MicroEcon Ch 6 Quiz
If the demand for a good is inelastic and the price of the good decreases,
Total revenue decreases.
If Jack bought 18 CDs last year when his income was $20,000 and he buys 19 CDs this year when his income is $25,000, then CDs are
a normal good.
Refer to Exhibit 5-5. For graph (3), what is the price elasticity of demand going between $2.00 and $1.50?
1.0
If the demand for good X is inelastic in the short run, then it will be __________ in the long run (as more time passes).
There is not enough information to answer the question
The quantity demanded of good A changes from 100 to 111 when the price of good A changes from $12 to $11. The cross elasticity of demand is
There is not enough information to answer the question.
All other things being equal, the __________ the percentage of one's budget spent on a good, the __________ the price elasticity of demand.
a and b
In terms of microeconomic analysis, what is the function of "utils"?
a measurement of utility
Tobacco is a normal, income inelastic good. It follows that a 10 percent decrease in income will __________ quantity demanded by __________ than 10 percent.
decrease; less
As a general rule, utility-maximizing choices between consumption goods occur where the:
price ratio and marginal utilities ratio of two goods is equal.
Refer to Exhibit 5-2. The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X as shown by the shift of S1 to S2. What is an expression for the tax revenue raised?
$2.25 x Q2
Refer to Exhibit 5-7. As a producer, if you had a choice, which of the depicted markets would you operate in?
(1)
Refer to Exhibit 5-7. If the government wants to impose a per-unit tax in order to raise revenues, which of the depicted markets should it choose in order to maximize tax revenues?
(1)
Refer to Exhibit 5-7. Which of the graphs shows a perfectly inelastic demand curve?
(1)
When the price of cigarettes decreases by 6 percent, the quantity demanded increases by 2 percent. The price elasticity of demand for cigarettes is __________, making cigarettes an ____________ product.
0.33; inelastic
Alex has $18 per week in his entertainment budget. He splits his time between going to the movies and renting video games. Each movie costs $6 while each video game rental costs $3. The measured total utility of each of his activities is shown in the table below. What is Alex's utility maximizing point?
1 movie, 4 video game rentals
If two goods are substitute goods,
An increase in the price of one will cause an increase in the demand for the other.
Refer to Exhibit 5-4. (NOTE: THERE IS NO PICTURE FOR THIS ONE) As a consequence of the depicted change in supply of X, the demand curve for Y shifted from D1 to D2. What is true of the cross elasticity of demand for Y?
A. Ec > 0 (zero) B. Ec < 0 (zero) C. Ec = 0 (zero) D. It cannot be determined from the information provided. ANSWER: A. Ec > 0 (zero)
If, as the price of good Y rises from $12 to $15, the quantity demanded of good Y falls from 100 units to 85 units, price elasticity of demand for good Y in this price range is
NOT: 1.37
Economists are able to determine total utility by:
summing up the marginal utilities of each unit consumed.
If demand is __________, price and total revenue are __________ related; if demand is __________, price and total revenue are directly related.
Elastic; inversely; inelastic
Refer to Exhibit 5-3. When price decreases from $4.50 to $3.50, the price elasticity of demand is EXHIBIT 5-3: ALL FOLLOWING ARE FOR GOOD A: (Price) (QD) (QS) $5.50 5 55 $4.50 15 45 $3.50 25 35 $2.50 35 25 $1.50 45 15 $0.50 55 5
2.00.
As the price of a good falls from $5 to $3, the quantity supplied of the good falls from 400 units to 300 units. Price elasticity of supply is
0.57
Refer to Exhibit 5-5. For graph (1), what is the price elasticity of demand going between $2.00 and $1.50?
2.33
Which of the following statements represents a correct and sequentially accurate economic explanation?
A tax is placed on the production of good X, the supply curve of good X shifts to the left, equilibrium price rises, equilibrium quantity stays constant, and buyers pay 100 percent of the tax.
