Micro Final

At the price of $1.25, a paper manufacturer is willing to supply 150 spiral notebooks per day. At a price of $1.50, the paper manufacturer is willing to supply 175 spiral notebooks per day. Using the midpoint, the price elasticity of supply is about

0.85

If the price elasticity of demand for good is 4.0, then a 10 percent increase in price results in a

40 percent decrease in the quantity demanded

For a particular good, a 10 percent increase in price cause a 15 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

The relevant time horizon is long (p.91)

Suppose that two supply curves pass through the same point. One is steep, and the is flat. Which of the following statements is correct?

The steeper supply curve represents a supply that is inelastic relative to the supply represented by the flatter supply curve

Rent-control law dictate

a maximum rent that landlord may charge tenants

Elasticity is

a measure of how much buyers and sellers respond to change in market conditions

The price elasticity of demand measures

buyers' responsiveness to a change in the price of a good

Price controls

can generate inequities of their own

A binding minimum wage tends to

cause labor surplus, cause unemployment, have the greatest impact in the market for teenage labor

Good news for farming can be bad news for farmers because the

demand for basic foodstuffs is usually inelastic, meaning that factors that shift supply to the right decrease total revenues to sellers

Ryan says that he would buy one cup of tea every day regardless of the price. If he telling the truth, Ryan's?

demand for tea is perfectly inelastic

Holding all other forces constant, if increasing the price of a good leads to a decrease in total revenue, then the demand for the good must be

elastic

The greater the price elasticity of demand, the

greater the responsiveness of quantity demanded to a change point

The case of perfectly elastic demand is illustrated by a demand curve that is

horizontal

In general, elasticity is a measure of

how much buyers and sellers respond to changes in the market conditions

If the price elasticity of supply is 1.2, and the price increased by 5%, quantity supplied would

increase by 6%

If the demand for textbooks is inelastic, then an increase in the price of textbooks will

increase total revenue of textbook sellers

if the government removes a binding price ceiling from a market, then the price paid by buyers will

increase, and the quantity sold in the market will increase

Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows. If the demand for milk is relatively inelastic, the discovery will

lower both price and total revenues

In the case of perfectly inelastic demand

quantity demanded stays the same whenever price changes

A tax imposed on the sellers of a good will

raise the price buyers pay and lower the effective price sellers recieve

When a supply curve is relatively flat, the

supply is relatively elastic

Using the midpoint method, the price elasticity of demand of a good is computed to be approximately 2. Which of the following events is consistent with a 0.1 percent increase in the price of the good ?

the quantity of the good demanded decreases by 0.2 percent

The price elasticity of supply measures how much

the quantity supplied responds to changes in the price of the good

If a tax is levied on the sellers of a product, then there will be

upward shift of the supply curve

If demand is price inelastic, then when price rises, total revenue

will rise