Chapter 17 & 18

Suppose the price of a service falls and people buy more of that service. What has happened? Demand increased. Quantity demanded changed. Demand decreased.

Quantity demanded changed

The imposition of a tax _______________. lowers only supply lowers only demand raises both supply and demand lowers neither supply nor demand

lowers only supply

Supply is most elastic in _______________. the market period the long run the short tun

the long run

If the price of iPods is reduced by 50 percent and the quantity of songs demanded on iTunes rises by 25 percent, then the cross elasticity of demand for iPods and iTune songs is _______________. 1.0 0.5 5.0 0.25

0.5

If supply is perfectly inelastic, a tax increase is borne . only by the buyer mostly by the buyer Only by the seller mostly by the seller

Only by the seller

Statement 1 - A perfectly elastic demand curve has an elasticity of zero. Statement 2 - When demand is elastic and price is raised, total revenue will fall. Statement 1 is true, and statement 2 is false Statement 2 is true, and statement 1 is false Both statements are false Both statements are true

Statement 2 is true, and statement 1 is false

Statement 1. When demand is inelastic and price is lowered, total revenue will rise. Statement 2. Demand is unit elastic when elasticity is one Both statements are true Both statements are false Statement 2 is true, and statement 1 is false. Statement 1 is true, and statement 2 is false.

Statement 2 is true, and statement 1 is false.

Each of the following may lead to a change in the demand for product A except _________________ . a change in people's taste for product A a change in the price of product A a change in people's incomes a change in the price of product B (a substitute for product A) Previous Next

a change in the price of product A

An increase in the supply of running shoes will—assuming demand is unchanged—lead to ______________ . a decrease in equilibrium price and a decrease in equilibrium quantity an increase in equilibrium price and a decrease in equilibrium quantity a decrease in equilibrium price and an increase in equilibrium quantity an increase in equilibrium price and an increase in equilibrium quantity

a decrease in equilibrium price and an increase in equilibrium quantity

A perfectly elastic supply curve is __________________. a horizontal line neither a horizontal nor a vertical line a vertical line

a horizontal line

If our income elasticity for vacation trips is 2.8, we may conclude that vacation trips are ________________. both a normal service and an inferior service neither a normal service nor an inferior service an inferior service a normal service

a normal service

Demand is elastic if ______________. percentage change in prize is zero percentage change in quantity demand is zero a percentage change in price is greater than percentage change in quantity a percentage change in quantity is greater than percentage change in price percentage change in quantity is equal to percentage change in price

a percentage change in quantity is greater than percentage change in price

A decrease in supply can be brought about by _________________ . a price increase a random event like a hurricane or an earthquake a change in consumers' tastes or preferences a price decrease

a random event like a hurricane or an earthquake

Changes in supply may be caused by changes in _______________ . all of the above the number of suppliers the cost of factors of production none of the above the level of technology

all of the above

During a very bad recession the nation's disposable income fell by 10 percent, while its consumption of a certain good rose by 5 percent. That good was ___________ good. a substitute an inferior good a normal good a complementary

an inferior good

The market demand for a good will decrease __________________ . as the number of consumers in the market increases if the market price of a complementary good decreases as income decreases if the good is an inferior good as income decreases if the good is a normal good if the market price of a substitute good increases

as income decreases if the good is a normal good

Over time the supply of a particular good or service tends to ____________________. become more elastic stay about the same become less elastic

become more elastic

When the cross elasticity of demand for two services is negative, then these services are _______________. substitutes neither complements nor substitutes complements both complements and substitutes

complements

When market price is above equilibrium price, the market price will be driven ________________ . up by unhappy sellers down by unhappy sellers up by unhappy buyers down by unhappy buyers

down by unhappy sellers

A 5 percent increase in the price of sugar causes the quantity demanded to fall by 15 percent. The demand for sugar is _________________. perfectly elastic perfectly inelastic inelastic unit elastic elastic

elastic

An increase in the demand for steak could be caused quickly by a(n) _____________ . a decline in the price of chicken expectation of a future cutback in the supply of steak increase in the supply of steak fall in the price of steak

expectation of a future cutback in the supply of steak

A decrease in demand means that the quantity demanded _______________ . falls at a few prices falls only at the equilibrium price does not fall at any price falls at all prices falls at most prices

falls at all prices

If your income goes down by 15 percent and you cut back on your manicures by 25 percent, then your demand for manicures is ___________________. income inelastic income elastic and income inelastic neither income elastic nor income inelastic income elastic

income elastic

If the price of cameras falls, there will be a(n) _________________ . decrease in the quantity of cameras demanded increase in the quantity of cameras demanded increase in the demand for cameras decrease in the supply of cameras decrease in the demand for film

increase in the quantity of cameras demanded

The retail market for gasoline is ________________ . regional local national international

local

When demand is relatively inelastic and supply is relatively elastic, the burden of a tax will be borne ________________. equally between buyers and sellers mainly by sellers it is impossible to determine the relative burdens of the tax mainly by buyers

mainly by buyers

The demand for an inferior good is_____________________. unaffected by consumer tastes and preferences negatively related to income insensitive to changes in prices of its complements positively related to its own price

negatively related to income

If the price of a product rises and as a result businesses increase their production, then ______________ . supply has decreased both supply and quantity supplied have increased supply has increased quantity supplied has increased quantity supplied has decreased

quantity supplied has increased

If demand is elastic and price is lowered, total revenue will ____________________. possibly rise or possibly fall rise fall stay the same

rise

If demand and supply both fall, then equilibrium quantity _______________ . will rise may rise, fall or remain the same may rise or remain the same may fall or remain the same will fall will remain the same

will fall

If demand rises and supply falls, then equilibrium price ______________ . may fall or remain the same may rise, fall or remain the same will remain the same will fall will rise may rise or remain the same

will rise

Total revenue would be maximized when elasticity is _________________. rising 1 falling above 10 0

1

When demand is perfectly elastic, a tax increase is borne . Only by the seller mostly by the buyer mostly by the seller Only by the buyer

Only by the seller

If demand and supply both rise, then equilibrium price ______________ . will rise may rise or remain the same will fall may fall or remain the same will remain the same may rise, fall or remain the same

may rise, fall or remain the same

If demand falls and supply rises, then equilibrium quantity ________________ . may rise or remain the same will rise will fall will remain the same may rise, fall or remain the same may fall or remain the same

may rise, fall or remain the same

Goods for which demand is directly (positively) related to income are called _____________ . complementary goods substitute goods inferior goods normal goods

normal goods

A firm seeking to maximize its total revenue would lower its price until price elasticity of demand was ______________. a minimum a maximum one

one

Demand is elastic when __________________. price increases raise total revenue the demand curve is vertical percentage change in price is greater than percentage change in quantity percentage change in quantity is greater than percentage change in price

percentage change in quantity is greater than percentage change in price

Change in which of the following would not quickly cause a shift in demand? buyers' perception of quality of product tastes number of buyers price income

price

A tax will: raise price and raise supply raise price and lower supply lower price and raise supply lower price and lower supply

raise price and lower supply

If demand is inelastic and price is raised, total revenue will _______________. fall stay the same possibly rise or possibly fall rise

rise

If the rise in the price of service A leads to a fall in the price of service B, we may conclude that _____________. services A and B are neither substitutes nor complements services A and B are complements services A and B are substitutes

services A and B are complements

The most important determinant of the degree of elasticity of demand is ________________. whether the item is a luxury how many uses the product has whether the item is a big-ticket item the availability of substitutes

the availability of substitutes