ch 5

A linear, downward-sloping demand curve is a. inelastic at some points, and elastic at others. b. unit elastic. c. elastic. d. inelastic

a

An increase in a good's price reduces the total amount consumers spend on the good if the ________ elasticity of demand is ________ than one. a. price, greater b. income, less c. income, greater d. price, less

a

An increase in the supply of grain will reduce the total revenue grain producers receive if a. the demand curve is inelastic b. the demand curve is elastic c. the supply curve is elastic d. the supply curve is inelastic

a

For a particular good, a 15 percent increase in price causes a 10 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good? a.There are no close substitutes for this good. b.There are many close substitutes for this good. c.This good is a luxury. d.The relevant time horizon is long.

a

If a fisherman must sell all of his daily catch before it spoils for whatever price he is offered, once the fish are caught, the fisherman's price elasticity of supply for fresh fish is a. zero. b. infinite. c. one. d. unable to be determined from this information.

a

If a supply curve for a good is price elastic, then a. the quantity supplied is sensitive to changes in the price of that good. b. the quantity supplied is insensitive to changes in the price of that good. c. the quantity demanded is sensitive to changes in the price of that good. d. the quantity demanded is insensitive to changes in the price of that good. e. none of the above.

a

Marco says that he will spend exactly $100 per month on restaurant meals, regardless of the price of restaurant meals. Marco's demand for restaurant meals is a.perfectly elastic. b.unit elastic. c.perfectly inelastic. d.independent of the price of restaurant meals.

b

If the price elasticity of demand for gift wrap is 0.8, then a 5% increase in the price of gift wrap will decrease the quantity demanded of gift wrap by a.4%, and gift wrap sellers' total revenue will increase as a result. b.16%, and gift wrap sellers' total revenue will increase as a result. c.4%, and gift wrap sellers' total revenue will decrease as a result. d.16%, and gift wrap sellers' total revenue will decrease as a result.

a

In general, a flatter demand curve is more likely to be a. price elastic. b. price inelastic. c. unit price elastic. d. none of the above.

a

Suppose that at a price of $30 per month, there are 30,000 subscribers to cable television in Small Town. If Small Town Cablevision raises its price to $40 per month, the number of subscribers will fall to 20,000. Using the midpoint method for calculating the elasticity, what is the price elasticity of demand for cable television in Small Town? a. 1.4 b. 2.0 c. 0.66 d. 0.75 e. 1.0

a

The price of a good rises from $16 to $24, and the quantity supplied rises from 90 to 110 units. Calculated with the midpoint method, the price elasticity of supply is a. 1/2. b. 1/5. c. 2. d. 5.

a

You are in charge of increasing revenue for the city's bus service. The mayor advises you to reduce the price of a bus ticket to get more riders, but you think a more prudent approach would be to increase the price of a bus ticket. Your approach is based on the assumption that a.the demand for bus tickets is inelastic, and the mayor believes the demand for bus tickets is elastic. b.the demand for bus tickets is elastic, and the mayor believes the demand for bus tickets is inelastic. c.the elasticity for bus tickets is irrelevant, and the mayor believes the demand for bus tickets is relevant. d.there are many substitutes for the bus, and the mayor believes there are few substitutes for the bus.

a

A decrease in supply (shift to the left) will increase total revenue in that market if a. demand is price elastic. b. demand is price inelastic. c. supply is price elastic. d. supply is price inelastic.

b

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

b

For which pairs of goods is the cross-price elasticity most likely to be positive? a.pillows and blankets b.quilts and comforters c.bed frames and mattresses d.sheets and towels

b

If consumers always spend 15 percent of their income on food, then the income elasticity of demand for food is a. 0.15. b. 1.00. c. 1.15. d. 1.50. e. none of the above.

b

If supply is price inelastic, the value of the price elasticity of supply must be a. zero. b. less than 1. c. greater than 1. d. infinite. e. none of the above.

b

If the cross-price elasticity between two goods is negative, the two goods are likely to be a. luxuries. b. complements. c. necessities. d. substitutes.

