Microeconomics Ch. 5

The demand curve for oil is ________ elastic in the long run, OPEC's reduction in the supply of oil had a ________ impact on the price in the long run than it did in the short run

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When small changes in price lead to infinite changes in quantity demanded, demand is perfectly a. elastic and the demand curve will be horizontal. b. inelastic and the demand curve will be horizontal. c. elastic and the demand curve will be vertical. d. inelastic and the demand curve will be vertical.

a. elastic and the demand curve will be horizontal.

The main reason for using the midpoint method to calculate an elasticity is that it a. gives the same answer regardless of whether the price increases or decreases. b. recognizes that prices are usually increasing, not decreasing. c. rounds prices to the nearest dollar and quantities to the nearest whole unit. d. uses fewer numbers than alternative methods.

a. gives the same answer regardless of whether the price increases or decreases.

When demand is inelastic the price elasticity of demand is a. less than 1, and price and total revenue will move in the same direction. b. less than 1, and price and total revenue will move in opposite directions. c. greater than 1, and price and total revenue will move in the same direction. d. greater than 1, and price and total revenue will move in opposite directions.

a. less than 1, and price and total revenue will move in the same direction.

Given the market for illegal drugs, when the government is successful in reducing the flow of drugs into the United States, a. supply decreases, demand is unaffected, and price increases. b. demand decreases, supply is unaffected, and price decreases. c. demand and supply both decrease, leaving price essentially unchanged. d. supply decreases, demand increases, and price increases substantially as a result.

a. supply decreases, demand is unaffected, and price increases.

There are very few, if any, good substitutes for motor oil. Therefore, a. the demand for motor oil would tend to be inelastic. b. the demand for motor oil would tend to be elastic. c. the demand for motor oil would tend to respond strongly to changes in prices of other goods. d. the supply of motor oil would tend to respond strongly to changes in people's tastes for large cars relative to their tastes for small cars.

a. the demand for motor oil would tend to be inelastic.

Consider airfares on flights between New York and Minneapolis. When the airfare is $250, the quantity demanded of tickets is 2,000 per week. When the airfare is $280, the quantity demanded of tickets is 1,700 per week. Using the midpoint method, a. the price elasticity of demand is about 1.43 and an increase in the airfare will cause airlines' total revenue to decrease. b. the price elasticity of demand is about 1.43 and an increase in the airfare will cause airlines' total revenue to increase. c. the price elasticity of demand is about 0.70 and an increase in the airfare will cause airlines' total revenue to decrease. d. the price elasticity of demand is about 0.70 and an increase in the airfare will cause airlines' total revenue to increase.

a. the price elasticity of demand is about 1.43 and an increase in the airfare will cause airlines' total revenue to decrease.

When the price of a good is $5, the quantity demanded is 100 units per month; when the price is $7, the quantity demanded is 80 units per month. Using the midpoint method, the price elasticity of demand is about a. 0.22. b. 0.67. c. 1.33. d. 1.50.

b. 0.67

When quantity demanded responds strongly to changes in price, demand is said to be a. fluid. b. elastic. c. dynamic. d. highly variable.

b. elastic.

For which of the following goods is demand probably most inelastic? a. camcorders b. insulin c. apples d. devices that remove cores from apples

b. insulin

If the quantity supplied responds only slightly to changes in price, then a. supply is said to be elastic. b. supply is said to be inelastic. c. an increase in price will not shift the supply curve very much. d. even a large decrease in demand will change the equilibrium price only slightly.

b. supply is said to be inelastic.

Total revenue will be at its largest value on a linear demand curve at a. the top of the curve, where prices are highest. b. the midpoint of the curve. c. the low end of the curve, where quantity demanded is highest. d. None of the above is correct.

b. the midpoint of the curve.

The price elasticity of supply measures how much a. the quantity supplied responds to changes in input prices. b. the quantity supplied responds to changes in the price of the good. c. the price of the good responds to changes in supply. d. sellers respond to changes in technology.

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

Get Smart University is contemplating an increase in tuition to enhance revenue. If GSU feels that raising tuition would enhance revenue, they are a. ignoring the law of demand. b. assuming that the demand for university education is elastic. c. assuming that the demand for university education is inelastic. d. assuming that the supply of university education is elastic.

c. assuming that the demand for university education is inelastic.

The price elasticity of demand changes as we move along a a. horizontal demand curve. b. vertical demand curve. c. linear, downward-sloping demand curve. d. All of the above are correct.

c. linear, downward-sloping demand curve.

Economists compute the price elasticity of demand as the a. percentage change in price divided by the percentage change in quantity demanded. b. change in quantity demanded divided by the change in price. c. percentage change in quantity demanded divided by the percentage change in price. d. percentage change in quantity demanded divided by the percentage change in income.

c. percentage change in quantity demanded divided by the percentage change in price.

Some firms eventually experience problems with their capacity to produce output as their output levels increase. For these firms, a. market power is substantial. b. supply is perfectly inelastic. c. supply is more elastic at low levels of output and less elastic at high levels of output. d. supply is less elastic at low levels of output and more elastic at high levels of output.

c. supply is more elastic at low levels of output and less elastic at high levels of output.

If the price elasticity of demand for a good is 4.0, then a 10 percent increase in price results in a. 0.4 percent decrease in the quantity demanded. b. 2.5 percent decrease in the quantity demanded. c. 4 percent decrease in the quantity demanded. d. 40 percent decrease in the quantity demanded.

d. 40 percent decrease in the quantity demanded.

It is likely that a. the demand for flat-screen computer monitors is more elastic than the demand for monitors in general. b. the demand for grandfather clocks is more elastic than the demand for wristwatches. c. the demand for cardboard is more elastic over a long period of time than over a short period of time. d. All of the above.

d. All of the above.

Which of the following statements is not valid when supply is perfectly elastic? a. The elasticity of supply approaches infinity. b. The supply curve is horizontal. c. Very small changes in price lead to large changes in quantity supplied. d. The time period under consideration is more likely a short period rather than a long period.

d. The time period under consideration is more likely a short period rather than a long period.

Demand is said to be elastic if a. the price of the good responds substantially to changes in demand. b. demand shifts substantially when income or the expected future price of the good changes. c. buyers do not respond much to changes in the price of the good. d. buyers respond substantially to changes in the price of the good.

d. buyers respond substantially to changes in the price of the good.

Demand is elastic if elasticity is a. less than 1. b. equal to 1. c. equal to 0. d. greater than 1.

d. greater than 1.

If sellers do not adjust their quantities supplied at all in response to a change in price, a. advances in technology must be prevalent. b. the time period under consideration must be very long. c. supply is perfectly elastic. d. supply is perfectly inelastic.

d. supply is perfectly inelastic.

You are in charge of the local city-owned golf course. You need to increase the revenue generated by the golf course in order to meet expenses. The mayor advises you to increase the price of a round of golf. The city manager recommends reducing the price of a round of golf. You realize that a. the mayor thinks demand is elastic and the city manager thinks demand is inelastic. b. both the mayor and the city manager think that demand is elastic. c. both the mayor and the city manager think that demand is inelastic. d. the mayor thinks demand is inelastic and the manager thinks demand is elastic.

d. the mayor thinks demand is inelastic and the manager thinks demand is elastic.

inelastic

no matter price still buy it

More elastic

respond more to price