Unit 2 Test STUDY
A local restaurant has estimated that the price elasticity of demand for meals is equal to 2. If the restaurant increases menu prices by 5%, they can expect the number of customers to decrease by ________and total revenue to ________. a. 10%; decrease b. 2.5%; increase c. 5%; stay constant d. 10%; increase e. 2.5%; decrease
a. 10%; decrease
A decrease in supply means: a. a shift to the left of the entire supply curve. b. more will be supplied at every price. c. less will be demanded at every price. d. moving downward (to the left) along the supply curve with lower prices. e. a shift to the left of the entire demand curve.
a. a shift to the left of the entire supply curve.
The government imposes a price ceiling below the equilibrium price. The price ceiling will cause: a. a shortage of the good. b. an increase in the quality of the good. c. quantity supplied to increase. d. quantity demanded to decrease. e. price to return to market equilibrium.
a. a shortage of the good.
In the market for beef tacos, a normal good, you observe that the equilibrium price and quantity have increased. This can only be caused by: a. an increase in the incomes of people who eat tacos. b. a decrease in the price of chicken tacos. c. an increase in the wages of taco shop workers. d. fewer taco shops. e. an increase in the price of beef.
a. an increase in the incomes of people who eat tacos.
Which of the following would result in a movement along the demand curve? a. an increase in the number of suppliers b. a change in preferences c. an increase in the number of buyers d. a decrease in the price of a substitute good e. a decrease in income
a. an increase in the number of suppliers
A decrease in the price of a good will result in: a. an increase in the quantity demanded. b. a rightward shift of the demand curve. c. more being supplied. d. an increase in supply. e. an increase in demand.
a. an increase in the quantity demanded.
An important determinant of the price elasticity of demand is the: a. availability of substitutes. b. average consumer's income. c. quantity of the good supplied. d. price of related goods. e. level of technology.
a. availability of substitutes.
A farmer finds that when he produces more corn, he also has more corn stalks that he can then sell as decorative ornaments. To the farmer, corn and corn stalks are: a. complements in production. b. substitutes in production. c. unrelated goods in production. d. inferior goods in production. e. luxury goods in production.
a. complements in production.
The government decides to impose a price ceiling on a good, because it thinks the market-determined price is "too high." If the government imposes the price ceiling below the equilibrium price: a. consumers will respond to the lower price and therefore wish to purchase more of the good than at the equilibrium price. b. producers will respond to the lower price and therefore offer more units for sale. c. consumers will be able to purchase more of the good after the price ceiling is imposed. d. it will not be binding. e. a surplus of the good will exist.
a. consumers will respond to the lower price and therefore wish to purchase more of the good than at the equilibrium price.
Jessica spends all her income on two goods, A and B. The price of A is $5, and the price of B is $7. At the current consumption bundle, the marginal utility of A is 10, and the marginal utility of B is 21. To maximize utility given her income, Jessica should: a. increase her consumption of B and decrease her consumption of A. b. increase her consumption of A and decrease her consumption of B. c. consume equal amounts of A and B. d. continue to consume the current bundle. e. decrease her consumption of A and decrease her consumption of B.
a. increase her consumption of B and decrease her consumption of A.
Which of the following will increase the quantity demanded of raspberries? a. A decrease in the number of raspberry farms, due to the drought. b. A government subsidy to raspberry farmers. c. An increase in raspberry prices. d. An increase in the price of blueberries, a substitute good. e. An increase in consumer incomes, if raspberries are a normal good.
b. A government subsidy to raspberry farmers.
Assume that corn is an input in the production of beef but not in the production of pork. Further, beef and pork are substitutes. A decrease in the price of corn will: a. increase the supply of beef and decrease the demand for pork. b. decrease the supply of beef and have no impact on the demand for pork. c. increase the supply of beef and increase the demand for pork. d. decrease the supply of beef and increase the demand for pork. e. decrease the supply of beef and decrease the demand for pork.
a. increase the supply of beef and decrease the demand for pork.
