ECO 111 Exam 2

ECO 111 Exam 2 - £C0111 Page: 1 Professor M. Redlo Exam,...

Info iconThis preview shows pages 1–13. Sign up to view the full content.

View Full Document Right Arrow Icon
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 4
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 6
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 8
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 10
Background image of page 11

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 12
Background image of page 13
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: £C0111 Page: 1 Professor M. Redlo Exam, Chapters 3, 5, 6 1. Suppose you drink more tea because the price of coffee has increased. Which of the following best explains your action? mantra: the law of supply tea and coffee are complements the substitution effect the income effect your nominal income has increased 2. For which of the following would the income effect of a price change be greatest? a. ballpoint pens b. air travel to Australia c. bubble gum d. haircuts e. hardcover college textbooks 3. The income effect of a decrease in the price of potatoes (an inferior good) is a(n) m a n U m decrease in the demand for potatoes decrease in the quantity demanded of potatoes increase in the demand for potatoes increase in the quantity demanded of potatoes new demand curve because everything else is no longer constant 4. Which of the following will not change the demand for movie tickets? a change in the cost of babysitting services a change in the price of movie tickets a change in the quality of television programs a change in the income of movie-goers a change in the number of consumers 5. Which of the following is most likely to be an inferior good? airline travel restaurant meals a subscription to the Wall Street Journal soft drinks used clothing Page: 2 ECOlll Professor M. Redlo Exam, Chapters 3, 5, 6 6. Which of the following might cause the demand for ice cream, a normal good, to increase? a. a rise in the price of ice cream b. a rise in the price of sherbet c. cooler weather d. a decrease in the number of consumers e. a drop in consumer income 7. If good B is a complement to good A, then a rise in the price of B increases the quantity demanded of A decreases the demand for A increases the demand for A decreases the quantity demanded of A will cause the demand for B to increase mantra: 8. An increase in the demand for peanut butter could be caused by a(n) decrease in consumer income increase in the supply of peanut butter decrease in the priCe of bread drought in Georgia that destroyed 30 percent of the peanut crop decrease in the price of bologna mantra: 9. A change in the composition of the population will generally a. change demand only if there is a change in the size of the population 'b. change demand only if there is no change in the size of the population c. change demand even if there is no change in the size of the population d. have absolutely no effect on demand e. reSult in a movement along the demand curve 10. Which of the following would not cause the demand curve for peaches to shift? a. an increase in the price of apricots b. a decrease in the price of nectarines c. an increase in the price of peaches d. a change in preferences for peaches e. a decrease in the income of peach buyers ECOlll Page: 3 Professor M. Redlo Exam, Chapters 3, 5, 6 11. If a certain type of clothing becomes more fashionable, we would expect its equilibrium price 12. 13. 14. 15. mantra: will decrease and quantity will remain constant and quantity will both decrease will increase and quantity will decrease will decrease and quantity will increase and quantity will both increase Which of the following is the reason supply curves typically slope upward? m (DQOU' When the supply of a product increases, 3' 00.050! 0000'!!! Opportunity cost of production increases as quantity supplied increases. Supply increases as opportunity cost decreases. Price increases as supply decreases. Quantity supplied is unrelated to price. The income and substitution effects of a price change. this implies that more will be purchased at the same price the price of the product first declined demand for the good must have increased producers will be willing to accept a lower price for each unit sold producers will offer less for sale at each possible price surplus of wheat is impossible if people are hungry is impossible if the price of wheat is below equilibrium will increase the price of wheat is unlikely to cause any change in the price of wheat indicates that the problem of scarcity of wheat has been solved The effect of a rise in consumer income on equilibrium price and quantity of Florida orange juiCe (a normal good) is 00.0!!!” to increase equilibrium price and quantity to decrease equilibrium price and quantity to increase equilibrium price and decrease equilibrium quantity to increase equilibrium quantity and decrease equilibrium price that equilibrium price and quantity remain constant ECOlll Exam, Chaptersig, 5, 6 Page: Professor M. Redlo 16. Attempts are being made to develop a biodegradable plastic using agricultural produce such as potatoes. If these attempts are successful, what will happen to the equilibrium price and quantity of potatoes? 17. 18. 