Module 4 Complete Quiz

Bailey's Barber Shop knows that a 5% increase in the price of their haircuts results in a 15% decrease in the number of haircuts purchased. What is the elasticity of demand facing Bailey's Barber Shop?

3.0

If Stephanie buys a laptop for $700 and the maximum she would have paid was $1,000, which of the following is true?

Stephanie received a consumer surplus of $300

Assume a price floor is imposed in the wheat market at the equilibrium price and that a price ceiling is imposed in the gasoline market at the equilibrium price. An increase in supply in both the wheat and gasoline markets will create:

a surplus in the wheat market and an increase the quantity of gasoline traded

The price elasticity of demand coefficient for gourmet coffee is estimated to be equal to 1.6. It is expected, therefore, that a 5% increase in price would lead to:

an 8% decrease in the quantity of gourmet coffee demanded

The difference between the value of a good to consumers and its price is known as:

consumer surplus

For a given increase in price, a greater elasticity of demand will result in a greater

decrease in quantity demanded

To the extent that a governmental price control succeeds in affecting price, it can be expected to lead to a corresponding:

decrease in the volume of sales whether the price is forced up or down

If an increase in price causes total expenditure on a product to decrease, then the price elasticity of demand is:

elastic

For a given increase in price, the greater is the elasticity of supply, the greater is the resulting

increase in quantity supplied

A government mandated price increase for doodads will:

increase the quantity of doodads supplied but decrease the quantity of doodads demanded

A recent study at a liberal arts college concluded that demand elasticity is 0.91 for college courses. The administration is considering a tuition increase to help balance the budget. An economist might advise the school to:

increase tuition in order to increase revenue

A steel mill raises the price of steel by 20%, which results in a 7% reduction in the quantity of steel demanded. The demand curve facing this firm is:

inelastic

Supply is said to be ____ when the quantity supplied is not very responsive to changes in price

inelastic

The current supply of Rembrandt paintings:

is perfectly inelastic

Unlike its competitors, one glass producer can use its equipment to make either windows for houses or windows for cars. Other things equal, compared to its competitors, its supply curve of windows for cars would be:

more elastic than the supply curves of competitors

When demand is elastic:

price elasticity of demand is greater than one the percentage change in quantity demanded resulting from a price change is greater than the percentage change in price consumers are relatively responsive to changes in price

If the demand is perfectly elastic, what would happen to the quantity demanded if there is a tiny increase in price?

quantity demanded will fall to zero

Total revenue represents the amount that:

sellers receive for a good or service which is computed as PxQ

If the government wanted to reduce the quantity of a good traded, it could do so by:

setting a price ceiling for the good below the equilibrium price setting a price floor for the good above the equilibrium price tax the good more heavily tax an input used intensively in the industry more heavily

Ceteris paribus, if an 8% increase in price leads to a 6% increase in the quantity supplied, then:

supply is inelastic

If the elasticity of demand coefficient for a good is one-sixth (in absolute terms), we know:

that for every 1% increase in quantity, there will be a 6% decrease in price.

A 25% decrease in the price of breakfast cereal leads to a 20% increase in the quantity of cereal demanded. As a result:

total revenue will decrease.

Along a supply curve, a decrease in price will increase total revenue:

under no circumstances

A secondary effect of an action that may occur after the initial effects is known as a(n):

unintended consequence

Demand is said to be ____ when the quantity demanded changes the same proportion as the price

unit elastic