question
If the price of textbooks increases by one percent and the quantity demanded falls by one-half percent, then the price elasticity of demand is equal to:
A. 0.05
B. 0.5
C. 2
D. 5
A. 0.05
B. 0.5
C. 2
D. 5
answer
B. 0.5
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:
A. Increase by 0.33%
B. decrease by 0.33%
C. increase by 3%
D. decrease by 3%
A. Increase by 0.33%
B. decrease by 0.33%
C. increase by 3%
D. decrease by 3%
answer
D. decrease by 3%.
question
If 20% increase in the price of a good leads to a 60% decrease in the quantity demanded, then what is the price elasticity of demand?
A. 30
B. 3
C. 1/3
D. 1/6
A. 30
B. 3
C. 1/3
D. 1/6
answer
B. 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?
A. 66.67
B. 5
C. 2
D. 0.2
A. 66.67
B. 5
C. 2
D. 0.2
answer
D. 0.2
question
If consumers respond to a 10% price reduction by buying twice as much of a particular good, we would conclude that:
A. there was excess demand at the original price
B. there was excess supply at the original price
C. the price elasticity of demand at the original price was greater than one.
D. the price elasticity of demand at the original price was less than one
A. there was excess demand at the original price
B. there was excess supply at the original price
C. the price elasticity of demand at the original price was greater than one.
D. the price elasticity of demand at the original price was less than one
answer
C. the price elasticity of demand at the original price was greater than one.
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:
A. elastic
B. inelastic
C. unit elastic
D. perfectly elastic
A. elastic
B. inelastic
C. unit elastic
D. perfectly elastic
answer
C. unit elastic
question
Which of the following is likely to have the highest price elasticity of demand?
A. shoes
B. running shoes
C. Nike running shoes
D. The price elasticity of demand will be the same for all of the answers listed.
A. shoes
B. running shoes
C. Nike running shoes
D. The price elasticity of demand will be the same for all of the answers listed.
answer
C. Nike running shoes
question
Suppose the price of a Snickers candy bar is $2.00 at both the airport and the grocery store. The price elasticity of demand for a Snickers candy bar at an airport is likely to be ______ the price elasticity of demand for a Snickers candy bar at the grocery store.
A. less than
B. equal to
C. greater than
D. the reciprocal of
A. less than
B. equal to
C. greater than
D. the reciprocal of
answer
less than
question
All else equal, the price elasticity of demand for a good tends to be lower:
A. if the good has few close substitutes
B. if the good represents a large share of a consumer's budget
C. in the long run
D. if the good has many close substitutes
A. if the good has few close substitutes
B. if the good represents a large share of a consumer's budget
C. in the long run
D. if the good has many close substitutes
answer
A. if the good has few close substitutes.
question
Suppose that the demand for electricity has been found to be price inelastic. The most likely explanation for this finding is that:
A. electricity is a luxury good
B. the fraction of income spent on electricity is large
C. few substitutes for electricity exist
D. electricity is sold in a monopoly market
A. electricity is a luxury good
B. the fraction of income spent on electricity is large
C. few substitutes for electricity exist
D. electricity is sold in a monopoly market
answer
C. few substitutes for electricity exist.
question
All else equal, the price elasticity of demand for small-budget items such as soap tends to be ______ than the price elasticity of demand for big-ticket items such as flat-screen TVs.
A. higher
B. lower
C. very high
D. the same
A. higher
B. lower
C. very high
D. the same
answer
B. lower
question
If the quantity demanded of a good is Q when the price for the good is P, the price elasticity of demand for that good at that point is:
A. (P/Q) x (1/slope)
B. (Q/P) x (1/slope)
C. (P/Q) x (slope)
D. Q x P x (1/slope)
A. (P/Q) x (1/slope)
B. (Q/P) x (1/slope)
C. (P/Q) x (slope)
D. Q x P x (1/slope)
answer
A. (P/Q) × (1/slope)
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:
A. 0.3.
B. 0.533.
C. 1.6.
D. 1.875.
A. 0.3.
B. 0.533.
C. 1.6.
D. 1.875.
answer
A. 0.3
question
If the absolute value of the slope of the demand curve is 0.25, price is $8 per unit, and quantity demanded is 12 units, then demand for this good is:
A. perfectly elastic
B. elastic
C. unit elastic
D. inelastic
A. perfectly elastic
B. elastic
C. unit elastic
D. inelastic
answer
B. elastic
question
Demand tends to be ______ in the short run than in the long run.
