Question

Questions and Problems for Chapter Twenty:

1. To determine if the demand for a good is inelastic, elastic, or unit elastic between two prices, a seller might raise the price to see what happens to total revenue: If total revenue rises, demand is a. elastic b. inelastic c. unit elastic. d. None of the above

2. If the Price rises by 10 percent and the quantity demanded falls by 2 percent, demand is: a. unit elastic b. inelastic c. elastic d. none of the above

3. If price falls by 6% and the quantity demanded does not change, demand is: a. Inelastic b. Unit elastic c. Perfectly inelastic d. Perfectly elastic e. None of the above

4. Suppose the current price of gasoline at the pump is $1 per gallon and that 1 million gallons are sold per month. A politician proposes to add a 10¢ tax to the price of a gallon of gasoline. She says the tax will generate $100,000 tax revenues per month (1 million gallons × $0.10 = $100,000). What assumption is she making? a. That demand is perfectly elastic for gasoline b. That demand is perfectly inelastic for gasoline c. That demand is unit elastic for gasoline d. That demand is relatively inelastic for gasoline

5. Identify how total revenue changes if Demand is inelastic and price falls; a. Total revenue falls b. Total revenue rises c. Total revenue remains constant d. None of the above

6. Identify how total revenue changes if Demand is elastic and price falls; a. Total revenue falls b. Total revenue rises c. Total revenue remains constant d. None of the above.

7. In the following pair of goods, which has the higher price elasticity of demand: (a) Airline travel in the short run or airline travel in the long run; a. Airline travel in the short run b. Airline travel in the long run

8. How might you determine whether toothpaste and mouthwash manufacturers are competitors? a. If the cross elasticity coefficient is less than 0 b. If the cross elasticity coefficient is greater than 0 c. If the cross elasticity coefficient is equal to 0 d. None of the above

9. A tax is placed on the sellers of a good. What happens to the percentage of this tax that buyers pay as the price elasticity of demand for the good decreases? Be able to explain your answer. a. The buyer pays more of the tax b. The buyer pays less of the tax c. The buyer and seller splits the tax equally. d. None of the above

10. A college raises its annual tuition from $23,000 to $24,000, and its student enrollment falls from 4,877 to 4,705. Compute the price elasticity of demand. (Would demand be elastic or inelastic?) a. 1.25 b. .84 c. .56 d. 2.34

11. As the price of good X rises from $10 to $12, the quantity demanded of good Y rises from 100 units to 114 units. Are X and Y substitutes or complements? What is the cross elasticity of demand? a. .72 which would make them substitutes b. 1.34 which would make them substitutes c. -.96 which would make them complements d. -.34 which would make them substitutes

12. The quantity demanded of good X rises from 130 to 145 units as income rises from $2,000 to $2,500 a month. What is the income elasticity of demand? a. 1.56 b. .34 c. 1.10 d. .491 13. The quantity supplied of a good rises from 120 to 140 as price rises from $4 to $5.50. What is price elasticity of supply? a. 1.21 b. .487 c. .678 d. 5.45

Consumer Behavior Content Chapter

21 Instructions: Read Chapter 21 Go over Outline for chapter 21 Work Homework Problems for Chapter 21 • Answer Assignment Questions below in along with chapters 20 and 22 in a word document and upload as one document into Module II Homework Quiz when all are finished and the Quiz is posted. Pay close attention to post date and due date.

14. On average, total utility rises as marginal utility declines. T/F T F

15. The law of diminishing marginal utility is consistent with the fact that people trade. Do you agree or disagree. Be able to explain your answer. a. Yes, I agree because people are prone to trade something of lesser value to them for something that has greater value to them. b. No, I disagree because people are prone to trade something of greater value to them for something that has lesser value to them.

16. Assume the marginal utility of good A is 4 utils, and its price is $2, and the marginal utility of good B is 6 utils, and its price is $1. Is the individual consumer maximizing (total) utility if she spends a total of $3 buying one unit of each good? (Be able to explain your answer). a. Yes b. No

17. If a person consumes fewer units of a good, will marginal utility of the good increase as total utility decreases? a. Yes b. No

18. "If we take $1 away from a rich person and give it to a poor person, the rich person loses less utility than the poor person gains." This is an example of: a. The law of increasing marginal utility b. The law of demand in reverse c. The law of decreasing minimal utility d. The law of interpersonal utility comparison

19. Is it possible to get so much of a good that it turns into a bad? (If so be ready to give an example) a. No, you can never consume too much of a good thing b. Yes, you can consume too much of a good such that it becomes a bad.

20. Can a good be a good for you and a bad for someone else? a. Certainly, strawberries might be an example. Some people are allergic b. No, all people enjoy goods alike. For example, everyone loves shrimp!

