Chapter 2 MCQ

Question 1

Demand is the same as wants. T  F

Answer 1

False.

Question 2

Your willingness to pay for a product depends on what substitutes are available, and what they cost. T  F

Answer 2

True

Question 3

What you can afford is just about money. T  F

Answer 3

False. Also depends on your time and effort.

Question 4

Marginal cost is the same as additional cost. T  F

Answer 4

True. Marginal means additional.

Question 5

The flat fee charged at an all-you-can-eat restaurant should not influence how much food you eat once you are seated. T  F

Answer 5

True. Flat fee is not an additional cost.

Question 6

Marginal benefit always equals average benefit. T  F

Answer 6

False. Marginal benefit equals average benefit only in special circumstances. For example, if a basketball player with a shooting percentage of 50 percent successfully makes one out of her next two shots, then the additional points she adds are equal to the amount of points she usually (on average) adds.

Question 7

Willingness to pay depends on marginal benefit, not total benefit. T  F

Answer 7

True. Willingness to pay changes with circumstances.

Question 8

Quantity demanded is the same as demand. T  F

Answer 8

False. Quantity demanded is a much more limited term than demand. Only a change in price changes quantity demanded. A change in any other influence on consumer choice changes demand.

Question 9

If the price of a product or service changes, quantity demanded changes. T  F

Answer 9

True. Only a change in price changes quantity demanded.

Question 10

Market demand is the sum of the demands of all individuals. T  F

Answer 10

True. Add up all individual demands at any price to get market demand.

Question 11

Demand curves may be straight lines or curves, but always slope downwardto the left. T  F

Answer 11

False. Slope downward to the right.

Question 12

If your willingness to pay decreases, demand decreases. T  F

Answer 12

True. For any quantity, maximum willing to pay is now less.

Question 13

If your ability to pay decreases, demand increases. T  F

Answer 13

False, for normal goods. A decrease in income decreases demand. But True, for inferior goods.

Question 14

Throughout the month of December, the quantity of video game consoles purchased increases even as the price rises. This violates the law of demand. T  F

Answer 14

False. As the holidays get nearer, people’s willingness and ability to pay for certain products or services increases for any given price. Therefore, an increase in demand drives the rising prices.

Question 15

A decrease in income always shifts the demand curve leftward. T  F

Answer 15

False. Statement is true for normal goods, false for inferior goods

Question 16

Economists describe the list of your wants and their intensities as

A demand.
B supply.
C benefit.
D preferences.

Answer 16

d) Definition of preferences.

Question 17

Costs are

A worth money.

B whatever we are willing to give up.

C the answer to the question “What do we want?”

D whatever we are willing to get.

Answer 17

b) Give up includes money, time, effort.

Question 18

Your preferences measure

A the availability of substitutes.

B how limited your time is.

C the price of a product.

D how badly you want something.

Answer 18

d) Intensities of your wants.

Question 19

All-you-can-eat buffet restaurants charge a fixed fee for eating. With each plate that Anna eats, she experiences

A decreasing marginal costs.

B increasing marginal costs.

C decreasing marginal benefits.

D Increasing marginal benefits.

Answer 19

c) Each additional plate brings less satisfaction.

Question 20

Thinking like economists, a dating couple should break up when the

A total benefits of dating are greater than the total costs of dating.

B total costs of dating are greater than the total benefits of dating.

C additional benefits of dating are greater than the additional costs of dating.

D additional costs of dating are greater than the additional benefits of dating.

Answer 20

d) Marginal costs greater than marginal benefits.

Question 21

Peter wants two cars, one for everyday and the other for special occasions. He has only $15 000, so he buys only one car. His quantity demanded of cars is

A 1.
B 2.
C 15 000.
D 30 000.

Answer 21

a) Quantity demanded is not wants. Must be willing and able to pay.

Question 22

The price of diamonds is higher than the price of water because

A total benefits from water are relatively low.

B total benefits from diamonds are relatively high.

C marginal benefits from water are relatively high.

D marginal benefits from diamonds are relatively high.

Answer 22

d) Price depends on marginal benefits, not total benefits.

Question 23

When the price of a product rises,

A consumers look for more expensive substitutes.

B quantity demanded increases.

C consumers look for cheaper substitutes.

D consumers use more of the product.

Answer 23

c) With switch to cheaper substitutes, quantity demanded decreases.

Question 24

If homeowners were charged for garbage collection by the number of garbage bags used, there would be a(n)

A increase in demand for garbage collection.

B decrease in demand for garbage collection.

C increase in quantity demanded of garbage collection.

D decrease in quantity demanded of garbage collection.

Answer 24

d) Rising price is movement along demand curve for garbage collection.

Question 25

A sociology class is a substitute for an economics class if

A attending the two classes has the same opportunity cost.

B the two classes satisfy the same want.

C both classes are at the same time.

D both classes are taught by the same instructor.

Answer 25

b) Definition of substitutes.

Question 26

What is most likely to be an inferior good?

fast food
antique furniture
school bags
textbooks

Answer 26

a) Buy less as income increases, switching to better food that was previously unaffordable.

Question 27

Demand

increases with a rise in price.

is the same as quantity demanded.

changes with income.

decreases with a rise in price.

Answer 27

c) Price changes quantity demanded, not demand.

Question 28

If the price of cars rises, the demand for tires

increases.

decreases.

stay the same.

depend on the price of tires.

Answer 28

b) Cars and tires are complements.

Question 29

Which of the following could cause a rightward shift of the demand curve for a product?

increase in income
decrease in income
increase in the price of a substitute
all of the above

Answer 29

d) (a) for inferior goods, (b) for normal goods.

Question 30

If Kraft Dinner is an inferior good, a rise in the price of Kraft Dinner

decreases demand for Kraft Dinner.

increases demand for Kraft Dinner.

increases the quantity demanded of Kraft Dinner.

decreases the quantity demanded of Kraft Dinner.

Answer 30

d) Price only affects quantity demanded. Change in income changes demand.