econ chapter 4
) Suppose that when the price per ream of recycled printer paper rises from $4 to $4.50, the quantity demanded falls from 800 to 600 reams per day. Using the midpoint formula, what is the price elasticity of demand (in absolute value) over this range? A) 4 B) 0.003 C) 2.43 D) 0.41
C
A supply curve that is vertical A) has an elasticity equal to 1. B) is perfectly elastic. C) is perfectly inelastic. D) is impossible
C
Along a straight-line demand curve, total revenue is the highest when the absolute value of elasticity of demand is: A) zero. B) between zero and one. C) one. D) infinity.
C
An economist estimates that with every 15 percent increase in income, the quantity of turkey purchased declines by 1.8 percent. From this information one would conclude that turkey is: A) a luxury. B) a necessity. C) an inferior good. D) a normal good.
C
As the manager of a ski resort, you want to increase the number of lift tickets sold by 8 percent. Your staff economist has determined that the price elasticity of demand for lift tickets is 2. To increase sales by the desired amount, you should decrease the price of a lift ticket by: A) 16 percent. B) 2 percent. C) 4 percent. D) 8 percent.
C
As the price of beachfront cottages in Florida was raised from $400,000 to $500,000, their quantity supplied rose from 2,000 to 2,100. Rounding to the nearest tenth, the elasticity of supply of beachfront cottages is: A) 1.0. B) 0.4. C) 0.2. D) 4.6
C
Demand is said to be price elastic when the: A) percentage change in quantity demanded is less than the percentage change in price. B) change in quantity demanded is less than the change in price. C) percentage change in quantity demanded is greater than the percentage change in price. D) change in quantity demanded is greater than the change in price.
C
If supply is highly inelastic and demand shifts to the left: A) price will fall significantly as will quantity. B) price and quantity will hardly change at all. C) price will fall significantly; quantity hardly changes at all. D) price will hardly change at all; quantity will fall significantly.
C
Refer to the graph shown below. Which of the following curves demonstrates a perfectly inelastic supply curve? A) A B) B C) C D) None of the curves
C
The cross-price elasticity of two goods is -2. This tells us the two goods are: A) unrelated. B) inelastic. C) complements. D) substitutes.
C
The price elasticity of demand is equal to A) the value of the slope of the demand curve. B) the percentage change in price divided by the percentage change in quantity demanded. C) the percentage change in quantity demanded divided by the percentage change in price. D) the change in quantity demanded divided by the change in price.
C
The price elasticity of supply is ________ elastic over time because ________. A) less; producers get accustomed to the price changes B) less; the ideal number of firms have time to move into or out of the industry C) more; producers have a longer time to adjust their production decisions D) more; producers get accustomed to the price changes
C
For complements: A) cross-price elasticity of demand is positive. B) price elasticity of income is positive. C) price elasticity of income is negative. D) cross-price elasticity of demand is negative.
D
If average movie attendance is 250 million when prices are $7 a ticket and 200 million when prices are $9 a ticket, the elasticity of demand for movie tickets is about: A) 1.10 B) -1.89 C) -0.03 D) -0.89
D
If demand is highly elastic and supply shifts to the right: A) price will fall significantly; quantity hardly changes at all. B) price and quantity will hardly change at all. C) price will rise significantly as will quantity. D) price will hardly change at all; quantity will rise significantly.
D
If quantity demanded falls by 25 percent when price rises by 50 percent, demand is said to be: A) unit elastic. B) proportional. C) elastic. D) inelastic.
D
In which case will the price change be the greatest (assuming the shifts described are the same size)? A) Demand is elastic, and supply shifts to the left. B) Supply is perfectly elastic, and demand shifts to the left. C) Supply is elastic, and demand shifts to the left. D) Demand is inelastic, and supply shifts to the left.
