Micro Unit One - Test Prep

Assume the income elasticity of demand for good Z equals −5.0. Which of the following is true? Good Z is a normal good Good Z must have an inelastic demand An increase in income will lead to a decrease in demand An increase in income will lead to an increase in demand The income effect of a price increase will be a decrease in quantity demanded at every price

An increase in income will lead to a decrease in demand

Describe the income effect associated with the law of demand.

If the price of a normal good decreases, the purchasing power of a consumer's income increases and therefore consumers will be willing and able to purchase more of the good.

A firm estimates that the absolute value of the price elasticity of demand for its signature sandwich is 2. If the firm increases its sandwich price by 10 percent, what will happen to the quantity demanded?

It will decrease by 20 percent

Which of the following would cause the supply of good X to become more elastic?

The ability to easily reallocate inputs to production of good X

$1,200 million

The figure above shows the market for tires. According to the figure, the government collects ____ per month in total tax revenue

$1000

The figure below shows the market for tires. According to the figure, after the tax the revenue neither collected by the government nor collected by the business is _____

decreases; decreases

The table below shows Buffy's utility from wooden stakes and cloves of garlic. As Buffy uses more stakes, the marginal utility of a stake ____ and as she uses more cloves of garlic, the marginal utility of a clove of garlic ____.

Figure C

Utility - In the figures below, which one reflects an increase in the price of chicken?

$30 per month.

Utility - Susan can watch movies or attend plays. The table above gives combinations of movies and plays that are on her budget line. If the price of a movie is $5, then her budget for movies and plays is

A 10% increase in the price of good Y.

Which of the following would result in the greatest rightward shift of the demand curve for good J? A A 50% decrease in the price of good J. B A 20% increase in the price of good X. C A 10% increase in the price of good Y. D A 10% increase in the price of good Z. E A 10% decrease in income.

Juan's marginal utility from strawberries is 100 and his marginal utility from cream is 200. Juan spends all his budget. The price of strawberries is $5 per pound and the price of cream is $5 per pint. To maximize his utility, Juan should

buy more cream and fewer strawberries.

In a month, Samantha consumes the quantity of lobster dinners so that her marginal utility from a lobster dinner is 500 units. The price of a lobster dinner is $25. She also is consuming the quantity of spaghettidinners so that its marginal utility is 300 units, while its price is $15. Samantha is allocating her entire budget.What should she do to maximize her total utility? consume fewer lobster dinners and fewer spaghetti dinners consume more lobster dinners and fewer spaghetti dinners Not enough information is given to answer the question. consume the current combination of lobster and spaghetti dinners consume more spaghetti dinners and fewer lobster dinners

consume the current combination of lobster and spaghetti dinners

Celine will maximize her utility if she allocates all of her available budget and then consumes so that the

marginal utility per dollar spent on good X is equal to marginal utility per dollar spent on good Y

A change in which of the following causes a movement along a given demand curve for a normal good?

the price of a good