Eco Test Paper

#5. Other things equal, what effects would each of the following have on aggregate demand or aggregate supply? In each case use a diagram to show the expected effects on the equilibrium price level and the level of real output.

a. This particular industry has a constantly increasing cost. There will be an increase in the demand for input factors for one key reason. Every day, new companies will be introduced into this market of remodeling, economic profits being the encouraging factor. Because of this, there will be a bid up on input prices for the companies in the industry of remodeling. “When a market is characterized by a large number of small producers, the demand curve facing the manager of each individual firm is horizontal at the price determined by the

2. Total revenue falls as the price of a good is raised, if the demand for the good is ( )

You just won a $100 shopping spree at a store that sells only DVDs and CDs. You are trying to determine what combination of these two goods would maximize your utility. The price of CDs is $10 and DVDs are $20. Below is the total utility you receive from consuming these goods.

Explain two (2) ways in which you applied the use of marginal cost and benefit to your decision to pursue a college degree.

20. Which of the following statements is TRUE? Economists normally assume that the goal of the

d. Calculate the price elasticity of demand in each market and discuss these in relation to the prices to be charged in each market.

1.  Increased demand for a product or service will usually result in lower prices for the item.  FALSE

30) The introduction of a new product to the market using market-penetration pricing is most likely to be successful when _____________.

The figure below shows a portion of a consumer’s indifference map, and a budget line. The consumer’s income is $1,200 and the price of Y is

6. In a monopolistic competition industry, if one firm appreciably increased its price from the existing equilibrium price, which of the following outcomes would most likely ensue?

a.) Draw and properly label the demand and supply graphs (this means you must label the axes and any lines you include on the graph).

8. Compared to a perfectly competitive industry with the same demand and cost curves, a monopoly’s price and output will be which of the following?

1) According to the Law of Demand, the demand curve for a good will A) shift leftward when the price of the good increases. B) shift rightward when the price of the good increases. C) slope downward. D) slope upward. Answer: C 2) An increase in the price of pork will lead to A) a movement up along the demand curve. B) a movement down along the demand curve. C) a rightward shift of the demand curve. D) a leftward shift of the demand curve. Answer: A 3) An increase in consumer incomes will lead to A) a rightward shift of the demand curve for plasma TVs. B) a movement upward along the demand curve for plasma TVs. C) a rightward shift of the supply curve for plasma TVs. D) no change of the demand curve for plasma TVs. Answer:

Marginal Utility by definition is the additional satisfaction a consumer gains from consuming one more unit of a good or service, which is usually positive, but can be negative. The concept implies that the utility or benefit to a consumer of an additional unit of a product is inversely related to the number of units of that product he already owns. The notion of marginal utility originated with attempts by 19th-century economists to examine and describe the economic validity of price. They believed price was partially determined by a commodity’s utility, which led to a paradox when applied to predominant price associations. This problem, commonly referred to as the