Micro Chapter 3

[P is price and Qd is quantity demanded.] Which of these measures the elasticity of a demand between any two points on a demand curve?

a. (Qd2 - Qd1) / (P2 - P1) b. (Qd2 - Qd1) * (P2 - P1) c. (Qd2 + Qd1) / (P2 + P1) d. (Qd2 - Qd1) / (Qd2 + Qd1) divided by (P2 - P1) / (P2 + P1)

[P is price and Qs is quantity supplied.] Which of these is the midpoints formula that the text uses to calculate the price elasticity of supply between two points on a supply curve?

a. (Qs2 - Qs1) / (P2 - P1) b. (Qs2 - Qs1) * (P2 - P1) c. (Qs2 - Qs1) / (Qs2 + Qs1) divided by (P2 - P1) / (P2 + P1) d. (Q2 + Q1) / (P2 + P1)

Assuming that Qd1 = 40, Qd2 = 60, P1 = $4.50, and P2 = $3.50, then the price elasticity of demand equals _____. Assume that the minus sign matters here.

a. -0.1 b. -0.5 c. -1.0 d. -1.6 d. -1.6

If, other things being equal, the % change in P is -5% and the associated % change in Qd is 10%, what is the price elasticity of demand? Assume the minus sign matters.

a. -2.0 b. -0.5 c. 0.5 d. 2.0 a. -2.0

Assuming that Qd1 = 100, Qd2 = 100, P1 = $4.50, and P2 = $3.50, then using the midpoints formula, the price elasticity of demand is closest to _____. (Ignore the minus sign.)

a. 0.0 b. 0.125 c. 0.25 d. 8.0 a. 0.0

The text compared which two methods of encouraging US consumers to reduce fuel consumption?

a. Banning cars or banning fuel sales b. Using more news stories on TV or using school texts to explain the issues c. Limiting directly how many miles consumers could drive each week or limiting their purchases of fuel with quotas d. Imposing fuel-efficiency standards on autos or raising fuel taxes d. Imposing fuel-efficiency standards on autos or raising fuel taxes

If X is an economically inferior good, its income elasticity of demand would be _____.

a. Less than zero b. Equal to zero c. More than zero but finite d. Infinite and positive a. Less than zero

If, other things being equal, the demand for wheat decreases by a set amount, which is most likely to influence directly the quantity of wheat exchanged in the market?

a. Price elasticity of supply b. Income elasticity of demand c. Cross-price elasticity of demand for wheat with regard to the oats price d. Income elasticity of supply for wheat a. Price elasticity of supply

Which of these is a determinant of the price elasticity of demand for a product?

a. Supply of the product b. Capital intensity of production c. Cost of production d. Availability of substitute products d. Availability of substitute products

Which term do economists use to represent responsiveness of one variable to a change in another variable?

a. Sustainability b. Remarkability c. Susceptibility d. Elasticity d. Elasticity

If X is a complementary good, which is the correct economic implication about changes in the demand for X?

a. When income goes up, demand for X goes up. b. When income goes up, demand for X goes down. c. When the price of some other good goes up, demand for X goes up. d. When the price of some other good goes up, demand for X goes down. d. When the price of some other good goes up, demand for X goes down.

The elasticity of supply tends to be _____ in the short run, compared to the long run.

a. about the same b. more negative c. more elastic d. less elastic d. less elastic

The price elasticity of demand tends to be _____ in the long run, compared to the short run.

a. about the same b. more positive c. more elastic d. less elastic c. more elastic

When the price of rice increased 50%, the Smith family bought 30% more potatoes. This is evidence that the Smiths seem to consider rice and potatoes to be _____.

a. complementary goods b. inferior goods c. necessities d. substitutes d. substitutes

The text example assumes that the demand for cocaine is price _____ and that the demand for DDT insect spray is price _____.

a. inelastic/elastic b. inelastic/inelastic c. elastic/inelastic d. elastic/elastic a. inelastic/elastic

(Qd is quantity demanded.) If the price elasticity of demand is inelastic, then a 10% decrease in price will cause _____.

a. more than a 10% increase in Qd b. exactly a 10% increase in Qd c. less than a 10% increase in Qd d. no increase in Qd c. less than a 10% increase in Qd

Family income changes from $3,000 to $2,600 per month. Other things being equal, quantity demanded of locally produced organic cheese changes from 2 lbs. to 1.5 lbs. per month. The income elasticity of demand for this cheese is _____.

a. negative b. zero c. positive but less than 1 d. positive but greater than 1 d. positive but greater than 1

A vertical demand curve is said to be _____.

a. perfectly elastic b. unitary elastic c. constant in elasticity d. perfectly inelastic d. perfectly inelastic

If price elasticity of demand equals 1.5, then we call this _____.

a. perfectly inelastic demand b. inelastic demand c. unit elastic demand d. elastic demand d. elastic demand

The percentage change in quantity of a good supplied divided by the percentage change in the price of the good is a(n) _____.

a. price elasticity of supply b. cross-price elasticity of demand c. income elasticity of demand d. price elasticity of cost a. price elasticity of supply