D
Refer to the following table to answer the question. Which of the following statements is true (ceteris paribus)? A) A and B are complements and A and C are complements. B) A and C are complements whereas A and B are substitutes. C) A and B are substitutes and A and C are substitutes. D) A and B are complements whereas A and C are substitutes
D
Refer to the graph shown below. At which point is elasticity zero? A) A B) B C) C D) D
D
Refer to the graph shown below. Between points E and F demand is: A) elastic. B) unit elastic. C) perfectly elastic. D) inelastic.
D
Susan's price elasticity of demand for restaurant meals is 2.27. If the price of a restaurant meal falls by 2 percent, the quantity of restaurant meals Susan demands will: A) fall by 2.27 percent. B) increase by 22.7 percent. C) increase by 2.27 percent. D) increase by 4.54 percent.
D
The demand for a good is inelastic. Which of the following would be the most likely explanation for this? A) The good costs a large portion of one's total income. B) The good is narrowly defined. C) The time interval considered is long. D) The good is broadly defined.
D
Which of the following could explain why the demand for table salt is inelastic? A) Salt is a luxury good. B) Salt is a luxury for high income consumers but a necessity for low income consumers. C) Salt is a rare commodity. D) Households devote a very small portion of their income to salt purchases.
D
increase in price affects total revenue in what ways
1. causes quantity effect or decrease in total revenue from selling fewer units of good 2.causes price effect or increase in total revenue resulting from receiving higher price for each unit sold
A determinant of the price elasticity of supply that is also a determinant of the price elasticity of demand is: A) adjustment time. B) availability of inputs. C) whether the good is a luxury or a necessity. D) flexibility of the production process.
A
Assume that the demand curve for sunblock is linear and downward sloping. Which of the following statements about the slope of the demand curve for sunblock and the price elasticity of demand for sunblock are true? A) The slope is constant, but the price elasticity of demand is not constant at all points along the demand curve for sunblock. B) The slope of the demand curve for sunblock is constant and equal to zero; demand is perfectly inelastic. C) The slope and the price elasticity of demand are constant at all points along the demand curve for sunblock. D) The slope is not constant, but the price elasticity of demand is constant at all points along the demand curve for sunblock.
A
For normal goods, income elasticity is: A) greater than 0. B) greater than 1. C) less than 0. D) equal to 1.
A
If elasticity of demand is less than 1: A) a rise in price increases total revenue. B) a decline in price will not change total revenue. C) a decline in price increases total revenue. D) a rise in price decreases total revenue.
A
If the price elasticity of supply is 0.5, a 10 percent increase in price will cause a: A) 5 percent increase in quantity supplied. B) 20 percent increase in quantity supplied. C) 5 percent decrease in quantity supplied. D) 20 percent decrease in quantity supplied.
A
Refer to the graph shown. When price rises from $30 to $40: A) lost revenue is represented by areas C and E and gained revenue is represented by area A. B) gained revenue is represented by areas C and E and lost revenue is represented by area A. C) gained revenue is represented by areas B, C, D, and E and lost revenue is represented by area A. D) lost revenue is represented by areas B, C, D, and E and gained revenue is represented by area A.
A
Suppose when Panini's Bakery raised the price of its breads by 10 percent, the quantity demanded fell by 15 percent. Which of the following best characterizes the elasticity of demand and the effect on total revenue of the price increase? A) Demand is elastic; total revenue decreased. B) Demand is inelastic; total revenue increased. C) Demand is elastic; total revenue increased. D) Demand is inelastic; total revenue decreased.
A
The price elasticity of supply measures A) the responsiveness of quantity supplied to changes in price. B) the responsiveness of quantity supplied to changes in input prices. C) a supplier's ability to produce a good in the face of scarcity. D) the responsiveness of quantity supplied to changes in technology.
A
The price elasticity of supply of hot dog buns is estimated to be 1.5. Holding everything else constant, this means that a 10 percent decrease in the price of hot dog buns will cause the quantity of hot dog buns supplied to decrease by A) 15 percent. B) 25 percent. C) 1.5 percent. D) 5 percent.
