ECO: Chapter 5 Practice

Refer to Figure 5.7. The amount the store owners will receive per pumpkin after paying the tax is

$4.25

Refer to Figure 5.7. Had the demand for pumpkins been perfectly inelastic at Point A, the amount store owners would have received per pumpkin after the imposition and payment of this tax would have been

$5.50

Refer to figure 5.7. The amount customers will pay per pumpkin after the imposition of tax is

$7.25

Refer to figure 5.7. Had the demand for pumpkins been perfectly inelastic at point A, the amount customers would have paid per pump in after the imposition of this tax would have been

$8.50

Using the midpoint formula, if the price of a hamburger is increased from $2 to $4, the price elasticity of demand =

-0.33

If the demand for oranges is unitarily elastic, the price elasticity of demand for oranges is

-1.0

Refer to figure 5.2. If the price of a hamburger increases from $6 to $8, the price elasticity of demand = ____. Use the midpoint formula

-1.4

Refer to Figure 5.3. Using the midpoint formula, if the price of a gardenburger decreases from $7 to $6, the price elasticity of demand equals ________, and the decrease results in a(n) ________ in total revenue.

-1.44; increase

Refer to figure 5.3. Using the midpoint formula, if the price of a garden burger increases from $7 to $9, the price elasticity of demand = ____ & the increase results in a(n) _____ in total revenue

-2.67; decrease

Using the midpoint formula, if the price of a hamburger is increased from $8 to $10, the price elasticity of demand =

-3.0

The price elasticity of demand for heart transplant is perfectly inelastic. Thus, the price elasticity demand for heart transplant is

0.0

If the quantity demanded of tea increase by 2% when the price of coffee increases by 8%, the cross-price elasticity of demand b/w tea & coffee is

0.25

If the quantity of tea demanded increases by 2% when the price of coffee increases by 6%, the cross-price elasticity of demand between tea and coffee is

0.33

If the quantity of bagels demanded decreases by 8% when the price of croissants decreases by 16%, the cross-price elasticity of demand b/w bagels & croissants is

0.5

If income increases by 10% &, in response, the quantity of housing demand increases by 7%, then the income elasticity of demand for housing is

0.7

If the cross-price elasticity of demand b/w fish & chicken is 2, then a 2% increase in the price of fish will result in a _____ in the quantity of chicken demanded

4% increase

The cross-price elasticity of demand b/w good X & good Y is 0.5. Given this info, which of the following statements is true?

Good X & Y are substitutes

The cross-price elasticity of demand between good X and good Y is -3. Given this information, which of the following statements is true?

Goods X and Y are complements

A perfectly price elastic supply curve will be a(n) ____ line

Horizontal

A firm is currently producing in the inelastic portion of its demand curve. What course of action should you recommend to this firm assuming it wants to raise revenue

Increase price, b/c if demand is inelastic & price is increased, total revenue will increase

The market is initially in equilibrium at Point A (where price =$7 & quantity =12 k pizzas) & supply shifts from S1 to S2. Which of the following statements is True?

Price will still serve as a rationing device causing quantity demanded to fall from 12 to 10k pizzas

Cross-price elasticity of demand measures the response in the

Quantity of one good demanded to a change in the price of another good

A firm is currently producing in the elastic portion of its demand curve. What course of action should you recommend to this firm assuming it wants to raise revenue

Reduce price, b/c if it reduces price & demand is elastic, total revenue will increase

Price is determined entirely by demand when

Supply is perfectly inelastic

Which of the following, if true, would most effectively undermine the argument that raising cigarette taxes reduces the number of people who smoke cigarettes?

The demand for cigarettes is relatively inelastic

The income elasticity of demand

a measure of the responsiveness of the quantity demanded to changes in income

The ABC Computer Company wants to increase the quantity of computers it sells by 5%. If the price elasticity of demand is -2.5, the company must

decrease price by 2.0%

The All Smiles Greeting Card Company wants to increase the quantity of greeting cards it sells by 20%. If the price elasticity of demand is -5.0, the company must

decrease price by 4.0%

When there are more substitutes for a product, the ____ for the product is ____

demand; more price elastic

If a firm wants to increase revenue, it should decrease the selling price of its product if it is currently producing in the ________ portion of its demand curve.

