07 Feb perfectly inelastic.

ECON312N Principles of Economics Week 2 Quiz Question 1 In the above figure, the shift in the demand curve from D to D2 can be the result of an increase in the price of a sub sandwich, a substitute for pizza. an increase in income if pizza is a normal good. a change in quantity demanded. an increase in the price of soda, a complement to pizza. a decrease in the supply of pizza that raises the price of pizza. Question 2 The question “Should economics majors or sociology majors earn more after they graduate?” is an example of a ________ question. for whom what how why where Question 3 The United States can use all its resources to produce 250 DVDs or 500 shoes. China can use all of its resources to produce 30 DVDs or 300 shoes. The opportunity cost of producing a DVD in the United States is 1/2 of a shoe. 500 shoes. 1 DVD. 2 shoes. 20 shoes. Question 4 What is an inferior good? a product that is a substitute for another, better good a product of low quality that we do not want to purchase a product for which demand increases when income decreases, and demand decreases when income increases a product for which demand increases when income increases, and demand decreases when income decreases a product that is complementary Question 5 Researchers have found a hybrid of corn that is cheaper to grow. This technological breakthrough Both answers A and B are correct. increases the supply of hybrid corn. increases the demand for hybrid corn. decreases the supply of hybrid corn. Both answers A and C are correct. Question 6 People eat at restaurants less often when their incomes fall because of a recession. Eating at restaurants must be a complement to other goods. an inferior good. a substitute for other goods. an inelastic good. a normal good. Question 7 The slope of the line shown in the above figure is 5/2. 2/3. 2/5. 2. 5. Question 8 When a landscaping company decides to use drafting software and computers instead of hiring designers to draw design plans by hand, it is answering the ________ question. what how why for whom opportunity cost Question 9 Proponents of cuts in income tax rates argue that when income tax rates are cut, workers have an incentive to increase their work hours. This argument is based on the assumption that workers make decisions based on the marginal benefit of each hour worked compared to the marginal cost of work. workers are irrational. the opportunity cost of working is negative. workers make decisions based on the social interest. the marginal cost of each additional work hour is not important to most workers. Question 10 Going skiing will cost Adam $80 a day. He also loses $40 per day in wages because he has to take time off from work. Adam still decides to go skiing. He loses a total of $120 per day, so his decision is irrational. The $80 price of skiing is not an opportunity cost and so did not affect Adam’s decision. Adam is definitely making a decision that is in the social interest. Adam’s lost $40 per day in wages is not an opportunity cost and so did not affect his decision. His decision is rational if Adam’s marginal benefit of spending a day skiing is greater than his marginal cost. Question 11 The table above shows the situation in the gasoline market in Tulsa, Oklahoma. If the price of a gallon of gasoline is $2.30 then there is a surplus of gasoline in Tulsa. Without more information we cannot determine if there is a surplus, a shortage, or an equilibrium in the gasoline market in Tulsa. there is a shortage of gasoline in Tulsa. the gasoline market in Tulsa is in equilibrium. There is neither a surplus nor a shortage, but the market is NOT in equilibrium. Question 12 A time series graph is not useful if the goal is to determine a variable’s trend. shows how a certain variable changes over time. depicts a series of good economic times a nation had. uses bars rather than lines. shows points that are scattered. Question 13 Milk can be used to produce cheese or butter. If the price of a pound of butter rises, what happens to the supply of cheese? The supply of cheese could increase, decrease, or stay the same depending on what happens to the supply of butter. The supply of cheese increases. The supply of cheese stays the same, and there is no change in the quantity supplied of cheese. The supply of cheese stays the same, and there is a decrease in the quantity supplied of cheese. The supply of cheese decreases. Question 14 In stores, it is common to find seasonal products marked down when the season ends. What explains this behavior? The store is trying to increase its customers’ demand for the product. The store is trying to increase its customers’ incomes by increasing their purchasing power. The law of demand is being used to increase the quantity demanded. The store manager must be trying to drive away customers by selling low quality products. The store is trying to sell the goods and realizes that they are substitutes for other goods whose prices have risen. Question 15 The law of supply states that, other things remaining the same, demand increases when supply increases. if the price of a good increases, the quantity supplied increases. if the price of a good increases, firms buy less of it. if the price of a good increases, the supply increases. as people’s income increase, the supply of goods increases. Question 16 Suppose the relationship between a person’s age and his or her height is plotted with the age measured along the x-axis and the height measured along the y-axis. Then, the curve showing this relationship is a straight line with a negative slope. positively sloped and becoming less steep. negatively sloped and becoming less steep. positively sloped and becoming more steep. a straight line with a positive slope. Question 17 The above figure shows the production possibility frontier for an economy. The point or points that are attainable are points A and D. points A, B, C, and D. point E. points B and C. points A, B, and C. Question 18 A graph shows that the number of U.S. tourists visiting a Caribbean island increases as the temperature in the northeastern United States falls. The graph shows no relationship. an invalid relationship. a positive relationship. a negative relationship. a direct relationship. Question 19 Moving from one point to another on a production possibilities frontier implies increasing the production of both goods. holding the production levels of both goods constant. decreasing the production of both goods. changing the amount of factors of production that are employed. increasing the production of one good and decreasing the production of another. Question 20 Suppose the equilibrium