econ130 ch6 hw & quiz

If the demand for wheat is highly price inelastic, an extraordinarily large crop may reduce farm incomes. Correct A. True B. False

B.in the long run.

An income elasticity coefficient of -1.8 means the product is a normal good. True Correct False

False

Income elasticity measures the effect of a change in income on the purchases of some good or service. Correct True False

True

In which price range of the accompanying demand schedule is demand elastic? Picture Correct A.$4-$3. B.$3-$2. C.$2-$1. D.Below $1.

A.$4-$3.

Refer to the diagrams. The case of a normal good is represented by figure: Correct A.A. B.B. C.C. D.D.

A.A.

If quantity demanded is completely unresponsive to price changes, demand is: Correct A.perfectly inelastic. B.perfectly elastic. C.relatively inelastic. D.relatively elastic.

A.perfectly inelastic.

The supply curve of antique reproductions is: Correct A.relatively elastic. B.relatively inelastic. C.perfectly inelastic. D.unit elastic.

A.relatively elastic.

Refer to the data. If this demand schedule were graphed, we would find that: A. its slope diminishes as we move southeast down the curve. B. its slope diminishes as we move northwest up the curve. Correct C. its slope is constant throughout. D. the data are inconsistent with the law of demand.

C. its slope is constant throughout.

If the income elasticity of demand for lard is -3.00, this means that: A. lard is a substitute for butter. B. lard is a normal good. Correct C. lard is an inferior good. D. more lard will be purchased when its price falls.

C. lard is an inferior good.

Suppose the supply of product X is perfectly inelastic. If there is an increase in the demand for this product, equilibrium price: A.will decrease but equilibrium quantity will increase. B.and quantity will both decrease. C.will increase, but equilibrium quantity will decline. Correct D.will increase, but equilibrium quantity will be unchanged.

D.will increase, but equilibrium quantity will be unchanged.

Refer to the diagrams. In which case would the coefficient of income elasticity be positive? A. A B. B C. C D. D

A. A

Generally speaking, the demand for luxury goods is more price elastic than is the demand for necessities. Correct A. True B. False

A. True

If price and total revenue are directly related, demand is inelastic. Correct A. True B. False

A. True

Income elasticity measures the effect of a change in income on the purchases of some good or service. Correct A. True B. False

A. True

Refer to the data. The demand for this product is elastic in the $8-$7 price range. Correct A. True B. False

A. True

(Last Word) Which of the following is not an example of pricing based on group differences in elasticity of demand? A. Senior-citizen discounts at restaurants and motels. Correct B. Cash rebates for purchases of automobiles. C. Child discounts for admission to theme parks. D. Discounted student prices for visits to museums.

B. Cash rebates for purchases of automobiles.

The price elasticity of demand for beef is about 0.60. Other things equal, this means that a 20 percent increase in the price of beef will cause the quantity of beef demanded to: A.increase by approximately 12 percent. Correct B.decrease by approximately 12 percent. C.decrease by approximately 32 percent. D.decrease by approximately 26 percent.

B.decrease by approximately 12 percent.

If the demand for farm products is price inelastic, a good harvest will cause farm revenues to: A.increase. Correct B.decrease. C.be unchanged. D.either increase or decrease, depending on what happens to supply.

B.decrease.

An antidrug policy that reduces the supply of heroin might: Correct A. increase street crime because the addict's demand for heroin is highly inelastic. B. reduce street crime because the addict's demand for heroin is highly elastic. C. reduce street crime because the addict's demand for heroin is highly inelastic. D. increase street crime because the addict's demand for heroin is highly elastic.

A. increase street crime because the addict's demand for heroin is highly inelastic.

Refer to the table. Over the $8-$6 price range, supply is: Correct A. inelastic. B. elastic. C. perfectly inelastic. D. perfectly elastic.

A. inelastic.

Suppose the price of local cable TV service increased from $16.20 to $19.80 and as a result the number of cable subscribers decreased from 224,000 to 176,000. Along this portion of the demand curve, price elasticity of demand is: A. 0.8. Correct B. 1.2. C. 1.6. D. 8.0.

B. 1.2.

The supply curve of a one-of-a-kind original painting is: A.relatively elastic. B.relatively inelastic. Correct C.perfectly inelastic. D.perfectly elastic.

C.perfectly inelastic.

The demand for a product is inelastic with respect to price if: Correct A.consumers are largely unresponsive to a per unit price change. B.the elasticity coefficient is greater than 1. C.a drop in price is accompanied by a decrease in the quantity demanded. D.a drop in price is accompanied by an increase in the quantity demanded.

