Ch.6 Test bank (63-92)
Which of the following goods (with their respective income elasticity coefficients in parentheses) will most likely suffer a decline in demand during a recession?
Plasma screen and LCD TVs (+4.2)
If the supply of product X is perfectly elastic, an increase in the demand for it will increase:
equilibrium quantity but equilibrium price will be unchanged.
The supply curve of antique reproductions is:
relatively elastic.
Compared to coffee, we would expect the cross elasticity of demand for:
tea to be positive, but negative for cream.
The supply of product X is perfectly inelastic if the price of X rises by:
10 percent and quantity supplied stays the same.
The supply of product X is elastic if the price of X rises by:
5 percent and quantity supplied rises by 7 percent.
The supply of product X is inelastic (but not perfectly inelastic) if the price of X rises by:
7 percent and quantity supplied rises by 5 percent.
If the income elasticity of demand for lard is -3.00, this means that:
lard is an inferior good.
Which of the following goods will least likely suffer a decline in demand during a recession?
Toothpaste
Suppose the income elasticity of demand for toys is +2.00. This means that:
a 10 percent increase in income will increase the purchase of toys by 20 percent.
The main determinant of elasticity of supply is the:
amount of time the producer has to adjust inputs in response to a price change.
Studies of the minimum wage suggest that the price elasticity of demand for teenage workers is relatively inelastic. This means that:
an increase in the minimum wage would increase the total incomes of teenage workers as a group
The larger the positive cross elasticity coefficient of demand between products X and Y, the:
greater their substitutability
Suppose that the price of product X rises by 20 percent and the quantity supplied of X increases by 15 percent. The coefficient of price elasticity of supply for good X is:
less than 1 and therefore supply is inelastic.
Supply curves tend to be:
more elastic in the long run because there is time for firms to enter or leave the industry.
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:
negative and therefore X is an inferior good
Suppose that a 20 percent increase in the price of normal good Y causes a 10 percent decline in the quantity demanded of normal good X. The coefficient of cross elasticity of demand is:
negative and therefore these goods are complements
We would expect the cross elasticity of demand between dress shirts and ties to be:
negative, indicating complementary goods.
The supply curve of a one-of-a-kind original painting is:
perfectly inelastic.
The supply of known Monet paintings is:
perfectly inelastic.
Assume that a 4 percent increase in income across the economy produces an 8 percent increase in the quantity demanded of good X. The coefficient of income elasticity of demand is:
positive and therefore X is a normal good
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:
positive and therefore these goods are substitutes
We would expect the cross elasticity of demand between Pepsi and Coke to be:
positive, indicating substitute goods
Studies show that the demand for gasoline is:
price inelastic in both the short and long run.
The formula for cross elasticity of demand is percentage change in:
quantity demanded of X/percentage change in price of Y.
An increase in demand will increase equilibrium price to a greater extent:
the less elastic the supply curve.
Farmers often find that large bumper crops are associated with declines in their gross incomes. This suggests that:
the price elasticity of demand for farm products is less than 1.
It takes a considerable amount of time to increase the production of pork. This implies that:
the short-run supply curve for pork is less elastic than the long-run supply curve for pork.
The price of old baseball cards rises rapidly with increases in demand because:
the supply of old baseball cards is price inelastic.
Suppose the supply of product X is perfectly inelastic. If there is an increase in the demand for this product, equilibrium price:
will increase but equilibrium quantity will be unchanged.