Econ 2305 TTU
If the price elasticity of demand for cigarettes is 0.55, and the price of cigarettes increases by 10 percent, then the quantity of cigarettes demanded will fall by: 0.55 percent. 5.5 percent. 55 percent. 550 percent.
5.5
A firm that produces a good with many substitutes will most likely find that: lowering its price will increase total revenue. lowering its price will decrease total revenue. raising its price will increase total revenue. lowering its price will not affect total revenue.
A
The following graph depicts demand. The slope of the demand curve (ignoring the negative sign) is: 2. 1.5. 1. 0.5.
.5
If the absolute value of slope of the demand curve is 2.5, price is $6 per unit, and the quantity demanded is 8 units, then the price elasticity of demand is: 0.3. 0. 533. 1. 6. 1.875.
0.3
In which of the following markets do firms sell the same standardized product?
2 % Milk
Jenny sells lemonade in front of her house in the summer. Several other kids in Jenny's neighborhood also run lemonade stands in the summer. The lemonade market in Jenny's neighborhood is more likely to be perfectly competitive if:
each lemonade stand sells the same kind of lemonade.
Suppose a profit-maximizing firm in a perfectly competitive market is earning an economic profit of $1,345. If the firm's fixed cost increases from $200 to $300, the firm will:
earn a smaller profit
If the absolute value of the slope of the demand curve is 0.25, price is $8 per unit, and quantity demanded is 12 units, then demand for this good is: perfectly elastic. elastic. unit elastic. inelastic.
elastic
To produce 150 units of output, a firm must use 3 employee-hours. To produce 300 units of output, the firm must use 8 employee-hours. Apparently, the firm is:
experiencing diminishing returns.
An imperfectly competitive firm is one that:
has some degree of influence
One implication of the shape of the demand curve facing a perfectly competitive firm is that:
if the firm increases its price above the market price, it will earn ZERO revenue.
If consumers cannot readily switch to a close substitute when the price of a good increases, the demand for that good is likely to be: elastic. inelastic. unit elastic. perfectly elastic.
inelastic
Pepsi One is a close substitute for Diet Coke. When Pepsi introduced Pepsi One, the price elasticity of demand for Diet Coke ______ and Coke's ability to raise revenues through price increases ______. increased; was reduced increased; increased decreased; was reduced had no effect; was reduced
A
Suppose the price P on a given demand curve results in a price elasticity of demand equal to 1. Any price higher than P will lie on the ______ part of the demand curve, and any price lower than P will lie on the ______ part of the demand curve. elastic; inelastic unit elastic; inelastic inelastic; elastic elastic; unit elastic
A
The price elasticity of demand is a measure of: A.the change in quantity demanded of a good that results from a change in its price. B.the change in price of a good that results from a change in its quantity demanded. C.the demand for a good. D.how consumers respond to excess demand.
A
Which of the following is a defining characteristic of all perfectly competitive markets?
All firms sell the same standardized product.
As the market price of a service increases, more potential sellers will decide to perform that service because: higher prices result in higher revenue. more potential sellers will find that the market price exceeds their reservation price. it's more prestigious to produce high-priced services. higher prices lead to lower opportunity costs.
B
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 inelastic. C elastic. D unit elastic.
B
The cross-price elasticity of demand between bread and potatoes is estimated to be 0.5. This implies bread and potatoes are: normal goods. substitutes. unrelated. complements.
B
The owner of a pizza shop observes that when she raises the price of a large pizza, her total revenue decreases, and when she lowers the price of a large pizza, her total revenue increases. This suggests that: pizza lovers act irrationally. the demand for her large pizzas is elastic with respect to price. there are few good substitutes for a large pizza. the demand for her large pizzas is inelastic with respect to price.
B
The percentage change in quantity demanded that results from a 1 percent change in price is known as the: price elasticity of supply. price elasticity of demand. income elasticity of demand. cross-price elasticity of demand.
B
To increase total revenue, firms with ______ demand should lower price, and firms with ______ demand should increase price. elastic; unit elastic; inelastic inelastic; elastic unit; inelastic
B
Refer to the figure below. If the price of a latte increases from $2.00 to $2.50: total expenditure would increase. total expenditure would stay the same. total expenditure would decrease. the change in total expenditure, if any, would depend on the supply curve.
C
Individual supply curves generally slope ______ because ______. downward; sellers become more efficient with practice. upward; profits increase with quantity. downward; inputs are cheaper when purchased in high volume. upward; of increasing opportunity costs.
