Econ Chapters 4 and 5
Suppose that over the next few years the demand for dancing to country and western music decreases. Hence, at country and western dance clubs the equilibrium price of admission ___ and the equilibrium quantity of dancing ___. A) falls; decreases B) rises; decreases C) does not change; decreases D) rises; increases E) falls; increases
A) falls; decreases
Suppose a good can be produced using commonly available resources. The elasticity of supply is A) greater than one B) greater than zero but less than one C) zero D) negative E) more information is needed to make a determination about the size of the elasticity of supply
A) greater than one
If a product is narrowly defined, it is likely to A) have many substitutes and therefore its demand is elastic B) be unique and have many substitutes C) have few substitutes and therefore its demand is less elastic D) have a larger proportion of income spent on it E) be unique and therefore its demand is inelastic
A) have many substitutes and therefore its demand is elastic
Consumers eat salsa with taco chips. The price of salsa rises. How does the increase in the price of salsa affect the demand for taco chips? A) it decreases the demand for taco chips B) it will decrease the demand for taco chips only if taco chips are a normal good C) it increases the demand for taco chips D) it has no effect on the demand for taco chips E) it could increase, decrease or have no effect on the demand for taco chips but more information is needed to determine the impact
A) it decreases the demand for taco chips
Which of the following explains why supply is more elastic as more time passes? A) it is difficult or impossible to increase the quantity produced in a short period of time B) consumers have more time to search fro substitutes C) sellers try to take advantage of a high price in the short term D) the supply curve becomes generally steeper as more time passes E) there is no explanation for this phenomenon
A) it is difficult or impossible to increase the quantity produced in a short period of time
The longer the time that has elapsed since the price of a good changed, the A) more elastic the demand for that good B) fewer substitutes available for the good C) steeper the demand curve D) smaller the amount of that good bought E) less elastic the demand for that good
A) more elastic the demand for that good
If consumers buy a large number of plug-in electric cars, the equilibrium price of electricity will ___ and the equilibrium quantity of electricity will ___. A) rise; increase B) rise; decrease C) fall; increase D) not change; increase E) fall; decrease
A) rise; increase
Suppose an increase in demand causes the price to increase from $2 to $4 and the quantity to increase from 1,000 to 1,800. using the midpoint method the elasticity of supply equals A) 1.17 B) 0.86 C) 2.74 D) 0.68 E)non of the above answers is correct
B) 0.86
If the demand for digital cameras increases when consumers' incomes rise, then digital cameras are A) an inferior good B) a normal good C) made using advanced technology D) a substitute camcorders E) a complement to camcorders
B) a normal good
The law of demand implies that, other things remaining the same, A) as the price of a cheeseburger rises, the quantity of cheeseburgers demanded increases B) as the price of a cheeseburger rises, the quantity of cheeseburgers demanded decreases C) as more people demand cheeseburgers, the quantity demanded increases D) as the demand for cheeseburgers increases, the price of a cheeseburger fails E) as income increases, the quantity of cheeseburgers demanded increases
B) as the price of a cheeseburger rises, the quantity of cheeseburgers demanded decreases
Suppose a good can be produced using commonly available resources. The elasticity of supply is A) greater than zero but less than one B) greater than one C) zero D) negative E) more information is needed to make determination about the size of the elasticity of supply
B) greater than one
If a product is narrowly defined, it is likely to A) be unique and have many substitutes B) have many substitutes and therefore its demand is elastic C) have a larger portion of income spent on it D) be unique and therefore its demand is inelastic E) have few substitutes and therefore its demand is less elastic
B) have many substitutes and therefore its demand is elastic
Which of the following statements is correct? The A) cross elasticity of demand for complements is positive B) income elasticity of demand for normal goods is positive C) cross elasticity of demand for substitutes is negative D) income elasticity of demand for inferior goods is zero E) income elasticity of demand for inferior goods is positive
B) income elasticity of demand for normal goods is positive
Which of the following increases the supply of a product? A) a decrease in productivity B) lower prices for the resources used to produce the product C) a higher price for the product D) an increase in the expected future price of the product E) some producers going bankrupt and leaving the industry
