econ test 2

b)decrease if demand were D2 only.

Refer to the diagram and assume a single good. If the price of the good decreases from $6.30 to $5.70, consumer expenditure would Multiple Choice a)decrease if demand were D1 only. b)decrease if demand were D2 only. c)decrease if demand were either D1 or D2. d)increase if demand were either D1 or D2.

b)in the second statement.

"In the corn market, demand often exceeds supply and supply sometimes exceeds demand." "The price of corn rises and falls in response to changes in supply and demand." In which of these two statements are the terms demand and supply being used correctly? Multiple Choice a)in neither statement. b)in the second statement. c)in the first statement. d)in both statements.

b)MUa/Pa = MUb/Pb = MUc/Pc = ... = MUn/Pn.

A consumer is maximizing her utility with a particular money income when: Multiple Choice a)the total utility derived from each product consumed is the same. b)MUa/Pa = MUb/Pb = MUc/Pc = ... = MUn/Pn. c)MUa = MUb = MUc = ... = MUn. d)Pa = Pb = Pc = ... = Pn.

d. 2

A consumer's weekly income is $300 and the consumer buys 5 bars of chocolate per week. When income increases to $330, the consumer buys 6 bars per week. The income elasticity of demand for chocolate by this consumer is about: Multiple Choice a. 0 b. 0.5 c. 1 d. 2

b)perfectly elastic.

A demand curve which is parallel to the horizontal axis is: Multiple Choice a)perfectly inelastic. b)perfectly elastic. c)relatively inelastic. d)relatively elastic.

d)some firms leaving an industry.

A leftward shift of a product supply curve might be caused by: Multiple Choice a)an improvement in the relevant technique of production. b)a decline in the prices of needed inputs. c)an increase in consumer incomes. d)some firms leaving an industry.

c)if the amount producers want to sell is equal to the amount consumers want to buy.

A market is in equilibrium: Multiple Choice a)provided there is no surplus of the product. b)at all prices above that shown by the intersection of the supply and demand curves. c)if the amount producers want to sell is equal to the amount consumers want to buy. d)whenever the demand curve is downsloping and the supply curve is upsloping.

a. The product is an inferior good

A negative income elasticity of demand coefficient indicates that: Multiple Choice a. The product is an inferior good b. The product follows the law of demand c. The product is a complementary good d. The product is a substitute good

b. .67

A price increase from $43 to $49 results in an increase in quantity supplied from 220 units to 240 units. The price elasticity of supply in this price range is: Multiple Choice a. .3 b. .67 c. 1.50 d. 3.33

c)a change in price will have no effect on the quantity supplied.

A supply curve that is a vertical straight line indicates that: Multiple Choice a)production costs for this product cannot be calculated. b)the relationship between price and quantity supplied is inverse. c)a change in price will have no effect on the quantity supplied. d)an unlimited amount of the product will be supplied at a constant price.

c)result in a surplus of wheat.

An effective price floor on wheat will: Multiple Choice a)force otherwise profitable farmers out of business. b)result in a shortage of wheat. c)result in a surplus of wheat. d)clear the market for wheat.

d)supply curve for cigarettes leftward.

An increase in the excise tax on cigarettes raises the price of cigarettes by shifting the: Multiple Choice a)demand curve for cigarettes rightward. b)demand curve for cigarettes leftward. c)supply curve for cigarettes rightward. d)supply curve for cigarettes leftward.

c. All combinations of two products from which the consumer derives a specific level of total utility

An indifference curve shows: Multiple Choice a. The maximum combinations of two products which a consumer can afford to buy, given prices and the consumer's income b. The quantities of two products a consumer is willing to buy at different income levels c. All combinations of two products from which the consumer derives a specific level of total utility d. Combinations of two products which yield the same marginal utilities

c. All combinations of two products from which the consumer derives a specific level of total utility

An indifference curve shows: Multiple Choice a. The maximum combinations of two products which a consumer can afford to buy, given prices and the consumer's income b. The quantities of two products a consumer is willing to buy at different income levels c. All combinations of two products from which the consumer derives a specific level of total utility d. Combinations of two products which yield the same marginal utilities

d. In order to maximize utility, Mary should buy more of A and less of B

Assume that A and B are both priced at $1 per unit and that Mary has $10 to spend on A and B. She buys 6 units of A and 4 units of B. The marginal utility of A is 12 and the marginal utility of B is 8. This indicates that: Multiple Choice a. Mary is in equilibrium b. Given another dollar, Mary should buy an additional unit of B c. In order to maximize utility, Mary should buy more of B and less of A d. In order to maximize utility, Mary should buy more of A and less of B

b. Purchase more of product A and less of product B

Assume that a consumer purchases a combination of product A and product B such that the MUa/Pa = 8 and MUb/Pb = 6. To maximize utility without spending more money, the consumer should: Multiple Choice a. Purchase less of product A and more of product B b. Purchase more of product A and less of product B c. Purchase more of both product A and product B d. Make no change in purchases of products A and B

a)a decline in income if X is an inferior good.

