Econ 201 Test 2 Darshak Patel

Suppose that when the price of good X falls from $10 to $8, the quantity demanded of good Y rises from 20 units to 25 units. Using the midpoint method, the cross-price elasticity of demand is: a) -1.0, and X and Y are complements. b) -1.0, and X and Y are substitutes. c) 1.0, and X and Y are complements. d) 1.0, and X and Y are substitutes.

A) -1.0 and X and Y are complements

When a Chinese Restaurant raised the price for their buffet, their total revenue fell. This implies that the price elasticity of demand for a trip to the buffet must be: a) elastic b) inelastic c) unitary elastic d) equal to zero

A) elastic

A likely example of complementary goods for most people would be: a) butter and margarine b) lawnmowers and automobiles c) shoes and shoe laces d) cola and lemonade

A) shoes and shoe laces because they go together

During the recession of 2007-2009, despite falling income levels, the fast food chain Subway experienced increased sales. The increase in demand for subway sandwiches despite the decline in income indicates that subway sandwiches are considered: a) normal goods b) inferior goods c) complementary goods d) substitute goods

B) inferior goods

Charles purchases 20 basketball tickets per year when his annual income is $50,000 and 25 basketball tickets when his annual income is $60,000. Charle's income elasticity of demand for basketball ticket is: a) 0.82, and basketball tickets are a normal good and necessity b) 0.82, and basketball tickets are an inferior good. c) 1.22, and basketball tickets are a normal good and luxurious d) 1.22, and basketball tickets are an inferior good and necessity

C) 1.22, and basketball tickets are a normal good and luxurious

If a 15% increase in price for a good results in a 20% decrease in quantity demanded, the price elasticity of demand is: A) 0.75 B) 1.25 C) 1.33 D) 1.60

C) 1.33

Which of the following products will have the most elastic demand? a) cars b) Hondas c) Buicks d) Honda Accords

D) Honda Accords

Which of the following is likely to have the most price inelastic demand? A) white chocolate chip macadamia nut cookies B) Mrs. Field's chocolate chip cookies C) milk chocolate chip cookies D) cookies

D) cookies because the rest can be replaced by other types and brands but cookies cannot be

Demand for a good is likely to be less elastic: a) the more narrowly defined the good is b) the larger the good's share of the buyer's budget c) in the long run than in the short run d) the smaller the number of substitute goods available

D) the smaller the number of substitute goods available

TRUE/FALSE: The cross-price elasticity of garlic salt and onion salt is -2, which indicates that garlic salt and onion salt are substitutes.

False because it is less than 0

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. Your roommate still enjoys Ramen noodles very much and buys even more, but you plan to buy fewer Ramen noodles in favor of foods you prefer more. When looking at income elasticity of demand for Ramen noodles, yours would a) be negative and your roommate's would be positive b) the larger the good's are of the buyer's budget c) be zero and your roommate's would be negative d) the smaller the number of substitute goods available

It would be positive and your roommate's would be negative

TRUE/FALSE: Consider the following equations for supply and demand in a market: Supply: Qs=10+5P and Demand: Qd=50-3P. If the government imposes a price ceiling of $6, the result will be no shortage or surplus. The market will go to equilibrium because this price control will not be binding.

True

TRUE/FALSE: If corn farmers believe that the price of corn will decrease in the future, they will supply more corn today.

True

TRUE/FALSE: Suppose the Dallas Cowboys (Football Team) end up playing super bowl 2016. The supply of tickets for this game is most likely to be perfectly inelastic.

True

TRUE/FALSE: Suppose you sell a kayak for $600, but you were willing to sell it for $450. The buyer was willing to pay $650. The total surplus is $200.

True

Price ceilings are primarily targeted to help ____, while price floors generally benefit _____. a) consumers; producers b) producers; consumers c) increase tax revenue for governments; producers d) increase tax revenue for governments; consumers

a) consumers; producers

Suppose that a tax is placed on books. If the buyers pay the majority of the tax, then we know that the: a) demand is more inelastic than the supply b) supply is more inelastic than the demand c) government has required that buyers remit the tax payers d) government has required that sellers remit the tax payments

a) demand is more inelastic than the supply

If American cheese and cheddar cheese are substitutes, then which of the following would increase the demand for cheddar cheese? a) a decrease in the price of cheddar cheese b) an increase in the price of American cheese c) a decrease in the price of American cheese d) both A and B are correct

b) an increase in the price of American Cheese

When the minimum wage is set above the equilibrium market wage: a) there will be a shortage of labor at the minimum wage b) it will have no effect on the quantity of labor employed c) the unemployment rate will rise d) the quality of the labor force will increase

c) the unemployment rate will rise

People scalping tickets for a rock concert will be successful: a) any time the rock group is popular b) when the price set by the concert hall is less than the market equilibrium price c) when prices are too high d) only when there is excess supply

c) when prices are too high

The unique point at which the supply and demand curves intersect is called: a) market harmony b) coincidence c) equivalence d) equilibrium

d) equilibrium

What would happen to the equilibrium price and quantity of lattes if the cost to produce steamed milk, used to make lattes, increased, 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 price would decrease, and the effect on equilibrium quantity would be ambiguous