Economists know that a particular good can be classified as an inferior good if a(n) ________ in buyers' income causes a(n) ________. a. increase; decrease in demand b. increase; increase in supply c. increase; increase in demand d. increase; decrease in quantity demanded e. decrease; decrease in demand
a. increase; decrease in demand
The amount by which total utility rises when an additional unit of a good is consumed is called: a. marginal utility. b. the income effect. c. average utility. d. diminishing utility. e. the law of diminishing returns.
a. marginal utility.
The typical supply curve illustrates that: a. other things equal, the quantity supplied of a good is positively related to the price of a good. b. price and quantity supplied are unrelated as the supply curve is vertical. c. other things equal, the supply of the good creates its own demand for the good. d. other things equal, the quantity supplied of a good is inversely related to the price of a good. e. other things equal, the supply curve is horizontal.
a. other things equal, the quantity supplied of a good is positively related to the price of a good.
When the price of lamps increases, the: a. quantity supplied increases. b. quantity supplied decreases. c. supply decreases. d. quantity demanded increases. e. supply increases.
a. quantity supplied increases.
If the supply and demand curves intersect at a price of $14, then any price below that would result in a(n): a. shortage. b. surplus. c. equilibrium. d. increase in demand. e. decrease in supply.
a. shortage.
When a consumer consumes more of a good that has become cheaper in place of a good that has become relatively more expensive, this is known as the: a. substitution effect. b. income effect. c. budget constraint. d. inferior effect. e. normal effect.
a. substitution effect.
The market for soybeans is initially in equilibrium. Because of "mad cow disease," producers decide to replace bone meal with soybeans in cattle feed. The likely effect is that: a. the equilibrium price and quantity of soybeans will rise. b. the equilibrium price and quantity of soybeans will fall. c. the equilibrium quantity of soybeans will rise, but we can't determine what will happen to the equilibrium price. d. the equilibrium price of soybeans will rise, but we can't determine what will happen to the equilibrium quantity. e. there is likely to be no impact on the soybean market.
a. the equilibrium price and quantity of soybeans will rise.
Which factor is the most important in determining the price elasticity of supply? a. the time period the producer has to adjust inputs and outputs b. the number of close substitutes c. the intensity of the need on behalf of consumers d. the number of alternative uses of the good e. the rate at which consumers' incomes are rising.
a. the time period the producer has to adjust inputs and outputs
The university hopes to raise more revenue by increasing parking fees. This plan will work only if: a. the upward price effect is larger than the downward quantity effect. b. the upward price effect is smaller than the downward quantity effect. c. the upward price effect and downward quantity effect are the same. d. there is no price or quantity effect. e. the downward price effect is smaller than the upward quantity effect.
a. the upward price effect is larger than the downward quantity effect.
Suppose the equilibrium price of Good Y is $5 and the equilibrium quantity is 150 units. If the current price of Good Y is $12: a. there will be an excess supply of Good Y. b. the quantity demanded will be greater than 150 units. c. the quantity supplied will be less than 150 units. d. the price will eventually rise to equilibrium. e. there will be an excess demand for Good Y
a. there will be an excess supply of Good Y.
The marginal utility of coffee consumption for Steve is the change in ________ generated by consuming an additional unit of coffee. a. total utility b. total consumption c. total demand d. price e. marginal demand
a. total utility
At the point where total utility is at a maximum, marginal utility is: a. zero. b. negative. c. at its average value. d. at a maximum. e. rising.
a. zero.
In the soft drink market, an increase in the price of sugar, a necessary ingredient for soft drinks, and an increased concern about tooth decay caused by the consumption of soft drinks will result in which of the following? a. Equilibrium quantity will increase, but equilibrium price may decrease, increase, or stay the same. b. Equilibrium quantity will decrease, but equilibrium price may decrease, increase, or stay the same. c. There will be an increase in both the equilibrium price and quantity. d. There will be a decrease in both equilibrium price and quantity. e. Equilibrium quantity will decrease, but equilibrium price will increase.
b. Equilibrium quantity will decrease, but equilibrium price may decrease, increase, or stay the same.
Consider the market for corn. What happens if there is an increased demand for corn tortillas and, at the same time, a new corn seed becomes available that increased the per-acre yield dramatically? a. Price and quantity both increase. b. The change in price is uncertain, quantity increases. c. The change in price is uncertain, quantity decreases. d. Price and quantity both decrease. e. Price increases, the change in quantity is uncertain.
b. The change in price is uncertain, quantity increases.
