Econ Chapter 5

A decrease in supply will cause the largest increase in price when A. Both supply and demand are inelastic B. Both supply and demand are elastic C. Demand is elastic and supply is inelastic D. Demand is inelastic and supply is elastic

A

As the price elasticity of supply approaches infinity, very small changes in price lead to A. Very large changes in quantity supplied B. Very small changes in quantity supplied C. No change in quantity supplied D. None of the above

A

Which of the following could be the price elasticity of demand for a good for which a decrease in price would increase total revenue? A. 0.3 B. 0 C. 1 D. 2.6

D

For a particular good, a 10 percent increase in price causes a 3 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good? A. The relevant time horizon is short B. The good is a luxury C. The market for this good is narrowly defined D. There are many close substitutes for this good

A

For which pairs of goods is the cross-price elasticity most likely to be negative? A. Peanut butter and jelly B. Automobiles and coffee C. Pens and pencils D. Paperback novels and electronic books for e-readers

A

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

If the demand for donuts is elastic, then a decrease in the price of donuts will A. Increase total revenue of donut sellers B. Decrease total revenue of donut sellers C. Not change total revenue of donut sellers D. Need more information

A

If the price of walnuts rises, many people would switch from consuming walnuts to consuming pecans. But if the price of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the importance of A. The availability of close substitutes in determining the price elasticity of demand B. A necessity vs a luxury in determining price elasticity of demand C. The definition of a market in determining the price elasticity of demand D. The time horizon in determining price elasticity of demand

A

Suppose the price elasticity of supply for minivans is 0.3 in the short run and 1.2 in the long run. If an increase in the demand for minivans causes the price of minivans to increase by 5%, then the quantity supplied of minivans will increase by about A. 1.5% in the short run and 6% in the long run B. 6% in the short run and 1.5% in the long run C. 16.7% in the short run and 4.2% in the long run D. 4.2% in the short run and 16.7% in the long run

A

A good will have a more inelastic demand, the A. Greater the availability of close substitutes B. Broader the definition of the market C. Longer the period of time D. More it is regarded as a luxury

B

For a particular good, a 10 percent increase in price causes a 5 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good? A. There are many close substitutes for this good B. The market for this good is broadly defined C. The good is a luxury D. The relevant time horizon is long

B

If sellers do not adjust their quantity supplied at all in response to a change in price, the price elasticity of supply is A. Zero and the supply curve is horizontal B. Zero and the supply curve is vertical C. Infinity and the supply curve is horizontal D. Infinity and the supply curve is vertical

B

If the price elasticity of supply is 0.7, and price elasticity increased by 24%, quantity supplied would A. Increase by 34.29% B. Increase by 16.8% C. Decrease by 34.29% D. Decrease by 16.8%

B

Meta says that she will spend exactly $25 each month on new apps for her mobile device, regardless of price of apps. Metas demand for apps is A. Perfectly elastic B. Unit elastic C. Perfectly inelastic D. Somewhat inelastic, but not perfectly inelastic

B

Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. Total consumer spending on milk will A. Increase, and total consumer spending on beef will increase B. Increase, and total consumer spending on beef will decrease C. Decrease, and total consumer spending on beef will increase D. Decrease, and total consumer spending on beef will decrease

B

Skip's sealcoating service increased its total monthly revenue from $12,000 to $13,500 when it raised the price of driveway repairs from $600 to $750. The price elasticity of demand for Skip's s Sealcoating Service is A. 0.11 B. 0.47 C. 1.12 D. 2.11

B

Suppose the cross-price elasticity of demand between peanut butter and jelly is -2.50. This implies that a 20 percent increase in the price of peanut butter will cause the quantity of jelly purchased to A. Fall by 8 percent B. Fall by 50 percent C. Rise by 8 percent D. Rise by 50 percent

B

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 0.55. Which of the following events is consistent with a 20 percent decrease in the quantity of the good demanded? A. An increase of 11% in the price of a good B. An increases of 36.36% in the price of the good C. An increase in the price of the good Fromm $11 to $20 D. An increase in the price of the good from $20 to $31

B

When the price of an eBook is $15.00, the quantity demanded is 400 eBooks per day. When the price falls to $10.00, the quantity demanded increases to 700. Given this information and using the midpoint method, we know that the demand for eBooks is A. Inelastic B. Elastic C. Unit elastic D. Perfectly inelastic

B

Whether a good is a luxury or necessity depends on the A. Price of the good B. Preferences of the buyer C. Intrinsic properties of the good D. Scarcity of the good

