Econ quiz 3

When the demand is elastic, a decrease in price will cause a. an increase in total revenue b. a decrease in total revenue c. no change in total revenue but an increase in quantity demanded d. no change in total revenue but a decrease in quantity demanded

a. an increase in total revenue

The price elasticity of demand measures a. buyers' responsiveness to a change in the price of a good b. the extent to which demand increases as additional buyers enter the market c. how much more of a good consumers will demand when incomes rise d. the movement along a supply curve when there is a change in demand

a. buyers' responsiveness to a change in the price of a good

A person who takes a prescription drug to control high cholesterol most likely has a demand for that drug that is a. inelastic b. unit elastic c. elastic d. highly responsive to changes in income

a. inelastic

Last year, Jim bought 8 tickets to sporting events when his income was $30,000. This year, his income is $33,000, and he purchases 10 tickets to sporting events. Holding other factors constant and using the midpoint method, it follows that Jim's income elasticity of demand is about a. .43 and Jim regards tickets to sporting events as inferior goods b. .43 and Jim regards tickets to sporting events as normal goods c. 2.33 and Jim regards tickets to sporting events as inferior goods d. 2.33 and Jim regards tickets to sporting events as normal goods

d. 2.33 and Jim regards tickets to sporting events as normal goods

Which of the following is likely to have the most price elastic demand? a. ice cream b. frozen yogurt c. vanilla ice cream d. Haagen-Dazs vanilla bean ice cream

d. Haagen-Dazs vanilla bean ice cream

When the price off candy bars in $1.00. the quantity demanded is 500 per day. When the price falls to $.80, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for candy bars is a. inelastic b. elastic c. unit elastic d. perfectly inelastic

a. inelastic

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 versus 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

a. the availability of close substitutes in determining the price elasticity of demand

Which of the following statements is valid when supply is perfectly elastic at a price of $4? a. the elasticity of supply approaches infinity b. the supply curve is vertical c. at a price below $4, quantity supplied is infinite d. at a price above $4, quantity supplied is zero

a. the elasticity of supply approaches infinity

Using the midpoint method, the price elasticity of demand for good is computed to be approximately .75. Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded? a. a 7.5 increase in the price of the good b. a 13.33 percent increase in the price of the good c. an increase in the price of the good from $7.50 to $10 d. an increase in the price of the good from $10 to $17.50

b. a 13.33 percent increase in the price of the good

You and your college roommate eat three packages of Ramen noodles each week. After graduation last month, both of you were hired at several times your college income. You still enjoy Ramen noodles very much and buy even more, but your roommate plans to buy fewer Ramen noodles in favor of other foods she prefers more. When looking at income elasticity of demand for Ramen noodles, yours would a. be negative, and your roommate's would be positive b. be positive, and your roommate's would be negative c. be zero, and your roommate's would approach infinity d. approach infinity, and your roommate's would be zero

b. be positive, and your roommate's would be negative

The case of perfectly elastic demand is illustrated by a demand curve that is a. vertical b. horizontal c. downward-sloping but relatively steep d. downward-sloping but relatively flat

b. horizontal

What would happen to the equilibrium price and quantity of peanut butter if the price of peanuts wheat up, the price of jelly fell, fewer firms decided to produce peanut butter, and health officials announced that eating peanut butter was good for you? a. price will fall, and the effect on quantity is ambiguous b. price will rise, and the effect on quantity is ambiguous c. quantity will fall, and the effect on price is ambiguous d. quantity will rise, and the effect on price is ambiguous

b. price will rise, and the effect on quantity is ambiguous

The smaller the price elasticity of demand, the a. more likely the product is a luxury b. small the responsiveness of quantity demanded to a change in price c. more substitutes the product has d. greater the responsiveness of quantity demanded to a change in price

b. small the responsiveness of quantity demanded to a change in price

If the quantity supplied responds only slightly to changes in price, then a. supply is said to be elastic b. supply is said to be inelastic c. an increase in price will not shift the supply curve very much d. even a large decrease in demand will change the equilibrium price only slightly

b. supply is said to be inelastic

If the cross-price elasticity of demand for two goods is 1.25, then a. the two goods are luxuries b. the two goods are substitutes c. one of the goods is normal and the other good is inferior d. the demand for one of the goods conforms to the law of demand, but the demand for the other good violates the law of demand

b. the two goods are substitutes

In which of the following situations would supply be the most elastic? a. an auto parts manufacturer is operating at capacity b. a real estate developer in Boston is looking to build condos on the waterfront c. a furniture manufacture is operating its factory 8 hours per day d. a hotel has all of its rooms booked for each night of the next 3 months

c. a furniture manufacture is operating its factory 8 hours per day

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

c. equal to 1

The local bakery makes such great cinnamon rolls that consumer so not respond much at all to a change in the price. If the owner is only interested in increasing revenue, she should a. lower the price of the cinnamon roll b. leave the price of the cinnamon roll unchanged c. raise the price of the cinnamon rolls d. reduce costs

c. raise the price of the cinnamon rolls

Which of the following is likely to have the most price inelastic demand? a. white chocolate chip with macadamia nut cookies b. hard back novels c. salt d. box seats a a major league baseball game

c. salt

Demand is said to be price elastic if a. the price of the good responds substantially to changes in demand b. demand shifts substantially when income or the expected future price of the good changes c. buyers do not respond much to changes in the price of the good d. buyers respond substantially to changes in the price of the good

d. buyers respond substantially to changes in the price of the good

If the price of gasoline rises, when is the price elasticity of demand likely to be the highest? a. immediately after the price increases b. one month after the price increase c. three months after the price increase d. one year after the price increase

d. one year after the price increase

As we move downward and to the right along a linear, downward-sloping demand curve a. both slope and elasticity remain constant b. slope changes but elasticity remains constant c. both slope and elasticity change d. slope remains constant but elasticity changes

d. slope remains constant but elasticity changes

Suppose chocolate-dipped strawberries are currently selling for $30 per dozen, but the equilibrium price of cholocate-dipped strawberries is $20 per dozen. We would expect a a. shortage to exist and the market price of chocolate-dipped strawberries to increase b. shortage to exist and the market price of chocolate-dipped strawberries to decrease c. surplus to exist and the market price of chocolate-dipped strawberries to increase d. surplus to exist and the market price of chocolate-dipped strawberries to decrease

d. surplus to exist and the market price of chocolate-dipped strawberries to decrease

What would happen to the equilibrium price and quantity of lattes if the cost to produce steamed milk, which is used to make lattes, increases, and scientists discovered that lattes cause heart attacks? a. both the equilibrium price and quantity would increase b. both the equilibrium price and quantity would decrease c. the equilibrium price would decrease, and the effect on equilibrium quantity would be ambiguous d. the equilibrium quantity would decrease, and the effect on equilibrium price would be ambiguous

d. the equilibrium quantity would decrease, and the effect on equilibrium price would be ambiguous

You are in charge of the local city-owned aquatic center. You need to increase the revenue generated by the aquatic center to meet expenses. The mayor advises you to increase the price of a day pass. The city manager recommends reducing the price of the day pass. You realize that a. the mayor thinks demand is elastic, and the city manager thinks demand is inelastic b. both the mayor and the city manager think demand is elastic c. both the mayor and city manager think that demand is inelastic d. the mayor thinks demand is inelastic, and the city manager thinks demand is elastic

d. the mayor thinks demand is inelastic, and the city manager thinks demand is elastic