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Name Exam 1 Chaps 1,2, 3 and 4

Description Exam 1 covers Chapters 1 - 4, but the emphasis is on Chaps 3 and 4. I think there is, maybe 1
question from Chap 1 and from Chap 2. All the rest (35 questions total) come from Chapters 3
& 4 pretty equally.
Instructions Modify

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Question 1 Multiple Choice 10 points Modify Remove

Question The economic concept of "opportunity cost" is most closely associated with which of
the following management considerations?
Answer technology
market structure
resource scarcity
product demand

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Question 2 Multiple Choice 10 points Modify Remove

Question A firm's "normal profit" is best characterized by the

Answer the average amount of profit earned in the firm's industry.
amount of profit a firm could earn in its next best alternative activity.
average of a firm's profits over the past five years.
amount of profit necessary to keep the price of a firm's stock from changing.

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Question 3 Multiple Choice 10 points Modify Remove

Question Which of the following best applies to the distinction between the "long run" and the
"short run"?
Answer The rationing function of price is a short-run phenomenon whereas the guiding
function is a long-run phenomenon.
In the short run, only new firms may enter, while in the long-run firms may either
enter or exit the market.
The short run is a period of approximately 1-6 months while the long run is any
time frame which is longer.
All of the above statements are correct.

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Question 4 Multiple Choice 10 points Modify Remove

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Question In the long run if there is a shortage in the market for a product, the guiding
(allocation) function of price can be expected to cause
Answer a decreasing shift in the demand for the product.
an increasing shift in the supply of the product.
a decreasing shift in the supply of the product.
an increasing shift in the demand for the product.

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Question 5 Multiple Choice 10 points Modify Remove

Question The "law" of demand can be best described by

Answer if incomes rise, people will buy more.
a rise in price will cause shortages.
a fall in price will increase quantity demanded.
people will buy things that they enjoy.

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Question 6 Multiple Choice 10 points Modify Remove

Question All of the following are non-price determinants of demand except

Answer tastes and preferences.
income.
future expectations.
technology.

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Question 7 Multiple Choice 10 points Modify Remove

Question Which of the following would cause a decrease in the demand for fish?
Answer The price of chicken decreases.
The price of fish increases.
The price of red meat increases.
The number of fishing boats decreases.

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Question 8 Multiple Choice 10 points Modify Remove

Question Which of the following can result in a decrease in the demand for I-Pods in the short
run?
Answer a decrease in the price of MP4s
a decrease in the population
a decrease in real household incomes
All of the above

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Question 9 Multiple Choice 10 points Modify Remove

Question Two goods are ________ if the quantity consumed of one increases when the price
of the other decreases.
Answer normal

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substitute
complementary
superior

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Question 10 Multiple Choice 10 points Modify Remove

Question Which of the following will not cause the demand curve for good X to shift?
Answer a change in the price of Y, a complement
an increase in average disposable real income
a change in the price of X
a change in the price of Z, a substitute

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Question 11 Multiple Choice 10 points Modify Remove

Question Coke and Pepsi are substitutes if

Answer the supply of Coke increases when the price of Pepsi falls
the demand for Coke increases when the price of Pepsi rises
the demand for Coke increases when the price of Pepsi falls
the demand for Coke and Pepsi rise and fall together

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Question 12 Multiple Choice 10 points Modify Remove

Question Which of the following applies most generally to supply in the long run?
Answer Producers are able to make change in all their factors of production.
Average total cost must decline.
Producers are only able to make change in their variable factors of production.
All original producers will leave the market.

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Question 13 Multiple Choice 10 points Modify Remove

Question A fall in the price of pesticide use in the production of Cotton will
Answer cause a downward movement along the supply curve of Cotton.
have no effect on the supply of Cotton.
decrease the supply of Cotton, causing the supply curve of Cotton to shift to the
left.
increase the supply of Cotton, causing the supply curve of Cotton to shift to the
left.
None of the above

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Question 14 Multiple Choice 10 points Modify Remove

Question Which of the following would cause a leftward shift in the demand curve for a good?
Answer the expectation that there will be a shortage in the availability of the good
an increase in income
an increase in the price of a complementary good

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an increase in the price of a substitute

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Question 15 Multiple Choice 10 points Modify Remove

Question A market is in equilibrium when

Answer the quantity supplied is equal to the quantity demanded.
tastes and preference remain constant.
the price is adjusting upward.
supply is equal to demand.

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Question 16 Multiple Choice 10 points Modify Remove

Question The switch to the use of ethanol in gasoline is driven primarily by its relatively lower
price. Assuming a competitive market, what effect would this change have on the equilibrium
price and output for gasoline?
Answer Price rises, output rises.
Price falls, output falls.
Price rises, output falls.
Price falls, output rises.

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Question 17 Multiple Choice 10 points Modify Remove

Question Holding supply constant, an increase in demand will

Answer decrease both the quantity and price.
increase both the quantity and price.
decrease the equilibrium price and increase the equilibrium quantity.
increase the equilibrium price and decrease the equilibrium quantity.

