ECO 2305 Exam 2 TTU - Assignment Essays

question

The price elasticity of supply for the Hope Diamond is zero because there is only one. Therefore, the supply curve for the Hope Diamond is:

answer

perfectly inelastic

question

The market equilibrium is only efficient if:

answer

all relevant costs and benefits are reflected in the market supply and demand curves

question

A firm earns a normal profit when its:

answer

economic profit is zero

question

Which of the following will cause an increase in market supply?

answer

a technological innovation that lowers the marginal cost of producing the good

question

Suppose two demand curves intersect and so have a point in common. At that point, demand shown by the steeper curve will be ____________ than the flatter curve.

answer

less elastic than

question

If the price of cheese falls by 1% and the quantity demanded rises by 3%, then the price elasticity of demand for cheese is equal to:

answer

question

The tendency for consumers to purchase more of a good or service as its price falls is captured by:

answer

the law of demand

question

On a given linear demand curve, as price increases demand becomes:

answer

more elastic

question

To increase total revenue, ______ demand should lower price, and firms with ________ demand should increase price.

answer

elastic; inelastic

question

A demand curve that is drawn as a vertical line has a price elasticity of demand equal to:

answer

question

Which of the following would be considered a factor of production in the provision of bus service?

answer

bus drivers

question

One difference between the long run and the short run in a perfectly competitive industry is that:

answer

firms necessarily earn zero economic profit in the long run but may earn positive or negative economic profit in the short run

question

In general, when the price of a fixed factor of production increases:

answer

the profit maximizing level of output does not change

question

If the absolute value of the price elasticity of demand for cell phone service is 3, then if the price of cell phone service increases by 1%, quantity demanded would:

answer

decrease by 3%

question

When the price of hot dogs is $1.50 each, 500 hot dogs are sold every day. After the price falls to $1.35 each, 510 hot dogs are sold every day. At the original price, what is the price elasticity of demand for hot dogs?

answer

0.2

question

If a 10% decrease in price for a good results in a 20% increase in quantity demanded, the price elasticity of demand is:

answer

question

Which of the following is most likely to be a fixed factor of production at a pizza restaurant?

answer

the size of the seating area

question

A firm should shut down if its total revenue is less than its _______ even when the firm produces the level of output at which the price equals marginal cost.

answer

variable cost

question

The price elasticity of demand is a measure of:

answer

the change in quantity demanded of a good that results from a change in its price

question

Demand tends to be ______ in the short run than in the long run.

answer

less elastic

question

If the absolute value of slope of the demand curve is 2.5, price is $6 per unit, and the quantity demanded is 8 units, then the price elasticity of demand is:

answer

0.3

question

Suppose a 10% increase in the price of aspirin leads to a 5% decrease in the quantity demanded of aspirin. The demand for aspirin is:

answer

inelastic

question

One assumption of the perfectly competitive model is free entry and exit. This assumption most directly leads to the implication that:

answer

positive economic profit is only possible in the short run

question

Assume that the production technology required to produce goods X and Y is very similar. If a firm that is producing good X notices that the market price of good Y is rising, it will:

answer

shift into producing good Y

question

Which of the following is a defining characteristic of all perfectly competitive markets?

answer

All firms sell the same standardized product

question

If a 1% increase in the price of oranges leads to a 5% increase in the quantity supplied, the price elasticity for the supply of oranges is:

answer

question

One implication of the shape of the demand curve facing a perfectly competitive firm is that:

answer

if the firm increases its price above the market price, it will earn zero revenue

question

A rational seller will sell another unit of output:

answer

if the cost of making another unit is less than the revenue gained from selling another unit

question

If the cross-price elasticity of demand between blueberries and yogurt is negative, then the two goods are:

answer

complements

question

Economic theory assumes that a firm's goal is to:

answer

maximize its economic profit

question

In general, perfectly competitive firms maximize their profit by producing the level of output at which:

