Econ Exam: Final May 13 ( tests 1 & 2)

Question 1

The law of demand:

Answer 1

tells us that demand curves slope down to the right

Question 2

When the slope of a curve is positive, this means:

Answer 2

an increase in the independent variable will cause an increase in the dependent variable

Question 3

When the slope of a curve is negative, this means

Answer 3

a decrease in the independent variable will cause an increase in the dependent variable

Question 4

What are the three economic agents?

Answer 4

firms, government, household

Question 5

what are the 4 economic questions?

Answer 5

How to produce? How much to produce? Who are we producing for? what are we producing?

Question 6

Which of these 4 concepts are illustrated in the ppc curve?

a. scarcity
b. equity
c. efficiency
d. choices

Answer 6

scarcity, efficiency, choices

Question 7

What are variables that affect the demand of a product?

Answer 7

price of substitutes, price of compliments, price of good x

Question 8

What are variables that affect the demand of a product?

Answer 8

expectations of consumers, income of consumers, price of good x

Question 9

What are reasons for the law of demand holding true?

Answer 9

the substitution effect, the income effect, law of diminishing marginal utility

Question 10

Which of the following is consistent with the law of demand?

Answer 10

an increase in the price of salads will cause a decrease in the quantity of salads demanded

Question 11

Which of the following is consistent with the law of demand?

Answer 11

an increase in the price of fusions causes a decrease in the quantity of fusions demanded

Question 12

which statement best illustrates the concept of diminishing marginal utility?

Answer 12

a typical consumer will receive less extra satisfaction from consuming the fourth hamburger per week than the third hamburger per week

Question 13

the term economic scarcity in economics refers to the fact that

Answer 13

no country can produce enough to satisfy everyone’s wants

Question 14

The main difference between the long run and short run is that

Answer 14

in the short run, at least one input is fixed

Question 15

which expression is another way of saying marginal benefit?

Answer 15

extra benefit

Question 16

the law of supply is illustrated by a supply curve that is

Answer 16

upward sloping

Question 17

economic scarcity is:

Answer 17

a problem every economy must deal with

Question 18

an example of capital is :

Answer 18

an office computer

Question 19

when a demand schedule is drawn on a graph:

Answer 19

the resulting curve has a negative slope, price is measured on the vertical axis, other variable are held constant

Question 20

When the price of good (j) decreases the demand for good (k) increases. this means that j and k are:

Answer 20

complements

Question 21

microeconomics covers which two goals?

Answer 21

efficiency and equity

Question 22

the law of diminishing marginal utility means that as a typical consumer consumes units of a product:

Answer 22

total utility increases and marginal utility decreases

Question 23

Which of the following is not held constant when a demand curve is drawn?

Answer 23

the price of the product itself

Question 24

Which is an example of a normal good?

Answer 24

steak

Question 25

which is a variable that affects supply?

Answer 25

technology

Question 26

the law of demand is illustrated by a demand curve that is

Answer 26

downward sloping

Question 27

There are four job offers available to you: a job that pays $80,000, $70,000, $65,000, and $55,000. If you were to choose the $70,000 option what would your opportunity cost be?

Answer 27

$80,000

Question 28

A normative statement is one which

Answer 28

is based on value judgements

Question 29

assume an economy is operating at some point on its ppc which shows civilian and military goods. If the output of military goods is increased, the output of civilian goods

Answer 29

must also be decreased

Question 30

The demand curve shows the relationship between

Answer 30

price and quantity demanded

Question 31

the relationship between quantity supplied and price is ____ while the relationship btwn quantity demanded and price is____.

Answer 31

direct, inverse

Question 32

camera and film are

Answer 32

complementary goods

Question 33

utility refers to the

Answer 33

satisfaction which a consumer receives from a good or service

Question 34

we would see an upward sloping demand curve for a

Answer 34

giffen good

Question 35

T or F. economic scarcity deals with the fact that our economy runs out of certain resources.

Answer 35

FALSE

Question 36

T or F. This is an example of a positive statement. Students should come to class everyday.

