Old Exam Ch 3-5

In the above figure, the marginal cost of the second ton of wheat is A) $75. B) None of these C) $25. D) $50.

A) $75.

If the price of a movie ticket increases by 4 percent and the quantity of movies demanded falls by 2 percent, the price elasticity of demand is A) 0.5. B) 2.0. C) some amount that cannot be determined without more information. D) 4.0.

A) 0.5.

The University of South Dakota just lowered the price of its season football tickets from $350.00 to $300.00. As a result, there was an increase in the number of season tickets purchased from 430 to 470. Rounding to two decimal places, the price elasticity of demand for season tickets equals A) 0.58. B) 1.58. C) 0.71. D) 1.71.

A) 0.58.

The money price of a pizza is $12 per pizza and the money price of a taco is $2 per taco. The relative price of a pizza is A) 6 tacos per pizza. B) $24 per pizza. C) $12 per pizza. D) 1/6 pizza per taco.

A) 6 tacos per pizza.

All shredded wheat producers have decided to add a new ingredient to shredded wheat, the "crunch enhancer." Crunch enhancer keeps cereals crisper longer in milk and, as a result, consumers decide they like shredded wheat more than before. What happens to the supply and demand curves for shredded wheat now that is costs more to produce and consumers like it better? A) The supply and demand curves both shift rightward. B) The supply curve shifts leftward and the demand curve shifts rightward. C) The supply curve shifts rightward and the demand curve doesn't shift. D) The supply curve shifts leftward and the demand curve doesn't shift

A) The supply and demand curves both shift rightward.

Cupcakes and granola bars are substitutes in consumption. The price of a granola bar increases so the demand for A) cupcakes will increase, that is, the demand curve will shift rightward. B) granola bars will decrease, that is, the demand curve will shift leftward. C) granola bars will increase, that is, the demand curve will shift rightward. D) cupcakes will decrease, that is, the demand curve will shift leftward.

A) cupcakes will increase, that is, the demand curve will shift rightward.

The figure above shows the demand for fruit snacks. Which movement reflects a decrease in demand? A) from point a to point c B) from point a to point b C) from point a to point e D) from point a to point d

A) from point a to point c

If the cross elasticity of demand between hot chocolate and tea is positive, an in crease in the price of tea will shift the demand curve for A) hot chocolate rightward. B) hot chocolate leftward. C) tea leftward. D) tea rightward.

A) hot chocolate rightward.

The elasticity of supply equals ________ if the supply curve is horizontal. A) infinity B) -1 C) 0 D) 1

A) infinity

Perfectly elastic demand is represented by a demand curve that A) is horizontal. B) is vertical. C) has a 45° slope. D) is a rectangular hyperbola.

A) is horizontal.

Because there are _____ substitutes available for fruit than for bananas, the price elasticity of demand for fruit is _____ elastic than the price elasticity for bananas A) less; less B) less; more C) more; more D) more; less

A) less; less

Resource use is efficient when A) marginal social benefit equals marginal social cost. B) marginal social benefit is increasing. C) marginal social benefit exceeds marginal social cost. D) marginal social cost is decreasing.

A) marginal social benefit equals marginal social cost.

The figure above shows the market for cocaine. The ________ price that producers must be offered to get them to produce 30 million pounds of cocaine per month is ________. A) minimum; $4.00 B) minimum; $2.50 C) maximum; $2.50 D) maximum; $4.00

A) minimum; $4.00

The table above gives the demand schedule for peas. Between point C and point D, the price elasticity of demand is A) unit elastic. B) elastic. C) 3.00. D) 0.75.

A) unit elastic.

In the figure above, when the price of a CD is $8.00, total producer surplus from all the CDs will be A) $20 million. B) $10 million. C) zero. D) greater than at $10.00 per CD.

B) $10 million.

A decrease in the expected future price of cars A) increases the current demand for cars, that is, there is a rightward shift of the demand curve for cars. B) decreases the current demand for cars, that is, there is a leftward shift of the demand curve for cars. C) increases the current quantity demanded of cars, that is, there is a movement downward along the demand curve for cars. D) decreases the current quantity demanded of cars, that is, there is a movement upward along the demand curve for cars.

B) decreases the current demand for cars, that is, there is a leftward shift of the demand curve for cars.

