Microeconomics - Chapter 5

Harry's Barber Shop increased its total monthly revenue from $1,500 to $1,800 when it raised the price of a haircut from $5 to $9. The price elasticity of demand for Harry's Haircuts is ...

0.417

Muriel's price income elasticity of demand for football tickets is 1.50. All else equal, this means that if her income increases by 20 percent, she will buy ...

30 percent more football tickets

Total reveneu when the price is P2 is represented by the areas(s)

A+B

Alice says that she would buy one banana split a day regardless of the price. If she is telling the truth,

Alice's demand for banana splits is perfectly inelastic

Which of the following statements does not help to explain why government drug interdiction increases drug-related crime?

Government drug programs are more lenient now with drug offenders than they were in the 1980s

Which of the following would be true as the price elasticity of supply approaches infinity?

Very small changes in price lead to very large changes in quantity supplied

Technological advances in wheat production can lower farmers' total revenue because the ...

demand for wheat is inelastic

When small changes in price lead to infinite changes in quantity demanded, demand is perfectly ...

elastic and demand curve will be horizontal

The section of the demand curved labeled A represents the ...

elastic section of the demand curve

True of False: Price elasticity of demand along a linear, downward-sloping demand curve increases as price falls

false

True of False: The demand for gasoline will respond more to a change in price over a period of five weeks than over a period of five years

false

True of False: The flatter the demand curve that passes through a given point, the more inelastic the demand

false

True or False: Drug interdiction, which reduces the supply of drugs, may decrease drug-related crime because the demand for drugs in inelastic

false

True or False: Normal goods have negative income elasticities of demand, while inferior goods have positive income elasticities of demand

false

True or False: Supply tends to be more elastic in the short run and more inelastic in the long run

false

True or False: When demand is inelastic, a decrease in price increases total revenue

false

True or False: When the price of knee braces increased by 25 percent, the Brace Yourself Company increased its quantity supplied of knee braces per week by 75 percent. BYC's price elasticity of supple knee braces is 0.33

false

Elasticity of demand is closely related to the slop of the demand curve. The more responsive buyers are to a change in price, the ...

flatter the demand curve will be

Demand is elastic if elasticity is ...

greater than 1

There are fewer farmers in the United States today than 200 years ago because of ..

increases in farm technology and an inelastic demand for food

The section of the demand curve labeled C represents the ..

inelastic section of the demand curve

Which of the following expressions represents a cross-price elasticity of demand?

percentage change in quantity demanded of apples divided by percentage change in price of pears

Demand is said to be unit elastic if ...

quantity demanded changes by the same percent as the price

In the case of perfectly inelastic demand, ...

quantity demanded stays the same whenever price changes

If the quantity supplied responds only slightly to changes in price, then ...

supply is said to be inelastic

There are very few, if any, good substitutes for motor oil. Therefore, ...

the demand for motor oil would tend to be inelastic

Suppose demand is perfectly inelastic and the supply of the good in question decreases. As a result, ...

the equilibrium price increases and the equilibrium quantity is unchaged

Assume the section of the demand curve labeled A corresponds to prices between $6 and $12. Then, when the price increases from $8 to $10, ...

the percent decrease in the quantity demanded exceeds the percent increase in the price

True or False: The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percent change in income

true

Income elasticity of demand measures how ...

the quantity demanded changes as consumer income changes

True of False: If a supply curve is horizontal then supply is said to be perfectly elastic and the price elasticity of supply approaches infinity.

true

True or False: Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes

true

True or False: Goods with close substitutes tend to have more elastic demands than do goods without close substitutes

true

True or False: If demand is perfectly inelastic, the demand curve is vertical, and elasticity is equal to 0

true

True or False: If the price of calculators increases by 15 percent and the quantity demanded per week falls by 45 percent as a result, then the price elasticity of demand is 3

true

True or False: Necessities tend to have inelastic demands, whereas luxuries have elastic demands

true

True or False: OPEC failed to maintain a high price of oil in the long run, partly because both the supply of oil and the demand for oil are more elastic in the long run than in the short un

true

True or False: The demand for Rice Krispies is more elastic than the demand for cereal in general

true

When demand is perfectly inelastic, the demand curve will be ...

vertical, because buyers purchase the same amount as before whenever the price rises or falls

Knowing that the demand for what is inelastic, if all farmers voluntarily plowed under 10 percent of their wheat crop, then ...

wheat farmers would experience an increase in their total revenue