1.

If an increase in a consumer's income causes the consumer to increase his quantity demanded of a good, then the good is a) b) c) d) a complementary good an inferior good a normal good a substitute good

2. If an increase in a consumer's income causes the consumer to decrease her quantity demanded of a good, then the good is a) b) c) d) a substitute good a normal good a complementary good an inferior good

3. In the long run, if a very small factory were to expand its scale of operations, it is likely that it would initially experience a) b) c) d) an increase in average total costs diseconomies of scale economies of scale constant returns to scale

4. Which of the following would generally be regarded as fixed costs in the short-run? (Select one or more answers) a) Interest charged on a bank loan for new equipment b) Security costs for the factory site c) Weekly wages for shop-floor workers d) The cost of raw materials e) Payments for rent 5. A perfectly inelastic demand exists if a 10 percent change in the price of a good results in a percentage change in quantity demanded that is:

a) equal to 0. b) greater than 0 but less than 10. c) equal to 10.

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d) greater than 10 but less than infinity. e) equal to infinity. 6. A relatively elastic demand exists if a 10 percent change in the price of a good results in a percentage change in quantity demanded that is: a) b) c) d) e) equal to 0. greater than 0 but less than 10. equal to 10. greater than 10 but less than infinity. equal to infinity.

7. If the price of chocolate-covered peanuts decreases 10 percent and the quantity demanded increases 5 percent, then the numerical elasticity of demand is: a) b) c) d) e) 0 0.5 1.0 2.0 Greater than 2.0

8. Suppose your local public golf course increases the greens fees for using the course. If the demand for golf is relatively inelastic, you would expect: a) b) c) d) e) a decrease in total revenue received by the course. an increase in total revenue received by the course. no change in total revenue received by the course. an increase in the amount of golf played on the course. no change in the amount of golf played on the course.

9. The income elasticity of demand of an inferior good is: a) b) c) d) e) 10. less than 0. equal to 0. greater than 0. between 0 and 1. ) greater than 1. The cross elasticity of demand of complements goods is:

a) less than 0.
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b) c) d) e) 11. a) b) c) d) e)

equal to 0. greater than 0. between 0 and 1. greater than 1. The burden of a tax is shifted toward buyers if: demand is perfectly elastic demand is relatively more elastic than supply. demand is relatively more inelastic than supply. demand and supply have equal elasticities. both demand and supply are unit elastic.

12. Suppose a firm produces 10 units of output and incurs $30 in per-unit variable cost and $5 in per-unit fixed cost. In this case, total cost is: a) b) c) d) e) 13. $3 $35 $50 $300 $350 A monopoly is a market structure characterized by:

a) a single buyer b) a product with many close substitutes c) a large number of small firms. d) a small number of large firms e) limited entry and exit. 14. A feature of monopolistic competition that makes it different from perfect competition is the: a) b) c) d) e) shape of the cost curves. ease of exit from the industry. ease of entry into the industry. number of firms in the industry. perceived differentiation of products.

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15. The figure shows the demand curve for popsicles. The price elasticity of demand when the price of a popsicle increases from $0.30 to $0.50 is _________.

a) 0 b) 2 c) d) 1

16. Cola has more close substitutes than do soft drinks. The price elasticity of demand for cola is _______ the price elasticity of demand for soft drinks. a) greater than b) a lot less than c) the same as d) less than 17. The price elasticity of demand for videos is 4. If the price of a video increased by 2 percent, the quantity demanded will ___________________. a) decrease by 8 percent b) decrease by 0.5 percent c) increase by 8 percent
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d) decrease by 2 percent 18. Sara's Strawberry Market maximizes its total revenue by selling strawberries for $1.25 a basket. At a price of $1.25, you predict that ______________. a) the demand for strawberries is unit elastic b) the demand for strawberries is elastic c) the demand for strawberries is inelastic d) Sara's sells all the strawberries that it grows 19. Donuts and coffee are complements. When the price of a donut increases, the demand for coffee __________ and the cross elasticity of demand for coffee with respect to the price of a donut is _____________. a) decreases; negative b) increases; positive c) increases; negative d) decreases; positive 20. The table gives some data on the supply of roses in a small town. When the price rises from $15 a dozen to $25 a dozen, the elasticity of supply is ___________.

a) 0.20 b) 0.80 c) 1.25 d) 5.00

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21. The price of a bus ride decreases, but the total revenue of the bus company does not change. The demand for bus rides is _____________________. a) unit elastic b) inelastic c) elastic d) perfectly inelastic 22. Marvin loves chocolate truffles. As the price of a chocolate truffle increases from $1 to $2 to $3, Marvin continues to buy a dozen chocolate truffles every week. Marvin's demand for chocolate truffles is _______________. a) Elastic b) perfectly inelastic c) illustrated by a horizontal demand curve d) unit elastic 23. Webster Dictionaries and Oxford Dictionaries are almost perfect substitutes. The price elasticity of demand for Webster Dictionaries ____________________. a) is 1 b) is almost infinity c) depends on the complements for dictionaries d) is almost zero

24. If the cross elasticity of demand between goods X and Y is positive and between goods X and Z is negative, then X and Y are ______________ and X and Z are ________________.
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a) price inelastic; complements b) price inelastic; income elastic c) substitutes; complements d) complements; substitutes 25. Because toothpaste and toothbrushes are complements, the ____________ elasticity of demand is ______________. a) income; positive b) cross; negative c) cross; positive d) income; negative

26. Haircuts and taxi rides are normal goods, so their ____________________. a) cross elasticity of demand is negative b) incomeelasticities of demand are positive c) cross elasticity of demand is positive d) incomeelasticities of demand are negative 27. A luxury is a good or service with a demand that is _____________ and a necessity is a good or service with a demand that is _____________.

a) cross inelastic; cross elastic b) income elastic; income inelastic c) income inelastic; income elastic d) cross elastic; cross inelastic

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28.

When one firm in the breakfast cereal market started an advertising campaign that stressed the nutritional value of its cereals, all other cereal manufacturers started similar advertising campaigns. This suggests that the breakfast cereal market is:

a) perfectly competitive. b) oligopolistic. c) indeterminate from this information. d) monopolistically competitive.

29. In which of the following circumstances would a cartel be most

likely to work? The fast-food market, where there are a large number of producers but the demand for fast food is inelastic. b) The automobile industry, where there are few producers but there is great product differentiation. c) The coffee market, where the product is standardized and there are a large number of coffee growers. d) The market for copper, where there are very few producers and the product is standardized.
a)

30. As a manager, one of Pasans duties is to present awards to outstanding employees within his department. Which Minzbergs managerial role is pasan acting when he does this?

a) Leadership role c) Figurehead role

b) Liaison role d) Spokesperson role

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