ECON m5
Which of the following is likely to have the most price inelastic demand? a. Running shoes b. Athletic shoes c. Nike running shoes d. Nike ZoomX running shoes
b
. Suppose the price of a bag of frozen chicken nuggets decreases from $6.60 to $6.50 and, as a result, the quantity of bags demanded increases from 600 to 620. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is a. 0.47. b. 0.03. c. 2.15. d. 0.02.
c
33. Which of the following statements is not correct? a. Advocates for drug-interdiction policies that reduce the supply of illegal drugs argue that the demand for illegal drugs may be more responsive in the long run than in the short run. b. The demand for illegal drugs is price inelastic. c. Drug interdiction efforts that reduce the supply of illegal drugs may increase drug-related crimes. d. The quantity of illegal drugs demanded is very responsive to changes in price.
d
39. The supply of a good will be more elastic, the a. more the good is considered a luxury. b. broader is the definition of the market for the good. c. larger the number of close substitutes for the good. d. longer the time period being considered.
d
. If the price of walnuts rises, many people would switch from consuming walnuts to consuming cashews. But if the price of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the importance of a. the availability of close substitutes in determining the price elasticity of demand. b. a necessity versus a luxury in determining the price elasticity of demand. c. the definition of a market in determining the price elasticity of demand. d. the time horizon in determining the price elasticity of demand.
a
13. If the demand for donuts is elastic, then a decrease in the price of donuts will a. increase total revenue of donuts sellers. b. decrease total revenue of donuts sellers. c. not change total revenue of donuts sellers. d. change total revenue of donuts sellers but in an unknown way without more information.
a
17. Suppose demand is perfectly inelastic, and the supply of the good in question decreases. As a result, a. the equilibrium price increases, and the equilibrium quantity is unchanged. b. the equilibrium quantity decreases, and the equilibrium price is unchanged. c. the equilibrium quantity and the equilibrium price both are unchanged. d. buyers' total expenditure on the good is unchanged.
a
57. Which of the following statements is valid when the market supply curve is vertical? a. Market quantity supplied does not change when the price changes. b. Supply is perfectly elastic. c. An increase in market demand will increase the equilibrium quantity. d. An increase in market demand will not increase the equilibrium price.
a
59. Goods with many close substitutes tend to have a. more elastic demands. b. less elastic demands. c. price elasticities of demand that are unit elastic. d. income elasticities of demand that are negative.
a
For which of the following goods is the income elasticity of demand likely lowest? a. Clothing b. Apples c. Diamond earrings d. Limousines
a
When large changes in price lead to no changes in quantity demanded, demand is perfectly a. inelastic, and the demand curve will be vertical. b. inelastic, and the demand curve will be horizontal. c. elastic, and the demand curve will be vertical. d. elastic, and the demand curve will be horizontal.
a
When the price of candy bars is $1.20, the quantity demanded is 490 per day. When the price falls to $1.00, the quantity demanded increases to 500. 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
. Suppose that two supply curves pass through the same point. One is steep, and the other is flat. Which of the following statements is correct? a. The flatter supply curve represents a supply that is inelastic relative to the supply represented by the steeper supply curve. b. The steeper supply curve represents a supply that is inelastic relative to the supply represented by the flatter supply curve. c. Given two prices with which to calculate the price elasticity of supply, that elasticity would be the same for both curves. d. A decrease in demand will increase total revenue if the steeper supply curve is relevant, while a decrease in demand will decrease total revenue if the flatter supply curve is relevant.
b
3. For a good that is a luxury, demand a. tends to be inelastic. b. tends to be elastic. c. has unit elasticity. d. cannot be represented by a demand curve in the usual way.
b
37. The demand for grape-flavored Hubba Bubba bubble gum is likely a. inelastic because there are many close substitutes for grape-flavored Hubba Bubba. b. elastic because there are many close substitutes for grape-flavored Hubba Bubba. c. inelastic because the market is broadly defined. d. elastic because the market is broadly defined.
b
48. Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows. If the demand for milk is relatively inelastic, the discovery will a. raise both price and total revenues. b. lower both price and total revenues. c. raise price and lower total revenues. d. lower price and raise total revenues.