Which of the following is likely to make supply more inelastic? a. The time period under consideration is quite long. b. The inputs necessary for production cannot readily be increased. c. The good is necessary for survival (e.g., a life-saving drug). d. Consumer income is rising. e. Production technology is easily adjusted to changes in price.
b. The inputs necessary for production cannot readily be increased.
If total utility is rising as more of Good X is consumed, we can definitely say that marginal utility is: a. equal to zero. b. constant. c. falling. d. rising. e. greater than zero.
e. greater than zero.
Suppose you manage a corner grocery store. If peanut butter is an inferior good, what do you suppose would happen to the price and quantity of peanut butter as incomes fall during an economic recession? a. The price would increase and the quantity would decrease. b. The price and quantity would both increase. c. The price and quantity would both decrease. d. The price would decrease and the quantity would increase. e. The price would decrease with no change in the quantity.
b. The price and quantity would both increase.
Bob attains $4.00 of total utility is he purchases one burrito, $7.00 of total utility if he purchases 2 burritos, $9.00 of total utility if he purchases 3 burritos, and $10.00 of total utility if he purchases 4 burritos. If burritos cost $2.50, how many should Bob purchase? a. We can't tell without more information. b. Two c. Three d. Four e. One
b. Two
An increase in supply is caused by: a. an increase in the price of the good. b. a decrease in prices of goods that are substitutes in production. c. a decrease in the number of firms producing the good. d. suppliers' expectations of higher prices in the future. e. an increase in input prices.
b. a decrease in prices of goods that are substitutes in production.
If I told you that income elasticity in the market for hybrid cars is positive, you would know that: a. there are many substitutes for hybrid cars. b. a hybrid car is a normal good. c. a hybrid car is an inferior good. d. the economy is in a recession. e. there are few substitutes for hybrid cars.
b. a hybrid car is a normal good.
Which of the following always results in an increase in price and quantity? a. an increase in demand and supply b. an increase in demand with no change in supply c. an increase in supply with no change in demand d. a decrease in demand and supply e. an increase in supply and a decrease in demand
b. an increase in demand with no change in supply
Which of the following factors cause a movement along the demand curve? a. change in the prices of related goods b. change in the price of the good c. change in the popularity of the good d. both a change in the price of the good and a change in the population e. change in the population
b. change in the price of the good
Consider the supply curve for cotton shirts. An increase in the price of cotton will: a. not shift the supply of cotton shirts. b. decrease the supply of cotton shirts. c. decrease the demand for cotton shirts. d. increase the quantity supplied of cotton shirts. e. increase the supply of cotton shirts.
b. decrease the supply of cotton shirts.
Suppose oranges and clementines are considered to be substitutes. Holding everything else constant, if the price of oranges increases, then the: a. demand for oranges will decrease. b. demand for clementines will increase. c. demand for oranges will increase. d. demand for clementines will decrease. e. demand for both oranges and clementines will decrease.
b. demand for clementines will increase.
The United States increases tariffs on imports of lumber from Canada, which causes the price of lumber to increase in the United States. The equilibrium price of new homes in the United States will ________ and the equilibrium quantity of new homes in the United States will ________. a. increase; increase b. increase; decrease c. decrease; increase d. decrease; decrease e. stay the same; stay the same
b. increase; decrease
Suppose the price of gasoline increases 10% and quantity demanded for gasoline in Orlando drops 5% per day. The price elasticity of demand for gasoline in Orlando is: a. price elastic. b. price inelastic. c. price unit-elastic. d. perfectly price inelastic. e. perfectly price elastic
b. price inelastic.
When a market is in equilibrium, one will find that the: a. quantity demanded is equal to zero. b. quantity demanded is equal to quantity supplied. c. quantity supplied is zero. d. market price is equal to zero. e. quantity demanded is greater than quantity supplied.
b. quantity demanded is equal to quantity supplied.
When the government removes a binding price floor: a. quantity demanded would decrease and quantity supplied would increase. b. quantity demanded would increase and quantity supplied would decrease. c. an excess demand would develop. d. an excess supply would develop. e. market efficiency is lost.
b. quantity demanded would increase and quantity supplied would decrease.
