econ 202 midterm
The difference between slope and elasticity is that slope A. is a ratio of two changes, and elasticity is a ratio of two percentage changes. B. is a ratio of two percentage changes, and elasticity is a ratio of two changes. C. measures changes in quantity demanded more accurately than elasticity. D. none of the above; there is no difference between slope and elasticity.
A.
For a good that is a luxury, demand A. tends to be elastic. B. cannot be represented by a demand curve in the usual way. C. has unit elasticity. D. tends to be inelastic.
A.
If sellers do not adjust their quantity supplied at all in response to a change in price, the price elasticity of supply is A. zero, and the supply curve is vertical. B. zero, and the supply curve is horizontal. C. infinity, and the supply curve is horizontal. D. infinity, and the supply curve is vertical.
A.
If the demand for donuts is elastic, then a decrease in the price of donuts will A. increase total revenue of donut sellers. B. There is not enough information to answer this question. C. not change total revenue of donut sellers. D. decrease total revenue of donut sellers.
A.
If the price elasticity of demand for a good is -10, then a 4 percent increase in price results in a A. 40 percent decrease in the quantity demanded. B. 0.4 percent decrease in the quantity demanded. C. 2.5 percent decrease in the quantity demanded. D. 4 percent decrease in the quantity demanded.
A.
One thing economists do to help them understand how the real world works is A. make assumptions. B. try to capture every aspect of the real world in the models they construct. C. All of the above are correct. D. ignore the past.
A. make assumptions.
The price elasticity of demand for eggs A. is computed as the percentage change in quantity demanded of eggs divided by the percentage change in price of eggs. B. will be lower if there is a new invention that is a close substitute for eggs. C. will be higher if consumers consider eggs to be a necessity. D. All of the above are correct.
A.
When consumers face rising gasoline prices, they typically A. reduce their quantity demanded more in the long run than in the short run. B. reduce their quantity demanded more in the short run than in the long run. C. do not reduce their quantity demanded in the short run or the long run. D. increase their quantity demanded in the short run but reduce their quantity demanded in the long run
A.
Which of the following could be the cross-price elasticity of demand for two goods that are complements? A. -1.3 B. 1.4 C. 0.2 D. 0
A.
Which of the following statements is valid when supply is perfectly elastic at a price of $4? A. The elasticity of supply approaches infinity. B. At a price below $4, quantity supplied is infinite. C. The supply curve is vertical. D. At a price above $4, quantity supplied is zero.
A.
What is the opportunity cost of moving from point A to point B? A. 15 candles B. 6 clocks and 15 candles C. zero D. 6 clocks
A. 15 candles
If these are the only four sellers in the market, then the market quantity supplied at a price of $4 is A. 30 units. B. 4 units. C. 10 units. D. 7.5 units.
A. 30 units.
If the production possibilities frontier is bowed outward, then "?" could be A. 4100. B. 4400. C. 4300 D. 4200
A. 4100.
Which of the following statements is correct? A. Buyers determine demand, and sellers determine supply. B. Buyers determine both demand and supply. C. Buyers determine supply, and sellers determine demand. D. Sellers determine both demand and supply.
A. Buyers determine demand, and sellers determine supply.
Which supply schedules obey the law of supply? A. Firm B's and Firm D's only B. Firm B's, Firm C's, and Firm D's only C. Firm A's only D. Firm A's and Firm C's only
A. Firm B's and Firm D's only
Which of the following statements best represents the principle represented by the adage, "There is no such thing as a free lunch"? A. Kendra must decide between going to Colorado or Cancun for spring break. B. Melissa can attend the concert only if she takes her sister with her. C. Brian must repair the tire on his bike before he can ride it to class. D. Greg is hungry and homeless.
A. Kendra must decide between going to Colorado or Cancun for spring break.
If demand can be represented by the equation Q^D=2,400-200P and supply can be represented by the equation Q^S=2,000+200P, what are the equilibrium price and quantity? A. P=1; Q=2200 B. P=2; Q=2400 C. P=3; Q=1800 D. P=2; Q=2000
A. P=1; Q=2200
Suppose the state of Massachusetts passes a law that increases the tax on alcoholic beverages. As a result, residents in Massachusetts start purchasing their alcohol in surrounding states. Which of the following principles does this best illustrate? A. People respond to incentives. B. Rational people think at the margin. C. Trade can make everyone better off. D. Markets are usually a good way to organize economic activity.
