Microeconomics Test 2 Review

Using the midpoint formula, what would be price elasticity of demand for a gallbladder operation if the number of operations fell from 6,000 to 4,000 per week after its price increased from $6,000 to $10,000?

0.80

In Exhibit 5-1, between points a and b, the price elasticity of demand measures:

1.0

If income rises from $100,000 to $110,000 for a year and as a result the quantity of new boats demanded rises from 100 to 120 boats for the year, the value of the income elasticity of demand for boats is closest to:

1.9

The marginal physical product of the third unit of labor in Figure 6.1 is:

12.0

If Michael has $40 to spend on cola and pretzels, what is his maximum utility possible?

174

Assume the price of cola is $8 per unit and the price of pretzels if $4 per unit. Units of Cola TU of Cola MU of Cola 1 40 40 2 ______ 32 3 96 24 4 112 _____ 5 124 _____ Units of Pretzels TU of pretzels MU of pretzels 1 30 30 2 _______ 10 3 66 16 4 78 ______ 5 84 ______ Suppose Michael has $28 to spend on cola and pretzels. What combination should he purchase in order to maximize his utility?

2 Colas and 3 Pretzels

Suppose the Pleasant Corporation Cuts the price of its American Girl dolls by 10 percent, and as a result, the quantity of the dolls sold increased by 25 percent. This indicates that the price elasticity of demand for the dolls over this range is:

2.5

The total utility when two unites are consumed is:

24

If the price elasticity of demand for football tickets is estimated to be 4.5, then a 10 percent increase in football ticket prices would be expected to cause a:

45 percent decrease in quantity demanded

Workers: Pizzas: 0 0 1 4 2 10 3 15 4 18 5 19 Exhibit 6-1 shows the change in the production of pizzas as more workers are hired. The marginal product of the second employee equals:

6

Which of the following would most likely have a own price-elasticity coefficient greater than 1?

Airline travel in the long run.

Variable inputs are defined as any resource that:

Can be changed as output changes.

If price is reduced and demand is price inelastic, then total revenue will:

Decrease

Consider the market for automibles. IF a dealer cuts prices 10 percent and finds he sells 20 percent more cars, then demand for autos is _____ and his total revenue will ____.

Elastic; rise

Suppose the income elasticity of demand for used jet skis is 3.5. If the level of income decreases by 1 percent, the number of used jet skits sold will, ceteris paribus:

Fall by 3.5 percent

Indicate if the following statement is True or False: If the percentage change in the quantity demanded of a good is less than the percentage change in price, price elasticity of demand is elastic:

False

Indicate if the following statement is True or False: The cross-price elasticity of demand for substitute goods must be greater than one.

False

Indicate if the following statement is True or False: If marginal utility is positive, then total utility must be falling.

False

Quantity Consumed: Total Utility: Marginal Utility: 1 15 15 2 ________ 9 3 30 _________ 4 _________ 3 Indicate if the following statement is True or False: The marginal utility of the third unit is 5.

False

The cross price elasticity between two products has been measured at 2.0. If the price of the first product is increased by 8%, demand for the second product will

Increase by 16%

A completely elastic demand curve has an elasticity coefficient of:

Infinity

The additional pleasure or satisfaction from a good declines as more of it is consumed in a given period. This is the definition of the:

Law of diminishing marginal utility

The law of diminishing returns states that beyond some point, the:

Marginal physical product of a variable input diminishes as more of that input is used.

A consumer maximizes total utility from a given amount of income when the:

Marginal utility per dollar spent on each good is the same.

MP3 players and MP3 files are complementary goods. The cross-price elasticity of demand between MP3 players and MP3 files is expected to be:

Negative

The price elasticity of demand for a vertical demand curve is:

Perfectly inelastic

The price elasticity of demand for gasoline measures the:

Responsiveness of customers to changes in the price of gasoline

Utility refers to the:

Satisfaction obtained from a good or service.

The period in which at least one input is fixed in quantity is the:

Short run

Marginal utility for a good is computed as:

The change in total utility divided by the change in quantity.

Jose goes to an all-you-can-eat buffet at a Chinese restaurant and consumes three plates of food. He does not go back for a fourth plate of food because:

The marginal utility of the fourth plate would be zero or even negative.

Which of the following best describes a production function?

The relationship between the maximum amounts of output a firm can produce and various quantities of inputs.

Indicate if the following statement is True or False: If the quantity demanded increases by 20 percent in response to a 10 percent decrease in price, then price elasticity of demand is elastic.

True

Indicated if the following statement is True or False: When the marginal physical product of labor is positive, then total output must be increasing.

True