21. Which of the following is an example of making an interpersonal utility comparison? a. Someone speeds by you on the interstate and you notice that they have their emergency lights flashing. b. You and your roommate are enjoying a pizza and beer watching the super bowl game. There’s only one slice of pizza left and you feel you should have it since you are still hungry. c. In the supermarket, you are rushing in to get one item and no one is at the check-out. You get your item and quickly go to the check-out, but now it is full and you have to stand in a line. d. You are on your way to church and are just a bit late, a large road construction vehicle has just pulled out in front of you on a two lane highway. (Doesn’t that just always happen to you when you are late? Never thought it could be economically explained, did you?) e. All of the above

22. There is a logical link between the law of demand and the assumption that individuals seek to maximize utility. Which of the following explains that? a. The condition for consumer equilibrium can be used to express the inverse relationship between price and quantity demanded. b. People are naturally buyers and always think of how they can gain something from nothing c. People buy goods to make them more satisfied and are disappointed when they are not d. None of the above

23. Which of the following is an example of the diamond and water paradox. Keep in mind that the good with the greater value in use has a lower value in exchange than does the good with the lower value in use. a. A dress that was worn by Judy Garland in The Wizard of Oz and peanuts b. A handwritten letter by Dr. Martin Luther King Jr. and rice c. The Shroud of Turin and raisins d. All of the above

24. If the utilities of good x are 10, 19, 26, 32, and 36 utils, respectively, what is the marginal utility of the third unit? a. 5 utils b. 7 utils c. 8 utils d. 36 utils

25. The endowment effect describes: a. The notion that people value things that they do not have at a higher rate than things that they want to acquire. b. The notion that people value things that they have at a higher rate than things that they want to acquire c. The effect that occurs when people begin to compare the way that they feel about purchasing something to the way someone else feels. d. The effect that people believe that they deserve to have something more than someone else does.

26. Indifference curves: a. Are downward sloping b. Are convex to the origin c. Do not cross d. All of the above 27. A demand curve can be derived using: a. The marginal utility of demand theory b. Indifference curve analysis c. Budget analysis d.

Consumer equilibrium analysis Chapter 22 Production and Costs Content Chapter 22 Instructions: Read Chapter 22 Go over Outline for chapter 22 Work Homework Problems for Chapter 22 • Answer Assignment Questions below in a word document and upload as one document into Module II Homework Quiz Go over power-point slides for Chapter 22 to review Questions and Problems for Chapter 22:

28. Total revenue minus explicit costs equal: a. Accounting profit b. Normal profit c. Economic profit d. Both a and b

29. Normal profit is just another way of saying the firm is earning: a. An economic profit b. A zero economic profit c. An accounting profit d. None of the above

30. Which of the following describes the Average-Marginal rule: a. When the marginal magnitude is greater than the average, the average is rising; when the marginal magnitude is below the average magnitude, the average is declining. b. When the marginal magnitude is greater than the average, the average is declining; when the marginal magnitude is below the average magnitude, the average is increasing. c. Is total cost divided by quantity d. Is total marginal costs divided by quantity

31. As Marginal Physical Product rises, Marginal Cost: a. rises b. falls c. remains constant d. none of the above

32. An input whose quantity cannot be changed as output changes describes: a. A variable input b. The short run c. A fixed input d. The law of diminishing marginal returns

33. When would total costs equal fixed costs? a. When there are no variable costs b. When variable costs equal fixed costs c. When variable costs equal 100 for most firms. d. None of the above

34. If Price = $20, quantity = 400 units, unit cost = $15, implicit costs = $4,000. What does economic profit equal? a. $2,000 b. $4,000 c. -$2,000 d. $8,000

35. If economic profit equals accounting profit, what do implicit costs equal? a. Explicit costs b. Total costs c. Marginal costs d. Zero e. None of the above 3. 4. If economic profit equals accounting profit, what do implicit costs equal? 5. If accounting profit is $400,000 greater than economic profit, what do implicit costs equal? 6. If marginal physical product is continually declining, what does marginal cost look like? Explain your answer. 7. If the ATC curve is continually declining, what does this imply about the MC curve? Explain your answer.

Answer 1

Answer-1 b. inelastic

When the price and total revenue moves in same direction then the demand is said to be Inelastic.

Answer-2  b. inelastic

Elasticity of demand

=( %age change in quantity demanded)/(%age change in price)

=2/10

= 0.2

Elasticity of demand is less than 1. Therefore, it is Inelastic.

Answer-3 c. Perfectly inelastic

There is no change in the quantity demanded even when the price has changed. This means that the demand is perfectly Inelastic.

Answer-4 b. That demand is perfectly inelastic for gasolin.

After the tax imposition price rise and quantity demanded must fall.But the politician is calculating tax Revenue by the previously sold unit only. Which means that underlying assumption is that Demand is perfectly Inelastic that is change in price level will not change quantity demanded by any amount.

5. a. Total revenue falls

6 b. Total revenue rises

7. b. Airline travel in the long run

Note: As per rule I have answered first four completely. Don't ask so many questions in a single post. For next questions kindly post another query. Ask only four at a time.