EC 252 Ch.5 (Exam 2)

The demand curve for physician office visits is quite inelastic; therefore: A. a large increase in price causes quantity demanded to decrease by very little. B. a large decrease in price causes quantity demanded to decrease by a lot. C. a small increase in price causes quantity demanded to decrease by a lot. D. a small decrease in price causes quantity demanded to decrease by very little.

A. a large increase in price causes quantity demanded to decrease by very little.

If the absolute value of the price elasticity of demand for a good is 1.5, the good has a(n): A. elastic demand. B. inelastic demand. C. unit elastic demand. D. unit inelastic demand.

A. elastic demand.

When demand is ______, an increase in price ______ total revenue. A. inelastic; raises B. inelastic; lowers C. unit elastic; raises D. elastic; raises

A. inelastic; raises

Demand for a specific brand ______ demand for the corresponding product category. A. is more elastic than B. is less elastic than C. is equally elastic to D. differs indeterminately from

A. is more elastic than

The more quantity demanded responds to a change in the price of that good the _____ is for that good. A. more elastic demand B. less elastic demand C. more elastic supply D. less elastic supply

A. more elastic demand

Over time, the demand for most goods becomes ______ elastic since we are able to ______. A. more; develop more/better substitutes B. less; develop more/better substitutes C. more; produce more of the good or service D. less; produce more of the good or service

A. more; develop more/better substitutes

The elasticity of demand is always negative because: A. of the law of demand: when price goes up, quantity demanded goes down. B. of the law of demand: when price goes down, quantity demanded goes down. C. when demand increases, the price goes up. D. when demand increases, the price goes down.

A. of the law of demand: when price goes up, quantity demanded goes down.

The price of wheat increases, but few people cut back on their consumption of bread because: A. the price of bread is a small portion of the budget, and thus the demand for bread is inelastic. B. the price of bread is a large portion of the budget, and thus the demand for bread is elastic. C. a change in the price of wheat does not affect the price of bread. D. None of the answers is correct.

A. the price of bread is a small portion of the budget, and thus the demand for bread is inelastic.

If Major League Baseball ticket prices rise by 15%, the number of tickets sold falls by 5%. The elasticity of demand is: A. -3. B. -1/3. C. -7.5. D. -0.75.

B. -1/3.

If the price of Good X rises from $4 to $5, and the quantity demanded of it falls from 200 units to 180 units, the absolute value of the price elasticity of demand is: A. 2.1. B. 0.47. C. 1.4. D. 0.4.

B. 0.47.

On October 1, 2009, the Nintendo Wii's Japanese price dropped from ¥25,000 to ¥20,000. In the three months after the price drop, Japanese sales of the Wii were approximately 1,040,000. Twelve months earlier, over the same interval at the high price, sales totaled 890,000. Using the midpoint method, what is the absolute value of the price elasticity of demand of a Wii console? Is it an elastic or inelastic good? A. 1.43; inelastic B. 0.7; inelastic C. 1.43; elastic D. 0.7; elastic

B. 0.7; inelastic

Necessities tend to have a(n) ______ demand than luxuries. A. more elastic B. more inelastic C. equally elastic D. equally inelastic

B. more inelastic

The demand curve for Froot Loops breakfast cereal is very elastic because: A. most breakfast cereals are considered a luxury good. B. there are many good substitutes for Froot Loops. C. the demand curve is negatively sloped. D. it is one of the most advertised cereals in the world.

B. there are many good substitutes for Froot Loops.

If the price of Good Y falls from $10 to $8, and the quantity demanded of it rises from 1,000 units to 1,200 units, the price elasticity of demand expressed in absolute value is: A. 1.00. B. 0.20. C. 0.82. D. 1.22.

C. 0.82.

If gasoline prices remain high long enough, people will arrange to do more telecommuting. This would be an example of why the elasticity of: A. supply for gasoline is higher in the long run. B. supply for gasoline is lower in the long run. C. demand for gasoline is higher in the long run. D. demand for gasoline is lower in the long run.

C. demand for gasoline is higher in the long run.

The elasticity of demand: A. equals the inverse of price to quantity demanded. B. measures how far the demand curve shifts from a change in price. C. tells us how responsive consumer purchases are to price changes. D. estimates the relationship between quantity demanded and production costs.

C. tells us how responsive consumer purchases are to price changes.

All of the following conditions would cause the demand curve for a good to be more elastic EXCEPT: A. a longer time horizon. B. the good is considered a luxury good. C. the price of the good falls. D. the good has many substitutes.

C. the price of the good falls.

Since roughly 1950, total revenues in the farming sector have ________, and since 1980 total revenues in computer chips have ________. A. increased; decreased B. decreased; decreased C. increased; increased D. decreased; increased

D. decreased; increased

The demand for oil is inelastic because there are: A. many complements for oil in its major use. B. few complements for oil in its major use. C. many substitutes for oil in its major use. D. few substitutes for oil in its major use.

D. few substitutes for oil in its major use.

The elasticity of demand measures: A. how responsive price is to a change in the quantity demanded of a good or service. B. how much value consumers place on each unit of the good or service. C. the rate of change of demand in relation to supply. D. how responsive quantity demanded is to a change in the price of a good or service.

D. how responsive quantity demanded is to a change in the price of a good or service.