QUESTION 1 No matter what the price of orangejuice is ,Jill spends $20 a week on orangejuice. We can conclude that the absolute value of the price elasticity of demand for orange juice forJill is O less than 1. O equal to 1. O equal to 0. O greater than 1. QUESTION 2 Relative percentage changes are used in measuring price elasticity of demand, so that O larger numbers indicate greater responsiveness. O it does not matter what units are used to measure prices or quantities. O it does not matter whether price increases or decreases when calculating the elasticity. O we always obtain a positive number. QUESTION 3 When very few substitutes for a good exist, demand will be O inelastic. O unit-elastic. O elastic. O perfectly elastic. QUESTION 4 All ofthe following are true regarding the relationship between price elasticity of demand and total revenues EXCEPT 0 when market demand is unit elastic, if the market price rises, then total revenues will not change. O when market demand is inelastic, if the market price rises, then total revenues will decrease. O when market demand is elastic. if the market price declines, then total revenues will rise. O when market demand is inelastic, if the market price fails, then total revenues will decrease. QUESTION 5 If the price of a good increases and the total revenue remains the same, the demand for the good is O elastic. O inelastic. O perfectly elastic. O unitelastic. QUESTION 6 (A) (5) Quantity demanded QMNW demanded 0 . O -. Income Income C U f ) z (D) "5 o a u .2 .g d: a. o - O . Quantity of B demanded Quantity of E demanded Use the above figure. Which graph depicts complementary goods? 0 A O B O C O D QUESTION 7 At a price of $10, quantity demanded is 30 units. When the price rises to $11, quantity demanded is 24 units. What is the absolute price elasticity of demand? O 6.0 O 0.43 O 0.5 O 2.33 A demand relationship in which a given percentage change in price will result in a less than proportionate percentage change in quantity demanded is O elastic. O unitelastic. O inelastic. O consistent with zero elasticity. QUESTION 9 Price 10 Demand Curve 2 4 5 8 10 Quantity In the above figure, along the section of the demand curve between point a and point b, demand is O inelastic. O elastic. O unit inelastic. O unit elastic. QUESTION 10 Total Revenues C Quantity per Period Refer to the above figure. Demand will be inelastic when quantity is between O 0 and A. O 0 and B. O A and B. O B and C. QUESTION 11 Which of the following statements is FALSE? O Time is an important consideration in determining supply elasticity. O A horizontal supply curve is possible. O Price elasticity of supply can never equal 1. O A perfectly inelastic supply curve is a vertical line.QUESTION 12 Even though price elasticity of demand is always O negative; prime number O positive; negative number O a fraction; whole number O negative; positive number by convention its absolute value is always discussed as a QUESTION 13 Suppose that the cross price elasticity of demand between good X and good Y is -1.55. This indicates that the two goods are O substitutes. O complements. O both inferior. O completely unrelated in the minds of consumers. QUESTION 14 The formal definition of price elasticity of demand is O quantity demanded divided by price. O change in quantity demanded divided by change in price. O percentage change in quantity demanded divided by percentage change in price. O quantity demanded multiplied by price and divided by 100. QUESTION 15 Which of the following is NOT a factor that determines the price elasticity of demand? O the existence of substitutes O the length of time allowed for adjustments to change in the price of the commodities O the amount that suppliers have made available O the percentage of a consumer's total budget spent on the good QUESTION 16 The actual value of the price elasticity of demand is always O negative because of the law of demand. O negative because percentages can only be negative. O positive because of the law of demand. O positive because of diminishing marginal utility. QUESTION 17 Suppose that when the price of donuts rises 10%. the quantity demanded of donuts falls 3%. Based on this information, what is the approximate absolute price elasticity of demand for donuts? O 1.3 030 O 0.3 O 3.33 QUESTION 18 George always purchases the soda with the lowest price. For George. the cross price elasticity of demand for two brands of soda will be O equal to 0. O negative. O positive. O impossible to determine without more information. QUESTION 19 If two goods are complements, O the demands for both goods will be elastic. O cross price elasticity of demand will be positive. O cross price elasticity of demand will be negative. O cross price elasticity of demand will be 0. QUESTION 2a The responsiveness of quantity demanded of a good to changes in its price is the O cross elasticity of demand. 