Econ Ch 5

Using the midpoint formula, what is the price elasticity of demand between $1.25 and $1.00 A.) 0.60 B.) 0.82 C.) 1.0 D.) 1.6

B.) 0.82

19. If the price of chocolate-covered peanuts increases and the demand for strawberry licorice twists increases, thisindicates that these two goods are: A) complementary goods. B) normal goods. C) inferior goods. D)substitute goods.

D.) substitute goods

We note that the price of pretzels increases and the demand for tortilla chips decreases, so we can assume that thesetwo goods are: A) unrelated goods. B) inferior goods. C) complementary goods. D) substitute goods.

c.) complementary goods

Suppose the price elasticity of demand for fishing lures is greater than 1 in South Carolina and 0.63 in Alabama. Toincrease revenue, fishing lure manufacturers should: A) lower prices in each state. B) raise prices in each state. C)lower prices in South Carolina and raise prices in Alabama. D) leave prices unchanged in South Carolina and raise prices in Alabama

c.) lower prices in South Carolina and raise prices in Alabama.

9. If the quantity supplied responds substantially to a relatively small change in price, supply would be:A) price-elastic. B) price-inelastic C) negatively sloped. D) insensitive to changes in price

A. Pre-elastic

17. The price of gasoline rises 5% and the quantity of gasoline purchased falls 1%. The price elasticity of demand isequal to ________ and demand is described as ________. A)0.2; inelastic B) 5; inelastic C) 0.2; elastic D) 5; elastic

A.) 0.2; inelastic

If the price of a good is increased by 20% and the quantity demanded changes by 15%, then the price elasticity of demand is equal to: A) 0.75. B) approximately 0.33. C) approximately 1.33. D) 1.

A.) 0.75

Suppose the government decides to fight obesity in America by imposing an excise tax on the saturated fat contentof food. The effect of this tax would be to:A) lower the profits of ice cream suppliers. B) decrease revenue for the government.C) decrease black market activity.D) raise the profits of ice cream suppliers

A.) lower the profits of ice cream suppliers.

15. If a good is a luxury item that looms large in the household budget, then the price elasticity of demand will tend to be: A) more price-elastic. B) less price-elastic. C) equal to 1. D) the same as that of a good that is a necessity

A.) more price-elastic

If the price elasticity of demand is found to be less than one, then demand is: A) price-inelastic. B) price-elastic. C) price unit-elastic. D) positively sloped

A.) price-inelastic

Suppose the price of Vanilla Coke increases by 9% and quantity demanded falls by 13% overall, but only 4% for loyal Coca-Cola customers. This means that for the general public there are ________ for Vanilla Coke, but for loyal Coca-Cola customers, Vanilla Coke is more of a ________ item. This means that Coca-Cola will enjoy anincrease in total revenue only from ________. A) several substitutes; necessity; loyal Coca-Cola customers B) few substitutes; luxury; the general public C) no substitutes; necessity; the general public D) several substitutes; necessity; the general public

A.) several substitutes; necessity; loyal Coca-Cola customers

11. (Table: Market for Pizza) The price elasticity of demand for pizza between the prices of $14 and $12 per pizzawhen income is $1,000 per month is: A) 0.6. B)1. C) 1.6. D) 2.

B. 1

20. If the price of chocolate-covered peanuts increases and the demand for strawberry-flavored soft drinks decreases,this indicates that these two goods are: A) unrelated goods. B)complementary goods. C) inferior goods. D) substitute goods.

B. complementary goods

2. The long-run price elasticity of supply of crude oil is ________ the short-run price elasticity of supply of crude oil. A) less than B) greater than C) equal to D) not comparable to

B. greater than

21. Paolo owns a pizza shop. The price of pizza recently increased from $3 to $5 a slice. Paolo responded by increasingthe quantity of slices he supplied from 100 to 150 slices per day. Using the midpoint method, calculate Paolo's priceelasticity of supply. A)5/4 B)4/5 C)3/4 D)5/2

B.) 4/5

3. Suppose the price elasticity of demand for cheeseburgers equals 0.37. This means the demand for cheeseburgers is: A) price elastic. B) price inelastic. C) price unit-elastic. D) perfectly price inelastic

B.) price inelastic.

If the absolute value of the price elasticity of demand is found to be 6, then demand is: A) price-inelastic. B) price-elastic. C) price unit-elastic. D) horizontal.

B.) price-elastic

Figure: Demand for Notebook Computers) The change in the firm's total revenue resulting from a change in pricefrom P to T suggests that demand is: A) nonelastic. B) price-elastic. C) price-inelastic. D) price unit-elastic

B.) price-elastic.

