ECON Midterm Help

(Figure: The Demand Curve for Crossings) Look at the figure The Demand Curve for Crossings. This graph examines the demand for crossing a bridge over a very large river. Using the midpoint method, the price elasticity of demand between $0.90 and $1.10 is approximately:

1

(Figure: The Demand for e-Books) Look again at the figure The Demand for e-Books. What is the price elasticity of demand (using the midpoint method) when the price increases from $6 to $8?

1

(Table: Price Elasticity) Look at the table Price Elasticity. What is the price elasticity of demand (using the midpoint formula) between $2.50 and $2.25?

19

If the price of chocolate-covered peanuts decreases from $1.05 to $0.95 and the quantity demanded increases from 180 bags to 220 bags, then the price elasticity of demand (using the midpoint method) is:

2

The publisher of an economics textbook finds that when the book's price is lowered from $60, sales rise from 10,000 to 15,000. Using the midpoint method, the price elasticity of demand is:

2.6

For an inferior good, the income elasticity of demand will be:

negative.

(Figure: The Demand Curve for Bridge Crossings) Look at the figure The Demand Curve for Bridge Crossings. The price elasticity of demand between $0.90 and $1.10 in the figure is:

price unit-elastic, since the price elasticity is equal to 1.

(Figure: Demand for Notebook Computers) Look at the figure The Demand for Notebook Computers. The change in total revenue resulting from a change in price from P to T suggests that demand is:

price-elastic.

If the quantity supplied responds substantially to a relatively small change in price, supply is:

price-elastic.

When the price goes down, the quantity demanded goes up. The price elasticity measure how:

responsive the quantity change is in relation to the price change.

An important determinant of the price elasticity of demand is the:

time period.

(Figure: The Demand Curve for Bridge Crossings) Look again at the figure The Demand Curve for Bridge Crossings. Demand is price________ between $0.90 and $1.10, since total revenue ________ when the price ________.

unit-elastic; stays the same; increases

A perfectly price-inelastic demand curve is:

vertical

Bessie wants to calculate the accounting and economic profits on her cattle farm in Nebraska. She pays $30,000 per year for the cost of raising cattle, $80,000 in wages, and $20,000 in insurance. she forgoes $30,000 per year that she could make as a teacher. If her total revenue equals $140,000, that means her accounting profit is ________ and her economic profit is ________.

$10,000; -$20,000

When the price of chocolate-covered peanuts decreases from $1.10 to $0.95, the quantity demanded increases from 190 bags to 215 bags. If the price is $1.10, total revenue is ______, and if the price is $0.95, total revenue is ______.

$209; $204.25

Demand for Wendy's hamburgers is more inelastic than the demand for all fast food.

False

Suppose a local hardware store has explicit costs of $2 million per year and implicit costs of $44,000 per year. If the store earned an economic profit of $50,000 last year, this means that the store's accounting profit equaled:

$94,000.

You decide to quit your $60,000 per year job as an information technology specialist and illustrate children's books. At the end of the first year of illustrating, you have earned $20,000. You also spent $5,000 for paint and paper. Your economic profit in the first year as an illustrator is:

-$45,000.

Look at the figure The Demand Curve for Oil. The price elasticity of demand between $20 and $21, using the midpoint method, is approximately

.21

The price of gasoline rises 5% and the quantity of gasoline purchased falls 1%. The price of elasticity of demand is equal _______ and demand is described as _________

.2; inelastic

(Figure: The Demand for Shirts) Look again at the figure The Demand for Shirts. The price elasticity of demand for the segment EF, using the midpoint method, is:

.33

(Table: Price Elasticity) Look again at the table Price Elasticity. What is the price elasticity of demand between $0.75 and $0.50?

.33

(Table: Price Elasticity) Look again at the table Price Elasticity. What is the price elasticity of demand between $1.00 and $0.75?

.54

If the price of a good increases by 20% and the quantity demanded changes by 15%, the price elasticity of demand is equal to:

.75

(Table: Price Elasticity) Look again at the table Price Elasticity. What is the price elasticity of demand between $1.25 and $1.00?

.82

Look at the the table Market for Pizza. The price elasticity of demand for pizza between the prices of $14 and $12 per pizza when income is $1,000 per month.

1

(Table: Price Elasticity) Look again at the table Price Elasticity. What is the price elasticity of demand between $1.50 and $1.25?

1.22

(Table: Market for Pizza) Look at the table Market for Pizza. In the table, when income changes from $1,000 to $1,400 per month, the income elasticity of demand for pizza at a price of $14 per pizza is:

1.5.