The government distributes food stamps that can only be used to acquire food to low-income families. The budget line graph will show food on the horizontal axis and everything else on the vertical axis. After receiving food stamps, Ted's family is able to consume the same amount of food. The new consumption point for Ted's family will be:
on the new budget line, directly above the old consumption point.
When price = $16, quantity demanded = 200. When price = $14, quantity demanded = 225. When the firm lowered price from $16 to $14, it discovered that demand is __________ and total revenue __________ by ____________,
inelastic; decreased; $50
When Marietta chooses to only purchase a combination of goods that lie within her budget line, she:
is maximizing utility.
If demand is elastic, then a given percentage change in price will bring about a(n) __________ percentage change in quantity __________.
larger; demanded
price elasticity of demand is lowest for which of the following goods?
Cars
If the price of good A decreases by 10 percent and the quantity demanded of good B increases by 10 percent, this is evidence that A and B are
Complement goods.
Refer to Exhibit 5-2. The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X, as shown by the shift of S1 to S2. As a result,
Consumers end up paying $6.25 per unit, and producers end up receiving $6.25 per unit, but keeping only $4.00 per unit.
For a normal good, __________ falls as income __________; for an inferior good, __________ rises as income __________.
Demand; falls; demand; falls
Cross elasticity of demand measures the responsiveness of changes in the quantity __________ of one good to changes in __________.
Demanded; the price of another good.
If the percentage change in quantity demanded is greater than the percentage change in price, demand is
Elastic
If the price of good X rises and the demand for good X is elastic, then the percentage __________ in quantity demanded is __________ the percentage rise in price, and total revenue __________.
Fall; greater than; falls
longer the period of time consumers have to adjust to price changes, the __________ the __________ elasticity of demand.
Higher, price
Which of the following would result in higher price elasticity?
More substitutes for a good
If the price of good A decreases by 10 percent and the quantity demanded of good B decreases by 10 percent, this is evidence that A and B are
Substitute goods.
If the price elasticity of demand for a given product is 7, this means that
The percentage change in quantity demanded is 7 times the percentage change in price.
If the demand for a good is elastic, then
The percentage change in quantity demanded is equal to the percentage change in price.
quantity supplied of land is constant regardless of price. Suppose a tax is imposed on the rental price of land. Who will pay the greater share of such a tax?
The sellers will pay the entire share.
Refer to Exhibit 5-6. Let S1 be the supply curve of a firm. If S2 represents the supply curve of the same firm after the government imposes a per-unit tax, the tax is
$1 per unit.
Refer to Exhibit 5-5. Assume that the seller of X increases the price from $1.50 to $2.00, and this results in an increase in total revenue. Which of the graphs represents the demand curve for X?
(2)
Which of the following statements is false?
A. Ham has a higher price elasticity of demand than meat. B. Peaches have a higher price elasticity of demand than fruit. C. Soap has a higher price elasticity of demand than Ivory Soap. D. Carrots have a higher price elasticity of demand than vegetables. ANSWER: C. Soap has a higher price elasticity of demand than Ivory Soap.
If the seller of good X raises the price of good X, it follows that the total revenue of good X will __________, if demand is __________.
A. Rise; inelastic. B. Rise; elastic. C. Fall; unit elastic. D. Fall; elastic. E. A and d ANSWER: E. A and d
Vernon spends the following percentages of his budget on the following goods: 23 percent on good A, 11 percent on good B, 1 percent on good C, and 3 percent on good D. For which good is price elasticity of demand the highest, ceteris paribus?
Good A
If the demand for a good is perfectly inelastic, then
Quantity demanded is not responsive to changes in price.
Cross elasticity of demand measures the responsiveness of
Quantity demanded of one good to changes in the price of another good.
Refer to Exhibit 5-l. The demand curve D3 is
Varying in elasticity along its length.
Refer to Exhibit 5-7. If the government is contemplating imposing a per-unit tax and it wants the tax to have as small a negative effect on consumers as possible, it should choose a good for which the market is depicted on graph
(2)
Refer to Exhibit 5-7. Which of the graphs shows a perfectly elastic demand curve?
