Econ Practice Test
Which of the following approaches to understanding and predicting consumer behavior provides the most insight into how consumers can be expected to respond in an actual market setting?
Test marketing.
Which of the following is a plausible reason that restaurants offer "Senior Citizen Discounts"?
Senior citizens tend to have relatively more elastic demands for restaurant meals than other consumer groups.
Assume a factory that currently employs 25 workers and owns a factory with 10,000 square feet of floor space is considering doubling the size of its factory. Economists would classify this as:
a long-run decision.
Marginal product equals 0 when:
total product reaches its maximum value.
Data collected on a sample of individuals with different characteristics at a specific point in time are called:
cross-section data.
Regression analysis that analyzes the relationship between one dependent variable and several independent variables is called:
multiple regression analysis.
The market structure that is characterized by a small number of large firms that have some market power is called:
oligopoly
When demand is inelastic and price decreases:
the effect of the decrease in price on total revenue dominates the effect of the increase in quantity demanded on total revenue; overall total revenue declines.
In a multiple regression problem involving two independent variables, if b1 is computed to be +2.0, it means that:
the estimated value of Y increases by an average of 2 units for each increase of 1 unit of X1, holding X2 constant.
An implicit cost is defined as:
the opportunity cost of using a resource that is not explicitly paid out by the firm.
Assume the auto market is initially in equilibrium with imports from Japan taking up a significant share of the market. Now assume a quota on imports of Japanese cars is established. What will occur at the initial equilibrium price to signal market participants regarding the change that has taken place?
A shortage is created by a decrease in supply.
As the price of milk increases, what happens at the original equilibrium in the market for cereal that signals market participants that the original equilibrium must change? (Milk and cereal are complements.)
A surplus is created by a decrease in demand.
Which of the following statements is true of the relationship among the average cost functions?
AFC = ATC - AVC
Assume there is an improvement in the technology used to produce Blu-ray disc players. What could be expected to happen to the equilibrium price and quantity in the market for Blu-ray disc players?
Equilibrium price would decrease and equilibrium quantity would increase. (Tech=price decrease)
Which of the following is not a characteristic of a perfectly competitive market?
Limited information is available to all market participants.
In the market for a normal good, what is the ultimate market reaction of suppliers to an increase in the incomes of consumers?
Quantity supplied increases as the equilibrium moves along the supply curve due to a rise in the demand.
Which of the following is true of the typical relationship between marginal product (MP) and average product (AP)?
The MP curve intersects the AP curve at maximum AP
Which of the following is not considered to be a determinant of the price elasticity of demand for a particular good?
The quantity of the good that is supplied to the market.
Gross Domestic Product (GDP) is defined as the market value of:
all final goods and services produced within the boundaries of an economy during the year by domestic and foreign-supplied resources.
For a normal good, the income elasticity of demand is:
always positive.
Fred is considering opening a ski shop in Colorado. Assume Fred will incur the following costs: building rent = $100,000/year, inventory = $250,000/year, energy = $50,000/year, and labor (one clerk) = $10,000/year. In addition, Fred's current income as a computer programmer is $40,000 per year. Assuming Fred would earn $460,000 in revenues, he could expect to earn:
an economic profit of $10,000 per year.
If the price of salmon increases relative to the price of cod, the demand for:
cod will increase.
Assume the demand for a good is price inelastic, i.e., ed < 1 (in absolute value). This means that if price decreases by 50 percent, quantity demanded will:
increase by less than 50 percent.
A strong Japanese yen
induced Japanese auto manufacturers to shift their production of cars to the U.S.
If the percentage change in quantity demanded is less than the percentage change in price, we would say that over this range, demand is:
inelastic
The term "fixed input" refers to:
inputs to production, the quantity of which cannot be varied in the short run.
Information on the price elasticity of demand is particularly important to managerial decision making because:
it allows one to predict how total revenue will respond, i.e., increase or decrease, to a change in price.
The amount of output produced with an additional unit of variable input is referred to as:
marginal product
The assumed goal of the firms that operate in each of the four market structures discussed in the text is to maximize:
profits
If the cross-price elasticity of demand between two goods is positive, we can assume that the two goods in question are:
substitutes
The test statistic used to test the hypothesis of whether a regression coefficient is significantly different from zero, holding all other independent variables constant, is called a(n):
t-test.
For a particular product, a demand elasticity is a quantitative measure that shows:
the percentage change in quantity demanded relative to the percentage change in any of the other variables included in the demand function for that product.
"Demand" is best defined as the relationship between:
the price of a good and the quantity consumers are willing and able to buy at each price level.