Econ test 2

The short run is best defined as:

a period of time sufficiently short that at least one factor of production is fixed.

The demand for a good is elastic if the price elasticity of demand is:

greater than one.

A demand curve that is drawn as a vertical line has a price elasticity of demand equal to:

0

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

0.5.

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.

If a one percent increase in the price of oranges leads to a five percent increase in the quantity supplied, the price elasticity of supply for oranges is ______. 1/5

5

Which of the following is a defining characteristic of all perfectly competitive markets?

All firms sell the same standardized product.

Which of the following is likely to have the highest price elasticity of demand?

Nike running shoes

If the quantity demanded of a good is Q when the price for the good is P, the price elasticity of demand for that good at that point is:

P/Q) × (1/slope)

Which of the following best explains why you are more likely to see a poor person than a wealthy person picking up aluminum cans to sell?

The opportunity cost of picking up cans is higher for wealthy people than for poor people.

Which of the following determines whether a firm will earn higher revenues when it raises its price?

The price elasticity of demand.

A technological innovation that reduces a firm's marginal cost will lead to:

an increase in the firm's supply.

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.

At the midpoint of a straight-line demand curve, the price elasticity of demand is:

equal to one.

According to the law of demand, when the price of shoes ______ people will consume ______ shoes.

falls, more

A price-taker faces a demand curve that is:

horizontal at the market price.

If your income elasticity of demand for hot dogs is negative, then:

hot dogs are an inferior good for you.

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

inelastic.

Suppose a 10% increase in the price of aspirin leads to a 5% decrease in the quantity demanded of aspirin. The demand for aspirin, therefore, is

inelastic.

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

inelastic; increase

A profit-maximizing firm will only produce a positive amount of output if:

its total revenue is greater than or equal to its variable cost.

According to the law of diminishing returns, when some factors of production are fixed, in order to increase production by a given amount, a firm will eventually need to add successively:

larger and larger quantities of the variable factors of production.

If the demand for a good is highly elastic, that good is likely to have:

many close substitutes.

A seller's supply curve shows the seller's:

opportunity cost of producing an additional unit of output at each quantity.

The price elasticity of supply for the Hope Diamond is zero because there is only one. Therefore, the supply curve for the Hope Diamond is

perfectly inelastic.

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

positive.

The percentage change in quantity supplied that results from a 1 percent change in price is known as the:

price elasticity of supply

Total revenue minus both explicit and implicit costs defines a firm's:

profit

If a firm's total revenue is less than its variable cost when the firm produces the level of output at which price equals marginal cost, then the firm should:

shut down.

If cross-price elasticity of demand between two goods is positive, the two goods are:

substitutes.

The price elasticity of demand is a measure of:

the change in quantity demanded of a good that results from a change in its price.

Growing rice requires extensive irrigation in California. Economists consider water to be a ______ for rice farmers in California

want