ExamView_Pro_-_Take-home__2wANS

# ExamView_Pro_-_Take-home__2wANS - Name: _ Class: _ Date: _...

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Name: ________________________ Class: ___________________ Date: __________ 1 ECON 2020 Take-home Quiz #2 Dr. Long Spring 2006 Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. ____ 1. Suppose that the quantity of DVD players sold increased from 200 to 400 when the price fell from \$225 to \$175. Over this price range, the absolute value of the price elasticity of demand for DVD players is a. 0.25. b. 0.375. c. 1.0. d. 2.67. e. 4.0. ____ 2. Which of the following is the best example of the substitution effect? a. Joe buys fewer apples and more oranges as the result of an increase in the price of apples. b. Joe buys more apples when his income increases. c. Joe buys an apple slicer when the price of apples decreases. d. Joe buys less sugar as the result of an increase in price of apples. ____ 3. An increase in the consumption of a good resulting from a reduction in price that makes the good cheaper in relation to other goods is called the a. substitution effect. b. income effect. c. real balance effect. d. inelasticity effect. ____ 4. If a 30 percent decline in the price of gasoline leads to a 15 percent rise in expenditures on gasoline, the price elasticity of demand for gasoline in this range must be a. 2. b. elastic. c. 0.5. d. inelastic. ____ 5. If the price of apples increases, total expenditures on apples will decline if a. there are few substitutes for apples. b. the supply of apples is inelastic. c. the demand for apples is elastic. d. apples are a normal good.

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2 Figure 7-9 ____ 6. At a price of \$10, the price elasticity of the demand curve depicted in Figure 7-9 is a. positive. b. approximately equal to -0.1. c. approximately equal to -1. d. approximately equal to -2. ____ 7. Which of the following is not a fundamental postulate that underlies consumer behavior? a. Goods can be substituted for one another. b. The law of diminishing marginal utility applies to all goods. c. Consumers make decisions purposefully based upon past experience and knowledge. d. Consumers always make choices with perfect information. ____ 8. If the demand for a product increases as the result of an increase in income, it can be concluded that the a. product is an inferior good. b. demand for the product is inelastic. c. price elasticity of demand for the product equals unity. d. product is a normal good. ____ 9. One advantage of team production over contracting out is that a. the cost of negotiating and enforcing contracts is generally lower with team production than with contracting out. b. the principal agent problem is eliminated by team production but cannot be addressed in contracting out. c. costs are always lower with team production because of the elimination of transactions costs. d.
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## This note was uploaded on 04/29/2008 for the course ECON 2010 taught by Professor Mixon during the Spring '08 term at Auburn University.

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ExamView_Pro_-_Take-home__2wANS - Name: _ Class: _ Date: _...

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