chpater 5 test prep

If the price of Diet Coke increases from 50 cents to 60 cents per can and the quantity demanded decreases from 150 cans to 100 cans, then, according to the midpoint formula, the value of price elasticity of demand for Pepsi-Cola is: −2.2. −3.2. −0.5. −1.

-2.2

When the price of a commodity increases from $1 to $3, the quantity of the good supplied by producers increases from 1,000 units to 3,000 units. This implies that the price elasticity of supply of the good is: −1. 1/3. 2. 1.

1

When the daily wages of laborers increase from $30 to $40, the quantity of labor supplied increases from 200 workers per week to 300 workers per week. The price elasticity of supply of labor is: 1.4. 1.0. 0.5. 2.25.

1.4.

If an increase in the price of a tennis ball from $2 per piece to $3 per piece leads to an increase in its daily quantity supplied from 200 to 1,000 units, then the value of price elasticity of supply is: 4. 3.33. 0.25. 1.67.

3.33.

If the value of the price elasticity of demand is −0.5, this means that a: 0.3 percent decrease in price causes a 0.3 percent increase in quantity demanded. 0.2 percent decrease in price causes a 1 percent increase in quantity demanded. 6 percent decrease in price causes a 2 percent increase in quantity demanded. 4 percent decrease in price causes a 2 percent increase in quantity demanded.

4 percent decrease in price causes a 2 percent increase in quantity demanded.

For which of the following items is the income effect of a price change likely to be the greatest? Toiletries Bread Kitchen towels Automobiles

Automobiles

For which of these commodities is the income effect of a price change likely to be very small? Cooking oil Automobiles Furniture Gasoline

Cooking oil

The demand for which of these commodities or services is more elastic in the long run than in the short run? Electricity Life-saving drugs Clothes Cigarettes smoked by adults

Electricity

For which of the following items is demand both income inelastic and price inelastic? High-end cars Owner-occupied housing Food Beer

Food

Internet shopping sites often list the prices offered by different sellers of a particular product, making price comparisons much easier. Which of the following is likely to result from this service? The supply of each seller's product is likely to become more elastic. The demand for each seller's product is likely to become more elastic. The supply of each seller's product is likely to become more inelastic The demand for each seller's product is likely to become more inelastic.

The demand for each seller's product is likely to become more elastic

Which of the following is likely to be observed when a nation experiences substantial economic growth? The demand for both inferior and normal goods decreases. The demand for both inferior and normal goods increases. The demand for inferior goods declines, and the demand for normal goods increases. The demand for inferior goods increases, and the demand for normal goods decreases.

The demand for inferior goods declines, and the demand for normal goods increases.

Which of these is the correct formula for calculating the price elasticity of demand? The ratio of the change in price and the change in quantity demanded The percentage change in quantity demanded divided by the percentage change in price The percentage change in price divided by the percentage change in quantity demanded The ratio of the change in quantity demanded and the change in price

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

Which of the following is an assumption made while calculating the price elasticity of demand for a product? The prices of all other goods are constant. The product is an inferior good. The product's price is constant. The income of the good's consumer is increasing.

The prices of all other goods are constant.

A perfectly elastic supply curve is depicted as: a horizontal line parallel to the output axis. a ray from the origin. a downward-sloping straight line. a vertical line parallel to the price axis.

a horizontal line parallel to the output axis.

A perfectly inelastic supply curve is depicted by: an upward-sloping curve. a horizontal straight line parallel to the output axis. a ray from the origin. a vertical straight line parallel to the price axis.

a vertical straight line parallel to the price axis.

The cross-price elasticity of demand for unrelated goods is: always infinity. always zero. greater than one. less than one.

always zero.

The price elasticity of demand for a product is the: degree of responsiveness of quantity demanded to price. change in the price of the product divided by the change in the quantity demanded. average price of the product over time. price of the product relative to the average price of other similar products.

degree of responsiveness of quantity demanded to price.

Elasticity in economics measures the: growth in income. level of satisfaction. degree of responsiveness. rate of profit.

degree of responsiveness.

The demand for a particular brand of smartphones decreases by 10 percent when the price increases by 5 percent. This implies that this brand of smartphones has _____ demand. perfectly inelastic elastic perfectly elastic unit elastic

elastic

Knowledge of price elasticity of demand is especially valuable to producers, because it indicates how a price change affects total revenue. A fall in the price of a good increases total revenue only if its demand is: inelastic. unit elastic. perfectly inelastic. elastic.

elastic.