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Question 18 Multiple Choice 10 points Modify Remove

Question The elasticity of demand for a product is likely to be greater

Answer if the product is a luxury rather than an absolute necessity.
if the product is an imported good rather than a domestically produced good.
the smaller the proportion of one's income spent on the product.
the smaller the number of substitute products available.

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Question 19 Multiple Choice 10 points Modify Remove

Question If the consumption of sugar does not change at all following a price increase from
50 cents per pound to 65 cents per pound, the demand for sugar is considered to be
Answer unitary elastic.
perfectly inelastic.
relatively inelastic.
perfectly elastic.

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Question 20 Multiple Choice 10 points Modify Remove

Question If an item has several good substitutes, the demand curve for that item is likely to be
Answer unit elastic.
relatively inelastic.
perfectly inelastic.
relatively elastic.

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Question 21 Multiple Choice 10 points Modify Remove

Question Suppose the price of beans rises from $1.00 a pound to $2.00 a pound, quantity
demanded falls from 10 units to 6 units, the coefficient of elasticity of demand for beans using
the arc elasticity approach is
Answer -0.75.
-0.25.
-0.4.
-1.33.

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Question 22 Multiple Choice 10 points Modify Remove

Question A perfectly elastic demand curve

Answer is a 45-degree line.
cannot be represented on a two-dimensional graph.
can be represented by a line parallel to the vertical axis.
can be represented by a line parallel to the horizontal axis.

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Question 23 Multiple Choice 10 points Modify Remove

Question The cross-price elasticity of demand for coffee and tea is likely to be
Answer greater than zero.
infinity.
zero.
less than zero.

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Question 24 Multiple Choice 10 points Modify Remove

Question The cross-price elasticity of demand for coffee and caskets is likely to be
Answer greater than zero.
less than zero.
zero.
infinity.

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Question 25 Multiple Choice 10 points Modify Remove

Question The owner of a produce store found that when the price of a head of lettuce was
raised from 50 cents to $1, the quantity sold per hour fell from 18 to 8. The arc elasticity of

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demand for lettuce is

Answer -0.8.
-1.15.
-0.56.
-1.57.

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Question 26 Multiple Choice 10 points Modify Remove

Question If a firm decreases the price of a good and total revenue decreases, then
Answer the cross elasticity is negative.
the demand for this good is price elastic.
the demand for this good is price inelastic.
the income elasticity is less than 1.

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Question 27 Multiple Choice 10 points Modify Remove

Question If the income elasticity of a particular good is negative 0.2, it would be considered
Answer a superior good.
an elastic good.
an inferior good.
a normal good.

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Question 28 Multiple Choice 10 points Modify Remove

Question Table 1
The following information is provided for Tony Romo's income and expenditures.

Quantity Purchased per Month

Monthly Income Steaks Pizzas
$2,000 2 8
$3,000 4 6

In Table 1, pizzas are classified as a(n)

Answer marginal good.
normal good.
inferior goods.
positive good.

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Question 29 Multiple Choice 10 points Modify Remove

Question Table 1
The following information is provided for Tony Romo's income and expenditures.

Quantity Purchased per Month

Monthly Income Steaks Pizzas
$2,000 2 8
$3,000 4 6

In Table 1, Tony's income elasticity of demand for pizzas is

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Answer greater than 1.0.

1.0.
0.
less than zero.

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Question 30 Multiple Choice 10 points Modify Remove

Question Which of the following instances will total revenue or receipts decline?
Answer Price falls and demand is unit elastic.
Price rises and demand is elastic.
Price falls and demand is elastic.
Price rises and demand is inelastic.

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Question 31 Multiple Choice 10 points Modify Remove

Question If the price of a good is decreased and total revenue received from the sale of this
good does not change, then the price elasticity of demand for the good is
Answer inelastic.
unitary.
elastic.
None of the above

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Question 32 Multiple Choice 10 points Modify Remove

Question If the price elasticity of supply of a good is elastic and the good price increases,
then the increase in the quantity of the good supplied should be
Answer greater than the increase in price.
the same as the increase in price.
less than the increase in price.
Cannot be determined from this information

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Question 33 Multiple Choice 10 points Modify Remove

Question The derived demand curve for a good component will be more inelastic
Answer the less essential is the component in question.
the more inelastic is the demand curve for the final good.
the larger is the fraction of total cost going to this component.
the more elastic are the supply curves of cooperating factors.

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Question 34 Multiple Choice 10 points Modify Remove

Question If government imposes a price ceiling on a good that is below the market equilibrium
price
Answer a shortage will develop.
a surplus will develop.

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consumers will reduce their demand for the good.

producers will reduce their sales price.

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Question 35 Multiple Choice 10 points Modify Remove

Question If government imposes an excise tax on a good and the tax burden is borne equally
by buyers and sellers, then
Answer the absolute values of price elasticities of demand and supply are equal.
price elasticity of supply is unitary.
price elasticity of demand is unitary.
None of the above

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