Econ 2302 Test 1

D. normal

A good for which demand decrease when income decreases is known as a(n) _____ good. A. inferior B. substitute C. complementary D. normal

C. responsiveness

A good synonym for elasticity would be: A. demand B. change C. responsiveness D. stickiness

D. all of the above

A market equilibrium will generate the largest possible surplus when: A. perfect information is available B. there is perfect competition C. there are no external benefits and external costs D. all of the above

increases

According to the law of supply, an increase in a good's price _____ the quantity supplied of that good.

Increase, Decrease, Increase

An excess demand for a product will cause the price to ____. As a consequence of the price change, the quantity demanded will ____ decrease and the quantity supplied will _____.

Increases, Increases

An increase in demand (given a typical upward sloping supply curve) for a product ____ the equilibrium price, and _______ the equilibrium quantity.

B. $0

Assume that the price of a DVD player is $50. If Joshua is willing to pay $50 for that DVD player, his consumer surplus is: A. $10 B. $0 C. $1 D. $50

D. D0 to D1

Figure 4.3 illustrates the demand for tacos. An increase in the demand for tacos is represented by the movement from: A. point a to point b B. point c to point b C. D2 to D1 D. D0 to D1

A. markets are efficient

Buyers and sellers acting in their own best interest generate outcomes that are in society's best interest when all of the following are true EXCEPT: A. markets are efficient B. there are no external benefits C. buyers and sellers are informed D. there are no external costs

D. more elastic

Ceteris paribus, if more alternative forms of energy become available, we would expect the demand for gasoline to become: A. perfectly elastic B. perfectly inelastic C. more inelastic D. more elastic

A. the supply of tortillas decreases

Corn is used to produce tortillas. If the price of corn increases: A. the supply of tortillas decreases B. the demand for tortillas decreases C. the supply of tortillas increase D. the demand for tortillas increases

D. D0 to D2

Figure 4.3 illustrates the demand for tacos. An increase in the number of consumers in the market would bring about a movement from: A. point a to point b B. point c to point a C. D2 to D1 D. D0 to D2

D. less elastic

Demand for low budget items, such as candy, is generally _____ than demand for large budget items, such as automobiles. A. higher B. more elastic C. lower D. less elastic

A. the invisible hand

Economists call the phenomenon that leads individual consumers and producers to the market equilibrium: A. the invisible hand B. the invisible arm C. the invisible foot D. the invisible head

Less than; Greater than

Excess demand occurs when the price is ______ the equilibrium price; excess supply occurs when the price is _____ the equilibrium price.

A. excess supply of 8 t-shirts

Figure 4.2 illustrates the supply and demand for t-shirts. If the actual price of t-shirts is $15, there is an: A. excess supply of 8 t-shirts B. excess supply of 10 t-shirts C. excess demand of 8 t-shirts D. excess demand of 10 t-shirts

C. price will increase until quantity demanded equals quantity supplied

Figure 4.2 illustrates the supply and demand for t-shirts. If the actual price of t-shirts is $7, we would expect that: A. supply will increase until quantity demanded equals quantity supplied B. demand will decrease until quantity demanded equals quantity supplied C. price will increase until quantity demanded equals quantity supplied D. there will be no change since the market is in equilibrium

B. point c to point a

Figure 4.3 illustrates the demand for tacos. An increase in price of tacos would bring about a movement from: A. point a to point c B. point c to point a C. D2 to D0 D. D0 to D1

D. D0 to D1

Figure 4.3 illustrates the demand for tacos. Assume tacos are a normal good. An increase in income would bring about a movement from: A. point a to point b B. point c to point b C. D2 to D1 D. D0 to D1

C. D2 to D1

Figure 4.3 illustrates the demand for tacos. Assume tacos are an inferior good. An increase in income would bring about a movement from: A. point a to point b B. point c to point b C. D2 to D1 D. D0 to D1

C. D2 to D1

Figure 4.3 illustrates the demand for tacos. Assume that tacos and beer are complements. An increase in the price of beer would bring about a movement from: A. point a to point b B. point c to point b C. D2 to D1 D. D0 to D2

