econ test 2

what kind of factor is capital?

fixed

Suppose that Tom bought a bike from Helen for $195. If Helen's reservation price was $185, and Tom's reservation price was $215, the seller's surplus from this transaction was:

$10

When Acme Dynamite produces 250 units of output, its variable cost is $2,000, and its fixed cost is $500. It sells each unit of output for $25. When Acme Dynamite produces 250 units of output, its profit is:

$3,750

If the quantity demanded of a good is Q when the price for the good is P, the price elasticity of demand for that good at that point is:

(P/Q) × (1/slope)

If the price of cheese falls by 1 percent and the quantity demanded rises by 3 percent, then the price elasticity of demand for cheese is equal to:

3

If the price elasticity of demand for pineapples is 0.75, then a 4% increase in the price of pineapples will lead to a:

3% decrease in the quantity of pineapples demanded.

Suppose an increase in the price of hamburger from $3 to $4 leads to an increase in quantity supplied from 100 units to 150 units. At the original price, the price elasticity of supply for hamburgers is ______ so supply is ______.

3/2; elastic

According to the law of demand, when the price of shoes ______ people will consume ______ shoes.

falls, more

Suppose the equilibrium price and quantity of ketchup fall. The most likely explanation for these changes is:

a decrease in the demand for ketchup

Suppose a new study highlights the health benefits of eating bacon. At the same time, suppose the cost of producing bacon falls. Given these changes, you should expect to see:

an increase in the equilibrium quantity of bacon, but it's hard to say what will happen to the equilibrium price

As the price of flour (an input in the production of cookies) increases, firms that produce cookies will:

decrease the supply of cookies

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

An increase in both the equilibrium price and the equilibrium quantity of DVD players is best explained by a(n):

increase in the demand for DVD players

Suppose that the equilibrium price of apples decreases and the equilibrium quantity of apples increases. This is best explained by a(n):

increase in the supply of apples

If demand is ______ with respect to price, a price increase will ______ total revenue.

inelastic; increase

Demand tends to be ______ in the short run than in the long run.

less elastic

The demand for a good is inelastic with respect to price if the price elasticity of demand is:

less than one

Suppose you believe that plaid flannel shirts are an inferior good, and want to test this with economic data. You expect to find that the income elasticity for plaid flannel shirts is:

less than zero

All else equal, the price elasticity of demand for small-budget items such as soap tends to be ______ than the price elasticity of demand for big-ticket items such as flat-screen TVs.

lower

Antony's Pizza uses the same dough, sauce, and cheese for pizza and calzones. When the price of pizza is low Antony produces more calzones. For Antony, the supply of pizza is ______ compared to the supply at a pizza restaurant that does not serve calzones.

more price elastic

Do complements have a positive or negative cross price elasticity?

negative

If the demand for salad dressing increases when the price of lettuce decreases, the cross-price elasticity of demand between salad dressing and lettuce will be ______ because these two goods are ______.

negative; complements

do supplements have a positive or negative price elasticity

positive

where does the law of diminishing returns apply

short run

Determinates of Elasticity

substitution options, budget share, time

When Taylor raised the price of earrings at Taylor's Boutique, her total revenue from selling earrings increased. This suggests that:

the demand for Taylor's earrings at the original price was inelastic.

Assume the demand for sugar decreases and the supply of sugar increases. Which of the following outcomes is certain to occur?

the equilibrium price of sugar will fall

Which of the following is the most likely to be a fixed factor of production at a farm?

the land on which the farm is located

short run

the period of time during which at least one of a firm's inputs is fixed

long run

the period of time in which all inputs are variable

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.

what kind of factor is labor

variable