Applications of Demand and Supply Practice Test

If the number of highway deaths among young people is roughly proportional to their beer consumption and young peoples' elasticity of demand for beer is 1.5, then to decrease highway deaths of young people by 15 percent, taxes would need to be increased enough to increase the price of beer by:

10%

In the above figure, if the minimum wage is set at $18 per hour, what quantity of labor supplied? Q L suppliedd)?

100 million hours

Suppose that the elasticity of demand for newspapers is 2.0 and quantity demanded decreases by 40%. What must the percentage increase in price have been?

20%

If the price elasticity of demand is 2, this means that a ________ increase in price causes a ________ decrease in quantity demanded

20%; 40%

In the above figure, if the minimum wage is set at $18 per hour, what is the quantity of labor demanded by firms( QL demanded)?

300 million hours

If the quantity demanded of hamburgers increases by 20 percent when the price decreases by 5 percent, then the price elasticity of demand is

4.0

The figure above shows the demand for and supply of labor of students in Smallville. If the minimum wage is set at $12 per hour. How many hours do students work?

9,000 hours

In figure 5.1 the demand curve that is perfectly inelastic is on graph:

A

A price floor is a price

Both answers A and C are correct. legal minimum price that sellers can charge for a product legal maximum price that sellers can charge for a product

Assume that when a lamp manufacturer decreases its price its total revenue does not change. What do we know?

Demand is unitary elastic

If the price elasticity of demand is infinite, demand is:

Perfectly elastic

A price ceiling can result in which of the following?

Shortage

The price elasticity of demand is calculated by:

The percentage change in quantity demanded divided by the percentage change in price.

The price elasticity of demand for higher education is about 1.4. A 5% increase in tuition would lead to:

a decrease in enrollment by 7%

the demand for new cars is elastic, an increase in price will result in

a decrease in total revenue.

A minimum wage set above the equilibrium wage will

create a surplus of labor

If the price of salt increases and the quantity demanded does not change, then

demand is perfectly inelastic

Dan sells newspapers. Dan says that a 4 percent increase in the price of a newspaper will decrease the quantity of newspapers demanded by 8 percent. According to Dan, the demand for newspapers is ________.

elastic

If the price elasticity of demand is 1.3, demand is

elastic

If a product has only a few acceptable substitutes, demand for the product is most likely to be:

inelastic

If the demand for a good is perfectly elastic, the elasticity of demand is ________ and the demand curve is ________.

infinite; horizontal

A price ceiling

is a legal maximum price can sellers can charge for a product.

A minimum wage

is a price floor in the labor market

Demand for low budget items, such as candy, is generally ________ than demand for large budget items, such as automobiles.

less elastic

If Juan purchases the same number of gallons of gasoline per week regardless of changes in gasoline price, Juan's demand for gasoline is:

perfectly inelastic

The price elasticity of demand for oil is estimated at 0.05. This value means a 10 percent increase in the

price of oil will decrease the quantity of oil demanded by 0.5 percent.

The price elasticity of demand reflects the responsiveness of

quantity demanded to a change in price.

If the demand for illegal drugs is inelastic, then a government policy to cause their price to increase would cause total revenue from drug sales to:

rise

In the figure above, originally the apartment rental market is in short-run and long-run equilibrium with a rent of $600 per month. Then the government imposes a rent ceiling of $500 per month. The rent ceiling leads to a

shortage of 2000 apartments 4000-2000=2000

In the above figure, if the minimum wage is set at $18 per hour,there will be a_____________of labor working hours by the amount of _____________ per month

surplus; 200 million hours 100-300=200