C. D2 to D0

Figure 4.3 illustrates the demand for tacos. Assume that tacos and burritos are substitutes. A decrease in the price of burritos would bring about a movement from: A. point a to point c B. point c to point b C. D2 to D0 D. D1 to D2

C. D2 to D0

Figure 4.3 illustrates the demand for tacos. If people expect the price of tacos to decrease in the near future, this would most likely bring about a movement from: A. point a to point b B. point c to point a C. D2 to D0 D. D0 to D1

D. point a to point b

Figure 4.5 illustrates a set of supply and demand curves for hamburgers. An increase in supply and an increase in quantity demanded are represented by a movement from: A. point a to point c B. point d to point b C. point c to point d D. point a to point b

D. tax revenues

Governments like to know the price elasticity of demand because it helps them determine how changes in sales tax rates will affect: A. government spending B. income C. profits D. tax revenues

False

Governments sometime create an excess demand for a product by setting a maximum price that is less than the equilibrium price, resulting in a permanent excess demand for the product. This is known as a price floor. True or False.

False

Governments sometime create an excess supply of a product by setting a minimum price that is greater than the equilibrium price, resulting in a permanent excess supply of the product. This is known as a price ceiling. True or False.

D. perfectly inelastic

If Juan purchase the same number of gallons of gasoline per week regardless of changes in gasoline price, Juan's demand for gasoline is: A. inelastic B. elastic C. perfectly elastic D. perfectly inelastic

A. the laws of supply and demand

If a competitive market operates perfectly, it relies on: A. the laws of supply and demand B. how many products can be produced for sale C. how much people are willing to pay for the products D. the number of people buying goods

B. elastic

If a product has several good substitutes, demand for the product is most likely to be: A. very inelastic B. elastic C. unitary elastic D. inelastic

A. inelastic

If a product only has a few acceptable substitutes, demand for the product is most likely to be: A. inelastic B. elastic C. very elastic D. very inelastic

B. price increases

If demand for a product increase, ceteris paribus, the equilibrium: A. price remains unchanged B. price increase C. price decreases D. quantity decreases

C. increase

If the demand curve facing a firm had a price elasticity of demand equal to zero and the firm raised its price, its total revenue would: A. not change B. decrease slightly C. increase D. fall to zero

C. an increase in total revenue

If the demand for school ball caps is inelastic, an increase in price will result in: A. an increase in the quantity demanded B. a decrease in total revenue C. an increase in total revenue D. a decrease in profits

C. supply decreased

If the equilibrium price of a good increase and the equilibrium quantity of the good decreases, we can conclude that: A. demand increased B. demand decreased C. supply decreased D. supply increased

C. Increase

If the population increase, the market demand for most products will: A. decrease B. depend on supply C. increase D. not change

C. 0.5

If the price elasticity of demand for water is inelastic, which of the following could be a possible value of the elasticity? A. 2 B. 1 C. 0.5 D. all of the above.

A. unitary elastic

If the price elasticity of demand is 1, demand is: A. unitary elastic B. inelastic C. upward sloping D. elastic

D. not change

If the price elasticity of demand is equal to zero and the price were to rise, the quantity demanded would: A. increase B. fall to zero C. decrease slightly D. not change

D. perfectly elastic

If the price elasticity of demand is infinite, demand is: A. elastic B. upward sloping C. inelastic D. perfectly elastic

A. 2

If the price elasticity of demand is very elastic, which of the following could be a possible value of the elasticity? A. 2 B. 1 C. 1/3 D. 0

False

If the quantity demanded of a product is greater than the quantity supplied for a product, there is pressure in the market to push the price downward. True or False.

