This document contains a practice test with multiple choice questions about concepts in economics including elasticity, demand curves, budget constraints, and utility maximization. The questions cover topics such as price elasticity, cross elasticity, income and substitution effects, marginal utility, indifference curves, and consumer choice subject to a budget constraint. An answer key is provided at the end.
This document contains a practice test with multiple choice questions about concepts in economics including elasticity, demand curves, budget constraints, and utility maximization. The questions cover topics such as price elasticity, cross elasticity, income and substitution effects, marginal utility, indifference curves, and consumer choice subject to a budget constraint. An answer key is provided at the end.
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Microeconomics practice test 2 Elasticity with anwsers
This document contains a practice test with multiple choice questions about concepts in economics including elasticity, demand curves, budget constraints, and utility maximization. The questions cover topics such as price elasticity, cross elasticity, income and substitution effects, marginal utility, indifference curves, and consumer choice subject to a budget constraint. An answer key is provided at the end.
This document contains a practice test with multiple choice questions about concepts in economics including elasticity, demand curves, budget constraints, and utility maximization. The questions cover topics such as price elasticity, cross elasticity, income and substitution effects, marginal utility, indifference curves, and consumer choice subject to a budget constraint. An answer key is provided at the end.
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Test 2 practice MCQ
(Answers are at the end)
1. If the demand for product X is inelastic, a percent increase in the price of X will!
A. decrease the "uantit# of X demanded $# more than percent. %. decrease the "uantit# of X demanded $# less than percent. C. increase the "uantit# of X demanded $# more than percent. &. increase the "uantit# of X demanded $# less than percent.
2. 'uppose Ai#anna(s )i**eria currentl# faces a linear demand cur+e and is char,in, a +er# hi,h price per pi**a and doin, +er# little $usiness. Ai#anna now decides to lower pi**a prices $# - percent per wee. for an indefinite period of time. /e can e0pect that each successi+e wee.!
A. demand will $ecome more price elastic. %. price elasticit# of demand will not chan,e as price is lowered. C. demand will $ecome less price elastic. &. the elasticit# of suppl# will increase.
1. 2efer to the a$o+e dia,ram and assume a sin,le ,ood. If the price of the ,ood increased from 3-.45 to 36.15 alon, D1, the price elasticit# of demand alon, this portion of the demand cur+e would $e! A. 5.7 . %. 1.5 . C. 1.2 . &. 2.5 .
. The elasticit# of suppl# of product X is unitar# if the price of X rises $#! A. - percent and "uantit# supplied rises $# 4 percent. %. 7 percent and "uantit# supplied rises $# 7 percent. C. 15 percent and "uantit# supplied sta#s the same. &. 4 percent and "uantit# supplied rises $# - percent.
-. It ta.es a considera$le amount of time to increase the production of por.. This implies that! A. a chan,e in the demand for por. will not affect its price in the short run. %. the short8run suppl# cur+e for por. is less elastic than the lon,8run suppl# cur+e for por.. C. an increase in the demand for por. will elicit a lar,er suppl# response in the short run than in the lon, run. &. the lon,8run suppl# cur+e for por. is less elastic than the short8run suppl# cur+e for por..
6. The suppl# cur+e of a one8of8a8.ind ori,inal paintin, is! A. relati+el# elastic. %. relati+el# inelastic. C. perfectl# inelastic. &. perfectl# elastic.
4. /e would e0pect the cross elasticit# of demand $etween dress shirts and ties to $e!
A. positi+e, indicatin, normal ,oods. %. positi+e, indicatin, complementar# ,oods. C. ne,ati+e, indicatin, su$stitute ,oods. &. ne,ati+e, indicatin, complementar# ,oods.
7. 'uppose that a 15 percent increase in the price of normal ,ood 9 causes a 25 percent increase in the "uantit# demanded of normal ,ood X. The coefficient of cross elasticit# of demand is!
A. ne,ati+e and therefore these ,oods are su$stitutes. %. ne,ati+e and therefore these ,oods are complements. C. positi+e and therefore these ,oods are su$stitutes. &. positi+e and therefore these ,oods are complements.
:. /hich of the followin, ,oods will least li.el# suffer a decline in demand durin, a recession;
A. &inner at a nice restaurant %. i)od s C. Toothpaste &. )lasma screen and <C& T=s
15. >enerall# spea.in,, the demand for lu0ur# ,oods is more price elastic than is the demand for necessities.
True ?alse
11. /hen the percenta,e chan,e in price is ,reater than the resultin, percenta,e chan,e in "uantit# demanded! A. a decrease in price will increase total re+enue. %. demand ma# $e either elastic or inelastic. C. an increase in price will increase total re+enue. &. demand is elastic.
