ECON102 EXAM #2

If the price of cheese falls by one percent and the quantity demanded rises by 3 percent, then the price elasticity of demand for cheese has a value of: A. 30. B. 0.30. C. 0.333. D. 3.

A. 30.

If the price elasticity of demand for a good is greater than one, then the demand for that good, with respect to price, is: A. elastic. B. inelastic. C. unitary elastic. D. perfectly elastic.

A. elastic.

Sven likes to water ski, but can only water ski during the one week that he is on vacation. Therefore, he plans to ski every day, for eight hours a day. The first day, Sven skied for eight hours and enjoyed every hour. The second day, Sven slept in and then skied for seven hours, which was fun but not as much fun as the first day. The third day, Sven skied for six hours, but was starting to get a bit bored by the end. The fourth day, Sven skied for four hours and then took a nap. On the fifth day of Sven's vacation, Sven went blueberry picking all day. Sven's total utility _______ with each hour that he skied. A. increased B. decreased C. remained constant D. first increased than decreased

A. increased

Suppose that the company that owns all of the vending machines on your campus has doubled the price of a can of soda. They notice that they are selling approximately 15% fewer sodas. Price elasticity of demand for sodas from the campus vending machines is: A. inelastic B. unitary elastic C. elastic D. infinite

A. inelastic

6. On a given linear demand curve, demand is ______ at high prices than at low prices. A. more price elastic. B. more price inelastic. C. more negative. D. more volatile.

A. more price elastic.

At his current consumption level Cameron get 3 times more marginal utility from an additional game of pinball than from an additional game of ping pong. If the price of a ping pong game is $0.50, than he is maximizing utility if the price of a pinball game is A. $1.00 B. $1.50 C. $2.00 D. $3.00

B. $1.50

JoJo is shopping for a new computer. A mail-order computer can be delivered to JoJo's home for $1,200. JoJo could pick up the same computer at the warehouse for $1,000. How should JoJo decide? A. JoJo should definitely drive to the warehouse because the monetary cost is $200 lower. B. JoJo should drive to the warehouse if the value of his travel time plus wear and tear on his car is less than $200. C. JoJo should definitely have the computer delivered, because the $200 saving is less than 20% of the purchase price. D. JoJo should definitely drive to the warehouse because the $200 saving is more than 10% of the purchase price.

B. JoJo should drive to the warehouse if the value of his travel time plus wear and tear on his car is less than $200.

Why are you more likely to see a poor person picking up aluminum cans than a wealthy person? A. Wealthy people care less about the environment. B. Wealthy people have higher opportunity costs for their time. C. Wealthy people are more concerned about their public image. D. Wealthy people are more likely to be aware of diseases that are transmitted through litter.

B. Wealthy people have higher opportunity costs for their time.

Suppose you want to equalize your marginal utility per dollar across all the goods that you consume. If your marginal utility per dollar is higher for one of those items than for any others, you should A. consume less of it to reduce your marginal utility. B. consume more of it to reduce your marginal utility. C. consume more of the other goods to equalize your marginal utilities per dollar. D. consume more of all goods in equal proportions.

B. consume more of it to reduce your marginal utility.

It is impossible for total utility to be _________ when marginal utility is ___________ A. increasing; increasing. B. decreasing; positive. C. positive; negative. D. increasing; decreasing.

B. decreasing; positive.

If a firm is experiencing diminishing returns, you can conclude that: A. marginal costs are also declining. B. marginal costs are increasing. C. total labor costs are constant. D. average revenue is increasing.

B. marginal costs are increasing.

Casey earns $150 a week and consumes only fish and shrimp. The price of fish is $3 a pound and the price of shrimp is $5 a pound. If Casey's income rises to $210, the rational spending rule would predict Casey would buy A. more fish and less shrimp. B. more fish and more shrimp. C. less fish and more shrimp. D. more fish and the same amount of shrimp.

B. more fish and more shrimp.

Demand tends to be _______ in the short run than in the long run. A. more elastic B. more inelastic C. more volatile D. less important

B. more inelastic

An individual's supply curve shows his or her: A. willingness to pay at each quantity. B. opportunity cost of producing at each quantity. C. hourly wage for producing at each quantity. D. profit from producing at each quantity.

B. opportunity cost of producing at each quantity.

If the price of textbooks increases by one percent and the quantity demanded falls by one-half percent, then demand for textbooks is: A. negative. B. price inelastic. C. price elastic. D. perfectly inelastic.

B. price inelastic.

Utility maximization means that people try to allocate their ______ to maximize their ___________. A. utility, spending B. resources, satisfaction C. time, work D. limited resource, desires

B. resources, satisfaction

Last summer, Casey took fresh vegetables to sell at the Farmer's Market, but this year, Casey did not plant any vegetables and went to work at the local bank. Refer to the information above. If Casey's decision to change careers did not change the market price for vegetables at the Farmers' Market, it is because: A. demand for vegetables did not change. B. the Farmers' Market attracts a large number of vegetable farmers. C. demand for vegetables increased this year. D. the price is set by a regulatory body.

