ECON 201 CH.4-7 review Multiple choice

Which of the following changes would not shift the demand curve for a good or service? a. a change in income b. a change in the price of the good or service c. a change in expectations about the future price of the good or service d. a change in the price of a related good or service

b. a change in the price of the good or service

The midpoint method for calculating elasticities is convenient in that it allows us to a. ignore the percentage change in quantity demanded and instead focus entirely on the percentage change in price. b. calculate the same value for the elasticity, regardless of whether the price increases or decreases. c. assume that sellers' total revenue stays constant when the price changes. d. restrict all elasticity values to between 0 and 1.

b. calculate the same value for the elasticity, regardless of whether the price increases or decreases.

You have just been hired as a business consultant to determine what pricing policy would be appropriate to increase the total revenue of a therapeutic massage spa. The first step you would take would be to a. increase the price of all massages. b. reduce staff in order to reduce operating costs. c. determine the price elasticity of supply for massages. d. determine the price elasticity of demand for massages.

d. determine the price elasticity of demand for massages.

The unique point at which the supply and demand curves intersect is called a. market harmony. b. coincidence. c. equivalence. d. equilibrium.

d. equilibrium.

In general, elasticity is a measure of a. the extent to which advances in technology are adopted by producers. b. the extent to which a market is competitive. c. how firms' profits respond to changes in market prices. d. how much buyers and sellers respond to changes in market conditions.

d. how much buyers and sellers respond to changes in market conditions.

Two goods are complements when a decrease in the price of one good a. decreases the quantity demanded of the other good. b. decreases the demand for the other good. c. increases the quantity demanded of the other good. d. increases the demand for the other good.

d. increases the demand for the other good.

If a increase in income decreases the demand for a good, then the good is a(n) a. substitute good. b. complementary good. c. normal good. d. inferior good.

d. inferior good.

The market demand curve a. is the sum of all individual demand curves. b. is the demand curve for every product in an industry. c. shows the average quantity demanded by individual demanders at each price. d. is always flatter than an individual demand curve.

d. is always flatter than an individual demand curve.

When drawing a demand curve, a. demand is measured along the vertical axis, and price is measured along the horizontal axis. b. quantity demanded is measured along the vertical axis, and price is measured along the horizontal axis. c. price is measured along the vertical axis, and demand is measured along the horizontal axis. d. price is measured along the vertical axis, and quantity demanded is measured along the horizontal axis.

d. price is measured along the vertical axis, and quantity demanded is measured along the horizontal axis.

Suppose that a decrease in the price of good X results in fewer units of good Y being demanded. This implies that X and Y are a. complementary goods. b. normal goods. c. inferior goods. d. substitute goods.

d. substitute goods.

Suppose roses are currently selling for $40 per dozen, but the equilibrium price of roses is $30 per dozen. We would expect a a. shortage to exist and the market price of roses to increase. b. shortage to exist and the market price of roses to decrease. c. surplus to exist and the market price of roses to increase. d. surplus to exist and the market price of roses to decrease.

d. surplus to exist and the market price of roses to decrease.

A downward-sloping demand curve illustrates a. that demand decreases over time. b. that prices fall over time. c. the relationship between income and quantity demanded. d. the law of demand.

d. the law of demand.

Consider luxury weekend hotel packages in Las Vegas. When the price is $250, the quantity demanded is 2,000 packages per week. When the price is $280, the quantity demanded is 1,700 packages per week. Using the midpoint method, the price elasticity of demand is about a. 1.43, and an increase in the price will cause hotels' total revenue to decrease. b. 1.43, and an increase in the price will cause hotels' total revenue to increase. c. 0.70, and an increase in the price will cause hotels' total revenue to decrease. d. 0.70, and an increase in the price will cause hotels' total revenue to increase.

a. 1.43, and an increase in the price will cause hotels' total revenue to decrease.

If two goods are substitutes, their cross-price elasticity will be a. Positive b. Negative c. Zero d. Equal to the difference between the income elasticities of demand for the two goods

a. Positive

A rightward shift of a demand curve is called a(n) a. increase in demand. b. decrease in demand. c. decrease in quantity demanded. d. increase in quantity demanded.

a. increase in demand.

Demand is inelastic if the price elasticity of demand is a. less than 1. b. equal to 1. c. greater than 1. d. equal to 0.

a. less than 1.

Goods with many close substitutes tend to have a. more elastic demands. b. less elastic demands. c. price elasticities of demand that are unit elastic. d. income elasticities of demand that are negative.

a. more elastic demands.

. If the demand for a good falls when income falls, then the good is called a(n) a. normal good. b. regular good. c. luxury good. d. inferior good.

a. normal good.

An increase in quantity demanded a. results in a movement downward and to the right along a demand curve. b. results in a movement upward and to the left along a demand curve. c. shifts the demand curve to the left. d. shifts the demand curve to the right.

a. results in a movement downward and to the right along a demand curve.

The presence of a price control in a market for a good or service usually is an indication that a. an insufficient quantity of the good or service was being produced in that market to meet the public's need. b. the usual forces of supply and demand were not able to establish an equilibrium price in that market. c. policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers. d. policymakers correctly believed that price controls would generate no inequities of their own once imposed.

c. policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers.

Demand is said to be inelastic if the a. quantity demanded changes proportionately more than price. b. price changes proportionately more than income. c. quantity demanded changes proportionately less than price. d. quantity demanded changes proportionately the same as price.

c. quantity demanded changes proportionately less than price.

A very hot summer in Atlanta will cause a. the demand curve for lemonade to shift to the left. b. the demand for air conditioners to decrease. c. the demand for jackets to decrease. d. a movement downward and to the right along the demand curve for tank tops.

c. the demand for jackets to decrease.

Economists typically measure efficiency using a. the price paid by buyers. b. the quantity supplied by sellers. c. total surplus. d. profits to firms.

c. total surplus.

The current price of blue jeans is $30 per pair, but the equilibrium price of blue jeans is $25 per pair. As a result, a. the quantity supplied of blue jeans exceeds the quantity demanded of blue jeans at the $30 price. b. the equilibrium quantity of blue jeans exceeds the quantity demanded at the $30 price. c. there is a surplus of blue jeans at the $30 price. d. All of the above are correct.

d. All of the above are correct.

The distinction between efficiency and equality can be described as follows: a. Efficiency refers to maximizing the number of trades among buyers and sellers; equality refers to maximizing the gains from trade among buyers and sellers. b. Efficiency refers to minimizing the price paid by buyers; equality refers to maximizing the gains from trade among buyers and sellers. c. Efficiency refers to maximizing the size of the pie; equality refers to producing a pie of a given size at the least possible cost. d. Efficiency refers to maximizing the size of the pie; equality refers to distributing the pie fairly among members of society.

d. Efficiency refers to maximizing the size of the pie; equality refers to distributing the pie fairly among members of society

The cross-price elasticity of demand can tell us whether goods are a. normal or inferior. b. elastic or inelastic. c. luxuries or necessities. d. complements or substitutes.

d. complements or substitutes.