MBA 601 - Economics test Take 1

If there is an improvement in the technology used to produce a good, then the supply curve for that good shifts to the left

false

Suppose that when the price rises by 10% for a particular good, the quantity demanded of that good falls by 20%. The price elasticity of demand for this good is equal to

2.0

Studies indicate that the price of demand for cigarettes is about 0.4. A government policy aimed at reducing smoking changed the price of a pack of cigarettes from$2 to $6. According to the midpoint method, the governmetn should have reduced smoking by

40%

Suppose the price elasticity of supply for cheese is 0.6 in the short run and 1.4 in the long run. If an increase int eh demand for cheese causes the price of cheese to increase by 15%, then the quantity supplied of cheese will be

9% in the short run and 21% in the long run (section 5-2b)

Suppose scientists prove evidence that people who drink energy drinks are more likely to have a heart attack than people who do not drink energy drinks. We would expect to see

a decrease in the demand for energy drinks

cross-price elasticity of demand

a measure of how much the quantity demanded of one good responds to a change in the price of another good

A decrease in the price of a product and an increase in the number of buyers in the market affect demand curve in the same general way (true/false)

false

You and your college roommate eat three packages of Ramen noodles each week. After graduation, last month, both of you were hired at several times your college income. You still enjoy Ramen noodles very much and buy even more, but your roommate plans to buy fewer Ramen noodles in favor of foods she prefers more. When looking at income elasticity of demand for Ramen noodles, yours would

be positive, and your roommate's would be negative

If a seller in a competitive market chooses to charge more than the going price, then

buyers will make purchases from other sellers

An increase in the price of a good will

decrease in quantity demanded

When small changes in price lead to infinite changes in quantity demanded, demand is perfectly

elastic, and the demand curve will be horizontal

Consumer surplus can be measured as the are between the demand curve and the

equilibrium price

The demand for soap is more elastic than the demand for Dove soap. (true/False)

false

Soup is an inferior good if the demand

for soup falls when income rises.

Most markets in the economy are

highly competitive

Warrensburg is a small college town in Missouri. At the end of August each year, the market demand for fast food in Warrensburg

increases

If a decrease in income increases the demand for a good, then the good is a(n)

inferior good

Suppose there are six bait and tackle shops that sell worms in a lakeside resort town in Minnesota. If we add the respective quantities that each shop would produce and sell at each of the bait and tackle shops when the price of worms is $2 per bucket, $2.50 per bucket, and $3 per bucket, and so forth we have found the

market supply curve

A competitive market is a market in which

no individual buyer or seller has any significant impact on the market price

In order to conclude that markets are efficient, we assume that they are

perfectly competitive

normal goods have a _____ income elasticity

positive

the quantity supplied of a good is the amount that

sellers are willing and able to sell

suppose that a decrease in the price of good X results in fewer units of good Y being demanded. This implies that X and Y are

substitute goods

A market's equilibrium is the point at which the supply and demand curves intersect (true/false)

true