QUESTION 1

1. As price falls along a particular supply curve, producer surplus:

   A.	decreases.
   B.	remains constant.
   C.	increases rapidly.
   D.	increases a very small bit.

QUESTION 2

1. Taxi fares in Cleveland are set by the city government. Suppose that the local taxi companiespetition the city council to raise taxi fares. Despite the fact that higher fares will ________ thequantity demanded for taxi cab rides, the taxi companies must believe that demand for taxis is________ and therefore that revenue will ________.

   A.	decrease; inelastic; increase
   B.	decrease; elastic; increase
   C.	decrease; inelastic; decrease
   D.	increase; inelastic; increase

QUESTION 3

1. The short-run average total cost curve is U-shaped because average fixed costs ________ and average variable costs ________ eventually as quantity produced increases.

   A.	increase; increase
   B.	increase; decrease
   C.	decrease; increase
   D.	decrease; decrease

QUESTION 4

1. Two goods are complements if the:

   A.	price elasticity of each is greater than one.
   B.	income elasticity of each is negative.
   C.	cross-price elasticity is negative.
   D.	cross-price elasticity is positive.

QUESTION 5

1. The budget line shows the set of all possible combinations:

   A.	that yield the same level of utility to the consumer.
   B.	that maximize a consumer's utility.
   C.	that can be purchased, given the consumer's income and the price of the goods.
   D.	that are equilibrium points.

QUESTION 6

1. The difference between the maximum amount that a consumer is willing to pay for a product and the price that is paid for the product describes:

   A.	consumer surplus.
   B.	the cost of producing a unit of the product.
   C.	marginal utility.
   D.	producer surplus.

QUESTION 7

1. Suppose that the elasticity of demand for a product is 4.0 and quantity demanded increases by 20%. What must the percentage decrease in price have been?

   A.	5%
   B.	20%
   C.	80%
   D.	200%

QUESTION 8

1. Suppose that the government sets a maximum price for insulin below the equilibrium price:

   A.	there will be an efficient level of insulin produced.
   B.	there will be excess supply of insulin.
   C.	total surplus will be lower than it would be at the market equilibrium price.
   D.	total surplus will be greater than it would be at the market equilibrium price.

QUESTION 9

1. Suppose the price of a scientific calculator is $80 . If Juan is willing to pay $100 for that scientific calculator, his consumer surplus is:

   A.	$0
   B.	$10
   C.	$20
   D.	$30

QUESTION 10

1. If the supply curve is relatively flat, then the price elasticity of supply will be:

   A.	relatively large.
   B.	relatively low.
   C.	unit elastic.
   D.	greater than one.

QUESTION 11

1. Suppose you have 2 goods, X and Y. If the price of X increases and you buy more Y, then X andY are:

   A.	substitutes.
   B.	normal goods.
   C.	complements.
   D.	inferior goods.

QUESTION 12

1. If the price elasticity of demand is 2, this means that a ________ increase in price causes a ________ decrease in quantity demanded

   A.	15%; 100%
   B.	15%; 10%
   C.	20%; 40%
   D.	30%; 20%

QUESTION 13

1. Suppose that David buys the same number of energy drinks every weekend no matter what happens to the price of the energy drinks. What does this suggest about David's demand for energy drinks?

   A.	It is elastic.
   B.	It is perfectly inelastic.
   C.	It is unitary elastic.
   D.	It is not something that can be characterized without knowing the prices of the energy drinks.

QUESTION 14

1. The price elasticity of demand is calculated by:

   A.	the change in price divided by the change in quantity demanded.
   B.	the change in quantity demanded divided by the change in price.
   C.	the percentage change in price divided by the percentage change in quantity demanded.
   D.	the percentage change in quantity demanded divided by the percentage change in price.

QUESTION 15

1. Robert eats four slices of pizza on a Sunday night but admits each slice of pizza doesn't taste asdelicious as the previous one. This suggests that for Robert:

   A.	the marginal utility of a slice of pizza is positive but decreasing.
   B.	the marginal utility of a slice of pizza is negative but increasing.
   C.	the total utility of slice of pizza is declining by larger and larger increments.
   D.	the total utility of slice of pizza is increasing by larger and larger increments.

QUESTION 16

1. Suppose that the supply of gasoline decreases. Price will ________ and consumer surplus will ________.

   A.	increase; increase
   B.	increase; decrease
   C.	decrease; increase
   D.	decrease; decrease

QUESTION 17

1.  

   Which of the following preference rankings is consistent with Figure 7.7?

   A.	D is preferred to B, which is equivalent in utility terms to C.
   B.	C is preferred to B, which is preferred to A.
   C.	A is preferred to B, which is preferred to D.
   D.	D is preferred to A, which is equivalent in utility terms to C.

QUESTION 18

1. A consumer maximizes utility by choosing:

   A.	a combination of goods such that the marginal rate of substitution is greater than the price ratio.
   B.	a combination of goods such that the marginal rate of substitution is less than the price ratio.
   C.	a combination of goods such that the marginal rate of substitution is equal to the price ratio.
   D.	the highest indifference curve drawn on the indifference map.

QUESTION 19

1. Which of the following are included in calculating economic costs?

   A.	implicit costs
   B.	explicit costs
   C.	accounting costs
   D.	All of the above are correct.

QUESTION 20

1. A good synonym for elasticity would be:

   A.	change.
   B.	demand.
   C.	Responsiveness.
   D.	stickiness.

QUESTION 21

1.  

   Which of the following preference rankings is consistent with Figure 7.7?

   A.	D is preferred to B, which is preferred to C.
   B.	C is preferred to B, which is preferred to A.
   C.	A is preferred to B, which is preferred to C.
   D.	D is preferred to A, which is preferred to C.

QUESTION 22

1. Good X and good Y are substitutes if the:

   A.	income elasticity of each is negative.
   B.	income elasticity of each is positive.
   C.	cross-price elasticity is negative.
   D.	cross-price elasticity is positive.

QUESTION 23

1. The long-run average cost of production is defined as:

   A.	total cost divided by the quantity of output the firm chooses when at least one factor is fixed.
   B.	total cost divided by the quantity of output the firm chooses when it can choose a production facility of any size.
   C.	the quantity produced by a firm that can choose any size production facility.
   D.	the quantity produced by a firm when at least one factor is fixed.

QUESTION 24

1. Utility is:

   A.	ease of use.
   B.	government provided goods like electricity.
   C.	the satisfaction experienced from consuming a good.
   D.	the change in benefit from consuming one more of a good.

QUESTION 25

1. Marginal utility is:

   A.	ease of use.
   B.	government provided goods like electricity.
   C.	the satisfaction experienced from consuming a good.
   D.	the change in total utility from one additional unit of a good.