Econ Chapter 5

Alice says that she would buy one banana split a day regardless of the price. If she is telling the truth, a. Alice's demand for banana splits is perfectly inelastic. b. Alice's price elasticity of demand for banana splits is 1. c. Alice's income elasticity of demand for banana splits is 0. d. None of the above answers is correct.

a. Alice's demand for banana splits is perfectly inelastic.

Which of the following would be true as the price elasticity of supply approaches infinity? a. Very small changes in price lead to very large changes in quantity supplied. b. Very large changes in price lead to very small changes in quantity supplied. c. Very small changes in price lead to no change in quantity supplied. d. Very large changes in price lead to no change in quantity supplied.

a. Very small changes in price lead to very large changes in quantity supplied.

Technological advances in wheat production can lower farmers' total revenue because the a. demand for wheat is inelastic. b. demand for wheat is elastic. c. supply of wheat is elastic. d. supply of wheat is inelastic.

a. demand for wheat is inelastic.

When small changes in price lead to infinite changes in quantity demanded, demand is perfectly a. elastic and the demand curve will be horizontal. b. inelastic and the demand curve will be horizontal. c. elastic and the demand curve will be vertical. d. inelastic and the demand curve will be vertical.

a. elastic and the demand curve will be horizontal.

Demand is said to be unit elastic if a. quantity demanded changes by the same percent as the price. b. quantity demanded changes by a larger percent than the price. c. the demand curve shifts by the same percentage amount as the price. d. quantity demanded does not respond to a change in price.

a. quantity demanded changes by the same percent as the price.

There are very few, if any, good substitutes for motor oil. Therefore, a. the demand for motor oil would tend to be inelastic. b. the demand for motor oil would tend to be elastic. c. the demand for motor oil would tend to respond strongly to changes in the prices of other goods. d. the supply of motor oil would tend to respond strongly to changes in people's tastes for large cars relative to their tastes for small cars.

a. the demand for motor oil would tend to be inelastic.

Income elasticity of demand measures how a. the quantity demanded changes as consumer income changes. b. consumer purchasing power is affected by a change in the price of a good. c. the price of a good is affected when there is a change in consumer income. d. many units of a good a consumer can buy given a certain income level.

a. the quantity demanded changes as consumer income changes.

Harry's Barber Shop increased its total monthly revenue from $1,500 to $1,800 when it raised the price of a haircut from $5 to $9. The price elasticity of demand for Harry's Haircuts is a. 0.567. b. 0.417. c. 1.429. d. 2.200.

b. 0.417.

Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the a. steeper the demand curve will be. b. flatter the demand curve will be. c. further to the right the demand curve will sit. d. closer to the vertical axis the demand curve will sit.

b. flatter the demand curve will be.

Which of the following expressions represents a cross-price elasticity of demand? a. percentage change in quantity demanded of apples divided by percentage change in quantity supplied of apples b. percentage change in quantity demanded of apples divided by percentage change in price of pears c. percentage change in price of apples divided by percentage change in quantity demanded of apples d. percentage change in quantity demanded of apples divided by percentage change in income

b. percentage change in quantity demanded of apples divided by percentage change in price of pears

If the quantity supplied responds only slightly to changes in price, then a. supply is said to be elastic. b. supply is said to be inelastic. c. an increase in price will not shift the supply curve very much. d. even a large decrease in demand will change the equilibrium price only slightly.

b. supply is said to be inelastic.

Suppose demand is perfectly inelastic and the supply of the good in question decreases. As a result, a. the equilibrium quantity decreases and the equilibrium price is unchanged. b. the equilibrium price increases and the equilibrium quantity is unchanged. c. the equilibrium quantity and the equilibrium price both are unchanged. d. buyers' total expenditure on the good is unchanged.

b. the equilibrium price increases and the equilibrium quantity is unchanged.

When demand is perfectly inelastic, the demand curve will be a. negatively sloped, because buyers decrease their purchases when the price rises. b. vertical, because buyers purchase the same amount as before whenever the price rises or falls. c. positively sloped, because buyers respond by increasing the market quantity demanded of the good when price rises. d. positively sloped, because buyers respond by increasing their total expenditure on the good when price rises.

b. vertical, because buyers purchase the same amount as before whenever the price rises or falls.

Muriel's income elasticity of demand for football tickets is 1.50. All else equal, this means that if her income increases by 20 percent, she will buy a. 150 percent more football tickets. b. 50 percent more football tickets. c. 30 percent more football tickets. d. 20 percent more football tickets.

c. 30 percent more football tickets.

Knowing that the demand for wheat is inelastic, if all farmers voluntarily plowed under 10 percent of their wheat crop, then a. consumers of wheat would buy more wheat. b. wheat farmers would suffer a reduction in their total revenue. c. wheat farmers would experience an increase in their total revenue. d. the demand for wheat would decrease.

c. wheat farmers would experience an increase in their total revenue.

Which of the following statements does not help to explain why government drug interdiction increases drug-related crime? a. The demand for illegal drugs is inelastic. b. Interdiction results in drug addicts having a greater need for quick cash. c. Interdiction results in an increase in the amount of money needed to buy the same amount of drugs. d. Government drug programs are more lenient now with drug offenders than they were in the 1980s.

d. Government drug programs are more lenient now with drug offenders than they were in the 1980s.

Demand is elastic if elasticity is a. less than 1. b. equal to 1. c. equal to 0. d. greater than 1.

d. greater than 1.

There are fewer farmers in the United States today than 200 years ago because of a. more educational opportunities and increases in farm technology. b. increased government regulations in farming and increased farm technology. c. an elastic demand for food and more attractive urban alternatives to farming. d. increases in farm technology and an inelastic demand for food.

d. increases in farm technology and an inelastic demand for food.

In the case of perfectly inelastic demand, a. the change in quantity demanded equals the change in price. b. the percentage change in quantity demanded equals the percentage change in price. c. infinitely-large changes in quantity demanded result from very small changes in the price. d. quantity demanded stays the same whenever price changes.

d. quantity demanded stays the same whenever price changes.