Microeconomics Exam 2

Refer to figure 4-18. Equilibrium price and quantity are, respectively,

$25 and 400 units

When the price of a bracelet was $28 each, the jewelry shop sold 128 per month. When it raised the price to $32 each, it sold 112 per month. Using the midpoint method, the price elasticity of demand for bracelets is

1.

In January the price of dark chocolate candy bars was $2.00, and Willy's chocolate factory produced 80 pounds. In February the price of dark chocolate candy bars was $2.50, and Willy's produced 110 pounds. In March, the price of dark chocolate candy bars was $3.00, and Willy's produced 140 pounds. The price elasticity of supply of Willy's dark chocolate candy bars was about

1.42 when the price increased from $2.00 to $2.50 and 1.32 when the price increased from $2.50 and $3.00.

Refer to figure 5-1. between point A and point B, price elasticity of demand is equal to

1.5

Last year, Jim bought 8 tickets to sporting events when his income was $30,000. This year, his income is $33,000, and he purchased 10 tickets to sporting events. Holding other factors constant and using the midpoint method, it follows that Jim's income elasticity of demand is about

2.33, and Jim regards ticket to sporting events as normal goods

If the price elasticity of demand for a good is 0.5, then a 5 percent increase in price results in a

2.5 percent decrease in the quantity demanded

Refer to figure 4-8. Suppose the figure shows the market demand for Big Box e-readers. Suppose the price of the leading competitor's e-readers, a substitute good, decreases. Which of the following changes would occur?

A shift from D1 to D2

The current price of blue jeans is $30 per pair, but the equilibrium price of blue jeans is $25 per pair. As a result,

All of the above are correct

When demand is elastic, a decrease in price will cause

An increase in total revenue

Refer to figure 5-2. As price falls from Pa to Pb, we could use the three demand curves to ..............

D3

Refer to figure 4-16. The shift from S' to S in the market for chocolate cake could be caused by a(n)

Decrease in the number of commercial bakers

Refer to figure 4-16. If the supply curves that are drawn represent supply curves for single-family residential houses, then the movement from S to S' could be caused by a(n)

Decrease in the price of lumber

Refer to figure 5-3. Jenna says she would buy 10 gallons of gas per week regardless of the price. If this is true, then Jenna's demand for gas is represented by demand curve

Demand curve A

Refer to figure 5-3. Which demand curve is perfectly inelastic?

Demand curve A

Which of the following is not possible?

Demand is unit elastic, and a decrease in price causes an increase in revenue.

Suppose that demand for a good increases and, at the same time, supply of the good decreases. What would happen in the market for the good?

Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous

Refer to figure 4-18. At a price of $35, there would be

Excess supply, and the price would tend to fall from $35 to a lower price

For which of the following goods is the income elasticity of demand likely lowest?

Housing

Refer to figure 4-7. The movement from Da to Db in the market for potato chips could be caused by a(n)

Increase in the price of a pretzels

Which of the following is likely to have the most price elastic demand?

Lattes

Scenario 5-1 Suppose that when the average college student's income is $10,000 per year, the annual quantity demanded of Patty's Pizza is 50 and the annual quantity demanded of Sue's Subs is 80. Suppose that when the price of Patty's Pizza increases from $8 to $10 per pie, the quantity demanded of Sue's Subs increases from 80 to 100. Suppose also that when the average student's income increases to $12,000 per year, the annual quantity demanded of Patty's Pizza increases from 50 to 60.

Patty's Pizza is a normal good and Patty's Pizza and Sue's Subs are substitutes

Refer to figure 4-26. Which of the following movements would illustrate the effect in the market for swimming lessons of an increase in the incomes of parents with school-aged children?

Point A to Point D

Refer to figure 4-26. Which of the following movements would illustrate the effect in the market for orange juice of an announcement by the American Dental Association that orange juice erodes tooth enamel?

Point C to Point B

Refer to figure 4-26. Which of the following movements would illustrate the effect in the market for convertible automobiles of an increase in the price of steel?