B) lower prices for the resources used to produce the product
The cross elasticity between computers and software is A) positive because they are substitutes B) negative because they are complements C) negative because they are substitutes D) positive because they are complements E) postive because they are normal goods
B) negative because they are complements
Goods are ___ when the income elasticity of demand is positive A) complements B) normal C) inferior D) elastic E) substitues
B) normal
For a good such as food, the income elasticity is likely A) positive and greater than one B) positive and less than one C) equal to zero D) negative E) undefined because people always buy the same amount of food
B) positive and less than one
You are more sensitive to a change in price if you A) have a very inelastic demand for the good B) spend a lot of your income on the good C) do not buy the good regularly D) buy very little of the good E) spend a small percentage of your income on the good
B) spend a lot of your income on the good
Suppose an increase in supply lowers the price from $10 to $8 and increases the quantity demanded from 100 units to 130 units. Using the midpoint method, the elasticity of demand equals A) 1.56 B) 0.26 C) 1.17 D) 0.85 E) none of the above answers is correct
C) 1.17
Suppose a decrease in demand causes the price to decrease from $4 to $3 and the quantity to decrease from 1,000to 700. Using the midpoint method, the elasticity of supply equals A) 0.18 B) 2.83 C) 1.24 D) 0.81 E) None of the above answers are correct
C) 1.24
Which of the following increases the supply of gasoline? A) an increase in the price of gasoline B) an increase in income if gas guzzling, sport utility vehicles are a normal good C) a decrease in the price of a resource used to produce gasoline such as crude oil D) a decrease in the demand for gas guzzling, sport utility vehicles E) a situation where the quantity of gasoline demanded exceeds the quantity supplied
C) a decrease in the price of a resource used to produce gasoline such as crude oil
Which of the following results in a movement upward along the supply curve for movies in theaters? A) a decrease in the price of movie tickets B) a decrease in movie star salaries C) an increase in the price of movie tickets D) a decrease in the price of downloaded movies E) an increase in the number of theaters
C) an increase in the price of movie tickets
If the price of elasticity of demand for moose hunting lessons is 4.23 then the demand for moose hunting lessons is A) perfectly elastic B) inelastic C) elastic D) perfectly unit elastic E) unit elastic
C) elastic
Which of the following is true? A) if people expect the price of a good will rise in the future, the demand curve shifts leftward B) an increase in population shifts the demand curve leftward C) for an inferior good, when income increases, the demand curve shifts leftward D) if the price of a substitute rises, the demand curve shifts leftward E) an increase in the cost of producing a good shifts the demand curve leftward
C) for an inferior good, when income increases, the demand curve shifts leftward
The longer the time that has elapsed since the price of a good changed, the A) steeper the demand curve B) less elastic the demand for that good C) more elastic the demand for that good D) smaller the amount of that good bought E) fewer substitutes available for the good
C) more elastic the demand for that good
The cross elasticity of demand for strawberry jelly an grape jelly is likely to be A) negative because they are complements B) negative because they are inferior good C) positive because they are substitutes D) negative because they are substitutes E) positive because they are complements
C) positive because they are substitutes
Two brands of water, Natural Water and Mountain Water, are close substitutes. If the price of Mountain Water decreases, the fall in price A) shifts the demand curve fro Natural Water rightward B) increases the demand for Mountain Water C) shifts the demand curve for Natural Water leftward D) increase the price of Natural Water E) more information is needed to determine if the demand curve for Natural Water shifts rightward or leftward
C) shifts the demand curve for Natural Water leftward
Suppose that the equilibrium price and quantity of new houses both increase. Which of the following could be a cause of this change? A) the supply of new houses decreases and the demand for new houses did not change B) the supply of new houses increases and the demand for new houses did not change C) the demand for new houses increases and the supply did not change D) both the supply and the demand for new houses increases and the supply increases by more than the demand E) both the supply and demand for new houses decreased
C) the demand for new houses increased and the supply did not change
Which of the following helps explain why the law of supply exists? A) the law of demand B) sellers realize that if the price increases, they make larger profits and do not need to change their production C) the law of increasing opportunity cost D) larger output result in lower costs of production E) the costs of production remain constant throughout all levels of output
