MICRO CH5

in general, a flatter demand curve is more likely to be a. price elastic b. price inelastic c. unit price elastic d. none of the above

a. price elastic

if a supply curve for a good is price elastic, then a. the quantity supplied is sensitive to changes in the prices of that good b. the quantity supplied is insensitive to changes in the prices of that good c. the quantity demanded is sensitive to changes in the price of that good d. the quantity demanded is insensitive to changes in the price of that good

a. the quantity supplied is sensitive to changes in the prices of that good

if a small percentage increases the price of a good greatly reduces the quantity demanded for that good, the demand for that good is a.. price inelastic b. price elastic c. unit price elastic d. income inelastic e. income elastic

b. price elastic

a measure of how much the quantity demanded of one good responds to a change in the price of good

cross-price elasticity of demand

when the quantity demanded or supplied responds substantially to a change in one of its determinants

elastic

a measure of responsiveness of the quantity demanded or quantity supplied to a change in one of its determinants

elasticity

T/F: if a demand curve is linear, the price elasticity of demand is constant along it

false; demand will be price elastic in its upper portion and price inelastic in its lower portion

T/F: the demand for necessity such as insulin tends to be elastic

false; the demand for necessities tends to be inelastic

a good characterized by a positive income elasticity

normal good

a measure of how much the quantity demanded of a good responds to a change in the price of that good

price elasticity of demand

a measure of how much the quantity supplied of a good responds to a change in the price of that good

price elasticity of supply

the amount paid by buyers received by sellers of a goof computed as P X Q

total revenue

T/F: if the demand for a good is price inelastic, an increase in its price will increase total revenue in that market

true

T/F: if the income elasticity of demand for a bus ride negative, then a bus ride is an inferior good

true

T/F: if the price elasticity of supply for blue jeans is 1.3, an increase of 10 percent in the price of blue jeans would increase the quantity supplied of blue jeans by 13 percent

true

T/F: the demand for tires should be more inelastic than the demand for Goodyear brand tires

true

T/F: the income elasticity of demand for luxury items, such as diamonds, tends to be large (greater than 1)

true

T/F: the price of elasticity of supply tends to be more inelastic as the firm's production facility reaches maximum capacity

true

T/F: the supply of automobiles for this week is likely to be more price inelastic than the supply of automobiles for this year

true

T/F: using the midpoint method to calculate elasticity, if an increase in the price of pencils from 10 cents to 20 cents reduces the quantity demanded from 1000 to 50 pencils, then the demand for pencils is unit price elastic

true

technological improvements in agriculture that shift the supply of agricultural commodities to the right tend to a. reduce total revenue to farmers as a whole because the demand for food is inelastic b. reduce total revenue to farmers as a whole because the demand for food is elastic c. increase total revenue to farmers as a whole because the demand for food is inelastic d. increase total revenue to farmers as a whole because the demand for food is elastic

a. reduce total revenue to farmers as a whole because the demand for food is inelastic

if a fisherman must sell all of his daily catch before it spoils for whatever price he is offered, once the fish are caught, the fisherman's price elasticity of supply for fresh fish is a. zero b. one c. infinite d. unable to be determined from this information

a. zero

Suppose that a price of $30 per month, there are 30,000 subscribers to cable television in Small Town. If Small Town Cablevision raises its price to $40 per month, the number of subscribers will foll to 20,000. At which of the following prices does Small Town Cablevision earn the greatest total revenue? a. either $30 or $40 per month because the price elasticity of demand is 1.0 b. $30 per month c. $40 per month d. 0

b. $30 per month

if consumers always spend 15 percent of their income on food,, then the income elasticity of demand for food is a. 0.15 b. 1.00 c. 1.15 d. 1.50 e. none of the above

b. 1.00

if supply is price inelastic, the value of the price elasticity of supply must be a. zero b. less than 1 c. greater than 1 d. infinite e. none of the above