A. People respond to incentives.
What would happen to the equilibrium price and quantity of peanut butter if the price of peanuts went up, the price of jelly fell, fewer firms decided to produce peanut butter, and health officials announced that eating peanut butter was good for you? A. Price will rise, and the effect on quantity is ambiguous. B. Price will fall, and the effect on quantity is ambiguous. C. Quantity will rise, and the effect on price is ambiguous. D. Quantity will fall, and the effect on price is ambiguous.
A. Price will rise, and the effect on quantity is ambiguous.
Which of the following events would explain the shift of the production possibilities frontier from A to B? A. The economy experienced a technological advance in the production of books. B. The economy's citizens developed an enhanced taste for books. C. More labor became available in the economy. D. More capital became available in the economy.
A. The economy experienced a technological advance in the production of books.
Which of the following changes would not shift the supply curve for a good or service? A. a change in the price of the good or service B. a change in input prices C. a change in production technology D. a change in expectations about the future price of the good or service
A. a change in the price of the good or service
The shift from D to D' is called A. a decrease in demand. B. an increase in quantity demanded. C. an increase in demand. D. a decrease in quantity demanded.
A. a decrease in demand.
The movement from D to D' could be caused by A. a decrease in the price of a substitute. B. a decrease in the price of a complement. C. an increase in price. D. a technological advance.
A. a decrease in the price of a substitute.
When we move along a given demand curve, A. all nonprice determinants of demand are held constant. B. all determinants of quantity demanded are held constant. C. only price is held constant. D. income and price are held constant.
A. all nonprice determinants of demand are held constant.
The shift from S to S' in the market for peaches could be caused by a(n) A. decrease in the labor costs of the workers who pick peaches. B. increase in income. C. decrease in the price of pears. D. increase in the price of peaches.
A. decrease in the labor costs of the workers who pick peaches.
The movement from point B to point D could be caused by A. economic growth. B. an advance in production technology. C. unemployment D. an improvement in efficiency.
A. economic growth.
When a production possibilities frontier is bowed outward, the opportunity cost of producing an additional unit of a good A. increases as more of the good is produced. B. may increase, decrease, or not change as more of the good is produced. C. does not change as more of the good is produced D. decreases as more of the good is produced.
A. increases as more of the good is produced.
When quantity supplied decreases at every possible price, we know that the supply curve has A. shifted to the left. B. shifted to the right. C. not shifted; rather, we have moved along the supply curve to a new point on the same curve. D. not shifted; rather, the supply curve has become flatter.
A. shifted to the left.
Suppose that a decrease in the price of good X results in fewer units of good Y being demanded. This implies that X and Y are A. substitute goods. B. complementary goods. C. inferior goods. D. normal goods.
A. substitute goods.
In markets, prices move toward equilibrium because of A. the actions of buyers and sellers. B. government regulations placed on market participants. C. increased competition among sellers. D. buyers' ability to affect market outcomes.
A. the actions of buyers and sellers.
Suppose a nation is currently producing at a point inside its production possibilities frontier. We know that A. the nation is not using all available resources. B. there will be a large opportunity cost if the nation tries to increase production of any good C. the nation is producing an efficient combination of goods. D. the nation is producing beyond its capacity.
A. the nation is not using all available resources.
The law of supply and demand asserts that A. the price of a good will eventually rise in response to an excess demand for that good. B. demand curves and supply curves tend to shift to the right as time goes by. C. when the supply curve for a good shifts, the demand curve for that good shifts in response. D. the equilibrium price of a good will be rising more often than it will be falling.
A. the price of a good will eventually rise in response to an excess demand for that good.
A decrease in the number of sellers in the market causes A. the supply curve to shift to the left. B. a movement up and to the right along a stationary supply curve. C. a movement downward and to the left along a stationary supply curve. D. the supply curve to shift to the right.
A. the supply curve to shift to the left.
The marginal benefit Claire gets from purchasing a third pair of flip-flops is A. the total benefit Claire gets from purchasing three pairs of flip-flops minus the total benefit she gets from purchasing two pairs of flip-flops. B. more than the marginal cost of purchasing the third pair of flip-flops. C. the total benefit Claire gets from purchasing four pairs of flip-flops minus the total benefit she gets from purchasing three pairs of flip-flops. D. the same as the total benefit of purchasing three pairs of flip-flops.
