Unit 2 Test (no graphs)

Which of the following explains why a decrease in the price of a normal good will lead to an increase in the quantity demanded of the good? A) lower price will increase the consumers purchasing power B) a lower price will increase consumers marginal utility C) a lower price will increase demand for the good D) a lower price will increase demand for substitute goods. A lower price will decrease demand for complementary goods E) a lower price will decrease the demand for complementary goods

A

Which of the following will tend to make the demand for a product more elastic? A) new firms which produce similar products enter the industry B) a change in taste and preferences makes the product more desirable C) the product is necessary for use with a complement D) production of the product is protected by a patent E) production cost of the product decreases

A

An increase in the supply of coffee would be caused by A) decrease in the price of cream, which is a complement coffee B) a decrease in the cost of labor used to produce coffee C) an increase in consumer income D) an increase in the demand for coffee E) an increase in the price of coffee

B

Assume that consumers consider popcorn and pretzels to be substitutes. A significant decrease in the supply of popcorn will affect the pretzel market by A) increasing the demand for pretzels and therefore the supply of pretzels B) increasing the demand for pretzels and therefore the price of pretzels C) decreasing the demand for pretzels and therefore the price of pretzels D) increasing the supply of pretzels and therefore the price of pretzels E) decrease in the supply of pretzels and therefore the price of pretzels

B

Assume that ice cream is a normal good. If the price of ice cream decreases, the substitution effect and the income effect will lead to which of the following changes in ice cream consumption? A) substitution effect: increase income effect: decrease B) substitution effect: increase income effect: increase C) substitution effect: increase income effect: no change D) substitution effect: decrease income effect: increase E) substitution effect: decrease income effect: no change

B

City transit authority increases the price of subway and bus tickets from $1.25 to $1.50. If the demand for these tickets is price inelastic, the number of people riding the buses and subways in the cities revenues will most likely change in which of the following ways? A) number of people riding: increase city's revenues: increase B) number of people riding: decrease city's revenues: increase C) number of people riding: decrease city's revenues: decrease D) number of people riding: decrease city's revenues: remain constant E) number of people riding: remain constant city's revenues: increase

B

The market for goldfish is perfectly competitive. From year 1 to year 2, both the price and the quantity of goldfish sold increase. This is most likely caused by A) an increase in the supply B) a decrease in the supply C) an increase in the demand D) a decrease in the demand E) a decrease in both the demand and supply

B

Given an increase in the price of material K - which is an input used to produce good X - and an increase in the price of good Y - which is a substitute for good X - which of the following will definitely occur? A) the equilibrium price of good X will decrease. B) the equilibrium price of good X will increase. C) the equilibrium quantity of a good X will be unaffected. D) The equilibrium quantity of good X will increase E) the equilibrium quantity of good X will decrease.

C

If a severe drought destroys a significant portion of the peanut crop in peanut farmers revenues increased, which of the following is true over the observed range of prices? A) the demand for peanuts must be unit price elastic B) the demand for peanuts must be price elastic C) the demand for peanuts must be price inelastic D) the supply of peanuts must be price inelastic E) the supply of peanuts must be price elastic

C

If cotton is used to produce towels, an increase in the price of cotton will result in which of the following changes in the towel market? (A) A decrease in the demand for towels, which leads to a shortage of towels followed by an upward pressure on the price of towels (B) A decrease in the demand for towels, which leads to a surplus of towels followed by a downward pressure on the price of towels (C) a decrease in the supply of towels, which leads to a shortage of towels followed by upward pressure on the price of towels (D) an increase in the supply of towels, which leads to a surplus of towels followed by downward pressure on the price of towels (E) an increase in both the demand and supply of towels, which leads to a surplus of towels followed by upward pressure on the price of towels

C

Promoters of a rock group know that if they charged eight dollars a ticket, 400 people would buy tickets for a concert, and if they charged four dollars a ticket, 800 people would buy tickets. Over this price range, the demand for concert tickets for the rock group is A) elastic B) inelastic C) unit elastic D) perfectly elastic E) perfectly inelastic

C

The Cross-price elasticity of demand between good X and good Z measures the percentage change in the quantity demanded of a good X in response to a percentage change in A) the price of good X B) income C) the price of goods Z D) the supply of a good Z E) total expenditures on good Z

C

The difference between what consumers are willing to pay for units of the good and the price consumers actually pay for units of the good is called A) marginal utility B) producer surplus C) consumer surplus D) economic rent E) a positive externality

C

Assuming a downward sloping demand curve and an upward sloping supply curve, which of the following will occur as a result of an increase in the sales tax on a good? A) supply will increase. B) demand will increase. C) quantity supplied will increase. D) quantity demanded will decrease. E) the price paid by consumers will decrease

D

Moving from left to right along the downward sloping when your demand curve, price elasticity varies in which of the following ways? A) first unit elastic, then any inelastic throughout B) first unit elastic, then elastic throughout C) first inelastic, then unit elastic throughout D) first elastic, then unit elastic, then finally inelastic E) first inelastic, then you need elastic, and finally elastic

D

According to the law of demand, an increase in the price of grape juice will result in (a) a rightward shift in the demand curve for grape juice (b) a leftward shift in the demand curve for grape juice (c) a decrease in the demand for orange juice, a substitute (d) a decrease in the quantity of grape juice demanded (e) an increase in the quantity of grape juice supplied

D

Assume that people like onions on their hamburgers. If the supply of hamburgers decrease, The demand for onions were most likely A) remain unchanged because hamburgers and onions are different goods B) increased because hamburgers and onions are substitutes C) increase because hamburgers and onions are complements D) decrease because hamburgers and onions are complements E) decrease because hamburgers and onions are substitutes

D

Which of the following changes in the demand for and the supply of a good would necessarily lead to a decrease in the equilibrium quantity of the good in the market? A) demand: increase supply: decrease B) demand: increase supply: no change C) demand: decrease supply: increase D) demand: decrease supply: decrease E) demand: no change supply: increase

D

Which of the following is true if consuming one unit of a good yields 100 utils and consuming the second unit of the good increases satisfaction by 20 utils? A) the marginal utility of the first unit is 20 B) the marginal utility of the second unit is 80 C) the marginal utility of the second unit is 120 D) the total utility of consuming two units is 120 E) the total utility of consuming one unit is greater than the total utility of consuming two units

D

Which of the following will cause the supply curve for shoes to shift to the right? A) an increase in the price of socks, assuming that shoes and socks are complements B) a decrease in the price of sandals, assuming that the shoes and sandals are substitutes C) an increase in the wage of shoeworkers D) an increase in the number of firms producing shoes E) a decrease in income of consumers, assuming that shoes are normal goods

D

If a government illuminated and effective price floor in a market, all of the following would occur except A) the surplus would be eliminated B) the price would decrease C) the quantity supplied with decrease D) the quantity demanded would increase E) the supply of the good would increase

E