b. less than 1

if there is excess capacity in a production facility, it is likely that the firm's supply curve is a. price inelastic b. price elastic c. unit price elastic d. none of the above

b. price elastic

in general, a steeper supply curve is more likely to be a. price elastic b. price inelastic c. unit price elastic d. none of the above

b. price inelastic

if the income elasticity of demand for a good is negative, it must be a. a luxury good b. a normal good c. an inferior good d. an elastic good

c. an inferior good

if the cross-price elasticity between two goods is negative, the two goods are likely to be a. luxuries b. necessities c. complements d. substitutes

c. complements

if demand is linear (straight line), then price elasticity of demand is a. constant along the demand curve b. inelastic in the upper portion and elastic in the lower portion c. elastic in the upper portion and inelastic in the lower portion d. elastic throughout e. inelastic throughout

c. elastic in the upper portion and inelastic in the lower portion

the price elasticity of demand is defined as a. the percentage change in the price of a good divided by the percentage change in the quantity demanded of that good b. the percentage change in income divided by the percentage change in the quantity demanded c. the percentage change in the quantity demanded of a good divided by the percentage change in the price of that good d. the percentage change in he quantity demanded divided by the percentage change in income

c. the percentage change in the quantity demanded of a good divided by the percentage change in the price of that good

if an increase in the price of a good has no impact on the total revenue in that market, demand must be a. price inelastic b. price elastic c. unit price inelastic d. all the above

c. unit price elastic

Suppose that a price of $30 per month, there are 30,000 subscribers to cable television in Small Town. If Small Town Cablevision raises its price to $40 per month, the number of subscribers will foll to 20,000. Using the midpoint method for calculating the elasticity, what is the price elasticity of demand for cable television in Small Town? a. 0.66 0.75 c. 1.0 d. 1.4 e. 2.0

d. 1.4 ((30,000-20,000)/(30,000 + 20,000)/2) / (40-30)/ ((40+30)/2) = (10,000/25,000) / (10/35) = 0.4/0.2857 = 1.4

a decrease in supply (shift to the left) will increase total revenue in that market if a. supply is price inelastic b. supply is price inelastic c. demand is price elastic d. demand is price inelastic

d. demand is price inelastic

the demand for which of the following is likely to be the most price inelastic? a. airline tickets b. bus tickets c. the good is a luxury d. the good is a necessity

d. the good is a necessity

which of the following would cause a demand curve for a good to be price inelastic? a. there are a great number of substitutes for the good b. the good is inferior c. the goo is a luxury d. the good is a necessity

d. the good is a necessity

if consumers think that there are very few substitutes for a good, then a. supply would tend to be price elastic b. supply would tend to be ineleastic c.demand would tend to be price elastic d.demand would tend to be price inelastic e. none of the above is true

d.demand would tend to be price inelastic

T/F: if the quantity demanded of a good is sensitive of a good to a change in the price of that good, demand is said to be price "inelastic"

false; demand would be price elastic

T/F: an advance in technology that shifts the market supply curve to the right always increases total revenue received by producers

false; it will increase total revenue only id demand is price elastic

T/F: the demand for aspirin this month should be more "elastic" than the demand for aspirin this year

false; the longer the time period considered, the more price elastic the demand curve because consumers have an opportunity to substitute or change their behavior

T/F: the price elasticity of demand is defined as the percentage change in the price of that food divided by the percentage change in quantity demanded of that good

false; the price elasticity of demand is defined as the percentage change in the quantity demanded of a good divided by the percentage change in the price of that good

T/F: if the cross-price elasticity of demand is defined as the percentage change in the price of that good are likely to be complements

false; the two goods are likely to be substitutes

a measure of how much the quantity demanded of a good responds to a change in consumers' income

income elasticity of demand

when the quantity demanded or supplied responds only slightly to a change in one of its determinants

inelastic

a good characterized by a negative income elasticity

inferior good