Deck 2: Making Smart Choices: the Law of Demand

Question 1

What you can afford is limited by more than just money.

Answer 1

True

Question 2

Smart choices are based on a comparison of expected benefits and opportunity costs.

Answer 2

True

Question 3

A Sociology class is a substitute for an Economics class if

A) attending the two classes has the same opportunity cost.
B) the two classes satisfy the same want.
C) the tuition for the two classes is the same.
D) both classes are taught by the same professor.
E) both classes are at the same time.

Answer 3

the two classes satisfy the same want.

Question 4

Your preferences can be affected by advertising.

Question 5

If you buy a product or service that has no substitutes, your expected benefits must be zero.

Question 6

Sam will drink anything that is cold, while Dave will only drink Gatorade. We expect Dave is willing to pay more for Gatorade than is Sam.

Question 7

Substitutes must

A) have the same price.
B) satisfy the same want.
C) be sold in the same store.
D) have the same opportunity cost.
E) be exactly the same product or service.

Question 8

Substitutes can be different products or services as long as they satisfy the same want.

Question 9

Substitutes need to be exactly the same product or service as the product or service you want.

Question 10

What you can afford is limited by

A) preferences.
B) externalities.
C) substitutes.
D) demand.
E) time.

Question 11

Your demand for tickets to the Lady Gaga concert depends on

A) how much you like Lada Gaga.
B) your income.
C) what other live concerts you are interested in.
D) what else you might spend the money on.
E) all of the above.

Question 12

Your preferences measure

A) the availability of alternatives.
B) how badly you want something.
C) the availability of substitutes.
D) how limited your time is.
E) the price of a product.

Question 13

Your preferences are determined only by your logical needs.

Question 14

Sam will drink anything that is cold, while Dave will only drink Gatorade. We expect Sam is willing to pay more for Gatorade than is Dave.

Question 15

Economists describe all of your wants - and how intense each want is - as your preferences.

Question 16

For economists, the terms wants and demands mean the same thing.

Question 17

To get tickets to see the Spice Girls reunion tour Sue missed a day at work, which cost her $300, drove her car downtown and parked, which cost her $30, and paid $170 for the tickets. Sue's expected benefits from attending the concert are at least

A) $300.
B) $200.
C) $130.
D) $500.
E) $170.

Question 18

What you can afford is limited by

A) preferences.
B) demand.
C) substitutes.
D) money.
E) externalities.

Question 19

Making a smart choice depends on what substitutes are available and what they cost.

Question 20

What you can afford is just about money.

Question 21

You are generally willing to pay more for a product or service that has no close substitutes.

Question 22

Your demand for a product or service depends only on your preferences, not on your income.

Question 23

The high price of diamonds relative to the price of water is due to the fact that

A) total benefits from water are relatively low.
B) total benefits from diamonds are relatively high.
C) marginal benefits from water are relatively low.
D) marginal benefits from diamonds are relatively low.
E) none of the above is true.

Question 24

A person's marginal growth (in height) decreases as they age because

A) people grow more quickly when they are younger.
B) older people prefer Pepsi over Coke.
C) our parents lose their ability to measure us as we get older.
D) circumstances change as we age.
E) total growth is decreasing; we begin to get shorter once we get old enough.

Question 25

Phone data plans often charge a high price for daytime use and a lower price on evenings and weekends. An economist would say this is because

A) total benefits decrease as you use more minutes.
B) it is less expensive to provide service when it is dark outside.
C) marginal benefits increase as you talk longer.
D) not many people have cell phones these days.
E) marginal benefits can decrease as circumstances change.

Question 26

The high price of diamonds relative to the price of water is due to the fact that

A) total benefits from water are relatively low.
B) total benefits from diamonds are relatively high.
C) marginal benefits from water are relatively high.
D) marginal benefits from diamonds are relatively low.
E) none of the above is true.

Question 27

The high price of diamonds relative to the price of water is due to the fact that

A) total benefits from water are relatively low.
B) total benefits from diamonds are relatively high.
C) marginal benefits from water are relatively high.
D) marginal benefits from diamonds are relatively high.
E) none of the above is true.

Question 28

People take their parents for granted because parents typically have ________ total benefits and ________ marginal benefits.

A) low; low.
B) low; high.
C) zero; infinite.
D) high; high.
E) high; low.

Question 29

When you download music for free, you have a demand for music.

Question 30

The diamond/water paradox can be explained by

A) water having a low price relative to diamonds.
B) water having high total benefits relative to diamonds.
C) water having higher marginal benefits in the summer than in the spring.
D) distinguishing between total benefits and price.
E) distinguishing between total benefits and marginal benefit.

Question 31

The term demand describes a consumer's wants for a product or service.

Question 32

The term demand describes a consumer's willingness and ability to pay for a product or service.

Question 33

Your instructor advised you to study for at least a week before your economics test. If you ignored his advice and only studied for one hour just before the test, your studying probably has ________ total benefits and ________ marginal benefits.

