Micro Test 2

The study of economics is

a way of analyzing decision-making processes caused by scarcity

As price declines, quantity demanded goes ______, and quantity supplied goes ________.

up, down

If quantity demanded is greater than the quantity supplied,

the price will rise

The law of demand holds

for both individuals and markets

When we go from one demand curve to another, there has definitely been

a change in demand

As income falls, the demand for normal goods _____ and the demand for inferior goods _____.

falls; rises

What is this

decrease in demand

What is a movement from point A to point B?

a change in quantity demanded

As income rises, the demand for inferior goods

falls

When the demand for CD’s rises, buyers will purchase more CD’s at

all prices

If good A and good B are substitutes and the price of good A decreases, the demand for good B will

decrease

A normal good is defined as a good for which demand increases

as the income of consumers increases

All but which of the following could shift the demand curve?

A shift in the supply curve

If beans are inferior goods, a decrease in income will

shift the demand curve for beans to the left

Chicken and pork are substitutes. Other things being equal, an increase in the price of chicken will

increase the demand for pork

Computers and computer software are complements. A decrease on the price of computers is likely to

increase the demand of computer software

An improvement in technology will cause

the supply to increase

A decrease in supply will tend to cause a(an)

decrease in quantity demanded

When personal computers became popular, several new firms entered the competition. What effect did this have on supply?

Shift of the supply curve to the right

Suppose that, due to low profits, many individuals decide to leave the farming business. The effect of the exodus will be

to increase the prices of agricultural products

How will the development of the hybrid automobile affect the market for gasoline?

Demand will decrease

If coffee and tea are substitutes and the supply of coffee increases, all of the following will result except

the quantity of coffee purchased will rise

When elasticity is 0.1, demand is

inelastic

An elasticity if 2 would be

elastic

The curve in the graph above is

a perfectly elastic demand curve

If demand is inelastic and price is lowered, total revenue will

fall

If demand is elastic and price is lower, total revenue will

rise

Demand is elastic when

percentage change in quantity is greater than percentage change in price

unit elasticity js when on the graph

when price and quantity are equal

the lowest elasticity in the graph would be at

the highest quantity for the lowest price

Which coefficients is the least elastic?

0.1

If consumers are price sensitive, then

they will have elastic demand curves

Advertisers try t0

raise the demand for their product to make it less elastic

A straight vertical line is

is an inelastic line (supply or demand)

Which of the following statements best represents the attitude of a consumer with a very inelastic demand toward various brands of coffee?

“My brand is superior”

A person would be maximizing her total utility when

her marginal utility was zero

Statement 1 - Utility is measured by how much a person is willing to pay for a good or service

Statement 2 - If you buy four units of a good, your total utility is higher than if you purchased only three units.

Both statements are true

Melissa says she will have to be paid in order to even try Jason’s cooking, so her marginal utility for Jasons cooking is

negative

Statement 1: if a resturaunt served free steaks, people would consume more and more steaks until their _________ fell to zero

marginal utility

We will keep buying DVD’s until the marginal utility is what

falls to the price of a DVD

Kelly eats 5 slices of pizza on Friday night, but admits each slice of pizza does not taste as good as the previous one. This suggests that for Kelly

the marginal utility of a slice of pizza is positive but decreasing

As you go on more and more ski weekends, your total utility _____ and your marginal utility _______

rises, declines

Which statement would be true about a person who goes to an all-you-can-eat-resturant

She will eat until the marginal utility of the last portion of food is zero

Which is most clearly a variable cost

Wages of production workers

The law of diminishing returns

states that profit margins decline as output rises

Arguments for why CEO’s are being paid too much

It creates inefficiency

It reduces performance

It rewards status over actual contributions

Arguments so that CEO’s can regulate their own pay

 Experience and Skill

tied to how a company does

Minimal Financial Impact

There are 2 measures to determine whether an industry is highly oligpolized

Concentration ratio and HHI

concentration ratio

(top 4 businesses in terms of market share and if its > 60%, then they are highly concentrated)

HHI

(all market share of each company squared + sum)

If a perfectly comp firm raises its prices above the market,

Its sales go down