ECON 101: Chapter 2

Which of the following would be considered in a cost-benefit analysis to decide if a person should cycle to work or ride the subway? (i) The air pollution that the cyclist has to breathe. (ii) The cost of subway tickets. (iii) The time it takes to cycle to work versus the time it takes to ride the subway to work. (iv) The cost per gallon of gasoline. 1. (i), (ii), and (iv) 2. (i), (ii) and (iii) 3. (i), (ii), (iii) and (iv) 4. (i), (iii) and (iv)

(i), (ii) and (iii)

The table contains the monthly demand for soda cans for four students. If these four students make up the entire market, what is the total monthly market demand for soda at $1.50 per can? 45 cans 99 cans 125 cans 148 cans

148 cans

Which of the following scenarios illustrates the law of demand? * Kathleen eats more steak when the price is low, and less when the price is high. * John likes to drink spring water. At $2 he buys four bottles of water, and at $1.50 he still buys four bottles of water. * Francis does not care about the price of coffee at the coffee shop - he must buy two cappuccinos every day, regardless of the price. * A research company finds that the more expensive a particular brand of a designer handbag, the more that consumers are willing to purchase the brand.

Kathleen eats more steak when the price is low, and less when the price is high.

(Figure: Demand for Bus Rides) The city of Vaughan in Ontario, Canada, opened a new subway line that extended the existing subway system between the greater Toronto area and the city of Vaughan. The route previously only had bus service. Which of the following graphs depicts the effect you would expect to see on the demand for bus rides on this route after the introduction of the subway? Graph B Graph C Graph A Graph D

Graph A

(Figure: Market for Printing Paper) Which of the following graphs illustrates what we expect to see in the market for printing paper if the price of printing paper rises? Graph A Graph B Graph D Graph C

Graph C

Figure: Market for Apple Computers) Dell and Apple are competitors in the computer market. Which graph illustrates the effect of a rise in the price of Dell computers on the demand for Apple computers? Graph C Graph D Graph B Graph A

Graph D

(Figure: Graph) Refer to the graph to answer the question. In the graph, the movement from point W to point P represents:

a decrease in demand.

A normal good is:

a good for which higher income causes an increase in demand.

Quantity demanded is on the horizontal axis when you plot a demand curve and shows the:

amount of a good that a person is willing to buy at each price.

(Figure: Graph) Refer to the graph to answer the question. The movement from point M to point N represents:

an increase in quantity demanded.

The interdependence principle:

implies that buyers decisions are affected by many factors other than the price of an item.

When you get hired for a well-paying job, you will most likely view older used cars as

inferior goods.

Diminishing marginal benefit:

is when buying an additional item yields a smaller marginal benefit than the previous item.

A rational buyer will:

keep buying a product until marginal benefit equals price.

When plotting a demand curve

price is on the vertical axis.

An individual demand curve is a graph:

that plots the quantity of an item that someone plans to buy, at each price.

Paint and paintbrushes are complements. If the price of paint rises, we can expect:

the demand for paintbrushes to decrease.

A downward-sloping demand curve implies:

there is an inverse relationship between price and quantity demanded.