C) the law of increasing opportunity cost
A demand schedule shows A) the quantities that people would plan to buy if they could afford them at each different price when all other influences on buying plans remain the same B) the quantities that people plan to buy at each different income when all other influences on buying plans remain the same C) the quantities that people plan to buy at each different price when all other influences on buying plans remain the same D) the quantities that people plan to buy in all possible circumstances E) the quantities that people plan to buy at each different price as long as producers are willing to supply that quantity
C) the quantities that people plan to buy at the each different price when all other influences on buying plans remain the same
If the cross elasticity of demand between good A and good B is negative, then decrease in the price of good A results in A) a decrease in the supply of good B B) an increase in the supply of good B C) an increase in the demand for good B D) a movement downward along the demand curve for good B E) a decrease in the demand for good B
C0 an increase in the demand for good B
If the price of a good decreases from $9 to $6 and the quantity supplied decreases from 1,500 to 1,300, using the midpoint formula the elasticity of supply equals A) 0.40 B) 0.20 C) 3.20 D) 0.36 E) 2.80
D) 0.36
A firm can sell 10 units if the price is $100 and can sell 8 units if the price is $125. Using the midpoint method, what is the price elasticity of demand? A) 0.50 B) 0.75 C) 0.0 D) 1.00 E) 1.25
D) 1.00
A decrease in the price of a complement in production leads to A) an increase in the supply of the good in question B) no change in the supply of the good in question C) a decrease in the quantity supplied of the good in question D) a decrease in the supply of the good in question E) an increase in the supply of the good in question and a decrease in the quantity supplied of the good in question
D) a decrease in the supply of the good in question
People take fewer trips by airplanes when their incomes fall because of the recession. Trips by airplane must be A) a complement to other goods B) an inferior good C) a substitue for other goods D) a normal good E) an inelastic good
D) a normal good
Which of the following increases the demand for a good or service? A) a fall in the price of the good or service B) a smaller number of consumers wanting to buy the good or service C) a rise in the price of the good or service D) a rise in the price of a substitute good or service E) a ruse in the price of complement
D) a rise in the price of a substitute good or service
A product's price elasticity of demand is likely to be greater A) if it only has a few substitutes B) if consumers spend a small proportion of income on the product C) the less time consumers have to adjust to price changers D) if the product is a luxury good rather than a necessity E) Both answers C and D are correct
D) if the product is a luxury good rather than a necessity
It is very difficult for Gourmet Chocolatier to find inexpensive and available inputs for the business. Because of this, we predict that Gourmet Chocolatier's supply to be A) unit elastic B) elastic C) perfectly elastic D) inelastic E) nonexistent
D) inelastic
Which of the following explains why supply is more elastic as more time passes? A) sellers try to take advantage of a high price in the short term B) the supply curve becomes generally steeper as more time passes C) consumers have more time to search fro substitutes D) it is difficult or impossible to increase the quantity produced in a short period of time E) there is no explanation for this phenomenon
D) it is difficult or impossible to increase the quantity produced in a short period of time
If a good is inferior, then is has an income elasticity of demand that is A) greater than one B) equal to zero C) undefined D) less than zero E) greater than zero
D) less than zero
An inferior good has a _____ elasticity of demand. A) negative cross B) positive income C) positive cross D) negative income E) negative cross
D) negative income
If the price elasticity of supply for a good is 0.75, then A) the supply is elastic B) the supply is inelastic so the demand must also be inelastic C) an increase in the price boosts the quantity supplied by a larger percentage D) the percentage chance in the quantity supplied is less than the percentage change in price E) none of the above answers is correct
D) the percentage change in the quantity supplied is less than the percentage change in price
The price of cotton clothing falls. As a result A) the quantity demanded of cotton clothing decreases B) the demand for cotton clothing increases C) both the demand for cotton clothing increases and the quantity demand of cotton clothing increases D) the quantity demanded of cotton clothing increases E) the demand for cotton clothing decreases
D) the quantity demanded of cotton clothing increases
