ECON 102 Quiz Lesson 4 - Assignment Essays

question

Suppose that the number of units of good X consumed falls 12 percent when the price of good Y falls 8 percent. The cross price elasticity of demand between goods X and Y is:

answer

1.5

question

Sarah gets a salary increase of 20 percent. Before her raise, she purchased 5 pounds of hamburger and 1 pound of beef stew a month. After her raise, she consumes 2 pounds of hamburger and 3 pounds of beef stew a month. If everything else is held constant, we know that:

answer

hamburger is an inferior good and beef stew is a normal good for Sarah

question

After the price of music downloads falls, Phil buys fewer CDs and buys a new MP3 player. For Phil,:

answer

music downloads and CDs are substitutes, and music downloads and MP3 players are complements

question

The signals in markets are determined:

answer

by supply and demand

question

A per-unit government subsidy to producers of a good tends to:

answer

increase the supply of the good

question

Given the market data for good X in the above table, an equilibrium quantity is established at:

answer

60 units

question

A demand curve for a normal good:

answer

shows the inverse relationship between price and quantity demanded

question

Which of the following will cause a movement along the demand curve instead of a shift of the demand curve?

answer

none of the above

question

In the above figure, when the price of Good B increases, the result can be shown by:

answer

the movement along D0 from P1 to P2

question

Which of the following statements is consistent with a decrease in supply?

answer

Prices of raw material inputs have increased

question

The price elasticity of demand is a measure of:

answer

the responsiveness of the quantity demanded of a good to a changes in the price of the good

question

Refer to Figure 4-2. What area represents the increase in producer surplus when the market price rises from P1 to P2?

answer

A + B

question

Suppose that the cross price elasticity of demand between goods A and B equals 1.5. Which of the following is TRUE?

answer

A and B are substitutes because the cross price elasticity is positive

question

An excess quantity supplied can be corrected by:

answer

a fall in price

question

Other things being constant, the only way to move along a given supply curve for a product is for:

answer

the product's relative price to change

question

In the above figure, if the market price is $100 per ton, then the firm's producer surplus on the second ton of wheat is:

answer

$25

question

According to the above table, at a price of $2 per unit, which of the following would exist?

answer

A shortage of 400 units

question

An increase in demand and an increase in supply will lead to:

answer

an unambiguous increase in quantity, but the effect on price is indeterminate

question

Suppose we observe the following two simultaneous events in the market for beef. First, there is a decrease in the demand for beef due to changes in consumer tastes. And second, there is a reduction in supply due to cattle farmers selling their land to real estate developers. We know with certainty that these two simultaneous events will cause which of the following?

answer

a decrease in the equilibrium quantity and an indeterminate change in the equilibrium price

question

Deadweight loss is the decrease in ________ from producing an inefficient amount of a product.

answer

consumer surplus and producer surplus

question

The figure illustrates the market for bagels. If the number of bagels is cut from 20 to 10 an hour, the deadweight loss is ________.

answer

$5.00 an hour

question

Which of the following statements best describes the concept of consumer surplus?

answer

"I was all ready to pay $300 for a new leather jacket that I had seen in Macy's but I ended up paying only $180 for the same jacket."

question

Suppose that when the price of root beer rises 10%, the quantity of pizza demanded falls 20%. This would mean that pizza and root beer are

answer

complements, with a cross price elasticity of -2.0

question

Holding supply constant, an increase in demand leads to

answer

higher prices and higher quantity supplied

question

When there is a shortage,
I. there is a tendency for price to increase.
II. there is an excess quantity demanded.

answer

Both I and II

question

According to the above figure for a gasoline market, what happens when the price per gallon of gasoline jumps from $1 to $4?

answer

A surplus of 40 million gallons/day results

question

Refer to the above figure. A shortage will exist when

answer

the price is between $0 and $6

question

If resources are used efficiently, then ________.

answer

consumer surplus plus producer surplus is maximized

question

An inelastic demand indicates that:

answer

relatively large changes in price are required to obtain a relatively small change in quantity demanded

question

Refer to the above figure. A surplus will exist when:

answer

the price equals $10

question

Other things being equal, an increase in wages paid to workers in the steel industry will cause:

answer

the supply of steel to decrease

question

Which of the following statements is FALSE?

answer

An increase in income causes the demand curve for an inferior good to shift to the right

question

Which of the following would NOT affect a good's price elasticity of demand?

answer

The cost of producing the good

question

Paul goes to Sportsmart to buy a new tennis racquet. He is willing to pay $200 for a new racquet, but buys one on sale for $125. Paul's consumer surplus from the purchase is:

answer

$75

question

Of the following, which is the least likely to be an example of substitute goods?

