Chapter 5 Econ Final

Over which range is the supply curve in this figure the most elastic? $16 to $40 $40 to $100 $100 to $220 $220 to $430

$16 to $40

OPEC successfully raised the world price of oil in the 1970s and early 1980s, primarily due to -an inelastic demand for oil and a reduction in the amount of oil supplied. -a reduction in the amount of oil supplied and a world-wide oil embargo. -a world-wide oil embargo and an elastic dem and for oil. -a reduction in the amount of oil supplied and an elastic demand for oil.

an inelastic demand for oil and a reduction in the amount of oil supplied.

Suppose good X has a negative income elasticity of demand. This implies that good X is -a normal good. -a necessity. -an inferior good. -a luxury.

an inferior good.

Suppose good X has a positive income elasticity of demand. This implies that good X could be (i)a normal good. (ii)a necessity. (iii)an inferior good. (iv)a luxury. (i)only (i) and (ii) only (i), (ii), and (iv) only (iii) only

(i), (ii), and (iv) only

Suppose the demand function for good X is given by: (Q= 15-0.5Px-0.8P) where is the quantity demanded of good X, is the price of good X, and is the price of good Y, which is related to good X. Refer to Scenario 5-2. Using the midpoint method, if the price of good X is constant at $10 and the price of good Y decreases from $10 to $8, the cross price elasticity of demand is about 0.57, and X and Y are substitutes. -0.22, and X and Y are complements. -0.80, and X and Y are complements. -2.57, and X and Y are complements.

-2.57, and X and Y are complements.

If marijuana were legalized, it is likely that there would be an increase in the supply of marijuana. Advocates of marijuana legalization argue that this would significantly reduce the amount of revenue going to the criminal organizations that currently supply marijuana. These advocates believe that the -supply for marijuana is elastic. -demand for marijuana is elastic. -supply for marijuana is inelastic. -demand for marijuana is inelastic.

-demand for marijuana is inelastic.

Demand is said to be inelastic if -buyers respond substantially to changes in the price of the good. -demand shifts only slightly when the price of the good changes. -the quantity demanded changes only slightly when the price of the good changes. -the price of the good responds only slightly to changes in demand.

-the quantity demanded changes only slightly when the price of the good changes.

If a 6% decrease in price for a good results in a 2% increase in quantity demanded, the price elasticity of demand is *0.02 *0.33 *3 *4

0.33

At price of $1.30 per pound, a local apple orchard is willing to supply 150 pounds of apples per day. At a price of $1.50 per pound, the orchard is willing to supply 170 pounds of apples per day. Using the midpoint method, the price elasticity of supply is about -1.14. -1.00. -0.875 -0.50.

0.875

Using the midpoint method, at a price of $12, what is the income elasticity of demand when income rises from $5,000 to $10,000? 0.00 0.41 1.00 2.45

1.00

Using the midpoint method, at a price of $16, what is the income elasticity of demand when income rises from $5,000 to $10,000? 0.00 0.50 1.00 1.50

1.00

Consider luxury weekend hotel packages in Las Vegas. When the price is $250, the quantity demanded is 2,000 packages per week. When the price is $280, the quantity demanded is 1,700 packages per week. Using the midpoint method, the price elasticity of demand is about -1.43, and an increase in the price will cause hotels' total revenue to decrease. -1.43, and an increase in the price will cause hotels' total revenue to increase. -0.70, and an increase in the price will cause hotels' total revenue to decrease. -0.70, and an increase in the price will cause hotels' total revenue to increase.

1.43, and an increase in the price will cause hotels' total revenue to decrease.

Between point A and point B, price elasticity of demand is equal to 0.33. 0.67. 1.5 2.67.

1.5

If a 25% change in price results in a 40% change in quantity supplied, then the price elasticity of supply is about -0.63, and supply is elastic -0.63, and supply is inelastic -1.60, and supply is elastic -1.60, and supply is inelastic

1.60, and supply is elastic

Between point A and point B, the slope is equal to -1/4, and the price elasticity of demand is equal to 2/3. Correct Answer -1/4, and the price elasticity of demand is equal to 3/2. -3/2, and the price elasticity of demand is equal to 1/4. -2/3, and the price elasticity of demand is equal to 3/2.

1/4, and the price elasticity of demand is equal to 3/2.

Using the midpoint method, if the price falls from $200 to $150, the absolute value of the price elasticity of demand is 5.3. 2.8. 0.8. 0.36.

2.8

In which of the following situations will total revenue increase? -Price elasticity of demand is 1.2, and the price of the good decreases. -Price elasticity of demand is 0.5, and the price of the good increases. -Price elasticity of demand is 3.0, and the price of the good decreases. -All of the above are correct.

All of the above are correct.

