ECON Final pt 2

Refer to Figure 2. With reference to Graph B, at a price of $10, total revenue equals:

$300.

Refer to Figure 2. With reference to Graph A, at a price of $5, total revenue equals:

$500.

Alex has $18 per week in his entertainment budget. He splits his time between going to the movies and renting video games. Each movie costs $6 while each video game rental costs $3. The measured total utility of each of his activities is shown in the table below. What is Alex's utility maximizing point?

1 movie, 4 video game rentals

How does the U.S. Bureau of Labor Statistics gather information with regard to the typical consumption choices of Americans?

Consumer Expenditure Survey

Jeremy maximizes utility by consuming both iced tea and coffee. Iced tea is priced at $1.50 per bottle and coffee at $2.00 per 16-ounce cup. Which of the following marginal utility pairs is inconsistent with Jeremy's consumer equilibrium at these prices?

MU of iced tea = 4; MU of coffee = 3

A consumer's utility is maximized when:

None of the above are generally true.

When demand and income move in the same direction, a good is said to be

a normal good.

(Table above) In the table, at a price of $5:

a shortage of 40 units occurs.

(Table above) In the table, at a price of $12:

a surplus of 20 units takes place.

The measure used to determine whether two products are substitutes or complements is called the:

cross-price elasticity of demand.

Marginal utility can:

be positive, negative, or zero

Butter is a substitute for margarine. If the price of margarine increases, we would expect to see:

both the price of butter and the quantity of butter traded rise.

Refer to Figure 4. A change from Point A to Point E represents a(n):

decrease in supply.

The term is used to describe the common pattern whereby each marginal unit of a consumed good provides less of an addition to utility than the previous unit.

diminishing marginal utility

Refer to Figure 2. Graph A represents a demand curve that is relatively __________. Total revenue __________ as the price decreases from $10 to $5.

elastic; increases

Determinants of supply include all of the following except:

income

The term - describes a situation where a - causes a reduction in the buying power of income, even though actual income has not changed.

income effect; higher price

When economists attempt to predict the spending patterns of U.S. households, they will typically view the - as a primary determining factor that influences the individual consumption choices that each will make.

income level of each household

Saving money is a(n) - , because it involves less consumption in the present, but the ability to consume more in the future.

intertemporal choice

The term refers to the additional utility provided by one additional unit of consumption.

marginal utility

The amount of added utility that an individual derives from consuming one more unit of a good or service is called:

marginal utility.

A technological advancement causes:

the supply curve to shift to the right.

A jeweler cut prices in his store by 20% and the quantity sold fell by 20%. This is indicative of:

unit elastic demand.

In microeconomic terms, the ability of a good or a service to satisfy wants is called:

utility.

Better technology lowers the cost of producing computers so that:

supply increases; quantity supplied increases; price decreases.

Approximately what portion of annual consumption is typically spent by American households on shelter?

one-third

Jay and Jen are married with two children. They are preparing a household budget for the coming year. Based on statistical information for American households, approximately what portion of this family's annual consumption will most likely be budgeted for food and vehicle expenses?

one-third

The price of peanut butter increases and as a result the demand for jelly increases. We can conclude that:

peanut butter and jelly are substitutes.

Chicken and fish are substitutes. Therefore, the cross elasticity of demand between chicken and fish should be:

positive.

Which of the following is not a major determinant of the price elasticity of demand?

quantity of goods available

The nation's largest cable TV company tested the effect of a price reduction for premium movie channels. It lowered prices from $12 to $9.95 and found that the number of customers rose by almost 50%. This means:

the demand for premium movie channels is elastic in this price range.

The law of diminishing marginal utility states that:

the increase in total utility from consuming an additional unit decreases as consumption increases.

The definition of cross-elasticity of demand with regard to two products X and Y is:

the percentage change in the quantity of X demanded divided by the percentage change in the price of Y.

Refer to Figure 1. The graph that best illustrates a perfectly elastic demand curve is

Graph B.

Refer to Figure 1. The graph that best illustrates a perfectly inelastic demand curve is:

Graph D.

Which of the following occurs simultaneously with an income effect?

substitution effect

Economists are able to determine total utility by:

summing up the marginal utilities of each unit consumed.

Refer to Figure 3 . Based on the price of $2.50, which of the following would result?

The quantity supplied would be 50 units.

Consumers expect the price of milk to decrease shortly. What happens in the short run?

demand decreases; quantity demanded decreases; price decreases

The ____ arises when a price changes because consumers have an incentive to consume less of the good with a relatively higher price and more of the good with a relatively lower price.

substitution effect