Pearson Dynamic Study CH 4-6 Econ 201
What is the cross-price elasticity of demand for two goods that are unrelated?
Zero
An increase in the price of a substitute for iPads will lead to __________ in the quantity demanded of iPads so the cross-price elasticity of demand will be __________.
an increase, positive
Which of the following represents an inferior good?
When consumer income increases, the demand for bologna decreases.
Other things remaining equal, the law of demand says that higher prices will lead to:
a smaller quantity demanded and lower prices to a larger quantity demanded.
The condition that exists when quantity supplied exceeds quantity demanded at the current price is known as __________.
a surplus or excess supply
If an effective minimum wage is imposed, then:
more workers will be unable to find jobs
When you compute a price elasticity of demand the answer is always:
negative
A legally determined maximum that sellers may charge is known as a:
price ceiling
In response to information regarding the salaries of executives at firms receiving bailout funds in the United States, some people called for a limit on the salaries paid to executives. Such a limit on the compensation executives can receive is an example of a:
price ceiling
If the average price that cable subscribers are willing to pay for satellite TV service is $200 but the actual price they pay is $80, how much is the consumer surplus per subscriber?
$120
A legally determined minimum price that sellers must receive is known as a:
price floor
If a 20 percent increase in the price of Red Bull energy drinks results in a decrease in the quantity demanded of 25 percent, the price elasticity of demand is:
-1.25
The current price of wheat is $1.00 per bushel, and the price elasticity of demand for wheat is known to be 0.50. A bad harvest causes the supply of wheat to decrease and as a result the price of wheat rises by 20%. What will be the percentage change in quantity demanded for wheat and will farm revenues rise or fall?
10%, rise
Which of the following is consistent with the law of supply?
An increase in the market price of MP3 players causes an increase in the production of MP3 players.
The market for corn is initially in equilibrium. Suppose that the production of biofuels, which use corn as an input, increase, and at the same time, increases in the price of oil cause farm production costs to rise. Which of the following explains the effect on equilibrium price and quantity in the corn market?
The price of corn will rise, but the effect on equilibrium quantity cannot be determined without more information.
For markets to generate the greatest benefit and function in the most efficient manner they must:
be perfectly competitive
Market price is determined by _________.
both supply and demand
If the cross-price elasticity of demand between two products is -3.0, then the two products are:
complements
If a 20 percent increase in the price of Red Bull energy drinks results in a decrease in quantity demanded of 25 percent, we say the demand for Red Bull is __________ in this range.
elastic
If the supply of Good B is perfectly elastic and price falls the quantity supplied will:
fall to zero
The more substitutes that exist for a particular product, the __________ the price elasticity of demand.
greater
At current prices of a highly addictive drug the demand for the drug is highly price:
inelastic
If the price elasticity of demand is 0.33 then demand is __________ over that price range.
inelastic
Rent controls:
make tenants less mobile
Economists avoid confusion over units in the computation of elasticity by using:
percentage changes
Prolonged shortages arise if:
prices are not allowed to rise to equilibrium
The difference between the lowest price a firm would have been willing to accept and the price it actually receives is known as:
producer surplus
At the market equilibrium price:
quantity demanded equals quantity supplied.
Price performs a(n) __________ function. Inputs or outputs go to the __________ bidders if people are free to exchange voluntarily in the markets without government intervention or other market friction.
rationing, highest
Prolonged agricultural surpluses can arise if governments:
set the price above equilibrium
Price controls that put a price ceiling on goods and services create __________.
shortages
Price controls that put a price floor on goods and services create __________.
surpluses
Given linear demand curves, if demand and supply increase by identical amounts, then:
the equilibrium price stays the same and the equilibrium quantity rises.
Given linear demand curves, if demand increases and supply decreases, then __________.
the equilibrium price will increase but the effect on the equilibrium quantity will be ambiguous
If prices rise the quantity supplied will be greater:
the longer the time that elapses
The income elasticity for peanut butter is -3. This defines peanut butter as what type of good?
An inferior good
Which of the following goods is probably the most highly income elastic?
Private education
Along a linear demand curve, the slope __________ while the price elasticity of demand __________.
is constant, changes from one point to another
The __________ is a measure of responsiveness of the change in quantity demanded of a good to the change in its price.
price elasticity of demand
Some people believe there should be a legally determined minimum price for farm products such as milk. A limit on the price of milk would be an example of:
price floor
If the income elasticity of SUVs is greater than 1, what is the good considered?
A luxury
Washington state had a bumper apple crop this year, significantly increasing the supply of apples in the U.S. Given this information, choose the statement that correctly describes the effect on the U.S. apple market.
The quantity of apples demanded will increase as the price of apples falls.
Assume there are three variables involved in the previous graph: (1) price, (2) quantity, and (3) a third variable. Which of these variables cause a move from Point C to Point D in the graph?
The third variable
Which of the following statements about a shortage is correct?
There is no shortage of most scarce goods.
All of the following will decrease the supply of airline flights except:
a technological change that makes airplanes safer and more fuel-efficient.
Economists assume that when there is a change in demand and/or supply, that prices reach a new equilibrium:
after an adjustment period that varies.
Personal computers and computer display monitors are:
complements
The difference between the highest price a consumer is willing to pay and the price the consumer pays is known as:
consumer surplus
A perfectly inelastic supply curve:
indicates the quantity supplied does not respond to a change in price
The price elasticity of supply always has a:
positive value
Given linear demand curves, if demand and supply both increase but demand increases by a greater amount than supply, then:
the equilibrium price and quantity both increase.
All of the following scenarios depict the characteristics of substitutes except:
the price of bacon increases and the demand for eggs decreases.
All of the following scenarios depict the characteristics of complements except:
the price of coffee increases and the demand for cream increases.
