Econ Test #2

question

When marginal revenue is positive,

answer

demand is elastic

question

The cross-price elasticity of demand between goods X and Y

answer

both "measures the responsiveness of the quantity of X demanded to changes in the price of Y" and "is greater than zero if X and Y are substitutes".

question

The slope of an indifference curve

answer

is the rate at which the consumer is willing to exchange one good for another, utility held constant.

question

A utility function

answer

shows the relation between the amount of goods consumed and a consumer's utility.

question

Marginal revenue

answer

both "is the change in total revenue when output increases by one unit" and "measures the slope of the total revenue curve".

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If the quantity of gidgets demanded increases when the price of gadgets decreases,

answer

gidgets and gadgets are complements.

question

An individual's demand curve for X

answer

shows how the utility-maximizing choice of X changes as the price of X changes.

question

If the demand for plastic surgery is price inelastic,

answer

then when more plastic surgery is performed, total expenditures on plastic surgery will decrease.

question

A typical indifference curve

answer

shows all combinations of goods that give a consumer the same level of utility.

question

The Interior Department recently announced that it will increase the entrance fees at Yellowstone National Park in order to increase park revenues. The Interior Department must believe that

answer

the percentage increase in fees will be greater than the percentage decrease in the number of park visitors.

question

The demand for heart surgery is price inelastic. So it follows that

answer

if the price of heart surgery increases, total expenditure by consumers on heart surgery will rise.

question

Suppose that the Houston Rockets' management is considering a plan in which fans who donate blood can attend games for $35 instead of the usual $50. If both ticket revenues and blood donations rise with this plan, which of the following is true?

answer

The demand for Houston Rockets' tickets is price elastic.

question

The rate at which a consumer is able to substitute one good for another is determined by

answer

the budget line.

question

Which of the following assumptions is (are) NOT made in consumer behavior theory?

answer

Consumers can measure the utility they get from all bundles of goods.

question

Now suppose the price of good X increases to $12 while the price of good Y remains $4. Utility will be maximized on which indifference curve?

answer

question

Marginal utility is

answer

the change in utility that results from increasing the amount of a good consumed by one unit

question

If Mary prefers bananas to plums and plums to peaches, but is indifferent between bananas and oranges, she

answer

prefers oranges to peaches.

question

Which of the following will NOT affect the elasticity of demand for a product?

answer

the cost of producing the product

question

If the demand for umbrellas is price inelastic,

answer

if more umbrellas are sold as the result of a price decrease, total expenditures by consumers on umbrellas will decrease.

question

Demand equations derived from actual market data are

answer

both"empirical demand functions" and "generally estimated using regression analysis".

question

Suppose that you run a house-painting company and currently have 2 workers painting a total of 4 houses per month. If you hire a third worker, 6 houses can be painted per month. If you hire a fourth worker, 9 houses can be painted, and a fifth and sixth worker will increase the number of houses painted to 13 and 15, respectively. Diminishing returns

answer

set in when the sixth worker is hired.

question

Suppose you run a pizza shop and currently have two employees. If you hire a third employee, your output of pizzas per day rises from 55 to 65. If you hire a fourth employee, output rises to 80 per day. A fifth and sixth employee would cause output to rise to 90 and 95 per day, respectively. Pick the correct statement:

answer

Diminishing returns set in with the hiring of the fifth worker.

question

A market-determined price

answer

both "is determined by the intersection of demand and supply curves" and "is an endogenous variable".

question

One problem with consumer interviews is that

answer

both "the sample may not be a representative sample" and "response bias"

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Manager-determined prices are

answer

both "not determined by the forces of demand and supply" and "exogenous variables in a demand equation".

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A representative sample

answer

both "reflects the characteristics of the population" and "is frequently a random sample"

question

Which of the following statements is false?

answer

In the short run all inputs are fixed.

question

Qualitative forecasting methods

answer

both "are often the result of expert opinion" and "cannot be replicated by another researcher"

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A production function measures the relation between

answer

the quantity of inputs and the quantity of output.

question

The estimated demand for a good is

Q̂ = 4,800 − 16 P− 0.65 M− 1.5 PR

where Q is the quantity demanded of the good, P is the price of the good, M is income, and PR is the price of related good R. The coefficient on P

answer

is negative as dictated by the law of demand.

question

Given the table below, if labor is fixed at three units, how much does the third unit of capital add to total output?