Assume the demand curve for product X shifts to the right. This might be caused by: Multiple Choice a)a decline in income if X is an inferior good. b)a decline in the price of Z if X and Z are substitute goods. c)a change in consumer tastes which is unfavorable to X. d)an increase in the price of Y if X and Y are complementary goods

c)ceiling prices and the resulting product shortages.

Black markets are associated with: Multiple Choice a)price floors and the resulting product surpluses. b)price floors and the resulting product shortages. c)ceiling prices and the resulting product shortages. d)ceiling prices and the resulting product surpluses.

c. A reduction in price results in a decrease in total revenue

Demand is said to be inelastic when: Multiple Choice a. An increase in price results in a reduction in total revenue b. A reduction in price results in an increase in total revenue c. A reduction in price results in a decrease in total revenue d. The elasticity coefficient exceeds one

c. Total revenues minus the opportunity costs of all inputs

Economic profits are equal to: Multiple Choice a. Total revenues minus fixed costs b. Total revenues minus the costs of raw materials c. Total revenues minus the opportunity costs of all inputs d. Gross profit minus selling and operating expenses

d)a schedule of various combinations of market prices and amounts demanded.

Economists use the term "demand" to refer to: Multiple Choice a)a particular price-quantity combination on a stable demand curve. b)the total amount spent on a particular commodity over a fixed time period. c)an upsloping line on a graph that relates consumer purchases and product price. d)a schedule of various combinations of market prices and amounts demanded.

d)demand is elastic at high prices.

For a linear demand curve: Multiple Choice a)elasticity is constant along the curve. b)elasticity is unity at every point on the curve. c)demand is elastic at low prices. d)demand is elastic at high prices.

c)the marginal utility of C is twice that of D.

Frank is purchasing products C and D in utility-maximizing amounts. If the price of C is $4 and the price of D is $2, then: Multiple Choice a)the marginal utility of D is twice that of C. b)the marginal utility of D is the same as that of C. c)the marginal utility of C is twice that of D. d)the marginal utility of C is four times that of D.

b. Substitute goods

If a 10 percent increase in the price of one good results in an increase of 5 percent in the quantity demanded of another good, then it can be concluded that the two goods are: Multiple Choice a. Complementary goods b. Substitute goods c. Independent goods d. Normal goods

c. Independent goods

If a 10 percent increase in the price of one good results in no change in the quantity demanded of another good, then it can be concluded that the two goods are: Multiple Choice a. Complementary goods b. Substitute goods c. Independent goods d. Normal goods

b)economies of scale are being realized.

If a firm doubles its output in the long run and its unit costs of production decline, we can conclude that: Multiple Choice a)technological progress has occurred. b)economies of scale are being realized. c)the firm is encountering diminishing returns. d)diseconomies of scale are being encountered.

d)the former refer to non-expenditure costs and the latter to monetary payments.

Implicit and explicit costs are different in that: Multiple Choice a)explicit costs are opportunity costs; implicit costs are not. b)implicit costs are opportunity costs; explicit costs are not. c)the latter refer to non-expenditure costs and the former to monetary payments. d)the former refer to non-expenditure costs and the latter to monetary payments.

a)the price of the product for which the demand curve is relevant.

In moving along a demand curve which of the following is not held constant? Multiple Choice a)the price of the product for which the demand curve is relevant. b)price expectations. c)consumer incomes. d)prices of complementary goods.

a)the prices of both products and money income are assumed to be constant.

In moving along a given budget line: Multiple Choice a)the prices of both products and money income are assumed to be constant. b)each point on the line will be equally satisfactory to consumers. c)money income varies, but the prices of the two goods are constant. d)the prices of both products are assumed to vary, but money income is constant.

b)BCDE.

Multiple Choice a)0BEQ. b)BCDE. c)0BEQ −0AFQ. d)0CDQ.

c. supply is perfect elastic

Multiple Choice a)Demand is perfectly elastic. b)Demand is perfectly inelastic. c)Supply is perfectly elastic. d)Supply is perfectly inelastic.

d)PC/PD.

