Ag Econ 1041 Quiz 4, 30 points September 30, 2010 Name _________KEY_______________________ 11 a.m. Section The following questions are valued at five points each 1. When considering revenue curves: a) MR = 0 when TR is at _a maximum_______________ b) MR > 0 when demand is _elastic________________ c) AR = __demand____________________ d) MR is the change in __TR_______________ e) P x Q = ___TR_______________ 2. Gasoline prices increased recently as we drove less. Graph the situation described. Be complete. S1 S0 P1 P0 D Q1 Q0 3. What do we know if: a) % change in quantity is less than % change in price __inelastic (demand)__________ b) Income increased and Ey < 0 ___inferior good_______________ c) Price falls for an inelastic good _____TR ↓____________ d) Price rises for an elastic good __TR ↓________________ e) Price falls for a substitute ___D ↓_____________ 4. Draw a demand curve and mark with an X a point where the MU/MC of this good is less than the MU/MC of another choice. P X 0 D Q True/False – one point each __T___ 5. Choosing an alternative with the lowest opportunity cost is equivalent to choosing the alternative where marginal utility is greatest per dollar. __F___ 6. Marginal benefit (utility) always increases as more of good is consumed. __T___ 7. A firm’s production possibilities curve shows maximum combinations of goods that can be produced with given resources and technology of that firm. __T___ 8. A change in demand is illustrated by a new demand curve. __T___ 9. When the relative price of yo-yos falls because of technological advances in yo-yo production, we would expect people to buy more yo-yos. __T___ 10. When both the supply and demand curves shift in the same direction, the direction of quantity will be in the same direction as the shifting curves. __T___ 11. Increasing opportunity cost occurs because some productive resources cannot be easily adapted from production of one good or service, like steel manufacturing, to another, like entertainment. __T___ 12. The law of diminishing marginal utility is consistent with the consumer behavior that produces a negatively sloped demand curve. __T___ 13. Elasticity is a measure of the relative responsiveness of change in the quantity demanded to a change in price. __T___ 14. A price cut will increase the revenue a firm receives if the demand for its product is elastic.