AP Micro Unit 2 questions

total surplus refers to what

the sum of differences between the prices that consumers are willing to pay for a good or service and the price they actually pay

If a store raises its prices by 20 percent and its total revenue increases by 10 percent, the demand it faces in this price range must be A inelastic B elastic C unit elastic D perfectly elastic E perfectly inelastic

A inelastic

Assume that demand for bottled water is relatively price elastic. An increase in supply of bottled water will result in which of the following? A decrease in price, leading to an increase in total revenue B. decrease in price, leading to a decrease in total revenue C. An excess supply of bottled water D. An excess demand for bottled water E. A relatively small decrease in price and no change in equilibrium quantity

A. decrease in price leading to an increase in total revenue

The quantity of peanuts supplied increased from 40 tons per week to 60 tons per week when the price of peanuts increased from $4 per ton to $5 per ton. The price elasticity of supply for peanuts over this price range is A elastic B inelastic C unit elastic D perfectly elastic E perfectly inelastic

A. elastic

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 A. inelastic B. unit elastic C. elastic D. equal to the price elasticity of supply E. equal to one

A. inelastic

Which of the following will tend to make the demand for a product more elastic? A. New firms which produce similar products enter the industry. B. A change in taste and preferences makes the product more desirable. C. The product is necessary for use with a complement. D. Production of the product is protected by a patent. E. Production cost of the product decreases.

A. new firms which produce similar products enter the industry

Assume a 10 percent increase in price increased the market quantity supplied by 20 percent. Which of the following is true? A. The value of the price elasticity of supply is 2. B. The value of the price elasticity of supply is 0.5. C. Supply is price inelastic. D. Demand is price elastic. E. This price-quantity combination violates the law of supply.

A. the value of the price elasticity of supply is 2. The price elasticity of supply measures the responsiveness of quantity supplied to a change in price and is calculated as the ratio of the percentage change in quantity supplied to the percentage change in price. The value of the price elasticity of supply is 2, which is calculated as 20 percent divided by 10 percent.

If a 10 percent increase in the price of a good leads to a 25 percent decrease in the quantity demanded of the good, demand is A. relatively inelastic B. relatively elastic C. unit elastic D. perfectly elastic E. perfectly inelastic

B relatively elastic

If a 5 percent wage increase in a particular labor market results in a 10 percent decrease in employment, the demand for labor is A perfectly elastic B relatively elastic C unit elastic D relatively inelastic E perfectly inelastic

B relatively elastic

If the demand for insulin is price inelastic, a 5 percent increase in the price of insulin will A. have no effect on the total revenue of insulin producers B. increase the total revenue of insulin producers C. decrease the total revenue of insulin producers D. decrease the total spending on insulin by consumers E. cause the demand for insulin to be less elastic

B. increase the total revenue insulin producers

Which of the following is true in the elastic range of a firm's demand curve? A. The firm should expand output to increase economic profits. B. An increase in price will also lead to an increase in total cost. C. A decrease in price will likely lead to an increase in total revenue. D. Marginal revenue is negative. E. The firm is maximizing total revenue.

C. a decrease in price will likely lead to an increase in total revenue

Assume that the price elasticity of supply for good Y is 0.5. If the price of good Y decreases by 30 percent, the quantity supplied of good Y will A. decrease by 60 percent B. decrease by 30 percent C. decrease by 15 percent D. increase by 0.5 percent E. increase by 0.15 percent

C. decrease by 15 percent

Assume that the price of orange juice increases by 40 percent following a crop failure. If the quantity demanded falls by 10 percent, which of the following is true? A. The demand for orange juice is elastic. B. The price of grapefruit juice, a substitute good, will fall. C. The absolute value of the price elasticity of demand for orange juice is 4. D. The absolute value of the price elasticity of demand for orange juice is 0.25. E. The absolute value of the price elasticity of demand for orange juice is 10.

D. The absolute value of the price elasticity of demand for orange juice is 0.25. The absolute value of the price elasticity of demand is 0.25 and is equal to the percentage change in quantity demanded divided by the percentage change in price, 10%/40%, or 0.25. Demand is inelastic, not elastic, because the absolute value of the price elasticity of demand is less than 1.

If the value of the price elasticity of supply is 3, which of the following is true? A. Supply is inelastic. B. A percentage increase in price will lead to a relatively smaller percentage increase in quantity supplied. C. The supply curve is downward sloping with respect to the price of output. D. A 10 percent decrease in price will decrease the quantity supplied by 30 percent. E. A 3 percent increase in price will decrease the quantity supplied by 10 percent.

