Chapter 6

Which of the following would result in a higher absolute value of the price elasticity of demand for a​ product? A. A wide variety of substitutes are available for the good. Your answer is correct. B. The expenditure on the good is small relative to​ one's budget. C. The good is a necessity. D. The time period under consideration is short.

A wide variety of substitutes are available for the good.

If the absolute value of the price elasticity of demand for gasoline is​ 0.5, then a 10 percent increase in the price of gasoline leads to a 0.5 percent decrease in the quantity demanded. True False

F

If the income elasticity for canned food is​ 0.8, then canned food is an inferior good. True False

F

If the price elasticity of demand for canned soup is estimated at −1.62. What happens to sales revenue if the price of canned soup​ rises? A. It falls by 162 percent. B. It rises by 1.62 percent. C. It falls. Your answer is correct. D. It rises.

It falls.

Necessities tend to have more inelastic demand than luxuries. True Your answer is correct. False

T

Suppose the California Nurses Union successfully secured a 12 percent increase in the wages of registered nurses. If a hospital responds by reducing the quantity of registered nurses hired and increasing the quantity of​ physician's assistants​ hired, what conclusion can you​ draw? A. ​Physician's assistants are more valuable in terms of their productivity. B. The cross−price elasticity of demand between registered nurses and​ physician's assistants is positive. Your answer is correct. C. The price elasticity of demand for registered nurses is negative while the price elasticity of demand for​ physician's assistants is positive. D. The cross−price elasticity of demand between registered nurses and​ physician's assistants is negative.

The cross−price elasticity of demand between registered nurses and​ physician's assistants is positive.

The demand for Camel cigarettes should be more elastic than the demand for all cigarettes.

The demand for Camel cigarettes should be more elastic than the demand for all cigarettes

Assume that when the price of cantaloupes is​ $2.50 the demand for cantaloupes is unit​ elastic, and that the demand curve for cantaloupes is linear and downward sloping. If firms lower the price of cantaloupes to​ $2.00 which of the following statements can be made regarding the price elasticity of demand for​ cantaloupes? A. The demand for cantaloupes at​ $2.00 must be elastic. B. The demand for cantaloupes at​ $2.00 must be unit elastic. C. The demand for cantaloupes at​ $2.00 must be inelastic. Your answer is correct. D. We cannot determine whether the demand for cantaloupes is elastic or inelastic without knowing what the quantity demanded is at each price.

The demand for cantaloupes at​ $2.00 must be inelastic.

Which of the following explains why a firm would be interested in knowing the price elasticity of demand for a good it​ sells? A. Knowing the price elasticity of demand allows the firm to calculate how changes in the price of the good will affect the​ firm's total profit. B. The price elasticity of demand allows the firm to calculate how changes in the price of the good will affect the​ firm's total revenue. Your answer is correct. C. The price elasticity of demand can be used to determine the impact of changes in income on quantity sold. D. Knowing the price elasticity of demand allows the firm to determine how the cost of producing additional units of the good will change.

The price elasticity of demand allows the firm to calculate how changes in the price of the good will affect the​ firm's total revenue.

According to a study of the U.S. demand for alcoholic​ beverages, the price elasticity of demand for beer is −0.30. Which of the following could explain why the price elasticity of demand for beer is​ low? A. There are only a few major suppliers of beer. B. The price of beer is relatively low and for many people it is a habit forming product. Your answer is correct. C. Beer is an inferior alcoholic beverage. D. More and more people are switching to wine and cocktails rather than beer.

The price of beer is relatively low and for many people it is a habit forming product.

The cross−price elasticity between Gillette razors and a related good is −3.4. What happens to the demand for the related good if the price of Gillette razors falls by 10​ percent? A. The quantity demanded of the related good rises by 34 percent. Your answer is correct. B. The quantity demanded of the related good falls by 3.4 percent. C. The quantity demanded of the related good rises by 3.4 percent. D. The quantity demanded of the related good falls by 34 percent.

The quantity demanded of the related good rises by 34 percent.

Economist X. M. Gao and two colleagues have estimated that the​ cross-price elasticity of demand between beer and spirits is 0.15. If​ so, then beer and spirits are substitutes. Gao and colleagues have estimated that the​ cross-price elasticity of demand between beer and wine is 0.31. If the price of wine increases by 10​ percent, then the quantity of beer demanded will increase by 3.13.1 percent. ​(Enter your response rounded to one decimal​ place.) In​ addition, Gao and colleagues have estimated the income elasticity of demand for beer to be −0.09. If​ so, then beer is A. a normal good that may be a luxury or a necessity. B. a normal good that is a necessity. C. a luxury that may be a normal good or an inferior good. D. an inferior good. Your answer is correct. E. a normal good that is a luxury.

an inferior good.