A) zero; infinite.
B) high; low.
C) low; high.
D) high; high.
E) low; low.

Question 34

Phone data plans often charge a high price for the first 10 megabytes, a lower price for the next 100 megabytes, and a very low price for the next 1,000 megabytes. An economist would say this is because

A) not many people have cell phones these days.
B) marginal benefits decrease as you use more megabytes.
C) marginal benefits always decrease as circumstances change.
D) 1,000 megabytes can be transmitted more cheaply than 100 megabytes.
E) total benefits decrease as you use more megabytes.

Question 35

If you feel strongly about protecting the environment, this affects your demand for cars and your demand for public transit.

Question 36

Products and services that are plentiful and essential will typically have

A) few alternatives.
B) a low total benefit.
C) a high price.
D) a low marginal benefit.
E) a high marginal benefit.

Question 37

You have a bet that you can eat more pizza slices than your friend. The loser has to pay for all the pizza. Which statement is true ?

A) Your total benefit increases with each slice of pizza you choose to eat.
B) As long as you don't get sick, there will be some positive marginal benefit from every slice you choose to eat.
C) Each additional slice of pizza has a lower marginal benefit than the slice before.
D) You will stop eating when the expected marginal benefit of the last slice is zero.
E) All of the above are true.

Question 38

People pay more for diamonds than for water because

A) total benefits from diamonds are high and total benefits from water are low.
B) there are no substitutes for water.
C) people don't make smart choices.
D) water is scarce.
E) marginal benefits from water are low and marginal benefits from diamonds are high.

Question 39

Total growth (in height) is best described by the question,

A) "How much have you grown since I last saw you?"
B) "Have you had a growth spurt?"
C) "How tall are you?"
D) "When did you get taller than your mother?"
E) "Did they stretch you on the rack to make you taller?"

Question 40

Products and services that are rare and essential will typically have

A) many alternatives.
B) a high total benefit.
C) a low price.
D) a low marginal benefit.
E) a high marginal benefit.

Question 41

A once-in-a-lifetime trip to Paris will give you marginal benefits that will be the same as total benefits.

Question 42

Willingness to pay depends on total benefit, not marginal benefit.

Question 43

Marginal benefits are always larger than total benefits.

Question 44

Products or services that are luxuries tend to have high marginal benefits.

Question 45

Charging people more for a product that has high marginal benefits is a bad business idea because people won't actually pay more.

Question 46

Willingness to pay depends on marginal benefit, not total benefit.

Question 47

Dry cleaners charge men a lower price than they charge women because men get lower total benefits than women from having clean clothes.

Question 48

After an intense workout at the gym with nothing to drink, the marginal benefit of a Gatorade would

A) depend on what other drinks were available.
B) depend on the marginal cost.
C) be equal to the marginal cost.
D) be high.
E) be low.

Question 49

Dry cleaners charge men a lower price than they charge women because men get lower marginal benefits than women from having clean clothes.

Question 50

If you spend the next hour studying instead of going out with a friend, that means at the margin, you value studying more than your friend.

Question 51

Your marginal benefits from a choice do not reflect how intensely you want it.

Question 52

Products or services that are essential to survival always have low marginal benefits.

Question 53

Marginal benefits change with circumstances.

Question 54

Your marginal benefits from a choice depend on your opportunity costs.

Question 55

The additional benefit from your second hamburger is less than the additional benefit from your first hamburger because your total benefits are decreasing.

Question 56

Smart choices depend on marginal benefits.

Question 57

A second date is never as exciting as the first one because total benefits decrease as you date more.

Question 58

If you spend the next hour studying instead of going out with a friend, that means overall, you value studying more than your friend.

Question 59

Tourists are typically willing to pay more for products or services than local consumers because tourists get larger marginal benefits from these items.

Question 60

As you consume more of a product or service, your marginal benefit usually gets smaller.

Question 61

The law of demand states that, if nothing else changes,

A) a rise in the price of a product or service causes a decrease in quantity demanded.
B) a rise in the price of a product or service causes a decrease in quantity supplied.
C) an increase in incomes causes a decrease in quantity demanded.
D) a rise in the price of a product or service causes an increase in quantity demanded.
E) an increase in incomes causes an increase in quantity demanded.

Question 62

Which will cause an increase in quantity demanded?

A) a rise in the price of a substitute product
B) a fall in the price of a complement product
C) an increase in income
D) a rise in the price of the product
E) a fall in the price of the product

Question 63

Smart consumers who will not pay $150 for a designer T-shirt make this choice because

A) their marginal costs from this t-shirt are less than $150.
B) they are willing to pay more than $150.
C) their marginal benefits from this t-shirt are less than $150.
D) their quantity demanded is greater than one t-shirt.
E) their marginal benefits from this t-shirt are more than $150.