Suppose the demand for peaches sold from one roadside stand in Georgia is perfectly elastic. As a result, a 7 percent increase in the price charger by the owner of this stand leads to A) no change in the quantity demanded at this stand B) a 7 percent decrease in the quantity demanded at this stand C) a virtually infinite increase in the quantity demanded at this stand D) zero peaches sold by this stand E) a 7 percent decrease in demand at this stand
D) zero peaches sold by this stand
Suppose the price of a ticket to Lenny Kravitz concert is $41 and at that price, the quantity of tickets demanded is 17,000 per concert. Using the midpoint method of calculating percentage changes if Mr. Kravitz raises the price to $48 and the quantity demanded decreases to 16,000, the price elasticity of demand for his concert tickets is A) 1.00 B) 15.73 C) 0.93 D) 6.06 E) 0.39
E) 0.39
Oil refiners can refine a barrel of petroleum so that it yields either more home heating oil or more diesel fuel. If the price of diesel fuel falls, there is A) a decrease in the supply of home heating oil B) an increase in the demand for home heating oil C) a decrease in the quantity of home heating oil supplied D) an increases in the quantity of home heating oil supplied E) an increase in the supply of home heating oil
E) an increases in the supply of home heating oil
If a good is inferior, then it has an income elasticity of demand that is A) equal to zero B) greater than one C) greater than zero D) undefined E) less than zero
E) less than zero
The law of supply reflects the fact that A) higher prices are more attractive to consumers because they signal a higher quality product B) people buy more of a food when its price falls C) the demand curve is downward sloping D) businesses can sell more goods at lower prices E) suppliers have an incentive to use their resources in the way that brings the biggest return
E) suppliers have an incentive to use their resources in the way that brings the biggest return
What happens to the demand for a good if a complement's price increases? A) the demand increases and the demand curve shifts rightward B) the demand decreases and the demand curve shifts rightward C) there is no impact on demand for the good and the demand curve does not shift D) the demand increases and the demand curve shifts leftward E) the demand decreases and the demand curve shifts leftward
E) the demand decreases and the demand curve shifts leftward
What happens to the demand for a good is a complement's price increases? A) the demand increases and the demand curve shifts rightward B) the demand decreases and the demand curve shifts rightward C) there is no impact on demand for the good and the demand curve does not shift D) the demand increases and the demand curve shifts leftward E) the demand decreases and the demand curve shifts leftward
E) the demand decreases and the demand curve shirts leftward
If macaroni and cheese is an inferior good, then a decrease in income results in A) an increase in the demand for macaroni and cheese B) a decrease in the demand for macaroni and cheese C) an increase in the supply of macaroni and cheese D) a decrease in the supply of the macaroni and cheese E) Both answers A and D are correct
A) an increase in the demand for macaroni and cheese
If Pepsi goes on sale and decreases its price by 10 percent and as a result, the quantity demanded of Coca Cola decreases by 5 percent, then Pepsi and Coke are ___ goods. A) inferior B) complementary C) unrelated D) substitue E) normal
D) substitue
If the price of corn increases by 20 percent and the quantity supplied of corn increases by 30 percent, then supply is A) elastic and the elasticity of supply equals 1.5 B) elastic and the elasticity of supply equals 0.66 C) inelastic and the elasticity of supply equals 1.5 D) inelastic and the elasticity of supply equals 0.66 E) either elastic or inelastic but more information about the elasticity of demand is needed to determine which
A) elastic and the elasticity of supply equals 1.5
Which of the following is most likely to have an income elasticity of demand that exceeds one? A) food B) airline travel C) telephone E) tobacco E) alcoholic beverages
B) airline travel
If the cross elasticity of demand between Coke and Pepsi is 2.02, then Coke and Pepsi are A) inferior goods B) normal goods C) complements D) substitutes E) Both answers B and C are correct
D) substitutes
If the price of a Brita water filtration system increases and the quantity demanded of bottled water increases, then these two goods are A) complements B) inferior goods C) inelastic goods D) substitutes E) normal goods
D) substitutes
Which of the following is correct? A) the income elasticity of demand for a normal good is negative B) the cross elasticity of demand equals the percentage chance in demand divided by the percentage change in income C) the cross elasticity of demand for substitute good is negative D) the cross elasticity of demand for substitute goods is positive E) the cross elasticity of demand for normal goods is positive
D) the cross elasticity of demand for substitute goods is positive
