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Test 3 MC

# Test 3 MC - 1"I like ice cream but after eating homemade...

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1. "I like ice cream, but after eating homemade ice cream last night, I want to have something else for dessert today." This statement most clearly reflects a. the budget constraint. b. consumer irrationality. c. the second law of demand: Price elasticity increases with time. d. the law of diminishing marginal utility. 2. Studies indicate that the demand for fresh tomatoes is much more elastic than the demand for salt. These findings reflect that a. tomatoes are a necessity while salt is a luxury. b. it takes longer for consumers to adjust to a change in the price of salt than to a change in the price of tomatoes. c. salt will not spoil as easily as fresh tomatoes. d. more good substitutes exist for fresh tomatoes than for salt. 3. Suppose the state of New York imposes a one dollar per pack tax on cigarettes, which increases their price by 30 percent, and as a result, the quantity sold declines by 20 percent. The price elasticity of demand for cigarettes is equal to a. -0.20. b. -0.67. c. -1.50. d. -3.00. 4. 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.i

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5. If the price of gasoline goes up, and Dan now buys fewer candy bars because he has to spend more on gas, this would best be explained by a. the substitution effect. b. the income effect. c. the highly elastic demand for gasoline. d. all of the above. 6. Marginal utility is the change in a. total utility when an extra unit of output is produced. b. total utility when an extra unit of output is consumed. c. marginal utility when an extra unit of output is produced. d. average utility when an extra unit of output is consumed. 7. The principle of diminishing marginal utility says that a. as more of a good or service is consumed, demand will decrease. b. as more of a good or service is consumed, the price will rise. c. the marginal utility of additional units consumed will increase. d. the marginal utility of additional units consumed will decline. 8. If the price of a good is \$0, a consumer will a. consume an infinite quantity. b. consume all units with positive marginal utility. c. consume the entire amount supplied. d. consume until total utility becomes 0. 9. Ceteris paribus , an increase in the price of a good will cause the a. quantity demanded of the good to increase. b. quantity supplied of the good to decrease. c. consumer surplus derived from the good to decrease. d. demand of the good to increase.
10. If John's marginal benefit derived from the consumption of another candy bar is greater than the price of the candy bar, a. John will not purchase any more candy bars. b. John will increase his total satisfaction by purchasing the candy bar. c. the opportunity cost of the candy bar is lower than the price.

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Test 3 MC - 1"I like ice cream but after eating homemade...

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