Econ Quiz 6

Suppose that the price of a money clip increases from $0.75 to $0.90 and quantity supplied rises from 8,000 units to 10,000 units. Use the midpoint formula to calculate the price elasticity of supply. a) 1.22 b) 1.0 c) 0.82 d) 0.07

a) 1.22

Which of the following would result in a higher absolute value of the price elasticity of demand for a product? a) A wide variety of substitutes are available for the good. b) The time period under consideration is short. c) The good is a necessity. d) The expenditure on the good is small relative to one's budget

a) A wide variety of substitutes are available for the good.

A service station owner in Staten Island, New York, was worried that raising the price of gasoline would cause the quantity demanded to fall by so much that he would be in a worse situation than if he did not raise the price. If raising the price of gasoline would cause the owner to receive less total revenue from the sale of gasoline, the demand for gasoline is a) elastic. b) inelastic. c) unit elastic. d) perfectly inelastic.

a) elastic.

Price elasticity of supply is used to gauge a) how responsive suppliers are to price changes. b) how responsive suppliers are to changes in future prices. c) how responsive suppliers are to a change in demand. d) how responsive sales are to a change in input prices.

a) how responsive suppliers are to price changes.

Last year, Sefton purchased 60 pounds of potatoes to feed his family of five when his household income was $30,000. This year, his household income fell to $20,000 and Sefton purchased 80 pounds of potatoes. All else constant, Sefton's income elasticity of demand for potatoes is a) negative, so Sefton considers potatoes to be an inferior good. b) positive, so Sefton considers potatoes to be an inferior good. c) positive, so Sefton considers potatoes to be a normal good and a necessity. d) negative, so Sefton considers potatoes to be a normal good.

a) negative, so Sefton considers potatoes to be an inferior good.

Which of the following is not a determinant of a good's price elasticity of demand? a) the slope of the demand curve b) the share of the good in the consumer's total budget c) whether the good is a luxury or a necessity d) the passage of time

a) the slope of the demand curve

In September 2012, the average price of gasoline in the United States was $3.91 per gallon and consumers bought 5 percent less gasoline than they had during September 2011, when the average price was $3.66 per gallon. Based on these numbers, what was the price elasticity of demand for gasoline from September 2011 to September 2012? a) -0.33 b) -0.76 c) -2.96 d) -6.75

b) -0.76

Economists estimated that the price elasticity of beer is -0.30 and the income elasticity of beer is 0.09. This means that a) an increase in the price of beer will increase the quantity demanded of beer and beer is a normal good. b) an increase in the price of beer will lead to an increase in revenue for beer sellers and beer is a normal good. c) a decrease in the price of beer will lead to an increase in revenue for beer sellers and beer is an inferior good. d) an increase in the price of beer will lead to a decrease in the quantity demanded of beer and beer is a necessity.

b) an increase in the price of beer will lead to an increase in revenue for beer sellers and beer is a normal good.

Which of the following goods would have the most inelastic demand? a) ski vacations b) bread c) luxury cars d) big screen TVs

b) bread

Which of the following products comes closest to having a perfectly inelastic demand? a) gasoline b) cholesterol medication in general c) iPhones d) bus rides

b) cholesterol medication in general

If demand is inelastic, the absolute value of the price elasticity of demand is a) one. b) less than one. c) greater than one. d) greater than the absolute value of the slope of the demand curve.

b) less than one.

The price elasticity of the supply of teenage labor services is approximately 1.36. Suppose the minimum wage rises from $7.25 per hour to $8.75. Using the midpoint formula, calculate the approximately change in the quantity supplied of teenage labor. a) 7.3 percent b) 14.4 percent c) 25.5 percent d) There is insufficient information to answer the question.

c) 25.5 percent

Seth is a competitive body builder. He says he has to have his 12-oz package of protein powder to "feed his muscles" every day. On the basis of this information, what can you conclude about his price elasticity of demand for protein powder? a) It is elastic. b) It is perfectly elastic. c) It is perfectly inelastic. d) The price elasticity coefficient is 0.

c) It is perfectly inelastic.

Suppose the California Nurses Union successfully secured a 12 percent increase in the wages of registered nurses. If a hospital responds by reducing the quantity of registered nurses hired and increasing the quantity of physician's assistants hired, what conclusion can you draw? a) Physician's assistants are more valuable in terms of their productivity. b) The price elasticity of demand for registered nurses is negative while the price elasticity of demand for physician's assistants is positive. c) The cross-price elasticity of demand between registered nurses and physician's assistants is positive. d) The cross-price elasticity of demand between registered nurses and physician's assistants is negative.

c) The cross-price elasticity of demand between registered nurses and physician's assistants is positive.

If a firm wanted to know whether the demand for its product was elastic, unit-elastic, or inelastic, then the firm could a) survey competitors and ask them what they think demand elasticity is for the product. b) talk to its customers. c) change price a little bit and observe what happens to total revenue. d) not do anything as there is no way to find an elasticity value.

c) change price a little bit and observe what happens to total revenue.

Consider the following pairs of items: a) shampoo and conditioner b) iPhones and earbuds c) a laptop computer and a desktop computer d) beef and pork e) air-travel and weed killer Which of the pairs listed will have cross-price elasticity of zero? a) a and b only b) c only since most people cannot do without computers c) e only d) none of the pairs listed

c) e only

Price elasticity of demand measures a) how responsive suppliers are to price changes. b) how responsive sales are to changes in the price of a related good. c) how responsive quantity demanded is to a change in price. d) how responsive sales are to a change in buyers' incomes

c) how responsive quantity demanded is to a change in price.

If you expect the economy is going to boom and average income in the economy will rise in the foreseeable future, the type of firm that would be able to increase its sales if your expectations are met is a) one that sells an inferior good. b) one that sells a necessity good. c) one that sells a luxury good. d) one that sells a price inelastic good.

c) one that sells a luxury good.

When there few close substitutes available for a good, demand tends to be a) perfectly inelastic. b) perfectly elastic. c) relatively inelastic. d) relatively elastic.

c) relatively inelastic.

If the percentage increase in price is 15 percent and the value of the price elasticity of demand is -3, then quantity demanded a) will increase by 45 percent. b) will increase by 5 percent. c) will decrease by 45 percent. d) will decrease by 5 percent.

c) will decrease by 45 percent.