AEC 305 Exam 2 Review
Questions
1. Corn and soybeans are considered .: -
substitutes in production
2. Given a graph of indifference curves, those consumption bundles that are farther from the origin have
total utility compared to those bundles that are closer to the origin.: more
3. The long run is defined as that point after which all costs are variable and no cost is fixed.: True
4. This lesson identified primary demand curve shift factors.: 4
5. If consumer incomes increase, , ceteris
paribus.: the effect on the market for walnuts is uncertain without additional as- sumptions or information
6. Calculate price elasticity of demand around (e.g., +/- 1%) a price of $3 using the following simplified demand
equation (QD = 30 - 4P). Use the calculus-based approach or the arc elasticity approach. State your answer in a
decimal form.: -0.6666
7. Given the following supply equation, calculate price elasticity of supply at (near) a market price of $10. Use
the arc-price elasticity or calculus approach. QS = 30 + 2P
Enter your answer as a decimal with the correct sign.: 0.4
8. If a good has a cross price elasticity of demand of -0.5 that means that
.: this good and another good are complements
9. If supply elasticity (ED) is -2.5, demand is relatively to
changes in price.: responsive
10. Consider a graphical depiction of a market where the supply curve is drawn more vertically and
demand is drawn more horizontally at the equilibrium price. Given this graphical depiction, which side of the
market pays a greater share of a production cost increase?: producers/suppliers
11.If the demand elasticity for chocolate-nut clusters at Barb's Candy Store equals -0.4, Barb (the owner) the
price she charges for her chocolate-nut clusters if she wants to increase her total revenue.: should raise
12.A decrease in the number or quality of available substitutes will cause the for that good or
service to become
.: elasticity of demand, less elastic
13.The most significant factor affecting elasticity of demand is
.: availability of substitutes
14.When producers are taxed, consumers may ultimately pay a portion of the tax. Consumers pay their share of
a tax through .: higher
market prices
, AEC 305 Exam 2 Review
Questions
15.The hallmark of a demand equation is that there is a negative sign before the (own) price variable (e.g., Q =
30 - 2P).: True
16.If tastes for a good or service increase, ,
ceteris paribus.: the demand curve shifts to the right
17.Given a demand equation, quantity demanded if
own price increases.: cannot be determined without more information (e.g., if all else is not constant)
18.Assume the supply function is Qs = 30 + 5P. What quantity would be supplied at a market price of
$5?: 55
19.Another word for elasticity is .: responsive- ness
20.If a good has an elasticity of demand of -0.5 that means that
.: demand is inelastic
21.Which kind of elasticity tells us how much quantity supplied changes for a 1% change in the price of an
input used for production, ceteris paribus.: Factor price elasticity of supply
22.What is the maximum number of unknown variables one can solve for given a set of three (3) structural
equations?: 3
23.Price elasticity of supply is .: always positive
24. According to the information presented in this lesson, demand for gasoline is more elastic (-0.20) in the
long run compared to the short run (-0.10).: True
25.Auctions that do not include a reserve price are also called
(one word) auctions.: absolute
26.A decrease in the budget share will cause the for
that good or service to become .: elasticity of demand, more
inelastic
27.Among the options listed below, crop farms are more likely to use
contracts.: marketing
28.Given a demand equation, quantity demanded
if the price of a substitute increases, ceteris paribus.: increases
29.The hallmark of a supply equation is that there is a positive sign in front of the (own) price variable (e.g.,
Q = 15 + 3P: True
30.
movement along the demand curve occurs when
changes, ceteris paribus.: own price
31.The demand function generally includes which of the following variables?-
: all of the above=the price of the good (own-price); the prices of related
toods;
income
Questions
1. Corn and soybeans are considered .: -
substitutes in production
2. Given a graph of indifference curves, those consumption bundles that are farther from the origin have
total utility compared to those bundles that are closer to the origin.: more
3. The long run is defined as that point after which all costs are variable and no cost is fixed.: True
4. This lesson identified primary demand curve shift factors.: 4
5. If consumer incomes increase, , ceteris
paribus.: the effect on the market for walnuts is uncertain without additional as- sumptions or information
6. Calculate price elasticity of demand around (e.g., +/- 1%) a price of $3 using the following simplified demand
equation (QD = 30 - 4P). Use the calculus-based approach or the arc elasticity approach. State your answer in a
decimal form.: -0.6666
7. Given the following supply equation, calculate price elasticity of supply at (near) a market price of $10. Use
the arc-price elasticity or calculus approach. QS = 30 + 2P
Enter your answer as a decimal with the correct sign.: 0.4
8. If a good has a cross price elasticity of demand of -0.5 that means that
.: this good and another good are complements
9. If supply elasticity (ED) is -2.5, demand is relatively to
changes in price.: responsive
10. Consider a graphical depiction of a market where the supply curve is drawn more vertically and
demand is drawn more horizontally at the equilibrium price. Given this graphical depiction, which side of the
market pays a greater share of a production cost increase?: producers/suppliers
11.If the demand elasticity for chocolate-nut clusters at Barb's Candy Store equals -0.4, Barb (the owner) the
price she charges for her chocolate-nut clusters if she wants to increase her total revenue.: should raise
12.A decrease in the number or quality of available substitutes will cause the for that good or
service to become
.: elasticity of demand, less elastic
13.The most significant factor affecting elasticity of demand is
.: availability of substitutes
14.When producers are taxed, consumers may ultimately pay a portion of the tax. Consumers pay their share of
a tax through .: higher
market prices
, AEC 305 Exam 2 Review
Questions
15.The hallmark of a demand equation is that there is a negative sign before the (own) price variable (e.g., Q =
30 - 2P).: True
16.If tastes for a good or service increase, ,
ceteris paribus.: the demand curve shifts to the right
17.Given a demand equation, quantity demanded if
own price increases.: cannot be determined without more information (e.g., if all else is not constant)
18.Assume the supply function is Qs = 30 + 5P. What quantity would be supplied at a market price of
$5?: 55
19.Another word for elasticity is .: responsive- ness
20.If a good has an elasticity of demand of -0.5 that means that
.: demand is inelastic
21.Which kind of elasticity tells us how much quantity supplied changes for a 1% change in the price of an
input used for production, ceteris paribus.: Factor price elasticity of supply
22.What is the maximum number of unknown variables one can solve for given a set of three (3) structural
equations?: 3
23.Price elasticity of supply is .: always positive
24. According to the information presented in this lesson, demand for gasoline is more elastic (-0.20) in the
long run compared to the short run (-0.10).: True
25.Auctions that do not include a reserve price are also called
(one word) auctions.: absolute
26.A decrease in the budget share will cause the for
that good or service to become .: elasticity of demand, more
inelastic
27.Among the options listed below, crop farms are more likely to use
contracts.: marketing
28.Given a demand equation, quantity demanded
if the price of a substitute increases, ceteris paribus.: increases
29.The hallmark of a supply equation is that there is a positive sign in front of the (own) price variable (e.g.,
Q = 15 + 3P: True
30.
movement along the demand curve occurs when
changes, ceteris paribus.: own price
31.The demand function generally includes which of the following variables?-
: all of the above=the price of the good (own-price); the prices of related
toods;
income
