Ag Econ 1041
Quiz 7, 30 points
October 25, 2012
Name ____KEY_____________________
8 a.m. Section
True/False – one point each
T
F
1.
The income elasticity of avocados is a measure of how much the demand for
avocados will change or shift if income changes.
T
F
2.
The law of diminishing returns implies that the marginal product of an input
eventually rises as more of the input is used.
T
F
3.
All inputs are fixed in the long run.
T
F
4.
Marginal costs rise due to diminishing returns.
T
F
5.
Total cost is the sum of marginal costs up to a level of output.
T
F
6.
Economies of scale occur when a larger firm or enterprise realizes lower
average costs primarily because of its large size.
T
F
7.
Government is necessary to enforce market rules for a free market to function
successfully.
Matching are valued at two points each
__C___ 8. If income increases and the demand for bus rides decreases,
a) Bus rides are a normal good
b) Consumers are behaving irrationally
c) Bus rides are an inferior good
d) Bus rides are a substitute good
e) Bus rides must be a complement good with some other good
__B___ 9. Researchers have found a hybrid corn that is cheaper to grow. This technological
breakthrough
a) Increases the demand for corn
b) Increases the supply for corn
c) Decreases the supply of corn
d) Both answers A and C are correct
e) Both answers A and B are correct
TURN THE QUIZ OVER
__D___ 10. A market is defined as
a) A physical place where people buy only goods
b) A physical place where people buy goods and services
c) A store where people buy physical goods
d) Any arrangements that brings buyers and sellers together
e) A place where one good is bartered for another
__A___ 11. The price of cotton falls. As a result,
a) The quantity demanded of cotton clothing increases
b) The demand for cotton increases
c) The quantity demanded of cotton clothing decreases
d) The demand for cotton clothing decreases
e) Both the demand for cotton clothing increases and the quantity demanded of
cotton clothing increases
Short answers are valued at five points each
12. Diagram the market impact of technological advances in package delivery.
P
S
S1
P0
P1
D
0
Q0
Q1
Q
13. Diagram the situation where demand for peanuts increases but the market price declines.
S
P
S1
P0
P1
D
0
Q0
Q1
D1
Q
14. Why does the demand for flowers change around Valentine’s Day? What are the changes in
the market (P & Q) resulting from the demand change?
Utility ↑; P ↑ Q ↑