A.consumers are largely unresponsive to a per unit price change.

(Last Word) Microsoft charges a substantially lower price for a software upgrade than for the initial purchase of the software. This implies that Microsoft views the demand curve for the software upgrade to be: A.more elastic than the demand for the original software. B.upsloping rather than downsloping. C.less elastic than the demand for the original software. D.of less value than the original software.

A.more elastic than the demand for the original software.

An income elasticity coefficient of -1.8 means the product is a normal good. A. True B. False

B. False

Generally speaking, the smaller the percentage of one's total budget devoted to a particular product, the more price elastic will be the demand for that product. Correct A. True B. False

B. False

The smaller the number of good substitutes for a product, the greater will be the price elasticity of demand for it. A. True B. False

B. False

Which type of goods is most adversely affected by recessions? A. Goods for which the income elasticity coefficient is relatively low or negative. Correct B. Goods for which the income elasticity coefficient is relatively high and positive. C. Goods for which the cross elasticity coefficient is positive. D. Goods for which the cross elasticity coefficient is negative.

B. Goods for which the income elasticity coefficient is relatively high and positive.

(Consider This) The supply of higher education in the United States is: A. highly price elastic. B. highly price inelastic. C. unitary elastic with respect to price. D. perfectly price elastic.

B. highly price inelastic.

The diagram concerns supply adjustments to an increase in demand (D1 to D2) in the immediate market period, the short run, and the long run. In the immediate market period, the increase in demand will: A. have no effect on either equilibrium price or quantity. B. increase equilibrium price but not equilibrium quantity. C. increase equilibrium quantity but not equilibrium price. D. increase both equilibrium price and quantity.

B. increase equilibrium price but not equilibrium quantity.

Supply curves tend to be: A. perfectly elastic in the long run because consumer demand will have sufficient time to adjust fully to changes in supply. Correct B. more elastic in the long run because there is time for firms to enter or leave the industry. C. perfectly inelastic in the long run because the law of scarcity imposes absolute limits on production. D. less elastic in the long run because there is time for firms to enter or leave an industry.

B. more elastic in the long run because there is time for firms to enter or leave the industry.

Refer to the information. If the Mudhens' management wanted to maximize total revenue from the game, it would set the ticket price at: A.$5. Correct B.$7. C.$9. D.$13.

B.$7.

The elasticity of supply of product X is unitary if the price of X rises by: A.5 percent and quantity supplied rises by 7 percent. Correct B.8 percent and quantity supplied rises by 8 percent. C.10 percent and quantity supplied stays the same. D.7 percent and quantity supplied rises by 5 percent.

B.8 percent and quantity supplied rises by 8 percent.

Refer to the diagram. Total revenue at price P1 is indicated by area(s): A.C + D. Correct B.A + B. C.A + C. D.A.

B.A + B.

Refer to the diagrams. In which case would the coefficient of income elasticity be negative? A.A B.B C.C D.D

B.B

The main determinant of elasticity of supply is the: A.number of close substitutes for the product available to consumers. Correct B.amount of time the producer has to adjust inputs in response to a price change. C.urgency of consumer wants for the product. D.number of uses for the product.

B.amount of time the producer has to adjust inputs in response to a price change.

Refer to the data. The price elasticity of demand is unity: A.throughout the entire price range because the slope of the demand curve is constant. Correct B.in the $4-$3 price range only. C.over the entire $3-$1 price range. D.over the entire $6-$4 price range.

B.in the $4-$3 price range only.

For an increase in demand, the price effect is smallest and the quantity effect is largest: A.when supply is least elastic. Correct B.in the long run. C.in the short run. D.in the immediate market period.

B.in the long run.

The basic formula for the price elasticity of demand coefficient is: A.absolute decline in quantity demanded/absolute increase in price. Correct B.percentage change in quantity demanded/percentage change in price. C.absolute decline in price/absolute increase in quantity demanded. D.percentage change in price/percentage change in quantity demanded.

B.percentage change in quantity demanded/percentage change in price.

Refer to the diagram. In the P3P4 price range, demand is: A.of unit elasticity. Correct B.relatively inelastic. C.relatively elastic.

B.relatively inelastic.