B

Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is A. Negative, and the good is an inferior good B. Negative, and the good is a normal good C. Positive, and the good is a normal good D. Positive, and the good is an inferior good

C

Demand is said to be inelastic if A. Buyers respond substantially to changes in the price of a good B. Demand shifts only slightly when the price of a good changes C. The quantity demanded changes only slightly when the price of the good changes D. The price of the good responds only slightly to changes in demand

C

Farm programs that pay farmers not to plant crops on all their land A. Hurt farmers by lowering their total revenue and hurt consumers by causing shortages of some food items B. Help farmers by cutting costs, which helps consumers by lowering food prices C. Helps farmers by increasing total revenue in the market but hurts consumers by raising food prices D. Help farmers directly since they receive government payments but have no real effect on consumer

C

For which pairs of goods is the cross-price elasticity most likely to be positive? A. Peanut butter and jelly B. Bicycles and bicycle tires C. Pens and pencils D. Digital college textbooks and iPhones

C

If the price elasticity of demand for a good is 1.2, then a 3 percent decrease in price results in a A. 0.4 percent increase in the quantity demanded B. 2.5 percent increase in the quantity demanded C. 3.6 percent increase in the quantity demanded D. 6 percent increase in the quantity demanded

C

In January, the price of dark chocolate candy bars was $2, and Willy's Chocolate factory produced 80 lbs. In February, the price of dark chocolate candy bars was $2.50, and Willy's produced 110 lbs. In March, the price of dark chocolate candy bars was $3, and Willy's produced 140 lbs. Using the midpoint method, the price elasticity of supply of Willy's dark chocolate candy bars was about A. 0.7 when the price increased from $2 to $2.50 and 0.76 when the price increased from $2.50 to $3 B. 0.88 when price increased from $2 to $2.50 and 1.08 when the price increased from $2.50 to $3 C. 1.42 when the price increased from $2 to $2.50 and 1.32 when the price increases from $2.50 to $3 D. 1.50 when the price increased from $2 to $2.50 and 1.18 when price increased from $2.50 to $3

C

Suppose that the supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose a large income tax increase decreases the demand for both goods by 10%. The price elasticity of supply for aged cheddar cheese could be A. -1 B. 0 C. 0.5 D. 1.5

C

When studying how some event or policy affects a market, elasticity provides information on the A. Change in cost of production B. Trade off between equality and efficiency C. Effect on the budget deficit or surplus D. Direction and magnitude of effect

D

At a price of 1.20, a local coffee shop is willing to supply 100 cinnamon rolls per a day. At a price of 1.40, the coffee shop would be willing to supply 150 cinnamon rolls per a day. Using the midpoint method, the price elasticity of supply is about A. 0.15 B. 0.375 C. 2.5 D. 2.60

D

If the price elasticity of supply is 0.4, and a price increase led to a 5% increase in quantity supply then the price increase is about A. 0.25% B. 1.2% C. 2% D. 12.5%

D

If the price of milk rises, when is the price elasticity of demand likely to be the highest? A. Immediately after the price increase B. One month after price increase C. Three months after price increase D. One year after price increase

D

Suppose that gasoline prices increase dramatically this month. Lola commutes 100 miles to work each weekday. Over the next few months, Lola drives less on the weekends to try and save money. Within the year, she sells her home and purchases one only 10 miles from her place of employment. These examples illustrate the importance of A. The availability of substitutes in determining the price elasticity of demand B. A necessity vs a luxury in determining the price elasticity of demand C. The definition of a market in determining the price elasticity of demand D. The time horizon in determining the price elasticity of demand

D

Suppose the point (Q = 3,400, P = $20) is the midpoint on a certain downward-sloping, linear demand curve. Then A. A decrease in price from $18 to $16 will increases total revenue B. A decrease in price from $24 to $22 will decrease total revenue C. A decrease in price from $21 to $19 will decrease total revenue D. The maximum value of total revenue is $68,000

D

Which of the following statements is not correct? A. Advocates for drug-interdiction policies that reduce the supply of illegal drugs argue that the demand for illegal drugs may be more responsive in long term than short term B. The demand for illegal drugs is price inelastic C. Drug Interdiction efforts that reduce the supply of illegal drugs may increase drug-related crimes D. The quantity of illegal drugs demanded is very responsive to change in prices

D

total revenue A. Always increases as price increases B. Increases as price increases, as long as demand is elastic C. Decreases as prices increases, as long as demand is inelastic D. Remains unchanged as price increases when demand is unit elastic

D