Microeconomics Exam 2

Price elasticity of supply is used to gauge

How responsive suppliers are to price changes

When demand is elastic, a fall in price causes total revenue to rise because

The increase in quantity sold is large enough to offset the lower price

If demand is inelastic, the absolute value of the price elasticity of demand is

Less than 1

Suppose the value of the price elasticity of demand is -3. What does this mean?

A 1 percent increase in the price of the good causes quantity demand to decrease by 3%

When demand is unit-elastic, a change in price causes total revenue to stay the same because

The percentage change in quantity demanded exactly offsets the percentage change in price

What goes a perfect elastic supply look like on a graph

Straight horizontal line

The price elasticity of demand for heart transplants is perfectly inelastic. Thus, the price elasticity for heart transplants is

0

If the cross price elasticity of demand for pizza with respect to burgers is 0.5, what can we say about pizza and burgers

A burger is a substitute to pizza

If the quantity of peanut butter demanded increases by 4% when the price of jelly decreases by 2%, the cross price elasticity of demand between peanut butter and jelly is

-2

At an income of $10 and a price of $4 per donut the class demanded 10 donuts. When our income increased to $20, out quantity demanded for donuts increased to 28. What is the cross price elasticity of demand for donuts

1.42, normal good

When Italy buys a Boeing jet, it pays —- if it produced the jet itself, and if the price Boeing receives is —— than what an additional US buyer is willing to pay

a lower price than, higher

When a country exports a good, the country’s producer surplus ——, consumer surplus —-, and the country —- from the trade

increase, decreases, gains

International trade based on comparative advantage is in the social interest because —-

When a tariff is imposed on an imported good, the —- of that good increases

domestic quantity produced

When a tariff is imposed on a good, domestic consumers of the good —- and domestic producers of the good —-

Lose, Win

The imposition of a tariff on carnations

decreases the number of carnations imported by 200

The amount of revenue collected the government from the tariff is

$400

If total utility increases at a decreasing rate as a consumer consumes more coffee, then marginal utility must

A decrease

Consumers maximize total utility within their budget constraint by

Buying the goods with the largest marginal utility per dollar spent

If a consumer always buys goods rationally, then

The marginal utility per dollar spent on all goods will be equal

You have $30 to spend on pita wraps and bubble tea. The thrice if a pita wrap is $6 and the price of a glass of bubble tea is $3. The table shows utility from different quantities of the two items. What is your optimal consumption bundle?

3 pita wraps and 4 bubble teas

If you obtain 9 units of utility per dollar spent on apples and 6 units of utility per dollar spent on oranges, then you

Should buy more apples and fewer oranges

What happens to your budget line if your income increases

The budget line shifts to the right

If the price of gum is $0.50 per pack and the price of water is $1.00, what is the relative price of water?

Two packs of gum

Referring to the figure, which of the following statements is true?

Quantities Q0 and Q1 are the utility maximizing quantities of hoagies at two different prices of hoagies

What is the marginal rate of substitution

The rate at which the consumer is willing to trade one good for another without any loss in utility

A consumers utility maximizing combination of goods is given by the bundle that corresponds to the point on?

An indifference curve that is tangent to the budget constraint

Refer to the figure. The consumer can afford consumption bundles?

S, v, t, u