Econ 2020 Chapter 5 Quiz

Why was OPEC unable to maintain high oil prices in the long run?

Demand and supply are both elastic in the long run compared to the short run

If the quantity demanded of a certain good responds only slightly to a change in the price of the good, then the

Demand for the good is said to be inelastic

The price elasticity of supply along. a typical supply curve is

Higher at low levels of quantity supplied

A key determinant of the price elasticity of supply is

The ability of sellers to change the amount of good they produce

For a particular good, a 2 percent increase in price cause a 12 percent decrease in quantity demanded. What is most likely an applicable statement about the good?

The good is a luxury

Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. The EQUILIBRIUM PRICE will

increase in both milk and beef markets

Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. The CONSUMER SPENDING ON MILK will

increase, and total consumer spending on beef will decrease

The local bakery makes such great cinnamon rolls that consumers do not respond much at all to a change in the price. If the owner is only interested in increasing revenue, she should

raise the price of the cinnamon rolls

Elasticity of demand is closely related to the slope of the demand curve. The less responsive buyers are to a change in price, the

steeper the demand curve will be

When a supply curve is relatively flat,

supply is relatively elastic

The value of the price elasticity of demand for a good will be relatively large when

the good is a luxury rather than a necessity

Generally, a firm is more willing and able to increase quantity supplied in response to a price change when

the relevant time period is long rather than short

Knowing that the demand for wheat is inelastic, if all farmers voluntarily did not plant wheat on 10 percent of their land, then

wheat farmers would experience an increase in their total revenue

The federal government is concerned about obesity in the US. Congress is considering two plans. One will ban the production and sale of "junk food". The other will increase nutrition-education programs and include substantial advertising campaigns to encourage healthy eating habits. The junk food ban program

will reduce the quantity of junk food sold ands raise the price. The education program will reduce the quantity of junk food and lower the price

If sellers do not adjust their quantity supplied at all in response to a change in price, the price elasticity of supply is

zero, and the supply curve is vertical

When the price of chai tea lattés is $5, Maxine buys 20 per month. When the price is $4, she buys 30 per month. Maxine's demand for chai tea lattés is

elastic, and her demand curve would be relatively flat

When small changes in price lead to infinite changes in quantity demanded, demand is perfectly

elastic, and the demand curve will be horizontal

Suppose the cross-price elasticity of demand between peanut butter and jelly is -2.50. This implies that a 20 percent increase in price of peanut butter will cause the quantity of jelly purchased to

fall by 50%

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the

income elasticity of demand is negative

suppose the income elasticity of demand is -0.5 for good X. This implies that a 5% decrease in income will cause the quantity demanded of good X to

increase by 2.5%, and X is an inferior good.

Suppose that when the price of good X falls from $6 to $4, the quantity demanded of good Y rises from 30 units to 40 units. Using the midpoint method, the cross-price elasticity of demand is

-0.71, and X and Y are complements

Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a ten-year period because

Buyers tend to be much more sensitive to a change in price when given time to react

Suppose that demand is inelastic within a certain price range. For that price range,

an increase in price would increase total revenue because the decrease in quantity demanded is proportionally less than the increase in price

Good news for farming can be bad news for farmers because the

demand for basic foodstuffs is usually inelastic, meaning that factors that shift supply to the right decrease total revenues to sellers

Marcus say that he would smoke one pack of cigarettes each day regardless of the price. If he is telling the truth, Marcus's

demand for cigarettes is perfectly inelasticS