(2)
If Jack bought 21 CDs last year when his income was $18,000 and he buys 23 CDs this year when his income is $20,000, then his income elasticity of demand is ______________ making CDs a(n) ______________ good for Jack.
+0.86; normal
Suppose a producer decides that if the price of her product is $9, the quantity supplied will be 1,000 units, and if the price is $11, the quantity supplied will be 1,300. The price elasticity of supply for the good is approximately
+1.30.
Price elasticity of supply registers perfect inelasticity at the value of
0 (zero)
If the percentage change in quantity demanded is less than the percentage change in price, demand is
Inelastic
Refer to Exhibit 21-2. Total utility for the first four units is Units of Oranges 1 2 3 4 5 Marginal Utility of Oranges (utils) 20 16 13 11 8
60 utils. (20+16+13+11=60)
In May and June, Tammy spent all her clothing budget on bathing suits and beach bags. Each bathing suit cost $75. At Tammy's optimal choice, her marginal utility from the last bathing suit purchased is 300 and her marginal utility from the last beach bag purchased is 200. This means that each handbag must cost:
$50
Suppose someone believes that if a per-unit tax is placed on the producers of good Y, the consumers of good Y will end up paying the full tax. This person assumes that the demand curve for good Y is
NOT: perfectly elastic
Airlines that try to lower fares in order to increase revenue believe the demand for airline service is
NOT: price inelastic.
An inferior good is a product:
for which demand decreases as income increases.
Suppose a producer decides that if the price of his or her product is $10, the quantity supplied will be 1,000 units, and if the price is $11, the quantity supplied will be 1,100. The supply of the good is
unit elastic
In microeconomic terms, the ability of a good or a service to satisfy wants is called:
utility.
If quantity demanded rises by 10 percent as price falls by 7 percent, the price elasticity of demand equals
1.43
If the price elasticity of demand for a good is zero, then demand is
Perfectly inelastic.
Refer to Exhibit 21-3. Assume that the price of oranges increases to $2, while the price of apples remains at $1, and Linda allocates $5 of the weekly food budget to purchasing apples and oranges. If Linda wants to maximize her utility, her new consumption bundle will consist of Apples-Oranges Units 0 1 2 3 4 5 Total Utility 0-0 15-22 28-41 39-58 48-73 55-85
3 apples and 1 orange.
The government wants to make medicare benefits available to more people, but to achieve this goal, it needs to make cuts in the existing medicare budget. The two areas where they are considering cuts are non-essential elective surgery and 6-12 month mental health care programs. Applying the concept of diminishing marginal utility, the budget cuts should be made for spending on:
NOT: mental health therapy due to its higher marginal return rate. elective surgery due to its lower marginal return rate. both programs, which have the same marginal return rate. neither can be compared by measuring marginal utility.
The theoretical model of the intertemporal budget constraint for the U.S. economy as a whole suggests that the most common pattern seems to be that:
NOT: the quantity of savings automatically adjusts to changes in the rate of return. the quantity of savings doesn't adjust much to changes in the rate of return. the result of a higher rate of return is a higher quantity of saving. the result of a lower rate of return is a lower quantity of saving.
Refer to Exhibit 5-2. The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X, as shown by the shift of S1 to S2. What is the per-unit tax equal to?
$2.25
Refer to Exhibit 5-6. Suppose the three equilibrium quantities are 700, 800, and 900, and the two other equilibrium prices are $2.20 and $2.75. What is the tax revenue collected from the tax that shifted S1 to S2 when D1 is the relevant demand curve?
$800
Refer to Exhibit 5-5. Which of the graphs represents a greater percentage change in quantity demanded than the percentage change in price?
(1)
Refer to Exhibit 5-2. The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X, as shown by the shift of S1 to S2. Approximately what percentage of the tax do consumers end up paying?
45 percent
Suppose the demand for a particular good is perfectly inelastic and the government decides to impose a tax on the production of this good. Who will pay the greater share of such a tax?
