Micro quiz 3

Suppose that as the price of Y falls from $2.00 to $1.90 the quantity of Y demanded increases from 110 to 118. Then the price elasticity of demand is:

1.37

If a firm can sell 3000 units of product A at $10 per unit and 5000 at $8, then:

the price elasticity of demand is 2.25

The Illinois Central Railroad once asked the Illinois Commerce Commission for permission to increase its commuter rates by 20 percent. The railroad argued that declining revenues made this rate increase essential. Opponents of the rate increase contended that the railroad's revenues would fall because of the rate hike. It can be concluded that:

the railroad felt that the demand for passenger service was inelastic and opponents of the rate increase felt it was elastic.

The concept of price elasticity of demand measures:

the sensitivity of consumer purchases to price changes

Which of the following is correct?

If demand is elastic, a decrease in price will increase total revenue

Which of the following is correct?

If the demand for a product is inelastic, a change in price will cause total revenue to change in the same direction.

Which of the following statements is not correct?

In the range of prices in which demand is elastic, total revenue will diminish as price decreases.

When the percentage change in price is greater than the resulting percentage change in quantity demanded:

an increase in price will increase total revenue

The price elasticity of demand coefficient measures:

buyer responsiveness to price changes

A perfectly inelastic demand schedule

can be represented by a line parallel to the vertical axis.

If a firm's demand for labor is elastic, a union-negotiated wage increase will:

cause the firm's total payroll to decline

black markets are associated with:

ceiling prices and the resulting product shortages.

(Last Word) A major objection to creating a legal market for human organs is that such a market would

commercialize human body parts and thus diminish the special nature of human life

the demand for a product is inelastic with respect to price of:

consumers are largely unresponsive to a per unit price change

(Last Word) A market for human organs (rather than the current volunteer-donor system) would be expected to

eliminate the shortage of organs

(Consider This) Ticket scalping implies that:

event sponsors have established ticket prices at below-equilibrium levels

Most demand curves are relatively elastic in the upper-left portion because the original price:

from which the percentage price change is calculated is large and the original quantity from which the percentage change in quantity is calculated is small

A price ceiling means that:

government is imposing a legal price that is typically below the equilibrium price

A price floor means that:

government is imposing a minimum legal price that is typically above the equilibrium price.

perfectly inelastic demand curve

graphs as a lineparallel to the vertical axis

Price elasticity of demand is generally:

greater in the long run than in the short run

If a demand for a product is elastic, the value of the price elasticity coefficient is:

greater than one

If the University Chamber Music Society decides to raise ticket prices to provide more funds to finance concerts, the Society is assuming that the demand for tickets is:

inelastic

if quantity demanded is completely unresponsive torpor changes, demand is:

perfectly inelastic

in which of the following cases will total revenue increase

price rises and demand in elastic

in which of the following instances will total revenue decline

price rises and demand is elastic

If price and total revenue vary in opposite directions, demand is

relatively elastic

Other things the same, if a price change causes total revenue to change in the opposite direction, demand is:

relatively elastic

Gigantic State University raises tuition for the purpose of increasing its revenue so that more faculty can be hired. GSU is assuming that the demand for education at GSU is:

relatively inelastic

The demand for a luxury good whose purchase would exhaust a big portion of one's income is:

relatively price elastic

The demand for a necessity whose cost is a small portion of one's total income is:

relatively price inelastic

The demand schedules for such products as eggs, bread, and electricity tend to be:

relatively price inelastic

(Consider This) Ticket scalping refers to:

reselling a ticket at a price above its original purchase price

The price elasticity of supply measures how

responsive the quantity supplied of X is to changes in the price of X

An effective ceiling price will:

result in a product shortage

an effective price floor will;

result in a product surplus.

An effective price floor on wheat will:

result in a surplus of wheat

A manufacturer of frozen pizzas found that total revenue decreased when price was lowered from $5 to $4. It was also found that total revenue decreased when price was raised from $5 to $6. Thus,

the demand for pizza is elastic above $5 and inelastic below $5.