Units of Capital123Units of Labor18010012021802202603270330390434042050053904905906410530650

Amount of total output produced from various combinations of labor and capital.

answer

question

A short-run production function assumes that

answer

at least one input is a fixed input.

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If average product is increasing, then marginal product

answer

must be greater than average product.

1 of 33

question

When marginal revenue is positive,

answer

demand is elastic

question

The cross-price elasticity of demand between goods X and Y

answer

both "measures the responsiveness of the quantity of X demanded to changes in the price of Y" and "is greater than zero if X and Y are substitutes".

question

The slope of an indifference curve

answer

is the rate at which the consumer is willing to exchange one good for another, utility held constant.

question

A utility function

answer

shows the relation between the amount of goods consumed and a consumer's utility.

question

Marginal revenue

answer

both "is the change in total revenue when output increases by one unit" and "measures the slope of the total revenue curve".

question

If the quantity of gidgets demanded increases when the price of gadgets decreases,

answer

gidgets and gadgets are complements.

question

An individual's demand curve for X

answer

shows how the utility-maximizing choice of X changes as the price of X changes.

question

If the demand for plastic surgery is price inelastic,

answer

then when more plastic surgery is performed, total expenditures on plastic surgery will decrease.

question

A typical indifference curve

answer

shows all combinations of goods that give a consumer the same level of utility.

question

The Interior Department recently announced that it will increase the entrance fees at Yellowstone National Park in order to increase park revenues. The Interior Department must believe that

answer

the percentage increase in fees will be greater than the percentage decrease in the number of park visitors.

question

The demand for heart surgery is price inelastic. So it follows that

answer

if the price of heart surgery increases, total expenditure by consumers on heart surgery will rise.

question

answer

The demand for Houston Rockets' tickets is price elastic.

question

The rate at which a consumer is able to substitute one good for another is determined by

answer

the budget line.

question

Which of the following assumptions is (are) NOT made in consumer behavior theory?

answer

Consumers can measure the utility they get from all bundles of goods.

question

Now suppose the price of good X increases to $12 while the price of good Y remains $4. Utility will be maximized on which indifference curve?

answer

question

Marginal utility is

answer

the change in utility that results from increasing the amount of a good consumed by one unit

question

If Mary prefers bananas to plums and plums to peaches, but is indifferent between bananas and oranges, she

answer

prefers oranges to peaches.

question

Which of the following will NOT affect the elasticity of demand for a product?

answer

the cost of producing the product

question

If the demand for umbrellas is price inelastic,

answer

if more umbrellas are sold as the result of a price decrease, total expenditures by consumers on umbrellas will decrease.

question

Demand equations derived from actual market data are

answer

both"empirical demand functions" and "generally estimated using regression analysis".

question

answer

set in when the sixth worker is hired.

question

answer

Diminishing returns set in with the hiring of the fifth worker.

question

A market-determined price

answer

both "is determined by the intersection of demand and supply curves" and "is an endogenous variable".

question

One problem with consumer interviews is that

answer

both "the sample may not be a representative sample" and "response bias"

question

Manager-determined prices are

answer

both "not determined by the forces of demand and supply" and "exogenous variables in a demand equation".

question

A representative sample

answer

both "reflects the characteristics of the population" and "is frequently a random sample"

question

Which of the following statements is false?

answer

In the short run all inputs are fixed.

question

Qualitative forecasting methods

answer

both "are often the result of expert opinion" and "cannot be replicated by another researcher"

question

A production function measures the relation between

answer

the quantity of inputs and the quantity of output.

question

The estimated demand for a good is

Q̂ = 4,800 − 16 P− 0.65 M− 1.5 PR

where Q is the quantity demanded of the good, P is the price of the good, M is income, and PR is the price of related good R. The coefficient on P

answer

is negative as dictated by the law of demand.

question

Given the table below, if labor is fixed at three units, how much does the third unit of capital add to total output?

Units of Capital123Units of Labor18010012021802202603270330390434042050053904905906410530650

Amount of total output produced from various combinations of labor and capital.

answer

question

A short-run production function assumes that

answer

at least one input is a fixed input.

question

If average product is increasing, then marginal product

answer

must be greater than average product.

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Econ Test #2

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