A. the total benefit Claire gets from purchasing three pairs of flip-flops minus the total benefit she gets from purchasing two pairs of flip-flops.
All else equal, an increase in the number of turkey sellers would cause a move from A. y to x. B. DA to DB. C. x to y. D. DB to DA.
A. y to x.
As we move downward and to the right along a linear, downward-sloping demand curve, A. slope changes but elasticity remains constant. B. slope remains constant but elasticity changes. C. both slope and elasticity change. D. both slope and elasticity remain constant
B.
Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the A. further to the right the demand curve will sit. B. flatter the demand curve will be. C. closer to the vertical axis the demand curve will sit. D. steeper the demand curve will be.
B.
Frequently, in the short run, the quantity supplied of a good is A. impossible, or nearly impossible, to measure. B. not very responsive to price changes. C. determined by psychological forces and other non-economic forces. D. determined by the quantity demanded of the good.
B.
If the price elasticity of supply is 1.2, and price increased by 5%, quantity supplied would A. increase by 4.2%. B. increase by 6%. C. decrease by 4.2%. D. decrease by 6%.
B.
In the market for oil in the short run, demand A. is elastic and supply is inelastic. B. and supply are both inelastic. C. is inelastic and supply is elastic. D. and supply are both elastic.
B.
Suppose goods A and B are substitutes for each other. We would expect the cross-price elasticity between these two goods to be A. either positive or negative. It depends whether the current price level is on the elastic or inelastic portion of the demand curve. B. positive C. either positive or negative. It depends whether A and B are normal goods or inferior goods. D. negative.
B.
Suppose the price of potato chips decreases from $1.45 to $1.25 and, as a result, the quantity of potato chips demanded increases from 2,000 to 2,200. Using the midpoint method, the price elasticity of demand for potato chips in the given price range is A. 1.00 B. 0.64 C. 2.00 D. 1.55
B.
Which of the following is likely to have the most price elastic demand? A. salt B. diamond earrings C. milk D. dental floss
B.
This economy has the ability to produce at which point(s)? A. C, F, G B. A, B, C, F, G C. A, B, D D. A, B
B. A, B, C, F, G
Which of the following statements about economic models is correct? A. Economic models are useful, but they should not be used for the purpose of improving public policies B. Because economic models omit many details, they allow us to see what is truly important C. Economic models are built to mirror reality exactly D. Economic models seldom incorporate equations or diagrams
B. Because economic models omit many details, they allow us to see what is truly important
All else equal, an increase in the income of buyers who consider turkey to be an inferior good would cause a move from A. x to y. B. DA to DB C. DB to DA. D. y to x.
B. DA to DB
In competitive markets, which of the following is not correct? A. No individual buyer can influence the market price. B. Some sellers can set prices. C. Firms produce identical products. D. Buyers are price takers.
B. Some sellers can set prices.
The movement from D' to D could be caused by A. buyers expecting the price of the good to fall in the near future. B. a decrease in income, assuming the good is inferior. C. a decrease in price. D. an increase in the price of a complement.
B. a decrease in income, assuming the good is inferior.
If toast and butter are complements, then which of the following would increase the demand for toast? A. a decrease in the price of toast B. a decrease in the price of butter C. an increase in the price of butter D. Both a) and b) are correct.
B. a decrease in the price of butter
A movement upward and to the left along a demand curve is called a(n) A. increase in demand. B. decrease in quantity demanded. C. increase in quantity demanded. D. decrease in demand.
B. decrease in quantity demanded.
Which of the following events must cause equilibrium quantity to fall? A. demand decreases and supply increases B. demand and supply both decrease C. demand and supply both increase D. demand increases and supply decreases
B. demand and supply both decrease
For a market for a good or service to exist, there must be a A. specific time and place at which the good or service is traded. B. group of buyers and sellers. C. All of the above are correct. D. high degree of organization present.
B. group of buyers and sellers.
The shift from S to S' could be caused by an A. increase in income. B. improvement in production technology. C. increase in input prices. D. increase in the price of the good.
B. improvement in production technology.
If suppliers expect the price of their product to fall in the future, then they will A. increase supply in the future but not now. B. increase supply now. C. decrease supply now D. decrease supply in the future but not now.
B. increase supply now.
Economists make assumptions to A. provide issues for political discussion B. make a complex world easier to understand C. make it easier to teach economic concepts and analysis D. create policy alternatives that are incmplete or subject to criticism
B. make a complex world easier to understand
A rational decision maker takes an action only if the A. marginal benefit is less than the marginal cost. B. marginal benefit is greater than the marginal cost. C. average benefit is greater than the average cost. D. marginal benefit is greater than both the average cost and the marginal cost.