answer

Beer and pretzels

question

An increase in demand for a good can be caused by:

answer

a decrease in the price of a complementary good

question

In a market system, how are the price signals established?

answer

The forces underlying supply and demand interact to determine a market clearing price

question

A demand relationship in which the quantity demanded changes exactly in proportion to the change in price is:

answer

unit-elastic

question

The price elasticity of demand measures:

answer

the consumers' sensitivity to a price change

question

In the above figure, what would result if the price was $40?

answer

a surplus

question

Holding supply constant, an increase in demand leads to:

answer

higher prices and higher quantity supplied

question

Suppose that goods X and Y are substitutes and the price of good Y falls. We would then expect:

answer

an increase in the quantity demanded of good Y and a decrease in the demand for good X

question

In general, any ceteris paribus determinant of supply that is favorable to production will:

answer

shift the supply curve to the right

question

Inelastic demand implies:

answer

that a one percent increase in price results in a smaller than one percent decrease in quantity demanded

question

Arthur buys a new cell phone for $150. He receives consumer surplus of $150 from the purchase. How much does Arthur value his cell phone?

answer

$300

question

Refer to Figure 4-2. What area represents producer surplus at a price of P2?

answer

A + B + C

question

Refer to the above figure. A shortage will exist when:

answer

the price is between $0 and $6

question

Which of the following statements about demand and price elasticity of demand is TRUE?

answer

As the demand curve has a negative slope, the price elasticity of demand is negative

question

If equilibrium is achieved in a competitive market:

answer

there is no deadweight loss

question

Another term for the equilibrium price is:

answer

market clearing price

question

The decrease in consumer surplus and producer surplus that results from an inefficient level of production is called the:

answer

deadweight loss

question

If more buyers came into the market for a good, we would expect to see the market demand curve:

answer

shift outward and to the right

question

The figure illustrates the market for bagels. Initially the market is in equilibrium, Then the number of bagels produced is cut from 20 to 10 an hour and the price rises to $2.00 per bagel. Consumer surplus decreases by ________.

answer

$7.50 an hour

question

Fashion trends are a nonprice determinant for demand because:

answer

they influence people's tastes and preferences in clothing

question

Refer to the above figure. Moving from point A to point B indicates:

answer

A decrease in quantity supplied

question

The longer the time frame involved, the more likely it is that the demand will be relatively:

answer

elastic

question

When demand is perfectly inelastic, the demand curve is:

answer

vertical

question

In the above figure, the lowest price for which the firm will sell its second ton of wheat is:

answer

$75

1 of 58

question

Suppose that the number of units of good X consumed falls 12 percent when the price of good Y falls 8 percent. The cross price elasticity of demand between goods X and Y is:

answer

1.5

question

answer

hamburger is an inferior good and beef stew is a normal good for Sarah

question

After the price of music downloads falls, Phil buys fewer CDs and buys a new MP3 player. For Phil,:

answer

music downloads and CDs are substitutes, and music downloads and MP3 players are complements

question

The signals in markets are determined:

answer

by supply and demand

question

A per-unit government subsidy to producers of a good tends to:

answer

increase the supply of the good

question

Given the market data for good X in the above table, an equilibrium quantity is established at:

answer

60 units

question

A demand curve for a normal good:

answer

shows the inverse relationship between price and quantity demanded

question

Which of the following will cause a movement along the demand curve instead of a shift of the demand curve?

answer

none of the above

question

In the above figure, when the price of Good B increases, the result can be shown by:

answer

the movement along D0 from P1 to P2

question

Which of the following statements is consistent with a decrease in supply?

answer

Prices of raw material inputs have increased

question

The price elasticity of demand is a measure of:

answer

the responsiveness of the quantity demanded of a good to a changes in the price of the good

question

Refer to Figure 4-2. What area represents the increase in producer surplus when the market price rises from P1 to P2?

answer

A + B

question

Suppose that the cross price elasticity of demand between goods A and B equals 1.5. Which of the following is TRUE?

answer

A and B are substitutes because the cross price elasticity is positive

question

An excess quantity supplied can be corrected by:

answer

a fall in price

question

Other things being constant, the only way to move along a given supply curve for a product is for:

answer

the product's relative price to change

question

In the above figure, if the market price is $100 per ton, then the firm's producer surplus on the second ton of wheat is:

answer

$25

question

According to the above table, at a price of $2 per unit, which of the following would exist?

