Economics Test 2

Using the data in the table above, when the price of a pizza falls from $10 to $9, what is the percentage change in price? (Use the midpoint method)

10.5 percent

if a 5 percent decrease in income leads to a 15 percent decrease in the demand for a good, the income elasticity of demand equals______

3 and the good is a normal good

The figure above shows lauren's demand curve for barbie dolls and the market price for barbie dolls. In order for lauren to avoid paying more for dollas than they are worth to her, she must not purchase any more than

3 dolls

If the price elasticity of demand for a product is 2.5, then a price increase of 1.5 percent decreases the quantity demanded by

3.75 percent

Suppose the local university charges $85 per credit hour. If tuition increases from $85 to $93 per credit hour, using the midpoint method, what is the percentage change in price?

8.99 percent

In the figure above suppose that $20 is the market equilibrium price. Which area is the consumer surplus?

A

The maximum amount of other goods and services that people are willing to give up in order to get one more unit of a good is defined as the good's

marginal benefit

The demand curve is also the

marginal benefit curve

In order to efficiently allocate goods and services, we have to compare

marginal cost to marginal benefit

Honda will sell its vehicles to anyone who wants to and can buy one. Honda is using a ____ allocation method.

market price

The longer the time that has elapsed since the price of a good changed, the

more elastic the demand for that good

The lower the level of income in a country, the

more income elastic is the demand for food

The cross elasticity between computers and software is

negative because they are complements

the cross elasticity of demand for film cameras and film is likely to be

negative because they are complements

If the demand for a good is elastic. then

people substantially decrease the quantity of the good they buy if its price increases by a small percentage

If wheat can be produced at a constant opportunity cost, then the supply of wheat is

perfectly elastic

The producer surplus is found by subtracting the ____ and then adding the difference for all units sold.

price from marginal cost

Value and price can be compared by noting that

price is what we must pay and value is what we are willing to pay

When the price of a product exceeds the marginal cost of producing it, producers have a

producer surplus

What is the formula for the price elasticity of demand? The percentage change in the

quantity demanded divided y the percentage change in price

If a seller charges a buyer the exact price the buyer is willing to pay, then the buyer would

receive no consumer surplus from that unit of good

If Pepsi goes on sale and decreases its price by 10 percent, and as a result, the quantity demanded of Coca Cola decreases by 5 percent, then pepsi and coke are ______ goods

substitute

If the cross elasticity of demand between Coke and Pepsi is 2.02 then Coke and Pepsi are

substitutes

If marginal benefit is equal to marginal cost, then the

sum of producer surplus and consumer surplus is as large as possible

Which of the following is correct

the cross elasticity of demand for substitute goods is positive

Mark loves ice cream. At any point in time, he will buy an additional ice cream cone if

the marginal benefit from it exceeds the price

The demand curve for Seattle Seahawk jerseys is the same as the marginal benefit curve of seattle seahawk jerseys because demand represents

the maximum price we are willing to pay for a jersey

As more of a good is consumed, marginal benefit _____ and as more of a good is produced, marginal cost ______

decreases; increases

Deadweight loss is created when a market produces

either more or less than the efficient quantity

If a good has many close substitutes, then its demand is most likely

elastic

The concept of utilitarianism is defined as the principle in which

equality of income brings the greatest efficiency

If a product is narrowly defined, it is likely to

have many substitutes and therefore its demand is elastic

When the price elasticity of demand is less than one and larger than zero, then demand is said to be

inelastic

The total benefit from buying a particular unit of a good

is the amount paid for the unit plus the consumer surplus of the unit

If the price elasticity of supply for a good is 0.75 then

the percentage change in the quantity supplied is less than the percentage change in price

The figure above shows the market for bell-bottom pants. If the efficient quantity is produced

the sum of consumer and producer surplus will be maximized

The demand for luxury suites at basketball games is elastic because

these suites are a luxury item

The price elasticity of demand for wheat is less than one. If a drought caused the supply curve for wheat to shift leftward then

wheat farmers' total revenue will increase

Bill and Krista sell potted plants from a roadside stand. The figure above shows Bill and Krista's marginal cost curve and the market price. If bill and Krista sell 60 plants per week, their producer surplus from the 60th plant will equal

$0

mary is willing to pay $50 for a Christmsa tree, John is willing to pay $45 and Jeff is willing to pay $40 the price of a tree is $40. The total consumer surplus for mary, john, and jeff taken together is

$15

The figure above shows Kaley's marginal benefit from swimming with manatees and Scott's marginal cost of providing manatee swimming tours. At 1 manatee swim per week, Kaley's marginal benefit is _____ and scott's marginal cost is ______

$40 ; $10

Suppose the price of a ticket to a Lenny Kravitz concert is $41 and at that price, the quantity of tickets demanded is 17,000 per concert. Using the midpoint method of calculating percentage changes, if Mr. Kravitz raises the price to $48 and the quantity demanded decreases to 16,000 the price elasticity of demand for his concert tickets is

0.39

If the price doubles and the quantity supplied also doubles, the price elasticity of supply for the good is

1

The total revenue test says that if a price decrease leads to

a decrease in total revenue, demand is price inelastic

In the figure above, suppose the market is at equilibrium. Then area A is the

amount of the consumer surplus

When the cost of producing a product is paid, at least in part, by someone other than the producer, the cost is referred to as

an external cost

A point on the supply curve can illustrate the

both answers A and B are correct

The concept of the "invisible hand" suggests that

buyers and sellers are self-interested

Based on the data in the table above, ice cream and cake are ______ goods

complementary

When two goods are related such that an increase in the price of one good decreases the quantity demanded of the other good, these goods are definitely

complements