b

If the price elasticity of supply is zero, the supply curve is a. upward sloping. b. vertical. c. horizontal. d. fairly flat at low quantities but steeper at larger quantities.

b

If there is excess capacity in a production facility, it is likely that the firm's supply curve is a. price inelastic. b. price elastic. c. unit price elastic. d. none of the above.

b

In general, a steeper supply curve is more likely to be a. price elastic. b. price inelastic. c. unit price elastic. d. none of the above.

b

The citizens of Lilliput spend a higher fraction of their income on food than do the citizens of Brobdingnag. The reason could be that a. Lilliput has lower income, and the income elasticity of demand is 1.5. b. Lilliput has lower income, and the income elasticity of demand is 0.5. c. Lilliput has lower food prices, and the price elasticity of demand is zero. d. Lilliput has lower food prices, and the price elasticity of demand is 0.5.

b

The demand for which of the following is likely to be the most price inelastic? a. airline tickets b. transportation c. taxi rides d. bus tickets

b

The price elasticity of demand measures a.how much more of a good buyers purchase when there is a change in the price of a related good. b.buyers' responsiveness to a change in the price of a good. c.the percentage change in quantity demanded divided by the percentage change in income. d.sellers' responsiveness to a change in the price of a good.

b

The price elasticity of supply is computed as the percentage change in a.price divided by the percentage change in quantity supplied. b.quantity supplied divided by the percentage change in price. c.price divided by the percentage change in income. d.quantity supplied divided by the percentage change in cost.

b

When the price of good A is $14, the quantity demanded of good A is 100 units. When the price of good A falls to $12, the quantity demanded of good A rises to 150 units. Using the midpoint method, the price elasticity of demand for good A is a.0.38, and a decrease in price will result in an increase in total revenue for good A. b.2.60, and a decrease in price will result in an increase in total revenue for good A. c.0.38, and a decrease in price will result in a decrease in total revenue for good A. d.2.60, and a decrease in price will result in a decrease in total revenue for good A.

b

At a price of $16.00 per gallon, a hardware store is willing to supply 180 gallons of paint per week. At a price of $20.00, the hardware store is willing to supply 240 gallons per week. Using the midpoint method, the price elasticity of supply is about a.0.29 b.0.78 c.1.29 d.2.20

c

If an increase in the price of a good has no impact on the total revenue in that market, demand must be a. price inelastic. b. price elastic. c. unit price elastic. d. all of the above.

c

If consumers think that there are very few substitutes for a good, then a. supply would tend to be price elastic. b. supply would tend to be price inelastic. c. demand would tend to be price elastic. d. demand would tend to be price inelastic. e. none of the above is true.

c

If the cross-price elasticity of demand for two goods is 0.88, then the two goods are a.inelastic. b.normal. c.substitutes. d.complements.

c

If the income elasticity of demand for a good is negative, it must be a. an elastic good. b. a luxury good. c. an inferior good. d. a normal good.

c

If the price elasticity of demand for a good is 0.45, then which of the following events is consistent with a 9 percent decrease in the quantity of the good demanded? a.A 4.05 percent increase in the price of the good b.A 0.05 percent increase in the price of the good c.A 20 percent increase in the price of the good d.A 0.5 percent increase in the price of the good

c

If the price elasticity of demand for a good is 0.75, then an 8 percent decrease in price results in a a.10.7 percent decrease in the quantity demanded. b.6 percent decrease in the quantity demanded. c.6 percent increase in the quantity demanded. d.10.7 percent increase in the quantity demanded.

c

Matt purchases 4 boxes of spinach and 3 pounds of tomatoes per month when the price of spinach is $1.50 per pound. He purchases 5 boxes of spinach and 5 pounds of tomatoes per month when the price of spinach is $1.00 per pound. Using the midpoint method, Matt's cross-price elasticity of demand for spinach and tomatoes is a.1.25, and they are substitutes. b.0.80, and they are substitutes. c.-1.25, and they are complements. d.-0.80, and they are complements.

