ECON 2302 Exam 2 Multiple Choice Questions

1. If Weiskamp T-shirt Co. lowers its price from $6 to $5 and finds that students increase their quantity demanded from 400 to 600 T-shirts, demand is

a. b. c. d.

price inelastic price elastic unit elastic cross elastic

2. a. b. c. d.

3. a. b. c. d.

4. a. b. c. d.

5. a. b. c. d.

In Exhibit D-1, price elasticity of demand within the price range $8 and $6 is 4.27

1.5 1.6 0.64

In Exhibit D-1, price elasticity of demand within the price range $10 and $8 is 1.0

0.7 1.5 2.0

The cross elasticity of demand for substitute goods must Be greater than one
Be less than one
Be zero

exceed zero

The cross elasticity of demand for complementary goods must Be less than one
Be greater than one
exceed zero

Be negative

6. If Herbert the hair stylist raises the price of his cuts from $13 to $15 and the quantity demanded for his cuts falls from 300 to 260, demand is

1. price inelastic
2. price elastic
3. unit elastic
4. cross elastic

7. Refer to Exhibit E-2. Each dessert is priced at $1. If you had $10 to spend on desserts, which of the following combinations of goods would you buy?

1. 5 units of brownies, 4 units of ice cream, and 1 unit of pie
2. 4 units of brownies, 5 units of ice cream, and 1 unit of pie
3. 4 units of brownies, 4 units of ice cream, and 2 units of pie
4. 4 units of brownies, 3 units of ice cream, and 3 units of pie

8. Refer to Exhibit E-3. Clothes and amusements are priced at $10 each. If you had a budget of $50, which of the following combinations of goods would you buy?

1. 4 units of clothes and 1 unit of amusement
2. 3 units of clothes and 3 units of amusement
3. 2 units of clothes and 3 units of amusement
4. 1 unit of clothes and 4 units of amusement

9. Refer to Exhibit E-3. Clothes and amusements are priced at $10 each. The marginal utility per dollar for the first unit of amusement is
a. 0.5
b. 1.5

c. 2.0 d. 5.0

10. Refer to Exhibit E-3. Your budget is $50. The price of amusement goods is $10. If the price of clothes falls to $4, which of the following statements is true?

1. The marginal-utility-to-price ratio for clothes will decrease.
2. The marginal-utility-to-price ratio for clothes will increase.
3. The quantity demanded of clothes will decrease.
4. There will be no change in the quantity demanded of clothes or amusements.

11. Given whatever income they have, consumers make consumption choices to maximize the

1. total utility of the goods they consume
2. marginal utility of the goods they consume
3. average utility of each good they consume
4. number of goods they buy

12. According to the law of diminishing marginal utility, the fifth pair of gloves that Mary receives for Christmas makes her

1. as happy as she was while receiving the first pair
2. less happy than she was while receiving the first pair
3. more happy than she was while receiving the first pair
4. consider that fifth pair as having zero marginal utility

13. If the total utility Jack receives from 10 gallons of gasoline is 16, and the total utility Jack receives from 11 gallons of gasoline is 20, the marginal utility of the 11th gallon of gasoline is
a. 1
b. 4

c. 7 d. 20

14. If income increases from $100 to $150 and demand increases from 1 to 2, then income elasticity is a. -1.1
b. 1.67
c. -1.5

d. 2.0

15. If income decreases from $150 to $100 and demand increases from 3 to 5, then income elasticity is a. -1.25
b. 1.33
c. -1.5

d. 2.0