Exam 2 Flashcards
Suppose that as the price of Y falls from $2.00 to 1.90 the quantity of Y demanded increases from 110 to 118. Then the price of elasticity of demand is
1.37
If the price of elasticity of demand for a product is 2.5 then a price it from $2 to $1.80 will
Increase the quantity demanded by about 25 percent
A perfectly in elastic demand schedule
Can be represented by a line parallel to the vertical axis
The price elasticity of demand of a straight-line demand curve is
Elastic in high price ranges and Inelastic on low-price ranges and Inelastic on low-price ranges
The price elasticity of product X is reduced from $100 to $90 and, as a result,the quantity demanded increases from 50-60 units. Therefore demand for X in this price range
Is elastic
Refer to the above data. The price elasticity of demand is relatively elastic
In the $6-$4 range
Refer to the above data. The price elasticity of demand is unity
In the $4-$3 price range only
Suppose that the above total revenue curve is derived from a particular linear demand curve. That demand curve must be
Inelastic for price declines that increase quantity demanded from 6 units to 7 units
In which of the following instances will total revenue decline
Price rises and demand is elastic
Refer to the above diagram. In P1 P2 price range demand is
Relatively elastic
The elasticity of demand for a product is likely to be greater
The greater the amount of time over which buyers adjust to price changes
The main determinant of elasticity of supply is the
Amount of time the producer has to adjust inputs in response to a price change
Suppose the income elasticity of demand for toys is $2.00 this means that
A 10 percent increase in income will increase the purchase of toys by 20 percent
Utility
The ability of a good or service to satisfy wants
Marginal utility can be
Positive, negative, zero
The law of diminishing marginal utility states that
Beyond some point additional units of a product will yield less and less extra satisfaction to a consumer
To maximize utility a consumer should allocate money income so that the
Marginal utility obtained from the last dollar spent on each product is the same
Suppose MUx IPx exceeds MUyIPy to maximize utility the consumer who is spending all her money income should buy
More of x and less of y
Refer to the above data. If the consumer has a money income of $52 and the prices of J and K are $8 and $4 respectively, the consumer will maximize her utility by purchasing
4 units of J and 5 units of K
Assume that a consumer purchases products A,B and C in quantities such that the last dollar spent on each yields the same marginal utility and the consumers income is totally spent. We can conclude tht
Total utility is being maximized
Refer to the above data. What quantities of X and Y should be purchased to maximize utility
2 of x and 5 of Y
The diamond water paradox occurs because
The price of a product is related to its marginal utility, not its total utility
No cash gifts
Reduce recipient utility relative to a cash gift because non cash gifts often fail to match recipient preferences
To the economist total cost include
Explicit and implicit costs, including a normal profit
Which of the following definitions is correct
Economic profit = accounting profit - implicit costs
Reefer to the above data. Creamy crisp’s explicit costs are
150,000
Refer to the above data. Creamy crisp’s implicit costs, including a normal profit are
136,000
The long run is characterized by
The ability of the firm to change its plant size
The law of diminishing returns indicates that
If a variable input is added to some fixed input beyond some point the resulting extra output will decide
Refer to the above data. Diminishing marginal returns become evident with the addition of the
The third worker
Refer to the above data. The marginal product of the sixth worker is
15 units of output
I the above diagram curve 1,2,3 represent the
Marginal, average, and total product curves respectively
The above diagram suggests that
When marginal product lies above average product, average product is rising
Refer to the above data. When Total product is increasing at an increasing rate. Marginal product is
Positive and increasing
Refer to the above data. When total product is increasing at a decreasing rate, marginal product is
Positive and decreasing
If you operated a small bakery, which of the following would be a variable cost in the short run
Baking supplies
Refer to the above diagram. At output level Q total variable cost is
0beq
Refer to the above diagram. At output level Q total cost is
Zero
Refer to the above data. The total variable cost of producing 5 units is
$37
Refer to the above data. The average fixed cost of producing 3 units of output is
$8
