Unit 2 quiz practice
For the multiple-choice questions that follow, select the best answer.
1.
A rational consumer who is eating Girl Scout cookies stops eating when
A.
the total benefit equals the total cost of eating cookies.
B.
the marginal benefit equals the marginal cost of the next cookie.
C.
the marginal cost of eating cookies is maximized.
D.
the marginal benefit of eating cookies is minimized.
E.
the price of the cookie equals the marginal benefit of the next cookie.
2.
Which of the following goods is likely to have the most elastic demand curve?
A.
Demand for white Ford minivans.
B.
Demand for automobiles.
C.
Demand for Ford automobiles.
D.
Demand for American-made automobiles.
E.
Demand for a Ford minivan.
3.
The downward sloping demand curve is partially explained by which of the following?
A.
Substitution effects and income effects.
B.
The Law of Increasing Marginal Costs.
C.
The principle of comparative advantage.
D.
The Law of Diminishing Marginal Returns to production.
E.
The least-cost principle.
4.
Dorothy has daily income of $20, each cup of coffee costs P c
= $1 and each scone costs
P s
= $4. The table below provides us with Dorothy's marginal utility (MU) received in the consumption of each good. As a utility-maximizing consumer, which combination of coffee and scones should Dorothy consume each day?
A.
2 coffee and 2 scones
B.
5 coffee and 6 scones
C.
3 coffee and 2 scones
D.
4 coffee and 4 scones
E.
4 coffee and 16 scones

5.
If it is true that bacon and eggs are complementary goods, then
A.
the income elasticity of bacon is positive and the income elasticity for eggs is negative.
B.
the price elasticity for eggs is greater than the price elasticity for bacon.
C.
the cross-price elasticity between bacon and eggs is negative.
D.
the income elasticity of bacon is negative and the income elasticity for eggs is positive.
E.
the cross-price elasticity between bacon and eggs is positive.
6.
Which of the following statements are true of consumer utility-maximizing behavior? i.
Utility from consumption of good X is maximized when the marginal utility is equal to zero. ii.
Total utility from consumption of good X rises at a decreasing rate. iii.
The consumer spends limited income until the quantity of good X
A.
I only
B.
II only
C.
III only consumed is equal to the quantity of good Y .
D.
I and II only
E.
II and III only
****either B or D is acceptable****
1. The price elasticity of demand is equal to the slope of the demand curve.
a. True
b. False
Exhibit 0059
Quantity Price
----------------------------------------------------------
Fairdale Ale 100 $10
120 9
Bellermine Books 200 $20
140 35
-------------------------------------------------------------
2. Use the information in Exhibit 0059 and the midpoint formula to calculate the value of price elasticity of demand for Good A.
a. -5/2 b. -11/3 c. -3/10 d. -10/3 e. -19/11

3. A perfectly inelastic demand curve is a. a vertical straight line b. a horizontal straight line c. a downward-sloping straight line d. an upward-sloping straight line e. not a straight line
4. If New York City officials expect that an increase in bus fares will raise mass transit revenues, they must think that the demand for bus travel is a. elastic b. unit elastic c. inelastic d. perfectly inelastic e. -10
6. If the supply curve slopes upward and a $3 per unit tax on suppliers raises the profitmaximizing price by $3, demand must be perfectly inelastic.
a. True b. False
7. The demand for a particular brand of automobile is likely to be more inelastic than the demand for automobiles in general.
a. True b. False
8. A good whose price represents a very large percentage of the consumer's budget will tend to have a. more elastic demand b. a perfectly elastic demand c. more inelastic demand d. an upward-sloping demand curve e. very many substitutes
13. The value of cross-price elasticity of demand between orange soda and grape soda is a. negative b. positive c. 0 d. between -1 and 0 e. less than -1

14. Suppose the cross-price elasticity of demand between quinces and muskmelons is 5.
Which of the following must be true?
a. Quinces are normal goods. b. Muskmelons are normal goods. c. If the price of quinces rises by $5, the demand for muskmelons will increase by
1. d. If the price of muskmelons rises by $5, the demand for quinces will increase by
1. e. Quinces and muskmelons are substitutes.
15. An inferior good is one for which demand increases as a. price decreases b. price increases c. income increases d. income decreases e. the price of a related good decreases
16. Suppose the income elasticity of demand for a private college education is equal to 1.5.
This means that a. every $1 increase in income provides an incentive for a $1.50 increase in expenditures on private college education b. every $1.50 increase in income provides an incentive for a $1 increase in expenditures on private college education c. a 10 percent increase in income causes a 15 percent increase in the demand for a
private college education d. a 15 percent increase in income causes a 10 percent increase in the demand for a private college education e. a 10 percent decrease in private college tuition will have a large enough income effect to increase spending on private college education by 15 percent

@ $100 budget, 2 CD and 4 DVD
@$140 budget, 3 CD and 5 DVD