# ECON 702 – When the percentage change in price is lesser than the percentage

Question
15. When the percentage change in price is lesser than the percentage change in quantity demanded, ceteris paribus:

Demand is unitary elastic.

Demand is inelastic.

Demand is elastic.

Demand is income elastic.

16. A price increase will leave the total revenue a firm receives unchanged, ceteris paribus, only if the demand for its product is:

Elastic.

Inelastic.

Unitary elastic.

Income elastic.

17. If goods X and Y are complementary goods, an increase in the price of Z will, ceteris paribus:

Decrease the demand for X.

Decrease the demand for Y.

Increase the demand for Y.

Not change the demand for Y unless the goods are related.

18. Assume that Heather always maximizes her total utility given her budget constraint. Every morning for breakfast Heather has two eggs and three sausages. If the marginal utility of the last egg is 20 utils and the price of eggs is \$2 each, what can we say about the marginal utility of the last sausage if the price of each sausage is \$1?

It must be equal to 40 utils.

It must be equal to 20 utils.

It must be equal to 10 utils.

None of the above.

19. If goods X and Y are substitute goods, a decrease in the price of X will, ceteris paribus:

Decrease the demand for X.

Decrease the demand for Y.

Increase the demand for Y.

Not change the demand for Y.

20. Other things being equal, if the price of good X increases and as a result, the demand for good Y decreases, goods X and Y are:

Inferior goods.

Normal goods.

Complementary goods.

Substitute goods.

Calculate the values in the blank spaces in Table 1 below to answer the following questions.

Quantity Consumed

Total Utility

Marginal Utility

1

25

2

22

3

60

4

5

21. In Table 5.1, the marginal utility of the third unit is:

5.

13.

22.

60.

22. In Table 5.1, the total utility of two units consumed is:

25.

47.

60.

65.

23. A firm’s productivity will decrease if:

There is an increase in the firm’s capital to labor ratio.

The firm hires more skilled workers.

The workers are given additional training.

None of the above.

24. The point of diminishing marginal returns occurs with each additional unit of a variable input when:

Total output grows at a lower rate.

Marginal physical product becomes negative.

Workers demand higher wages.

None of the above.

25. Diminishing returns to labor occur because of:

Inefficiency in the production process.

The use of inferior factors of production.

A rising ratio of labor to capital.

All of the above.

26. If an additional unit of labor costs \$150 and has a MPP of 50 units of output, the marginal cost is:

\$0.03.

\$0.30.

\$3.00.

\$5.00.

27. As the production rate is increased, average fixed costs:

Are constant.

First fall, then rise (in a U-shaped curve).

Decline.

Increase.

28. When the average total cost curve is rising, then the marginal cost curve will be:

Below the average fixed cost curve.

Falling with greater output.

Above the average total cost curve.

Below the average total cost curve.

29. Accounting costs and economic costs may differ because:

The explicit cost for at least one factor is less than the factor’s opportunity cost.

Accounting costs include implicit costs and economic costs do not.

Explicit costs are positive.

All of the above.