Microeconomics Chapter 6

Studies of the minimum wage suggest that the price elasticity of demand for teenage workers is relatively inelastic. This means that A) an increase in the minimum wage would increase the total incomes of teenage workers as a group. B) an increase in the minimum wage would decrease the total incomes of teenage workers as a group. C) the unemployment effect of an increase in the minimum wage would be relatively large. D) the cross elasticity of demand between teenage and adult workers is positive and very large.

A) an increase in the minimum wage would increase the total incomes of teenage workers as a group.

The demand for autos is likely to be A) less price elastic than the demand for Honda Accords. B) You Answered more price elastic than the demand for Honda Accords. C) of the same price elasticity as the demand for Honda Accords. D) perfectly inelastic.

A) less price elastic than the demand for Honda Accords

(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.

Cross elasticity of demand is A) negative for complementary goods. B) negative for substitute goods. C) unitary for inferior goods. D) positive for inferior goods.

A) negative for complementary goods.

Assume that a 3 percent increase in income across the economy produces a 1 percent decline in the quantity demanded of good X. The coefficient of income elasticity of demand for good X is A) negative, and therefore X is an inferior good. B) negative, and therefore X is a normal good. C) positive, and therefore X is an inferior good. D) positive and therefore X is a normal good.

A) negative, and therefore X is an inferior good.

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

A) relatively elastic.

The narrower the definition of a product, A) the larger the number of substitutes and the greater the price elasticity of demand. B) the smaller the number of substitutes and the greater the price elasticity of demand. C) the larger the number of substitutes and the smaller the price elasticity of demand. D) the smaller the number of substitutes and the smaller the price elasticity of demand.

A) the larger the number of substitutes and the greater the price elasticity of demand.

Chuck has a price elasticity of demand for beer of 1.2. Suppose that the price of beer is increased by 10 percent. What will happen to the total amount Chuck spends on beer? A) It will not change. B) It will decrease. C) It will increase. D) It is impossible to tell.

B) It will decrease.

The cross elasticity of demand between digital cameras and memory cards is likely to be A) zero. B) a negative number. C) a positive number greater than 1. D) a positive number between zero and 1.

B) a negative number.

Studies show that the demand for gasoline is A) price inelastic in the short run but elastic in the long run. B) price inelastic in both the short and long run. C) You Answered price elastic in the short run but inelastic in the long run. D) price elastic in both the short and long run.

B) price inelastic in both the short and long run.

The main reason for the high price of antiques is that A) supply is relatively elastic and demand increases over time. B) supply is relatively inelastic and demand increases over time. C) demand is relatively elastic and supply increases over time. D) demand is relatively inelastic and supply increases over time.

B) supply is relatively inelastic and demand increases over time.

The total revenue received by sellers of a good is the same amount as the A) total income earned by the buyers. B) total amount spent on the good by the buyers. C) You Answered price paid by the buyers for each unit of the good. D) profits earned by the sellers of the good.

B) total amount spent on the good by the buyers.

For which product is the income elasticity of demand most likely to be negative? A) computer software B) used clothing C) apps for iPhones D) bread

B) used clothing

Refer to the diagram and assume that price increases from $2 to $10. The coefficient of the price elasticity of supply (midpoint formula) relating to this price change is about A) 5, and supply is elastic. B) 1, and supply is unit elastic. C) 0.25, and supply is inelastic. D) 2.5, and supply is elastic.

C) 0.25, and supply is inelastic.

(Consider This) Which of the following statements is true about the history of Southwest Airlines entering new markets? A) Southwest's entry caused the demand for each carrier to become more inelastic as customers increased their loyalty to particular airlines. B) Southwest's entry into new markets had little impact on either the markets or airlines already serving those markets. C) Southwest's low price strategy tapped into existing elastic demand in the market, increasing the airline's revenue. D) Southwest's highly inelastic supply made it difficult for them to take advantage of demand in the market.

C) Southwest's low price strategy tapped into existing elastic demand in the market, increasing the airline's revenue.