12. If a firm finds that it can sell 311,555 worth of a product when its price is 3- per unit and 311,555 worth of it when its price is 36, then! A. the demand for the product is elastic in the 3683- price ran,e. %. the demand for the product must ha+e increased. C. elasticit# of demand is 5.4. &. the demand for the product is inelastic in the 3683- price ran,e.
11. /hich of the followin, ,enerali*ations is not correct; A. The lar,er an item is in one(s $ud,et, the ,reater the price elasticit# of demand. %. The price elasticit# of demand is ,reater for necessities than it is for lu0uries. C. The lar,er the num$er of close su$stitutes a+aila$le, the ,reater will $e the price elasticit# of demand for a particular product. &. The price elasticit# of demand is ,reater the lon,er the time period under consideration.
1. Mar,inal utilit# can $e! A. positi+e, $ut not ne,ati+e. %. positi+e or ne,ati+e, $ut not *ero. C. positi+e, ne,ati+e, or *ero. &. decreasin,, $ut not ne,ati+e.
1-. 'uppose that M@xAPx e0ceeds M@yAPy. To ma0imi*e utilit# the consumer who is spendin, all her mone# income should $u#! A. less of X onl# if its price rises. %. more of 9 onl# if its price rises. C. more of 9 and less of X. &. more of X and less of 9.
16. /hen a consumer shifts purchases from product X to product 9 the mar,inal utilit# of! A. X falls and the mar,inal utilit# of 9 rises. %. X rises and the mar,inal utilit# of 9 falls. C. $oth X and 9 rises. &. $oth X and 9 falls.
14. &iminishin, mar,inal utilit# e0plains wh#! A. the income effect e0ceeds the su$stitution effect. %. the su$stitution effect e0ceeds the income effect. C. suppl# cur+es are upslopin,. &. demand cur+es are downslopin,.
17. Accordin, to prospect theor#, firms are more li.el# to shrin. pac.a,es than raise prices $ecause! A. consumers feel the loss of a price increase more than the# feel the loss of $u#in, a smaller pac.a,e for their mone#. %. the# don(t understand that consumers reco,ni*e price increases easil#, re,ardless of what form the# ta.e. C. consumers associate smaller pac.a,es with hi,her "ualit# lu0ur# ,oods. &. consumers are ,enerall# tr#in, to downsi*e their purchases and lead simpler li+es.
1:. )rospect theor# and the wor. of $eha+ioral economists confirm that consumers are economicall# rational.
True ?alse
25. If the price of A is 312 and the price of % is 31, the $ud,et line tells us that a consumer in effect can trade! A. 12 units of A for 1 of %. %. 1 unit of A for of %. C. 1 unit of A for 1 of %. &. 1 unit of % for of A.
21. AA is Al(s indifference cur+e and BB is %ett#(s. Al and %ett# ha+e the same $ud,et line, LL. This information implies that! A. Al(s demand for X is ,reater than %ett#(s. %. Al(s demand for Y is ,reater than %ett#(s. C. Al and %ett# ha+e the same demand for $oth products. &. Al will $u# some of X, $ut %ett# will not.
22. In the a$o+e dia,ram!
A. the consumer is indifferent $etween points A and B, $ut neither point ma0imi*es his utilit#. %. the consumer is indifferent $etween points A and B and either point will ma0imi*e his utilit#. C. an# com$ination of X and Y entailin, more of Y and less of X than shown at B would $e preferred. &. an# com$ination of X and Y entailin, more of X and less of Y than shown at A would $e preferred.
21. BCssentialB water is cheaper than BnonessentialB diamonds $ecause!
A. new industrial uses for diamonds ha+e $een disco+ered. %. the suppl# of water is ,reat relati+e to demand and the suppl# of diamonds is small relati+e to demand. C. althou,h the total utilit# of diamonds is ,reater, their mar,inal utilit# is small. &. the suppl# of diamonds is ,reat relati+e to demand and the suppl# of water is small relati+e to demand.
2. /h# do people tend to eat more at all8#ou8can8eat $uffet restaurants than at restaurants where each item is purchased separatel#;
A. Dnce the all8#ou8can8eat meal is purchased, consumers +iew additional trips $ac. to the $uffet as ha+in, a price of *ero. %. M@A) is ,reater at all8#ou8can8eat restaurants. C. )eople who eat at all8#ou8can8eat restaurants do not e0perience diminishin, mar,inal utilit#. &. ?ood at all8#ou8can8eat restaurants tends to ha+e fewer calories, so consumers feel the need to consume a ,reater +olume of food.
2-. 2efer to the a$o+e dia,ram. The $ud,et line shift that mo+es the consumer(s e"uili$rium from point A to point B su,,ests!
A. an increase in the demand for product X. %. a decrease in the demand for product X. C. no chan,e in the demand for product X. &. that X is an inferior ,ood.