Answer 36

FALSE

Question 37

T or F. ice cream and chocolate sauce would be examples of substitute goods

Answer 37

FALSE

Question 38

T or F. purses and shoes would be examples of substitute goods

Answer 38

FALSE

Question 39

T or F. a BMW is an example of a normal good

Answer 39

TRUE

Question 40

T or F. a ppc that is a straight line has an increasing opportunity cost as we trade production of one good for another

Answer 40

false

Question 41

t or f. there are many good giffen goods in our economy

Answer 41

false

Question 42

the difference between the complete market demand function and single market demand function is the use of the concept ceteris paribus

Answer 42

true

Question 43

T or F. market prices give us an idea of the relative value of products

Answer 43

true

Question 44

the value of the marginal utility for a given unit is the same as the slope of the total utility at that quantity

Answer 44

true

Question 45

T or F. the law of diminishing returns is a short run concept because capital can be changed in the long run

Answer 45

true

Question 46

T or F. our economy determines the allocation of resources through prices and competitive markets

Answer 46

true

Question 47

The market for ragu spaghetti sauce changes due to a price decrease in spaghetti. this change causes the following:

Answer 47

the demand curve will shift to the right, equilibrium price will rise, equilibrium quantity will rise

Question 48

the market for wooden shelves changes due to a price decrease in lumber. this change causes the following:

Answer 48

the supply curve will shift to the right, equilibrium price will fall, equilibrium quantity will rise

Question 49

the market for galaxy 17s changes due to a tax refund of $1000 going to every resident of Fargo. this change causes the following:

Answer 49

the demand curve will shift to the right, equilibrium price will rise, equilibrium quantity will rise

Question 50

recent studies have shown that price elasticity of demand for theatrical plays are at current prices is approximately .150.

Answer 50

plays are relatively inelastic

Question 51

if the price of plays increased by 10%:

Answer 51

consumers would decrease their purchases by less than 10%

Question 52

to increase total revenue, theaters should

Answer 52

increase the price

Question 53

recent studies have shown that the price elasticity of demand for snowmobiles at current prices is approximately 3.00

Answer 53

snowmobiles are relatively elastic

Question 54

if the price of snowmobiles increased by 10%

Answer 54

consumers would decrease their purchase by more than 10%

Question 55

to increase total revenue, snowmobile dealers should

Answer 55

decrease price

Question 56

Calculate cross price elasticity for the following situation. The price of (a) increases from $8 to $9, which causes quantity demanded of (b) to increase from 10 to 11.

Answer 56

0.814

Question 57

What is the significance of this?

Answer 57

these two goods are substitutes

Question 58

Calculate the income elastic of demand for the following situation. A consumers income falls from $500 per week to $480 per week, which causes q demanded of (f) to decrease from 7 to 5.

Answer 58

8.350

Question 59

what is the significance of the answer?

Answer 59

this good is normal

Question 60

Want to make up a new elasticity to measure the responsiveness of consumers of ice cream to changes in the daily temperature. What is the formula used to calculate elasticity?

Answer 60

Q(new)-Q(old)/Q(new)+Q(old) all divided by T(new)-T(old)/T(new)+T(old)

Question 61

in the previous question, what would be important?

Answer 61

the value of the calculated answer

Question 62

if we were to calculate the price elasticity of supply and derive the answer .623, what would be the significance of your answer?

Answer 62

it is relatively inelastic

Question 63

an increase in income shifts the consumers:

Answer 63

budget line to the right

Question 64

a change in the slope of a budget line is solely the result of a change in

Answer 64

the price of one or both goods

Question 65

a consumer with a fixed income will maximize utility when each good is purchased in amounts such that the

Answer 65

marginal utility per dollar spent is the same for all goods

Question 66

cross price elasticity of demand measures how sensitive purchase of a specific product are to changes in:

Answer 66

the price of some other product

Question 67

an indifference curve shows all

Answer 67

combinations of two products yielding the same total utility to a consumer

Question 68

What are characteristics of indifference curves?

Answer 68

they are downsloping, they are convex to origin, their slope diminishes as we move from northwest to southeast on a given curve

Question 69

in class we:

Answer 69

discuss concepts

Question 70

t or f. a price ceiling would create a shortage in the market

Answer 70

true

Question 71

t or f. most governments would more likely place a tax on an elastic item

Answer 71

false

Question 72

eggs would be an example of an inelastic good

Answer 72

true

Question 73

t or f. there would be no problem if indifference curves were to cross.

Answer 73

false

Question 74

to be realistic, indifference curves have to be represented by straight lines most of the time.

Answer 74

false

Question 75

t or f. the solution to the consumer maximization problem given in class is to find the point in which the budget line is just tangent to one indifference curve

Answer 75

true

Question 76

t or f. consumer surplus is derived by a consumer that is willing to pay a higher price than the market price for a product

Answer 76

true

Question 77

the government might impose a price flor on a market to protect consumers?

Answer 77

false

Question 78

in economic models, we assume that consumers will be rational in their decision making

Answer 78

true

Question 79

t or f. if a products current price is in the elastic portion of the demand curve, then total revenue could be increased by increasing the price

Answer 79

false