If steak and potatoes are complements, when the price of steak goes up, the demand curve for potatoes: a. shifts to the right and then moves back. b. shifts to the left. c. will get steeper and shift to the right. d. stays the same. e. shifts to the right.
b. shifts to the left.
A price ceiling will create a persistent ________ and a price floor will create a persistent ________. a. quota; inefficiency b. shortage; surplus c. shortage; shortage d. surplus; surplus e. surplus; shortage
b. shortage; surplus
Benny spends all his money buying wine and cheese. The marginal utility of the last bottle of wine is 60, and the marginal utility of the last block of cheese is 30. The price of wine is $3, and the price of cheese is $2. Benny: a. is buying wine and cheese in the utility-maximizing amounts. b. should buy more wine and less cheese. c. should buy more cheese and less wine. d. is spending too much money on wine and cheese. e. should buy more cheese and more wine.
b. should buy more wine and less cheese.
The market for soybeans is initially in equilibrium. Because of "mad cow disease," producers decide to replace bone meal with soybeans in cattle feed. The likely effect is that: a. there is likely to be no impact on the soybean market. b. the equilibrium price and quantity of soybeans will rise. c. the equilibrium quantity of soybeans will rise, but we can't determine what will happen to the equilibrium price. d. the equilibrium price and quantity of soybeans will fall. e. the equilibrium price of soybeans will rise, but we can't determine what will happen to the equilibrium quantity.
b. the equilibrium price and quantity of soybeans will rise.
A good is likely to have an inelastic demand curve if: a. the good is a luxury. b. the good has few available substitutes. c. the good accounts for a large share of consumer income. d. the consumer has significant time to respond to the price change. e. the good has many available substitutes.
b. the good has few available substitutes.
The market for apples is in equilibrium at a price of $0.50 per pound. If the government imposes a price floor in the market at a price of $0.40 per pound, then: a. there will be a shortage of the good. b. the price floor will not affect the market price or output. c. there will be a surplus of the good. d. quantity supplied will increase. e. quantity demanded will decrease.
b. the price floor will not affect the market price or output.
If the price of a good is increased by 20% and the quantity demanded changes by 15%, then the price elasticity of demand is equal to: a. 1. b. approximately 0.33. c. 0.75. d. approximately 1.33. e. zero.
c. 0.75.
A local restaurant has estimated that the price elasticity of demand for meals is equal to 2. If the restaurant increases menu prices by 5%, they can expect the number of customers to decrease by ________and total revenue to ________. a. 10%; increase b. 5%; stay constant c. 10%; decrease d. 2.5%; decrease e. 2.5%; increase
c. 10%; decrease
Scenario 51-2: Budget Constraint Tom is trying to decide how to allocate his $50 budget for CD purchases and DVD rentals when the price of a CD is $10 and the price of a DVD rental is $5. (Scenario 51-2: Budget Constraint) Which of the following combinations of CD purchases and DVD rentals lies on Tom's budget line? a. 10 CDs and 5 DVDs b. 5 CDs and 10 DVDs c. 5 CDs and 0 DVDs d. 5 CDs and 5 DVDs e. 0 CDs and 5 DVDs
c. 5 CDs and 0 DVDs
Which of the following best describes the law of demand? a. As the price of gasoline rises, fewer large SUVs are purchased. b. As the population rises, more electricity is consumed. c. As the price of a DVD rental rises, fewer DVDs are rented. d. As the price of corn rises, more acres of corn are planted. e. As income taxes rise, fewer new cars are purchased.
c. As the price of a DVD rental rises, fewer DVDs are rented.
There is one gas station in a small rural town. The owner of the station claims that he will sell the same quantity of gas, no matter how high or low the price. If he is correct in this assertion, what must be true about the demand curve for gas at his station? a. It must be vertical with a price elasticity of infinity. b. It must be horizontal with a price elasticity of infinity. c. It must be vertical with a price elasticity of zero. d. It must be downward sloping with a price elasticity less than one. e. It must be horizontal with a price elasticity of zero.
c. It must be vertical with a price elasticity of zero.
