Question 1. Mathematically, the price elasticity of demand is a __________________. ratio graph sum straight line
Question 2. When the price elasticity of demand is less than 1, demand is ________________. elastic inelastic non elastic unit-elastic
Question 3. When the price of milk increases 4 percent, the quantity demanded of corn flakes decreases 2 percent. The cross-price elasticity of corn flakes with respect to the price of milk is __________________. These two products are _________________. -0.5; complements +0.5; substitutes +0.5; complements -2.0; complements
Question 4. Luxuries have a larger income elasticity of demand than do _________________. necessities substitutes complements independents
Question 5. When marginal utility is zero, total utility is ________________. at its minimum at its maximum zero increasing
Question 6. When a good becomes less expensive, it yields more satisfaction per dollar, so consumers buy more of it and less of other goods. This is called the __________________ effect of a price change substitution income replacement augmentation
Question 7. When a good becomes less expensive, consumers' real incomes increase and consumers purchase more of all goods. This is called the _________________ effect of a price change. substitution income augmentation disbursement
Question 8. Marginal utility measures the total satisfaction derived from consuming a good or service divided by the price of the good or service extra utility derived from consuming one more unit of a good or service total satisfaction derived from consuming a quantity of a good or service extra utility derived from consuming one more unit of a good or service divided by the price of the good or service
Question 9. As a consumer eats additional pieces of pie today, total utility always keeps increasing always keeps decreasing keeps increasing until dissatisfaction sets in keeps decreasing until dissatisfaction sets in
Question 10. Jennifer is trying to decide whether to buy a croissant or a bran muffin for tomorrow's breakfast. The croissant costs $2 and has a marginal utility of 30. The muffin costs $1 and has a marginal utility of 20. Which should she buy? the croissant because it has a higher marginal utility the croissant because it has a lower marginal utility per dollar the muffin because it costs less the muffin because it has a higher marginal utility per dollar
Question 11. To decide which of two goods is the better buy, a consumer should compare the products' marginal utilities per dollar. True False
Question 12. Brenda says, "You would have to pay me to listen to an opera." We can assume that, for Brenda, the marginal utility of listening to opera is zero. True False
Question 13. The difference between what a consumer is willing and able to pay and the market price of a good is known as producer surplus. True False
Question 14. The point at which the marginal utilities per dollar of expenditure on the last unit of each good purchased are equal is called consumer equilibrium. True False
Question 15. According to the principle of diminishing total utility, marginal utility declines with each additional unit of a good or service. True False
Question 16. Total costs are the sum of _________________ and ____________ average fixed costs; average variables costs total fixed costs; total variable costs average variable costs; marginal costs total variable costs; average marginal costs
Question 17. Average costs - average total, average fixed, and average variable - are derived by dividing the corresponding __________________ costs by _______________. change in total; change in output total; change in output total; quantity of output change in total; quantity of output
Question 18. Diseconomies of scale result when increases in output lead to _________________ in unit costs when all resources are _________________. decreases; variable increases; fixed decreases; fixed increases; variable
Question 19. Assume that one laborer can produce 8 units of output, two laborers 19 units, three laborers 24 units, and four laborers 28 units. Diminishing returns sets in when the firm hires the first worker second worker third worker fourth worker
Question 20. The minimum efficient scale is the output level at which the cost per unit is lowest, or the minimum point on the long-run average-cost curve. True False