c

Suppose that at a price of $30 per month, there are 30,000 subscribers to cable television in Small Town. If Small Town Cablevision raises its price to $40 per month, the number of subscribers will fall to 20,000. At which of the following prices does Small Town Cablevision earn the greatest total revenue? a. $40 per month b. $0 per month c. $30 per month d. either $30 or $40 per month because the price elasticity of demand is 1.0

c

Suppose the cross-price elasticity of demand between pencils and paper is -1.50. This implies that a 10 percent increase in the price of pencils will cause the quantity of paper purchased to a.rise by 15 percent. b.fall by 6.67 percent. c.fall by 15 percent. d.rise by 6.67 percent

c

Suppose the price of tablets increases by 8 percent and producers respond by increasing the quantity supplied by 20 percent. The price elasticity of supply for tablets is a.2.5 and producers are not responsive to the price change. b.0.4 and producers are very responsive to the price change. c.2.5 and producers are very responsive to the price change. d.0.4 and producers are not responsive to the price change.

c

Suppose there is an 18 percent decrease in the price of a good that has a price elasticity of demand of 4. The percent increase in the quantity demanded must be a.4.5 percent. b.0.22 percent. c.72 percent. d.22 percent.

c

The price elasticity of demand is defined as a. the percentage change in price of a good divided by the percentage change in the quantity demanded of that good. b. the percentage change in income divided by the percentage change in the quantity demanded. c. the percentage change in the quantity demanded of a good divided by the percentage change in the price of that good. d. the percentage change in the quantity demanded divided by the percentage change in income. e. none of the above.

c

The price elasticity of supply is computed as the percentage change in a.quantity supplied divided by the percentage change in cost. b.price divided by the percentage change in quantity supplied. c.quantity supplied divided by the percentage change in price. d.price divided by the percentage change in income.

c

The price elasticity of supply measures how responsive a.consumers are to a change in sellers' prices. b.sellers are to a change in the number of luxuries. c.sellers are to a change in price. d.consumers are to a change in input prices.

c

A good tends to have a small price elasticity of demand if a. the long-run response is being measured. b. the market is narrowly defined. c. there are many close substitutes. d. the good is a necessity

d

If demand is linear (a straight line), then price elasticity of demand is a. elastic throughout. b. constant along the demand curve. c. inelastic in the upper portion and elastic in the lower portion. d. elastic in the upper portion and inelastic in the lower portion. e. inelastic throughout.

d

Suppose researchers discover a new shape for cranberry bogs that allow cranberry growers to harvest more cranberries than with the old shape. If the demand for cranberries is relatively inelastic, the discovery will a.raise price and lower total revenues. b.raise both price and total revenues. c.lower price and raise total revenues. d.lower both price and total revenues.

d

Suppose that when the price of good X falls from $60 to $48, the quantity demanded of good Y falls from 10 units to 8 units. Using the midpoint method, the cross-price elasticity of demand is a.-1.0, and X and Y are complements. b.-1.0, and X and Y are substitutes. c.1.0, and X and Y are complements. d.1.0, and X and Y are substitutes.

d

Technological improvements in agriculture that shift the supply of agricultural commodities to the right tend to a. increase total revenue to farmers as a whole because the demand for food is elastic. b. increase total revenue to farmers as a whole because the demand for food is inelastic. c. reduce total revenue to farmers as a whole because the demand for food is elastic. d. reduce total revenue to farmers as a whole because the demand for food is inelastic.

d

The ability of firms to enter and exit a market over time means that, in the long run, a. the demand curve is more elastic. b. the demand curve is less elastic. c. the supply curve is less elastic. d. the supply curve is more elastic.

d

The price elasticity of supply is computed as the percentage change in a.price divided by the percentage change in income. b.price divided by the percentage change in quantity supplied. c.quantity supplied divided by the percentage change in cost. d.quantity supplied divided by the percentage change in price.

d

Which of the following is likely to have the most price elastic demand? a.Vegetables b.Toilet paper c.Water d.Flowers

d

Which of the following would cause a demand curve for a good to be price inelastic? a. There are a great number of substitutes for the good. b. The good is inferior. c. The good is a luxury. d. The good is a necessity.

d

For a good that is a luxury, demand

tends to be elastic