Point C to Point D

The price elasticity of demand measures how much

Quantity demanded responds to a change in price

Music compact discs are normal goods. What will happen to the equilibrium price and quantity of music compact discs if musicians accept lower royalties, compact disc players become cheaper, more firms start producing music compact discs, and music lovers experience an increase in income?

Quantity will rise, and the effect on price is ambiguous.

Refer to figure 5-20. Which supply curve represents perfectly inelastic supply?

S1

If, at the current price, there is a surplus of a good, then

Sellers are producing more than buyers wish to buy

Refer to figure 4-20. If the price is $25, then there would be an excess

Supply of 300 units, and price would fall.

Which of the following statements is true?

The demand for bourbon whiskey is more elastic than the demand for alcoholic beverages in general

Today's supple curve for gasoline could shift in response to a change in

The expected future price of gasoline

A decrease in the number of sellers in the market causes

The supply curve to shift to the left

A university's football stadium is never more than half-full during football games. This indicates

The ticket price is above the equilibrium price

refer to figure 4-27. Panel(d) shows which of the following

a decrease in quantity demanded and a decrease in supply

Refer to figure 4-15. Which of the following would cause the supply curve to shift from supply A to supply C in the market for sail boats?

a decrease in the price of fiberglass and sail cloth

When demand is inelastic, a decrease in price will cause

a decrease in total revenue

A supply curve slopes upward because

an increase in price gives producers an incentive to supply a larger quantity

refer to figure 4-7. The movement from Db to Da could be caused by

an increase in the price of a complement

If the demand for a product increases, then we would expect equilibrium price

and equilibrium quantity both to increase

For which of the following goods is the income elasticity of demand likely highest?

boats

Today, people changed their expectations about the future. This change

can affect today's demand

In the long run, the quantity supplied of most goods

can respond substantially to a change in price

Demand is said to be unit elastic if quantity demanded

changes by the same percent as the price

An improvement in production technology will:

decrease a firm's costs and increase its supply.

If the demand for bananas is elastic, then an increase in the price of bananas will

decrease total revenue of banana sellers.

Equilibrium quantity must decrease when demand

decreases and supply does not change, when demand does not change and supply decreases, and when both demand and supply decreases.

Which of the following events must cause equilibrium quantity to rise?

demand and supply both increase

Which of the following events must cause equilibrium price to rise?

demand increases and supply decreases

Exceptionally favorable growing conditions in the vineyards of Napa Valley would cause a(n)

increase in the supply of wine, decreasing price.

Two goods are complements when a decrease in the price of one good

increases the demand for the other good

A person who takes a prescription drug to control high cholesterol most likely has a demand for that drug that is

inelastic

Holding all other forces constant, if increasing the price of a good leads to an increase in total revenue, then the demand for the good must be

inelastic

Kara receives a promotion at work, which increases her income. We would expect Kara's demand for

inferior goods to decrease

The market demand curve

is the sum of all individual demand curves

The supply of a good will be more elastic, the

longer the time period being considered

For which pairs of goods is the cross-price elasticity most likely to be positive?

pens and pencils

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

percentage change in quantity demanded of bread divided by percentage change in price of butter

A perfectly inelastic demand implies that buyers

purchase the same amount as before when the price rises or falls.

Suppose the American Medical Association announces that men who shave their heads are less likely to die of heart failure. We could expect the current demand for

razors to increase

The market demand curve

represents the sum of the quantities demanded by all the buyers at each price of the good.

The law of supply states that, other things equal, when the price of a good

rises, the quantity supplied of the good rises

A improvement in production technology will shift the

supply curve to the right

Some firms eventually experience problems with their capacity to produce output as their output levels increase. For these firms,

supply is more elastic at low levels of output and less elastic at high levels of output

A surplus exists in a market if

the current price is above its equilibrium price

If, at the current price, there is a shortage of a good, then

the price is below the equilibrium price

If the supply of a product increases, then we would expect equilibrium price

to decrease and equilibrium quantity to increase