microeconomics workbook multiple choice chapter 2

a downward sloping demand curve can be explained by
I. diminishing marginal utility
II. diminishing marginal returns
III. the substitution effect
IV. the income effect

a. I only
b. II only
c. I and III only
d. I and IV only
e. I, III, and IV only

if hot dogs are an inferior good, an increase in income will result in

a. an increase in the quantity demanded for hot dogs
b. an increase in the demand for hot dogs
c. a decrease in the quantity demanded for hot dogs
d. a decrease in the demand for hot dogs
e. no change in the demand for hot dogs

assume that coal is a normal good. If the price of coal increases and the quantity sold increases, which of the following is consistent with these observations?

a. the price of oil, a substitute for coal, increased
b. a wage increase was given to coal miners
c. new machinery made coal mining more efficient
d. consumers' incomes fell
e. the demand curve in inelastic

during a football game, it starts to rain and the temperature drops. The senior class, which runs the concession stand and is studying economics, raises the price of coffee from 50 cents to 75 cents a cup. They sell more than ever before. Which answer explains this?

a. the supply of coffee increased
b. the demand curve for coffee was elastic
c. the supply of coffee decreased
d. the demand for coffee increased
e. the demand curve for coffee was inelastic

which of the following statements best reflect the law of diminishing marginal utility?

a. "I have to have a scoop of ice cream on my pie"
b. "I'll never get tired of your cooking"
c. "The last bite tastes just as good as the first"
d. "I couldn't eat another doughnut if you paid me"
e. "I prefer to eat several small meals a day, rather than three large ones"

if the cost of producing automobiles increases, the price, equilibrium quantity, and consumer surplus (respectively) will most likely change in which of the following ways?

a. increase, increase, increase
b. increase, decrease, increase
c. increase, decrease, decrease
d. decrease, increase, decrease
e. decrease, decrease, decrease

compare 2011 with 2012. Which of the following statements is (are) true?
2011 quantity sold was 30,000 at a price of $10
2012 quantity sold was 50,000 at a price of $20
I. demand has increased
II. quantity demanded has increased
III. supply has increased
IV. quantity supplied has increased
V. supply has decreased

a. I only
b. V only
c. I and IV only
d. I and V only
e. I, II, and III only

during the 1990s, the price of VCRs fell by about 30 percent, and the quantity sold decreased by the same amount. The demand for VCRs must

a. be inelastic
b. be elastic
c. be unit elastic
d. have shifted to the right
e. have shifted to the left

which of the following will occur is a legal price floor is placed on a good below its free-market equilibrium?

a. surpluses will develop
b. shortages will develop
c. underground markets will develop
d. the equilibrium price will ration the good
e. the quantity sold will increase

a marketing survey shows that gate receipts would increase in the price of tickets to a summer rock concert increased, even though the number of tickets sold would fall. What does this imply about the price elasticity of demand for concert tickets?

a. demand is inelastic
b. demand is elastic
c. demand is unit elastic
d. demand is perfectly inelastic
c. demand is perfectly elastic

according to the graph above, which of the following will occur if a legal price ceiling is imposed at price X?

a. shortages will occur
b. surpluses will occur
c. demand will increase
d. Q2 will be purchased
e. supply will decrease

which of the following statements about price controls is true?

a. a price ceiling causes a shortage if the ceiling price is above the equilibrium price
b. a price floor causes a surplus if the price floor is below the equilibrium price
c. a price ceiling causes an increase in demand if the ceiling price is set below the equilibrium price
d. a price ceiling causes a decrease in demand if the price floor is set above the equilibrium price
e. price ceilings and price floors result in a misallocation of resources

if the price of lunch at the school cafeteria increases and cafeteria revenue remains constant, the price elasticity of demand for a school lunch must be

a. elastic
b. perfectly elastic
c. unit elastic
d. inelastic
e. perfectly inelastic

if an excise tax is imposed on a product, consumer surplus and producer surplus for this good will most likely change in which of the following ways?

a. decrease, decrease
b. decrease, increase
c. decrease, not change
d. not change, increase
e. not change, not change

if the price of paperback books increases and consumer expenditures on paperback books also increase, which of the following is necessarily true?

a. paperback books are normal goods
b. paperback books are inferior goods
c. the demand for paperback books is unit elastic
d. the demand for paperback books is elastic
e. the demand for paperback books is inelastic

the substitution effect causes a consumer to buy less of a product when the price increases because the

a. product is now less expensive compared to similar products
b. product is now more expensive compared to similar products
c. consumer's real income has decreased
d. consumer's real income has increased
e. consumer will buy more inferior goods and fewer normal goods

product A % change in income +5 % change in quantity +5
product B % change in income +5 % change in quantity -5
product C % change in income -10 % change in quantity -5
product D % change in income -10 % change in quantity +10

based on this information which product(s) is/are inferior?

a. product A only
b. product B only
c. product D only
d. product A and C only
e. product B and D only

Brooke is spending all of her income consuming products X and Y. if MUx/Px=10 and MUy/Py=6, what should Brooke do to maximize her satisfaction?

a. buy more X and more Y
b. buy more X and less Y
c. buy less X and less Y
d. buy less X and more Y
e. make no changes

if the price of a good decreases by 3% and total revenue increase, the absolute value of the price elasticity of demand for the good could possibly be

a. 1.3
b. 1
c. 0.8
d. 0.2
e. 0

advocates of higher minimum wages for unskilled labor defend their position by arguing

a. low-income workers deserve to earn incomes above the poverty level
b. higher wages boost worker productivity and efficiency
c. higher wages will cause employers to reduce the payroll, but the total wages of remaining workers will be higher
d. higher wages induce more workers into the labor market and thus reduce unemployment
e. it is more efficient for the private sector to provide a higher wage than for the government to provide transfer payments to low-income workers

a paper mill located on a scenic river decides to dump its untreated waste products into the river. Which of the following is the likely result of this action?

a. the marginal private cost and the marginal social cost of paper production will be equal
b. the marginal private cost will be greater than the marginal social cost of paper production
c. the price of paper produced by the mill will increase
d. the mill will produce more paper than society would like it to produce
e. the mill will produce the socially optimal amount of paper