The law of demand concludes that a rise in the price of a golf ball ________ the quantity demanded and ________. A) decreases; shifts the demand curve for golf balls leftward B) decreases; creates a movement up along the demand curve for golf balls C) increases; creates a movement down along the demand curve for golf balls D) increases; shifts the demand curve for golf balls rightward

B) decreases; creates a movement up along the demand curve for golf balls

The above figure shows the market for oil. Because of the development of a new deep sea drilling technology the A) demand curve shifts from D1 to D2 and the supply curve does not shift. B) demand curve does not shift, and the supply curve shifts from S1 to S2. C) demand curve does not shift, and the supply curve shifts from S2 to S1. D) demand curve shifts from D1 to D2 and the supply curve shifts from S1 to S2.

B) demand curve does not shift, and the supply curve shifts from S1 to S2.

The big tradeoff is a tradeoff between A) consumer surplus and producer surplus. B) efficiency and fairness. C) taxes and subsidies. D) price ceilings and price floors.

B) efficiency and fairness.

Bus rides and canned soup are inferior goods, so the ________ elasticity of demand is ________. A) cross; negative B) income; negative C) income; positive D) cross; positive

B) income; negative

An increase in the number of fast-food restaurants A) increases the demand for fast-food meals. B) increases the supply of fast-food meals. C) increases the demand for substitutes for fast-food meals. D) raises the price of fast-food meals

B) increases the supply of fast-food meals.

The cross elasticity of demand for pizza with respect to the price of a soda is A) negative because the goods are substitutes. B) negative because the goods are complements. C) positive because the goods are substitutes. D) positive because the goods are complements

B) negative because the goods are complements.

In the above figure, a price of $15 per dozen roses would result in a ________ so that the price of roses will ________. A) surplus; fall B) shortage; rise C) surplus; rise D) shortage; fall

B) shortage; rise

When the price of a pizza decreases from $14 to $12 A) None of these answers is correct. B) the income effect points out that the total purchasing power of people who buy pizza increases. C) the income effect means that the demand for pizza will not change. D) the income effect means people buy less pizza.

B) the income effect points out that the total purchasing power of people who buy pizza increases.

A fall in the price of a good causes producers to reduce the quantity of the good they are willing to produce. This fact illustrates: A) the law of demand. B) the law of supply. C) the nature of an inferior good. D) a change in supply.

B) the law of supply.

Susan thinks the only fair outcome is one in which she has three slices of pizza a week. Susan is using a(n) ________ concept of fairness. A) "big tradeoff" B) "it's not fair if the rules aren't fair" C) "it's not fair if the result isn't fair" D) "Novak principle"

C) "it's not fair if the result isn't fair"

The figure above shows Clara's demand for CDs. At a price of $5 for a CD, the value of Clara's total consumer surplus for all the CDs she buys is A) $25. B) $5. C) $125. D) $10.

C) $125.

The table below shows the demand schedules for pizza for Abby and Barry who are the only buyers in the market. Based on the table, what is the marginal social benefit from the 45th slice of pizza? A) $3.25 B) $0.50 C) $3.50 D) $9

C) $3.50

What is the efficient quantity of snowboards in the above figure? A) 500 B) 0 C) 200 D) 100

C) 200

When 2,000 hamburgers per day are produced, the marginal social benefit is $1.50 and the marginal social cost is $1.00. And when 7,500 hamburgers per day are produced, the marginal social benefit is $1.00 and the marginal social cost is $1.50. The efficient production quantity of hamburgers is ________ a day. A) 2,000 B) 7,500 C) between 2,000 and 7,500 D) more than 7,50

C) between 2,000 and 7,500

Marginal benefit is the benefit received from ________. A) consuming the efficient quantity B) consuming more goods or services C) consuming one more unit of a good or service D) producing the efficient quantity

C) consuming one more unit of a good or service

If demand for Farmer John's maple syrup is inelastic, then when Farmer John raises the price of maple syrup, his total revenue will A) decrease. B) probably change, but more information is needed to determine if the total revenue increases, decreases, or stays the same. C) increase. D) stay the same.

C) increase.

The equilibrium quantity of a good will increase and its equilibrium price might rise, fall, or stay the same when A) its demand and supply both decrease. B) its demand decreases and supply increases. C) its demand and supply both increase. D) its demand increases and supply decreases.

C) its demand and supply both increase.

