Chapter 3, 5, & 6 test study guide

Which of the following would not cause the market supply of cell phones to change?

A reduction in the demand for cell phones causes the price to fall.

A demand curve that is perfectly elastic is

horizontal

Elasticity of supply tells us

how much sellers will increase production in response to a change in price

Price elasticity of demand refers to

how sensitive buyers are to a change in price.

Demand is more price-elastic

in the long run.

According to the law of demand, during a given period of time, the quantity of a good demanded

increases as its price falls, ceteris paribus.

As more satisfaction is achieved from consuming a good with diminishing marginal utility, then total utility

increases at a decreasing rate.

13.When income falls, the demand for an inferior good

increases.

16.If the demand for cigarettes is

inelastic, total revenue will rise if the price of cigarettes rises.

Price ceilings are intended to address the problem of

inequity in the distribution of goods and services.

Price discrimination is ________ in the United States and ________ practiced.

legal; often

The slope of the indifference curve is equal to the

marginal rate of substitution.

Maximum utility is achieved when

marginal utility is zero.

The World View article featured in the text titled "Venezuela's Food Crisis" describes how government-imposed price ceilings generated negative consequences for Venezuelans. When cross-border smugglers bring food into the country, then the

market shortage is made smaller and the smugglers reap a profit.

Smart phones and apps are complementary goods. The cross-price elasticity of demand between smartphones and apps is expected to be

negative.

A buyer is said to have a demand for a good only when

the buyer is both willing and able to purchase the good.

To find the percentage change in price,

the change in price is divided by the average price.

To find the average percentage change in quantity demanded,

the change in quantity demanded is divided by the average quantity.

If advertising is successful,

the demand curve shifts to the right and becomes steeper.

Total revenue is equal to

the income from sales.

An indifference map shows a set of indifference curves. Jose goes to an all-you-can-eat buffet at a Chinese restaurant and consumes three plates of food. He does not go back for a fourth plate of food because

the marginal utility of the fourth plate would no longer be positive.

When choosing among products, consumers look at

the marginal utility per dollar and their budget constraint.

The equilibrium price in a market is found where

the market supply curve intersects the market demand curve.

The price elasticity of demand is equal to

the percentage change in quantity demanded divided by the percentage change in price.

According to the law of demand, ceteris paribus

the quantity demanded increases at lower prices.

Supply is very inelastic when.

the quantity supplied changes little when the price increases

Supply is very elastic when

the quantity supplied has a large increase in response to an increase in price.

(Figure 3.3) Which panel could represent the changes in the market for wool when the government increases subsidies for the production of wool and at the same time an oncoming cold winter increases the demand for warm jackets made of wool?

A

The goal of the consumer in a market economy is to use their limited income to buy

the set of goods and services that maximizes the consumer's total utility

Assume that steel is used to produce monkey wrenches. Ceteris paribus, if the price of steel rises, then

the supply curve for monkey wrenches will shift to the left.

A demand curve that is perfectly inelastic

vertical

Technically the elasticity number is negative because

when price falls, quantity demanded will rise, but for simplicity, economists take the absolute value of the elasticity number.

All of the possible combinations of two goods that lie on one indifference curve

yield the same level of utility.

Graphically, as a consumer buys more of a good, the marginal utility line will

continuously decline if diminishing returns are present.

.Ceteris paribus, a consumer that purchases a sports car must consider the price of gasoline because these goods are

compliments.

The benefit that individuals get when they buy goods at the equilibrium price but were willing to pay more is called

consumer surplus

Which of the following statements best captures the concept of consumer surplus?

"I was willing to pay $15 for a takeout meal, but I was able to get my meal for $12.50"

Lu's consumer surplus is equal to

$500

If the government required the actual market price to be fixed at $6 per unit, then

-a binding or effective price ceiling would result.

Assume that baseballs and baseball mitts are complements In the market for baseballs, what would we expect to happen if the price of baseball mitts falls?

An increase in the demand for baseballs

In the market for bell-bottom jeans, what would we expect to happen if celebrities begin wearing more bell-bottom jeans?

An increase in the demand for bell-bottom jeans

Marginal utility is the

Change in total utility obtained by consuming one extra unit of a good or service

Which of the following will cause the consumer surplus to increase?

Decreasing the equilibrium price by $14.

Cross-price elasticity refers to

How responsive consumers of one good are to a change in the price of another good.

Which of the following is not held constant along a given supply curve for a good?

Price

Which of the following must be true for a consumer to make a purchase?

The consumer surplus must be greater than or equal to zero.

Suppose both the demand for and supply of salsa increase (although not necessarily by the same amount). What can we conclude about changes in the price and quantity of salsa?

The equilibrium quantity increases, but the change in the equilibrium price cannot be determined.

Which of the following is the best example of negative marginal utility?

Your third TV is still in the box and you regret that you were talked into buying it.

Ceteris paribus, lower quantity demanded of a good occurs if there is

a higher price of the good.

Ceteris paribus, a leftward shift of the market demand curve for HDTVs causes the equilibrium price to

a shortage exists at the old equilibrium price

Ceteris paribus, when the demand for coffee increases, the equilibrium price will also increase because

a shortage exists at the old equilibrium price

If a price is below equilibrium,

a shortage will cause the price to rise and the quantity supplied to increase.

Which of the following events would cause a rightward shift in the market supply curve for automobiles?

a technological improvement that reduces the cost of production

If the price elasticity of demand is equal to 2, the good has _____ demand

an elastic

Suppose there are a series of forest fires that affect the lumber industry while, at the same time, consumers demand more wooden furniture. The wooden furniture market would experience

an increase in equilibrium price and an indeterminate change in equilibrium quantity.

Ceteris paribus, which of the following is most likely to cause a decrease in the supply of skateboards?

an increase in the cost of materials used to produce skateboards

The law of diminishing marginal utility states that

as a consumer enjoys successive units of a good, eventually marginal utility will fall.

The World View titled "Rebounding Oil Price Spurs More Rigs" related to oil prices and oil rigs suggests that

as the price of oil increases, there is an increase in oil rigs and thus an increase in supply, indicating that supply is elastic.

A decrease in the price of bubble gum below equilibrium will

cause a shortage of bubble gum.

When economists refer to the determinants of demand, they are referring to factors that when changed,

cause the demand curve to shift left or right.

Sellers can gain profits from price discrimination because

charging different prices based on willingness to pay can increase revenues without increasing costs.

An indifference curve shows the

combinations of goods giving equal utility to a consumer.

The total revenue effect of a movement along a demand curve can best be predicted using the

price elasticity of demand.

When demand is price-inelastic, ceteris paribus, an increase in

price leads to greater total revenue.

Economic explanations of consumer behavior take into consideration

prices and income.

In a market economy, which of the following is an incentive for producers to produce efficiently?

profits

If peanut butter and jelly are complementary goods, an increase in the price of peanut butter will, ceteris paribus,

reduce the demand for jelly.

Price elasticity of demand shows how

responsive the quantity demanded is to a change in price.

Income elasticity measures the

responsiveness of quantity demanded to a percentage change in income.

15.The demand for normal goods

rises when incomes rise.

Car dealers can easily price discriminate because

sellers negotiate a separate price agreement with each individual buyer. ​​

If the current market price is $4, then

shortage of 30 units.

Oil and alternative sources of energy such as wind and solar are

substitute goods

Which of the following industries is unlikely to exhibit price discrimination?

supermarkets