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| 1.
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An increasing number of individuals have come to believe that consuming less red meat represents an improvement in their diet. As a result: |
| | A) | there is a movement down the demand curve for beef. |
| | B) | there is a leftward shift of the demand curve for beef. |
| | C) | there is a movement up the demand curve for beef. |
| | D) | the demand curve for beef shifts to the right. |
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| 2.
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In economics elasticity means ______. |
| | A) | responsiveness. |
| | B) | satisfaction. |
| | C) | output. |
| | D) | pleasure. |
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| 3.
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Teachers generally earn less than top athletes. As a result, this means: |
| | A) | athletes are better people than teachers. |
| | B) | the marginal value of one more top athlete is greater than the marginal value of one more teacher. |
| | C) | It is clear that the total value derived from the services of all top athletes is larger than the total value derived from all teachers. |
| | D) | very few athletes have the skill to become a top athlete, which tends to reduce the marginal value of a top athlete. |
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| 4.
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If you eat at a fixed price buffet and act in accordance with the principle of diminishing marginal utility, the following statement will be true: |
| | A) | You would eat the same amount you would if you paid per portion. |
| | B) | You would continue to eat so long as the marginal utility from an additional portion exceeded zero. |
| | C) | You would eat more than if you paid per portion but you would definitely stop eating before the marginal utility reached zero. |
| | D) | You would eat less than if you paid per portion. |
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| 5.
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Assuming the price elasticity of demand among teenagers for cigarettes is 0.6: |
| | A) | the demand for cigarettes must be price elastic. |
| | B) | if the price of cigarettes were to increase by 20%, the quantity demanded would not change since teenagers would simply pay the extra money. |
| | C) | if the price of cigarettes were to increase by 20%, the quantity demanded would fall by 20/.6 = 33%. |
| | D) | if the price of cigarettes were to increase by 20%, the quantity demanded would fall by 20 x .6 =12%. |
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| 6.
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If the demand for lunch at a local restaurant is currently price elastic for college students but price inelastic for businessmen, then: |
| | A) | the restaurant should lower the price to both businessmen and students in order to increase total revenue. |
| | B) | the restaurant should increase the price to students and decrease the price to businessmen in order to increase total revenue. |
| | C) | the restaurant should increase the price to both businessmen and students in order to increase total revenue. |
| | D) | the restaurant should decrease the price to students but increase the price to businessmen in order to increase total revenue. |
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| 7.
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According to the law of diminishing marginal utility: |
| | A) | as one consumes more of a good, both total and marginal utility always decline. |
| | B) | as one consumes more of a good, marginal utility declines but total utility continues to increase so long as marginal utility is positive. |
| | C) | total utility declines but marginal utility remains constant. |
| | D) | marginal utility has no effect on total utility. |
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| 8.
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Suppose the quantity of heating fuel purchased in January is larger than the quantity purchased in July, even though the price is higher in January compared to July. |
| | A) | This proves the so-called law of demand is false since more is purchased at a higher price. |
| | B) | This analysis does not disprove the law of demand since the ceteris paribus assumption has been violated; in particular, the change in weather shifts the demand curve. |
| | C) | This represents a change in quantity demanded but not a change in demand. |
| | D) | All of the above are true. |
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| 9.
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Suppose you enjoy both hot dogs and hamburgers but prefer hamburgers to hot dogs. According to the theory of diminishing marginal utility, one would: |
| | A) | expect to see you eat only hot dogs when given the choice between the two. |
| | B) | expect to see you eat a mix of hot dogs and hamburgers but to see you eat more hot dogs than hamburgers. |
| | C) | expect to see you eat a mix of hot dogs and hamburgers but to see you eat more hamburgers compared to hot dogs. |
| | D) | expect to see you eat the same amount of hot dogs and hamburgers since you enjoy both. |
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| 10.
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If your school is contemplating a tuition increase: |
| | A) | you would prefer to be able to prove that tuition demand is inelastic. |
| | B) | it would make no difference what you could prove about tuition demand elasticity since the administration just wants to increase revenue. |
| | C) | you would prefer to be able to prove that tuition demand is elastic. |
| | D) | it is clearly incapable of rational calculation. |
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| 11.
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Consumers spend most of their income on which of the following? |
| | A) | Clothing |
| | B) | Food |
| | C) | Transportation |
| | D) | Housing |
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| 12.
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Utility means ______. |
| | A) | responsiveness. |
| | B) | satisfaction. |
| | C) | sensitivity. |
| | D) | output. |
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| 13.
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A good whose demand is not very responsive to a change in price is called: |
| | A) | elastic. |
| | B) | inelastic. |
| | C) | unitary elastic. |
| | D) | None of the above is true. |
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| 14.
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Total revenue is calculated by which of the following formulas? |
| | A) | P + Q |
| | B) | P x Q |
| | C) | P - Q |
| | D) | P / Q |
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| 15.
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If the demand for a good is elastic, when price increases, total revenue will: |
| | A) | increase. |
| | B) | decrease. |
| | C) | not change. |
| | D) | None of the above is true. |
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| 16.
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Which of the following are determinants of elasticity? |
| | A) | The availability of substitutes. |
| | B) | The relative price of the good compared to income. |
| | C) | Necessities vs. luxuries. |
| | D) | All of the above are determinants of elasticity. |
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| 17.
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In general, the demand for cigarettes is ______. Because of its very high excise tax on cigarettes, the demand for cigarettes in New York City is relatively ______. |
| | A) | elastic; elastic |
| | B) | inelastic; inelastic |
| | C) | elastic; inelastic |
| | D) | inelastic; elastic |
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| 18.
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When marginal utility is negative, total utility is ______. |
| | A) | increasing. |
| | B) | decreasing. |
| | C) | constant. |
| | D) | None of the above is true. |
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| 19.
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Which of the following are characteristics of a good with an elastic demand? |
| | A) | The coefficient of price elasticity of demand is greater than one. |
| | B) | The good has many substitutes. |
| | C) | The good is a luxury. |
| | D) | All of the above are characteristics. |
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| 20.
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Utility is maximized by consuming more of a good until the marginal utility is ______. |
| | A) | zero |
| | B) | positive |
| | C) | negative |
| | D) | None of the above is true. |
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| 21.
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A relatively elastic good tends to be a _____ or is a good with _____ substitutes. |
| | A) | necessity; many |
| | B) | necessity; few |
| | C) | luxury; many |
| | D) | luxury; few |
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| 22.
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Which of the following would have a relatively inelastic demand? |
| | A) | airline travel |
| | B) | automobiles |
| | C) | new furniture |
| | D) | coffee |
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| 23.
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Gasoline and trucks and SUVs are _____; as gasoline prices have increased, truck and SUV sales have _____. |
| | A) | complementary goods; decreased |
| | B) | complementary goods; increased |
| | C) | substitute goods; decreased |
| | D) | substitute goods; increased |
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| 24.
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When income changes there is a _____ the _____ curve. |
| | A) | movement along; demand |
| | B) | shift of; demand |
| | C) | movement along; supply |
| | D) | shift of; supply |
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| 25.
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A new car would be expected a have a _____ demand. |
| | A) | relatively elastic |
| | B) | relatively inelastic |
| | C) | unitary elastic |
| | D) | None of the above is true. |
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