price of oranges is $2.00 per pound. If the actual price is above the equilibrium price, a shortage exists and the price rises to restore equilibrium. surplus exists but nothing happens until either the demand or the supply changes. surplus exists and the price rises to restore equilibrium. surplus exists and the price falls to restore equilibrium. shortage exists and the price falls to restore equilibrium. Question 21 An increase in the quantity demanded is shown as both a movement along the demand curve and a shift of the demand curve. a movement toward the demand curve. a rightward shift of the demand curve. a leftward shift of the demand curve. a movement along the demand curve. Question 22 Wichita is building a convention center and financing it with revenues raised from a city hotel tax. Local politicians assert that the convention center is essentially free for Wichita residents because out-of-town visitors are paying for it. Someone who is practicing the economic way of thinking would disagree because the hotel tax may reduce commercial property values in the area. there are other projects that could be undertaken with the tax funds. the hotel tax may lead to a decline in visits to Wichita. the convention center may not pass a marginal cost-benefit test. they believe that Wichita does not need a new convention center. Question 23 A trend is the maximum value of a variable. the difference between the maximum value of a variable and the minimum value of the variable. the minimum value of a variable. a general tendency for a variable to rise or fall. a measure of closeness on a scatter diagram. Question 24 Suppose the Chicago Bears football team raises ticket prices by 13 percent and as a result the quantity of tickets demanded decreases by 21 percent. This response means that the demand for Bears tickets is perfectly elastic. perfectly inelastic. inelastic. unit elastic. elastic. Question 25 As a person increases his or her caloric intake, the person’s weight increases, ceteris paribus. The relationship between the person’s caloric intake and the person’s weight is an example of a single point on a graph. a positive relationship. a negative relationship. a trended relationship. unrelated variables. Question 26 Matt pays a $50 a month membership fee at Bruno’s Gym. He can exercise at the gym as many times as he wishes. If the membership fee is measured along the vertical axis and the number of times he exercises is measured along the horizontal axis, the graph between his membership fee and the number of times he exercises will be negatively sloped. be positively sloped. be a horizontal line. start out positively sloped and then, as Matt loses interest, become negatively sloped. be a vertical line. Question 27 Which figure above shows the effect if research is published claiming that eating pizza is healthy? Figure D Figure C Figure B Both Figure A and Figure D Figure A Question 28 When you make the decision to spend your time attending class, which economic question are you answering? What? How? Is this in the social interest? Why? For whom? Question 29 The figure above shows a scatter diagram. slope. cross-section graph. trend diagram. time-series graph. Question 30 Suppose you eat two hamburgers for lunch. The marginal benefit of the first burger is ________ of the second burger. larger than the marginal benefit equal to the marginal cost and the marginal benefit equal to the marginal benefit smaller than the marginal benefit not related to the marginal benefit Question 31 In the diagram above, which figure(s) show(s) an inverse relationship between the variables? only D only C both B and C only B both A and C Question 32 The price elasticity of demand measures the extent to which the quantity demanded changes when both the demand and supply of the good change. the price of the good changes. the price of a related good changes. consumer preferences change. the expected future price of a good changes. Question 33 Which figure above shows the effect of an increase in the cost of the tomato sauce used to produce? pizza? Both Figure B and Figure C Figure B Figure C Figure D Figure A Question 34 A student at New York University used to take the Redhound bus when she visited her grandmother in Boston. After graduating, although the bus fare and the plane fare were the same as they were when she was a student, with a well-paid job on Wall Street she now takes the plane to Boston to visit her grandmother. For this student, travel by Redhound bus is a good with negative preferences. a complement good. a substitute good. a normal good. an inferior good. Question 35 The production possibilities frontier illustrates the limits to people’s wants. resources the economy possess, but not its level of technology. amount of each good that people want to buy. maximum combinations of goods and services that can be produced. goods and services that people want. Question 36 When the percentage change in the quantity supplied is twice the percentage change in price, then supply is unit elastic. perfectly elastic. inelastic. elastic. perfectly inelastic. Question 37 The income elasticity of demand is a measure of the extent to which the demand for a good changes when income changes. how responsive suppliers are to changes in the price of a product. how demand for a product changes when the price of a substitute or complement product changes. how responsive consumers are to changes in the price of a product. the extent to which the supply of a good changes when the demand changes as a result of a change in income. Question 38 Assume a market is in equilibrium. There is an increase in supply, but no change in demand As a result the equilibrium price ________, and the equilibrium quantity ________. rises; decreases rises; does not change falls; increases falls; decreases rises; increases Question 39 The American Dairy Association starts a highly successful advertising campaign that makes most people want to drink more milk. As a result, the demand for milk decreases because the price of milk rises. the demand for milk increases. the quantity demanded of milk increases. the price of milk falls to encourage people to drink more milk. the demand for milk is not affected. Question 40 The cross elasticity of demand is a measure of how responsive suppliers are to changes in the price of a product. total revenue changes when the price of a product changes. demand for a product changes when income changes. responsive consumers are to changes in the price of a product. demand for a product changes when the price of a substitute or complement changes.

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