micro 2 test

What do the income effect, the substitution effect, and diminishing marginal utility have in common?

They all help explain the downsloping demand curve.

Leather and beef are jointly produced such that an increase in the production of one results in an equal increase in the production of the other. An increase in the demand for leather will most likely cause

decrease in the price of beef

A demand schedule

is a list of the quantities demanded at each different price when all other influences on buying plans remain the same.

The main determinant of elasticity of supply is the:

mount of time the producer has to adjust inputs in response to a price change.

The larger the coefficient of price elasticity of demand for a product, the:

smaller the resulting price change if there's an increase in supply.

We would expect:

the demand for Coca-Cola to be more elastic than the demand for soft drinks in general.

Assume MUc and MUd represent the marginal utility that a consumer gets from products C and D, the respective prices of which are Pc and Pd. The consumer will increase his total utility from a specific money outlay by spending more on C and less on D if initially:

MUc/Pc > MUd/Pd

Suppose the market for roses is currently in equilibrium. If the supply of roses falls, while at the same time the demand for roses rises, what can you say about the price and quantity of roses in the market?

Price rises, but the change in quantity is ambiguous.

Gasoline prices increase by 50 percent and other things remain the same. As a result, there is

a decrease in the quantity of gasoline demanded.

Which of the following increases the quantity supplied of compact discs but does NOT increase the supply of compact discs?

an increase in the price of a compact disc

The price elasticity of demand coefficient measures:

buyer responsiveness to price changes.

Assume a consumer finds that his total expenditure on compact disks stays the same after the price of compact disks declines, other things being equal. Which of the following is true for this price change?

he consumer's demand for compact disks is unit price elastic.

Which of the following would cause the equilibrium price of good X to increase?

he price of an essential input in the production of good X increases

The law of supply states that, other things remaining the same,

if the price of a good increases, the quantity supplied increases.

An antidrug policy which reduces the supply of heroin might:

increase street crime because the addict's demand for heroin is highly inelastic.

Assume that consumers consider popcorn and pretzels to be substitutes. A significant decrease in the supply of popcorn will affect the pretzel market by

increasing the demand for pretzels and therefore the price of pretzels

To alleviate a financial crisis, a university increases student fees. This action will increase university revenues if the price elasticity of demand for university education is

inelastic

The price of an airline ticket is typically lower if a traveler buys the ticket several weeks before the flight's departure date rather than on the day of the departure. This pricing strategy is based on the assumption that

travelers demand becomes less elastic as the departure date approaches

Promoters of a rock group know that if they charged $8 a ticket, 400 people would buy tickets for a concert, and if they charged $4 a ticket, 800 people would buy tickets. Over this price range, the demand for the concert tickets for the rock group is

unit elastic

The income effect indicates that:

when the price of a product falls, a consumer will be able to buy more of it with a specific money income.