If a firm finds that it can sell $13,000 worth of a product when its price is $5 per unit and $11,000 worth of it when its price is $6, then:

the demand for the product is elastic in the $6-$5 price range

Suppose the price of local cable TV service increased from $16.20 to $19.80 and as a result the number of cable subscribers decreased from 224,000 to 176,000. Along this portion of the demand curve, price elasticity of demand is:

1.2

Suppose the price elasticity of demand for bread is 0.20. If the price of bread falls by 10 percent, the quantity demanded will increase by:

2 percent and total expenditures on bread will fall

The price elasticity of demand for widgets is 0.80. Assuming no change in the demand curve for widgets, a 16 percent increase in sales implies a:

20 percent reduction in price

Which of the following generalizations is not correct?

The price elasticity of demand is greater for necessities than it is for luxuries

Suppose the price elasticity coefficients of demand are 1.43, 0.67, 1.11, and 0.29 for products W, X, Y, and Z respectively. A 1 percent decrease in price will increase total revenue in the case(s) of:

W and Y

Which of the following is a consequence of rent controls established to keep housing affordable for the poor?

all of these are consequences of rent control:

price elasticity of demand of a straight-line down sloping demand curve is:

elastic in high price ranges and inelastic in low-priced ranges

If the demand for farm products is price inelastic, a good harvest will cause farm revenues to:

decrease

If the demand for product X is inelastic, a 4 percent increase in the price of X will:

decrease the quantity of X demanded by less than 4 percent

Suppose we find that the price elasticity of demand for a product is 3.5 when its price is increased by 2 percent. We can conclude that quantity demanded:

decreased by 7 percent

The price elasticity of demand for beef is about 0.60. Other things equal, this means that a 20 percent increase in the price of beef will cause the quantity of beef demanded to:

decreases by approximately 12 percent

Suppose that coffee growers sell 200 million pounds of coffee beans at $2 per pound in 2015, and sell 240 million pounds for $3 per pound in 2016. Based on this information we can conclude that the:

demand for coffee beans has increased

The state legislature has cut Gigantic State University's appropriations. GSU's Board of Regents decides to increase tuition fees to compensate for the loss of revenue. The board is assuming that the:

demand for education at GSU is inelastic

If the price of hand calculators falls from $10 to $9 and, as a result, the quantity demanded increases from 100 to 125, then:

demand is elastic

for a linear down sloping demand curve:

demand is elastic at high prices

If the demand for bacon is relatively elastic, a 10 percent decline in the price of bacon will:

increase the amount demanded by more than 10 percent

If the price elasticity of demand for a product is 2.5, then a price cut from $2.00 to $1.80 will:

increase the quantity demanded by about 25 percent

If the price elasticity of demand for a product is unity, a decrease in price will

increase the quantity demanded, but total revenue will be unchanged

(Last Word) A market-based system of buying and selling human organs for transplant would:

increase the quantity of organs available for transplant

Price floors and ceiling prices:

interfere with the rationing function of prices.

The price of product X is reduced from $100 to $90 and, as a result, the quantity demanded increases from 50 to 60 units. Therefore demand for X in this price range:

is elastic

If government set a maximum price of $45 in the above market:

it would create neither a shortage nor a surplus

The demand for autos is likely to be:

less price elastic than the demand for Honda Accords

the price elasticity of demand is generally

negative, but the minus sign is ignored.

If a legal ceiling price is set above the equilibrium price:

neither the equilibrium price nor the equilibrium quantity will be affected

The basic formula for the price elasticity of demand coefficient is:

percentage change in quantity demanded/percentage change in price.

A demand curve which is parallel to the horizontal axis is:

perfectly elastic

In the above market, economists would call a government-set maximum price of $40 a:

price ceiling

In the above market, economists would call a government-set minimum price of $50 a:

price floor

Suppose that salsa manufacturers sell 2 million bottles at $3.50 in one year, and 3 million bottles at $3 in the next year. Based on this information we can conclude that the:

supply of salsa has increased

If government set a minimum price of $50 in the above market, a:

surplus of 21 units would occur.

We would expect

the demand for Coca-Cola to be more price elastic than the demand for soft drinks in general.

Suppose that the price of peanuts falls from $3 to $2 per bushel and that, as a result, the total revenue received by peanut farmers changes from $16 to $14 billion. Thus:

the demand for peanuts is inelastic

The elasticity of demand for a product is likely to be greater:

the greater the amount of time over which buyers adjust to a price change.

The more time consumers have to adjust to a change in price:

the greater will be the price elasticity of demand