Microeconomics Exam 2 Study Guide
If the price elasticity of demand for a given product is 7, this means that A. the percentage change in quantity demanded is 7 times the percentage change in price. B. if quantity demanded fell by 1 percent, price would fall by 7 percent. C. if price was raised 7 percent, quantity demanded would fall by 7 percent. D. if price was raised 7 percent, quantity demanded would rise 7 percent. E. none of the above
A
Price rises from $10 to $11, and the quantity demanded falls from 100 units to 95 units. What is the price elasticity of demand between these two prices? A. 5.00 B. 0.54 C. 1.86 D. 1.64
A
Suppose you could quantify the amount of satisfaction you receive from consuming ice cream in money terms. You might say, "I expect to get $3 worth of satisfaction from this ice cream cone." According to traditional economic theory, if the price of this ice cream cone were $3.05, would you buy one? A. Sure, why not? What's a nickel? B. Absolutely. It's worth it at that price. C. No way, because it's not worth it. D. There is no way to answer this question because you really can't compare the price of something and the amount of satisfaction you expect to receive from it.
A
Which of the following would result in higher price elasticity? A. more substitutes for a good B. shorter periods of time considered C. lower costs of labor D. the good is more of a necessity
A
If quantity demanded is completely unresponsive to changes in price, demand is A. inelastic. B. unit elastic. C. elastic. D. perfectly elastic. E. perfectly inelastic.
B
If quantity demanded rises by 10 percent as price falls by 7 percent, the price elasticity of demand equals A. 0.70. B. 1.43. C. 1.07. D. 0.43.
B
Price elasticity of supply is the percentage change in the quantity __________ of a good divided by the percentage change in __________. A. demanded, the price of the good. B. supplied, the price of the good. C. demanded, the price of another good. D. supplied, the price of another good. E. demanded, income.
B
Suppose Valerie is consuming lipstick (L) and eye shadow (E) and nothing else. MUL = 24 and MUE = 40. The price of eye shadow is $5, and the price of lipstick is $4. What should Valerie do? A. Consume more eye shadow and less lipstick. B. Consume more lipstick and less eye shadow. C. Consume less of both. D. Consume more of both. E. Not change her consumption of either good.
B
Suppose the marginal utility (MU) of paperback books is 40 utils and each costs $5 while the MU of DVD rentals is 20 utils and each rents for $4. If you consume one movie and one book per week, are you attaining consumer equilibrium? A. Yes, so there is no need to change. B. No. You need to buy more books and rent fewer DVDs. C. No. You need to rent more DVDs and buy fewer books. D. There is not enough information to answer the question.
B
The price elasticity of demand is lowest for which of the following goods? A. Toyotas B. cars C. Fords D. Chevrolets
B
Cross elasticity of demand is the percentage change in the quantity __________ of a good divided by the percentage change in __________. A. demanded; the price of the good B. supplied; the price of the good C. demanded; the price of another good D. supplied; the price of another good E. demanded; income
C
If Jack bought 21 CDs last year when his income was $18,000 and he buys 23 CDs this year when his income is $20,000, then his income elasticity of demand is ______________ making CDs a(n) ______________ good for Jack. A. +1.16; normal B. -1.16; inferior C. +0.86; normal D. +0.86; inferior E. -0.44; inferior
C
If the cross elasticity of demand for good A with respect to good B is +2.7, then good A is A. an inferior good. B. a normal good. C. a substitute for good B. D. a complement to good B.
C
If the percentage change in quantity demanded is greater than the percentage change in price, demand is A. inelastic. B. unit elastic. C. elastic. D. perfectly inelastic.
C
If the price of good X falls and the demand for good X is unit elastic, then the percentage rise in quantity demanded is __________ the percentage fall in price, and total revenue __________. A. greater than; rises B. less than; falls C. equal to; remains constant D. greater than; falls E. less than; rises
C
Suppose Will receives 50 utils from consuming one banana and 92 utils from consuming two bananas. What is the marginal utility of the second banana? A. 92 utils B. 46 utils C. 42 utils D. 58 utils E. none of the above
C
Suppose you are eating buffalo wings at a local happy hour. The total utils from doing so after the fourth, fifth, sixth, and seventh wings are 30, 50, 65, 72, respectively. In this situation we have __________ marginal utility, which is generally __________ in the analysis of consumer choice. A. increasing; assumed B. increasing; not assumed C. diminishing; assumed D. diminishing; not assumed
C
The price elasticity of demand is the ratio of the A. absolute change in quantity demanded to the absolute change in price. B. absolute change in price to the absolute change in quantity demanded. C. percentage change in quantity demanded to the percentage change in price. D. percentage change in price to the percentage change in quantity demanded.
C
When an economist talks about utility, she is talking about A. a company that provides electricity, water, gas, etc. B. the satisfaction, in terms of price, that a producer receives from selling his product. C. the satisfaction that results from the consumption of a good. D. the amount of one good that a person is willing to give up in order to get a unit of another good. E. the satisfaction that results from the consumption of a good minus the price that must be paid to get the good.
C
Diamonds are more expensive than water because markets do not always reflect value. A. they have fewer uses. B. they yield higher marginal utility. C. they yield higher total utility. D. all of the above
D
In order for an individual to achieve consumer equilibrium through the consumption of two goods, A and B, that individual must fulfill the condition A. TUA = TUB. B. TUA/PA = TUB/PB. C. MUA = MUB. D. MUA/PA = MUB/PB. E. MUB/PA = MUA/PB.
D
Marginal utility is defined as the A. change in marginal utility a person derives from the consumption of a good. B. change in total utility a person derives from the consumption of a good divided by the price of that good. C. change in total utility a person derives from the consumption of a good divided by the change in the quantity of the good consumed. D. sum of the amounts of satisfaction a person receives from consuming a good. E. change in total utility a person derives from the consumption of a good divided by the value in use of that good.
E