B. perfect competition

If there are a large number of firms, each of which is so small it takes the market price as given, then the market is characterized by: A. efficiency B. perfect competition C. no externalities D. informed buyers and sellers

D. vertical

If, regardless of price, the quantity demanded is a constant amount, then the demand curve is: A. upward sloping B. horizontal C. downward sloping D. vertical

C. C

In Figure 5.1 the demand curve along which price elasticity of demand changes as you move along it is on graph: A. A B. B C. C D. D

A. A

In Figure 5.1 the demand curve that has zero elasticity is shown in graph: A. A B. B C. C D. D

A. $100

In Figure 6.1, the consumer surplus is equal to: A. $100 B. $300 C. $400 D. $200

A. consumer surplus

In Figure 6.1, the price of the good is $20 and the shaded area represents: A. consumer surplus B. producer surplus C. a price ceiling D. market equilibrium

C. producer surplus

In Figure 6.2 the price is $20 and the shaded area represents: A. market equilibrium B. consumer surplus C. producer surplus D. a price ceiling

B. $200

In figure 6.2, the producer surplus is: A. $300 B. $200 C. $400 D. $100

D. vertical

In the case of perfectly inelastic demand, the demand curve is: A. upward sloping B. horizontal C. downward sloping D. vertical

A. the price of coffee will increase

In the event of excess demand in the coffee market: A. the price of coffee will increase B. the demand for coffee will decrease (demand will shift to the left) to meet the supply C. the supply of coffee will increase (supply will shift to the right) to meet the demand D. the price of coffee will decrease

C. less than

In wealthy countries such as the United States, the price elasticity of the demand for food is _____ it is in poorer countries. A. the same as B. greater than C. less than D. None of the above; it is not possible to make international comparisons of price elasticity

True

On the "supply side" of a market, producers indicate to consumers what they are willing to sell, in what quantity and at what price. True or False.

B. the price a producer receives for a product minus the marginal cost of production

Producer surplus is: A. the economic profit earned from the sale of a good, minus its marginal cost of production B. the price a producer receives for a product minus the marginal cost of production C. the difference between the highest market price consumers are willing to pay for a product and the minimum amount producers are willing to accept for that product. D. the difference between the market price consumers are willing to pay for a product and the actual price they pay

B. $6

Refer to Figure 4.1, which shows Molly's and Ryan's individual demand curves for compact discs per month. Assuming Molly and Ryan are the only consumers in the market, if the market quantity demanded is 15, the price must be: A. $0 B. $6 C. $9 D. $15

D. 10

Refer to Figure 4.1, which shows Molly's and Ryan's individual demand curves for compact discs per month. Assuming Molly and Ryan are the only consumers in the market, what is the market quantity demanded at a price of $9? A. 2 B. 4 C. 6 D. 10

D. $40

Refer to Figure 4.6, which shows David's and Celeste's individual supply curves for flower arrangements per week. Assuming David and Celeste are the only producers in the market, if the market quantity supplied is 350, the price must be: A. $10 B. $20 C. $30 D. $40

B. total surplus

Refer to Figure 6.3. On this graph, are ACD is: A. consumer net benefit B. total surplus C. consumer surplus D. producer surplus

B. producer surplus

Refer to Figure 6.3. On this graph, are BCD is: A. consumer net benefit B. producer surplus C. total surplus D. consumer surplus

B. consumer surplus

Refer to Figure 6.3. On this graph, area ABC is: A. total surplus B. consumer surplus C. total producer net benefit D. producer surplus

B. B

Refer to Figure 6.3. On this graph, the total surplus of the market is maximized when the price is at point: A. 0 B. B C. A D. D

C. $4

Refer to Table 4.1, which shows Flo's and Rita's individual supply schedules for frozen latte-on-a-stick. Assuming Flo and Rita are the only suppliers in the market, if the market quantity supplied is 18, the price must be: A. $2 B. $3 C. $4 D. $5

C. 3

Refer to Table 4.4, which shows Flo's and Rita's individual supply schedules for frozen latte-on-a-stick. Assuming Flo and Rita are the only suppliers in the market, what is the market quantity supplied at a price of $2? A. 0 B. 2 C. 3 D. 5

A. 0.75

Refer to Table 5.2. A change in the price of calculators caused the change in quantity demanded shown in the table. The price elasticity of demand for calculators, using the initial-value formula, is: A. 0.75 B. 1.75 C. 0.25 D. 25

B. inefficient; willingness to pay < marginal cost

Refer to Table 6.1. When quantity = 7, this market is _____ because ______. A. inefficient; willingness to pay > marginal cost B. inefficient; willingness to pay < marginal cost C. producing too much consumer surplus; willingness to pay > marginal cost D. efficient; willingness to pay = marginal cost

A. efficient; willingness to pay = marginal cost

Refer to Table 6.1. When the quantity = 5, this market is ____ because ______. A. efficient; willingness to pay = marginal cost B. inefficient; willingness to pay > marginal cost C. producing too much consumer surplus; willingness to pay > marginal cost D. inefficient; willingness to pay < marginal cost

9

Referring to the diagram, at the current market price 'P Market' of $6, there is an excess demand of ____ units.

