ECON Exam 2 Practice

Gigantic State University raises tuition for the purpose of increasing its revenue so that more faculty can be hired. GSU is assuming that the demand for education at GSU is: A. decreasing. B. relatively elastic. C. perfectly elastic. D. relatively inelastic

relatively inelastic.

The supply curve of antique reproductions is: A. relatively elastic. B. relatively inelastic. C. perfectly inelastic. D. unit elastic

relatively elastic.

The demand for a luxury good whose purchase would exhaust a big portion of one's income is: A. perfectly price inelastic. B. perfectly price elastic. C. relatively price inelastic. D. relatively price elastic.

relatively price elastic.

The demand for a necessity whose cost is a small portion of one's total income is: A. perfectly price inelastic. B. perfectly price elastic. C. relatively price inelastic. D. relatively price elastic.

relatively price inelastic.

Suppose the price elasticity coefficients of demand are 1.43, 0.67, 1.11, and 0.29 for products W, X, Y, and Z respectively. A 1 percent decrease in price will increase total revenue in the case(s) of: A. W and Y. B. Y and Z. C. X and Z. D. Z and W.

W and Y

A supply curve that is a vertical straight line indicates that: A. production costs for this product cannot be calculated. B. the relationship between price and quantity supplied is inverse. C. a change in price will have no effect on the quantity supplied. D. an unlimited amount of the product will be supplied at a constant price.

a change in price will have no effect on the quantity supplied.

The main determinant of elasticity of supply is the: A. number of close substitutes for the product available to consumers. B. amount of time the producer has to adjust inputs in response to a price change. C. urgency of consumer wants for the product. D. number of uses for the product.

amount of time the producer has to adjust inputs in response to a price change.

The law of diminishing marginal utility states that: A. total utility is maximized when consumers obtain the same amount of utility per unit of each product consumed. B. beyond some point additional units of a product will yield less and less extra satisfaction to a consumer. C. price must be lowered to induce firms to supply more of a product. D. it will take larger and larger amounts of resources beyond some point to producesuccessive units of a product.

beyond some point additional units of a product will yield less and less extra satisfaction to a consumer.

The price elasticity of demand coefficient measures: A. buyer responsiveness to price changes. B. the extent to which a demand curve shifts as incomes change. C. the slope of the demand curve. D. how far business executives can stretch their fixed costs.

buyer responsiveness to price changes.

Marginal utility is the: A. sensitivity of consumer purchases of a good to changes in the price of that good. B. change in total utility obtained by consuming one more unit of a good. C. change in total utility obtained by consuming another unit of a good divided by thechange in the price of that good. D. total utility associated with the consumption of a certain number of units of a gooddivided by the number of units consumed

change in total utility obtained by consuming one more unit of a good.

The theory of consumer behavior assumes that: A. consumers behave rationally, attempting to maximize their satisfaction. B. consumers have unlimited money incomes. C. consumers do not know how much marginal utility they obtain from successive unitsof various products. D. marginal utility is constant.

consumers behave rationally, attempting to maximize their satisfaction.

If the demand for farm products is price inelastic, a good harvest will cause farm revenues to: A. increase. B. decrease. C. be unchanged. D. either increase or decrease, depending on what happens to supply.

decrease

The price elasticity of demand for beef is about 0.60. Other things equal, this means that a 20 percent increase in the price of beef will cause the quantity of beef demanded to: A. increase by approximately 12 percent. B. decrease by approximately 12 percent. C. decrease by approximately 32 percent. D. decrease by approximately 26 percent.

decrease by approximately 12 percent.

The total-revenue test for elasticity: A. is equally applicable to both demand and supply. B. does not apply to demand because price and quantity are inversely related. C. does not apply to supply because price and quantity are directly related. D. applies to the short-run supply curve, but not to the long-run supply curve.

does not apply to supply because price and quantity are directly related.

Price elasticity of demand is generally: A. greater in the long run than in the short run. B. greater in the short run than in the long run. C. the same in both the short run and the long run. D. greater for "necessities" than it is for "luxuries."

greater in the long run than in the short run.

If the demand for bacon is relatively elastic, a 10 percent decline in the price of bacon will: A. decrease the amount demanded by more than 10 percent. B. increase the amount demanded by more than 10 percent. C. decrease the amount demanded by less than 10 percent. D. increase the amount demanded by less than 10 percent.

increase the amount demanded by more than 10 percent.

The price of product X is reduced from $100 to $90 and, as a result, the quantity demanded increases from 50 to 60 units. Therefore demand for X in this price range: A. has declined. B. is of unit elasticity. C. is inelastic. D. is elastic.

is elastic

The utility of a good or service: A. is synonymous with usefulness. B. is the satisfaction or pleasure one gets from consuming it. C. is easy to quantify. D. rarely varies from person to person.

is the satisfaction or pleasure one gets from consuming it.

The basic formula for the price elasticity of demand coefficient is: A. absolute decline in quantity demanded/absolute increase in price. B. percentage change in quantity demanded/percentage change in price. C. absolute decline in price/absolute increase in quantity demanded. D. percentage change in price/percentage change in quantity demanded.

percentage change in quantity demanded/percentage change in price.

We would expect the cross elasticity of demand between Pepsi and Coke to be: A. positive, indicating normal goods. B. positive, indicating inferior goods. C. positive, indicating substitute goods. D. negative, indicating substitute goods.

positive, indicating substitute goods

Marginal utility can be: A. positive, but not negative. B. positive or negative, but not zero. C. positive, negative, or zero. D. decreasing, but not negative.

positive, negative, or zero.

In which of the following instances will total revenue decline? A. price rises and supply is elastic B. price falls and demand is elastic C. price rises and demand is inelastic D. price rises and demand is elastic

price rises and demand is elastic

The formula for cross elasticity of demand is percentage change in: A. quantity demanded of X/percentage change in price of X. B. quantity demanded of X/percentage change in income. C. quantity demanded of X/percentage change in price of Y. D. price of X/percentage change in quantity demanded of Y

quantity demanded of X/percentage change in price of Y.

Total utility may be determined by: A. multiplying the marginal utility of the last unit consumed by the number of units consumed. B. summing the marginal utilities of each unit consumed. C. multiplying the marginal utility of the last unit consumed by product price. D. multiplying the marginal utility of the first unit consumed by the number of units consumed.

summing the marginal utilities of each unit consumed.

Farmers often find that large bumper crops are associated with declines in their gross incomes. This suggests that: A. farm products are normal goods. B. farm products are inferior goods. C. the price elasticity of demand for farm products is less than 1. D. the price elasticity of demand for farm products is greater than 1.

the price elasticity of demand for farm products is less than 1.

Cross elasticity of demand measures how sensitive purchases of a specific product are to changes in: A. the price of some other product. B. the price of that same product. C. income. D. the general price level

the price of some other product.

The concept of price elasticity of demand measures: A. the slope of the demand curve. B. the number of buyers in a market. C. the extent to which the demand curve shifts as the result of a price decline. D. the sensitivity of consumer purchases to price changes.

the sensitivity of consumer purchases to price changes.