Question

Economics 1020 Pract The correct responses are marked with an asterisk ) ice 2 Dr. Elroy M. Leach 1. At very low prices, such as $0.02 per unit: a. income elasticity gets larger b. demand becomes inelastic c. income elasticity gets smaller d. demand becomes elastic 2. The price of an item is determined by the value of its a. total utility b. marginal utility c. marginal cost * d. marginal revenue product 3. Marginal utility is defined as the change in total satisfaction that is derived a. by consuming large amounts of the good b. when there is an increase in the price ratio c. when there is a decrease in the price ratio d. when an extra unit of the good is consumed* 4. The income elasticity of demand for a normal good is a. less than zero b. greater than zero* c. equal to zero d. none of the above 5. If the price of pork increases, the equilibrium price of beef will and the equilibrium quantity will1 a. increase, increase* c. increase, decrease b. decrease, increase d. decrease, decrease 6. If the cost of grapes used to make raisins rises, the equilibrium price of raisins will equilibrium quantity wil1 a. increase, increase b. increase, decrease* and the c. decrease, increase d. decrease, decrease 7. What is different about buying stocks or bonds? a. Stocks may pay dividends indefinitely bonds pay interest for a limited time b. Stocks give buyers ownership: bonds do not a. Stocks are debt instruments, bonds are assets b. Both options A and B are correct. 8. Actually, own the corporation and select the . a. board of directors, managers b. shareholders, board of directors c. management, employees d. board of directors, shareholders

Answer 1

Answer : 1) The correct option is b.

Because at lower price demand increase. This means here demand is positive. Positive demand is known as inelastic demand.

2) The correct option is c.

In competitive market at equilibrium, price = marginal cost. This means market equilibrium price of good is determined by the value of marginal cost.

3) The correct option is d.

Marginal utility means how much total utility changes because of consumption one more unit. If you consume more units of a good then the utility of that good change to you. Here changed utility due to more consumption is called marginal utility.

4) The correct option is b.

Because if income increase then demand for normal good increase. This means here demand is positive for normal good. Greater than zero shows the positive sign digits and hence it shows the income elasticity of demand for normal good.