It takes a considerable amount of time to increase the production of pork. This implies that: A.a change in the demand for pork will not affect its price in the short run. Correct B.the short-run supply curve for pork is less elastic than the long-run supply curve for pork. C.an increase in the demand for pork will elicit a larger supply response in the short run than in the long run. D.the long-run supply curve for pork is less elastic than the short-run supply curve for pork.

B.the short-run supply curve for pork is less elastic than the long-run supply curve for pork.

Suppose that a 10 percent increase in the price of normal good Y causes a 20 percent increase in the quantity demanded of normal good X. The coefficient of cross elasticity of demand is: A. negative and therefore these goods are substitutes. B. negative and therefore these goods are complements. C. positive and therefore these goods are substitutes. D. positive and therefore these goods are complements.

C. positive and therefore these goods are substitutes.

The demand for a necessity whose cost is a small portion of one's total income is: A. perfectly price inelastic. B. perfectly price elastic. Correct C. relatively price inelastic. D. relatively price elastic.

C. relatively price inelastic.

The diagram concerns supply adjustments to an increase in demand (D1 to D2) in the immediate market period, the short run, and the long run. On the basis of this illustration, we can conclude that: A. short-run adjustments are more economically efficient than are long-run adjustments. B. the amount of time producers have to adjust to a change in demand is not a determinant of supply elasticity. Correct C. supply is more elastic the greater the amount of time producers have to adjust to a change in demand. D. supply is less elastic the greater the amount of time producers have to adjust to a change in demand.

C. supply is more elastic the greater the amount of time producers have to adjust to a change in demand.

(Last Word) Based on the concept of price elasticity of demand, which of the following cases is most likely to occur? A.Golf courses charging higher prices for golf during the week than on weekends. B.Movie theaters charging higher prices for senior citizens. C.Colleges charging lower tuition for low-income students. D.Airlines charging lower fares for business travelers.

C.Colleges charging lower tuition for low-income students.

Which of the following is correct? A.If demand is elastic, an increase in price will increase total revenue. B.If demand is elastic, a decrease in price will decrease total revenue. Correct C.If demand is elastic, a decrease in price will increase total revenue. D.If demand is inelastic, an increase in price will decrease total revenue.

C.If demand is elastic, a decrease in price will increase total revenue.

Which of the following goods will least likely suffer a decline in demand during a recession? A.Dinner at a nice restaurant B.iPods Correct C.Toothpaste D.Plasma screen and LCD TVs

C.Toothpaste

When the percentage change in price is greater than the resulting percentage change in quantity demanded: A.a decrease in price will increase total revenue. B.demand may be either elastic or inelastic. Correct C.an increase in price will increase total revenue. D.demand is elastic.

C.an increase in price will increase total revenue.

A perfectly inelastic demand curve: A.has a price elasticity coefficient greater than unity. B.has a price elasticity coefficient of unity throughout. Correct C.graphs as a line parallel to the vertical axis. D.graphs as a line parallel to the horizontal axis.

C.graphs as a line parallel to the vertical axis.

If the University Chamber Music Society decides to raise ticket prices to provide more funds to finance concerts, the Society is assuming that the demand for tickets is: A.parallel to the horizontal axis. B.shifting to the left. Correct C.inelastic. D.elastic.

C.inelastic.

Refer to the information and assume the stadium capacity is 5,000. The supply of seats for the game: A.varies inversely with ticket prices. B.varies directly with ticket prices. Correct C.is perfectly inelastic. D.is perfectly elastic.

C.is perfectly inelastic.

Refer to the information and assume the stadium capacity is 5,000. If the Mudhens' management wanted a full house for the game, it would: A.set price so as to maximize its total revenue. B.encourage scalpers to sell their tickets for more than $7. Correct C.set ticket prices at $5. D.set ticket prices at $9.

C.set ticket prices at $5.

Farmers often find that large bumper crops are associated with declines in their gross incomes. This suggests that: A.farm products are normal goods. B.farm products are inferior goods. Correct C.the price elasticity of demand for farm products is less than 1. D.the price elasticity of demand for farm products is greater than 1.

C.the price elasticity of demand for farm products is less than 1.

We would expect the cross elasticity of demand for Pepsi to be greater in relation to other soft drinks than that for soft drinks in general because: A.soft drinks are normal goods. B.the income effect always exceeds the substitution effect. Correct C.there are fewer good substitutes for soft drinks as a whole than for Pepsi specifically. D.there are more good substitutes for soft drinks as a whole than for Pepsi specifically.

C.there are fewer good substitutes for soft drinks as a whole than for Pepsi specifically.

