630. Microeconomics Leveling Course

Question 1

Price elasticity of demand is a measure of the responsiveness of quantity demanded to changes in

Answer 1

Price.

Question 2

If the percentage change in quantity demanded is greater than the percentage change in price, demand is

Answer 2

Elastic.

Question 3

If quantity demanded is completely unresponsive to changes in price, demand is

Answer 3

Inelastic.

Question 4

Which of the following would result in higher price elasticity?

Answer 4

more substitutes for a good

Question 5

The shorter the period of time consumers have to adjust to price changes, the _____ the ________ elasticity of demand.

Answer 5

lower; price

Question 6

Cross elasticity of demand measures the responsiveness of changes in the quantity _____ of one good to changes in ______.

Answer 6

demanded; the price of another good

Question 7

If two goods are substitute goods,

Answer 7

an increase in the price of one will cause an increase in the demand for the other.

Question 8

Income elasticity of demand for a normal good is always

Answer 8

greater than zero.

Question 9

An inferior good is

Answer 9

a good for which demand rises as income falls.

Question 10

Price elasticity of supply is the percentage change in the quantity _____ of a good divided by the percentage change in ______.

Answer 10

supplied; price of the good.

Question 11

Price elasticity of supply is the percentage change in the quantity _____ of a good divided by the percentage change in ______.

Answer 11

time.

Question 12

Suppose the demand for a particular good is perfectly inelastic and the government decides to impose a tax on the production of this good. Who will pay the greater share of such a tax?

Answer 12

The buyers will pay the entire share.

Question 13

Total revenue is defined as

Answer 13

price multiplied by quantity sold.

Question 14

When an economist talks about utility, she is talking about

Answer 14

the satisfaction that results from the consumption of a good.

Question 15

Total utility is defined as the

Answer 15

sum of the amounts of satisfaction a person receives from consuming a good.

Question 16

Marginal utility is defined as the

Answer 16

change in total utility a person derives from the consumption of a good divided by the change in the quantity of the good consumed.

Question 17

The law of diminishing marginal utility says that

Answer 17

the marginal utility gained by consuming equal successive units of a good will decline as the amount consumed increases.

Question 18

We take one dollar from a millionaire and give it to a pauper. Assuming a diminishing marginal utility of money,

Answer 18

we cannot say whether or not total utility changes.

Question 19

we cannot say whether or not total utility changes.

Answer 19

we cannot say whether or not total utility changes.

Question 20

we cannot say whether or not total utility changes.

Answer 20

we cannot say whether or not total utility changes.

Question 21

To resolve the diamond-water paradox, it is important to note that under most circumstances,

Answer 21

the marginal utility of water is lower than the marginal utility of diamonds.

Question 22

The theory of consumer choice assumes that consumers attempt to maximize

Answer 22

total utility.

Question 23

The theory of consumer choice assumes that consumers attempt to maximize

Answer 23

states that we value an item more highly if we own it than if we do not own it.

Question 24

Economist David Friedman pointed out that

Answer 24

is not limited to humans.

Question 25

No matter what the price of food, a person will eat the same amount of food. This is ______ with the idea of ________.

Answer 25

not consistent; consumer equilibrium.

Question 26

A cost that is incurred when an actual monetary payment is made is a(n) _____ cost.

Answer 26

explicit.

Question 27

implicit cost

Answer 27

an implicit cost is a cost that represents the value of resources used in production for which no actual monetary payment is made.

Question 28

Which of the following statements is true?

Answer 28

Accounting profit is the difference between total revenue and explicit costs.

Question 29

Which of the following statements is true?

Answer 29

Saying that a firm earned zero economic profit is the same as saying it earned normal profit.

Question 30

An unrecoverable cost that should be disregarded in any current or future decision is also called a(n) ________ cost.

Answer 30

sunk

Question 31

A fixed input is an input whose quantity

Answer 31

cannot be changed as output changes in the short run.

Question 32

the law of diminishing marginal returns.

Answer 32

“As additional units of a variable input are added to a fixed input, eventually the marginal physical product of the variable input will decline.”

Question 33

The marginal physical product (MPP) of a variable input is

Answer 33

The marginal physical product (MPP) of a variable input is

Question 34

Economies of scale are said to exist when inputs are increased by some percentage and output increases by a(n) ______ percentage, causing unit costs to ______.

Answer 34

greater; fall

Question 35

Average variable costs equal

Answer 35

total variable cost divided by output

Question 36

Minimum efficient scale refers to the

Answer 36

lowest output level at which average total costs are minimized.

Question 37

Total costs are

Answer 37

fixed costs plus variable costs

Question 38

As a firm produces more units of a good, its

Answer 38

fixed costs remain constant in the short run and its variable costs rise.

Question 39

There is a link between production and cost. We know this because

Answer 39

what happens to MPP directs what happens to MC.