microeconomics quiz 5

The production of methamphetamine (meth) is a social problem in the Midwest. Iowa is considering two potential programs: Operation Methbust would increase the number of sheriffs' deputies to search out and destroy methamphetamine labs. Operation Say No to Meth would increase the training required of public school teachers so that they could better educate students about the health risks of using meth. Assuming that each program were successful, which of the following statements is correct?

Operation Methbust would reduce the supply of meth; Operation Say No would reduce the demand for meth.

Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. Total consumer spending on milk will

increase, and total consumer spending on beef will decrease.

When the price of candy bars is $1.00, the quantity demanded is 500 per day. When the price falls to $0.80, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for candy bars is

inelastic.

Goods with many close substitutes tend to have

more elastic demands

Which of the following could be the price elasticity of demand for a good for which an increase in price would increase revenue? a) 0.3 b) 1 c) 1.8 d) None of the above could be correct.

0.3

When the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A rises to $70, the quantity demanded of good A falls to 400 units. Using the midpoint method, the price elasticity of demand for good A is

0.67, and an increase in price will result in an increase in total revenue for good A.

A bakery would be willing to supply 500 bagels per day at a price of $0.50 each. At a price of $0.80, the bakery would be willing to supply 1,100 bagels. Using the midpoint method, the price elasticity of supply for bagels is about

1.63

If the price elasticity of supply is 1.2, and a price increase led to a 5% increase in quantity supplied, then the price increase is about

4.2%

Which of the following statements about the consumers' responses to rising gasoline prices is correct? a) Because gasoline is a necessity, consumers do not decrease their quantity demanded in either the short run or the long run. b) Consumers react to a 10% increase in price with about a 10% decrease in quantity demanded in both the short run and long run. c) Consumers decrease their quantity demanded more in the short run than in the long run. d) Consumers decrease their quantity demanded more in the long run than in the short run.

Consumers decrease their quantity demanded more in the long run than in the short run.

For a particular good, a 5 percent increase in price causes a 15 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good? a) There are many substitutes for this good. b) The good is a necessity. c) The market for the good is broadly defined. d) The relevant time horizon is short.

There are many substitutes for this good.

elasticity is

a measure of how much buyers and sellers respond to changes in market conditions.

For which pairs of goods is the cross-price elasticity most likely to be negative? a) peanut butter and jelly b) automobile tires and coffee c) pens and pencils d) paperback novels and electronic books for e-readers

a) peanut butter and jelly

In which of the following situations will total revenue increase? a) Price elasticity of demand is 1.2, and the price of the good decreases. b) Price elasticity of demand is 0.5, and the price of the good increases. c) Price elasticity of demand is 3.0, and the price of the good decreases. d) all of the above

all of the above

In the market for oil in the short run, demand

and supply are both inelastic

The price elasticity of demand measures

buyers' responsiveness to a change in the price of a good.

If the quantity demanded of a certain good responds only slightly to a change in the price of the good, then the

demand for the good is said to be inelastic.

For which of the following goods is the income elasticity of demand likely highest? a) water b) diamonds c) hamburgers d) housing

diamonds

When quantity demanded responds strongly to changes in price, demand is said to be

elastic

When the price of an eBook is $15.00, the quantity demanded is 400 eBooks per day. When the price falls to $10.00, the quantity demanded increases to 700. Given this information and using the midpoint method, we know that the demand for eBooks is

elastic

The demand for grape-flavored Hubba Bubba bubble gum is likely

elastic because there are many close substitutes for grape-flavored Hubba Bubba.

Last year, Joan bought 50 pounds of hamburger when her household's income was $40,000. This year, her household income was only $30,000 and Joan bought 60 pounds of hamburger. All else constant, Joan's income elasticity of demand for hamburger is

negative, so Joan considers hamburger to be an inferior good.

In the case of perfectly inelastic demand,

quantity demanded stays the same whenever price changes.

The smaller the price elasticity of demand, the

smaller the responsiveness of quantity demanded to a change in price.

Which of the following is not a determinant of the price elasticity of demand for a good? a) the time horizon b) the steepness or flatness of the supply curve for the good c) the definition of the market for the good d) the availability of substitutes for the good

the steepness or flatness of the supply curve for the good

A key determinant of the price elasticity of supply is the

time horizon