|These multiple choice questions are from the exam bank. If you believe one or more answers are not correct, then speak with the instructor. He is human and makes mistakes.|
|Lesson 6 - Elasticities and Welfare|
1. The demand for a product is inelastic with respect to price if:
A. consumers are largely unresponsive to a per unit price change.
2. If a firm can sell 3,000 units of product A at $10 per unit and
5,000 at $8, then:
A. the price elasticity of demand is 0.44.
3. In which of the following instances will total revenue decline?
A. price rises and supply is elastic
4. Gigantic State University raises tuition for the purpose of
increasing its revenue so that more faculty can be hired. GSU is assuming
that the demand for education at GSU is:
5. For a linear demand curve:
A. elasticity is constant along the curve.
6. If a demand for a product is elastic, the value of the price
elasticity coefficient is:
7. Price elasticity of demand is generally:
A. greater in the long run than in the short run.
8. Suppose that a 20 percent increase in the price of normal good Y
causes a 10 percent decline in the quantity demanded of normal good X. The
coefficient of cross elasticity of demand is:
A. negative and therefore these goods are substitutes.
9. Consumer surplus:
A. is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price.
10. We would expect the cross elasticity of demand between dress shirts
and ties to be:
A. positive, indicating normal goods.
11. We would expect the cross elasticity of demand between Pepsi and
Coke to be:
A. positive, indicating normal goods.
12. 45. If a 1% increase in fees for legal services leads to a 5% increase in total revenue for lawyers, the price elasticity of demand for legal services must be:
13. The “incidence of a tax” is the term used to indicate:
A. Responsibility for collecting the tax.
14. Approximately 40 luxury boats (price $100,000 or more) are produced
each year. How much revenue could the government expect to raise
from a $1,000 excise tax on luxury boats?
A. Exactly equaled to $40,000.
15. Sally recently got a raise from $500 per week to $550 per
week. As a result, she now purchases six steaks per week rather than
five. This indicates that:
A. Steak is an inferior good for Sally.
|Lesson 7 - The Theory of Consumer Behavior|
A. is synonymous with usefulness.
2. The ability of a good or service to satisfy wants is called:
A. utility maximization.
3. The first Pepsi yields Craig 18 units of utility and the second
yields him an additional 12 units of utility. His total utility from three
Pepsis is 38 units of utility. The marginal utility of the third Pepsi is:
A. 26 units of utility.
4. Total utility may be determined by:
A. multiplying the marginal utility of the last unit consumed by the number of units consumed.
5. To maximize utility a consumer should allocate money income so that the:
A. elasticity of demand on all products purchased is the same.
6. Suppose that MUx/Px exceeds MUy/Py. To maximize utility the consumer
who is spending all her money income should buy:
A. less of X only if its price rises.
7. Suppose you have a limited money income and you are purchasing
products A and B whose prices happen to be the same. To maximize your
utility you should purchase A and B in such amounts that:
A. their marginal utilities divided by its market price are the same.8. A consumer is maximizing her utility with a particular money income when:
A. the total utility derived from each product consumed is the same.
9. The theory of consumer behavior assumes that consumers attempt to
A. the difference between total and marginal utility.10. When a consumer shifts purchases from product X to product Y the marginal utility of:
A. X falls and the marginal utility of Y rises.
11. Which of the following has been a significant factor in DVDs
replacing video cassettes (VCs) in the retail home video market?
A. DVDs are now less than one-half the price of VCs.12. The diamond-water paradox arises because:
A. essential goods may be cheap while nonessential goods may be expensive.
13. All of the following would reduce property crime by increasing its
A. imposing greater penalties for those who are caught and convicted.14. High-wage consumers are over-represented among airline and taxi passengers because:
A. They pay lower money prices for these services than do low-wage consumers.
15. If you receive a gift whose market price is $20, but you consider
it to be worth only $10, then:
A. there is a $10 or 50 percent value gain.
|Lesson 8 - Costs and Supply of Goods|
1. Which of the following constitutes an implicit cost to the Johnston
A. payments of wages to its office workers
2. Implicit costs are:
A. regarded as costs by accountants but not by economists.
3. Accounting profits are typically:
A. greater than economic profits because the former do not take explicit costs into account.
4. Normal profit is:
A. determined by subtracting implicit costs from total revenue.
5. Which of the following is a short-run adjustment?
A. A local bakery hires two additional bakers.
6. Average fixed cost:
A. equals marginal cost when average total cost is at its minimum.
7. Marginal cost:
A. equals both average variable cost and average total cost at their respective minimums.
8. If a technological advance increases a firm's labor productivity, we
would expect its:
A. average total cost curve to rise.
9. Economies and diseconomies of scale explain:
A. the profit-maximizing level of production.
10. In the long run:
A. all costs are variable costs.
11. (Last Word) A cost that cannot be partly or fully recovered through
any subsequent action is known as a:
A. variable cost.
12. Other things equal, if the prices of a firm's variable inputs were
A. one could not predict how unit costs of production would be affected.
13. In the diagram below, curves 1, 2, and 3 represent:
A. average variable cost, marginal cost, and average fixed cost respectively.
A. ATC, MC, AFC, and AVC curves respectively.
15. Refer to the diagram below. The vertical distance between ATC and
A. the law of diminishing returns.