b
51. If the cross-price elasticity of two goods is positive, then the two goods are a. complements. b. substitutes. c. normal goods. d. inferior goods.
b
Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the a. steeper the demand curve will be. b. flatter the demand curve will be. c. further to the right the demand curve will sit. d. closer to the vertical axis the demand curve will sit.
b
For which of the following goods is the income elasticity of demand likely highest? a. Water b. Diamonds c. Doctor's visits d. Toilet paper
b
If the price elasticity of supply is 0.7, and price increased by 24 percent, quantity supplied would a. increase by 34.29 percent. b. increase by 16.80 percent. c. decrease by 34.29 percent. d. decrease by 16.80 percent.
b
Suppose the cross-price elasticity of demand between peanut butter and jelly is −2.50. This implies that a 20 percent increase in the price of peanut butter will cause the quantity of jelly purchased to a. fall by 8 percent. b. fall by 50 percent. c. rise by 8 percent. d. rise by 50 percent.
b
Which of the following is not a determinant of the price elasticity of demand for a good? a. Whether a good is a necessity or a luxury b. The flatness of the supply curve for the good c. The time horizon d. The definition of the market for the good
b
You and your college roommate eat three packages of Ramen noodles each week. After graduation last month, both of you were hired at several times your college income. You still enjoy Ramen noodles very much and buy even more, but your roommate plans to buy fewer Ramen noodles in favor of foods she prefers more. When looking at income elasticity of demand for Ramen noodles, yours would a. be negative, and your roommate's would be positive. b. be positive, and your roommate's would be negative. c. be zero, and your roommate's would approach infinity. d. approach infinity, and your roommate's would be zero.
b
. If a 39 percent change in price results in a 35 percent change in quantity supplied, then the price elasticity of supply is about a. 1.11, and supply is elastic. b. 1.11, and supply is inelastic. c. 0.90, and supply is inelastic. d. 0.90, and supply is elastic.
c
. If marijuana were legalized, it is likely that there would be an increase in the demand for marijuana. If demand for marijuana is inelastic and the supply of marijuana is perfectly elastic, this will result in a. higher prices and higher total revenue from marijuana sales. b. higher prices but lower total revenue from marijuana sales. c. the same price and higher total revenue from marijuana sales. d. the same price but lower total revenue from marijuana sales.
c
15. If a 16 percent increase in price for a good results in a 7 percent decrease in quantity demanded, the price elasticity of demand is a. 2.29. b. 0.16. c. 0.44. d. 0.07.
c
22. 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. negative, and the good is an inferior good. b. negative, and the good is a normal good. c. positive, and the good is a normal good. d. positive, and the good is an inferior good.
c
25. Cross-price elasticity of demand measures how a. the price of one good changes in response to a change in the price of another good. b. the quantity demanded of one good changes in response to a change in the quantity demanded of another good. c. the quantity demanded of one good changes in response to a change in the price of another good. d. strongly normal or inferior a good is.
c
40. If the price elasticity of demand for a good is 5, then a 10 percent increase in price results in a a. 0.50 percent decrease in the quantity demanded. b. 2.00 percent decrease in the quantity demanded. c. 50.00 percent decrease in the quantity demanded. d. 100.00 percent decrease in the quantity demanded.
c
60. Which of the following statements is not correct concerning government attempts to reduce the flow of illegal drugs into the country? Drug interdiction a. raises prices and total revenue in the drug market. b. can increase drug-related crime. c. shifts the demand curve for drugs to the left. d. shifts the supply curve of drugs to the left.
c
A manufacturer produces 350 units when the market price is $10 per unit and produces 460 units when the market price is $14 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about a. 1.23. b. 0.27. c. 0.81. d. 0.33.
c
Cadence says that she would smoke one pack of cigarettes each day regardless of the price. If she is telling the truth, Cadence's a. demand for cigarettes is perfectly inelastic. b. price elasticity of demand for cigarettes is infinite. c. income elasticity of demand for cigarettes is 0. d. demand for cigarettes is unit elastic.
