ECON Quiz 6 SG

1. If the price of a good increases by 20% and the quantity demanded changes by 15%, then the price elasticity of demand is equal to: A) 0.75. B) approximately 0.33. C) approximately 1.33. D) 1.

A) 0.75.

20. (Figure: Supply Curves) Look at the figure Supply Curves. Which graph shows a perfectly inelastic supply curve? A) A B) B C) C D) D

A) A

16. The income elasticity of demand for peaches has been estimated to be 1.43. If income grows by 15% in a period, how will that affect total revenue from peaches in that period, all other things unchanged? A) Total revenue will rise. B) Total revenue will fall. C) Total revenue will remain unchanged. D) Not enough information is given to answer the question.

A) Total revenue will rise.

15. If the income elasticity of demand for a good is negative, the good is said to be: A) an inferior good. B) a negative good. C) a positive good. D) a normal good.

A) an inferior good.

13. Suppose the price of cereal rose by 25% and the quantity of milk sold decreased by 50%. We know that the: A) cross-price elasticity between cereal and milk is -2. B) cross-price elasticity between cereal and milk is -0.5. C) price elasticity of demand for milk is 2. D) cross-price elasticity of demand for milk is 2.

A) cross-price elasticity between cereal and milk is -2.

5. The university president believes that increasing student tuition by 5% will increase revenues. If the president is correct that revenues will increase, then the tuition increase will: A) reduce the number of students enrolling by less than 5%. B) reduce the number of students enrolling by more than 5%. C) reduce the number of students enrolling by exactly 5%. D) increase the number of students enrolling by 5%.

A) reduce the number of students enrolling by less than 5%.

6. The university hopes to raise more revenue by increasing parking fees. This plan will work only if: A) the price effect is larger than the quantity effect. B) the price effect is smaller than the quantity effect. C) the price effect and quantity effect are the same. D) there is no price or quantity effect.

A) the price effect is larger than the quantity effect.

2. The Cozy Chair Company believes it can sell 200 chairs at $200 per chair or 300 chairs at $150 per chair. Using the midpoint formula, what do they think is the price elasticity of demand? A) 2.5. B) 1.4. C) 0.7. D) 0.5.

B) 1.4.

3. (Figure: The Demand for Shirts) Look at the figure The Demand for Shirts. The price elasticity of demand for the segment AB, using the midpoint method, is: A) 13. B) 11. C) 0.91. D) 0.1.

B) 11.

12. Suppose the cross-price elasticity between demand for Burger King burgers and the price of McDonald's burgers is 0.8. If McDonald's increases the price of its burgers by 10%, then: A) Burger King will sell 10% more burgers. B) Burger King will sell 8% more burgers. C) Burger King will sell 8% fewer burgers. D) We cannot tell what will happen to Burger King, but McDonald's will sell 8% fewer burgers.

B) Burger King will sell 8% more burgers.

7. If a good is a necessity with few substitutes, then demand will tend to: A) be more price-elastic. B) be less price-elastic. C) have price elasticity equal to 1. D) be the same as that of a luxury good.

B) be less price-elastic.

9. If a good is very inexpensive, but it is a necessity, you would predict that demand for the good is: A) is price-elastic. B) is price-inelastic. C) is price unit-elastic. D) has indeterminable price elasticity.

B) is price-inelastic.

11. Suppose the cross-price elasticity of demand for butter and margarine is equal to 0.96 but the cross price elasticity for water and lemons is -0.13. This means that butter and margarine are ________ while water and lemons are ________. A) complements; substitutes B) substitutes; complements C) inelastic goods; elastic goods D) elastic goods; complements

B) substitutes; complements

8. A good is likely to have an inelastic demand curve if: A) the consumer has significant time to respond to the price change. B) the good has few available substitutes. C) the good is a luxury. D) the good accounts for a large share of consumer income.

B) the good has few available substitutes.

19. Suppose the price of university sweatshirts increases from $10 to $20 and the quantity supplied increases from 20 to 30. The price elasticity of supply, using the midpoint formula, is: A) 0.66. B) 1.50. C) 0.60. D) 1.66.

C) 0.60.

14. If the income elasticity of demand for a good is positive, the good is said to be: A) an inferior good. B) a substitute good. C) a normal good. D) a positive good.

C) a normal good.

10. Yovanka has diabetes and she will pay any amount of money to buy the insulin she needs to stay alive. Yovanka's demand for insulin is: A) price-inelastic. B) price-elastic. C) perfectly price-inelastic. D) perfectly price-elastic.

C) perfectly price-inelastic.

17. Eric's income increased from $40,000 to $50,000 per year. Eric's consumption of tickets to pro football games increased from two to four per year. Using the midpoint formula, his income elasticity of demand for pro football game tickets is equal to ________, and football game tickets are ________ goods. A) -1/3; inferior B) +2/3; normal C) -3; inferior D) +3; normal

D) +3; normal

4. (Figure: The Demand for Shirts) Look again at the figure The Demand for Shirts. The price elasticity of demand for the segment EF, using the midpoint method, is: A) 1.3. B) 1. C) 0.7. D) 0.33.

D) 0.33.

18. (Table: Market for Pizza) Look at the table Market for Pizza. In the table, when income changes from $1,000 to $1,400 per month, the income elasticity of demand for pizza at a price of $14 per pizza is: A) -1. B) 1. C) 1.25. D) 1.5.

D) 1.5.

21. (Figure: Supply Curves) Look at the figure Supply Curves. Which graph shows a perfectly elastic supply curve? A) A B) B C) C D) D

D) D