The buyers will pay the entire share.
demand curve for good X is generally highly inelastic at and around the current price. If we assume that the supply curve is neither perfectly elastic nor perfectly inelastic, then who will pay the greater share of a tax placed on the production of good X?
The buyers will pay the greater share.
Refer to EXHIBIT 5-3 ALL FOLLOWING ARE FOR GOOD A: (Price) (QD) (QS) $5.50 5 55 $4.50 15 45 $3.50 25 35 $2.50 35 25 $1.50 45 15 $0.50 55 5 When price decreases from $5.50 to $4.50, the price elasticity of supply is
5.0
Refer to Exhibit 5-2. The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X, as shown by the shift of S1 to S2. Approximately what percentage of the tax do producers end up paying?
55 percent (is from pro test)
Refer to Exhibit 21-4. What value goes in blank (A)? Units of Good Consumed: 1 2 3 4 5 Total Utility (utils): 40 (A)-----75 (B)-----95 100 (D) Marginal Utility (utils): 40 35 20 (C)-----10 2
75
Jed's weekly budget for lunch is $24. He eats only pizza and burgers. Each pizza costs $6 and each burger costs $3. Jed knows that 2 pizzas and 4 burgers will give him a utility of 8. At his utility-maximizing point, Jed's utility is:
8
If the cross elasticity of demand is +2.0, this means that
the percentage change in quantity demanded of a product is 2 times the percentage change in price of some other product.
Mark's annual after tax income earnings are $50,000. His $40,000, 3-year CD is maturing in the near future and he is planning to spend the interest on a 6 week holiday after that. His investments can earn a total of 10% before he starts his trip. If Mark's "present consumption" is the time he spends working and his "future consumption" is his trip, his optimal choice from the table below is to: Present Consumption: 0 10,000 20,000 30,000 40,000 50,000 60,000 - Total Utility from Present Consumption: 0 600 1,100 1,500 1,800 2,000 2,100 Future Consumption: 0 11,000 22,000 33,000 44,000 55,000 66,000 77,000 Total Utility from Future Consumption: 0 3,000 4,000 4,800 5,400 5,800 6,000 6,100
spend $10,000 now and consume $44,000 in the future.
Garth inherited $25,000. He needs to decide now much to spend now and how much to save for later. If he saves the money, then he can earn 15% interest on the total before he spends it. Using the information about his marginal utility in the table below, Garth should: Present Consumption: 0 5,000 10,000 15,000 20,000 Marginal Utility from Present Consumption: - 500 400 300 200 Future Consumption: 0 5,750 11,500 17,250 23,000 Marginal Utility from Future Consumption: - 900 800 700 600
spend nothing now and $28,750 in the future (23,000+5,750=28,750)
good will tend to have a low price elasticity of demand if
It has few substitutes.
When the price of diamond rings rises by 40 percent, the quantity demanded falls by 10 percent. The price elasticity of demand for diamond rings is ____________, making diamond rings an _______________ good (in this example).
0.25; inelastic
As the price of good X rises from $10 to $12 the result is a decrease in the quantity demanded of good X from 120 units to 100 units. The price elasticity of demand for good X is _____________ and total revenue __________ as the price of good X rises from $10 to $12.
1.00; remains unchanged
For a certain good, when price rises from $90 to $95, quantity demanded falls from 90,000 to 85,000. The price elasticity of demand here is _____________, making the demand for this good ____________ in the price range between $90 and $95.
1.06; elastic
Terry attends college and works part-time job in a drug store. She can work up to 40 hours each week, and is paid $9 per hour. The table below shows her utility from different levels of leisure and income. If Terry decides to work 20 hours per week, her total utility from both leisure and income would be: Hours of Leisure: 5, 10, 15, 20, 25, 30, 35, 40 Total Utility from Leisure: 18, 34, 48, 56, 60, 65, 69, 72 Income: 45, 90, 135, 180, 225, 270, 315, 360 Total Utility from Income: 35, 59, 77, 86, 92, 98, 103, 107
142 (56+86=142)
Josh's weekly budget for lunch is $24. He eats only pizza and burgers. Each pizza costs $6 and each burger costs $3. Josh knows that 2 pizzas and 4 burgers will give him a utility of 8. What is Josh's utility-maximizing point?