D
The short run is best defined as:
a period of time sufficiently short that at least one factor of production is FIXED.
When Taylor raised the price of earrings at Taylor's Boutique, her total revenue from selling earrings increased. This suggests that: A.the demand for Taylor's earrings at the original price was elastic. B.there are many other boutiques competing with Taylor. C.there was excess demand for earrings at the original price. D.the demand for Taylor's earrings at the original price was inelastic.
D
In surveying their alumni, State U's economics department discovered that ramen noodle consumption declined once students graduated and found jobs. One conclusion the survey team might draw from this result is that: there is excess demand for ramen noodles. the equilibrium price for ramen noodles is too high. college graduates have a high reservation price for ramen noodles. ramen noodles are an inferior good.
D inferior
When the price of NBA tickets is $25 each, 30,000 tickets are sold. After the price rises to $30 each, 20,000 tickets are sold. At the original price, the demand for NBA ticket is: elastic. inelastic. unit elastic. perfectly elastic.
Elastic
Jenny sells lemonade in front of her house in the summer. Several other kids in Jenny's neighborhood also run lemonade stands in the summer. Suppose that the first week of summer, Jenny charged 25 cents for an 8-ounce cup of lemonade, her next-door neighbor Sam charged 50 cents for an 8-ounce cup of lemonade, and Alex across the street charged 15 cents for an 8-ounce cup of lemonade. Assuming the market for lemonade is perfectly competitive, what is most likely to happen?
Eventually prices will equalize across all three lemonade stands.
A price-taker faces a demand curve that is:
Horizontal at the market price
Last year, Casey grew fresh vegetables, which she sold at her local farmers market, but this year, Casey did not plant any vegetables and went to work at a bank instead. If Casey's decision to change careers did not affect the price of vegetables at the farmers market, then this suggests that:
It is perfectly competitive
Which of the following is NOT true of a perfectly competitive firm?
It seeks to maximize revenue.
The primary objective of most private firms is to:
Maximize Profit
During recessions, when some workers lose their jobs and have lower incomes, sales of durable goods (goods with a life expectancy of 3 years or more) decline. Apparently, durable goods are: substitutes. normal goods. complements. inferior goods.
Normal
The government taxes sodas sweetened with high-fructose corn syrup. The market supply curve would -
Not Shift
Scientists discover that corn consumption improves performance on standardized tests. The market supply curve would .
Not shift
Which of the following is the most likely to be a variable factor of production at a university?
Number of librarians
A profit-maximizing perfectly competitive firm must decide:
Only how much to produce, taking price as fixed
When calculating price elasticity of demand, if the percentage change in price is negative, then the percentage change in quantity demanded is typically:
Positive
Total revenue minus both explicit and implicit costs defines a firm?s:
Profit
If a firm's total revenue is less than its variable cost when the firm produces the level of output at which price equals marginal cost, then the firm should:
SHUT DOWN
The opportunity cost of farmer's time increases. The market supply curve would
Shift to left
Suppose a firm produces the level of output at which the marginal cost of the last unit produced equals the price of the good. Which of the following statements is always true?
The firm should shutdown if its total revenue is less than its variable cost.
Which of the following is the most likely to be a fixed factor of production at a farm?
The land of the farm is located
Individual supply curves generally slope ______ because ______.
Upward, of Increasing opportunity costs
If the slope of a demand curve is infinite, then the price elasticity of demand is: zero. infinite. one. equal to the price of the good.
ZERO
A variable factor of production:
is variable in both the short run and the long run.
Jenny sells lemonade in front of her house in the summer. Several other kids in Jenny's neighborhood also run lemonade stands in the summer. If the lemonade market is perfectly competitive and Jenny is charging the equilibrium price, then Jenny can increase her revenue if she:
keeps the price of her lemonade the same and increases the output.
If the demand for a good is highly elastic, that good is likely to have: many close complements. few close complements. many close substitutes. few close substitutes.
many close subsitutes
As the market price of a service increases, more potential sellers will decide to perform that service because:
more potential sellers will find that the market price exceeds their reservation price.
In general, when the price of a fixed factor of production increases:
the profit-maximizing level of output does not change.
In general, when the price of a variable factor of production increases:
the profit-maximizing level of output falls.
One reason that variable factors of production tend to show diminishing returns in the short run is that:
there is only so much that can be produced using additional variable inputs when some factors of production are fixed.