B. marginal benefit is greater than the marginal cost.
When the price of a good is higher than the equilibrium price, A. quantity demanded exceeds quantity supplied. B. sellers desire to produce and sell more than buyers wish to purchase. C. a shortage will exist. D. buyers desire to purchase more than is produced.
B. sellers desire to produce and sell more than buyers wish to purchase.
If the price were $4, a A. surplus of 15 units would exist, and price would tend to fall. B. shortage of 25 units would exist, and price would tend to rise. C. shortage of 40 units would exist, and price would tend to rise. D. surplus of 25 units would exist, and price would tend to fall.
B. shortage of 25 units would exist, and price would tend to rise.
Which of the following changes would not shift the demand curve for a good or service? A. a change in expectations about the future price of the good or service B. a change in the price of a related good or service C. a change in the price of the good or service D. a change in income
C. a change in the price of the good or service
Suppose roses are currently selling for $20 per dozen, but the equilibrium price of roses is $30 per dozen. A. surplus to exist and the market price of roses to increase. B. shortage to exist and the market price of roses to increase. C. surplus to exist and the market price of roses to decrease. D. shortage to exist and the market price of roses to decrease.
B. shortage to exist and the market price of roses to increase.
In a market, to find the total amount supplied at a particular price, we must A. account for all determinants of demand. B. sum the quantities that individual firms are willing and able to supply at that price. C.calculate the average of the quantities that individual firms are willing and able to supply at that price. D. sum the costs that individual firms incur to supply the product at that price.
B. sum the quantities that individual firms are willing and able to supply at that price.
A market supply curve shows A. suppliers' responses, in terms of the amounts they will supply, to the demands of buyers. B. the total quantity supplied at all possible prices. C. the average quantity supplied by producers at all possible prices. D. how quantity supplied changes when consumer income changes.
B. the total quantity supplied at all possible prices.
When the price of a good or service changes, A. the demand curve shifts in the same direction. B. there is a movement along a given demand curve. C. the supply curve shifts in the opposite direction. D. the demand curve shifts in the opposite direction.
B. there is a movement along a given demand curve.
A manufacturer produces 400 units when the market price of $10 per unit and produces 600 units when the market price is $12 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about A. 2.0 B. 200 C. 2.2 D. 0.45
C.
Consider luxury weekend hotel packages in Las Vegas. When the price is $250, the quantity demanded is 2,000 packages per week. When the price is $280, the quantity demanded is 1,700 packages per week. Using the midpoint method, the price elasticity of demand is about A. 0.70, and an increase in the price will cause hotels' total revenue to decrease. B. 0.70, and an increase in the price will cause hotels' total revenue to increase. C. 1.43, and an increase in the price will cause hotels' total revenue to decrease. D. 1.43, and an increase in the price will cause hotels' total revenue to increase.
C.
Cross-price elasticity of demand measures how A. strongly normal or inferior a good is. 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. the price of one good changes in response to a change in the price of another good.
C.
Goods with many close substitutes tend to have A. price elasticities of demand that are unit elastic. B. less elastic demands. C. more elastic demands. D. income elasticities of demand that are negative.
C.
If soybean farmers know that the demand for soybeans is price inelastic, in order to increase their total revenues they should A. use more fertilizers and weed killers to increase their yields. B. plant additional acres to increase their output. C. reduce the number of acres they plant to decrease their output. D. Both a and b are correct.
C.
If the price of walnuts rises, many people would switch from consuming walnuts to consuming pecans. But if the price of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the importance of A. the definition of a market in determining the price elasticity of demand. B. the time horizon in determining the price elasticity of demand. C. the availability of close substitutes in determining the price elasticity of demand. D. a necessity versus a luxury in determining the price elasticity of demand.
C.
Last year, Carolyn bought 6 pairs of earrings when her income was $40,000. This year, her income is $52,000, and she purchased 7 pairs of earrings. Holding other factors constant, it follows that Carolyn's income elasticity of demand is about A. 0.59, and Carolyn regards earrings as an inferior good. B. 1.7, and Carolyn regards earrings as a normal good. C. 0.59, and Carolyn regards earrings as a normal good. D. 1.7, and Carolyn regards earrings as an inferior good.