0 income elasticity. O quantity elasticity of price. O price elasticity of demand. QUESTION 21 If demand is inelastic and the price of a product decreases by 100 percent, then C) the decrease in quantity demanded is greater than 0 percent. O the change in quantity demanded is less than 100 percent. O the change in quantity demanded is greater than 100 percent. O the change in quantity demanded is equal to 100 percent. QUESTION 22 When the price of a video rental was $2.00, ticket sales at the local movie theatre averaged 180 admissions per night. Then the video store reduced the price of a video rental to $1, and the theatre manager reported that ticket sales had fallen to 126 per night. What is the approximate value of the cross price elasticity of demand between video rentals and theatre tickets? 0 +0.53 O +1.67 O +0.30 O 0.53 QUESTION 23 Other things being equal, demand is more elastic if C) the good is more unique. O the time period for adjustment is shorter. O a family spends a larger percentage of its budget on the good. O the good is less expensive the good. QUESTION 24 The income elasticity of demand O can be positive, negative, or zero. O must lie between -1 and +1. O is negative only. O is positive only. QUESTION 25 When demand is unit elastic, a 7 percent change in the price of the good Q will cause a change in quantity demanded greater than 7 percent. Q will cause a change in quantity demanded equal to 7 percent. Q will cause a change in quantity demanded of less than 7 percent. Q will not cause any change in quantity demanded. QUESTION 26 Ifthe price of a good is zero, a rational consumer will O stop consuming the good when marginal utility is zero. O consume the good up to the point where total utility is just below zero. O buy all of the units available. 0 not consume the good at all since it must not be valuable if it has a zero price. QUESTION 27 Quantity Total Utility Per Week Amy Brook Kate Dave 0 0 0 0 5.0 100 600 60 9.9 190 1200 130 147 270 1800 220 19.4 340 2400 310 240 400 3000 425 28.5 450 3600 575 32.9 490 4200 900 37.2 520 4800 1275 41.4 510 5400 1770 Refer to the above table. Kate's utility schedule is characterized by increasing marginal utility. O decreasing marginal utility. O constant marginal utility. O diminishing marginal utility.Total Utility 5 6 Units of Pizza Consumed Marginal Utility O Units of Pizza Consumed Given the above figure and suppose that David is a rational consumer, then he will NOT eat more than piece(s) of pizza. 0 1 0 5 0 4 0 6 QUESTION 29 Marginal utility is defined as O the increase in utility divided by the total number of units consumed. the total utility divided by the total number of units consumed. the number of units consumed divided by the total utility. the change in total utility divided by the change in number of units consumed.QUESTION 30 According to the law of diminishing marginal utility, the marginal utility for a particular product 0 decreases as more of the product is consumed. 0 remains constant. regardless of how much of the product is consumed. 0 remains constant as long as the product is still considered useful. 0 increases as more of the product is consumed. QUESTION 31 The idea that consumers continue to adjust their purchases until the marginal utility per last dollar spent on all items is equal is called the 0 law of increasing costs. 0 law of diminishing marginal utility. 0 consumer optimum. 0 rule of 72. QUESTION 32 To derive the demand curve from the indifference map 0 vary the price of one good and income while holding the price of the other good constant. C) vary the price of one good while holding the price of the other good and income constant. 0 vary the prices of both goods while holding income constant. C) vary income while holding the prices constant. The marginal rate of substitution is O the slope of the budget line at all points. O found by adding additional units. O the change in the quantity of one good thatjust offsets a unit change in another good. keeping utility constant. C) equal to unit changes in the quantities of both goods so that utility rises. QUESTION 34 Pizza Marginal Utility lst Slice 7 U' 2nd Slice 6 utils 3rd Slice 4 uti'Ls 4th Slice 3 u'cLls Suppose the price of pizza falls to $1 per slice. Assuming that Tom's preferences continue to be those shown in the above table, and assuming that MU/P = 3 is still the point at which his consumer optimum is reached, how many slices will Tom now buy? 0 1 slice O 2 slices 0 3 slices O 4 slices QUESTION 35 The diamondwater paradox illustrates the idea that determines what consumers are willing to pay for a particular good. O marginal utility O total utility O the substitution effect 0 the realincome effect QUESTION 36 John is currently spending all of his income. For the last unit of Good X consumed John gets 20 utils and for the last unit of Good Y consumed he gets 10 utils. The price of Good X is $2. The price of Good Y is $5. If John wants to maximize his utility he should O continue to purchase the same amount of Good X and Good Y. increase the consumption of Good X and decrease the consumption of Good Y. decrease the consumption of Good X and increase the consumption of Good Y. O decrease the consumption of Good X and decrease the consumption of Good Y. QUESTION 37 Carl's Marginal Utility for consuming beer and pizza with $8.00 in income Quantity Marginal Quantity of Marginal of Hotdogs Utility Beer Utility 45 40 40 40 30 35 UI WN 15 10 -5 0 According to the above table, how much total utility does Carl get from 3 hotdogs? 