Eco 201 Chapter 5 Quiz

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

(a) demand is price inelastic

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

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. increase total revenue to farmers as a whole because the demand for food is inelastic. c. reduce total revenue to farmers as a whole because the demand for food is elastic. 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 supply curve for a good is price elastic, then a. the quantity supplied is sensitive to changes in the price of that good. b. the quantity supplied is insensitive to changes in the price 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. e. none of the above.

(a) the quantity supplied is sensitive to changes in the price of that good.

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. infinite. c. unable to be determined from this information. d. one.

(a) zero

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

(b) elastic in the upper portion and inelastic in the lower portion.

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

The demand for which of the following is likely to be the most price inelastic? a. airline tickets b. transportation c. bus tickets d. taxi rides

(b) transportation

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

(c) complements

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

(c) price elastic

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 a luxury. c. The good is a necessity. d. The good is inferior.

(c) the good is a necessity

The price elasticity of demand is defined as a. the percentage change in 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 the quantity demanded divided by the percentage change in income. e. none of the above

(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 elastic. d. all of the above

(c) unit price elastic

Suppose that at 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 fall to 20,000. At which of the following prices does Small Town Cablevision earn the greatest total revenue? a. $40 per month b. $0 per month c. either $30 or $40 per month because the price elasticity of demand is 1.0 d. $30 per month

(d) $30 per month

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

(d) an inferior good

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 price inelastic. 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

Suppose that at 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 fall 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 b. 0.75 c. 2.0 d. 1.0 e. 1.4

(e) 1.4