C. the current demand for the product increases

Suppose that consumers expect that the price of a product will increase in the future. The result is that: A. the current demand for the product decrease B. the current supply of the product increases C. the current demand for the product increases D. the current supply of the product decreases

D. 1

Suppose that in a month the price of a gallon of milk increases from $2 to $2.50. At the same time, the quantity of gallons of milk demanded decreases from 100 to 80. The price elasticity of demand for gallons of milk (calculated using the midpoint formula) is approximately: A. 0.2 B. 1.2 C. 0.11 D. 1

C. inelastic

Suppose that in a month the price of pizza increases from $4 to $5. At the same time, the quantity of pizzas demanded decreases from 200 to 190. The price elasticity of demand for pizza (calculated using the midpoint formula) is: A. unitary elastic B. zero C. inelastic D. elastic

B. Total revenue will decrease

Suppose that the elasticity of demand for a product is 2.0. What will happen to total revenue as a firm increases the price? A. Total revenue will increase B. Total revenue will decrease C. Total revenue will stay the same D. Cannot be determined from the information provided

C. Tammmy

Suppose that the price of New York style slices of pizza is $4 each. Matthew is willing to pay $6 for the first slice, James is willing to pay $5 for the second slice, Jessica is willing to pay $4 for the third slice, and Tammy is willing to pay $3 for the fourth slice. Which consumer will NOT buy pizza slices? A. Matthew B. James C. Tammy D. Jessica

A. $3

Suppose that the price of a coffee mug is $2. Lee's marginal cost of producing coffee mugs $0.50 for the first mug, Tammy's marginal cost of producing coffee mugs is $1 for the second mug. Stan's marginal cost of producing coffee mugs is $1.50 for the third mug, Joy's marginal cost of producing coffee mugs is $2 for the fourth mug, and Jody's marginal cost of producing coffee mugs is $3 for the fifth mug. In equilibrium, what is the producer surplus from producing coffee mugs? A. $3 B. $0 C. $6 D. $2

C. $3

Suppose that the price of a hamburger is $3. Victoria is willing to pay $5 for the first hamburger, David is willing to pay $4 for the second hamburger, Kelly $3 for the third hamburger, and Antony $2 for the fourth. In equilibrium, what is the total consumer surplus from the consumption of hamburger? A. $9 B. $2 C. $3 D. $0

A. increase; increase

Suppose that the price of a laptop computer drops from $700 to $550. Quantity demanded for laptop computers will _____ and consumer surplus will ____. A. increase; increase B. increase; decrease C. decrease; increase D. decrease; decrease

C. decrease; decrease

Suppose that the price of beer goes up due to a higher alcohol tax added. Quantity demanded for beer will ______ and consumer surplus will _______. A. increase; decrease B. decrease; increase C. decrease; decrease D. increase; increase

C. the price of cars will decrease

Suppose that the quantity supplied of cars exceeds the quantity of cars demanded. We would expect that: A. the demand will decrease (demand will shift to the left) to meet the supply B. the supply will increase (supply will shift to the right) to meet the demand C. the price of cars will decrease D. the price of cars will increase

A. 23 units

Suppose that there are only three consumers of a product. At a price of $6 per unit, the first consumer would buy 12 units of the product, the second consumer would buy 8 units, and the third consumer would buy 3 units of the product. If you drew a market demand curve for this product, the quantity demanded at a price of $6 would be: A. 23 units B. 20 units C. 12 units D. 11 units

