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A perfectly inelastic demand curve
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graphs as a line parallel to the vertical axis.
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If the price-elasticity coefficient for a good is 1.75, the demand for that good is described as
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elastic
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A perfectly inelastic demand schedule
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can be represented by a line parallel to the vertical axis.
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The price elasticity of demand of a straight-line demand curve is
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elastic in high-price ranges and inelastic in low-price ranges
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Refer to the table above. If the price starts falling from $5, at what price range does demand first become inelastic?
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From $3 to $2
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Suppose the total-revenue curve is derived from a particular linear demand curve. That demand curve must be
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unit elastic for price increases that reduce quantity demanded from 5 units to 4 units
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The state legislature has cut Gigantic State University's appropriations. GSU's Board of Regents decides to increase tuition and fees to compensate for the loss of revenue. The board is assuming that the
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demand for education is inelastic
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(Last Word) Microsoft charges a substantially lower price for a software upgrade than for the initial purchase of the software. This implies that Microsoft views the demand curve for the software upgrade to be
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more elastic than the demand for the original software
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An auto rental company lowers the price of its rentals to increase its market share. The price cut increases quantity demanded, but total revenue decreases. This result suggests that over this price range, the demand for the auto rentals is
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inelastic
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The diagram shows two product supply curves. It indicates that
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over range q1q2, price elasticity of supply is greater for s1 than for s2
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Refer to the diagram and assume that price decreases from $10 to $2. The coefficient of the price elasticity of supply (midpoint formula) relating to this price change is about
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1, and supply is unit elastic
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If a college admits only a fixed number of applicants every year, then the school's supply curve for admissions is
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perfectly inelastic
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Refer to the above table. Which product is a normal good but least responsive to a change in income?
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Product X
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The cross elasticity of demand for product X with respect to the price of product Y is −1.2. It can be inferred that X and Y are
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complementary products
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Refer to the diagram. Total utility
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increases at a diminishing rate, reaches a maximum, and then declines
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While eating at Alex's "Pizza by the Slice" restaurant, Kara experiences diminishing marginal utility. She gained 10 units of satisfaction from her first slice of pizza consumed and would only receive 5 units of satisfaction from consuming a second slice, at the same price. Based on this information, we can conclude that
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Alex may have to lower the price to convince Kara to buy a second slice
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What level of total utility will the utility-maximizing consumer realize?
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96 utils
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If a rational consumer is in equilibrium, which of the following conditions will hold true?
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The marginal utility of the last dollar spent on each good purchased will be purchased will be the same
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If the price of X decreases to $2, then the utility-maximizing combination of the two products is
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4 of X and 5 of Y
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Diminishing marginal utility explains why
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demand curves are downsloping
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Assume that Tonya consumes only two products, pizza and potato chips, out of a given budget. If the price of pizza decreases, then Tonya's consumption of pizza will
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increase due to the income effect
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If you receive a gift whose market price is $20, but you consider it to be worth only $10, then
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there is a $10 , or 50%, value loss
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At each point on an indifference curve,
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total utility is the same
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The ratio of the prices of two products that a consumer could buy with a given fixed income is equivalent to the
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slope of the budget line
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Which of the graphs shows an increase in the price of X and a decrease in the price of Y?
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graph D
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Which of the following is most likely to be an implicit cost for Company X?
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forgone rent from the building owned and used by Company X
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Normal profits are
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Considered an implicit cost by economists
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Refer to the diagram. At output level Q,
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marginal product is falling
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The short-run average total cost curve is U-shaped because
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of increasing and diminishing returns
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Which of the following holds true?
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When AP is rising AVC is falling, and when AP is falling AVC is rising.
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Average fixed cost
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declines continually as output increases
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Which of the following is most likely to be a fixed cost?
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property insurance premiums
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Suppose a firm is in a range of production where it is experiencing economies of scale. Knowing this, we can predict that
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a 10% increase in all inputs will increase output by more than 10%
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Economies of scale are indicated by
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the declining segment of the long-run average total cost curve.
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Many people have turned to the Internet to get the news. This has caused the circulation numbers of newspapers to fall drastically, which in turn caused their
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average fixed costs to increase
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Economists would describe the U.S. automobile industry as
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an oligopoly
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Local electric or gas utility companies mostly operate in which market structure?
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pure monopoly
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Which of the following is a reason why individual firms under pure competition would not find it gainful to advertise their product?
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Firms produce a homogeneous product
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Which of the following statements is correct?
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The demand curve for a purely competitive firm is perfectly elastic, but the demand curve for a purely competitive industry is downsloping.
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Average revenue and marginal revenue are equal at each output level in
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pure competition
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In pure competition, the demand for the product of a single firm is perfectly
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elastic because many other firms produce the same product
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Refer to the provided graph for a purely competitive firm in the short run. If the firm increases its output level from B to C, then its total profits will be
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positive and decreasing
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Curve (3) in the diagram is a purely competitive firm's
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total revenue curve
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Refer to the provided graph for a purely competitive firm in the short run. The firm would suffer losses if it operated at which of the following ranges of output?
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0A
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Refer to the accompanying graph for a purely competitive firm. When the firm is in equilibrium in the short run, the amount of economic profit per unit is
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EH
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DASH Airlines is considering the addition of a flight from Red Cloud to David City. The total cost of the flight would be $1,100, of which $800 are fixed costs already incurred. Expected revenues from the flight are $600. DASH should
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add this flight, because marginal revenue exceeds marginal costs and total revenue exceeds total variable cost
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According to the accompanying diagram, to maximize profit or minimize losses, this firm will produce
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E units at price A
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The data in the accompanying table indicates that this firm is selling its output in a(n)
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purely competitive market
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The provided graph gives short-run data for a firm. Which of the following statements is correct?
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At price P1 , the firm will not supply any quantity
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At which of the following prices will the firm shown in the accompanying graph make an economic profit?
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$10
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