A. more elastic
B. less elastic
C. more variable
D. less important
A. more elastic
B. less elastic
C. more variable
D. less important
answer
B. less elastic
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:
A. becomes more elastic
B. increases
C. decreases
D. becomes less elastic
A. becomes more elastic
B. increases
C. decreases
D. becomes less elastic
answer
D. becomes less elastic.
question
If the percentage change in quantity demanded is zero for any percentage change in the price of the good, demand is classified as:
A. inelastic
B. perfectly inelastic
C. unit elastic
D. perfectly elastic
A. inelastic
B. perfectly inelastic
C. unit elastic
D. perfectly elastic
answer
B. perfectly inelastic.
question
A demand curve that is drawn as a vertical line has a price elasticity of demand equal to:
A. 0
B. 1
C. infinity
D. the quantity
A. 0
B. 1
C. infinity
D. the quantity
answer
A. 0
question
If demand is ______ with respect to price, a price increase will ______ total revenue.
A. elastic; increase
B. inelastic; increase
C. unit elastic; decrease
D. inelastic; decrease
A. elastic; increase
B. inelastic; increase
C. unit elastic; decrease
D. inelastic; decrease
answer
B. inelastic; increase
question
To increase total revenue, firms with ______ demand should lower price, and firms with ______ demand should increase price.
A. elastic; unit
B. elastic; inelastic
C. inelastic; elastic
D. unit; inelastic
A. elastic; unit
B. elastic; inelastic
C. inelastic; elastic
D. unit; inelastic
answer
B. elastic; inelastic
question
If the San Diego Opera decreases the price of their opera tickets and their total revenue falls, then this suggests that, at the original price, the demand for tickets to the San Diego Opera was:
A. unit elastic
B. elastic
C. inelastic
D. either elastic or inelastic
A. unit elastic
B. elastic
C. inelastic
D. either elastic or inelastic
answer
C. inelastic
question
When Taylor raised the price of earrings at Taylor's Boutique, her total revenue from selling earrings increased. This suggests that:
A. the demand for Taylor's earrings at the original price was elastic
B. there are many other boutiques competing with taylor
C. there was excess demand for earrings at the original price
D. the demand for Taylor's earrings at the original price was inelastic.
A. the demand for Taylor's earrings at the original price was elastic
B. there are many other boutiques competing with taylor
C. there was excess demand for earrings at the original price
D. the demand for Taylor's earrings at the original price was inelastic.
answer
D. the demand for Taylor's earrings at the original price was inelastic.
question
Suppose that total expenditures for coffee reach a maximum at a price of $5 per pound. At this price, the demand for coffee is:
A. elastic
B. inelastic
C. unit elastic
D. perfectly inelastic
A. elastic
B. inelastic
C. unit elastic
D. perfectly inelastic
answer
C. unit elastic
question
A seller's supply curve shows the seller's:
A. willingness to pay for an additional unit of output at each quantity
B. opportunity cost of producing an additional unit of output at each quantity.
C. hourly wage for producing an additional unit of output at each quantity
D. profit from producing an additional unit of output at each quantity
A. willingness to pay for an additional unit of output at each quantity
B. opportunity cost of producing an additional unit of output at each quantity.
C. hourly wage for producing an additional unit of output at each quantity
D. profit from producing an additional unit of output at each quantity
answer
B. opportunity cost of producing an additional unit of output at each quantity.
question
Individual supply curves generally slope ______ because ______.
A. downward; sellers become more efficient with practice
B. upward; profits increase with quantity
C. downward; inputs are cheaper when purchased in high volume
D. upward; of increasing opportunity costs
A. downward; sellers become more efficient with practice
B. upward; profits increase with quantity
C. downward; inputs are cheaper when purchased in high volume
D. upward; of increasing opportunity costs
answer
D. upward; of increasing opportunity costs.
question
Total revenue minus both explicit and implicit costs defines a firm's:
A. gross earnings
B. profit
C. marginal earnings
D. net worth
A. gross earnings
B. profit
C. marginal earnings
D. net worth
answer
B. profit
question
Which of the following is NOT a characteristic of a perfectly competitive market?