C.
Suppose the cross-price elasticity of demand between hot dogs and mustard is -2.00. This implies that a 20 percent increase in the price of hot dogs will cause the quantity of mustard purchased to A. rise by 40 percent. B. rise by 200 percent. C. fall by 40 percent. D. fall by 200 percent.
C.
The price elasticity of demand measures A. the extent to which demand increases as additional buyers enter the market. B. how much more of a good consumers will demand when incomes rise. C. buyers' responsiveness to a change in the price of a good. D. the movement along a supply curve when there is a change in demand.
C.
When a supply curve is relatively flat, A. sellers are not very responsive to changes in price. B. supply is relatively inelastic. C. supply is relatively elastic. D. Both a and b are correct.
C.
The equilibrium price and quantity, respectively, are A. $6 and 60 units. B. $12 and 30 units. C. $6 and 30 units. D. $2 and 50 units.
C. $6 and 30 units.
If this economy devotes all of its resources to the production of clocks, then it will produce A. 16 clocks and 35 candles. B. 0 clocks and 35 candles. C. 16 clocks and 0 candles. D.10 clocks and 25 candles.
C. 16 clocks and 0 candles.
If scientists discover that steamed milk, which is used to make lattés, prevents heart attacks, what would happen to the equilibrium price and quantity of lattés? A. The equilibrium price would increase, and the equilibrium quantity would decrease. B. Both the equilibrium price and quantity would decrease. C. Both the equilibrium price and quantity would increase. D. The equilibrium price would decrease, and the equilibrium quantity would increase.
C. Both the equilibrium price and quantity would increase.
An improvement in production technology will A. increase a firm's costs and increase its supply. B. decrease a firm's costs and decrease its supply. C. increase a firm's costs and decrease its supply. D. decrease a firm's costs and increase its supply.
D. decrease a firm's costs and increase its supply.
If the demand for a product decreases, then we would expect equilibrium price A. to decrease and equilibrium quantity to increase. B. to increase and equilibrium quantity to decrease. C. and equilibrium quantity to both decrease. D. and equilibrium quantity to both increase.
C. and equilibrium quantity to both decrease.
If a seller in a competitive market chooses to charge more than the going price, then A. the sellers' profits must increase. B. other sellers would also raise their prices. C. buyers will make purchases from other sellers. D. the owners of the raw materials used in production would raise the prices for the raw materials.
C. buyers will make purchases from other sellers.
You are considering staying in college another semester so that you can complete a major in economics. In deciding whether or not to stay you should A. compare the total benefits of your education to the cost of staying one more semester. B. compare the total cost of your education to the benefits of staying one more semester. C. compare the cost of staying one more semester to the benefits of staying one more semester. D. compare the total cost of your education to the total benefits of your education.
C. compare the cost of staying one more semester to the benefits of staying one more semester.
The shift from S' to S in the market for chocolate cake could be caused by a(n) A. decrease in the price of chocolate cake. B. decrease in the price of butter. C. decrease in the number of commercial bakers. D. improvement in oven technology.
C. decrease in the number of commercial bakers.
At the equilibrium price, the quantity of the good that buyers are willing and able to buy A. Either a) or c) could be correct. B. is less than the quantity that sellers are willing and able to sell. C. exactly equals the quantity that sellers are willing and able to sell. D. is greater than the quantity that sellers are willing and able to sell.
C. exactly equals the quantity that sellers are willing and able to sell.
Soup is an inferior good if the demand A. for soup falls when the price of a substitute for soup rises. B. curve for soup slopes upward. C. for soup falls when income rises. D. for soup rises when the price of soup falls.
C. for soup falls when income rises.
To obtain the market demand curve for a product, sum the individual demand curves A. vertically. B. and then average them. C. horizontally. D. diagonally
C. horizontally.
The movement from D' to D in the market for potato chips could be caused by a(n) A. decrease in the price of potato chips. B. announcement by the FDA that potato chips cause cancer. C. increase in the price of a pretzels. D. decrease in income, assuming that potato chips are a normal good
C. increase in the price of a pretzels.
For this economy, as more and more clocks are produced, the opportunity cost of an additional clock produced (in terms of candles) A. remains constant. B. decreases C. increases D. This cannot be determined from the figure.
C. increases
A competitive market is a market in which A. there are only a few sellers. B. the forces of supply and demand do not apply. C. no individual buyer or seller has any significant impact on the market price. D. an auctioneer helps set prices and arrange sales.