Consider the market for iPods. What happens if a fantastic new alternative MP3 player is developed and, at the same time, a boat carrying a large shipment of iPods is attacked by sea monsters and sunk? a. Price decreases and quantity increases. b. Price increases and quantity increases. c. The change in price is uncertain and quantity decreases. d. Price increases and the change in quantity is uncertain. e. Price decreases and the change in quantity is uncertain.
c. The change in price is uncertain and quantity decreases.
If the estimated price elasticity of demand for foreign travel is 4, then: a. demand for foreign travel is inelastic. b. a 20% increase in the price of foreign travel will increase quantity demanded by 80%. c. a 20% decrease in the price of foreign travel will increase quantity demanded by 80%. d. a 20% decrease in the price of foreign travel will increase quantity demanded by 5%. e. a 10% increase in the price of foreign travel will increase quantity demanded by 40%
c. a 20% decrease in the price of foreign travel will increase quantity demanded by 80%.
Which of the following will result in an increased price of milk? a. a shift to the right of the supply curve for milk b. a decrease in the number of milk buyers c. a shift to the right of the demand curve for milk d. an increase in the number of milk suppliers e. an increase in the production technology of milk suppliers.
c. a shift to the right of the demand curve for milk
A shift to the left of a supply curve is caused by: a. a technological improvement. b. a decrease in consumer income if the product is a normal good. c. an increase in the cost of an input. d. an increase in the number of buyers. e. an increase in the number of sellers.
c. an increase in the cost of an input.
A shift to the left of a supply curve is caused by: a. an increase in the number of sellers. b. a technological improvement. c. an increase in the cost of an input. d. an increase in the number of buyers. e. a decrease in consumer income if the product is a normal good
c. an increase in the cost of an input.
A decrease in the price of a good will result in: a. an increase in supply (a rightward shift in the supply curve.. b. an increase in demand (a rightward shift in the demand curve.. c. an increase in the quantity demanded along a given demand curve. d. An increase in the quantity supplied along a given supply curve. e. a decrease in supply (a leftward shift in the supply curve..
c. an increase in the quantity demanded along a given demand curve.
The law of demand states that, other things equal: a. as the price increases, the demand will decrease. b. as the price increases, the quantity demanded will increase. c. as the price increases, the quantity demanded will decrease. d. as the price decreases, the demand curve will shift to the right. e. as the price decreases, the demand curve will shift to the left.
c. as the price increases, the quantity demanded will decrease.
Suppose the government sets a price floor of $2.85 per bushel on corn when the current price is $2.55. This price floor will: a. have no effect on the price of corn. b. cause a shortage of corn. c. cause a surplus of corn. d. shift the supply of corn to the right. e. shift the demand for corn to the left.
c. cause a surplus of corn.
If goods A and B are substitutes, a decrease in the price of good B will: a. increase the demand for good B. b. increase the demand for good B and decrease the demand for good A. c. decrease the demand for good A. d. increase the quantity of good B demanded and increase the demand for good A. e. increase the demand for good A.
c. decrease the demand for good A.
One of the ways rent control is inefficient is that it leads to: a. higher-quality apartments. b. markets that maximize total surplus. c. high opportunity costs associated with wasted time for apartment seekers. d. the construction of more apartments. e. an increase in producer surplus with a larger decrease in consumer surplus.
c. high opportunity costs associated with wasted time for apartment seekers.
A price floor is a ________ set ________ the equilibrium price. a. minimum price; at b. maximum price; below c. minimum price; above d. maximum price; above e. minimum price; below
c. minimum price; above
The typical supply curve illustrates that: a. other things equal, the quantity supplied of a good is inversely related to the price of a good. b. other things equal, the supply of the good creates its own demand for the good. c. other things equal, the quantity supplied of a good is positively related to the price of a good. d. price and quantity supplied are unrelated as the supply curve is vertical. e. other things equal, the supply curve is horizontal.
c. other things equal, the quantity supplied of a good is positively related to the price of a good.