2 pizzas, 4 burgers
If the price of good X rises and the demand for good X is inelastic, then the percentage fall in quantity demanded is __________ the percentage rise in price, and total revenue __________.
A. Greater than; rises B. Less than; falls C. Equal to; remains constant D. Greater than; falls E. None of the above4 4 none of the above ANSWER: E. None of the above4 4 none of the above
If price rises and total revenue falls,
A. Cross elasticity is negative. B. Price elasticity of demand is less than 1. C. Income elasticity of demand is positive. D. B and c E. None of the above ANSWER: E. None of the above
Income elasticity of demand for an inferior good is
Less than 0 (ZERO)
If the percentage change in quantity demanded of a good is less than the percentage change in income, then the good is said to be
income inelastic
Price falls from $1.80 to $1.70, and the quantity demanded rises from 110 units to 118 units. What is the price elasticity of demand between these two prices?
1.26
If most drivers are _____________ in their demand for driving, then as cars become more fuel-efficient ______________ greenhouse gases will be emitted.
A. Inelastic; more B. Inelastic; less C. Elastic; more D. Elastic; less E. B and c ANSWER: E. B and c
If the price of good X falls and the demand for good X is unit elastic, then the percentage rise in quantity demanded is __________ the percentage fall in price, and total revenue __________.
Equal to; remains constant
Refer to Exhibit 5-6. Let S1 be the supply curve of a producer. If S2 is the supply curve of the same producer after the government imposes a per-unit tax, the tax revenue generated will be
Greater if D1 is the demand curve facing the firm.
A Broadway play company can only charge one price for tickets to a given performance of its play. The company manager notices that they earn greater total revenue when they charge a higher ticket price and its theater is three-quarters full than when they charge a lower ticket price and the theater is completely full. It follows that demand for this play is
NOT: perfectly elastic.
Marginal utility can:
be positive, negative, or zero
Government wants to maximize its tax revenue and it can only place a $2 per-unit tax on one of two goods. It should place the tax (on the production) of the good whose demand curve has the
lower price elasticity of demand
The step-by-step process of finding the choice with highest total utility involves a comparison of the:
marginal utility gained and lost from different choices along the budget constraint.
The term _____________ describes a situation where a ________________ causes a reduction in the buying power of income, even though actual income has not changed.
substitution effect; lower price NOT: intertemporal budget; higher price income effect; higher price intertemporal budget; lower price
Refer to Exhibit 5-3. When price decreases from $3.50 to $2.50, the price elasticity of supply is ALL FOLLOWING ARE FOR GOOD A: (Price) (QD) (QS) $5.50 5 55 $4.50 15 45 $3.50 25 35 $2.50 35 25 $1.50 45 15 $0.50 55 5
1.0
For a certain good, when price falls from $20 to $19, quantity demanded rises from 5,000 to 5,700. The price elasticity of demand here is
2.55
If elasticity of demand is 0.5, it follows that a _______ percent decrease in price causes a _______ percent increase in quantity demanded.
2; 1
Refer to Exhibit 5-6. Let S1 be the supply curve of a producer. If S2 is the supply curve of the same producer after the government imposes a per-unit tax, the share of the tax paid by the producer as compared to the share of the tax paid by consumers will be
Greater if D2 is the demand curve facing the producer.
Price elasticity of supply, and price elasticity of demand, are likely to be __________ in the __________ than in the __________.
Higher; long run; short run
In order for greenhouse gas emissions to be reduced as a result of increased fuel- efficiency in automobiles, it must be true that the price elasticity of demand for driving is
NOT: unit elastic
The key assumption that accompanies the use of numbers for measuring utility is that:
NOT: utility cannot be measured by an outside party. utility can be perfectly measured. individuals choose based on their preferences. people make consumption decisions.
Refer to Exhibit 5-5. For graph (3), if the seller of X raises the price from $1.50 to $2.00, the total revenue the seller receives will
Not change.