The supply of product X is inelastic (but not perfectly inelastic) if the price of X rises by: A. 5 percent and quantity supplied rises by 7 percent. B. 8 percent and quantity supplied rises by 8 percent. C. 10 percent and quantity supplied remains the same. Correct D. 7 percent and quantity supplied rises by 5 percent.

D. 7 percent and quantity supplied rises by 5 percent.

For a linear demand curve: A. elasticity is constant along the curve. B. elasticity is unity at every point on the curve. C. demand is elastic at low prices. D. demand is elastic at high prices.

D. demand is elastic at high prices.

A leftward shift in the supply curve of product X will increase equilibrium price to a greater extent the: A. more elastic the supply curve. B. larger the elasticity of demand coefficient. C. more elastic the demand for the product. Correct D. more inelastic the demand for the product.

D. more inelastic the demand for the product.

The demand for a luxury good whose purchase would exhaust a big portion of one's income is: A. perfectly price inelastic. B. perfectly price elastic. C. relatively price inelastic. Correct D. relatively price elastic.

D. relatively price elastic.

The price elasticity of demand for widgets is 0.80. Assuming no change in the demand curve for widgets, a 16 percent increase in sales implies a: A.1 percent reduction in price. B.12 percent reduction in price. C.40 percent reduction in price. Correct D.20 percent reduction in price.

D.20 percent reduction in price.

Suppose the price of a product rises and the total revenue of sellers increases. A.It can be concluded that the demand for the product is elastic. B.It can be concluded that the supply of the product is elastic. C.It can be concluded that the supply of the product is inelastic. Correct D.No conclusion can be reached with respect to the elasticity of supply.

D.No conclusion can be reached with respect to the elasticity of supply.

Assume that a 6 percent increase in income in the economy produces a 3 percent increase in the quantity demanded of good X. The coefficient of income elasticity of demand is: A.negative and therefore X is an inferior good. B.positive but less than one; therefore X is an inferior good. C.positive and therefore X is an inferior good. Correct D.positive and therefore X is a normal good.

D.positive and therefore X is a normal good.

Refer to the diagram and assume that price increases from $2 to $10. The coefficient of price elasticity of demand (midpoint formula) relating to this change in price is about: Correct A..25 and demand is inelastic. B.1.5 and demand is elastic. C.1 and demand is unit elastic. D..67 and demand is inelastic.

A..25 and demand is inelastic.

Refer to the diagram. If price falls from P1 to P2, total revenue will become area(s): Correct A.B + D. B.C + D. C.A + C. D.C.

A.B + D.

(Last Word) Which of the following is not an example of pricing based on group differences in elasticity of demand? A.Senior-citizen discounts at restaurants and motels. B.Cash rebates for purchases of automobiles. C.Child discounts for admission to theme parks. D.Discounted student prices for visits to museums.

B.Cash rebates for purchases of automobiles.

The demand for a necessity whose cost is a small portion of one's total income is: A.perfectly price inelastic. B.perfectly price elastic. Correct C.relatively price inelastic. D.relatively price elastic.

C.relatively price inelastic.

The diagram suggests that: A.X and Y are both inferior goods. B.X and Y are both normal goods. C.X and Y are substitute goods. Correct D.X and Y are independent goods.

D.X and Y are independent goods.

For a linear demand curve: A.elasticity is constant along the curve. B.elasticity is unity at every point on the curve. C.demand is elastic at low prices. Correct D.demand is elastic at high prices.

D.demand is elastic at high prices.

The diagram concerns supply adjustments to an increase in demand (D1 to D2) in the immediate market period, the short run, and the long run. In the long run, the increase in demand will: A.have no effect on either equilibrium price or quantity. B.increase equilibrium price but not equilibrium quantity. C.increase equilibrium quantity but not equilibrium price. D.increase both equilibrium price and quantity.

D.increase both equilibrium price and quantity.

The concept of price elasticity of demand measures: A.the slope of the demand curve. B.the number of buyers in a market. C.the extent to which the demand curve shifts as the result of a price decline. Correct D.the sensitivity of consumer purchases to price changes.

D.the sensitivity of consumer purchases to price changes.

The larger the coefficient of price elasticity of demand for a product, the: A.larger the resulting price change for an increase in supply. B.more rapid the rate at which the marginal utility of that product diminishes. C.less competitive will be the industry supplying that product. Correct D.smaller the resulting price change for an increase in supply.

will be the industry supplying that product. Correct D.smaller the resulting price change for an increase in supply.