19. {DD-00'!” will increase and will increase will decrease will decrease Price Price Price Price and quantity decrease. and quantity increase. and quantity increase. quantity decrease. No change in equilibrium price and quantity will occur. Assume supply increases slightly and demand increases greatly. Which of the following will happen? mQOUW equilibrium price falls equilibrium price rises equilibrium price rises equilibrium price falls and equilibrium quantity rises and equilibrium quantity falls and equilibrium quantity rises and equilibrium quantity falls neither equilibrium price nor equilibrium quantity changes Many people argue against increasing the minimum wage because they believe the result would be increased unemployment. Which of the following best summarizes this argument? A higher minimum wage would a. b. c. increase decrease increase quantity decrease quantity increase of labor the supply of labor while decreasing the supply of labor while increasing the quantity supplied of labor while demanded of labor the quantity supplied of labor while demanded of labor the supply of labor while decreasing the demand for labor the demand for labor decreasing the increasing the the quantity demanded Firms would like to know the price elasticity of demand for their product because it helps determine the effect of price changes on the firms‘ (DO-0U!” property taxes profits quantity supplied revenues total costs 4 ECOlll Page: 5 Professor M. Redlo Exam, Chapters 3, 5, 6 20. 21. 22. 23. In calculating price elasticity of demand, which of the following is assumed to be held constant? the price of the product itself the quantity demanded of the product total revenue received from the sale of the product the prices of all other products none of the above mQOU'fl! If the price of Pepsi-Cola increases from 40 cents to 50 cents per can and the quantity demanded decreases from 100 cans to 50 cans, then, according to the midpoint formula, the value of price elasticity of demand for Pepsi-Cola is a. —0.5 ‘ b. ~O.25 c. -l d. -3 e. -2 If the value of the price elasticity of demand is -O.2, this means that a a. 20 percent decrease in price causes a 1 percent increase in quantity demanded b. 0.2 percent decrease in price causes a 1 percent increase in quantity demanded 5 percent decrease in price causes a 1 percent increase in quantity demanded d. 0.2 percent decrease in price causes a 0.2 percent increase in quantity demanded e. 100 percent decrease in price causes a 200 percent increase in quantity demanded When quantity is measured in gallons, the price elasticity of demand for milk will be the price elasticity when quantity is measured in quarts. the same as four times one quarter two times less than $00!?!” ECOlll Page: Professor M. Redlo Exam, Chapters 3, 5, 6 24. 25. ‘26. 27. an The midpoint formula of elasticity solves the problem of, a. b. c. d. e. whether price or quantity is in the numerator which price or quantity to use as a base for calculating percentage changes whether to use quantity supplied or demanded removing the negative sign whether to use income or price in the denominator If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units, then, according to the midpoint formula, the value of price elasticity of demand is ‘ (00.01?!” -1/3 -2 1/3 -1/4 -3 -2/3 If a 5% increase in price leads to an 8% decrease in quantity demanded, demand is mantra: perfectly elastic elastic unit elastic inelastic perfectly inelastic If the price of Pepsi-Cola increases from 50 cents to 60 cents per can and the quantity demanded decreases from 100 cans to 50 cans, then the demand for Pepsi—Cola is 0000'!” unit elastic perfectly elastic perfectly inelastic relatively elastic relatively inelastic 6 Page: 7 ECOlll Professor M. Redlo Exam, Chapters 3, 5, 6 28. The price elasticity of demand a. is of no use to producers b. tells producers what will happen to total profit if they change product price c. tells producers what will happen to quantity supplied if they change product price d. tells producers what will happen to total revenue if they change product price e. tells producers what will happen to price in the following time period . 29. Along a downward-sloping linear demand curve, total revenue is greatest if demand is inelastic elastic inelastic when prices are high elastic when prices are high unit elastic mantra» 30. It has been suggested that if NHL hockey teams would lower ticket prices, they could increase revenue from ticket sales. This suggestion is based on which of the following assumptions? a Both d and e are correct. b All of the follOWing are correct. c. Demand for NHL hockey is income inelastic. d Demand for NHL hockey is priCe elastic. e. There are many substitutes for NHL hockey. 31. If Joe Normal says nothing comes close to a Pepsi, his demand for Pepsi is likely to be a. relatively price elastic b. relatively income elastic c. relatively price inelastic d. unit elastic e. infinitely elastic Page: 8 ECOlll Professor M. Redlo Exam, Chaptersjg, 5, 6 "* 32. For which of the following is demand most likely to be price inelastic? a. lamb b. meat c. veal d. pork e. beef 33. If price increases from $45 to $55, the market quantity supplied increases from 20 units per week to 30 units per week. The price elasticity of supply is a. 1/2 = 0.5 b. 1.0 c. 11/6 = 1.8333 d. 9/4 = 2.25 e. 2.0 34. The supply of paintings by Van Gogh is most likely to be of infinite elasticity because supply is limited of high elasticity because supply is limited elastic because the paintings are luxury goods inelastic because supply is limited unit elastic (DO-DUB! 35. The supply curve will be more elastic if a. a good has few substitutes b. the time the producer has to adjust is long c. the time frame for adjusting to price changes is short d. demand is elastic e. demand is inelastic 36. Inferior goods have an income elasticity of demand that is . positive negative 0 greater than 1 in absolute value equal to l in absolute value anUflJ ECOlll Exam, Chaptrrs 3, 5, 6 37. 