C. demand being price elastic

Suppose that you observe that as a TV manufacturer increases its price its total revenue decrease. This could be due to: A. demand being unitary elastic B. demand being perfectly price inelastic C. demand being price elastic D. demand being price inelastic

C. $0.75

Suppose the market price or bagels is $1.50 each. If Fresh Bagels Bakery's marginal cost of producing that bagel is $0.75, its producer surplus from that bagel is: A. $0.25 B. $0 C. $0.75 D. $1.25

B. the higher the price, the smaller the quantity demanded, ceteris paribus

The Law of Demand can be explained as: A. legal reasons people make purchases in the marketplace B. the higher the price, the smaller the quantity demanded, ceteris paribus C. people are willing to make limited sacrifices to acquire products D. a lot of people wanting the same thing

C. consumer surplus

The difference between the maximum amount that a consumer is willing to pay for a product and the price that is paid for the product describes: A. the cost of producing a unit of the product B. marginal utility C. consumer surplus D. producer surplus

B. Adam Smith

The famous economist who coined the metaphor "the invisible hand" is: A. Mickey Kantor B. Adam Smith C. Alan Greenspan D. Milton Friedman

True

The law of demand states that there is a negative relationship between price and quantity demanded, ceteris paribus. True or False

True

The law of supply states that there is a positive relationship between price and quantity supplied, ceteris paribus. True or False.

True

The law of supply states that there is positive relationship between price and quantity supplied, ceteris paribus. True or False.

B. which price or quantity to use as the initial value of the variable

The midpoint formula for elasticity of demand solves the problem of: A. whether elasticity of demand is really positive or negative B. which price or quantity to use as the initial value of the variable C. whether to use quantity demanded or supplied D. whether to use quantity or price in the numerator

D. all of the above

The price elasticity of demand for a good is relatively elastic if: A. the good is less of a necessity B. the consumer has more time to make decisions about purchasing the good C. there are a large number of substitutes D. all of the above.

C. quantity demanded to a change in price

The price elasticity of demand reflects the responsiveness of: A. demand to a change in price of a substitute good B. firms to changes in demand C. quantity demanded to a change in price D. demand to a change in price

D. 1

The price of apples increases from $1 to $1.10. At the same time, the quantity of apples demanded decreases from 100 to 90. The price elasticity of demand for apples (calculated using the initial value formula is: A. 0.9 B. 0.002 C. 1.1 D. 1

C. the price of the product falls

The quantity demanded of a product increases as A. consumer income rises B. the prices of other products fall C. the price of the product falls D. the price of the product rises

D. the sum of consumer surplus and producer surplus

What is the total surplus of a market? A. the difference between the consumer surplus and producer surplus B. the difference between the highest price that a consumer is willing to pay and the lowest price that a producer is willing to sell C. the sum of consumer surplus and producer surplus D. the sum of consumer surplus and producer surplus

C. there is excess supply of the product in the market

When consumers are willing to buy more than producers are willing to sell: A. the demand curve will shift until the quantity supplied equals the quantity demanded B. the market is in equilibrium C. there is excess demand for the product in the market D. there is excess supply of the product in the market

A. decreases; decreases

When demand decreases and the demand curve shifts to the left, equilibrium price _____ and equilibrium quantity _____. A. decreases; decrease B. increases; increases C. decreases; increases D. increases; decreases

D. the quantity demanded of almonds increases, ceteris paribus

When the price of almonds falls... A. the demand of almonds decreases, ceteris paribus B. the quantity of almonds decreases, ceteris paribus C. the demand for almonds increases, ceteris paribus D. the quantity demanded of almonds increases, ceteris paribus

B. the quantity a consumer is willing to buy changes when the prices changes

When there us a change in the quantity demanded it means that: A. the selling price of the products has not changed B. the quantity a consumer is willing to buy changes when the price changes C. the number of products in inventory have increased D. the hours the customers can buy products each day have increased

A. There are few substitutes

Which of the following factors would indicate less elastic demand? A. There are few substitutes B. The good represents a large fraction of the budget C. Demand is measured over a longer period of time D. The price of the good is high

B. movie

Which of the following goods is likely to have the most elastic demand? A. gasoline B. movie C. electricity D. cigarettes