Refer to Exhibit 5-3. If price decreases from $5.50 to $4.50, total revenue along the demand curve EXHIBIT 5-3 ALL FOLLOWING ARE FOR GOOD A: (Price) (QD) (QS) $5.50 5 55 $4.50 15 45 $3.50 25 35 $2.50 35 25 $1.50 45 15 $0.50 55 5
Increases to $67.50.
Suppose at a price of $4 and at a price of $6, John purchases 40 units of good X. Given this information, we know that
John's demand for good X is perfectly inelastic between the prices of $4 and $6.
shorter the period of time consumers have to adjust to price changes, the __________ the __________ elasticity of demand.
Lower; price
longer the period of time allowed for the producer of a good to adjust to a change in the price of the good, the ____________ the price elasticity of supply will be. This statement assumes that the quantity supplied __________ be altered with time.
More elastic; can
Income rises from $2,200 to $2,800 a month and the quantity demanded of good X falls from 50 to 45 units a month. Income elasticity of demand (for good X) is __________ and good X is a(n) __________ good.
NOT: 2.28; normal
Louisa works for a hedge fund company. Her wage increased from $30 per hour to $40 per hour. She can work up to 50 hours each week. The table below shows her utility from different levels of leisure and income. Louisa decided to increase her hours of work from 10 to 20 hours per week after receiving her raise. As a result, her marginal utility gain from having more income will now be: Hours of Leisure: 0, 10, 20, 30, 40, 50, -, -, -, - Total Utility from Leisure: 0, 27, 52, 71, 84, 90 Income: 0, 300, 400, 600, 800, 90, 1200, 1500, 1600, 2000 Total Utility from Income: 0, 42, 74, 98, 110, 118, 122, 124, 126, 127
NOT: 74 36 13 12
If good Z has an income elasticity of 1.0, then demand for good Z is income __________ and the good is __________.
NOT: elastic, normal
Refer to the budget line shown in the diagram above. At point U, __________. Diagram 6.2
P1/P2 = MU1/MU2
Which of the following defines elastic demand?
Percentage change in quantity demanded greater than percentage change in price
Refer to Exhibit 5-1. The demand curve D1 is
Perfectly elastic.
fewer substitutes for a good,
The lower its price elasticity of demand.
If the demand for a good is unit elastic and the price of the good increases,
Total revenue is not affected.
If the percentage change in quantity demanded is equal to the percentage change in price, demand is
Unit elastic.
Even with wage increases, the supply curve of labor is most often inelastic for which of the following?
full-time workers
A decrease in consumer preference for a product, other things being equal, will cause:
market demand to shift to the left.
Refer to Exhibit 5-6. Suppose the three equilibrium quantities are 700, 800, and 900, and the two other equilibrium prices are $2.20 and $2.75. What is the change in total revenue when a per-unit tax shifts S1 to S2, given that D2 is the relevant demand curve?
-$260
If the cross elasticity of demand for good A with respect to good B is +2.7, then good A is
A substitute for good B.
If supply is inelastic, it follows that
A. A rise in price will not change quantity supplied. B. A fall in price will not change quantity supplied. C. Consumers will pay 100 percent of any tax placed on sellers. D. Quantity supplied always changes more than price changes. E. None of the above ANSWER: E. None of the above
price elasticity of demand is the ratio of the
Percentage change in quantity demanded to the percentage change in price.
If a small increase in the price of a good reduces quantity demanded to zero, demand is ________________ and the price elasticity of demand is
Perfectly elastic; equal to infinity.
Refer to Exhibit 5-l. The demand curve D2 is
Perfectly inelastic
If quantity demanded is completely unresponsive to changes in price, demand is
Perfectly inelastic.
Price elasticity of demand is a measure of the responsiveness of quantity demanded to changes in
Price
Refer to EXHIBIT 5-3 ALL FOLLOWING ARE FOR GOOD A: (Price) (QD) (QS) $5.50 5 55 $4.50 15 45 $3.50 25 35 $2.50 35 25 $1.50 45 15 $0.50 55 5 80. Refer to Exhibit 5-3. If price increases from $2.50 to $3.50, total revenue along the demand curve
Remains at $87.50.