Question 64

Franco the barber charges $15 for a haircut. He has 200 customers who each pay Franco $30 a month. Market demand for Franco's haircuts is

A) 200 haircuts per month.
B) 400 haircuts per month.
C) 15 dollars per haircut.
D) 6,000 dollars per month.
E) 200 customers per month.

Question 65

Gina and George had a cash bar at their party last week. At $2 a ticket, the 50 people at their party bought 2,000 tickets. Market demand at Gina and George's party was

A) 2,000 tickets.
B) 4,000 dollars.
C) 400 tickets.
D) 50 people.
E) 100 dollars.

Question 66

An online music store charges $1 per song. Your VISA bill shows that you spent $300 on songs last month. This means that your

A) marginal benefits must be less than $1 per song.
B) quantity demanded was 1 dollar.
C) marginal costs must be more than $1 per song.
D) quantity demanded was 300 songs.
E) quantity demanded was 300 dollars.

Question 67

Smart choices depend on total benefits.

Question 68

The Cineplex charges $8 for admission. The 200-seat theatre is full. Market demand is

A) 1,600 dollars.
B) 1,600 tickets.
C) 8 dollars.
D) 1,600 people.
E) 200 tickets.

Question 69

As the price of butter rises, smart consumers buy

A) less margarine and the quantity demanded of butter decreases.
B) more margarine and the quantity demanded of butter decreases.
C) more margarine and the demand for butter decreases.
D) more margarine and the demand for butter increases.
E) less margarine and the quantity demanded of butter increases.

Question 70

If the price of gasoline continues to rise, the

A) demand for substitutes for gasoline decreases.
B) quantity demanded for substitutes for gasoline increases.
C) quantity demanded of gasoline increases.
D) demand for gasoline decreases.
E) quantity demanded of gasoline decreases.

Question 71

Some sales managers are talking about business. Which quotation refers to a leftward shift of the demand curve?

A) "Since our competitors raised their prices, our sales have tripled."
B) "Because it's been such a warm winter, our sales of wool scarves are down from last year."
C) "We decided to cut our prices, and there has been a big increase in our sales."
D) "The Green movement has made our biodegradable products best-sellers."
E) None of the above

Question 72

Some sales managers are talking about business. Which quotation refers to a movement along the demand curve?

A) "Since our competitors raised their prices, our sales have tripled."
B) "Because it's been such a warm winter, our sales of wool scarves are down from last year."
C) "We decided to cut our prices, and there has been a big increase in our sales."
D) "The Green movement has made our biodegradable products best-sellers."
E) None of the above

Question 73

Some sales managers are talking about business. Which quotation refers to a change in quantity demanded?

A) "Since our competitors raised their prices, our sales have tripled."
B) "Because it's been such a warm winter, our sales of wool scarves are down from last year."
C) "We decided to cut our prices, and there has been a big increase in our sales."
D) "The Green movement has made our biodegradable products best-sellers."
E) None of the above

Question 74

An economics professor offers to sell cookies to her class. At a price of 50 cents per cookie, each of the 100 students in the class spends $2.00 on cookies. At a price of 50 cents per cookie, market demand in this class is

A) 400 cookies.
B) 50 cents.
C) 100 students.
D) 1 professor.
E) 200 dollars.

Question 75

Which will cause a decrease in quantity demanded?

A) a decrease in the number of consumers
B) a decrease in income
C) an increase in income
D) a rise in the price of the product
E) a fall in the price of the product

Question 76

At a price of $2, Michael buys 4 muffins and Matthew buys 6 muffins. The market demand for these two individuals at a price of $2 is

A) 6 muffins.
B) 2 muffins.
C) 20 dollars.
D) 10 muffins.
E) 2 dollars.

Question 77

At $1.20 per litre you spent $240 on gasoline last month. Your

A) marginal benefit must be less than 1.20 per litre.
B) quantity demanded is 240 litres.
C) quantity demanded is 1.20 dollars.
D) quantity demanded is 240 dollars.
E) quantity demanded is 200 litres.

Question 78

Some sales managers are talking about business. Which quotation refers to a rightward shift of the demand curve?

A) "Since our competitors raised their prices, our sales have tripled."
B) "Because it's been such a warm winter, our sales of wool scarves are down from last year."
C) "We decided to cut our prices, and there has been a big increase in our sales."
D) "The Green movement has hurt sales of our non-recyclable products."
E) None of the above

Question 79

Which will cause a movement down along a demand curve?

A) a rise in the price of a substitute product
B) a fall in the price of a complement product
C) an increase in income
D) a rise in the price of the product
E) a fall in the price of the product

Question 80

Market demand is the

A) sum of the prices each individual is willing and able to pay for each quantity demanded.
B) sum of the quantities demanded by all individuals at each price.
C) difference between the maximum amount each individual is willing to pay and the market price.
D) difference between the minimum amount each individual is willing to pay and the market price.
E) demand for stock markets.