A. Each firm in the market sells a somewhat different variant of the good.
B. There are many sellers, each of which sells only a small fraction of the total quantity exchanged.
C. Buyers and sellers are well-informed.
D. Sellers can easily buy and sell the productive resources needed to enter the market.
A. Each firm in the market sells a somewhat different variant of the good.
B. There are many sellers, each of which sells only a small fraction of the total quantity exchanged.
C. Buyers and sellers are well-informed.
D. Sellers can easily buy and sell the productive resources needed to enter the market.
answer
A. Each firm in the market sells a somewhat different variant of the good.
question
A price-taker faces a demand curve that is:
A. vertical at the market price
B. upward sloping
C. downward sloping
D. horizontal at the market price.
A. vertical at the market price
B. upward sloping
C. downward sloping
D. horizontal at the market price.
answer
D. horizontal at the market price.
question
One implication of the shape of the demand curve facing a perfectly competitive firm is that:
A. if the firm increases its price above the market price, it will earn higher revenue.
B. if the firm decreases its price above the market price, it will earn zero revenue.
C. if the firm increases its price above the market price, it will earn zero revenue.
D. the market would be unable to reach a new equilibrium if demand changed
A. if the firm increases its price above the market price, it will earn higher revenue.
B. if the firm decreases its price above the market price, it will earn zero revenue.
C. if the firm increases its price above the market price, it will earn zero revenue.
D. the market would be unable to reach a new equilibrium if demand changed
answer
C. if the firm increases its price above the market price, it will earn zero revenue.
question
Jenny sells lemonade in front of her house in the summer. Several other kids in Jenny's neighborhood also run lemonade stands in the summer. The lemonade market in Jenny's neighborhood is more likely to be perfectly competitive if:
A. all of the kids advertise heavily
B. each stand tries to get more customers by offering different varieties of lemonade and snacks
C. each lemonade stand sells the same kind of lemonade.
D. some of the neighborhood parents build elaborate booths for their kids' stands while some kids sell from makeshift tables
A. all of the kids advertise heavily
B. each stand tries to get more customers by offering different varieties of lemonade and snacks
C. each lemonade stand sells the same kind of lemonade.
D. some of the neighborhood parents build elaborate booths for their kids' stands while some kids sell from makeshift tables
answer
C. each lemonade stand sells the same kind of lemonade.
question
Which of the following would be considered a factor of production in the provision of bus service?
A. The revenue from the sale of bus tickets.
B. The amount it costs to provide bus service between two locations.
C. Bus drivers
D. The hourly wage paid to bus drivers.
A. The revenue from the sale of bus tickets.
B. The amount it costs to provide bus service between two locations.
C. Bus drivers
D. The hourly wage paid to bus drivers.
answer
C. Bus drivers
question
The short run is best defined as:
A. one year or less
B. a period of time sufficiently short that all factors of production are variable
C. the period of time between quarterly accounting reports
D. a period of time sufficiently short that at least one factor of production is fixed.
A. one year or less
B. a period of time sufficiently short that all factors of production are variable
C. the period of time between quarterly accounting reports
D. a period of time sufficiently short that at least one factor of production is fixed.
answer
D. a period of time sufficiently short that at least one factor of production is fixed.
question
A fixed factor of production:
A. is fixed in the long run but variable in the short run
B. is fixed only in the short run.
C. is fixed in both the short run and the long run
D. is common in large firms but rare in small firms
A. is fixed in the long run but variable in the short run
B. is fixed only in the short run.
C. is fixed in both the short run and the long run
D. is common in large firms but rare in small firms
answer
B. is fixed only in the short run.
question
The long run is best defined as:
A. one year or more
B. a period of time sufficiently long that all factors of production are variable.
C. the period of time between annual accounting reports
D. B. a period of time sufficiently long that at least one factor of production is fixed
A. one year or more
B. a period of time sufficiently long that all factors of production are variable.
C. the period of time between annual accounting reports
D. B. a period of time sufficiently long that at least one factor of production is fixed
answer
B. a period of time sufficiently long that all factors of production are variable.
question
According to the law of diminishing returns, when some factors of production are fixed, in order to increase production by a given amount, a firm will eventually need to add successively:
A. smaller and smaller quantities of the variable factors of production
B. constant quantities of the variable factors of production
C. larger and larger quantities of the variable factors of production.
D. larger and larger quantities of the fixed factor of production.
A. smaller and smaller quantities of the variable factors of production
B. constant quantities of the variable factors of production
C. larger and larger quantities of the variable factors of production.
D. larger and larger quantities of the fixed factor of production.
answer
C. larger and larger quantities of the variable factors of production.
question
Which of the following is the most likely to be a fixed factor of production at a pizza restaurant?
