1. The more time that elapses, the (Points : 1)
less price elastic is the demand for the product.
more price elastic is the demand for the product.
greater the income elasticity of demand for a product.
smaller the income elasticity of demand for the product.
2. For inferior goods, an increase in income will cause the (Points : 1)
quantity demanded to fall.
demand to increase.
demand to fall.
quantity demanded to increase.
3. For perfectly price inelastic supply (Points : 1)
supply determines price solely.
demand determines price solely.
only a government can set the price.
either supply or demand may set the price.
4. The diamond/water paradox states that things with the ________ value in use frequently have ________ value in exchange. (Points : 1)
least; the least
least; little or no
greatest; little or no
greatest; the greatest
5. The law of diminishing marginal utility implies that (Points : 1)
demand curves always slope downward and to the right.
supply curves always slope upward and to the right.
a consumer will always buy positive amounts of all goods.
total utility will always increase by an increasing amount as consumption increases.
6. According to the law of demand there is ________ relationship between price and quantity demanded. (Points : 1)
a positive
a negative
either a positive or negative
a constantly changing
7. A firm is currently producing in the elastic portion of its demand curve. What course of action do you recommend for it assuming it wants to raise revenue? (Points : 1)
Continue producing at the current output level, because it maximizes its total revenue by producing in the elastic portion of its demand curve.
Reduce price, because if it reduces price and demand is elastic, total revenue will increase.
Increase price, because if it increases price and demand is elastic, total revenue will increase.
Continue selling at the same price, but increase the amount it produces.
8. Price decreases will ________ a household's choice set. (Points : 1)
increase
decrease
not change
sometimes increase and other times decrease
9. When there are more substitutes for a product, the ________ for the product is ________. (Points : 1)
demand; less price elastic
demand; more price elastic
income elasticity; greater
income elasticity; smaller
10. The income elasticity of demand (Points : 1)
measures the change in income necessary for a given change in quantity demanded.
measures the responsiveness of income to changes in quantity demanded.
measures the responsiveness of quantity demanded to changes in income.
is the ratio of the percentage change in income to the percentage change in quantity demanded.
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