If income elasticity of demand is 2.12, it means that quantity demanded will __________ by 2.12 percent for every __________ percent __________ in income.
Rise; 1.0; rise
Refer to Exhibit 5-2. The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X, as shown by the shift of S1 to S2. As a result, the equilibrium price
Rises from $5.00 to $6.25
Refer to Exhibit 5-2. The market for good X is initially in equilibrium at $5. The government then places a tax on the producers of good X-in effect, taxing them on each unit of good X they sell. As a result, the supply curve
Shifts (up and) leftward from S1 to S2.
Which of the following statements is false?
A. Income elasticity of demand measures the responsiveness of quantity demanded to changes in income. B. Price elasticity of demand measures the responsiveness of quantity demanded to changes in price. C. Price elasticity of demand and the slope of a demand curve are the same thing. D. The more substitutes for a good, the higher the price elasticity of demand, ceteris paribus. ANSWER: C Price elasticity of demand and the slope of a demand curve are the same thing.
Which of the following statements is true?
A. Lower prices always lower total revenue. B. Higher prices always raise total revenue. C. Higher prices always lower total revenue. D. Lower prices always raise total revenue. E. None of the above ANSWER: E. None of the above
If for good Z income elasticity is less than 1 but greater than zero, then demand for good Z is income __________, and good Z is a(n) __________ good.
NOT: elastic; normal
If goods A and B have a cross elasticity of demand that is positive, this is evidence that goods A and B are __________ goods.
Substitute
Molly attends college and works part-time job as a telemarketer. She can work up to 40 hours each week at her job, which pays $8 per hour. The table below shows her utility from different levels of leisure and income. Molly is currently working 20 hours per week. If she decides to work 30 hours instead, then her marginal utility loss from having less leisure is: Hours of Leisure: 0, 5, 10, 15, 20, 25, 30, - Total Utility from Leisure: 0, 18, 34, 48, 56, 60, 62, - Income: 0, 40, 80, 120, 160, 200, 240, 280 Total Utility from Income: 0, 30, 54, 72, 81, 87, 90, 92
18 34 3 NOT: 6
Bob budgets $12 a week for entertainment. He splits his time between going to the movies and going to the gym. Each movie costs $3 and each session at the gym also costs $3. The total utility from each of these activities is shown in the table below. Bob's utility maximizing point is:
3 movies; 3 gym workout sessions
For lunch, Maria eats only salads or vegetarian burgers. Her weekly food budget is $36. Each salad costs $6 and each vegetarian burger costs $3. When deciding how much of each good to buy, Maria knows that 2 salads and 4 vegetarian burgers will give her a utility of 8. Maria's utility-maximizing point is:
3 salads, 6 vegetarian burgers
Refer to Exhibit 5-3. EXHIBIT 5-3 ALL FOLLOWING ARE FOR GOOD A: (Price) (QD) (QS) $5.50 5 55 $4.50 15 45 $3.50 25 35 $2.50 35 25 $1.50 45 15 $0.50 55 5 When price decreases from $1.50 to $0.50, the price elasticity of supply is
5.0.
Troy has a part-time job in a book store to help pay for his college. He can work up to 30 hours each week at his job, which pays $9 per hour. The table below shows his utility from different levels of leisure and income. Troy currently works 20 hours per week. If he decides to work 30 hours instead, his marginal utility gain from the additional income is ____. Hours of Leisure: 0, 5, 10, 15, 20, 25, 30, - Total Utility from Leisure: 0, 18, 34, 48, 56, 60, 62, - Income: 0, 45, 90, 135, 180, 225, 270, 315 Total Utility from Income: 0, 30, 54, 72, 81, 87, 90, 92
9 (90-81=9)
If a 7 percent increase in the price of a commodity results in a 12 percent increase in the quantity supplied, supply is said to be
Elastic