Econ Test 1

Refer to Figure 19.2. The total utility of two apples is

11 Units

Use the indifference curves and the budget lines in Figure 19.3 to answer the indicated question. Assume the price of Y is $1 per unit. If the price per unit of good X is $3, the consumer would maximize utility by consuming

21 units of Y.

Suppose computer prices at an office supply store fall from $1,000 to $900 and as a result the quantity demanded of typewriters decreases from 40 to 20 per month. The cross-price elasticity of demand is closest to

6.3

Which of the following is used to depict all combinations of goods that are affordable with a given income and given prices?

A budget constraint.

If a product has a high marginal utility, then

A consumer is willing to pay a high price for it.

Which of the following is an example of Government failure?

All of the above. Required use of pollution control technology that is obsolete, Bureaucratic delays, and Inefficient incentives

Suppose Caesar allocates his entire budget to the purchase of soft drinks and chips. The marginal utility of the last bottle of soft drink purchased is 12 utils, and each bottle costs $1.20. The marginal utility of the last bag of chips purchased is 8 utils, and each bag costs $1. In order to maximize his utility, Caesar should

Buy more soft drinks and fewer chips since he gets more marginal utility per dollar from soft drinks.

A decrease in the price of bubble gum below equilibrium will

Cause a shortage of bubble gum.

If Carmen's Coffee Company wants to increase total revenue and the price elasticity of demand is 0.43, the company should

Increase the price of its coffee.

Use the indifference curves and the budget lines in Figure 19.3 to answer the indicated question. Assume that the price of both goods X and Y are $1 each. Point D on the graph.

Is affordable but does not yield the highest utility possible.

Greater regulation to correct the imbalances in the economy, as well government intervention to maintain full employment, was associated primarily with the work of

John Maynard Keynes.

The federal government placed an upper limit on human organ prices, which is called a

Price ceiling.

Any point on the budget constraint

Represent a combination of two goods that are affordable.

A shift in supply is defined as a change in

Supply because of a change in a determinant of supply.

Which of the following is not held constant when considering a shift in the demand for pizza?

The price of pizza.

Refer to Table 19.3. If Michael has $28 dollars to spend, why will three colas ($8) and four pretzels ($4) not be optimal?

This combination is not affordable.

For inferior goods, when incomes rise the demand for these goods falls.

True

Ceteris paribus, if buyers expect the price of airline tickets to fall in the future, then right now there should be

Ceteris paribus, if buyers expect the price of airline tickets to fall in the future, then right now there should be

Ceteris paribus, a consumer that purchases a sports car must consider the price of gasoline because these goods are

Complements in consumption.

Ceteris paribus, for the owner of a sawmill, lumber and the sawdust that go into particle board are

Complements in production; by-products.

A consumer can purchase a product that is outside her or his budget constraint if it is on a higher indifference curve.

False

If the prices of the factors used to produce a good change, both the demand curve and the supply curve of the good will shift.

False

The market mechanism satisfies all consumer desires and maximizes business profits.

False

The table below shows Tom's demand schedule for web tutoring before and after winning the lottery. Use the data provided to answer the following questions:

Just check the graph.

Sam owns a taco restaurant, and he conducted a consumer survey that indicates that the price elasticity of demand for his restaurant is 3.5. You would advise Sam to

Lower his price to increase revenue.

The local baseball team owner hires you to help maximize the team's profits. You are told that costs are constant because enough help is always hired for a full stadium, so assume your task is to maximize revenues from ticket sales. Your advice to the owner should be to

Set the price of tickets at the unitary elasticity price.

When the market mechanism is allowed to operate freely, prices will determine

The mix of output to be produced, the resources to be used in the production process, and for whom the output is produced.

If two goods are substitute goods,

The percentage change in quantity demanded for good X will fall if there is a reduction in price of good Y.

Which of the following can change without shifting demand, ceteris paribus?

The price of the good itself.

In Table 19.2, diminishing marginal utility occurs

With all units after the first.

The market mechanism

Works because prices serve as a means of communication between consumers and producers.