A
when demand is elastic -
a price increase causes revenue to fall (price increase = quantity demanded decrease)
demand is unit-elastic when
absolute value of elasticity is exactly 1 - change in price causes same percentage change in q demanded
demand is elastic when
absolute value of price elasticity of demand is greater than 1
Demand is inelastic if
absolute value of price elasticity of demand is less than one - given percentage change in price will cause smaller percentage change in q demanded
When demand is inelastic
the percentage change in price is greater than the percentage change in quantity demanded (consumers purchase less when price rises)
For many consumers, bacon and eggs are complements. Therefore, egg producers monitor the price of bacon because the cross elasticity between bacon and eggs is A) negative, and a decrease in the price of bacon will decrease the demand for eggs. B) negative, and a decrease in the price of bacon will increase the demand for eggs. C) positive, and a decrease in the price of bacon will increase the demand for eggs. D) positive, and an increase in the price of bacon will increase the demand for eggs.
B
If the cross-price elasticity of two goods is 1.82, then we know that these goods are: A) complements because their cross-price elasticity is greater than zero. B) substitutes because their cross-price elasticity is greater than zero. C) complements because their cross-price elasticity is less than 1. D) substitutes because their cross-price elasticity is less than 1.
B
If the percentage increase in the quantity supplied is smaller than the percentage increase in the price, the supply: A) is unit elastic. B) is inelastic. C) is perfectly elastic. D) is elastic.
B
Imagine Oregon State is considering increasing its tuition to raise revenue. If the university believes that raising tuition will increase revenue A) it is assuming that the demand for attending the university is perfectly elastic. B) it is assuming that the demand for attending the university is inelastic. C) it is assuming that the demand for attending the university is elastic. D) it is assuming that the demand for attending the university is unit-elastic
B
Refer to Figure 6-2. As price falls from PA to PB, the quantity demanded increases most along D1; therefore, A) D1 is more inelastic than D2 or D3. B) D1 is more elastic than D2 or D3 C) D1 is unit elastic. D) D1 is elastic at PA but inelastic at PB.
B
Refer to the following table to answer the question. Demand is inelastic between: A) $10 and $12. B) $6 and $8. C) $8 and $10. D) $12 and $14.
B
Refer to the graphs shown below. If the quantity demanded by consumers is the same for every price, then the demand curve would look like A) Graph I. B) Graph II. C) Graph III. D) Graph IV.
B
The demand for a good is elastic. Which of the following would be the most likely explanation for this? A) The good is a necessity. B) The good costs a large portion of one's total income. C) The good is broadly defined. D) The time interval considered is short.
B
When consumers' incomes decline during a recession, they increase their consumption of instant coffee and reduce their consumption of other beverages. Therefore, instant coffee: A) has an income elasticity of demand greater than zero but less than one. B) has a negative income elasticity of demand. C) is a normal good. D) is a necessity because consumers buy more during a recession.
B
When consumers' incomes decline during a recession, they increase their consumption of instant coffee and reduce their consumption of other beverages. Therefore, instant coffee: A) is normal. B) has a negative income elasticity of demand. C) is a necessity because consumers buy more during a recession. D) has an income elasticity of demand greater than zero but less than one.When consumers' incomes decline during a recession, they increase their consumption of instant coffee and reduce their consumption of other beverages. Therefore, instant coffee: A) is normal. B) has a negative income elasticity of demand. C) is a necessity because consumers buy more during a recession. D) has an income elasticity of demand greater than zero but less than one.
B
Which of the following statements is true? A) The demand curve for a necessity is more elastic than the demand curve for a luxury. B) The more narrowly we define a market, the more elastic the demand for a product will be. C) The more time that passes the more inelastic the demand for a product becomes. D) In general, if a product has few substitutes it will have an elastic demand.
B