Chapter 5: Quiz
Suppose that at a price of $30 per month, there are 30,000 subscribers to cable television in Small Town. If Small Town Cablevision raises its price to $40 per month, the number of subscribers will fall to 20,000. At which of the following prices does Small Town Cablevision earn the greatest total revenue?
$30 per month
Suppose that at a price of $30 per month, there are 30,000 subscribers to cable television in Small Town. If Small Town Cablevision raises its price to $40 per month, the number of subscribers will fall to 20,000. Using the midpoint method for calculating the elasticity, what is the price elasticity of demand for cable television in Small Town?
1.4
In general, a flatter demand curve is more likely to be: A) Price elastic B) Price inelastic C) Unit price elastic D) None of the above
A) Price elastic
Technological improvements in agriculture that shift the supply of agricultural commodities to the right tend to: A) Reduce total revenue to farmers as a whole because the demand for food is inelastic B) Reduce total revenue to farmers as a whole because the demand for food is elastic C) Increase total revenue to farmers as a whole because the demand for food is inelastic D) Increase total revenue to farmers as a whole because the demand for food is elastic
A) Reduce total revenue to farmers as a whole because the demand for food is inelastic
If a supply curve for a good is price elastic, then: A) The quantity supplied is sensitive to change in the price of that good B) The quantity supplied is insensitive to changes in the price of that good C) The quantity demanded is sensitive to changes in the price of that good D) The quantity demanded is insensitive to changes in the price of that good
A) The quantity supplied is sensitive to change in the price of that good
If a fisherman must sell all of his daily catch before it spoils for whatever price he is offered, once the fish are caught, the fisherman's price elasticity of supply for fresh fish is: A) Zero B) One C) Infinite D) Unable to be determined from this information
A) Zero
If consumers always spend 15 percent of their income on food, then the income elasticity of demand for food is: A) 0.15 B) 1.00 C) 1.15 D) 1.50 E) None of the above
B) 1.00
If supply is price inelastic, the value of the price elasticity of supply must be: A) Zero B) less than 1 C) Greater than 1 D) Infinite E) None of the above
B) Less than 1
If a small percentage increase in the price of a good greatly reduces the quantity demanded for that good, the demand for that good is: A) Price inelastic B) Price elastic C) Unit price elastic D) Income inelastic E) Income elastic
B) Price elastic
If there is excess capacity in the production facility, it is likely that the firm's supply curve is: A) Price inelastic B) Price elastic C) Unit price elastic D) None of the above
B) Price elastic
In general, a steeper supply curve is more likely to be: A) Price elastic B) Price inelastic C) Unit price elastic D) None of the above
B) Price inelastic
If the income elasticity of demand for a good is negative, it must be: A) A luxury good B) A normal good C) An inferior good D) An elastic good
C) An inferior good
If the cross-price elasticity between two goods is negative, the two goods are likely to be: A) Luxuries B) Necessities C) Complements D) Substitutes
C) Complements
If demand is linear ( a straight line), then the price elasticity of demand is: A) Constant along the demand curve B) Inelastic in the upper portion and elastic in the lower portion C) Elastic in the upper portion and inelastic in the lower portion D) Elastic throughout E) Inelastic throguhout
C) Elastic in the upper portion and inelastic in the lower portion
The price elasticity of demand is defined as: A) The percentage change in price of a good divided by the percentage change in the quantity demanded of that good B) The percentage change in the income divided by the percentage change in quantity demanded C) The percentage change in the quantity demanded for a good divided by the percentage change in the price of that good D) The percentage change in the quantity demanded divided by the percentage change in income E) None of the above
C) The percentage change in the quantity demanded for a good divided by the percentage change in the price of that good
If an increase in the price of a good has no impact on the total revenue in that market, demand must be: A) Price inelastic B) Price elastic C) Unit price elastic D) All of the above
C) Unit price elastic
A decrease in supply (shift to the left) will increase total revenue in that market if: A) Supply is price elastic B) Supply is price inelastic C) Demand is price elastic D) Demand is price inelastic
D) Demand is price inelastic
If consumers think that there are very few substitutes for a good, then: A) Supply would tend to be price elastic B) Supply would tend to be price inelastic C) Demand would tent to be price elastic D) Demand would tend to be price inelastic E) None of the above is true
D) Demand would tend to be price inelastic
Which of the following would cause a demand curve for a good to be price inelastic? A) There are a great number of substitutes for the good B) The good is inferior C) The good is a luxury D) The good is a necessity
D) The good is a necessity
The demand for which of the following is likely to be the most price elastic? A) Airline tickets B) Bus tickets C) Taxi rides D) Transportation
D) Transportation
T/F: An advance in technology that shifts the market supply curve to the right always increases total revenue received by producers
False
T/F: If a demand curve is linear, the price elasticity of demand is constant along it
False
T/F: If the cross-price elasticity of demand between two goods is positive, the goods are likely to be complements
False
T/F: If the quantity demanded of a good is sensitive to a change in the price of that good, demand is said to be price inelastic
False
T/F: The demand for a necessity such as insulin tends to be elastic
False
T/F: The demand for aspirin this month should be more elastic than the demand for aspirin this year
False
T/F: The price elasticity of demand is defined as the percentage change in the price of that good divided by the percentage change in quantity demanded of that good
False
T/F: If the demand for a good is price inelastic, an increase in its price will increase total revenue in that market
True
T/F: The supply of automobiles for this week is likely to be more price inelastic than the supply of automobiles for this year
True
T/F: If the income elasticity of demand for a bus ride is negative, then a bus ride is an inferior good
True
T/F: If the price elasticity of supply for blue jeans is 1.3, an increase of 10 percent in the price of blue jeans would increase the quantity supplied of blue jeans by 13 percent
True
T/F: The demand for tires should be more inelastic than the demand for Goodyear brand tires
True
T/F: The income elasticity of demand for luxury items, such as diamonds, tends to be large (greater than 1)
True
T/F: The price elasticity of supply tends to be more inelastic as the firm's production facility reaches maximum capacity
True
T/F: Using the midpoint method to calculate elasticity, if an increase in the price of pencils from 10 cents to 20 cents reduces the quantity demanded from 1000 pencils to 500 pencils, then the demand for pencils is unit price elastic
True