Microeconomics Chapter 7

Eric Cartman recently received a 10 percent increase in his income. His purchase and consumption of the snack food "Cheezy Poofs" has since increased by 25 percent. Eric Cartman's income elasticity for Cheezy poofs is A. -2.5, making cheezy poofs an inferior good for Cartman B. 2.5, making cheezy poofs a necessity for Cartman C. 2.5, making cheezy poofs a luxury for Cartman D. 0.40, making cheezy poofs a necessity for Cartman

C. 2.5, making cheezy poofs a luxury for Cartman (Quantity Demand/Percent Change = 25%/10%)

UCR is selling tickets to its softball game against Long Beach State and is trying to maximize its revenue from the game. What should UCR do to maximize its revenue? A. Raise ticket prices to get more revenue from each ticket sold B. Lower ticket prices to get more people to attend the game C. It's impossible to know without more information.

C. It's impossible to know without more information.

UCR is selling tickets to its softball game against Long Beach State and is trying to maximize its revenue from the game. What should UCR do to maximize its revenue? A. Raise ticket prices to get more revenue from each ticket sold B. Lower ticket prices to get more people to attend the game C. Raise ticket prices for parents of players who desire greatly to see the game, and lower prices for the general public who have less of a vested interest in the game.

C. Raise ticket prices for parents of players who desire greatly to see the game, and lower prices for the general public who have less of a vested interest in the game.

If the supply of hand sanitizer was considered to be elastic than a 10% increase in the price of hand sanitizer would cause the quantity of hand sanitizer supplied to A. decrease by more than 10% B. decrease by exactly 10% C. increase by more than 10% D. Increase by less than 10%

C. increase by more than 10%

Suppose you are managing a clothing store and you plan to increase revenues by increasing the price of the clothing that you sell. What must the absolute value of the price elasticity of demand for the clothing in your store be in order for your plan to make sense? A. greater than 1 B. equal to 1 C. less than 1 D. perfectly elastic

C. less than 1

If the price of tacos on UCR's campus decreases by 4 percent and causes taco consumption to increase by 2 percent, the price elasticity of demand is ____, indicating that the demand for tacos among UCR students is ____. A. 2, elastic B. 2, inelastic C. 0.5, elastic D. 0.5, inelastic

D. 0.5, inelastic (Good substitutes = Higher elasticity) (The more narrowly defined the product is the more elastic it is [because it has more good substitutes])

Which of the following mysteries does the law of diminishing marginal utility help explain? A. Why diamonds, which are not necessary for our survival, are so expensive and water, which is essential for life, is so cheap. B. Why some people cheat on their spouse, who they love more than anybody else in the world. C. Why the top professional wrestlers and actors get paid more than the top teachers and nurses. D. All of the above

D. All of the above