As price falls from Pa to Pb, which demand curve represents the most elastic demand? -D1 -D2 -D3 -All of the above are equally elastic.

D1

Which of the following statements helps to explain why government drug interdiction increases drug-related crime? -The direct impact is on buyers, not sellers. -Successful drug interdiction policies reduce the demand for illegal drugs. -Drug addicts will have an even greater need for quick cash to support their habits. -In the short run, both equilibrium quantities and prices will fall in the markets for illegal drugs.

Drug addicts will have an even greater need for quick cash to support their habits.

If the price elasticity of supply for a window manufacturer is 1.5 -a 10% increase in the price of windows results in a 15% increase in the quantity of windows supplied. -supply is considered to be inelastic. -the manufacturer is likely operating very near capacity. -All of the above are correct.

a 10% increase in the price of windows results in a 15% increase in the quantity of windows supplied.

The cross-price elasticity of demand can tell us whether goods are -normal or inferior. -elastic or inelastic. -luxuries or necessities. -complements or substitutes.

complements or substitutes.

If the cross-price elasticity of two goods is negative, then the two goods are -necessities. -complements. -normal goods. -inferior goods.

complements.

A decrease in price from $20 to $10 leads to a -decrease in total revenue of $200, so the price elasticity of demand is greater than 1 in this price range. -decrease in total revenue of $200, so the price elasticity of demand is less than 1 in this price range. -decrease in total revenue of $120, so the price elasticity of demand is less than 1 in this price range. -decrease in total revenue of $120, so demand is elastic in this price range.

decrease in total revenue of $120, so the price elasticity of demand is less than 1 in this price range.

Which of the following is likely to have the most price inelastic demand? -strawberry-banana milk shakes -gasoline in the short run -diamond earrings -box seats at a major league baseball game

gasoline in the short run

If the price of milk rises, when is the price elasticity of demand likely to be the lowest? immediately after the price increase one month after the price increase three months after the price increase one year after the price increase

immediately after the price increase

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the -cross-price elasticity of demand is negative. -price elasticity of demand is elastic. -income elasticity of demand is negative. -income elasticity of demand is positive.

income elasticity of demand is negative.

If price increases from $10 to $20, total revenue will increase by $120, so demand must be inelastic in this price range. increase by $320, so demand must be inelastic in this price range. decrease by $120, so demand must be elastic in this price range. decrease by $320, so demand must be elastic in this price range.

increase by $120, so demand must be inelastic in this price range

Suppose the income elasticity of demand is-0.5 for good X. This implies that a 5% decrease in income -will cause the quantity demanded of good X to increase by 2.5%, and X is an inferior good. -decrease by 2.5% and X is a normal good. -increase by 10% and X is an inferior good. -decrease by 10% and X is a normal good.

increase by 2.5%, and X is an inferior good.

If the price elasticity of supply for wheat is less than 1, then the supply of wheat is -inelastic -elastic -unit elastic -quite sensitive to changes in income

inelastic

Using the midpoint method, if the price falls from $100 to $50, the price elasticity of demand is zero inelastic unit elastic elastic

inelastic

Goods with many close substitutes tend to have -more elastic demands. -less elastic demands. -price elasticities of demand that are unit elastic. -income elasticities of demand that are negative.

more elastic demands

The price elasticity of demand measures how much -quantity demanded responds to a change in price. -quantity demanded responds to a change in income. -price responds to a change in demand. -demand responds to a change in supply.

quantity demanded responds to a change in price

For a vertical demand curve, -the slope is undefined, and the price elasticity of demand is equal to 0. -the slope is equal to 0, and the price elasticity of demand is undefined. -both the slope and price elasticity of demand are undefined. -both the slope and price elasticity of demand are equal to 0.

the slope is undefined, and the price elasticity of demand is equal to 0

Knowing that the demand for wheat is inelastic, if all farmers voluntarily did not plant wheat on 10 percent of their land, then -consumers of wheat would buy more wheat. -wheat farmers would suffer a reduction in their total revenue. -wheat farmers would experience an increase in their total revenue. -the demand for wheat would decrease.

wheat farmers would experience an increase in their total revenue.

The federal government is concerned about obesity in the United States. Congress is considering two plans. One will ban the production and sale of "junk food." The other will increase nutrition-education programs and include substantial advertising campaigns to encourage healthy eating habits. The junk-food ban program -and the education program will reduce the quantity of junk food sold and raise the price. -and the education program will reduce the quantity of junk food sold and lower the price. -will reduce the quantity of junk food sold and raise the price. The education program will reduce the quantity of junk food sold and lower the price. -will reduce the quantity of junk food sold and lower the price. The education program will reduce the quantity of junk food sold and raise the price.

will reduce the quantity of junk food sold and raise the price. The education program will reduce the quantity of junk food sold and lower the price.