ECO 215 - Test 2

more

A demand curve that is flat represents a (more/less) elastic demand?

less

A demand curve that is steep represents a (more/less) elastic demand?

a

A linear, upward-sloping supply curve has: a. a constant slope and a changing price elasticity of supply. b. both a constant slope and a constant price elasticity of supply. c. both a changing slope and a changing price elasticity of supply. d. a changing slope and a constant price elasticity of supply.

b

A manufacturer produces 1.000 units, regardless of the market price. For this firm price elasticity of supply is: a. infinity b. zero. c. one. d. negative one.

b

For a good that is a necessity, demand: a. cannot be represented by a demand curve in the usual way. b. tends to be inelastic. c. has unit elasticity. d. tends to be elastic.

a

For a particular good, a 3 percent increase in price causes a 10 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good? a. There are many close substitutes for this good. b. The relevant time horizon is short. c. The market for the good is broadly defined. d. The good is a necessity.

a

For which of the following goods is the price elasticity of demand most inelastic? a. pizza b. large pizza C. large pepperoni pizza d. Domino's large pepperoni pizza

d

Holding all other forces constant, if increasing the price of a good leads to an increase in total revenue, then the demand for the good must be: a. unit elastic. b. None of the above is correct because a price increase always leads to an increase in total revenue. c. elastic. d. inelastic.

b

If the demand for bananas is elastic, then an increase in the price of bananas will: a. increase total revenue of banana sellers. b. decrease total revenue of banana sellers. c. not change total revenue of banana sellers. d. There is not enough information to answer this question.

2.5 decrease

If the price elasticity of demand for a good is 0.5, then a 5 percent increase in price results in a _________________ percent ___________ in quantity demanded

d

If the quantity supplied is the same regardless of price, then supply is a. elastic. b. perfectly elastic. c. inelastic. d. perfectly inelastic.

b

Suppose that a tax is placed on books. If the sellers pay the majority of the tax, then we know that the: a. demand is more inelastic than the supply. b. supply is more inelastic than the demand. c. government has required that buyers remit the tax payments. d. government has required that sellers remit the tax payments.

b

Suppose that a tax is placed on books. If the sellers pay the majority of the tax, then we know that the: a. government has required that sellers remit the tax payments. b. supply is more inelastic than the demand. c. demand is more inelastic than the supply. d. government has required that buyers remit the tax payments.

C

Suppose that the supply of aged cheddar cheese is inelastic. The price elasticity of supply for aged cheddar cheese could be: a. -1 b. 0. C. 0.5. d. 1.5.

d

Suppose that the supply of aged cheddar cheese is inelastic. The price elasticity of supply for aged cheddar cheese could be: a. 1.5. b. -1. c. 0. d. 0.5.

c

Suppose that when the price of wheat is $2 per bushel, farmers can sell 10 million bushels. When the price of wheat is $3 per bushel, farmers can sell 8 million bushels. Which of the following statements is true? The demand for wheat is: a. price elastic, so an increase in the price of wheat will increase the total revenue of wheat farmers. b. income elastic, so an increase in the price of wheat will increase the total revenue of wheat farmers. c. price inelastic, so an increase in the price of wheat will increase the total revenue of wheat farmers. d. income inelastic, so an increase in the price of wheat will increase the total revenue of wheat farmers.

2.33

Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a result, the quantity of bags demanded increases from 600 to 800. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is

D

The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods. The equilibrium price will: a. increase in both the aged cheddar cheese and bread markets. b. increase in the aged cheddar cheese market and decrease in the bread market. C. decrease in the aged cheddar cheese market and increase in the bread market. d. decrease in both the aged cheddar cheese and bread markets.

d

When a tax is placed on the sellers of a product, the: a. size of the market decreases. b. effective price received by sellers decreases, and the price paid by buyers increases. c. supply of the product decreases. d. All of the above are correct.

d

When demand is perfectly inelastic, the price elasticity of demand: a. is zero, and the demand curve is horizontal. b. approaches infinity, and the demand curve is horizontal. c. approaches infinity, and the demand curve is vertical. d. is zero, and the demand curve is vertical.

c

When demand is perfectly inelastic, the price elasticity of demand: a. is zero, and the demand curve is horizontal. b. approaches infinity, and the demand curve is vertical. c. is zero, and the demand curve is vertical. d. approaches infinity, and the demand curve is horizontal.

less

the (more/less) elastic side of the market always bears a greater tax burden