85 utils O 130 utils O 115 utils O 30 utilsQUESTION 38 If the marginal utility of each good is constant as consumption increases, the indifference curves are O horizontal. O straight lines. O vertical. O positively sloped. QUESTION 39 The price of hamburgers is $2 and the price of brownies is $4. The consumer has $14 of income. The consumer is purchasing 3 hamburgers and receiving 30 utils for the last hamburger. He is also purchasing 2 brownies and receiving 40 utils for the last brownie. This set of goods O is an optimum since the entire income is spent and the marginal utility per dollar spent is the same for the last unit of each good. O is not an optimum because the marginal utility per dollar spent is greater for hamburgers than for brownies. O is an optimum since the entire income is spent and total utility is maximized. O is not an optimum because the consumer has not spent all of his money. QUESTION 40 The expression "getting the most bang for your buck\" is an illustration of the O total utility/price ratio. O marginal utility/price ratio. O marginal utility/total utility ratio. O total utility/marginal utility ratio. QUESTION 41 If a restaurant guest said, \"Every bite, including the last bite, tasted as good as the first," then the marginal utility for her O is decreasing. O is increasing. O is positive. O is constant. QUESTION 42 A consumer's optimum is found when O the consumer saves part of their income. O the consumer is achieving the maximum level of utility given market prices and their limited income. O prices of goods go down. O the marginal utility of the last dollar spent equals 0 for every good. QUESTION 43 The marginal rate of substitution is measured along O the total utility curve. C) a given indifference curve. C) the demand curve. C) a given budget line. QUESTION 44 The fact that the price of diamonds is higher than the price of water O can be explained as the outcome of a consumer optimum in consumer choice theory. O is an outcome of irrational behavior in consumer choice theory. O can be explained only by behavioral economics but not by consumer choice theory. O cannot be explained by behavioral economics or consumer choice theory. QUESTION 45 In economics, people make decisions regarding consumption based on comparing O additional units of satisfaction with average costs. O average satisfaction with additional costs. O average satisfaction with average costs. O additional units of satisfaction with additional costs. QUESTION 46 The price ofa piece of pizza is $1 and the price ofa movie is $6 and the consumer has $14. A consumer has purchased 2 pieces of pizza and 2 movies, receiving 20 units of utility for the second piece of pizza and 100 units of utility for the second movie. When the consumer spends all her income, the set of goods Q is not an optimum because the marginal utility per dollar spent is greater for pizza than for movies and the consumer is not spending all of his income. O is not an optimum because the marginal utility for each good is not equal. O is an optimum since the entire income is spent and the marginal utility per dollar spent is the same for the last unit of each good. O is an optimum since the entire income is spent and total utility is maximized. QUESTION 47 If your guest is serious when he said that he just could not get enough of the lasagna you cooked and that the more he ate the more he wanted, you would conclude that the marginal utility of lasagna for him was O zero. O positive. O negative. O undefined. QUESTION 48 Quantity Total Utility 0 10 25 35 GUIAWNG 42 47 49 Refer to the above table. At what quantity does diminishing marginal utility set in? O after 0 O after 1 O after 10 O after 2QUESTION 49 Quantities MUapples(Adam) MUoranges(Adam) Quantities MUapples(Eve) MUoranges(Eve) 40 30 15 20 30 20 10 15 25 15 12 UI Co 20 12 10 Adam has 3 apples and 3 oranges. Eve has 2 apples and 2 oranges. The marginal utilities for Adam and Eve are summarized in the above table. Adam asks Eve to exchange one of her apples for an orange. O Eve will be unwilling to make the exchange, because she loses 5 utils of satisfaction. O Eve will be willing to make the exchange, because her total satisfaction will remain unchanged. O Eve will be unwilling to make the exchange, because she loses 15 utils of satisfaction. O Eve will be willing to make the exchange, because her total satisfaction will increase.QUESTION 50 Bagels Coffee In the above gure, the budget line will change from line DE to line DF when O the price of coffee decreases. O income rises. O the price of coffee increases. O the price of bagels increases