Multiple Choice a)MUC/MUD. b)one-half. c)PD/PC. d)PC/PD.

b) Q2 workers

Multiple Choice a)Q3 workers. b)Q2 workers. c)Q1 workers. d)more than Q3 workers.

c)an increase in incomes if the product is a normal good.

Multiple Choice a)a decline in the number of buyers in the market. b)a decline in the price of a substitute good. c)an increase in incomes if the product is a normal good. d)an increase in incomes if the product is an inferior good.

b)a decrease in the demand for product X.

Multiple Choice a)an increase in the demand for product X. b)a decrease in the demand for product X. c)no change in the demand for product X. d)that X is an inferior good.

d)0F represents a price that would result in a shortage of AC.

Multiple Choice a)at any price above 0G a shortage would occur. b)0F represents a price that would result in a surplus of AC. c)a surplus of GH would occur. d)0F represents a price that would result in a shortage of AC.

b)a total product curve that eventually increases at a decreasing rate.

The law of diminishing returns results in: Multiple Choice a)an eventually rising marginal product curve. b)a total product curve that eventually increases at a decreasing rate. c)an eventually falling marginal cost curve. d)a total product curve that rises indefinitely.

c)unit elastic for price increases that reduce quantity demanded from 5 units to 4 units.

Multiple Choice a)inelastic for price declines that increase quantity demanded from 2 units to 3 units. b)elastic for price declines that increase quantity demanded from 5 units to 6 units. Incorrect c)unit elastic for price increases that reduce quantity demanded from 5 units to 4 units. d)inelastic for price increases that reduce quantity demanded from 4 units to 3 units.

a)is positive but may be either increasing or decreasing.

Multiple Choice a)is positive but may be either increasing or decreasing. b)must also be increasing. c)may be either positive or negative. d)will be increasing at an increasing rate.

d)movement from point b to point a.

Multiple Choice a)shift from D1 to D3. b)shift from D1 to D2. c)movement from point a to point b. d)movement from point b to point a.

c)Average fixed costs and average total costs would rise.

Other things equal, if the fixed costs of a firm were to increase by $100,000 per year, which of the following would happen? Multiple Choice a)Marginal costs and average variable costs would both rise. b)Average fixed costs and average variable costs would rise. c)Average fixed costs and average total costs would rise. d)Average fixed costs would rise, but marginal costs would fall.

b)$200,000 and its economic profits were zero.

Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year. If the firm sold 4,000 units of its output at $300 per unit, its accounting profits were: Multiple Choice a)$100,000 and its economic profits were zero. b)$200,000 and its economic profits were zero. c)$100,000 and its economic profits were $100,000. d)zero and its economic loss was $200,000.

a. 8 percent

Suppose the price elasticity of supply for crude oil is 2.5. How much would price have to rise to increase production by 20 percent? Multiple Choice a. 8 percent b. 12.5 percent c. 20 percent d. 45 percent

b)indicates the lowest unit costs achievable when a firm has had sufficient time to alter plant size.

The long-run average total cost curve: Multiple Choice a)displays declining unit costs so long as output is increasing. b)indicates the lowest unit costs achievable when a firm has had sufficient time to alter plant size. c)has a shape which is the inverse of the law of diminishing returns. d)can be derived by summing horizontally the average total cost curves of all firms in an industry.

a)buyer responsiveness to price changes.

The price elasticity of demand coefficient measures: Multiple Choice a)buyer responsiveness to price changes. b)the extent to which a demand curve shifts as incomes change. c)the slope of the demand curve. d)how far business executives can stretch their fixed costs.

c. Responsiveness of quantity demanded to a change in price

The price elasticity of demand is a measure of the: Multiple Choice a. Steepness or slope of a demand curve b. Absolute changes in quantity demanded and price c. Responsiveness of quantity demanded to a change in price d. Sensitivity of price to changes in demand

c)perfectly inelastic.

The supply curve of a one-of-a-kind original painting is: Multiple Choice a)relatively elastic. b)relatively inelastic. c)perfectly inelastic. d)perfectly elastic.

b)perfectly inelastic.

The supply of known Monet paintings is: Multiple Choice a)perfectly elastic. b)perfectly inelastic. c)relatively elastic. d)relatively inelastic

b. Diminishing marginal returns means that in order to increase output at a constant rate, the firm must add larger and larger quantities of the variable inputs

Which of the following statements is true? Multiple Choice a. Diminishing marginal returns sets in after marginal product intersects average product b. Diminishing marginal returns means that in order to increase output at a constant rate, the firm must add larger and larger quantities of the variable inputs c. Diminishing marginal returns implies that there will never be increasing returns to scale d. Diminishing marginal returns implies that the firm's profits will be shrinking

a)an increase in supply.

Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity? Multiple Choice a)an increase in supply. b)an increase in demand. c)a decrease in supply. d)a decrease in demand.

a)increase equilibrium price and quantity if the product is a normal good.

With a downsloping demand curve and an upsloping supply curve for a product, an increase in consumer income will: Multiple Choice a)increase equilibrium price and quantity if the product is a normal good. b)decrease equilibrium price and quantity if the product is a normal good. c)have no effect on equilibrium price and quantity. d)reduce the quantity demanded, but not shift the demand curve.

a. 0.25, and demand is inelastic.

a. 0.25, and demand is inelastic. b. 1.5, and demand is elastic. c. 1, and demand is unit elastic. d. 0.67, and demand is inelastic.

b. The consumer prefers C to A.

a. The consumer prefers E to F. b. The consumer prefers C to A. c. The consumer likes B and D equally well. d. The consumer likes D better than E.

b. The consumer prefers C to A.

a. The consumer prefers E to F. b. The consumer prefers C to A. c. The consumer likes B and D equally well. d. The consumer likes D better than E.

b. The price of good 1 decreased.

a. The consumer's income increased. b. The price of good 1 decreased. c. The price of good 1 increased. d. The consumer's income decreased.

b. The price of good 1 decreased.

a. The consumer's income increased. b. The price of good 1 decreased. c. The price of good 1 increased. d. The consumer's income decreased.

c. perfectly inelastic

a. perfectly elastic. b. relatively elastic. c. perfectly inelastic. d. relatively inelastic.

b. Economic profit is zero

If a firm's revenues just cover all its opportunity costs, then: Multiple Choice a. Normal profit is zero b. Economic profit is zero c. Total revenues equal its explicit costs d. Total revenues equal its implicit costs

c. Total utility increases at a diminishing rate

If a product has a diminishing but positive marginal utility, then: Multiple Choice a. Total utility decreases at an increasing rate b. Total utility will become negative c. Total utility increases at a diminishing rate d. Total utility decreases at a diminishing rate

b. Diseconomies of scale

If all resources used in the production of a product are increased by 10 percent and output increases by less than 5 percent, then the firm is experiencing: Multiple Choice a. Economies of scale b. Diseconomies of scale c. Constant returns to scale d. Decreasing average total costs

d. The price elasticity of demand is zero

If an increase in the supply of a product results in a decrease in the price, but no change in the quantity traded, then: Multiple Choice a. The price elasticity of supply is zero b. The price elasticity of supply is infinite c. The price elasticity of demand is unitary d. The price elasticity of demand is zero

b)decrease the quantity of X demanded by less than 4 percent.

If the demand for product X is inelastic, a 4 percent increase in the price of X will: Multiple Choice a)decrease the quantity of X demanded by more than 4 percent. b)decrease the quantity of X demanded by less than 4 percent. c)increase the quantity of X demanded by more than 4 percent. d)increase the quantity of X demanded by less than 4 percent.

c)lard is an inferior good.

If the income elasticity of demand for lard is -3.00, this means that: Multiple Choice a)lard is a substitute for butter. b)lard is a normal good. c)lard is an inferior good. d)more lard will be purchased when its price falls.

b)is above the equilibrium level.

If there is a surplus of a product, its price: Multiple Choice a)is below the equilibrium level. b)is above the equilibrium level. c)will rise in the near future. d)is in equilibrium.

b. $930

If you know that when a firm produces 10 units of output, total costs are $1,030 and average fixed costs are $10, then total variable costs are: Multiple Choice a. $104 b. $930 c. $1,040 d. $1,130

d)independent goods.

Tennis rackets and ballpoint pens are: Multiple Choice a)substitute goods. b)complementary goods. c)inferior goods. d)independent goods.

c)relatively price inelastic.

The demand for a necessity whose cost is a small portion of one's total income is: Multiple Choice a)perfectly price inelastic. b)perfectly price elastic. c)relatively price inelastic. d)relatively price elastic.

a)price and quantity demanded are inversely related.

The law of demand states that, other things equal: Multiple Choice a)price and quantity demanded are inversely related. b)the larger the number of buyers in a market, the lower will be product price. c)price and quantity demanded are directly related. d)consumers will buy more of a product at high prices than at low prices.

b) demand curves slope downward

The law of diminishing marginal utility explains why: Multiple Choice a)supply curves slope upward. b)demand curves slope downward. c)addicts can never get enough. d)people will only consume their favorite goods and not try new things.

b)demand curves slope downward.