answer

marginal cost equals price

question

Mary Jane is willing to babysit for $6 an hour. Her neighbor has asked her to babysit for $8 an hour. Assuming Mary Jane accepts the offer:

answer

her economic rent will be $2 per hour

question

Adam Smith coined the term "invisible hand" to describe the process by which the actions of independent, self-interested buyers and sellers will:

answer

often lead to the most efficient allocation of resources

question

A firm that produces a good with many substitutes will most likely find that:

answer

lowering its price will increase total revenue

question

The long run is best defined as:

answer

a period of time sufficiently long that all factors of production are variable

question

If the percentage change in the price of a good is equal to the percentage change in the quantity demanded of that good, then the demand for that good is:

answer

unit elastic

question

According to the law of demand, when the price of shoes _____ people will consume ______ shoes.

answer

falls; more

question

The role that prices play in distributing scarce goods and services to those consumers who value them the most highly is known as the _______ function of price.

answer

rationing

question

An increase in consumers' demand for espresso will lead to an increase in _____, while an increase in the number of firms producing espresso will lead to an:

answer

quantity supplied; increase in supply

question

The price elasticity of demand equals 1:

answer

at the midpoint of a straight-line demand curve

question

Suppose all firms in a perfectly competitive industry are earning an economic profit. One would expect that, over time, the number of firms in the industry will ______ and the market price will ________.

answer

rise; fall

question

When the price of a perfectly competitive firm's output rises:

answer

the firm will produce more

question

Individual supply curves generally slope _______ because ________.

answer

upward; of increasing opportunity costs

question

As one moves down along a linear demand curve (i.e., from high price, low quantity pairs to low price, high quantity pairs), demand:

answer

becomes less elastic

question

Suppose 30 employee-hours can produce 50 units of output. Assuming the law of diminishing marginal returns is present, to produce 100 units of output would require:

answer

more than 30 additional employee-hours

question

The championship game will be held next weekend in your college's 40,000-seat stadium. The supply of tickets to the game:

answer

is perfectly inelastic

question

If consumers can easily switch to a close substitute when the price of a good increases, demand for that good is likely to be:

answer

elastic

question

When Acme Dynamite produces 250 units of output, its variable cost is $2,000, and its fixed cost is $500. It sells each unit of output for $25. When Acme Dynamite produces 250 units of output, its profit is:

answer

$3,750

1 of 48

question

The price elasticity of supply for the Hope Diamond is zero because there is only one. Therefore, the supply curve for the Hope Diamond is:

answer

perfectly inelastic

question

The market equilibrium is only efficient if:

answer

all relevant costs and benefits are reflected in the market supply and demand curves

question

A firm earns a normal profit when its:

answer

economic profit is zero

question

Which of the following will cause an increase in market supply?

answer

a technological innovation that lowers the marginal cost of producing the good

question

Suppose two demand curves intersect and so have a point in common. At that point, demand shown by the steeper curve will be ____________ than the flatter curve.

answer

less elastic than

question

If the price of cheese falls by 1% and the quantity demanded rises by 3%, then the price elasticity of demand for cheese is equal to:

answer

question

The tendency for consumers to purchase more of a good or service as its price falls is captured by:

answer

the law of demand

question

On a given linear demand curve, as price increases demand becomes:

answer

more elastic

question

To increase total revenue, ______ demand should lower price, and firms with ________ demand should increase price.

answer

elastic; inelastic

question

A demand curve that is drawn as a vertical line has a price elasticity of demand equal to:

answer

question

Which of the following would be considered a factor of production in the provision of bus service?

answer

bus drivers

question

One difference between the long run and the short run in a perfectly competitive industry is that:

answer

firms necessarily earn zero economic profit in the long run but may earn positive or negative economic profit in the short run

question

In general, when the price of a fixed factor of production increases:

answer

the profit maximizing level of output does not change

question

If the absolute value of the price elasticity of demand for cell phone service is 3, then if the price of cell phone service increases by 1%, quantity demanded would:

answer

decrease by 3%

question

answer

0.2

question

If a 10% decrease in price for a good results in a 20% increase in quantity demanded, the price elasticity of demand is:

answer

question

Which of the following is most likely to be a fixed factor of production at a pizza restaurant?