With the onset of the winters, the price of snow jackets charged by retailers increased from $15 to $18 due to a surge in demand. The producers of snow jackets almost immediately increased their weekly supply from 1,500 units to 4,500 units. This implies that the supply of snow jackets is: elastic. inelastic. perfectly elastic. unit elastic.

elastic.

The demand curve for a particular brand of canned fish is likely to be _____ as the demand for the product is _____. horizontal; perfectly price elastic vertical; perfectly price inelastic upward sloping; price inelastic downward sloping; price elastic

horizontal; perfectly price elastic

The supply of a commodity is said to be elastic: it is represented by a vertical supply curve. if the percentage change in quantity supplied is more than the percentage change in price. if the percentage change in quantity supplied is equal to the percentage change in price. if it is represented by a horizontal supply curve.

if the percentage change in quantity supplied is more than the percentage change in price.

When Katie's earnings increase by 10%, her demand for Gucci leather handbags increases by 15%. This implies that the demand for Gucci leather handbags is: income elastic. price inelastic. price elastic. income inelastic.

income elastic.

Ceteris paribus, the more important an item is as a share of the consumer's budget, the greater is the _____ effect of a price change and the more _____ is the demand for the item. price; inelastic price; elastic income; elastic income; inelastic

income; elastic

Among the given goods, the value of the income elasticity of demand is likely to be largest for: meals at upscale restaurants. newspapers. toilet paper. paperback books.

meals at upscale restaurants.

As digital SLR cameras become popular substitutes for point-and-shoot film cameras, demand for the latter is likely to become: income inelastic. more price elastic. less price elastic. income elastic.

more price elastic.

Most companies invest heavily in advertising that aims to establish the uniqueness of a product in the consumer's mind. This strategy helps to make the demand for the product: income elastic. more price inelastic. perfectly price elastic. unit price elastic.

more price inelastic.

The degree of responsiveness of demand to changes in the level of income is: equal to 1 for normal goods. negative for inferior goods. positive for inferior goods. zero for normal goods.

negative for inferior goods.

A good that is in fixed supply will have a(n): downward-sloping supply curve. perfectly inelastic supply curve. perfectly elastic supply curve. unit elastic supply curve.

perfectly inelastic supply curve.

The cross-price elasticity of demand between butter and olive oil is likely to be: positive because the goods are substitutes. one because both the goods are inferior. negative because the goods are complements. zero because the goods are unrelated.

positive because the goods are substitutes.

Suppose the marginal cost of supplying additional units of a good rises sharply when output expands. In this case, the supply of the good will be: income elastic. price inelastic. income inelastic. price elastic.

price inelastic.

what is the midpoint formula?

quantity: (Change in Quantity)/(Average Quantity) price: (Change in price)/(Average price) answer for q/answer for p

When demand is inelastic, a decrease in price: increases marginal revenue. reduces total revenue. reduces marginal revenue. increases total revenue.

reduces total revenue.

The more time buyers get to adjust to a change in the price of a commodity, the _____ is the demand curve for the commodity and the _____ is its elasticity of demand. flatter; lower steeper higher flatter; higher steeper; lower

steeper; lower

The ratio of the percentage change in the demand for cars to the percentage change in the price of gasoline indicates: the price elasticity of demand for gasoline. the cross-price elasticity of demand between substitutes. the cross-price elasticity of demand between complements. the price elasticity of demand for cars.

the cross-price elasticity of demand between complements.

When the ratio of the percentage change in the demand for a good to the percentage change in income is greater than one, _____. the good is referred to as a luxury. demand is said to be unit elastic. demand is said to be income inelastic. the good is referred to as a necessity.

the good is referred to as a luxury.

Price elasticity of supply is positively related to: the additional cost of increasing production. the proportion of the consumer's budget spent on the product. the product's price. the length of the adjustment period under consideration.

the length of the adjustment period under consideration.

The demand for most prescription drugs is perfectly inelastic because: they have no close substitutes. consumers consider them inferior goods. they have a variety of alternative uses. they are viewed as luxuries by consumers.

they have no close substitutes.

When the absolute value of the price elasticity of demand for a commodity is exactly equal to one, the demand for the commodity is said to be: inelastic. perfectly inelastic. unit elastic. elastic.

unit elastic.

The value of income elasticity of demand is most likely to be negative for goods such as: real estate. champagne. used cars. airline tickets.

used cars.