elastic

Price & total revenue are inversely related when demand is

elastic

When the price of tea decreases 7%, quantity demanded increases 12%. The price elasticity of demand for tea is ________ and total revenue from tea sales will ________.

elastic; increase

The price elasticity of demand for bottled water in Texas is -2, & the price elasticity of demand for bottled water in Missouri is -0.8. In other words, demand in Texas is ___ & demand in Missouri is ____

elastic; inelastic

Total revenue increases if price ____ & demand is ______

falls; elastic

Total revenue decreases if price ________ and demand is ________.

falls; inelastic

Refer to figure 5.4. the demand for milkshakes is unit elastic at point C. If the milkshakes price falls from P1 to P2, total revenue will

increase

The income elasticity of demand for education is 3.5. Thus, a 4% increase in income will

increase the quantity of education demanded by 14%

Assume you earn $75,000 a year & your favorite entertainment magazine costs you $25 a year. Your demand for the entertainment magazine is likely to be

inelastic

The owner of a local hot dog stand has estimated that if he lowers the price of hot dogs from $2 to $1.50, he will increase sales from 400 to 500 hot dogs per day. Using the midpoint formula, the demand for hot dogs is

inelastic

When the price of fresh fish increases 10%, quantity demanded decreases 5%. The price elasticity of demand for fresh fish is ________ and total revenue from fresh fish sales will ________

inelastic; increase

At a price of $20, a store can sell 24 pics frames a day. At a price of $18 the store can sell 33 pic frames a day. Since total revenue _____ by the price decrease, demand must be

is increased; elastic

Suppose an increase of 10% in the price of steak reduces the consumption of steak by 30%. Such a price will induce households to spend

less of their income on steak

A mass transit authority charges bus fares of $1.25 during the morning rush hrs but only $1 during the late morning non rush hrs. Economists explain the fare difference by the fact that the demand for bus rides during the morning rush hrs is ____ but during the late morning it is _____

more inelastic; more elastic

The more time elapses, the

more price elastic is the demand for the product

An increase in quantity demanded caused no change in the equilibrium price. Thus, demand must be

perfectly elastic

An increase in supply caused no change in equilibrium quantity bought & sold. Thus, demand must be

perfectly inelastic

When the price of fresh fish increases 10%, quantity demanded is unchanged. The price elasticity of demand for fresh fish

perfectly inelastic

When the price of oysters decreases 25%, quantity demanded is unchanged. The price elasticity of demand for oysters is

perfectly inelastic

As the price of W increased, the demand for Y shifted from D1 to D2. The cross-price elasticity of demand b/w W & Y is

positive

In output markets, the price elasticity of supply tends to be

positive

When supply is perfectly inelastic w/ respect to price,

price is determined solely by demand

Demand determines ________ entirely when ________ is perfectly inelastic.

price; supply

A gov't wants to reduce elasticity consumption by 10%. The price elasticity of demand for electricity is -5. The gov't must _____ the price of electricity by ______

raise; 2.0%

A gov't wants to reduce electricity consumption by 40%. The price elasticity of demand for electricity is -10. The gov't must _____ the price of electricity by ____

raise; 4.0%

Luxury items tend to have _____ demand, & necessities tend to have _____ demand

relatively elastic; inelastic

The more substitutes there are for a product,

the more price elastic the demand for the product is

The gov't is considering placing a tax on cigarettes to raise revenue to finance health care benefits. One of the arguments for this tax is that the demands for cigarettes is price inelastic. Which of the following statements is true?

the tax on cigarettes may not raise as much revenue as anticipated in the yrs to come b/c demand for cigarettes is likely to become more elastic over time

When the price of cheddar cheese increases 15%, quantity demanded decreases 15%. The price elasticity of demand for cheddar cheese is _____ & total revenue from cheddar cheese sales will ____

unit elastic; not change

When the price of coffee decreases 5%, quantity quantity demanded increases 5%. The price elasticity of demand for coffee is ____ & total revenue from coffee sales will ____

unit elastic; not change

When the price of radios decreases 5%, quantity demanded increases 5%. The price elasticity of demand for radios is ________ and total revenue from radio sales will ________.

unitary elastic

If the price elasticity of labor supply is positive, the labor-supply curve would be

upward sloping

A perfectly price elastic demand curve will be a ____ line

vertical

The demand for milkshakes is unitary elastic at Point C. If the price of a milkshake is reduced from P3 to P4, total revenue

will decrease