ECON 202 Tests

If the demand for a product is perfectly inelastic, a decrease in the price of the product will decrease total revenue. will increase total revenue. will not change total revenue. any of the above are possible.

will decrease total revenue.

Which of the following was not mentioned in the video as a driver of economic growth? Process innovation Product innovation Increased demand Capital investment

Increased demand

Because the demand for illegal drugs is inelastic and the supply is elastic, policies that reduce supply in the illegal drug market do not reduce equilibrium quantity very much. True False

True

An item has utility for a consumer if it is scarce. is something everyone else wants. has a high price. generates enjoyment or satisfaction.

generates enjoyment or satisfaction.

The buyers of a good will want to purchase it as long as their willingness to pay for the good is: greater than zero. equal to zero. less than the price. greater than or equal to the price.

greater than or equal to the price.

The larger the share of a good in a consumer's budget, holding everything else constant, the more price inelastic is a consumer's demand. more price elastic is a consumer's demand. more unit elastic is a consumer's demand. more vertical is a consumer's demand curve.

more price elastic is a consumer's demand.

The best alternative use of a resource is referred to as its: market price. opportunity cost. marginal utility. sunk cost.

opportunity cost.

If quantity of tea is measured on the horizontal axis and quantity of coffee is measured on the vertical axis, an increase in the price of coffee will cause the budget constraint to: pivot leftward (pivot in) along the horizontal axis. pivot rightward (pivot out) along the horizontal axis. pivot leftward (pivot in) along the vertical axis. pivot rightward (pivot out) along the vertical axis.

pivot leftward (pivot in) along the vertical axis.

Jonah lives in a small town where there is only one Mexican restaurant. Which of the following is likely to be true about the price elasticity of demand for meals at the Mexican restaurant? Demand is likely to be relatively inelastic. Demand is likely to be relatively elastic. Demand is likely to be perfectly elastic. Demand is likely to be perfectly inelastic.

Demand is likely to be relatively inelastic.

Which of the following statements about the price elasticity of demand is correct? The absolute value of the elasticity of demand ranges from zero to one. Demand is more elastic in the long run than it is in the short run. The elasticity of demand for a good in general is equal to the elasticity of demand for a specific brand of the good. Demand is more elastic the smaller the percentage of the consumer's budget the item takes up.

Demand is more elastic in the long run than it is in the short run.

Scarcity is defined as the situation that exists when the quantity demanded for a good is greater than the quantity supplied. True False

False

Which of the following statements is true? The more narrowly we define a market, the more elastic the demand for a product will be. In general, if a product has few substitutes it will have an elastic demand. The demand curve for a necessity is more elastic than the demand curve for a luxury. The more time that passes the more inelastic the demand for a product becomes.

The more narrowly we define a market, the more elastic the demand for a product will be.

If opportunity costs are constant, the production possibilities frontier would be graphed as a negatively sloped curve bowed in toward the origin. a positively sloped straight line. a negatively sloped straight line. a ray from the origin.

a negatively sloped straight line.

A model refers to: a set of facts established by observation and measurement. a perfect replica of reality. facts, measurements, or statistics that describe the world. a simplified description, or representation, of reality.

a simplified description, or representation, of reality.

Consider the following statements: a. Car owners purchase more gasoline from a gas station that sells gasoline at a lower price than other rival gas stations in the area. b. Banks do not take steps to increase security since they believe it is less costly to allow some bank robberies than to install expensive security monitoring equipment. c. Firms produce more of a particular DVD when its selling price rises. Which of the above statements demonstrates that economic agents respond to incentives? a only b only c only a and b a, b, and c

a, b, and c

As a consumer spends a larger share of his income on a particular good, the price elasticity of demand for that good: decreases. initially decreases then increases. increases. remains the same.

increases

If demand is perfectly elastic, the absolute value of the price elasticity coefficient is one. zero. infinity. equal to the absolute value of the slope of the demand curve.

infinity

If the price of the good measured along the vertical axis increases without a change in the price of the good measured along the horizontal axis, the consumer's budget constraint: shifts to the left. pivots rightward (pivot out) without a change in the intercept on the horizontal axis. shifts to the right. pivots leftward (pivot in) without a change in the intercept on the horizontal axis.

pivots leftward (pivot in) without a change in the intercept on the horizontal axis.

If, for a given percentage decrease in price, quantity supplied decreases by a proportionately smaller percentage, then supply is unit elastic. elastic. perfectly elastic. relatively inelastic.

relatively inelastic.

When there few close substitutes available for a good, demand tends to be perfectly inelastic. perfectly elastic. relatively elastic. relatively inelastic.

relatively inelastic.

The substitution effect of an increase in the price of peaches is: the change in the supply for peaches that results when the price of peaches increases. the change in the quantity of peaches demanded that results from the effect of the change in the price of peaches on the consumer's purchasing power. the change in the quantity demanded that results from a change in the price of peaches, making peaches more expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power. None of the Above.

the change in the quantity demanded that results from a change in the price of peaches, making peaches more expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power.

When demand is elastic, a fall in price causes total revenue to rise because the demand curve shifts. when price falls, quantity sold increases so total revenue automatically rises. the increase in quantity sold is large enough to offset the lower price. the percentage increase in quantity demanded is less than the percentage fall in price.

the increase in quantity sold is large enough to offset the lower price.

The slope of a demand curve is not used to measure the price elasticity of demand because the measurement of slope is sensitive to the units chosen for price and quantity. the slope of a line cannot have a negative value. the slope of the demand curve does not tell us how much quantity changes as price changes. the slope of a linear demand curve is not constant.

the measurement of slope is sensitive to the units chosen for price and quantity.

If the demand for cell phone service is inelastic, then the percentage change in quantity demanded is equal to the percentage change in price . the percentage change in quantity demanded is greater than the percentage change in price (in absolute value). the quantity demanded does not change in response to changes in price. the percentage change in quantity demanded is less than the percentage change in price (in absolute value).

the percentage change in quantity demanded is less than the percentage change in price (in absolute value).

Elasticity is: the difference of the percentage change in two variables. the ratio of the percentage change in two variables. the sum of the percentage change in two variables. the product of the percentage change in two variables.

the ratio of the percentage change in two variables.