Practice Exam 3

Suppose the price of popcorn at movie theaters increases by 10%, and, as a result, the quantity of movie tickets demanded decreases by 8%. What is the cross-price elasticity of demand for movie tickets?

• -1.25

• -0.8

• 0.8

• 1.25

• None of these

Given the cross-price elasticity of demand for movie tickets that you just determined, what kind of related goods are movie theater popcorn and movie tickets?

• Complements

• Substitutes

• Not related goods

• None of the above

If a product has an income elasticity of demand of -0.5, the product is:

• A normal good

• A luxury

• A necessity

• An inferior good

• None of the above

A firm has a total cost of $600 when it produces 30 units. If the fixed cost is $90, what is the average variable cost?

• $17

• $27

• $30

• $510

• $21

An economic agent allocates consumption between ice cream and soda. If the price of ice cream is $3, marginal utility of ice cream is 60, price of soda is $2, and the marginal utility of soda is 30, is the consumer maximizing utility?

• Yes

• No, they should consume more soda and less ice cream

• No, they should consume more ice cream and less soda

• It cannot be determined

• They are indifferent

When marginal cost is less than average variable cost:

• AVC is rising

• AVC is falling

• AVC is constant

• Marginal cost must be negative

• None of these

Which of the following is true about economic cost?

• It includes only explicit monetary payments

• It excludes opportunity costs

• It is always less than accounting cost

• It includes both explicit and implicit costs

• None of the above

A rational economic agent will:

• Never make a decision that makes them worse off

• Always maximize utility or profits

• Always act with complete information

• Seek to maximize total rather than marginal benefit

• Be selfish

If total utility is increasing but marginal utility is decreasing, then:

• Consumption should stop

• The good is inferior

• The consumer is experiencing diminishing marginal utility

• The consumer’s utility is negative

• None of the above

If long-run average total cost increases as output increases, the firm is experiencing:

• Economies of scale

• Constant returns to scale

• Diseconomies of scale

• Diminishing marginal returns

• Increasing marginal cost