Microeconomics Exam1

Refer to the figure below. If Laura and Chris are the only two consumers in this market then at a price of $2.50 per pound, the market demand for hamburger is:

4.5 pounds per wk

The following graph depicts demand. The price elasticity of demand at point A is:

5/2

If consumers completely cease purchasing a product when its price increases by any amount, then demand is:

perfectly elastic

When calculating price elasticity of demand, if the percentage change in price is negative, then the percentage change in quantity demanded is typically:

postiive

When Joe's Gas raises its price for regular unleaded gasoline, total revenue from regular unleaded gas falls to zero. It must be the case that

the demand for Joe's regular unleaded gasoline is perfectly elastic.

If pencils and paper are complements for most consumers, then if the price of paper increases, you would expect:

the equilibrium price and quantity of pencils to fall

The tendency for consumers to purchase more of a good or service as its price falls is captured by

the law of demand

The slope of the demand curve (ignoring the negative sign) is:

0.5

Fran runs a doughnut shop in a tiny 3-person town. The table below shows the quantity demand by the three townspeople at various prices. Price Per Doughnut Quantity Demanded by Al Quantity Demanded by Betty Quantity Demanded by Carol 10 cents 10 4 6 25 cents 9 2 5 35 cents 7 1 5 50 cents 5 0 4 When the price of a doughnut is 25 cents, what is the market demand for doughnuts?

16 dougnuts

If 20% increase in the price of a good leads to a 60% decrease in the quantity demanded, then what is the price elasticity of demand

3

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 total economic surplus from this transaction was:

30

What might cause a demand curve to shift to the right?

An increase in the price of a substitute.

Assume that Joe is willing to produce a hamburger for $1, and Mary is willing to pay $3 for a hamburger. Which of the following is true?

Joe and Mary can make a mutually beneficial exchange.

Suppose you observe a decrease in the equilibrium price and quantity of corn. Of the options listed below, this is best explained by:

a fall in consumer income assuming corn is a normal good.

The responsiveness of the quantity demanded of one good to a change in the price of a different good is measured by the:

cross price elasticity of demand

If two products are substitutes, then the:

cross-price elasticity of demand between them will be positive.

If the price elasticity of demand for a good is greater than one, then the demand for that good is:

elastic

MC Qu. 97 The following graph depicts... The following graph depicts demand. At point A, demand is:

elastic

Suppose that when the price of oranges is $3 per pound, the quantity demanded is 4.7 tons per day and the quantity supplied is 3.9 tons. In this case:

excess demand will lead the price of oranges to rise

Suppose demand decreases, but there is no change in supply. As the market reaches its new equilibrium:

excess supply will lead the price to fall.

Shelly purchases a leather purse for $400. One can infer that:

her reservation price was at least $400.

If the local slaughterhouse gives off an unpleasant stench, then the equilibrium quantity of meat will be _____ the quantity that maximizes total economic surplus.

higher than

If the price of textbooks increases by one percent and the quantity demanded falls by one-half percent, then demand for textbooks is:

inelastic

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

inelastic,, increase

Suppose two demand curves intersect and so have a point in common. At that point, demand shown by the steeper curve will be _______ the flatter curve.

less elastic then

If the demand for a good decreases as income decreases, then the good is a(n):

normal good

If most consumer goods and services are ______, then most income elasticities are ______.

normal... positive

The price elasticity of demand for a good measures the responsiveness of:

quantity demanded to a one percent change in price of that good.

The entire group of buyers and sellers of a particular good or service makes up:

the market

When a market is in equilibrium:

there is neither excess demand nor excess supply.

Refer to the figure below. If the price of a latte increases from $2.00 to $2.50:

total expenditure would decrease.

The price of bananas will increase in response to:

✓ an excess demand for bananas.

Suppose that the market price for hot dogs sold by street vendors has just risen from $4.50 to $5.00, and that in response Curly has now begun operating a hot dog cart. We can assume that Curly's reservation price for hot dogs is:

✓ greater than $4.50 but no more than $5.00.

Suppose that if the price of plane tickets increased, more people would choose to travel by train. If this happened, you would know that:

✓ the cross-price elasticity between plane tickets and train tickets is positive.