38. 39. 40. Demand for a necessity, a. c. d. e. such as food, is both income and price inelastic income inelastic and price elastic income elastic and price inelastic both income and price elastic income elastic and perfectly price inelastic Professor M. Redlo If the cross-price elasticity of demand is -3, then o a mantra: the goods are substitutes one good is price inelastic one good is an inferior good one good is‘a luxury good the goods are complements Utility is easily measured because consumption easily measured because easily measured because hard to measure because hard to measure because Marginal utility is the Page: all people derive the same utility from it it it it is is is is an objective a subjective a subjective an objective concept concept concept concept overall satisfaction obtained from consuming a good additional satisfaction obtained from consuming one more unit of a good average satisfaction obtained from consuming a good the change in satisfaction obtained from consuming 1 percent more of a good additional cost of one more unit of a good 9 ECOlll Page: 10 Professor M. Redlo Exam, Chaptersii, 5, 6 41. 42. 43. 44. The law of diminishing marginal utility states that a. 0 total utility falls as more of a good is consumed, other things constant . ' total utility falls as marginal utility falls, other things constant marginal utility falls as total utility increases, other things constant marginal utility falls constant marginal utility falls constant as more of a good is consumed, other things as less of a good is consumed, other things Which of the following illustrates the law of diminishing marginal utility? a. b. The marginal utility of Diane's second Coke is greater than the marginal utility of her third pretzel, other things constant. The marginal utility of Diane‘s second Coke is greater than the marginal utility of Ken's third pretzel, other things constant. The marginal utility of Diane's second Coke is greater than the marginal utility of her third Coke, other things constant. The total utility of one Coke is greater than the total utility of two Cokes, other things constant. The marginal utility of Diane's second Coke is greater than the marginal utility of Ken's third Coke, other things constant. "The second glass of Evian water was very good. May I have another?" Which of the following is necessarily true regarding this statement? second glass is negative. a. The marginal utility of the b. The marginal utility of the second glass is less than the marginal utility of the first glass. c. The marginal utility of the second glass is positive. d. The water is free. e. The marginal utility of the third glass is negative. Joe the Economist tells his wife, Jane, that he wants to spend a weekend fishing with his friends. before she hits Joe with a croquet mallet, She replies, "You don't love me anymore." Just Joe explains to her that she has confused the concepts of 00.017?” marginal utility and price income and price marginal utility and total utility love and death consumer surplus and utility BCOlll Exam, Chapters 3, 5, 6 -.f\ Page: 11 Professor M. Redlo 45. If marginal utility is positive, then total utility is 46. 47. 48. a. constant b. negative c. increasing d. decreasing e. 0 Suppose you go to a wedding reception that has free drinks. What is likely to be the marginal utility of the last drink you had? a. infinite b. 0 c. l d less than 0 e greater than 1 Which of the following people is least likely to clip store coupons? a retired person an unemployed person a low-income worker a. b c. d a high-priced consultant e a graduate student on summer break One reason why a consumer might buy from a high-priced local hardware store instead of going to a big discount store several miles away in another community is that a. the local store will still have lower money prices b. the time cost of going to the local store is equal to going to the discount store c. comparing the sum of money prices store is a bargain for people who d. comparing the sum of money prices store is a bargain for people who and time cost, the local hardware value time highly and time cost, the local hardware earn low hourly wages e. the time cost of going to the discount store is less than going to the local hardware store Page: 12 £COlll Professor M. Redlo Exam, Chapters 3, S, 6 49. Which of the following must be true of an attorney who buys a portable computer so that she can work on trains and planes? a. She is engaging in conspicuous consumption. b. She gets utility from working. c. She thinks the opportunity cost of her time is higher than it really is. d. She thinks the opportunity cost of her time is lower than it really is. e. She is trying to reduce the opportunity cost of traveling. 50. Your willingness to pay additional money for time-saving goods depends primarily on the opportunity cost of your time your wealth and property your social status the number of people in your household the distance between your home and your workplace (00.00“!!! com 5mm 21‘ E c . o o n c o c ...
View Full Document

Page1 / 13

ECO 111 Exam 2 - £C0111 Page: 1 Professor M. Redlo Exam,...

This preview shows document pages 1 - 13. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online