Chapter 5
C
Q: A men's tie store sold an average of 30 ties per day at $5 per tie but sold 50 of the same ties per day at $3 per tie. The price elasticity of demand, by the midpoint method, is: a. greater than 1 but less than 3. b. greater than zero but less than 1. c. equal to 1. d. greater than 3.
B
Q: Decreases in input costs and a longer time since a price change will tend to: a. increase price elasticity of supply with decreases in input costs but decrease price elasticity of supply with length of time. b. increase the price elasticity of supply. c. have no impact on the price elasticity of supply. d. decrease price elasticity of supply.
A
Q: If the absolute value of the price elasticity of demand is greater than 1: a. percentage changes in the price will lead to much larger percentage changes in the quantity demanded. b. small percentage changes in the price will lead to even smaller changes in the percentage change in the quantity demanded. c. changes in the price will have no impact on changes in the quantity demanded. d. percentage changes in the price will lead to equal percentage changes in the quantity demanded
B
Q: If the government wants to minimize the deadweight loss from taxes, it should tax goods for which: a. the demand is high. b. the price elasticity of demand is low. c. the price elasticity of demand is high. d. the price elasticity of supply is high.
A
Q: If the price elasticity of demand between two points on a demand curve is 0.75, then the demand between those two points is: A. price-inelastic. B. unknown. c. price-elastic. d. price unit-elastic.
B
Q: Look at the figure Demand Curves. Which graph shows a perfectly elastic demand curve? a. C b. D c. A d. B
C
Q: Look at the figure Linear Demand Curve II. If price was initially set at $8 and then increased to $10, total revenue would: a. stay the same, as both the price and quantity effects remain unchanged. b. stay the same, but the price effect is dominated by the quantity effect. c. decrease, as the price effect is dominated by the quantity effect. d. increase, as the price effect dominates the quantity effect.
B
Q: Look at the figure The Demand for Shirts. By the midpoint method, the price elasticity of demand for the segment AB is: a. less than the price elasticity of demand for the segment EF. b. greater than the price elasticity of demand for the segment BC. c. zero. d. less than the price elasticity of demand for the segment BC.
B
Q: Look at the table Johnson's Income and Expenditures. Johnson's income elasticity of demand for steaks is: a. between 0 and 1. b. 0. c. 1. d. greater than 1.
D
Q: Sometimes airlines raise ticket prices as the flight departure date approaches in the hope of increasing revenue on the assumption that consumer demand is: a. always unit elastic. b. more price-elastic as departure time approaches. c. very sensitive to price changes as the time of departure approaches. d. less price-elastic as departure time approaches.
D
Q: Suppose at $10 the quantity demanded is 100. When the price falls to $8, the quantity demanded increases to 130. The price elasticity of demand (using the midpoint formula) between $10 and $8 is approximately: a. 0.85. b. 1.50. c. 1.00. d. 1.17.
C
Q: The amount of tax levied per unit of good or service is called the tax: a. surplus. b. revenue. c. rate. d. incidence.
D
Q: The demand for strawberry ice cream tends to be relatively price-elastic because: a. for most people there are many close substitutes for strawberry ice cream and it costs so little. b. it costs so little. c. it has to be consumed very quickly. d. for most people there are many close substitutes for strawberry ice cream.
C
Q: The pair of items that is most likely to have a negative cross-price elasticity of demand is: a. aspirin and hamburgers. b. ketchup and coffee. c. hot dogs and mustard. d. margarine and butter.
A
Q: The percent change in quantity demanded of a good divided by the percent change in income, all other things unchanged, is the _____ elasticity of demand. a. income b. quantity c. price d. cross-price
B
Q: The price elasticity of demand for gasoline in the short run has been estimated to be 0.1. If a war in the Middle East causes the price of oil (from which gasoline is made) to increase, how will that affect total expenditures on gasoline in the short run, all other things equal? a. Quantity demanded will stay the same, but total expenditures will fall. b. Quantity demanded will not change much, but total expenditures will rise. c. Total expenditures will remain unchanged. d. Quantity demanded will decrease, but total expenditures will rise.
B
Q: The price elasticity of demand measures the: a. responsiveness of demand when price is held constant and demand increases or decreases. b. responsiveness of quantity demanded to a change in price. c. extent to which prices are flexible and respond to market forces. d. responsiveness of price to a change in quantity demanded.
D
Q; Which of the following is likely to be associated with inelastic supply? a. The time under consideration is very short. b. The inputs necessary for production cannot readily be increased. c. The good is necessary for survival (e.g., a life-saving drug). d. The time under consideration is very short and the inputs necessary for production cannot readily be increased
Draw
Use the quadrilateral tool to illustrate the price effect and quantity effect of this price decrease on total revenue. Label the areas PE and QE respectively.