A. The number of waiters.
B. The size of the seating area
C. The amount of pizza dough.
D. The amount of electricity.
A. The number of waiters.
B. The size of the seating area
C. The amount of pizza dough.
D. The amount of electricity.
answer
B. The size of the seating area
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:
A. an additional 30 employee-hours.
B. more than 30 additional employee-hours.
C. a total of 60 or fewer employee-hours.
D. fewer than 30 additional employee-hours.
A. an additional 30 employee-hours.
B. more than 30 additional employee-hours.
C. a total of 60 or fewer employee-hours.
D. fewer than 30 additional employee-hours.
answer
B. more than 30 additional employee-hours.
question
If a production process exhibits diminishing returns, then as output rises:
A. average total cost will eventually decrease
B. marginal cost will eventually increase.
C. total fixed costs will eventually increase.
D. total revenue will eventually decrease.
A. average total cost will eventually decrease
B. marginal cost will eventually increase.
C. total fixed costs will eventually increase.
D. total revenue will eventually decrease.
answer
B. marginal cost will eventually increase.
question
In general, when the price of a variable factor of production increases:
A. total cost falls.
B. the profit-maximizing level of output rises.
C. the profit-maximizing price falls.
D. the profit-maximizing level of output falls.
A. total cost falls.
B. the profit-maximizing level of output rises.
C. the profit-maximizing price falls.
D. the profit-maximizing level of output falls.
answer
D. the profit-maximizing level of output falls.
question
Suppose a profit-maximizing firm in a perfectly competitive market is earning an economic profit of $1,345. If the firm's fixed cost increases from $200 to $300, the firm will:
A. reduce its output
B. raise its price
C. earn a greater profit
D. earn a smaller profit
A. reduce its output
B. raise its price
C. earn a greater profit
D. earn a smaller profit
answer
D. earn a smaller profit.
question
The Cost-Benefit Principle tells us that a firm should continue to expand production as long as:
A. the firm's profit is positive
B. price of the good is greater than its marginal cost
C. it can sell another unit of the good
D. the supply curve is upward sloping
A. the firm's profit is positive
B. price of the good is greater than its marginal cost
C. it can sell another unit of the good
D. the supply curve is upward sloping
answer
B. price of the good is greater than its marginal cost
question
If a firm's total revenue is less than its variable cost when the firm produces the level of output at which price equals marginal cost, then the firm should:
A. not change its level of output even if it's earning an economic loss in the short run
B. shut down
C. produce more so that its total revenue increases
D. purchase more fixed factors of production
A. not change its level of output even if it's earning an economic loss in the short run
B. shut down
C. produce more so that its total revenue increases
D. purchase more fixed factors of production
answer
B. shut down.
question
Suppose that when a perfectly competitive firm produces 500 units of output a day, it earns an economic loss. If the price of each unit of output is $1.50, then, in the short run, it's clear that this firm:
A. should shut down
B. should not shut down if its total variable cost is less than $750.
C. is not maximizing its profit
D. should produce more than 500 units a day
A. should shut down
B. should not shut down if its total variable cost is less than $750.
C. is not maximizing its profit
D. should produce more than 500 units a day
answer
B. should not shut down if its total variable cost is less than $750.
question
If a perfectly competitive firm produces an output level at which price is less than marginal costs, then the firm should:
A. raise its price
B. reduce output to earn greater profits or smaller losses.
C. expand output to earn greater profits or smaller losses
D. leave its output level unchanged provided it is covering its variable cost
A. raise its price
B. reduce output to earn greater profits or smaller losses.
C. expand output to earn greater profits or smaller losses
D. leave its output level unchanged provided it is covering its variable cost
answer
B. reduce output to earn greater profits or smaller losses.
question
An increase in the price a firm receives for its output will lead the firm to:
A. expand output
B. leave output unchanged and earn greater profits
C.leave output unchanged and earn smaller profits
D. reduce output
A. expand output
B. leave output unchanged and earn greater profits
C.leave output unchanged and earn smaller profits
D. reduce output
answer
A. expand output
question
A decrease in the price a firm receives for its output will lead the firm to:
A. expand output
B. cut its payments to its factors of production
C. leave output unchanged
D. reduce output
A. expand output
B. cut its payments to its factors of production
C. leave output unchanged
D. reduce output
answer
D. reduce output
question
A profit-maximizing firm will only produce a positive amount of output if:
A. its total revenue is grater than its total cost
B. its total revenue is greater than its fixed cost
C. its total revenue equals its total cost
D. its total revenue is greater than or equal to its variable cost
A. its total revenue is grater than its total cost
B. its total revenue is greater than its fixed cost
C. its total revenue equals its total cost
D. its total revenue is greater than or equal to its variable cost
answer
D. its total revenue is greater than or equal to its variable cost.
question
If crude oil is a variable factor of production for a firm, then an increase in the price of crude oil will lead to:
A. a decrease in the quantity supplied by the firm, but no change in the firm's supply.
B. a decrease in the firm's supply.
C. an increase in the quantity supplied by the firm, but no change in the firm's supply.
D. an increase in the firm's supply.
A. a decrease in the quantity supplied by the firm, but no change in the firm's supply.
B. a decrease in the firm's supply.
C. an increase in the quantity supplied by the firm, but no change in the firm's supply.
D. an increase in the firm's supply.
answer
B. a decrease in the firm's supply.
question
As price increases, firms in a perfectly competitive market find that it is:
A. beneficial to produce more units of output.
B. more difficult to sell their product
C. beneficial to produce fewer units of output
D. easier to sell their product
A. beneficial to produce more units of output.
B. more difficult to sell their product
C. beneficial to produce fewer units of output
D. easier to sell their product
answer
A. beneficial to produce more units of output.
question
The price elasticity of supply at a point is:
A. the percentage change in quantity supplied divided by the percentage change in price
B. the percentage change in price divided by the percentage change in quantity supplied
C. the change in quantity supplied divided by the change in price
D. the change in price divided by the change in quantity supplied
A. the percentage change in quantity supplied divided by the percentage change in price
B. the percentage change in price divided by the percentage change in quantity supplied
C. the change in quantity supplied divided by the change in price
D. the change in price divided by the change in quantity supplied
answer
A. the percentage change in quantity supplied divided by the percentage change in price.
question
Suppose Sarah owns a small company that makes wedding cakes. The accompanying table shows how Sarah's total cost varies depending on the number of wedding cakes she makes each day.
# of cakes per day. total cost per day
0 $100
1 $180
2 $220
3 $300
4 $400
Sarah's fixed cost is ______ per day.
# of cakes per day. total cost per day
0 $100
1 $180
2 $220
3 $300
4 $400
Sarah's fixed cost is ______ per day.
answer
$100
question
The championship game will be held next weekend in your college's 40,000-seat stadium. The supply of tickets to the game:
A. will increase because the price changed will be higher
B. is elastic
C. is perfectly inelastic
D. depends on which teams make it to the championship game
A. will increase because the price changed will be higher
B. is elastic
C. is perfectly inelastic
D. depends on which teams make it to the championship game
answer
C. is perfectly inelastic.
question
If the elasticity of demand for the latest American Idol CD is 1.4, this means
A. few substitutes for the american idol album exist
B. a 1% increase in the price leads to a 14% decrease in quantity demanded
C. a 10% decrease in the price leads to a 140% increase in quantity demanded.
D. a 5% increase in the price leads to a 7% decrease in quantity demanded.
A. few substitutes for the american idol album exist
B. a 1% increase in the price leads to a 14% decrease in quantity demanded
C. a 10% decrease in the price leads to a 140% increase in quantity demanded.
D. a 5% increase in the price leads to a 7% decrease in quantity demanded.
answer
D. a 5% increase in the price leads to a 7% decrease in quantity demanded.
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, therefore, is
A. elastic.
B. inelastic.
C. unit elastic.
D. perfectly inelastic.
A. elastic.
B. inelastic.
C. unit elastic.
D. perfectly inelastic.
answer
B. inelastic
question
If the price of cheese falls by 1 percent and the quantity demanded rises by 3 percent, then the price elasticity of demand for cheese is equal to:
A. 30
B. 0.30
C. 0.333
D. 3
A. 30
B. 0.30
C. 0.333
D. 3
answer
D. 3
question
The figure below shows a single consumer's demand for ice cream at the student union.During the summer, there are 300 students on campus. Each student's weekly demand for ice cream is shown above. When the price of ice cream is $2.00 per scoop, those 300 students purchase a total of ______ scoops per week from the student union.