A fall in the price of wheat fertilizer ________ the equilibrium price of wheat and ________ the equilibrium quantity of wheat. A) raise; decrease B) lower; decrease C) lower; increase D) raise; increase

C) lower; increase

If the price of a song download is equal to the equilibrium pr ice, there will be ________ of song downloads and the price will ________. A) a surplus; rise B) a surplus; fall C) neither a shortage nor surplus; not change D) a shortage; fall

C) neither a shortage nor surplus; not change

Elasticity measures the A) percentage change in a variable. B) change in a variable. C) responsiveness of a variable to a change in another variable. D) slope of a curve

C) responsiveness of a variable to a change in another variable.

Good A and good B are substitutes in production. The demand for good A increases so that the price of good A rises. The increase in the price of good A shifts the A) demand curve for good B leftward. B) supply curve of good B rightward. C) supply curve of good B leftward. D) demand curve for good B rightward.

C) supply curve of good B leftward.

During the last decade, the price of a computer fell ever y year and the quantity sold increased every year. This experience suggests that the A) "law of demand" was definitely contradicted. B) demand curve shifted rightward. C) supply curve shifted rightward. D) "law of supply" was definitely contradicted.

C) supply curve shifted rightward.

Using the data in the above table, at the price of $80 a phone, a A) shortage of 55 thousand cellular telephones occurs. B) shortage of 25 thousand cellular telephones occurs. C) surplus of 25 thousand cellular telephones occurs. D) surplus of 80 thousand cellular telephones occurs.

C) surplus of 25 thousand cellular telephones occurs.

Scarcity guarantees that A) demands will exceed wants. B) demands will be equal to wants. C) wants will exceed demands. D) most demands will be satisfied.

C) wants will exceed demands.

In the figure above, if the quantity is restricted to 2, then the deadweight loss in this market equals A) e + k. B) c + d. C) h + i. D) b + g

D) b + g

A 10 percent increase in income increases the quantity of orange juice demanded from 19,200 to 20,800 gallons. The income elasticity of demand for orange juice is A) 1.2. B) 0.5. C) 1.0. D) 0.8.

D) 0.8.

The above figures show the market for gasoline. Which figure shows the effect of an increased preference for cars that are smaller and more fuel efficient? A) Figure D B) Figure C C) Figure A D) Figure B

D) Figure B

The figure above shows supply curves for soft drinks. Suppose the economy is at point a. A movement to point c could be the result of A) an increase in the relative price of a soft drink. B) a decrease in technology. C) an increase in the money price of a soft drink. D) a decrease in the relative price of a soft drink.

D) a decrease in the relative price of a soft drink.

The figure above illustrates a linear demand curve. In the pr ice range from $8 to $6, demand is ________ and in the price range $4 to $2, demand is ________. A) inelastic; elastic B) elastic; elastic C) inelastic; inelastic D) elastic; inelastic

D) elastic; inelastic

Alvin Roth of Harvard won the 2012 Nobel Prize in Economics for designing systems that allocate resources in innovative ways. For example, he designed a system that matches donated kidneys to recipients waiting for such donations. This system takes into account the needs of each perspective recipient, their blood type, and the urgency of their case. Based on the news clip above, the allocation of resources is made using A) market price. B) lottery. C) auction. D) personal characteristics.

D) personal characteristics.

The figure above shows supply curves for soft drinks. Suppose the economy is at point a. A decrease in the price of sugar used to make soft drinks is shown as a movement from point a to a point such as A) point c. B) point d. C) none of the points that are illustrated. D) point b.

D) point b.

If the price of oil is $60 per barrel, the quantity of oil supp lied is 70 million barrels per day. If the price is $40 per barrel, the quantity of oil supplied is 69 million barrels per day. This implies that the A) demand for oil is elastic. B) supply of oil is elastic. C) demand for oil is inelastic. D) supply of oil is inelastic

D) supply of oil is inelastic

Marginal cost is best defined as A) the price received from selling one more unit of output. B) equal to producer surplus. C) the profit earned from selling one more unit of output. D) the extra cost of producing one more unit of output.

D) the extra cost of producing one more unit of output.

The figure above shows the demand for fruit snacks. Which movement reflects an increase in income if fruit snacks are an inferior good? A) from point a to point b B) from point a to point e C) from point a to point d D) from point a to point c

from point a to point c