c
Demand is said to be inelastic if a. buyers respond substantially to changes in the price of the good. b. demand shifts only slightly when the price of the good changes. c. the quantity demanded changes only slightly when the price of the good changes. d. the price of the good responds only slightly to changes in demand.
c
For which pairs of goods is the cross-price elasticity most likely to be positive? a. Peanut butter and jelly b. Bicycle frames and bicycle tires c. Pens and pencils d. Digital college textbooks and iPhones
c
If the price elasticity of supply is 0.6, and a price increase led to a 3.7 percent increase in quantity supplied, then the price increase is about a. 0.16 percent. b. 2.22 percent. c. 6.17 percent. d. 5.17 percent.
c
Suppose the price elasticity of supply for cheese is 0.6 in the short run and 1.4 in the long run. If an increase in the demand for cheese causes the price of cheese to increase by 15 percent, then the quantity supplied of cheese will increase by a. 0.4 percent in the short run and 4.6 percent in the long run. b. 1.7 percent in the short run and 0.7 percent in the long run. c. 9 percent in the short run and 21 percent in the long run. d. 25 percent in the short run and 10.7 percent in the long run.
c
When the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A rises to $70, the quantity demanded of good A falls to 400 units. Using the midpoint method, the price elasticity of demand for good A is a. 1.50, and an increase in price will result in an increase in total revenue for good A. b. 1.50, and an increase in price will result in a decrease in total revenue for good A. c. 0.67, and an increase in price will result in an increase in total revenue for good A. d. 0.67, and an increase in price will result in a decrease in total revenue for good A.
c
Which of the following is likely to have the most price elastic demand? a. Ice cream b. Frozen yogurt c. Häagen-Dazs® vanilla bean ice cream
c
Which of the following statements about agriculture in the United States is correct? a. From the 1950s to today, agricultural output has approximately doubled. b. Because technological improvements increase the supply of a product for which demand is inelastic, an individual farmer would be better off not adopting the new technology. c. Increasing the supply of agricultural products typically benefits consumers but harms farmers as a group.
c
Your younger sister needs $50 to buy a new bike. She has opened a lemonade stand to make the money she needs. Your mother is paying for all of the ingredients. She currently is charging 25 cents per cup, but she wants to adjust her price to earn the $50 faster. If you know that the demand for lemonade is elastic, what is your advice to her? a. Leave the price at 25 cents and be patient. b. Raise the price to increase total revenue. c. Lower the price to increase total revenue. d. There isn't enough information given to answer this question.
c
. If the price of milk rises, when is the price elasticity of demand likely to be the highest? a. Immediately after the price increase b. One month after the price increase c. Three months after the price increase d. One year after the price increase
d
30. Demand is said to be price elastic if a. the price of the good responds substantially to changes in demand. b. demand shifts substantially when income or the expected future price of the good changes. c. buyers do not respond much to changes in the price of the good. d. buyers respond substantially to changes in the price of the good.
d
Last year, Shemar bought 7 shirts when his income was $32,000. This year, his income is $45,000, and he purchased 4 shirts. Holding other factors constant and using the midpoint method, it follows that Shemar's income elasticity of demand is about a. -0.62, and Shemar regards shirts as normal goods. b. -0.62, and Shemar regards shirts as inferior goods. c. -1.62, and Shemar regards shirts as normal goods. d. -1.62, and Shemar regards shirts as inferior goods.
d
Suppose that when the price of good X increases from $610 to $710, the quantity demanded of good Y decreases from 51 to 15. Using the midpoint method, the cross-price elasticity of demand is about a. 7.20, and X and Y are substitutes. b. -0.14, and X and Y are complements. c. 0.14, and X and Y are substitutes. d. -7.20, and X and Y are complements.
d
Which of the following could be the price elasticity of demand for a good for which a decrease in price would increase total revenue? a. 0.3 b. 0.0 c. 1 d. 2.6
d
Which of the following was not a reason OPEC failed to keep the price of oil high? a. Over the long run, producers of oil outside of OPEC responded to higher prices by increasing oil exploration and by building new extraction capacity. b. Consumers responded to higher prices with greater conservation. c. Consumers replaced old inefficient cars with newer efficient ones. d. The agreement OPEC members signed allowed each country to produce as much oil as each wanted.
d