ECO 2305 exam 2

If a countrys economic decision are made by an individual or small number of individuals, then it has a: A. centralized economy B. free-market economy C. capitalist economy D. open economy

A. centralized economy

"all else constant, consumers will purchase more of a good as the price falls". this statement reflects the behavior underlying: A. the demand curve B. a change in demand C. the supply curve D. a change in the supply curve

A. the demand curve

after the price of a Revlon nail polish increased, Jen stopped buying Revlon nail polish and started buying a cheaper brand of nail polish instead. this is called: A. the substitution effect of a price change B. the income effect of a price change C. a decrease in the buyers reservation price D. a decrease in the sellers reservation price

A. the substitution effect of a price change

when a slice of pizza at the student union sold for $2, Moe did not purchase any. when the price fell to $1.75, Moe purchased a slice each day for lunch. thus, we can infer that Moe's reservation price for a slice of pizza is: A. less than $1.75 B. at least $1.75 but less than $2 C. exactly $1.75 D. exactly $2

B. at least $1.75 but less than $2

suppose you camped out in front of an electronics store to be one of the 200 lucky people able to purchase the latest gaming system. you bought the system for $350 . two weeks later you see that same system can be sold for on e-bay for $600, so you sell your system. your market role was a: A. consumer in both markets B. C. consumer at the electronics store; e-bay transaction did not occur in the market D. seller in both markets

B. consumer at the electronics store and a seller on e-bay

shelly purchases a leather purse for $400. one can infer that: A. she paid too much B. her reservation price was at least $400 C. her reservation price was exactly $400 D. her reservation price was less than $400

B. her reservation price was at least $400

as the price of a good rises: A. firms generally decrease the supply of the good B. more firms can cover their opportunity cost of producing the good C. firms generally increase the supply of the good D. government regulation becomes more justified

B. more firms can cover their opportunity cost of producing the good C. firms generally increase the supply of the good

which of the following is NOT a characteristic of a market in equilibrium? A. there is neither excess supply nor excess demand B. neither buyers nor sellers want the price to change C. sellers can sell as many units as they want at the equilibrium price D. buyers can buy as many units as they want at the equilibrium price

B. neither buyers nor sellers want the price to change

you can spend $10 for lunch and you would like to purchase two cheeseburgers. when you get to the restaurant, you find out the price for cheeseburgers has increased for $5 to $6, so you decide to purchase one cheeseburger. this is best described as: A. the substitution effect of a price change B. the income effect of a price change C. a decrease in the buyers reservation price D. an increase in the buyers reservation price

B. the income effect of a price change

a price ceiling that is set above the equilibrium price: A. will lead to a black market B. will have no effect on the market C. will lead to excess supply in the market D. will lead to excess demand in the market

B. will have no effect on the market

jessicas marginal cost for producing a pitcher of lemonade is$0.25. therefore; $0.25 is her: A. marginal revenue B. equilibrium price C. reservation price D. producers surplus

C. reservation price

Gertie saw a pair of jeans that she was willing to buy for $35. the price tag said they were $29.99. therefore: A. Gertie should not buy the jeans because they will be of lower quality than expected B. Gertie should not buy the jeans because the price is not equal to her reservation price C. Gertie should buy jeans because the price is less than her reservation price D. Gertie should buy the jeans because the price is more than her reservation price

C. Gertie should buy jeans because the price is less than her reservation price

suppose you bought three tickets to a concert in advance at the universoty window. at the last minute one friend canceled, so you could use only two of the tickets. you sold the third ticket just outside the entrance to the concert for more than the price you had originally paid. which transaction occurred in the market? A. the advance purchase at the university window B. the sale that occurred at the concert entrance C. both D. neither

C. both

the quantity that sellers wish to sell tends to ________ as price increases, and so the supply curve is __________ slopping: A. increase; downward B. decrease; downward C. increase; upward D. decrease; upward

C. increase; upward

the buyers reservation price for a particular good or service is the: A. smallest price the buyer would be willing to pay for it B. same as the market price C. largest price the buyer would be willing to pay for it D. price the buyer must pay to ensure he or she gets it

C. largest price the buyer would be willing to pay for it

The entire group of buyers and sellers of a particular good or service makes up: A. the demand curve B. the supply curve C. the market D. the equilibrium price and quantity

C. the market

as coffee becomes more expensive, uncle Joe starts drinking tea instead of coffee: A. the income effect of a price change B. a decrease in reservation price C. the substitution effect of a price change D. a decrease in demand

C. the substitution effect of a price change

A good example of central planning at work in the US is: A. car manufacturers establishing suggested retail prices B. McDonlads fries being the same everywhere C. unions working with businesses to establish wages D. New York rent control program

D. New York rent control program

to understand how the price of a good is determined in a free market, one must account for the interest of: A. only buyers B. only sellers C. neither buyers and sellers D. buyers and sellers

D. buyers and sellers

which of the following is NOT true of a demand curve? A. it has negative slope B. it shows the amount consumers want to buy at various prices C. it relates the price of an item to the quantity demanded of that item D. it reflects sellers reservation prices

D. it reflects sellers reservation prices

if price is above the equilibrium price, then there will be:

excess supply

when a market is in the equilibrium:

there is neither excess demand or supply

excess demand occurs:

when the price is below the equilibrium price