The principle of diminishing marginal utility: a. indicates that, if a good is inferior, less of it will be purchased when income falls. b. assumes all goods are normal. c. refers to the tendency of marginal utility to decline as the amount of consumption of a good or service increases. d. refers to the possibility that some demand curves are upward sloping. e. refers to the tendency of total utility to increase until an individual's budget is no longer constrained.
c. refers to the tendency of marginal utility to decline as the amount of consumption of a good or service increases.
A decrease in the price of a good, holding income and the prices of all other goods constant, will: a. cause a negative substitution effect as consumers decrease their consumption of the good as the marginal utility per dollar spent of the good decreases. b. mean the consumer will purchase less of all goods in the consumption bundle. c. result in a positive substitution effect as consumers increase their consumption of the good as the marginal utility per dollar of the good increases. d. cause a negative income effect if the good is a normal good. e. cause the budget line to shift in.
c. result in a positive substitution effect as consumers increase their consumption of the good as the marginal utility per dollar of the good increases.
It is certain that the equilibrium quantity will fall when: a. the supply curve and the demand curve both shift to the right. b. the supply curve shifts to the right and the demand curve shifts to the left. c. supply and demand both shift to the left. d. supply shifts to the right and demand stays the same. e. supply shifts to the left and demand shifts to the right
c. supply and demand both shift to the left.
The market price of airline flights increased recently. Some economists suggest that the price increased because several airlines went out of business. If the economists are correct, it must be the case that: a. supply increased while demand also decreased. b. supply increased. c. supply decreased. d. demand decreased. e. demand increased.
c. supply decreased.
Egg producers know that the elasticity of demand for eggs is 0.1. If they want to increase sales by 5%, they will have to lower price by ________%. a. 0.1 b. 1 c. 5 d. 50 e. 0.5%
d. 50
Chuck spends all his income on two goods: tacos and milkshakes. His income is $100, the price of tacos is $10, and the price of milkshakes is $2. If Chuck purchases 10 milkshakes, he can purchase ________ tacos. a. 10 b. 0 c. 18 d. 8 e. 50
d. 8
The market for lemonade is currently in equilibrium and the price of lemons rises. How will this affect the lemonade market? a. Supply will increase, decreasing the price and increasing the quantity. b. Demand will decrease, decreasing the price and decreasing the quantity. c. Demand will decrease, increasing the price and decreasing the quantity. d. Supply will decrease, increasing the price and decreasing the quantity. e. Supply will decrease, increasing the price and increasing the quantity.
d. Supply will decrease, increasing the price and decreasing the quantity.
A price ceiling is: a. the difference between the quantity supplied and quantity demanded. b. a minimum price buyers are required to pay for a good or service. c. a way for the government to assist producers who cannot operate at the equilibrium market price. d. a maximum price sellers are allowed to charge for a good or service. e. caused by an inefficiently low quantity.
d. a maximum price sellers are allowed to charge for a good or service.
Consider two competing motorcycle manufacturers, Harley-Davidson and Honda. If Harley-Davidson raises the price that it charges for its motorcycles, we can expect: a. a shift to the right in the supply curve of Hondas and lower prices for Hondas. b. a shift to the right in the demand curve for Hondas and lower prices for Hondas. c. a shift to the left in the supply curve of Hondas and higher prices for Hondas. d. a shift to the right in the demand curve for Hondas and higher prices for Hondas. e. a shift to the left in the demand curve for Hondas and lower prices for Hondas.
d. a shift to the right in the demand curve for Hondas and higher prices for Hondas.
An increase in supply is caused by: a. suppliers' expectations of higher prices in the future. b. a decrease in the number of sellers in the market. c. a decrease in the number of producers. d. an advancement in the technology for producing the good. e. an increase in resource prices.
d. an advancement in the technology for producing the good.
The demand curve for running shoes has shifted to the right. What could have caused it? a. a decrease in the price of running shoes b. an increase in the price of running shoes c. an increase in the supply of running shoes d. an increase in the income of buyers of running shoes if running shoes are normal goods. e. a medical report that concludes that running causes arthritis in the joints.
d. an increase in the income of buyers of running shoes if running shoes are normal goods.
The law of demand states that, other things equal: a. as the price increases, the quantity demanded will increase. b. as the price decreases, the demand curve will shift to the right. c. as the price increases, the demand will decrease. d. as the price increases, the quantity demanded will decrease. e. as the price decreases, the demand curve will shift to the left.
d. as the price increases, the quantity demanded will decrease.