(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

The price-elasticity of demand coefficient, Ed, is measured in terms of A) dollar change in price and unit change in quantity demanded. B) dollar change in price and amount of shift in demand. C) percentage change in price and percentage change in quantity demanded. D) percentage change in price and unit change in demand.

C) percentage change in price and percentage change in quantity demanded.

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. C) relatively price inelastic. D) relatively price elastic.

C) relatively price inelastic

(Consider This) In markets entered by Southwest Airlines, gains in passenger traffic and profits A)went primarily to airlines already in those markets. B)were evenly distributed among airlines in those markets. C)went almost entirely to southwest D)were minimal, as the highly inelastic demand for air travel meant reduced revenues for all airlines in those markets.

C)went almost entirely to southwest

Which product is most likely to be the most price elastic? A) Milk B) Housing C) Clothing D) Automobiles

D) Automobiles

Product% Change in Income% Change in Quantity Demanded W −1 −1 X +6 +3 Y −1 +1 Z +4 +8 Refer to the above table. Which product is most responsive to a change in income? A) Product W B) Product X C) Product Y D) Product Z

D) Product Z

Refer to the diagram. If price falls from $10 to $2, total revenue A) rises from A + B to A + B + D + C, and demand is elastic. B) falls from A + D to B + C, and demand is inelastic. C) rises from C + D to B + A, and demand is elastic. D) falls from A + B to B + C, and demand is inelastic.

D) falls from A + B to B + C, and demand is inelastic.

To economists, the main differences between "the short run" and "the long run" are that A) the law of diminishing returns applies in the long run, but not in the short run. B) in the short run all resources are fixed, while in the long run all resources are variable. C) fixed inputs are more important to decision making in the long run than they are in the short run. D) in the long run all resources are variable, while in the short run at least one resource is fixed.

D) in the long run all resources are variable, while in the short run at least one resource is fixed.

What is the most likely effect of the development of rental movies and online movie streaming on the movie theater (or cinema) industry? A) decreased costs of producing movies B) increased demand for movie theater tickets C) movie theater tickets become an inferior good D) increased price elasticity of demand for movie theater tickets

D) increased price elasticity of demand for movie theater tickets

Price 10 8 6 4 2 Quantity Supplied 10 9 8 7 6 Refer to the table. Over the $6-$4 price range, supply is A) perfectly elastic. B) elastic. C) perfectly inelastic. D) inelastic.

D) inelastic

If the government tightens up on drug dealers and raises the costs of dealing illegal drugs, then the drug addicts' dollar expenditures to feed their addiction will tend to A)increase because their demand is price-elastic. B)decrease because their demand is price-Inelastic. C)decrease because their demand is price-elastic. D)increase because their demand is price-Inelastic.

D)increase because their demand is price-Inelastic.

Refer to the above graph. Consider a situation where price decreases from P2 to P1. In this price range, demand is relatively A)inelastic because the loss in total revenue (areas D + G + I + J) is greater than the gain in total revenue (areas C + F + H). B)elastic because the loss in total revenue (areas C + F + H) is greater than the gain in total revenue (area J). C)elastic because the loss in total revenue (area J) is less than the gain in total revenue (areas C + F + H). D)inelastic because the gain in total revenue (area J) is less than the loss in total revenue (areas C + F + H)

D)inelastic because the gain in total revenue (area J) is less than the loss in total revenue (areas C + F + H)

A state government wants to increase the taxes on cigarettes to increase tax revenue. Because cigarettes are addictive, we would expect its demand to be A) elastic. Thus, the government's cigarette-tax revenues would rise with a tax increase. B) elastic. Thus, the government's cigarette-tax revenues would fall with a tax increase. c) inelastic. Thus, the government's cigarette-tax revenues would fall with a tax increase. D)inelastic. Thus, the government's cigarette-tax revenues would rise with a tax increase.

D)inelastic. Thus, the government's cigarette-tax revenues would rise with a tax increase.

Answer the question based on the following table, which shows a demand schedule. Price 5 4 3 2 1 Quantity Demanded 10 13 15 19 25 Total revenues will decrease if price .... A)rises from $1 to $2. B)rises from $2 to $3. C)rises from $3 to $4. D)rises from $4 to $5.

D)rises from $4 to $5.