To maximize its revenue,

Select one:

a.A firm facing inelastic demand should always raise its price.

b.A firm facing elastic demand should always raise its price.

c.A firm should always charge the highest price possible regardless of the elasticity of demand.

d.None of the above answers is correct.

As time passes after a change in the price, the supply of a good or service

Select one:

a.Initially becomes less elastic and then becomes more elastic.

b.Becomes more elastic.

c.Becomes less elastic.

d.Initially becomes more elastic and then becomes less elastic.

When the price elasticity of demand for a good equals

Select one:

a.0, the demand curve is horizontal.

b.1, the demand curve is vertical.

c.0, the demand curve is vertical.

d.1, the demand curve is horizontal.

Suppose the price of burgers increases from $2 to $3 each. The degree to which quantity demanded responds to this price increase depends on the

Select one:

a.Income elasticity of demand.

b.Cross elasticity of demand.

c.Price elasticity of demand.

d.The price elasticity of supply.

The price elasticity of demand measures

Select one:

a.The responsiveness of the quantity demanded to changes in price.

b.The slope of a budget curve.

c.How sensitive the quantity demanded is to changes in demand.

d.How often the price of a good changes.

The diamond-water paradox of value can be explained by

Select one:

a.Water's low price relative to diamonds.

b.Distinguishing between total utility and marginal utility.

c.Water's high level of utility relative to diamonds.

d.The fact that utility cannot be measured.

The concept of elasticity of supply measures the responsiveness of the

Select one:

a.Price to a change in the quantity supplied.

b.Quantity demanded to a change in the quantity supplied.

c.Quantity supplied to a change in the price.

d.Quantity supplied to a change in the quantity demanded.

Total utility describes

Select one:

a.An increase in consumption multiplied by the gain in utility.

b.Total consumption multiplied by marginal utility.

c.The benefit gained from all consumption.

d.Total consumption divided by marginal utility.

Marginal utility is the

Select one:

a.Change in satisfaction that results from a one-unit increase in the quantity of a good consumed.

b.Additional cost to a consumer when an additional unit of a good is consumed.

c.Total satisfaction that a person gets from the consumption of all of the units of a good consumed.

d.Maximum price that a consumer is willing to pay for an additional unit of a good.

According to the total revenue test, a price cut increases total revenue if demand is

Select one:

a.Inelastic.

b.Perfectly inelastic.

c.Unit elastic.

d.Elastic.

Demand is inelastic when a price ________ results in total revenue ________.

Select one:

a.Rise; decreasing

b.Fall; increasing

c.Fall, remaining the same

d.Rise, increasing

A rise in the price of good A shifts the ________ good B rightward if the cross elasticity of demand between A and B is ________.

Select one:

a.Supply curve of; negative

b.Supply curve of; positive

c.Demand curve for; positive

d.Demand curve for; negative

In the indifference curve/budget line diagram, consumers reach higher indifference curves when

Select one:

a.The price of either good falls.

b.Their budget decreases.

c.The price of only the good measured along the y-axis increases.

d.The price of either good rises.

A measure of all the satisfaction you receive from all the coffee that you consume is your

Select one:

a.Marginal utility of coffee.

b.Marginal utility per dollar spent on coffee.

c.Total utility from coffee.

d.Marginal utility per dollar spent on coffee when you are in your consumer equilibrium.

The price elasticity of demand is calculated as the absolute value of the

Select one:

a.Change in quantity demanded divided by the change in price.

b.Change in price divided by the change in quantity demanded.

c.Percentage change in quantity demanded divided by the percentage change in price.

d.Percentage change in price divided by the percentage change in quantity demanded.

The marginal rate of substitution of one good for another is measured by moving

Select one:

a.Among different indifference curves.

b.Along a budget line.

c.Along an indifference curve.

d.Among different budget lines

As a consumer moves rightward along an indifference curve, the

Select one:

a.Income required to buy the combinations of the goods always increases.

b.Relative price of both goods falls.

c.Consumer generally prefers the combinations of goods farther rightward along the indifference curve.

d.Consumer remains indifferent among the different combinations of goods.

An increase in subway fares in New York City will boost your expenditures on subway rides if

Select one:

a.The supply of subway rides is elastic.

b.Your demand for subway rides is inelastic.

c.The supply of subway rides is inelastic.

d.Your demand for subway rides is elastic.

The measure of the benefit you get from consuming the next cup of coffee is your

Select one:

a.Total utility per dollar spent on coffee.

b.Total utility from coffee when you are at your consumer equilibrium.

c.Marginal utility of coffee.

d.Total utility from coffee.

The paradox of value between diamonds and water is explained by the fact that the

Select one:

a.Total utility of diamonds exceeds the total utility of water.

b.Total utility of diamonds exceeds the marginal utility of water.

c.Marginal utility of diamonds exceeds the marginal utility of water.

d.Marginal utility of diamonds exceeds the total utility of water.