22. The elasticity of demand for Gala apples is relatively elastic, so if a tax is levied on the consumers of Gala apples,the cost of the tax: A) typically falls on the consumer. B) typically falls on the producer. C) is typically split equally between the consumer and the producer. D) cannot be determined without more information

B.) typically falls on the producer

You manage a popular nightclub and lately revenues have been disappointing. Your bouncer suggests that raisingdrink prices will increase revenues, but your bartender suggests that decreasing drink prices will increase revenues.You aren't sure who is right, but you do know that: A) your bouncer thinks the demand for drinks is elastic, while your bartender thinks the demand for drinks is inelastic. B) your bouncer thinks the demand for drinks is inelastic, while your bartender thinks the demand fordrinks is elastic. C) both the bouncer and bartender think the demand for drinks is elastic. D) both the bouncer and bartender think the demand for drinks is inelastic

B.) your bouncer thinks the demand for drinks is inelastic, while your bartender thinks the demand fordrinks is elastic.

Suppose the price of university sweatshirts increases from $10 to $20, and the quantity supplied increases from 20to 30. Using the midpoint formula, you calculate the price elasticity of supply to be: A) 0.66. B) 1.50. C)0.60 D.) 1.66

C.) 0.60

16. If the price of chocolate-covered peanuts decreases from $1.05 to $0.95 and the quantity demanded increases from180 bags to 220 bags, this indicates that, if other things are unchanged, the absolute value of the price elasticity of demand using the midpoint method is: A) 0.5. B) 1. C) 2. D) greater than 2.

C.) 2

27. The price elasticity of demand can be found by: A) examining only the slope of the demand curve. B) measuring absolute changes in price and quantity demanded. C) comparing the percentage change in quantity demanded to the percentage change in price. D) knowing that when price changes, the quantity demanded goes in the opposite direction

C.) comparing the percentage change in quantity demanded to the percentage change in price.

If an item increases 30% in price and the quantity decreases by 40%, the price elasticity of demand is:A) 0.B) 1.C) greater than 1. D) less than 1, but greater than 0

C.) greater than 1.

A major state university in the South recently raised tuition by 12%. An economics professor at this universityasked his students, "Due to the increase in tuition, how many of you will transfer to another university?" Onestudent out of about 300 said that he or she would transfer. Based on this information, the price elasticity of demandfor education at this university is: A) 1. B) highly elastic. C)highly inelastic. D)0

C.) highly inelastic

If an increase in income leads to a decrease in the demand for a good, then the good is said to be: A) normal. B) a luxury. C) inferior. D) a staple or necessity.

C.) inferior

When the percentage change in quantity demanded is larger than the percentage change in price, demand is said to be: A) price-inelastic. B) price unit-elastic. C) price-elastic. D) perfectly inelastic

C.) price-elastic

Considering demand only, a tax on which of the following goods would result in a larger deadweight loss? A) gasoline B) medicine C)restaurant meals D) tobacco

C.) restaurant meals

The absolute value of the price elasticity of demand for soft drinks has been estimated to be 0.55. If the governmentenacts a major increase in the tax on imported sugar (a major ingredient in soft drink manufacture), how will thataffect total expenditures on soft drinks, all other things equal? (Hint: Consider the change in soft drink prices.) A) Total expenditures will remain unchanged. B) Total expenditures will fall. C)Total expenditures will rise. D) People will buy Pepsi instead of Coke

C.) total expenditures will rise

1. If two goods are substitutes, their cross-price elasticity of demand should be A) less than 0. B) negative, yet almost equal to 0. C) equal to 0. D)greater than 0.

D)greater than 0.

The price elasticity of demand along a demand curve with a constant slope: A) is equal to the slope. B) is greater than the slope. C) is less than the slope. D) decreases in absolute value as quantity demanded rises

D. decrease in absolute value as quantity demanded rises.

26. Prior to any taxes, suppose the equilibrium price of gasoline is $3 per gallon. A $1 tax is levied on each gallon of gas that is supplied. As a result, the price of gasoline rises to $3.75 per gallon. The revenue raised by the $1 tax is: A) $0.25 paid by consumers, $0.75 paid by producers. B) $0.50 paid by consumers, $0.50 paid by producers. C) $1.00 paid by producers, $0 paid by consumers. D) $0.75 paid by consumers, $0.25 paid by producers.

D.) $0.75 paid by consumers, $0.25 paid by producers.

(Figure: Demand for Shirts) The price elasticity of demand for the segment EF using the midpoint method, is: A) 1.3. B) 1. C) 0.7 .D)0.33

D.) 0.33

10. (Figure: Market for Lattes) In the market for lattes shown in the figure, what is the price elasticity of demand between prices of $2 and $2.50 per cup, using the midpoint formula? A) 1 B) 1.29 C) 2.51 D)3

D.) 3

18. Egg producers know that the elasticity of demand for eggs is 0.1. If they want to increase sales by 5%, they willhave to lower price by ________%. A) 0.1 B) 1 C) 5 D)50

D.) 50

23. Deadweight losses arising from the presence of an excise tax are greatest when demand: A) and supply are relatively inelastic. B) is relatively inelastic and supply is relatively elastic. C) is relatively elastic and supply is relatively inelastic. D) and supply are relatively elastic.

D.) and supply are relatively elastic

To minimize deadweight loss, markets where demand is relatively ________ and supply is relatively ________ should be taxed. A) elastic; inelastic B) elastic; elastic C) inelastic; elastic D) inelastic; inelastic

D.) inelastic; inelastic