What are the key determinants of the price elasticity of demand for a​ product? The key determinants of the price elasticity of demand for a product​ are: A. whether a firm has market​ power, whether some consumers are willing to pay more for a product than other​ consumers, and ability to segment the market. B. government​ regulations, control of a key resource necessary for​ production, network​ externalities, and economies of scale. C. availability of close​ substitutes, passage of​ time, necessities versus​ luxuries, definition of the​ market, and share of the good in the​ consumer's budget. Your answer is correct. D. number of​ firms, availability of close​ substitutes, and ease of firm entry and exit. E. competition from existing​ firms, threat from potential​ entrants, competition from​ substitutes, bargaining power of​ buyers, and bargaining power of sellers. Which determinant is the most​ important? The availability of close substitutes is the most important determinant.

availability of close​ substitutes, passage of​ time, necessities versus​ luxuries, definition of the​ market, and share of the good in the​ consumer's budget.

The paradox of American farming is A. the demand for imported luxury food products has risen as the demand for domestic food products has fallen. B. food has become cheaper and more abundant as the number of farms has decreased. Your answer is correct. C. the amount of food produced has increased as the average farm size has fallen. D. the demand for food has risen as the number of people who pursue farming as a career has fallen.

food has become cheaper and more abundant as the number of farms has decreased.

An article in the New York Times about the New York Metropolitan Opera​ (the Met) suggests that the popularity of opera might be increased if the Met reduced its ticket prices. But the article observes that such ticket price cuts would only be possible if the Met received a gift from​ "a very​ deep-pocketed donor." ​Source: Zachary​ Woolfe, et​ al., "The Met Opera Is Struggling. How Can It Fill Those Empty​ Seats?" New York Times​, May​ 4, 2016. The authors of the article are assuming a cut in ticket​ prices, and assuming there is no gift from a​ "very deep-pocketed​ donor," will not increase the​ Met's revenue. The authors are assuming the price elasticity of demand for tickets to the Met is A. unit elastic. B. inelastic. Your answer is correct. C. infinite. D. elastic.

inelastic.

In recent​ years, a number of cities have enacted taxes on soda and other sweetened beverages. If the policy goal of these city governments is to raise tax revenue to fund important initiatives such as education​ programs, this would be most successful if the price elasticity of demand for these sweetened beverages is A. perfectly elastic. B. unit elastic. C. elastic. D. inelastic.

inelastic.

The cross−price elasticity of demand measures the A. percentage change in the quantity demanded of one good divided by the percentage change in the price of another good. Your answer is correct. B. absolute change in the quantity demanded of one good divided by the absolute change in the price of another good. C. percentage change in the price of one good divided by the percentage change in the quantity demanded of another good. D. percentage change in the quantity demanded of one good in one location divided by the price of the same good in another location.

percentage change in the quantity demanded of one good divided by the percentage change in the price of another good. Your answer is correct.

Inelastic supply occurs whenever the elasticity of supply value is A. negative and​ < −1. B. positive and​ < 1. Your answer is correct. C. positive and​ > 1. D. any positive number.

positive and​ < 1.

correct,Concept: Elasticity and Revenue 3 A sportswriter writing about the Cleveland Indians baseball team made the following​ observation: ​"If the Indians suddenly slashed all tickets to​ $10, would their attendance actually​ increase? Not all that much and revenue would drop​ dramatically." ​Source: David​ Schoenfiel, "Chat with David​ Schoenfield," espn.com, November​ 27, 2012. The sportswriter is assuming that the demand for Indians tickets is A. perfectly price elastic. B. perfectly price inelastic. C. relatively price elastic. D. relatively price inelastic.

relatively price inelastic

Suppose the demand for a product decreases. What will be the effect on the market equilibrium price and quantity if supply is infinitely elastic​? If supply is infinitely elastic​, then A. the equilibrium price will not change and the equilibrium quantity will not change. B. the equilibrium price will not change and the equilibrium quantity will decrease. Your answer is correct. C. the equilibrium price will not change and the equilibrium quantity will increase. D. the equilibrium price will decrease and the equilibrium quantity will decrease. E. the equilibrium price will increase and the equilibrium quantity will increase.

the equilibrium price will not change and the equilibrium quantity will decrease.

The income elasticity of demand measures A. the percentage change in the price of a product divided by the percentage change in consumer income. B. the income effect of a change in price. C. how a​ consumer's purchasing power is affected by a change in the price of a product. D. the responsiveness of quantity demanded to changes in income.

the responsiveness of quantity demanded to changes in income.

If the quantity of walkie−talkies supplied increases by 5 percent when prices increases by 12​ percent, then A. the walkie−talkie supply curve will shift to the left. B. the supply of walkie−talkies is inelastic. Your answer is correct. C. the supply of walkie−talkies is elastic. D. the walkie−talkie supply curve will shift to the right.

the supply of walkie−talkies is inelastic.

If the slope of a demand curve is equal to −0.1 then A. the demand is elastic at low prices and inelastic at high prices. B. we​ don't know whether the demand is elastic or inelastic. Your answer is correct. C. demand is inelastic. D. as price increases by 10 percent quantity demanded decreases by 1 percent.

we​ don't know whether the demand is elastic or inelastic.

The demand for a product is likely to be more​ elastic: A. when a product has more substitutes available. Your answer is correct. B. when the market for a product is less narrowly defined. C. when a product is a necessity. D. the less time that passes. E. both a and b.

when a product has more substitutes available. Your answer is correct.