ECO TEST 1 REVIEW - CHP 5

Refer to Figure 5-7 . Using the midpoint method, what is the price elasticity of supply between point B and point C? a. 1.29 b. 0.96 c. 0.69 d. 1.44

d. 1.44

Suppose that when the price of good X increases from $800 to $850, the quantity demanded of good Y increases from 65 to 70. Using the midpoint method, the cross-price elasticity of demand is about a. 0.1, and X and Y are substitutes. b. 1.2, and X and Y are substitutes. c. −1.2, and X and Y are complements. d. −0.1, and X and Y are complements.

1., and X and Y are substitutes

If a 15% increase in price for a good results in a 20 percent decrease in quantity demanded, the price elasticity of demand is a. 1.33. b. 0.75. c. 1.25. d. 1.60. Hide Fee

a. 1.33

f a 25 percent change in price results in a 40 percent change in quantity supplied, then the price elasticity of supply is about a. 1.60, and supply is inelastic. b. 1.60, and supply is elastic. c. 0.63, and supply is inelastic. d. 0.63, and supply is elastic

a. 1.60 and supply is elastic

he supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10 percent. Refer to Scenario 5-2. The equilibrium price will a. decrease in both the aged cheddar cheese and bread markets. b. increase in the aged cheddar cheese market and decrease in the bread market. c. increase in both the aged cheddar cheese and bread markets. d. decrease in the aged cheddar cheese market and increase in the bread market.

a. decrease in both the aged cheddar cheese and bread market.

When the price of candy bars is $1.00, the quantity demanded is 500 per day. When the price falls to $0.80, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for candy bars is a. inelastic. b. elastic. c. unit elastic. d. perfectly inelastic.

a. inelastic

Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is a. positive, and the good is a normal good. b. positive, and the good is an inferior good. c. negative, and the good is a normal good.

a. positive and the good is a normal good

hen small changes in price lead to infinite changes in quantity demanded, demand is perfectly a. elastic, and the demand curve will be vertical. b. elastic, and the demand curve will be horizontal. c. inelastic, and the demand curve will be vertical. d. inelastic, and the demand curve will be horizontal.

b. Perfectly Elastic and the demand curve will be horizontal

Demand is said to be price elastic if a. demand shifts substantially when income or the expected future price of the good changes. b. buyers do not respond much to changes in the price of the good. c. buyers respond substantially to changes in the price of the good. d. the price of the good responds substantially to changes in demand

buyers respond substantially to changes in the price of the good

Refer to Figure 5-3At a price of $70 per unit, sellers' total revenue equals a. $1,400. b. $700. c. $1,050. d. $1,250

c. 1050

Refer to Table 5-2. Using the midpoint method, if the price falls from $200 to $150, the price elasticity of demand is a. inelastic. b. zero. c. elastic. d. unit elastic

c. elastic

Jerome says that he will spend exactly $25 each month on new apps for his mobile device, regardless of the price of apps. Jerome's demand for apps is a. perfectly inelastic. b. perfectly elastic. c. unit elastic. d. somewhat inelastic, but not perfectly inelastic.

c. unit elastic

A manufacturer produces 400 units when the market price is $10 per unit and produces 600 units when the market price is $12 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about a. 0.45. b. 200. c. 2.0. d. 2.2.

d. 2.2

Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a result, the quantity of bags demanded increases from 600 to 800. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is a. 0.35. b. 2.89. c. 0.43. d. 2.33.

d. 2.33

Refer to Figure 5-3. Using the midpoint method, between prices of $20 and $30, price elasticity of demand is about a. 1.33. b. 0.4. c. 3. d. 0.33.

d. 33

Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1? a. A is a good after an increase in income and B is that same good after a decrease in income. b. A is a good immediately after a price increase and B is that same good three years after the price increase. c. A has fewer substitutes than B. d. A is a luxury and B is a necessity.

d. A is a Luxury and B is a necessity

he price elasticity of demand measures a. the movement along a supply curve when there is a change in demand. b. the extent to which demand increases as additional buyers enter the market. c. how much more of a good consumers will demand when incomes rise. d. buyers' responsiveness to a change in the price of a good.

d. buyer's responsiveness to a change in the price of a goo

The demand for grape-flavored Hubba Bubba bubble gum is likely a. inelastic because the market is broadly defined. b. inelastic because there are many close substitutes for grape-flavored Hubba Bubba . c. elastic because the market is broadly defined. d. elastic because there are many close substitutes for grape-flavored Hubba Bubba.

d. elastic because there are many close substitutes for grape-flavored Hubba Bubba

The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10 percent. Refer to Scenario 5-2. The change in equilibrium price will be a. the same in the aged cheddar cheese and bread markets. b. greater in the bread market than in the aged cheddar cheese market. c. unknown without more information. d. greater in the aged cheddar cheese market than in the bread market.

d. greater in the aged cheddar cheese market than in the bred market

The price elasticity of supply measures how much a. the price of the good responds to changes in supply. b. the quantity supplied responds to changes in input prices. c. sellers respond to changes in technology. d. the quantity supplied responds to changes in the price of the good.

d. the quantity supplied responds to changes in the price of the goo