C. no individual buyer or seller has any significant impact on the market price.
If the demand curve shifts from D to D', then A. people's incomes must have decreased. B. firms would be willing to supply less of the good than before at each possible price. C. people are willing to buy less of the good than before at each possible price. D. the price of the product has increased, causing consumers to buy less of the product.
C. people are willing to buy less of the good than before at each possible price.
When quantity demanded decreases at every possible price, the demand curve has A. shifted to the right. B. not shifted; rather, the demand curve has become flatter. C. shifted to the left D. not shifted; rather, we have moved along the demand curve to a new point on the same curve.
C. shifted to the left
Workers at a bicycle assembly plant currently earn the mandatory minimum wage. If the federal government increases the minimum wage by $1.00 per hour, then it is likely that the A. demand for bicycle assembly workers will increase. B. supply of bicycles will shift to the right. C. supply of bicycles will shift to the left. D. firm must increase output to maintain profit levels.
C. supply of bicycles will shift to the left.
Denise decides to spend three hours working overtime rather than watching a video with her friends. She earns $10 an hour. Her opportunity cost of working is A. the $30 she earns working. B. the $30 minus the enjoyment she would have received from watching the video. C. the enjoyment she would have received had she watched the video. D. nothing, since she would have received less than $30 of enjoyment from the video.
C. the enjoyment she would have received had she watched the video.
High-school athletes who skip college to become professional athletes A. obviously do not understand the value of a college education. B. usually do so because they cannot get into college. C. understand that the opportunity cost of attending college is very high. D. are not making a rational decision since the marginal benefits of college outweigh the marginal costs of college for high-school athletes.
C. understand that the opportunity cost of attending college is very high.
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.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. D.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.
A key determinant of the price elasticity of supply is A. the slope of the demand curve. B. how responsive buyers are to changes in sellers' prices C. the ability of sellers to change the price of the good they produce. D. the ability of sellers to change the amount of the good they produce.
D.
Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is A. positive, and the good is an inferior good. B. negative, and the good is a normal good. C. positive, and the good is a normal good. D. negative, and the good is an inferior good.
D.
For which pairs of goods is the cross-price elasticity most likely to be positive? A. bicycle frames and bicycle tires B. peanut butter and jelly C. college textbooks and iPods D. pens and pencils
D.
If the price elasticity of demand for a good is 0.8, then which of the following events is consistent with a 4 percent decrease in the quantity of the good demanded? A. a 3.2 percent increase in the price of the good B. a 0.2 percent increase in the price of the good C. a 4.8 percent increase in the price of the good D. a 5 percent increase in the price of the good
D.
Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows. If the demand for milk is relatively inelastic, the discovery will A. lower price and raise total revenues. B. raise price and lower total revenues. C. raise both price and total revenues. D. lower both price and total revenues.
D.
Suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded. Price elasticity of demand for X is A. 0 B. 36 C. 6 D. 1
D.
When the price of bubble gum is $0.50, the quantity demanded is 400 packs per day. When the price falls to $0.40, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for bubble gum is A. perfectly inelastic. B. unit elastic. C. inelastic. D. elastic.
D.
Which of the following statements is correct? A. The demand for flat-screen computer monitors is more elastic than the demand for monitors in general. B. The demand for grandfather clocks is more elastic than the demand for clocks in general. C. The demand for cardboard is more elastic over a long period of time than over a short period of time. D. All of the above are correct.
D.
If there is currently a shortage of 20 units of the good, then the law of A. supply predicts that the price will rise by $2 to eliminate the shortage. B. supply and demand predicts that the price will fall by $2 to eliminate the shortage. C. demand predicts that the price will rise by $2 to eliminate the shortage. D. supply and demand predicts that the price will rise by $2 to eliminate the shortage.
D. supply and demand predicts that the price will rise by $2 to eliminate the shortage.
If Consumer A and Consumer B are the only consumers in the market, then the market quantity demanded when the price is $6 is A. 6 units. B. 4 units. C. 8 units. D. 12 units.
D. 12 units.
If the resource is not fully utilized (e.g., unemployment), could this economy produce at which point(s)? A. A, B B. C, D, F, G C. D D. C, F, G
D. C, F, G
Which of the following is an example of a positive, as opposed to normative, statement? A. Income tax rates should not have been cut as they were a few years ago B. The quantity of money has grown too slowly in recent years. C. All of the above are positive statements. D. When the quantity of money grows rapidly, inflation is a predictable consequence.
