Chapter 6-Microeconomics

Opera Estate Girls' School is considering increasing its tuition to raise revenue. If the school believes that raising tuition will increase revenue A) it is assuming that the demand for attending the school is inelastic. B) it is assuming that the demand for attending the school is elastic. C) it is assuming that the demand for attending the school is unit-elastic. D) it is assuming that the demand for attending the school is perfectly elastic.

A

Total revenue equals A) price per unit times quantity sold. B) price per unit times quantity supplied. C) price per unit times change in quantity sold. D) change in price per unit times quantity sold.

A

Which of the following pairs of goods is likely to have a negative cross-price elasticity of demand? A) pancakes and syrup B) hot dogs and hamburgers C) orange juice and grapefruit juice D) peanuts and cat food

A

Which of the following would result in a higher absolute value of the price elasticity of demand for a product? A) A wide variety of substitutes are available for the good. B) The time period under consideration is short. C) The good is a necessity. D) The expenditure on the good is small relative to one's budget.

A

If the absolute value of the price elasticity of demand for aspirin equals 0.8 then A) aspirin is a normal good. B) the demand for aspirin is inelastic. C) aspirin has few substitutes. D) the demand for aspirin is elastic.

B

Suppose a decrease in the supply of wheat results in an increase in revenue. This indicates that A) the decrease in quantity sold is proportionately larger than the resulting change in price. B) the resulting increase in price is proportionately greater than decrease in quantity sold. C) the demand curve for wheat must be vertical. D) the supply curve for wheat must be vertical.

B

If 50 units are sold at a price of $20 and 80 units are sold at a price of $15, what is the absolute value of the price elasticity of demand? Use the midpoint formula. A) 0.17 B) 0.62 C) 1.62 D) 5

C

If a 35 percent increase in price of golf balls led to an 42 percent decrease in quantity demanded, then the demand for golf balls is A) unit-elastic. B) perfectly elastic. C) relatively inelastic. D) relatively elastic.

D

Suppose the absolute value of the price elasticity of demand for basketball game tickets on your campus is greater than 1. Increasing ticket prices will increase the total revenue from ticket sales. T or F?

F

When there are few substitutes available for a good, demand tends to be relatively inelastic. T or F?

T

If demand is perfectly inelastic, the absolute value of the price elasticity of demand is A) zero. B) less than one. C) more than one. D) equal to the absolute value of the slope of the demand curve.

A

If the demand for a product is elastic, the quantity demanded changes by a larger percentage than the percentage change in price. T or F?

T

The value of the price elasticity of supply depends primarily on how quickly firms can acquire inputs to increase quantity supplied when price increases. T or F?

T

In order to prove that Motrin and Ibuprofen are substitutes, one should measure the ________ and get a ________. A) cross-price elasticity; positive number B) cross-price elasticity; negative number C) price elasticity of demand; number greater than 1 (in absolute value) D) price elasticity of demand; number less than 1 (in absolute value)

A

The price elasticity of supply is usually a positive number because A) quantity supplied increases in response to income increases. B) quantity supplied increases in response to price increases. C) the quantity demanded usually rises when price falls and therefore suppliers would want to capitalize on this increase in demand. D) price rises when supply increases.

B

Which of the following products comes closest to having a perfectly inelastic demand? A) gasoline B) cholesterol medication in general C) iPhones D) bus rides

B

At a price of $8 per dozen, Chuy sells 40 dozen homemade tamales per week. When he raised her price to $12 per dozen, he still sold 40 dozen per week. Based on this information, the demand for his tamales is A) perfectly elastic. B) inelastic. C) perfectly inelastic. D) unit-elastic.

C

If an 8 percent decrease in the price of lobster leads to a 15 percent decrease in the quantity supplied of lobster, then the supply of lobster is A) unit-elastic. B) unitarily elastic. C) elastic. D) perfectly inelastic.

C

Income elasticity measures A) how a good's quantity demanded responds to change in the goods price. B) how a good's quantity demanded responds to change in the price of another good. C) how a good's quantity demanded responds to change in buyers' incomes. D) how a good's quantity demanded responds to producers' incomes.

C

Price elasticity of demand measures A) how responsive suppliers are to price changes. B) how responsive sales are to changes in the price of a related good. C) how responsive quantity demanded is to a change in price. D) how responsive sales are to a change in buyers' incomes.

C

Suppose the value of the price elasticity of supply is 4. What does this mean? A) A 4 percent increase in the price of the good causes quantity supplied to increase by 1 percent. B) A 1 percent increase in the price of the good causes the supply curve to shift upward by 4 percent. C) A 1 percent increase in the price of the good causes quantity supplied to increase by 4 percent. D) For every $1 increase in price, quantity supplied increases by 4 units.

C

Which of the following items is likely to have the highest income elasticity of demand? A) a bus ride B) a meal at Taco Bell C) a vacation home in the Swiss Alps D) a tank of gasoline

C

If the quantity demanded for a good rises as income rises then the income elasticity of demand for this good is ________ than 0, and the good is ________ good. A) greater; an inferior B) less; a normal C) less; an inferior D) greater; a normal

D

Suppose Tinsel Town Videos lowers the price of its movie club membership by 10 percent and as a result, CineArts Videos experienced a 16 percent decline in its movie club membership. What is the value of the cross-price elasticity between the two movie club memberships? A) -1.6 B) -0.625 C) 0.625 D) 1.6

D

The price elasticity of demand is equal to A) the value of the slope of the demand curve. B) the change in quantity demanded divided by the change in price. C) the percentage change in price divided by the percentage change in quantity demanded. D) the percentage change in quantity demanded divided by the percentage change in price.

D