question
Which of the following help to explain why the demand curve slopes downward to the right?
1. The income effect
2. The substitution effect
3. The ratchet effect
4.Diminishing marginal utility
1. The income effect
2. The substitution effect
3. The ratchet effect
4.Diminishing marginal utility
answer
1. The income effect, 2. The substitution effect, & 4. Diminishing marginal utility
question
Assume that we violate ceteris paribus and increase both supply and demand at the same time for a product. Which of the following statements about the results is correct?
answer
Quantity will increase but the effect on price is indeterminate.
question
If the supply of a product is reduced due to a higher cost of production, how do economists illustrate that fact on the supply graph?
answer
Since supply is reduced, the curve shifts to the left.
question
Which of the responses below best describes the factors that shift the supply curve?
1.cost of production, technology, profit expectations
2. government regulations, number of suppliers, price of other products the supplier could make
3. buyers' incomes and expectations, number of buyers, buyers' stock on hand
4. cost of complements and cost of substitutes in consumption
5. years of education and training, gender, and age of buyers
1.cost of production, technology, profit expectations
2. government regulations, number of suppliers, price of other products the supplier could make
3. buyers' incomes and expectations, number of buyers, buyers' stock on hand
4. cost of complements and cost of substitutes in consumption
5. years of education and training, gender, and age of buyers
answer
1.cost of production, technology, profit expectations & 2. government regulations, number of suppliers, price of other products the supplier could make
question
Demand graphs are typically drawn in two dimensions. That means the graph can only show one independent variable and one dependent variable. In the common demand graph, which variable is independent and which is dependent?
A. Price is the independent variable and quantity is the dependent variable.
B. Income is the independent variable and price is the dependent variable.
C. Quantity is the independent variable and price is the dependent variable.
D. Buyers' expectations are the independent variable and price is the dependent variable.
E. Demand is the independent variable and supply is the dependent variable.
A. Price is the independent variable and quantity is the dependent variable.
B. Income is the independent variable and price is the dependent variable.
C. Quantity is the independent variable and price is the dependent variable.
D. Buyers' expectations are the independent variable and price is the dependent variable.
E. Demand is the independent variable and supply is the dependent variable.
answer
A. Price is the independent variable and quantity is the dependent variable.
question
Exceptionally large harvests of wheat or corn often result in farmers having lower total incomes for that season despite the increased production. Economists explain this fact by saying that:
A. the demand of wheat and corn is basically inelastic and so increases in output drastically reduce price and income to the farmers.
B. the demand for wheat and corn is basically elastic and so increases in output drastically reduce price and income to farmers.
C. farming is an inefficient industry.
D. consumers have demonstrated the substitution effect and sought other foods.
E. this is an example of the income effect for farmers.
A. the demand of wheat and corn is basically inelastic and so increases in output drastically reduce price and income to the farmers.
B. the demand for wheat and corn is basically elastic and so increases in output drastically reduce price and income to farmers.
C. farming is an inefficient industry.
D. consumers have demonstrated the substitution effect and sought other foods.
E. this is an example of the income effect for farmers.
answer
A. the demand of wheat and corn is basically inelastic and so increases in output drastically reduce price and income to the farmers.
question
In a market economy, prices are determined by:
A. decisions by government authorities at all levels.
B. the customs of the past.
C. the forces of supply and demand in the market.
D. strictly by the sellers.
E. strictly by the buyers.
A. decisions by government authorities at all levels.
B. the customs of the past.
C. the forces of supply and demand in the market.
D. strictly by the sellers.
E. strictly by the buyers.
answer
C. the forces of supply and demand in the market.
question
Assume that new technology develops a substitute for DVDs. How will the price elasticity of demand for DVDs be impacted?
A. there will be no change in the price elasticity of demand for DVDs.
B. The appearance of a substitute for DVDs with increase the elasticity coefficient for DVDs.
C. The appearance of a substitute for DVDs with decrease the elasticity coefficient for DVDs.
D. The impact on price elasticity of demand for DVDs is uncertain but the demand for DVDs will increase.
E. The impact on price elasticity of demand for DVDs is uncertain but the total revenue for sellers of DVDs will increase.
A. there will be no change in the price elasticity of demand for DVDs.
B. The appearance of a substitute for DVDs with increase the elasticity coefficient for DVDs.
C. The appearance of a substitute for DVDs with decrease the elasticity coefficient for DVDs.
D. The impact on price elasticity of demand for DVDs is uncertain but the demand for DVDs will increase.
E. The impact on price elasticity of demand for DVDs is uncertain but the total revenue for sellers of DVDs will increase.
answer
B. The appearance of a substitute for DVDs with increase the elasticity coefficient for DVDs.
question
Harold is the new manager of Jan's Pizza Parlor. He has been told that the price elasticity of demand for his product is 1.10. Which of the following statements are correct?
1.The demand for his pizza is elastic.
2. If Harold raises the price of pizza, the total revenue for the operation will increase
3. A decrease in the pizza price will increase the total revenue of the business.
4. A $1.00 increase in quantity will cause an increase in sales of 110 pizzas.
5. A 10% increase in price of pizzas will cause an 11% decrease in quantity of pizzas demanded.
1.The demand for his pizza is elastic.