D. When the quantity of money grows rapidly, inflation is a predictable consequence.
Suppose scientists provide evidence that chocolate pudding increases the bad cholesterol levels of those who eat it. We would expect to see A. an increase in the demand for chocolate pudding. B. no change in the demand for chocolate pudding. C. a decrease in the supply of chocolate pudding. D. a decrease in the demand for chocolate pudding.
D. a decrease in the demand for chocolate pudding.
A supply curve slopes upward because A. an increase in input prices increases supply. B. the quantity supplied of most goods and services increases over time. C. as more is produced, total cost of production falls. D. an increase in price gives producers an incentive to supply a larger quantity.
D. an increase in price gives producers an incentive to supply a larger quantity.
The movement from point A to point B on the graph shows A. a decrease in quantity demanded. B. an increase in demand. C. a decrease in demand. D. an increase in quantity demanded.
D. an increase in quantity demanded.
An economic theory in international trade that is based on the assumption that there are only two countries trading two goods A. is useless, since the real world has many countries trading many goods. B. can be useful only in situations involving two countries and two goods C. can be useful in the classroom but is useless in the real world D. can be useful in helping economists understand the complex world of international trade involving many countries and many goods
D. can be useful in helping economists understand the complex world of international trade involving many countries and many goods
A typical society strives to get the most it can from its scarce resources. At the same time, the society attempts to distribute the benefits of those resources to the members of the society in a fair manner. In other words, the society faces a tradeoff between A. work and leisure. B. inflation and unemployment. C. guns and butter. D. efficiency and equality.
D. efficiency and equality.
People are likely to respond to a policy change A. only if they think the policy is a good one. B. only if the policy change changes the benefits of their behavior. C. only if the policy change changes the costs of their behavior. D. if the policy changes either the costs or benefits of their behavior.
D. if the policy changes either the costs or benefits of their behavior.
Mitch has $100 to spend and wants to buy either a new amplifier for his guitar or a new mp3 player to listen to music while working out. Both the amplifier and the mp3 player cost $100, so he can only buy one. This illustrates the basic concept that A. people respond to incentives. B. rational people think at the margin. C. trade can make everyone better off. D. people face trade-offs.
D. people face trade-offs.
The market demand curve A. slopes upward. B.represents the sum of the prices that all the buyers are willing to pay for a given quantity of the good. C. is found by vertically adding the individual demand curves. D. represents the sum of the quantities demanded by all the buyers at each price of the good.
D. represents the sum of the quantities demanded by all the buyers at each price of the good.
Ford Motor Company announces that next month it will offer $3,000 rebates on new Mustangs. As a result of this information, today's demand curve for Mustangs A. will not shift; rather, the demand curve for Mustangs will shift to the right next month. B. shifts to the right. C.shifts either to the right or to the left, but we cannot determine the direction of the shift from the given information. D. shifts to the left.
D. shifts to the left.
If the price were $8, a A. surplus of 45 units would exist, and price would tend to fall. B. shortage of 20 units would exist, and price would tend to rise. C. shortage of 25 units would exist, and price would tend to rise. D. surplus of 25 units would exist, and price would tend to fall.
D. surplus of 25 units would exist, and price would tend to fall.
People are willing to pay more for a diamond than for a bottle of water because A. water prices are held artificially low by governments, since water is necessary for life. B. the marginal cost of producing an extra diamond far exceeds the marginal cost of producing an extra bottle of water. C. producers of diamonds have a much greater ability to manipulate diamond prices than producers of water have to manipulate water prices. D. the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water.
D. the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water.
A movement along the supply curve might be caused by a change in A. expectations about future prices. B. production technology. C. input prices. D. the price of the good or service that is being supplied.
D. the price of the good or service that is being supplied.
Suppose that demand for a good increases and, at the same time, supply of the good decreases. What would happen in the market for the good? A. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous. B. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. C. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous. D.Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.
D.Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.
Production possibilities frontiers are usually bowed outward. This is because A.it reflects the fact that the opportunity cost of producing a good decreases as more and more of that good is produced. B.the more resources a society uses to produce one good, the fewer resources it has available to produce another good. C. of the effects of technological change. D.resources are specialized; that is, some are better at producing particular goods rather than other goods.
D.resources are specialized; that is, some are better at producing particular goods rather than other goods.