answer

the size of the seating area

question

A firm should shut down if its total revenue is less than its _______ even when the firm produces the level of output at which the price equals marginal cost.

answer

variable cost

question

The price elasticity of demand is a measure of:

answer

the change in quantity demanded of a good that results from a change in its price

question

Demand tends to be ______ in the short run than in the long run.

answer

less elastic

question

If the absolute value of slope of the demand curve is 2.5, price is $6 per unit, and the quantity demanded is 8 units, then the price elasticity of demand is:

answer

0.3

question

Suppose a 10% increase in the price of aspirin leads to a 5% decrease in the quantity demanded of aspirin. The demand for aspirin is:

answer

inelastic

question

One assumption of the perfectly competitive model is free entry and exit. This assumption most directly leads to the implication that:

answer

positive economic profit is only possible in the short run

question

Assume that the production technology required to produce goods X and Y is very similar. If a firm that is producing good X notices that the market price of good Y is rising, it will:

answer

shift into producing good Y

question

Which of the following is a defining characteristic of all perfectly competitive markets?

answer

All firms sell the same standardized product

question

If a 1% increase in the price of oranges leads to a 5% increase in the quantity supplied, the price elasticity for the supply of oranges is:

answer

question

One implication of the shape of the demand curve facing a perfectly competitive firm is that:

answer

if the firm increases its price above the market price, it will earn zero revenue

question

A rational seller will sell another unit of output:

answer

if the cost of making another unit is less than the revenue gained from selling another unit

question

If the cross-price elasticity of demand between blueberries and yogurt is negative, then the two goods are:

answer

complements

question

Economic theory assumes that a firm's goal is to:

answer

maximize its economic profit

question

In general, perfectly competitive firms maximize their profit by producing the level of output at which:

answer

marginal cost equals price

question

Mary Jane is willing to babysit for $6 an hour. Her neighbor has asked her to babysit for $8 an hour. Assuming Mary Jane accepts the offer:

answer

her economic rent will be $2 per hour

question

Adam Smith coined the term "invisible hand" to describe the process by which the actions of independent, self-interested buyers and sellers will:

answer

often lead to the most efficient allocation of resources

question

A firm that produces a good with many substitutes will most likely find that:

answer

lowering its price will increase total revenue

question

The long run is best defined as:

answer

a period of time sufficiently long that all factors of production are variable

question

If the percentage change in the price of a good is equal to the percentage change in the quantity demanded of that good, then the demand for that good is:

answer

unit elastic

question

According to the law of demand, when the price of shoes _____ people will consume ______ shoes.

answer

falls; more

question

The role that prices play in distributing scarce goods and services to those consumers who value them the most highly is known as the _______ function of price.

answer

rationing

question

An increase in consumers' demand for espresso will lead to an increase in _____, while an increase in the number of firms producing espresso will lead to an:

answer

quantity supplied; increase in supply

question

The price elasticity of demand equals 1:

answer

at the midpoint of a straight-line demand curve

question

answer

rise; fall

question

When the price of a perfectly competitive firm's output rises:

answer

the firm will produce more

question

Individual supply curves generally slope _______ because ________.

answer

upward; of increasing opportunity costs

question

As one moves down along a linear demand curve (i.e., from high price, low quantity pairs to low price, high quantity pairs), demand:

answer

becomes less elastic

question

Suppose 30 employee-hours can produce 50 units of output. Assuming the law of diminishing marginal returns is present, to produce 100 units of output would require:

answer

more than 30 additional employee-hours

question

The championship game will be held next weekend in your college's 40,000-seat stadium. The supply of tickets to the game:

answer

is perfectly inelastic

question

If consumers can easily switch to a close substitute when the price of a good increases, demand for that good is likely to be:

answer

elastic

question

answer

$3,750

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