The law of diminishing marginal utility explains why: Multiple Choice a)supply curves slope upward. b)demand curves slope downward. c)addicts can never get enough. d)people will only consume their favorite goods and not try new things.

a. Total cost eventually rises faster and faster

The law of diminishing returns explains why: Multiple Choice a. Total cost eventually rises faster and faster b. Total cost eventually falls c. Total cost eventually rises more and more slowly d. Total cost eventually reaches a maximum point

c. The total satisfaction received from consuming a particular amount of a product

Total utility is best defined by which of the following? Multiple Choice a. The change in marginal utility multiplied by the price of a product b. The maximum amount of satisfaction from consuming a product c. The total satisfaction received from consuming a particular amount of a product d. The additional satisfaction received from consuming one more unit of a product

c. Its average total costs will decline if it reduces its scale of operations

When a firm is experiencing diseconomies of scale: Multiple Choice a. It should increase the amount of labor it hires b. It should lower its price to the competitive level c. Its average total costs will decline if it reduces its scale of operations d. It should increase the size of its plant to decrease its average total costs

c. Substitution effect will encourage consumers to purchase less of the product but the income effect will encourage them to purchase more

When the price of a product rises for an inferior good, the: Multiple Choice a. Income and substitution effects will encourage consumers to purchase more of the product b. Income and substitution effects will encourage consumers to purchase less of the product c. Substitution effect will encourage consumers to purchase less of the product but the income effect will encourage them to purchase more d. Substitution effect will encourage consumers to purchase more of the product but the income effect will encourage them to purchase less

c)increase in the supply of gasoline.

When the price of oil declines significantly, the price of gasoline also declines. The latter occurs because of a(n): Multiple Choice a)increase in the demand for gasoline. b)decrease in the demand for gasoline. c)increase in the supply of gasoline. d)decrease in the supply of gasoline.

c)zero.

Where total utility is at a maximum, marginal utility is: Multiple Choice a)negative. b)positive and increasing. c)zero. d)positive but decreasing.

b)Marginal cost intersects average total cost at the latter's minimum point.

Which of the following is correct as it relates to cost curves? Multiple Choice a)Average variable cost intersects marginal cost at the latter's minimum point. b)Marginal cost intersects average total cost at the latter's minimum point. c)Average fixed cost intersects marginal cost at the latter's minimum point. d)Marginal cost intersects average fixed cost at the latter's minimum point.

b. a decrease in the demand for product X.

a. an increase in the demand for product X. b. a decrease in the demand for product X. c. no change in the demand for product X. d. that X is an inferior good.

a. an increase in the quantity of Y demanded.

a. an increase in the quantity of Y demanded. b. a decrease in the quantity of Y demanded. c. a leftward shift in the demand curve for Y. d.a rightward shift in the demand curve for Y.

a. marginal product is falling.

a. marginal product is falling. b. marginal product is rising. c. marginal product is negative. d. one cannot determine whethermarginal product is falling or rising.

b. price of Y has decreased.

a. price of Y has increased. b. price of Y has decreased. c. price of X has increased. d. consumer's money income has increased.

a. the consumer's purchase of good 2 decreases even though its price stays constant.

a. the consumer's purchase of good 2 decreases even though its price stays constant. b. the slope of the budget line decreases because the price of good 1 increased. c. the marginal utility of good 1 increases and the marginal utility of good 2 decreases. d. the consumer's total utility decreases.

a. the consumer's purchase of good 2 decreases even though its price stays constant.

a. the consumer's purchase of good 2 decreases even though its price stays constant. b. the slope of the budget line decreases because the price of good 1 increased. c. the marginal utility of good 1 increases and the marginal utility of good 2 decreases. d. the consumer's total utility decreases.

b) is downsloping and convex to the origin

an indifference curve; a) may be either upsloping or downsloping, depending on whether the two products are complements or substitutes b) is downsloping and convex to the origin c) is upsloping and has a constant slope d) is downsloping and concave to the origin

c. Rises at a decreasing rate

Over the range of positive, but diminishing, marginal returns for an input, the total product curve: Multiple Choice a. Falls b. Rises at a constant rate c. Rises at a decreasing rate d. Rises at an increasing rate

b)reflect opportunity costs.

Production costs to an economist: Multiple Choice a)consist only of explicit costs. b)reflect opportunity costs. c)never reflect monetary outlays. d)always reflect monetary outlays.