D. a 10% percent decrease in price will decrease the quantity supplied

consider the market for arugula, a normal good. which of the following changes would result in an increase in both the equilibrium price and the equilibrium quantity of arugula? A. a decrease in the price of radicchio, a substitute B. an increase in the price of water irrigation for arugula farms C. an increase in the price of a complement good D. an increase in population E. a decrease in consumer income

D. an increase in population

Which of the following statements about the price elasticity of demand is true? A. When demand is price inelastic, total revenue will decrease as price increases. B. When demand is price elastic, an increase in price will increase total revenue. C. Demand tends to be more elastic in the short run compared to the long run. D. As more close substitutes become available, demand tends to be more price elastic. E. As a good becomes viewed as a necessity, demand becomes more price elastic.

D. as more close substitutes become available, demand tends to be more price elastic. With more close substitutes, demand becomes more price elastic because buyers are more sensitive to price changes. A slight increase in a good's price will induce the buyers to go for its substitutes.

which of the following explains why the supply curve is upward slopping? A. producers receive subsidies as they increase production B. at a higher quantity, producers are more able to control the market price C. at a lower price, consumers are able to buy more of the good D. at a higher price, producers are more able to cover the higher marginal cost associated with increasing production E. at a higher price consumers are able to buy more of the good

D. at a higher price, producers are more able to cover the higher marginal cost associated with increasing production

Moving from left to right along a downward- sloping linear demand curve, price elasticity varies in which of the following ways? A. First unit elastic, then inelastic throughout B. First unit elastic, then elastic throughout C. First inelastic, then unit elastic throughout D. First elastic, then unit elastic, and finally inelastic E. First inelastic, then unit elastic, and finally elastic

D. first elastic, unit elastic and inelastic

The price elasticity of demand for a product is 0.5. If the price of the product increases by 20 percent, which of the following will occur? A. The quantity demanded of the good will increase by 10%. B. The quantity demanded of the good will increase by 20%. C. The quantity demanded of the good will increase by 40%. D. The quantity demanded of the good will decrease by 10%. E. The quantity demanded of the good will decrease by 40%.

D. the quantity demanded of the good will decrease by 10%. The quantity demanded will decrease by 10 percent. The price elasticity of demand illustrates the negative relationship between price and quantity demanded and is equal to the percentage change in quantity demanded divided by the percentage change in price. Therefore, an increase in price by 20 percent will result in a decrease in quantity demanded by 10 percent for an absolute value of a price elasticity of demand of 0.5.

Assume a consumer finds that his total expenditure on compact discs stays the same after the price of compact discs declines. Which of the following is true for this price change? A Compact discs are inferior goods to this consumer. B The consumer's demand for compact discs increased in response to the price change. C The consumer's demand for compact discs is perfectly price elastic. D The consumer's demand for compact discs is perfectly price inelastic. E The consumer's demand for compact discs is unit price elastic.

E. the consumers demand for compact discs is unit price elastic

Which of the following must be true if the revenues of wheat farmers increase when the price of wheat increase? A The supply of wheat is price elastic. B The supply of wheat is income elastic. C The supply of wheat is income inelastic. D The demand for wheat is price elastic. E The demand for wheat is price inelastic.

E. the demand for wheat is price inelastic

if the demand for product x is perfectly elastic and the price of product x decreases which of the following will occur in the market for X a. quantity supplied will exceed quantity demanded b. quantity demanded will exceed quantity supplied c. total revenue will stay the same d. total revenue will decrease e. total revenue will increase

d. total revenue will decrease

a 10% increase in the price of a good results in a 4% increase in total revenue. from this info it can be concluded that the demand over this range of prices a. is upward sloping b. is inelastic c. has a price elasticity of demand equal to 2.5 d. has increased by 14% e. has increased by 40%

b. is inelastic

an increase in the supply of good X resulted in an increase in the price and quantity of good Y. it can be concluded that good Y is A. inferior good b. a luxury good c. a normal good d. a substitute for good X e. a complement for good X

e. a complement for good X

which of the following will occur asa result of a decrease in the prices of inputs used to produce a good? a. the price of the good would increase as the quantity supplied decreased b. the quantity supplied would increase as the price of the good decreased c. the quantity suppled would increase as the price of the good increased d. the price of the good would increase for any given quantity supplied e. the quantity supplied would increase at each possible price for the good

e. the quantity supplied would increase at each possible price for the good