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The demand for a product is inelastic with respect to price if:1)consumers are largely unresponsive to a per unit price change.2)the elasticity coefficient is greater than 1.3)a drop in price is accompanied by a decrease in the quantity demanded.4)a drop in price is accompanied by an increase in the quantity demanded.SaveQuestion 2 (5 points) Question 2 UnsavedA supply curve that is parallel to the horizontal axis suggests that:1)the industry is organized monopolistically.2)the relationship between price and quantity supplied is inverse.3)a change in demand will change price in the same direction.4)a change in demand will change the equilibrium quantity but not price.SaveQuestion 3 (5 points) Question 3 UnsavedAn antidrug policy which reduces the supply of heroin might:1)increase street crime because the addict’s demand for heroin is highly inelastic.2)reduce street crime because the addict’s demand for heroin is highly elastic.3)reduce street crime because the addict’s demand for heroin is highly inelastic.4)increase street crime because the addict’s demand for heroin is highly elastic.SaveQuestion 4 (5 points) Question 4 UnsavedThe supply curve of a one-of-a-kind original painting is:1)relatively elastic.2)relatively inelastic.3)perfectly inelastic.4)perfectly elastic.SaveQuestion 5 (5 points) Question 5 UnsavedThe formula for cross elasticity of demand is percentage change in:1)quantity demanded of X/percentage change in price of X.2)quantity demanded of X/percentage change in income.3)quantity demanded of X/percentage change in price of Y.4)price of X/percentage change in quantity demanded of Y.SaveQuestion 6 (5 points) Question 6 UnsavedCompared to coffee, we would expect the cross elasticity of demand for:1)tea to be negative, but positive for cream.2)tea to be positive, but negative for cream.3)both tea and cream to be negative.4)both tea and cream to be positive.SaveQuestion 7 (5 points) Question 7 UnsavedAssume that a 3 percent increase in income in the economy produces a 1 percent decline in the quantity demanded of good X. The coefficient of income elasticity of demand for good X is:1)negative and therefore X is an inferior good.2)negative and therefore X is a normal good.3)positive and therefore X is an inferior good.4)positive and therefore X is a normal good.SaveQuestion 8 (5 points) Question 8 UnsavedConsumer surplus:1)is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price.2)the difference between the maximum prices consumers are willing to pay for a product and the minimum prices producers are willing to accept.3)the difference between the minimum prices producers are willing to accept for a product and the higher equilibrium price.4)rises as equilibrium price rises.SaveQuestion 9 (5 points) Question 9 UnsavedAt the output level defining allocative efficiency:1)the areas of consumer and producer surplus necessarily are equal.2)marginal benefit exceeds marginal cost the by the greatest amount.3)consumer surplus exceeds producer surplus by the greatest amount.4)the maximum willingness to pay for the last unit of output equals the minimum acceptable price of that unit of output.SaveQuestion 10 (5 points) Question 10 UnsavedThe smaller the number of good substitutes for a product, the greater will be the price elasticity of demand for it.1)TRUE2)FALSESaveQuestion 11 (5 points) Question 11 UnsavedImplicit and explicit costs are different in that:1)explicit costs are relevant only in the short run.2)implicit costs are relevant only in the short run.3)the latter refer to non-expenditure costs and the former to out-of-pocket costs.4)the former refer to non-expenditure costs and the latter to out-of-pocket costs.SaveQuestion 12 (5 points) Question 12 UnsavedEconomic profits are calculated by subtracting:1)explicit costs from total revenue.2)implicit costs from total revenue.3)implicit costs from normal profits.4)explicit and implicit costs from total revenue.SaveQuestion 13 (5 points) Question 13 UnsavedTo economists, the main difference between the short run and the long run is that:1)the law of diminishing returns applies in the long run, but not in the short run.2)in the long run all resources are variable, while in the short run at least one resource is fixed.3)fixed costs are more important to decision making in the long run than they are in the short run.4)in the short run all resources are fixed, while in the long run all resources are variable.SaveQuestion 14 (5 points) Question 14 UnsavedThe law of diminishing returns indicates that:1)as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point.2)because of economies and diseconomies of scale a competitive firm’s long-run average total cost curve will be U-shaped.3)the demand for goods produced by purely competitive industries is downsloping.4)beyond some point the extra utility derived from additional units of a product will yield the consumer smaller and smaller extra amounts of satisfaction.SaveQuestion 15 (5 points) Question 15 UnsavedWhich of the following is most likely to be a fixed cost?1)shipping charges2)property insurance premiums3)wages for unskilled labor4)expenditures for raw materialsSaveQuestion 16 (5 points) Question 16 UnsavedIf you operated a small bakery, which of the following would be a variable cost in the short run?1)baking ovens2)interest on business loans3)annual lease payment for use of the building4)baking supplies (flour, salt, etc.)SaveQuestion 17 (5 points) Question 17 UnsavedIf average total cost is declining, then:1)marginal cost must be greater than average total cost.2)the average fixed cost curve must lie above the average variable cost curve.3)marginal cost must be less than average total cost.4)total cost must also be declining.SaveQuestion 18 (5 points) Question 18 UnsavedIn the short run, which of the following statements is correct?1)The marginal cost curve intersects the average variable and average fixed cost curves at their minimum points.2)Average variable cost declines continuously as total output is expanded.3)Total cost will exceed variable cost.4)If the inputs of all resources are increased by equal amounts, total output will expand by diminishing amounts.SaveQuestion 19 (5 points) Question 19 UnsavedIf a firm wanted to know how much it would save by producing one less unit of output, it would look to:1)MC.2)ATC.3)AVC.4)AFC.SaveQuestion 20 (5 points) Question 20 UnsavedIf a profitable firm’s fixed costs somehow were zero:1)MC and ATC would be equal at all levels of output.2)AFC would become negative as output increases.3)AVC and ATC would coincide.4)ATC would be zero at all output levels.