Marginal utility is best computed as the: a. change in total utility divided by the total quantity consumed. b. total utility divided by the total quantity consumed. c. total utility minus the price of the product being consumed. d. change in total utility from an additional unit consumed. e. total utility divided by the change in quantity consumed.
d. change in total utility from an additional unit consumed.
Question 11 A decrease in the price of eggs will result in a(n): a. increase in the demand for eggs. b. increase in the supply of eggs. c. greater quantity of eggs supplied. d. greater quantity of eggs demanded. e. decrease in the demand for eggs.
d. greater quantity of eggs demanded.
To say that two goods are substitutes, their cross-price elasticities of demand should be: a. less than 0, but not less than -1. b. negative, yet almost equal to 0. c. equal to 0. d. greater than 0. e. less than -1.
d. greater than 0.
The pair of items that is most likely to have a negative cross-price elasticity of demand is: a. ketchup and coffee. b. coffee and tea. c. aspirin and hamburgers. d. hot dogs and mustard. e. margarine and butter.
d. hot dogs and mustard.
If a university decreases the price of tickets to football games to collect more revenue, it is assuming that the demand for tickets is: a. price unit-elastic. b. unstable. c. price-inelastic. d. price-elastic. e. perfectly price-inelastic.
d. price-elastic.
The price elasticity of demand is computed as the percentage change in: a. quantity demanded divided by the percentage change in quantity supplied. b. price divided by the percentage change in quantity demanded. c. quantity demanded divided by the percentage change in income. d. quantity demanded divided by the percentage change in price. e. quantity supplied divided by the percentage change in price.
d. quantity demanded divided by the percentage change in price.
Joseph consumes pizza and soda. He is currently consuming three units of pizza and two units of soda. The price of pizza is $5 and the price of soda is $1. If he is consuming the optimal consumption bundle and his marginal utility of pizza is 50, then his marginal utility of soda is: a. 5. b. impossible to determine unless you know Joseph's income. c. 25. d. 50. e. 10.
e. 10
When the economy suffers a downturn, vacationers are more likely to take car trips than to fly. Which of the following provides the most reasonable explanation for this phenomenon? a. Air travel and vacation travel by car are both normal goods. b. Air travel and vacation travel by car are complementary goods. c. Air travel and vacation travel by car are both inferior goods. d. Air travel is an inferior good and vacation travel by car is a normal good. e. Air travel is a normal good and vacation travel by car is an inferior good.
e. Air travel is a normal good and vacation travel by car is an inferior good.
An ambiguous change in price and a decrease in quantity are most likely caused by: a. a shift to the left in supply and a shift to the right in demand. b. a shift to the right in supply and a shift to the right in demand. c. no shift in supply and a shift to the left in demand. d. a shift to the right in supply and a shift to the left in demand. e. a shift to the left in supply and a shift to the left in demand.
e. a shift to the left in supply and a shift to the left in demand.
Over the past several years, consumer tastes for tattoos have increased. This means that the ________ for tattoos has ________. a. quantity demanded; increased b. demand; remained the same c. quantity demanded; decreased d. demand; decreased e. demand; increased
e. demand; increased
The price elasticity of demand measures the: a. extent to which prices are flexible and respond to market forces. b. responsiveness of demand when price is held constant and demand increases or decreases. c. responsiveness of price to a change in quantity demanded. d. responsiveness of quantity demanded to a change in income. e. responsiveness of quantity demanded to a change in price.
e. responsiveness of quantity demanded to a change in price.
If the supply and demand curves intersect at a price of $14, then any price below that would result in a(n): a. surplus. b. increase in demand. c. decrease in supply. d. equilibrium. e. shortage.
e. shortage.
One of the consequences of increasing the minimum wage has been: a. lower production costs for small businesses. b. decreased unemployment for low-skill workers. c. increased employment for high-skill workers. d. lower prices for goods produced with minimum wage workers. e. workers offering to work "off the books" for less than the minimum wage.
e. workers offering to work "off the books" for less than the minimum wage.
