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The price elasticity of demand is a measure of
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the responsiveness of the quantity demanded of a good to a change in the price of the good
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Suppose that when the price of milk rises 20%, the quantity demanded of milk falls 10%. Based on this information, what is the approximate absolute price elasticity of demand for milk
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.5
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The price elasticity of demand is
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always negative, but by convention, economists typically express the price elasticity of demand as an absolute value
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If the price elasticity of demand for good A is -1 then a 1% increase in
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the market price of good A will result in a 1% decrease in the quantity demanded for good A
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If the absolute price elasticity of demand is 2.0, a 5 percent decrease in price will increase quantity demanded by
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10 percent
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The value of the absolute price elasticity of demand for the good X is 4. The absolute price elasticity for good Y is 1. Which good's quantity demanded is more responsive to a change in price?
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Good X
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A perfectly horizontal demand curve has
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perfect elasticity
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Moving down a straight-line demand curve, the absolute price elasticity of demand
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decreases
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When total revenue and price are inversely related, demand is
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elastic
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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
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1.5
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If goods X and Y are complements, then the cross price elasticity of demand will be
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negative
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The percentage change in demand for one good divided by the percentage change in the price of a related good is the
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cross price elasticity of demand
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Income elasticity relates to
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a horizontal shift in a demand curve
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If one's demand for peanut butter decreases as income rises, the income elasticity of demand for the product is
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negative
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The income elasticity of demand
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can be positive, negative, or zero
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In economics, another term for satisfaction is
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utility
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Suppose that Usher derives 45 utils of total utility from eating 6 hotdogs and 55 utils of total utility from eating 7 hotdogs. What is Usher's marginal utility from eating the 7th hotdog?
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10
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marginal utility is
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the change in total utility due to a one-unit change in the quantity of a good consumed
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The concept of marginality is important in economics because
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individuals make decisions at the margin
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If total utility is decreasing, then marginal utility is
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negative
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The principle that "as more of a good is consumed, its extra benefit declines" is known as
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the law of diminishing marginal utility
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A rational consumer will NEVER purchase a product when its
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marginal utility is negative
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The change in output caused by a one-unit change in labor is referred to as
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marginal physical product of labor
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The law of diminishing marginal product indicates that
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marginal product will eventually decrease
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Suppose that a firm is currently producing $1000 units of output. At this level of output, AVC is $1 per unit and TFC is $500. What is the firm's TC?
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$1,500
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Suppose that when the level of output for the firm increases from $100 to $110 units, its variable costs increase from $500 to $700. What is the firm's marginal cost?
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$20
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Which one of the following statements is FALSE?
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MC = TC divided by Q
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In economics, a fixed cost is a cost that
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does not vary with the level of output
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When Super Stuff Corporation produces 5,000 units, total costs equal $150,000 and total variable costs equal $75,000. At this level of output, what is Super Stuff Corporation's average fixed cost?
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$15
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