B. the Farmers' Market attracts a large number of vegetable farmers.

After subsistence levels of food, shelter, and clothing are provided, A. all other goods and services are "needs". B. many goods and services are "needs". C. all other goods and services are "wants". D. all other goods and services are "luxuries".

C. all other goods and services are "wants".

Satellite TV is a close substitute for cable TV. In the 1990's, small satellite TV units were developed that made it more practical for individual consumers to subscribe to satellite TV service. This caused the price elasticity of demand for cable TV service to: A. become more inelastic. B. become less elastic. C. become more elastic. D. shift to the left.

C. become more elastic.

Evan gets twice as much marginal utility from an additional bottle of water than from an additional bottle of soda. If the price of soda is $1.00 per bottle, then Evan is maximizing utility if the price of a bottle of water is A. $1.00 B. $1.50 C. $2.00 D. $.50

C. $2.00

If the price elasticity of demand for tickets to a football game is 2 then, when the price increases by 1%, quantity demanded decreases by: A. ½%. B. 1%. C. 2%. D. 4%.

C. 2%.

One implication of the shape of the demand curve that faces a perfectly competitive firm is that: A. If the firm increases its price above the market price, it will earn higher revenue. B. If the firm decreases its price below the market price, it will earn higher revenue. C. If the firm increases its price above the market price, it will earn zero revenue. D. The market is unable to reach a new equilibrium if prices change.

C. If the firm increases its price above the market price, it will earn zero revenue.

Jenny sells lemonade by the street during the summer time. Several other kids also sell lemonade in Jenny's neighborhood. Refer to the information above. The lemonade market in Jenny's neighborhood is more likely to be perfectly competitive if: A. all of the kids advertise heavily. B. each stand tries to get more customers by offering a different variety of lemonades and snacks. C. each lemonade stand sells the same kind of lemonade. D. some of the neighborhood parents build elaborate booths for their kids' stands while some kids sell from makeshift tables.

C. each lemonade stand sells the same kind of lemonade.

If the demand for a good is elastic, that good is likely to have: A. many close complements. B. few close complements. C. many close substitutes. D. few close substitutes.

C. many close substitutes.

Assume that a firm uses 13 employee-hours and an office to produce 100 units of output. The price of output is $5, the wage rate is $10, and rent is $200. The firm will earn a _____ of _____. A. profit; $370 B. loss; $200 C. profit; $170 D. loss; $170

C. profit; $170

The price elasticity of demand for a good is the response of: A. demand to a one percent change in price of that good. B. demand to a one percent change in price of the related good. C. quantity demanded to a one percent change in price of that good. D. quantity demanded to a one percent change in price of the related good.

C. quantity demanded to a one percent change in price of that good.

17. For two goods, A and B, the rational spending rule is expressed as A. MUA = MUB. B. MUA * MUB = PA * PB. C. (MUA/PB) = (MUB/PA). D. (MUA/PA) = (MUB/PB).

D. (MUA/PA) = (MUB/PB).

When the price of hot dogs is $1.50 each, 500 hot dogs are sold every day. After the price falls to $1.35 each, 510 hot dogs are sold every day. At the original price, what is the price elasticity of demand for hot dogs? A. 66.67 B. 5 C. 2 D. 0.2

D. 0.2

Assume that Dusty has $30 in income, the price of a loaf of bread is $1.50, and the price of a jar of peanut butter is $3. If Dusty's income rises to $45, Dusty can now buy a maximum of _____ loaves of bread or a maximum of _____ jars of peanut butter. A. 5; 25 B. 10; 40 C. 15; 30 D. 30; 15

D. 30; 15

Which of the following statements is true for both General Motors and a locally owned restaurant? A. Both are perfect competitors. B. Both confront perfectly elastic demand for their products. C. Neither firm is able to influence the price of their products. D. Both seek to maximize profits.

D. Both seek to maximize profits.

2. When calculating price elasticity of demand, if the numerator is positive, the denominator is: A. always greater than one. B. always greater than zero. C. sometimes positive and sometimes negative. D. always less than zero.

D. always less than zero.

A price-taker confronts a demand curve that is: A. vertical at the market price. B. upward sloping. C. downward sloping. D. horizontal at the market price.

D. horizontal at the market price.

If the local electricity utility wants to raise revenues, it should _______ its price because demand for electricity is likely to be ________. A. lower; inelastic B. raise; elastic C. lower; elastic D. raise; inelastic

D. raise; inelastic

The dollar price of a good relative to the average dollar price of all other goods is the A. market price B. equilibrium price C. nominal price D. real price

D. real price