A. 1,800
B. 1,200
C. 1,500
D. 3,000
A. 1,800
B. 1,200
C. 1,500
D. 3,000
answer
A. 1,800
question
Shelter for homeless people as an example of:
A. a want
B. a need
C. something they can live without
D. something hard to find
A. a want
B. a need
C. something they can live without
D. something hard to find
answer
B. a need
question
Jenny sells lemonade by the street during the summer time. Several other kids also sell lemonade in Jenny's neighborhood. If the market is perfectly competitive and the price is already at the equilibrium level, Jenny can increase her revenue if she:
A. decreases the price of her lemonade and doesn't change her output.
B. increases the price of her lemonade and decreases her output.
C. increases the price of her lemonade and doesn't change her output.
D. keeps the price of her lemonade the same and increases the output.
A. decreases the price of her lemonade and doesn't change her output.
B. increases the price of her lemonade and decreases her output.
C. increases the price of her lemonade and doesn't change her output.
D. keeps the price of her lemonade the same and increases the output.
answer
D. keeps the price of her lemonade the same and increases the output.
question
Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The accompanying table describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day.
Employee-Hours Per Day
Output Per Day
0 0
1 40
4 80
9 120
15 160
23 200
When a firm uses 9 employee-hours, its total cost each day is:
A. $126
B. $64
C. $56
D. $176
Employee-Hours Per Day
Output Per Day
0 0
1 40
4 80
9 120
15 160
23 200
When a firm uses 9 employee-hours, its total cost each day is:
A. $126
B. $64
C. $56
D. $176
answer
D. $176
question
Suppose Chris is a potter who makes mugs. His total costs depend on the number of mugs he makes each day, as shown in the accompanying table.
Number of Mugs Per Day
Total Cost Per Day
0 $10
1 $14
2 $19
3 $25
4 $32
5 $40
6 $49
Chris's fixed cost is ___ per day:
A. $0
B. $10
Number of Mugs Per Day
Total Cost Per Day
0 $10
1 $14
2 $19
3 $25
4 $32
5 $40
6 $49
Chris's fixed cost is ___ per day:
A. $0
B. $10
answer
B. $10
question
John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the accompanying table
.Time cleaning windows (hours/day)
Total number of windows cleaned
0 0
1 7
2 11
3 14
4 16
5 17
John's benefit from his first hour cleaning windows is
A. $14
B. $18
C. $7
D. $2
.Time cleaning windows (hours/day)
Total number of windows cleaned
0 0
1 7
2 11
3 14
4 16
5 17
John's benefit from his first hour cleaning windows is
A. $14
B. $18
C. $7
D. $2
answer
A. $14
question
If a 10% decrease in price for a good results in a 20% increase in quantity demanded, the price elasticity of demand is:
A. %
B. 2
C. 10
D. 20
A. %
B. 2
C. 10
D. 20
answer
B. 2
question
Refer to the accompanying table. To increase output from 99 to 132 units requires ______ extra employee-hours per day; to increase output from 132 to 165 units requires ______ extra employee-hours.
output
employees
0 0
33 1
66 2
99 4
132 7
165 11
A. 11; 18
B. 7; 11
C. 4; 3
D. 3; 4
output
employees
0 0
33 1
66 2
99 4
132 7
165 11
A. 11; 18
B. 7; 11
C. 4; 3
D. 3; 4
answer
D. 3; 4
question
Which of the following will cause an increase in market supply?
A. A decrease in the number of firms in the market.
B. An increase in demand for the good.
C. A technological innovation that lowers the marginal cost of producing the good.
D. An increase in the price of the good.
A. A decrease in the number of firms in the market.
B. An increase in demand for the good.
C. A technological innovation that lowers the marginal cost of producing the good.
D. An increase in the price of the good.
answer
C. A technological innovation that lowers the marginal cost of producing the good.
question
Refer to the figure below. What is the price elasticity of supply at point A?
A. 4
B. 2
C. 1
D. 1/2
A. 4
B. 2
C. 1
D. 1/2
answer
C. 1
question
The following graph depicts demand. The slope of the demand curve (ignoring the negative sign) is:
A. 2
B. 1.5
C. 1
D. 0.5
A. 2
B. 1.5
C. 1
D. 0.5
answer
D. 0.5
question
The following graph depicts demand. The price elasticity of demand point A is:
A. 5/2
B. 1/2
C. 2/5
D. 2
A. 5/2
B. 1/2
C. 2/5
D. 2
answer
A. 5/2
question
The following graph depicts demand. The price elasticity at point D is:
A. 5/2
B. 1/2
C. 2/5
D. 2
A. 5/2
B. 1/2
C. 2/5
D. 2
answer
C. 2/5
question
Refer to the figure below. At P=8 and Q=4, D1 is ______ elastic than D2, which is shown graphically as D1 being _____ D2.
