Exam 2

Question 0

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

Answer 0

1.37

Question 1

If the price of elasticity of demand for a product is 2.5 then a price it from $2 to $1.80 will

Answer 1

Increase the quantity demanded by about 25 percent

Question 2

A perfectly in elastic demand schedule

Answer 2

Can be represented by a line parallel to the vertical axis

Question 3

The price elasticity of demand of a straight-line demand curve is

Answer 3

Elastic in high price ranges and Inelastic on low-price ranges and Inelastic on low-price ranges

Question 4

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

Answer 4

Is elastic

Question 5

Refer to the above data. The price elasticity of demand is relatively elastic

Answer 5

In the $6-$4 range

Question 6

Refer to the above data. The price elasticity of demand is unity

Answer 6

In the $4-$3 price range only

Question 7

Suppose that the above total revenue curve is derived from a particular linear demand curve. That demand curve must be

Answer 7

Inelastic for price declines that increase quantity demanded from 6 units to 7 units

Question 8

In which of the following instances will total revenue decline

Answer 8

Price rises and demand is elastic

Question 9

Refer to the above diagram. In P1 P2 price range demand is

Answer 9

Relatively elastic

Question 10

The elasticity of demand for a product is likely to be greater

Answer 10

The greater the amount of time over which buyers adjust to price changes

Question 11

The main determinant of elasticity of supply is the

Answer 11

Amount of time the producer has to adjust inputs in response to a price change

Question 12

Suppose the income elasticity of demand for toys is $2.00 this means that

Answer 12

A 10 percent increase in income will increase the purchase of toys by 20 percent

Question 13

Utility

Answer 13

The ability of a good or service to satisfy wants

Question 14

Marginal utility can be

Answer 14

Positive, negative, zero

Question 15

The law of diminishing marginal utility states that

Answer 15

Beyond some point additional units of a product will yield less and less extra satisfaction to a consumer

Question 16

To maximize utility a consumer should allocate money income so that the

Answer 16

Marginal utility obtained from the last dollar spent on each product is the same

Question 17

Suppose MUx IPx exceeds MUyIPy to maximize utility the consumer who is spending all her money income should buy

Answer 17

More of x and less of y

Question 18

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

Answer 18

4 units of J and 5 units of K

Question 19

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

Answer 19

Total utility is being maximized

Question 20

Refer to the above data. What quantities of X and Y should be purchased to maximize utility

Answer 20

2 of x and 5 of Y

Question 21

The diamond water paradox occurs because

Answer 21

The price of a product is related to its marginal utility, not its total utility

Question 22

No cash gifts

Answer 22

Reduce recipient utility relative to a cash gift because non cash gifts often fail to match recipient preferences

Question 23

To the economist total cost include

Answer 23

Explicit and implicit costs, including a normal profit

Question 24

Which of the following definitions is correct

Answer 24

Economic profit = accounting profit - implicit costs

Question 25

Reefer to the above data. Creamy crisp’s explicit costs are

Answer 25

150,000

Question 26

Refer to the above data. Creamy crisp’s implicit costs, including a normal profit are

Answer 26

136,000

Question 27

The long run is characterized by

Answer 27

The ability of the firm to change its plant size

Question 28

The law of diminishing returns indicates that

Answer 28

If a variable input is added to some fixed input beyond some point the resulting extra output will decide

Question 29

Refer to the above data. Diminishing marginal returns become evident with the addition of the

Answer 29

The third worker

Question 30

Refer to the above data. The marginal product of the sixth worker is

Answer 30

15 units of output

Question 31

I the above diagram curve 1,2,3 represent the

Answer 31

Marginal, average, and total product curves respectively

Question 32

The above diagram suggests that

Answer 32

When marginal product lies above average product, average product is rising

Question 33

Refer to the above data. When Total product is increasing at an increasing rate. Marginal product is

Answer 33

Positive and increasing

Question 34

Refer to the above data. When total product is increasing at a decreasing rate, marginal product is

Answer 34

Positive and decreasing

Question 35

If you operated a small bakery, which of the following would be a variable cost in the short run

Answer 35

Baking supplies

Question 36

Refer to the above diagram. At output level Q total variable cost is

Answer 36

0beq

Question 37

Refer to the above diagram. At output level Q total cost is

Answer 37

Zero

Question 38

Refer to the above data. The total variable cost of producing 5 units is

Answer 38

$37

Question 39

Refer to the above data. The average fixed cost of producing 3 units of output is

Answer 39

$8