answer

A shortage of 400 units

question

An increase in demand and an increase in supply will lead to:

answer

an unambiguous increase in quantity, but the effect on price is indeterminate

question

answer

a decrease in the equilibrium quantity and an indeterminate change in the equilibrium price

question

Deadweight loss is the decrease in ________ from producing an inefficient amount of a product.

answer

consumer surplus and producer surplus

question

The figure illustrates the market for bagels. If the number of bagels is cut from 20 to 10 an hour, the deadweight loss is ________.

answer

$5.00 an hour

question

Which of the following statements best describes the concept of consumer surplus?

answer

"I was all ready to pay $300 for a new leather jacket that I had seen in Macy's but I ended up paying only $180 for the same jacket."

question

Suppose that when the price of root beer rises 10%, the quantity of pizza demanded falls 20%. This would mean that pizza and root beer are

answer

complements, with a cross price elasticity of -2.0

question

Holding supply constant, an increase in demand leads to

answer

higher prices and higher quantity supplied

question

When there is a shortage,
I. there is a tendency for price to increase.
II. there is an excess quantity demanded.

answer

Both I and II

question

According to the above figure for a gasoline market, what happens when the price per gallon of gasoline jumps from $1 to $4?

answer

A surplus of 40 million gallons/day results

question

Refer to the above figure. A shortage will exist when

answer

the price is between $0 and $6

question

If resources are used efficiently, then ________.

answer

consumer surplus plus producer surplus is maximized

question

An inelastic demand indicates that:

answer

relatively large changes in price are required to obtain a relatively small change in quantity demanded

question

Refer to the above figure. A surplus will exist when:

answer

the price equals $10

question

Other things being equal, an increase in wages paid to workers in the steel industry will cause:

answer

the supply of steel to decrease

question

Which of the following statements is FALSE?

answer

An increase in income causes the demand curve for an inferior good to shift to the right

question

Which of the following would NOT affect a good's price elasticity of demand?

answer

The cost of producing the good

question

Paul goes to Sportsmart to buy a new tennis racquet. He is willing to pay $200 for a new racquet, but buys one on sale for $125. Paul's consumer surplus from the purchase is:

answer

$75

question

Of the following, which is the least likely to be an example of substitute goods?

answer

Beer and pretzels

question

An increase in demand for a good can be caused by:

answer

a decrease in the price of a complementary good

question

In a market system, how are the price signals established?

answer

The forces underlying supply and demand interact to determine a market clearing price

question

A demand relationship in which the quantity demanded changes exactly in proportion to the change in price is:

answer

unit-elastic

question

The price elasticity of demand measures:

answer

the consumers' sensitivity to a price change

question

In the above figure, what would result if the price was $40?

answer

a surplus

question

Holding supply constant, an increase in demand leads to:

answer

higher prices and higher quantity supplied

question

Suppose that goods X and Y are substitutes and the price of good Y falls. We would then expect:

answer

an increase in the quantity demanded of good Y and a decrease in the demand for good X

question

In general, any ceteris paribus determinant of supply that is favorable to production will:

answer

shift the supply curve to the right

question

Inelastic demand implies:

answer

that a one percent increase in price results in a smaller than one percent decrease in quantity demanded

question

Arthur buys a new cell phone for $150. He receives consumer surplus of $150 from the purchase. How much does Arthur value his cell phone?

answer

$300

question

Refer to Figure 4-2. What area represents producer surplus at a price of P2?

answer

A + B + C

question

Refer to the above figure. A shortage will exist when:

answer

the price is between $0 and $6

question

Which of the following statements about demand and price elasticity of demand is TRUE?

answer

As the demand curve has a negative slope, the price elasticity of demand is negative

question

If equilibrium is achieved in a competitive market:

answer

there is no deadweight loss

question

Another term for the equilibrium price is:

answer

market clearing price

question

The decrease in consumer surplus and producer surplus that results from an inefficient level of production is called the:

answer

deadweight loss

question

If more buyers came into the market for a good, we would expect to see the market demand curve:

answer

shift outward and to the right

question

answer

$7.50 an hour

question

Fashion trends are a nonprice determinant for demand because:

answer

they influence people's tastes and preferences in clothing

question

Refer to the above figure. Moving from point A to point B indicates:

answer

A decrease in quantity supplied

question

The longer the time frame involved, the more likely it is that the demand will be relatively:

answer

elastic

question

When demand is perfectly inelastic, the demand curve is:

answer

vertical

question

In the above figure, the lowest price for which the firm will sell its second ton of wheat is:

answer

$75

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