ECON: Chapter 4 Quiz

Refer to the figure above. Over the $5-$6 range, the elasticity of demand using the midpoint formula is:

1.00

Refer to the above graph. Demand is price-elastic between points:

A and B

Refer to the above graph. If the price is P 3, then the total revenue is represented by areas:

B + C + D + E + F + G.

Refer to the above graph. If the price increases from P 1 to P 2, then the gain in total revenue is areas:

C + F + H and the loss in total revenue is area J.

Refer to the above graphs. Assume they are the graphs of a town market for tomatoes in which there is one farmer that supplies the tomatoes. Which graph would best illustrate the situation where the one farmer brings to market a truckload of tomatoes that is the entire season's output?

Graph C

The Mear Corporation finds that its total spending on machine parts increases after the price of machine parts falls, other things being equal. Which of the following is true about the Mear Corporation's demand for machine parts with the price change?

It is price elastic

Which will cause a demand curve to be relatively elastic?

The time interval considered is large.

Demand can be said to be inelastic when:

a reduction in price results in a decrease in total revenue.

Which product is most likely to be the most price elastic?

automobiles

A negative cross-elasticity of demand for two products indicates that they are

complements

For which product is the income elasticity of demand most likely to be positive?

computers

Consider a situation where the U.S. Congress wants to place a special tax on private airplanes to increase tax revenue. This tax would be most effective in raising new tax revenues if the price elasticity of:

demand is inelastic.

An increase in the price of a good will cause total revenue to fall if price elasticity of demand is:

elastic

Refer to the above graph. Over the $5-$6 range, supply is:

elastic

To economists, the main differences between "the short run" and "the long run" are that:

in the long run all resources are variable, while in the short run at least one resource is fixed.

If in the short run the demand for mass transit is inelastic and in the long run the demand is elastic, then a price:

increase will increase total revenue in the short run but decrease total revenue in the long run.

For complementary goods, the coefficient of the cross price elasticity of demand is

negative

Refer to the above graph. If the demand decreased,

price would stay the same and quantity would decrease.

If the price of shoes falls from $10 to $8 and the amount sold increases by 12 percent, it can be concluded that:

the demand for shoes is inelastic.

Refer to the figure above. Over the $5-$6 range, demand is:

unitary elastic.