ECN201 Exam

Supply is relatively inelastic and demand increases over time

The main reason for the high price of antiques is that:

Income and substitution effects will encourage consumers to purchase more of the product

When the price of a product falls for a normal good, the:

Equal to zero

When total utility reaches a maximum, then marginal utility is:

The additional satisfaction from consuming one more unit of a product

Which of the following defines marginal utility?

additional

Which of the following is the best synonym for "marginal" in economics?

Many economic resources are better at producing one product rather than another

Which of the following statements is an explanation for the law of increasing opportunity costs?

A change in the price of A

Which of the following will not cause a change in the demand for product A?

The destruction caused by bombing and warfare in a losing military conflict

Which situation would most likely cause a nation's production possibilities curve to shift inward?

capitalism

market system is known as:

the income elasticity for the good is greater than 0

most goods can be classified as normal goods rather than inferior goods, the definition of a normal good suggests that:

correct

normal profit is an implicit cost

incorrect

over a longer time period after a price-change, the price elasticity of supply tends to decrease

guiding functions of prices in a market system

the "invisible hand" concept refers to the:

scarcity

the basic truth that underlies the study of economics is the fact that we all face:

true

the comment that "taxes must be reduced for the good of the economy" is an example of a normative economic statement.

in the short run, some inputs are fixed and some are variable

the main difference between the short run and the long run is that:

gives private individuals the right to own resources used in production

the market system is an economic system that:

Supply is relatively inelastic so changes in demand have a large effect on price

the price of gold is often volatile because:

the law of demand

the price-elasticity of demand is always negative because of:

opportunity cost

when a state government chooses to build more roads, the resources used are no longer available for public education programs. this dilemma illustrates the concept of:

self-interest in a market system will automatically promote the public interest as well

which of the following best describes the "invisible hand" concept?

Marginal utility per dollar spent is the same for all goods

A consumer with a fixed income will maximize utility when each good is purchased in amounts such that the:

Increase the supply of ice cream

A fall in the price of milk, used in the production of ice cream, will:

Sets a price floor above the equilibrium price

A government will create a surplus in a market when it:

Inelastic, thus the government's cigarette-tax revenues would rise with a tax increase

A state government wants to increase the taxes on cigarettes to increase tax revenue. 49) Because cigarettes are addictive, we would expect its demand to be:

Inelastic demand for business travel

Airlines charge business travelers more than leisure travelers because there is a more:

A reduction in price results in a decrease in total revenue

Demand is said to be inelastic when:

upward sloping

If A decreases, then B will also decrease. The graph relating the two variables A and B is:

The quantity demanded will exceed the quantity supplied

If a price ceiling is set below the equilibrium price in a market:

Shift the demand curve for product Y to the right

If product Y is an inferior good, a decrease in consumer incomes will:

Cause changes in the quantities demanded and supplied that tend to eliminate the surplus or shortage

In competitive markets, a surplus or shortage will:

Can vary as the result of using a fixed amount of plant and equipment more or less intensively

In the short run, total output in an industry:

price rises and Ed equals 2.47

In which instances will total revenues decline?

The income elasticity for the good is greater than 0

Most goods can be classified as normal goods rather than inferior goods. The definition of a normal good suggests that:

Consume a combination of goods that is beyond (or outside) its production possibilities

Specialization and international trade allows a nation to:

The interdependence of businesses and consumers

The circular flow model illustrates:

a positive number

The cross elasticity of demand between Quaker State motor oil and Texaco motor oil is likely to be:

complementary products

The cross elasticity of demand for product X with respect to the price of product Y is -1.2. It can be inferred that X and Y are:

A consequence of the fact that productive resources are scarce relative to economic wants

The economizing problem faced by a society is:

total utility from all goods consumed

The goal of a rational consumer is to maximize:

Guiding function of prices

The market system communicates changes in market conditions and elicits appropriate responses from businesses and resource suppliers through changes in prices. This is known as the:

Focus on the effect of a single factor on a certain variable

The purpose of the ceteris paribus assumption used in economic analysis is to:

What is produced is ultimately determined by what consumers buy

The term consumer sovereignty means that:

The prices of products are not necessarily measures of the products' usefulness

Understanding the water and diamond paradox is valuable because it explains why:

increase the price of the software

You are the sales manager for a software company and have been informed that the price elasticity of demand for your most popular software is less than 1. To increase total revenues from that product, you should:

false

a decrease in the price of digital cameras will cause the demand for memory cards to shift to the left

international specialization and trade

a society can consume a combination of goods outside its production possibilities if there is:

the demand for mass transit is price-elastic in the long run

a study of mass-transit systems in american cities revealed that in the long run revenues generally decline after substantial fare increase. this would suggest:

the additional output generated by additional units of an input will diminish

according to the law of diminishing returns:

individuals have to make choices from among alternatives

as a consequence of the problem of scarcity:

purchase more of Y and less of Z

assume that a consumer purchases a combination of products Y and Z and that the MUy/Py=25 and MUz/Pz=20. to maximize utility, without spending more money, the consumer should:

a rightward shift of the production possibilities curve

economic growth may be represented by:

elastic

if a 5% cut in price of a product causes the quantity demanded to rise by 10%, the demand is:

may either be increasing or decreasing, but it must be greater than zero

if total utility is increasing, then marginal utility:

the government makes production and allocation decisions

in a command system: