ECON II Test 1 Study Guide BAC

Refer to the above data: Equilibrium price is:

$4

Refer to the above information. If the Mudhens' management wanted to maximize total revenue from the game, it would set the ticket price at:

$7

Refer to the above diagrams. The case of complementary goods is represented by figure:

A

In which of the following instances will the effect on equilibrium price be dependent on the magnitude of the shifts in supply and demand? A. demand rises and supply rises B. supply falls and demand remains constant C. demand rises and supply falls D. supply rises and demand falls

A. demand rises and supply rises

An unusually large crop of coffee beans might: A. increase the supply of coffee. B. increase the price of coffee. C. decrease the quantity of coffee consumed. D. increase the price of tea.

A. increase the supply of coffee.

Elastic demand is analogous to a _____ and inelastic demand to a _____

Ace bandage; firm rubber tie-down

Which of the following statements is correct? A. if demand increases and supply decreases, equilibrium price will fall B. if supply increases and demand decreases, equilibrium price will fall. C. If demand decreases and supply increases, equilibrium price will rise D. If supply declines and demand remains constant, equilibrium price will fall

B. if supply increases and demand decreases, equilibrium price will fall.

Suppose that in 2007 Ford sold 500,000 Mustangs at an average price of $18,800 per car; in 2008, 600,000 Mustangs were sold at an average price of $19,500 per car. These statements: A. suggest that the demand for Mustangs decreased between 2007 and 2008. B. suggest that the supply of Mustangs must have increased between 2007 and 2008. C. suggest that the demand for Mustangs increased between 2007 and 2008. D. constitute an exception to the law of demand in that they suggest an upsloping demand curve.

C. suggest that the demand for Mustangs increased between 2007 and 2008.

Based on the concept of price elasticity of demand, which of the following cases is most likely to occur?

Colleges charging lower tuition for low-income students

Which of the following is not an example of pricing based on group differences in elasticity of demand?

Cash rebates for purchases of automobiles

Refer to the above diagrams. The case of substitute goods is represented by figure:

D

Refer to the above diagram, in which Sv1 and Dv1 represent the original supply and demand curves and Sv2 and Dv2 the new curves. In this market:

Demand has increased and equilibrium price has increased

Which type of good is most adversely affected by recessions?

Goods for which the income elasticity coefficient is relatively low or negative

Suppose the income elasticity of demand for toys is +2.00. This means that:

a 10 percent increase in income will increase the purchase of toys to 20 percent

Amanda buys a ruby for $330 for which she was willing to pay $340. The minimum acceptable price to the seller, Tony, was $140. Amanda experiences:

a consumer surplus of $10 and Tonya experiences a producer surplus of $190

Refer to the above diagram, in which Sv1 and Dv1 represent the original supply and demand curves and Sv2 and Dv2 the new curves. In this market:

an increase in demand has been more than offset by an increase in supply

Assuming competitive markets with typical supply and demand curves, which of the following statements is correct?

an increase in demand with no change in supply will result in an increase in sales

Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity?

an increase in supply

Refer to the above. An increase in the price of a product that is a close substitute for X will:

increase D, increase P, and increase Q

Assume in a competitive market that price is initially above the equilibrium level. We can predict that price will:

decrease, quantity demanded will increase, and quantity supplied will decrease

Refer to the above. An increase in the tastes and preferences for X will:

increase D, increase P, and increase Q

The larger the positive cross elasticity coefficient of demand between products X and Y, the:

greater their substitutability

Assuming conventional supply and demand curves, changes in the determinants of supply and demand will:

in all likelyhood alter both equilibrium price and quantity

Suppose that in each of four successive years producers sell more of their product at lower prices. This could be explained:

in terms of a stable demand curve and increasing supply

Refer to the above. An increase in income, if X is a normal good, will

increase D, increase P, and increase Q

Refer to the above. An improvement in the technology used to produce X will:

increase S, decrease P, and increase Q

Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. Other things equal, a shift of the supply curve from Sv0 to Sv1 might be caused by an:

increase in the wage rates paid to laborers employed in the production of X

An antidrug policy which reduces the supply of heroin might:

increase street crime because the addict's demand for heroin is highly inelastic

Refer to the above information. Over the $7-$5 price rang, demand is:

inelastic

Assume that a 3 percent increase in income across the economy produces a 1 percent decline in the quantity demanded of good X. The coefficient of income elasticity of demand for good X is:

negative and therefore X is an inferior good.

Suppose that a 20 percent increase in the price of normal good Y causes a 10 percent decline in the quantity demanded of normal good X. The coefficient of cross elasticity of demand is:

negative and therefore these goods are compliments

The supply curve of a one-of-a-kind original painting is:

perfectly inelastic

If the supply and demand curves for a product both decrease, then equilibrium:

quantity must decline, but equilibrium price may rise, fall, or remain the same

If we say that a price is too high to clear the market, we mean that:

quantity supplied exceeds quantity demanded

Camille's Creations and Julia's Jewels both sell beads in a competitive market. If at the market price of $5, both are running out of beads to sell (they can't keep up with the quantity demanded at that price), then we would expect both Camille's and Julia's to:

raise their price and increase their quantity supplied

Data from the registrar's office at Gigantic State University indicate that over the past twenty years tuition and enrollment have both increased. From this information we can conclude that:

school-age population, incomes, and preferences for education have changed over the twenty-year period

If price is above the equilibrium level, competition among sellers to reduce the resulting:

surplus will increase quantity demanded and decrease quantity supplied

Suppose that when income rises from $28,000 to $30,000 per year, your purchases of X increase from 4 to 5 units because of that income increase. Thus:

the demand for X is elastic with respect to income

Farmers often find that large bumper crops are associated with declines in their gross incomes. This suggests that:

the price elasticity of demand for farm products is less that one

Which of the following goods will least likely suffer a decline in demand during a recession?

toothpaste