Economics Exam #2
complements.
If the demand for cucumbers falls when the price of tomatoes rises, then we know that tomatoes and cucumbers are:
The price ceiling would have no effect.
If the government imposed a price ceiling of $40, what would happen in this market?
coffee and tea are substitutes.
It is likely that for most people:
set the price below the equilibrium price.
Suppose one knows two facts: first, the market for prescription drugs experiences chronic shortages and second, the government sets the price for prescription drugs. One can conclude that the government has:
demand.
A change in consumers' incomes causes a change in:
normal good.
If the demand for a good decreases as income decreases, then the good is a(n):
her reservation price was at least $400.
Shelly purchases a leather purse for $400. One can infer that:
more of a good as its price falls.
The demand curve illustrates the fact that consumers tend to purchase:
It is fair in the sense that everyone can afford basic goods and services.
Which of following is NOT true of the equilibrium price?
when price is below the equilibrium price.
Excess demand occurs:
less than one.
The demand for a good is inelastic with respect to price if the price elasticity of demand is:
percentage change in quantity supplied divided by the percentage change in price.
The price elasticity of supply at a point is the:
Neither buyers nor sellers want the price to change.
Which of the following is NOT a characteristic of a market in equilibrium?
It reflects sellers' reservations prices.
Which of the following is NOT true of a demand curve?
the income effect of a price change.
You can spend $10 for lunch and you would like to purchase two cheeseburgers. When you get to the restaurant, you find out the price for cheeseburger has increased from $5 to $6, so you decide to purchase just one cheeseburger. This is best described as:
Reservation price
a limit on the price of a good or a service. On the demand side, it is the highest price that a buyer is willing to pay; on the supply side, it is the lowest price at which a seller is willing to sell a good or service.
the seller's opportunity cost of producing an additional unit.
A seller's reservation price is generally equal to:
increase in the quantity of pizza demanded.
A decrease in the price of pizza will lead to a(n):
downward; fewer people are willing to buy an item at higher prices
A demand curve is ______ sloping because ______.
more firms can cover their opportunity cost of producing the good.
As the price of a good rises:
inelastic.
If consumers cannot readily switch to a close substitute when the price of a good increases, the demand for that good is likely to be:
substitutes.
If cross-price elasticity of demand between two goods is positive, the two goods are:
inelastic.
Suppose a 10% increase in the price of aspirin leads to a 5% decrease in the quantity demanded of aspirin. The demand for aspirin, therefore, is
an increase in the equilibrium quantity of bacon, but it's hard to say what will happen to the equilibrium price.
Suppose a new study highlights the health benefits of eating bacon. At the same time, suppose the cost of producing bacon falls. Given these changes, you should expect to see:
3/2; elastic
Suppose an increase in the price of hamburger from $3 to $4 leads to an increase in quantity supplied from 100 units to 150 units. At the original price, the price elasticity of supply for hamburgers is ______ so supply is ______.
an increase in the supply of pickles.
Suppose that the equilibrium price of pickles falls while the equilibrium quantity rises. The most likely explanation for these changes is:
An increase in the price of a substitute
What might cause a demand curve to shift to the right?
at least $1.75 but less than $2.
When a slice of pizza at the student union sold for $2, Moe did not purchase any. When the price fell to $1.75, Moe purchased a slice each day for lunch. Thus, we can infer that Moe's reservation price for a slice of pizza is:
positive.
When calculating price elasticity of demand, if the percentage change in price is negative, then the percentage change in quantity demanded is typically:
the substitution effect of a price change.
As coffee becomes more expensive, Joe starts drinking tea instead of coffee. This is called:
increase by less than $1.00.
If all buyers' reservation prices increase by $1.00, then the equilibrium price of coffee would:
inferior good.
If an increase in income leads to a decrease in the demand for ground beef, then ground beef is a(n):
uncertain; lower
If supply and demand both decrease, the new equilibrium price will be ______ and the new equilibrium quantity will be ______.
decrease by 3 percent.
If the absolute value of the price elasticity of demand for cell phone service is 3, then if the price of cell phone service increases by 1 percent, quantity demanded would:
0.18 percent
If the price elasticity of demand for food is 0.03, then a 6 percent increase in the price of food will lead to a ______ decrease in quantity demanded.
3 percent decrease in the quantity of pineapples demanded.
If the price elasticity of demand for pineapples is 0.75, then a 4 percent increase in the price of pineapples will lead to a:
0.5.
If the price of textbooks increases by one percent and the quantity demanded falls by one-half percent, then the price elasticity of demand is equal to:
(P/Q) × (1/slope)
If the quantity demanded of a good is Q when the price for the good is P, the price elasticity of demand for that good at that point is:
quantity will be lower, but the direction of the price change is uncertain.
If the supply curve and the demand curve both shift to the left, then the new equilibrium:
inelastic; elastic
Suppose that the short-run price elasticity of demand for electricity is 0.03, and the long-run price elasticity of demand is 1.2. One would classify the short-run elasticity as being ___________ and the long-run elasticity as being ____________.
excess demand will lead the price of oranges to rise.
Suppose that when the price of oranges is $3 per pound, the quantity demanded is 4.7 tons per day and the quantity supplied is 3.9 tons. In this case:
inelastic.
Suppose the company that owns the vending machines on your campus has doubled the price of a can of soda. They then notice that they are selling approximately 15 percent fewer sodas. The price elasticity of demand for sodas from the campus vending machines, therefore, is:
decrease in the price of butter, a complement to bread.
Suppose we observe an increase in both the equilibrium price and quantity of bread. This is best explained by:
There is an excess demand for tickets at the Ticketmaster price.
Suppose you bought a concert ticket from Ticketmaster for $50, but when you get to the concert, there are a large number of people waiting outside who offer to pay you more than $50 for your ticket. What is probably true?
Both the purchase at the University ticket window and the sale at the concert entrance were market transactions.
Suppose you bought three tickets to a concert in advance at the University ticket window. At the last minute one friend cancelled, so you could use only two of the tickets. You sold the third ticket just outside the entrance to the concert for more than the price you had originally paid. Which transaction occurred in a market?
lower
Suppose you have one hour to catch a flight to Miami for spring break, and it takes 45 minutes to drive to the airport. Your car is almost out of gas and the price of gas at the closest gas station is higher than at other gas stations that are much farther away. To you, the price elasticity of demand for gas is likely to be ______ than it would be if you had several hours before the flight.
a market.
The entire group of buyers and sellers of a particular good or service makes up:
at the midpoint of a straight-line demand curve.
The price elasticity of demand equals 1:
quantity demanded to a 1 percent change in price of that good.
The price elasticity of demand for a good measures the responsiveness of:
perfectly inelastic.
The price elasticity of supply for the Hope Diamond is zero because there is only one. Therefore, the supply curve for the Hope Diamond is
an excess demand for bananas.
The price of bananas will increase in response to:
because of both the substitution and the income effects.
When the price of a good changes, the amount of that good that buyers wish to buy changes:
0.2
When the price of hot dogs is $1.50 each, 500 hot dogs are sold every day. After the price falls to $1.35 each, 510 hot dogs are sold every day. At the original price, what is the price elasticity of demand for hot dogs?