A. more; flatter than
B. more; steeper than
C. less; flatter than
D. less; steeper than
A. more; flatter than
B. more; steeper than
C. less; flatter than
D. less; steeper than
answer
D. less; steeper than
question
Refer to the figure below. When P=4, the price elasticity for the demand curve D1 is _____ and D2 is now ____.
A. 3;3
B. 2/3; 1/3
C. 1/3; 3
D. 1/3; 2/3
A. 3;3
B. 2/3; 1/3
C. 1/3; 3
D. 1/3; 2/3
answer
D. 1/3; 2/3
question
Refer to the figure below. If the price rises from $10 to $14, what will happen to the price elasticity of supply?
A. it increases
B. it decreases
C. it stays the same
D. this cannot be determined from the information provided
A. it increases
B. it decreases
C. it stays the same
D. this cannot be determined from the information provided
answer
B. it decreases
question
Refer to the figure below. If the price of a latte increases from $2.00 to $2.50:
A. total expenditure would increase
B. total expenditure would stay the same
C. total expenditure would decrease
D. the change in total expenditure, if any, would depend on the supply curve
A. total expenditure would increase
B. total expenditure would stay the same
C. total expenditure would decrease
D. the change in total expenditure, if any, would depend on the supply curve
answer
C. total expenditure would decrease
question
Refer to the figure below. Suppose the demand curve shows the demand for lattes at a single coffee shop that charges $2.00 for a latte. If the manager wants to increase total revenue, what should the manager do
A. increase the price from $2.00 to $3.00
B. increase the price from $2.00 to $2.50
C. reduce the price from $2.00 to $1.00
D. reduce the price from $2.00 to $1.75
A. increase the price from $2.00 to $3.00
B. increase the price from $2.00 to $2.50
C. reduce the price from $2.00 to $1.00
D. reduce the price from $2.00 to $1.75
answer
D. reduce the price from $2.00 to $1.75
question
17. Suppose Chris is a potter who makes mugs. His total costs depend on the number of mugs he makes each day, as shown in the table below.
Number of Mugs Per Day VS Total Cost Per Day
0 $10
1 $14
2 $19
3 $25
4 $32
5 $40
6 $49
The marginal cost of the 4th mug per day is ______.
A. $8
B. $5
C. $32
D. $7
Number of Mugs Per Day VS Total Cost Per Day
0 $10
1 $14
2 $19
3 $25
4 $32
5 $40
6 $49
The marginal cost of the 4th mug per day is ______.
A. $8
B. $5
C. $32
D. $7
answer
D. $7
question
Suppose Sarah owns a small company that makes wedding cakes. The table below shows how Sarah's total cost varies depending on the number of wedding cakes she makes each day.If the market for wedding cakes is perfectly competitive, and wedding cakes sell for $125 each, then at her profit-maximizing level of output, then sarah should produce ___ cakes per day
A) 0
B) 3
C) 5
D). 6
A) 0
B) 3
C) 5
D). 6
answer
B. 3
question
If the cross-price elasticity of demand between lettuce and salad dressing is negative, then when the price of lettuce rises, the demand for salad dressing will ______.
A)increase
B)become more inelastic
C)decrease
D)remain the same
A)increase
B)become more inelastic
C)decrease
D)remain the same
answer
C)decrease
question
A change in consumers' incomes causes a change in:
A) the cross-price elasticity of demand.
B) demand.
C) the demand for normal goods but not the demand for inferior goods.
D) supply.
A) the cross-price elasticity of demand.
B) demand.
C) the demand for normal goods but not the demand for inferior goods.
D) supply.
answer
B) demand.
question
If the elasticity of demand for the latest American Idol album is 1.4, this means
A) a 5% increase in the price leads to a 7% decrease in quantity demanded.
B) a 1% increase in the price leads to a 14% decrease in quantity demanded.
C) few substitutes for the American Idol album exist.
D) a 10% decrease in the price leads to a 140% increase in quantity demanded.
A) a 5% increase in the price leads to a 7% decrease in quantity demanded.
