Ch.6 Test bank (63-92)

Which of the following goods (with their respective income elasticity coefficients in parentheses) will most likely suffer a decline in demand during a recession?

Plasma screen and LCD TVs (+4.2)

If the supply of product X is perfectly elastic, an increase in the demand for it will increase:

equilibrium quantity but equilibrium price will be unchanged.

The supply curve of antique reproductions is:

relatively elastic.

Compared to coffee, we would expect the cross elasticity of demand for:

tea to be positive, but negative for cream.

The supply of product X is perfectly inelastic if the price of X rises by:

10 percent and quantity supplied stays the same.

The supply of product X is elastic if the price of X rises by:

5 percent and quantity supplied rises by 7 percent.

The supply of product X is inelastic (but not perfectly inelastic) if the price of X rises by:

7 percent and quantity supplied rises by 5 percent.

If the income elasticity of demand for lard is -3.00, this means that:

lard is an inferior good.

Which of the following goods will least likely suffer a decline in demand during a recession?

Toothpaste

Suppose the income elasticity of demand for toys is +2.00. This means that:

a 10 percent increase in income will increase the purchase of toys by 20 percent.

The main determinant of elasticity of supply is the:

amount of time the producer has to adjust inputs in response to a price change.

Studies of the minimum wage suggest that the price elasticity of demand for teenage workers is relatively inelastic. This means that:

an increase in the minimum wage would increase the total incomes of teenage workers as a group

The larger the positive cross elasticity coefficient of demand between products X and Y, the:

greater their substitutability

Suppose that the price of product X rises by 20 percent and the quantity supplied of X increases by 15 percent. The coefficient of price elasticity of supply for good X is:

less than 1 and therefore supply is inelastic.

Supply curves tend to be:

more elastic in the long run because there is time for firms to enter or leave the industry.

Assume that a 3 percent increase in income across the economy produces a 1 percent decline in the quantity demanded of good X. The coefficient of income elasticity of demand for good X is:

negative and therefore X is an inferior good

Suppose that a 20 percent increase in the price of normal good Y causes a 10 percent decline in the quantity demanded of normal good X. The coefficient of cross elasticity of demand is:

negative and therefore these goods are complements

We would expect the cross elasticity of demand between dress shirts and ties to be:

negative, indicating complementary goods.

The supply curve of a one-of-a-kind original painting is:

perfectly inelastic.

The supply of known Monet paintings is:

perfectly inelastic.

Assume that a 4 percent increase in income across the economy produces an 8 percent increase in the quantity demanded of good X. The coefficient of income elasticity of demand is:

positive and therefore X is a normal good

Suppose that a 10 percent increase in the price of normal good Y causes a 20 percent increase in the quantity demanded of normal good X. The coefficient of cross elasticity of demand is:

positive and therefore these goods are substitutes

We would expect the cross elasticity of demand between Pepsi and Coke to be:

positive, indicating substitute goods

Studies show that the demand for gasoline is:

price inelastic in both the short and long run.

The formula for cross elasticity of demand is percentage change in:

quantity demanded of X/percentage change in price of Y.

An increase in demand will increase equilibrium price to a greater extent:

the less elastic the supply curve.

Farmers often find that large bumper crops are associated with declines in their gross incomes. This suggests that:

the price elasticity of demand for farm products is less than 1.

It takes a considerable amount of time to increase the production of pork. This implies that:

the short-run supply curve for pork is less elastic than the long-run supply curve for pork.

The price of old baseball cards rises rapidly with increases in demand because:

the supply of old baseball cards is price inelastic.

Suppose the supply of product X is perfectly inelastic. If there is an increase in the demand for this product, equilibrium price:

will increase but equilibrium quantity will be unchanged.