2. If Harold raises the price of pizza, the total revenue for the operation will increase
3. A decrease in the pizza price will increase the total revenue of the business.
4. A $1.00 increase in quantity will cause an increase in sales of 110 pizzas.
5. A 10% increase in price of pizzas will cause an 11% decrease in quantity of pizzas demanded.
answer
1.The demand for his pizza is elastic, 3. A decrease in the pizza price will increase the total revenue of the business, & 5. A 10% increase in price of pizzas will cause an 11% decrease in quantity of pizzas demanded.
question
Income elasticity is used to discover if products are:
A. substitutes or complements to each other.
B. normal or inferior goods.
C. in high or low demand for wealthy consumers.
D. in high or low demand for poor consumers.
E. well advertised to those consumers with large incomes.
A. substitutes or complements to each other.
B. normal or inferior goods.
C. in high or low demand for wealthy consumers.
D. in high or low demand for poor consumers.
E. well advertised to those consumers with large incomes.
answer
B. normal or inferior goods.
question
Jeffery Brooks has just landed a job as the produce manager for a large grocery store. The store manager mentioned that last summer a group of students had calculated that the cross elasticity of demand between two vegetables to be 1.50. Jeffery should know that this means:
A. consumers view these two products as substitutes.
B. consumers view these two products as complements.
C. consumers view these two products as inferior goods.
D. consumers view these two products as normal goods.
E. consumers view these two products as unrelated products.
A. consumers view these two products as substitutes.
B. consumers view these two products as complements.
C. consumers view these two products as inferior goods.
D. consumers view these two products as normal goods.
E. consumers view these two products as unrelated products.
answer
A. consumers view these two products as substitutes.
question
In a supply and demand graph, the consumer surplus is represented by the?
A. area above the demand curve and below the market price.
B. area above the supply curve and below the market price.
C. area under the supply curve and above the market price.
D. area between to the supply and demand curves.
E. area under the demand curve and above the market price.
A. area above the demand curve and below the market price.
B. area above the supply curve and below the market price.
C. area under the supply curve and above the market price.
D. area between to the supply and demand curves.
E. area under the demand curve and above the market price.
answer
E. area under the demand curve and above the market price.
question
Maria finally bought her car! She paid less than expected. In economic terms, this is an example of
A. producer surplus.
B. consumer deficit.
C. producer deficit.
D. consumer surplus.
E. profit maximization.
A. producer surplus.
B. consumer deficit.
C. producer deficit.
D. consumer surplus.
E. profit maximization.
answer
D. consumer surplus.
question
What is more likely to happen if the supply of a product increases?
A. Consumer surplus will increase and producer surplus will decrease.
B. Consumer surplus will decrease.
C. Producer surplus will increase.
D. Consumer surplus will decrease and producer surplus will increase.
E. Neither, the government will receive all of the surplus.
A. Consumer surplus will increase and producer surplus will decrease.
B. Consumer surplus will decrease.
C. Producer surplus will increase.
D. Consumer surplus will decrease and producer surplus will increase.
E. Neither, the government will receive all of the surplus.
answer
A. Consumer surplus will increase and producer surplus will decrease.
question
When a price ceiling is placed on a DVD, the consumer surplus relative to the free market equilibrium will more likely
A. decrease.
B. remain the same.
C. increase by 100%.
D. increase.
F. decrease by 100%.
A. decrease.
B. remain the same.
C. increase by 100%.
D. increase.
F. decrease by 100%.
answer
D. increase.
question
If Jenny really likes to eat hot dogs for lunch and the price of them increases, the following will more likely happen
A. consumer surplus will increase
B. producer surplus will decrease
C. consumer surplus will decrease
D. consumer surplus will not change
E. producer surplus will not change
A. consumer surplus will increase
B. producer surplus will decrease
C. consumer surplus will decrease
D. consumer surplus will not change
E. producer surplus will not change
answer
C. consumer surplus will decrease
question
When the government implements a sales tax on cars, the following will most likely happen
A. consumer surplus will decrease
B. producer surplus will increase
C. producer surplus will decrease
D. both a and c
E. both a and b
A. consumer surplus will decrease
B. producer surplus will increase
C. producer surplus will decrease
D. both a and c
E. both a and b
answer
D. both a and c
question
Dead weight loss represents
A. lost consumer surplus.
B. lost producer surplus.
C. increase in consumer surplus.
D. government loss of income.
E. both a and b.
A. lost consumer surplus.
B. lost producer surplus.
C. increase in consumer surplus.
D. government loss of income.
E. both a and b.
answer
E. both a and b.
question
Taxes create a loss in efficiency because they
1. move the quantity away from the equilibrium market point.
2. reduce consumer surplus.
3. reduce producer surplus.
I, II and III
Only I
Only II
Only III
Both I and II
1. move the quantity away from the equilibrium market point.
2. reduce consumer surplus.
3. reduce producer surplus.
I, II and III
Only I
Only II
Only III
Both I and II
answer
1 2 and 3
question
To an economist, the term "utility" means:
A. useful.
B. electricity/water/sewer and trash collection.
C. satisfaction.
D. need.
E. price or cost.
A. useful.
B. electricity/water/sewer and trash collection.
C. satisfaction.
D. need.
E. price or cost.
answer
C
question
To an economist, the word "marginal" is best defined as:
A. "poor quality."
B. "average" or "mean."
C. "median."
D. "additional."
E. "superior."
A. "poor quality."
B. "average" or "mean."
C. "median."
D. "additional."
E. "superior."
answer
D. "Additional"
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