B) a 1% increase in the price leads to a 14% decrease in quantity demanded.
C) few substitutes for the American Idol album exist.
D) a 10% decrease in the price leads to a 140% increase in quantity demanded.
answer
A) a 5% increase in the price leads to a 7% decrease in quantity demanded.
question
Suppose a perfectly competitive firm is producing 77 units of output, and the marginal cost of the 77 th unit is 11. If the firm can sell each unit of output for $8 and the firm's revenue is sufficient to cover its variable cost, the firm should:
A) increase production.
B) lower its price.
C) decrease production.
D) raise its price.
A) increase production.
B) lower its price.
C) decrease production.
D) raise its price.
answer
C) decrease production.
question
When Joe's Gas raises its price for regular unleaded gasoline, total revenue from regular unleaded gas falls to zero. It must be the case that
A) there are not many good substitutes for Joe's regular unleaded gasoline.
B) the demand for Joe's regular unleaded gasoline is perfectly elastic.
C) consumers are switching to premium grades of gasoline.
D) the demand for Joe's regular unleaded is inelastic.
A) there are not many good substitutes for Joe's regular unleaded gasoline.
B) the demand for Joe's regular unleaded gasoline is perfectly elastic.
C) consumers are switching to premium grades of gasoline.
D) the demand for Joe's regular unleaded is inelastic.
answer
B) the demand for Joe's regular unleaded gasoline is perfectly elastic.
question
Suppose an increase in the price of hamburger from $3 to $4 leads to an increase in quantity supplied from 100 units to 150 units. At the original price, the price elasticity of supply for hamburgers is ______ so supply is ______.
A) 3/2; elastic
B) 2/3; inelastic
C) 3/2; inelastic
D) 2/3; elastic
A) 3/2; elastic
B) 2/3; inelastic
C) 3/2; inelastic
D) 2/3; elastic
answer
A) 3/2; elastic
question
Suppose that when a perfectly competitive firm produces 500 units of output a day, it earns an economic loss. If the price of each unit of output is $1.50, then, in the short run, it's clear that this firm:
A)should shut down.
B)should not shut down if its total variable cost is less than $750.
C)should produce more than 500 units a day.
D)is not maximizing its profit.
A)should shut down.
B)should not shut down if its total variable cost is less than $750.
C)should produce more than 500 units a day.
D)is not maximizing its profit.
answer
B)should not shut down if its total variable cost is less than $750.
question
In general, perfectly competitive firms maximize their profit by producing the level of output at which:
A)marginal cost equals price.
B)marginal cost is minimized.
C)total cost is minimized.
D)total cost equals total revenue.
A)marginal cost equals price.
B)marginal cost is minimized.
C)total cost is minimized.
D)total cost equals total revenue.
answer
A)marginal cost equals price.
question
One reason that variable factors of production tend to show diminishing returns in the short run is that:
A) the cost of employing additional resources increases as firms employ more of those resources.
B) large firms cannot effectively manage their resources.
C) there is only so much that can be produced using additional variable inputs when some factors of production are fixed.
D) capital equipment is often idle in the short run.
A) the cost of employing additional resources increases as firms employ more of those resources.
B) large firms cannot effectively manage their resources.
C) there is only so much that can be produced using additional variable inputs when some factors of production are fixed.
D) capital equipment is often idle in the short run.
answer
C) there is only so much that can be produced using additional variable inputs when some factors of production are fixed.
question
Demand tends to be ______ in the short run than in the long run.
answer
less elastic
question
The primary objective of most private firms is to:
answer
maximize profit
question
The championship game will be held next weekend in your college's 40,000-seat stadium. The supply of tickets to the game:
A) depends on which teams make it to the championship game.
B) will increase because the price charged will be higher.
C) is elastic.
D) is perfectly inelastic.
A) depends on which teams make it to the championship game.
B) will increase because the price charged will be higher.
C) is elastic.
D) is perfectly inelastic.
answer
D) is perfectly inelastic.
question
Which of the following will cause an increase market supply?
A)An increase in the price of the good.
B)A technological innovation that lowers the marginal cost of producing the good.
C)A decrease in the number of firms in the market.
D)An increase in demand for the good.
A)An increase in the price of the good.
B)A technological innovation that lowers the marginal cost of producing the good.
C)A decrease in the number of firms in the market.
D)An increase in demand for the good.
answer
B)A technological innovation that lowers the marginal cost of producing the good.
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