(Figure: The Demand for Shirts) Look at the figure The Demand for Shirts. The price elasticity of demand for the segment AB, using the midpoint method, is:

11

(Figure: The Demand for Shirts) Look again at the figure The Demand for Shirts. The price elasticity of demand for the segment BC, using the midpoint method, is:

3

(Table: Price Elasticity) Look again at the table Price Elasticity. What is the price elasticity of demand between $2.00 and $1.75?

3

(Table: Price Elasticity) Look again at the table Price Elasticity. What is the price elasticity of demand between $2.25 and $2.00?

5.67

(Figure: The Demand for e-Books) Look at the figure The Demand for e-Books. What is the price elasticity of demand (using the midpoint method) when the price decreases from $6 to $4?

5/9

After earning your BA, you have to decide whether to accept the offer of a job that will pay you $45,000 per year or spend an additional two years earning an MBA. If you decide to pursue the graduate degree, your annual expenses for tuition, books, board, and lodging will be $32,000. You have been offered a scholarship for $10,000 per year, but in order to pay the remaining $22,000 per year, you would have to cash in savings bonds that your grandparents have given you that have been earning $500 in interest per year. The annual opportunity cost of earning your MBA is:

67,500

Suppose the cross-price elasticity between demand for Burger King burgers and the price of McDonald's burgers is 0.8. If McDonald's increases the price of its burgers by 10%, then:

Burger King will sell 8% more burgers.

The price elasticity of demand for gasoline in the short run has been estimated to be 0.1. If a war in the Middle East causes the price of oil (from which gasoline is made) to increase, how will that affect total expenditures on gasoline in the short run, all other things equal?

Demand will not change much, but total expenditures will rise.

Which of the following statements is true?

If the price elasticity of supply is greater than 1, then the supply is price-elastic.

Which of the following statements is true?

If the price elasticity of supply is less than 1, then the supply is price-inelastic.

Which of the following statements about opportunity cost is not true?

Opportunity cost is synonymous with explicit costs.

The price elasticity of demand for cabbage has been estimated to be 0.25. If an insect infestation destroys 20% of the nation's cabbage crop (and thus reduces supply), how will that affect total expenditures on cabbage, all other things equal?

Total expenditures will rise.

A major determinant of the price elasticity of demand is the availability of substitutes.

True

A perfectly inelastic demand curve for insulin would mean that the quantity demanded does not respond at all to changes in the price of insulin.

True

The price elasticity of demand for gasoline is likely to be higher in the long run than in the short run.

True

If the estimated price elasticity of demand for foreign travel is 4, then:

a 20% decrease in the price of foreign travel will increase the quantity demanded by 80%

When actually calculated for a normal demand curve, the price elasticity of demand will...

always negative

Which of the following pairs of goods are most likely to have a cross-price elasticity of demand that is greater than zero?

apples and bananas

(Figure: Demand for Notebook Computers) Look again at the figure The Demand for Notebook Computers. Total revenue at point S equals the:

area 0PSM.

(Figure: Demand for Notebook Computers) Look again at the figure The Demand for Notebook Computers. Total revenue at point V equals the:

area 0TVN.

An important determinant of the price elasticity of demand is the:

availability of substitutes.

If a good is a luxury item that looms large in the household budget, then demand will tend to:

be more price-elastic.

Part of the ________ associated with the Chicago Cubs baseball team is the value of batting cages.

capital

A men's tie store sold an average of 30 ties per day when the price was $5 per tie but sold 50 of the same ties per day when the price was $3 per tie. The price elasticity of demand, using the midpoint method, is:

equal to 1

If two goods are substitutes, their cross-price elasticity of demand should be:

greater than 0.

(Figure: The Demand for Shirts) Look at the figure The Demand for Shirts. Using the midpoint method, the price elasticity of demand for the segment AB is:

greater than the price elasticity of demand for the segment BC.

A major state university in the South recently raised tuition by 12%. An economics professor at this university asked his students, "How many of you will transfer to another university because of the increase in tuition?" One student out of about 300 said that he or she would transfer. Based on this information, the price elasticity of demand for education at this university is:

highly inelastic

Suppose the Chicago Cubs could rent out Wrigley Field (the field the players play on) to local youth leagues for $11,000 per month. The $11,000 per month reflects the ________ of capital.

implicit cost

Suppose the price of barley increases by 16.53%. If breweries buy 3.28% less barley after the price increase, the total revenue for barley producers will ________ because the ________ effect is greater than the ________ effect.

increase; price; quantity

When the price of chocolate-covered peanuts decreases from $1.10 to $0.95, the quantity demanded increases from 190 bags to 215 bags. In this price range, the demand for chocolate covered peanuts is _________ and total revenue will _______ when price decreases.

inelastic; decrease

Suppose that the cross-price elasticity of demand for Mountain Dew with respect to the price of Coke is 0.7. This implies that the two goods are:

substitutes.

A good is likely to have an inelastic demand curve if:

the good has few available substitutes.