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1 | |
The price elasticity of demand measures ________________ |
| | A) | the responsiveness of quantity demanded to a change in price |
| | B) | how far a demand curve shifts |
| | C) | a change in price |
| | D) | a change in quantity demanded |
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2 | |
If demand is ___________ then price cuts will __________ spending |
| | A) | inelastic, increase |
| | B) | elastic, increase |
| | C) | elastic, decrease |
| | D) | none of the above |
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3 | |
The cross-price elasticity of demand measures how the quantity demanded of one good is related to consumer income |
| | A) | TRUE |
| | B) | FALSE |
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4 | |
Positive cross-elasticities suggest that goods are _________ and negative cross-elasticities that goods are __________ |
| | A) | substitutes, inferior |
| | B) | normal, complements |
| | C) | substitutes, complements |
| | D) | normal, inferior |
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5 | |
A measurement showing how quantity demanded varies with income is the |
| | A) | price elasticity of demand |
| | B) | cross-price elasticity of demand |
| | C) | budget elasticity of demand |
| | D) | income elasticity of demand |
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6 | |
Inferior goods have ___________ and luxury goods have ____________ |
| | A) | negative income elasticities, income elasticities greater than 1 |
| | B) | income elasticities greater than 1, negative income elasticities |
| | C) | positive income elasticities, negative income elasticities |
| | D) | none of the above |
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7 | |
If your income doubles and the prices of the goods you buy double, then your demand for these goods will likely ________ |
| | A) | increase |
| | B) | not change |
| | C) | decrease |
| | D) | shift |
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8 | |
Any price change can be decomposed into an income effect and a complementary effect |
| | A) | TRUE |
| | B) | FALSE |
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9 | |
The income effect of a price increase of a normal good is to __________ of that good and the substitution effect is to _______ of that good |
| | A) | increase quantity demanded, reduce quantity demanded |
| | B) | increase quantity demanded, increase quantity demanded |
| | C) | reduce quantity demanded, reduce quantity demanded |
| | D) | reduce quantity demanded, increase quantity demanded |
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10 | |
The opportunity cost of a student is |
| | A) | Course fees and rent |
| | B) | A loan from the bank |
| | C) | What the student could have earned in the best job available by not studying |
| | D) | What the student will earn after graduation |
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11 | |
Economics assumes that people consume goods and services to achieve |
| | A) | Status |
| | B) | Prestige |
| | C) | Utility |
| | D) | Self-esteem |
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12 | |
The extra utility from consuming one more unit of a good is called |
| | A) | Marginal utility |
| | B) | Additional utility |
| | C) | Surplus utility |
| | D) | Bonus utility |
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13 | |
Adding up the quantities demanded of a good by different people facing the same price gives us the |
| | A) | Supply curve |
| | B) | Market demand curve |
| | C) | Demand curve |
| | D) | Market supply curve |
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14 | |
Firms are assumed to _________ costs and to _________ profits |
| | A) | incur, desire |
| | B) | pay, make |
| | C) | charge, earn |
| | D) | minimize, maximize |
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15 | |
The increase in total cost when one more unit is produced is known as |
| | A) | marginal cost |
| | B) | opportunity cost |
| | C) | limited cost |
| | D) | average cost |
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16 | |
Marginal revenue is the _________ when output is ____________ |
| | A) | change in average revenue, increased |
| | B) | change in total revenue, increased by one unit |
| | C) | change in average revenue, increased by one unit |
| | D) | change in total revenue, increased |
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17 | |
Profits are maximized when _________________ |
| | A) | costs are minimized |
| | B) | revenue is maximized |
| | C) | average cost is less than average revenue |
| | D) | marginal cost equals marginal revenue |
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18 | |
If a firm is producing a level of output where marginal cost is greater than marginal revenue, it should increase output to maximise profits |
| | A) | TRUE |
| | B) | FALSE |
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19 | |
If a firm's wage costs increase this will cause __________ and ________ |
| | A) | marginal cost to increase, output to fall |
| | B) | marginal revenue to increase, output to fall |
| | C) | opportunity cost to increase, the firm will close |
| | D) | average cost will rise, output will increase |
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20 | |
An upward shift in marginal cost ________output and an upward shift in marginal revenue ________ output |
| | A) | reduces, reduces |
| | B) | reduces, increases |
| | C) | increases, increases |
| | D) | increases, reduces |
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21 | |
A firm should close down if profits are zero |
| | A) | TRUE |
| | B) | FALSE |
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22 | |
A firm that breaks even after all economic costs are paid is earning |
| | A) | Economic profit |
| | B) | Accounting profit |
| | C) | Normal profit |
| | D) | Supernormal profit |
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23 | |
A firm that makes profit in addition to normal profit is making |
| | A) | Economic profit |
| | B) | Accounting profit |
| | C) | Normal profit |
| | D) | Supernormal profit |
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24 | |
If both marginal cost and marginal revenue increase, a firm __________ |
| | A) | should increase output |
| | B) | should reduce output |
| | C) | will require further information on how to respond |
| | D) | should not change output |
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