine the answer.

c. 5 utils

Consumers maximize total utility within their budget constraint by a. Buying the cheapest goods they can find b. buying whatever they like the best c. buying the goods with the largest marginal utility per dollar spent. d. spending the same dollar amount for each good.

c. buying the goods with the largest marginal utility per dollar spent.

As a consumer consumes more and more of a product in a particular time period, eventually marginal utility a. rises b. is constant c. declines d. fluctuates

c. declines

Suppose that in 2012 ABC Corp. produced 500 million units of a good at an average cost of $2, and in 2013 ABC Corp. expanded its plant capacity and produced 600 million units at an average cost of also $2. In this range, one can conclude that ABC Corp. is experiencing: a. economies of scale. b. diseconomies of scale. c. neither economies of scale or diseconomies of scale. d. diminishing marginal product.

c. neither economies of scale or diseconomies of scale. ñ

Most people would prefer to drive a luxury car that has all the options, but more people buy less expensive cars even though they could afford the luxury car because a. car buyers are irrational. b. the total utility of less expensive cars is greater than that of luxury cars. c. the marginal utility per dollar spent on the less expensive car is higher than that spent on luxury cars. d. luxury cars cost a lot more than non-luxury cars

c. the marginal utility per dollar spent on the less expensive car is higher than that spent on luxury cars.

In order to derive an individual's demand curve for salmon, we would observe what happens to the utility-maximizing bundle when we change a. income and hold everything else constant b. taste and preferences and hold everything else constant c. the price of the product and hold everything else constant d. the price of close substitutes and hold everything else constant

c. the price of the product and hold everything else constant

Marginal utility is the a...total satisfaction received from consuming a given number of units of a product. b...average satisfaction received from consuming a product. c...extra satisfaction received from consuming one more unit of a product. d...satisfaction achieved when a consumer has had enough of a product.

c...extra satisfaction received from consuming one more unit of a product.

Joe runs a restaurant. He pays his employees $200,000 per year. His ingredients cost him $50,000 per year. Prior to running his restaurant, Joe was a lawyer earning $150,000 per year. What would economists say is Joe's cost of running the restaurant? a. $150,000 b. $200,000 c. $250,000 d. $400,000

d. $400,000

If Callum is consuming his utility maximizing bundle and the price of one good rises, what happens to the marginal utility per dollar spent on this good (MU/P), and what should Callum do? a. MU/P has increased and Callum should buy more of this good. b. MU/P has increased and Callum should buy less of this good. c. MU/P has decreased and Callum should buy more of this good. d. MU/P has decreased and Callum should buy less of this good.

d. MU/P has decreased and Callum should buy less of this good.

Accountants include ________ costs as part of a firm's costs, while economists include ________ costs. a. explicit; no explicit b. implicit; no implicit c. explicit and implicit; implicit d. explicit; explicit and implicit

d. explicit; explicit and implicit

If, as a person consumes more and more of a good, each additional unit adds less satisfaction than the previous unit consumed, we are seeing the workings of a. The law of demand b. The law of supply c. The law of increasing marginal opportunity cost d. the law of diminishing marginal utility

d. the law of diminishing marginal utility

If Paul decides to buy a $60 ticket to a Cirque du Soleil show rather than a $45 ticket for a Blue Man Group performance, we can conclude that a...the marginal utility per dollar spent on Cirque du Soleil is lower than the marginal utility per dollar spent on Blue Man Group. b. Paul's demand for a ticket to see Cirque du Soleil is more elastic than his demand for a ticket to see Blue Man Group. c. Paul is not making a rational choice. d. the marginal utility per dollar spent on Cirque du Soleil is higher than the marginal utility per dollar spent on Blue Man Group.

d. the marginal utility per dollar spent on Cirque du Soleil is higher than the marginal utility per dollar spent on Blue Man Group.

Average total cost is defined as: a. total variable cost divided by quantity. b. quantity divided by total variable cost. c. the change in total variable cost divided by the change in quantity. d. total cost divided by quantity.

d. total cost divided by quantity.