Econ Chapter 6

Cross elasticity of demand measures consumer responsiveness to a change in the price of one good, in terms of the quantity demanded of some other good. A. True B. False

A

If a good is perfectly inelastic in a given price range, it will be perfectly inelastic at all prices. A. True B. False

B

If the percentage change in quantity demanded is greater than the percentage change in price, demand is A. inelastic. B. unit elastic. C. elastic. D. perfectly inelastic.

C

The existence of substitutes for a good and the percentage of one's budget spent on the good are among the factors that determine how elastic the demand for the good will be. A. True B. False

A

The longer the period of time allowed for the producer of a good to adjust to a change in the price of the good, the ____________ the price elasticity of supply will be. This statement assumes that the quantity supplied __________ be altered with time. A. more elastic; can B. more elastic; cannot C. more inelastic; can D. more inelastic; cannot E. none of the above

A

When a good is perfectly inelastic in demand, or perfectly elastic in supply, the buyers will pay the full tax that is placed on the sellers. A. True B. False

A

Which of the following would result in higher price elasticity of good X? A. more substitutes for good X B. a shorter period of time has passed since the change in the price of good X C. lower costs of labor in the production of good X D. good X is more of a necessity than a luxury

A

Government wants to maximize its tax revenue and it can only place a $2 per-unit tax on one of two goods. It should place the tax (on the production) of the good whose demand curve has the A. higher price elasticity of demand. B. lower price elasticity of demand. C. greater length. D. shorter length. E. 1 or 3

B

If Cassandra bought 16 cotton blouses last year when her income was $40,000 and she buys 14 cotton blouses this year her when income is $35,000, then blouses are A. an inferior good. B. a normal good. C. a substitute good. D. a complementary good. E. There is not enough information to answer this question

B

If a 7 percent increase in the price of a commodity results in a 12 percent increase in the quantity supplied, supply is said to be A. perfectly elastic. B. elastic. C. unit elastic. D. inelastic. E. perfectly inelastic.

B

Income elasticity of demand for a normal good is always A. less than zero. B. greater than zero. C. equal to zero. D. less than one.

B

Price elasticity of demand is a measure of the responsiveness of quantity demanded to changes in A. interest rates. B. price C. supply. D. demand.

B

Total revenue is defined as A. price minus quantity sold. B. price multiplied by quantity sold. C. price divided by quantity sold. D. quantity divided by price sold. E. price plus quantity sold.

B

An inferior good is A. any good that consumers think is of low quality. B. a good for which the quantity demanded increases as its price decreases. C. a good for which the demand rises as income falls. D. a good for which the demand rises as income rises. any good that a producer cannot sell a large quantity of, even at a low price.

C

Price elasticity of supply and price elasticity of demand are likely to be __________ in the __________ than in the __________. A. higher; short run; long run B. lower; long run; short run C. higher; long run; short run D. lower; past; future E. higher; past; future

C

Which of the following statements is false? A. Income elasticity of demand measures the responsiveness of quantity demanded to changes in income. B. Price elasticity of demand measures the responsiveness of quantity demanded to changes in price. C. Price elasticity of demand and the slope of a demand curve are the same thing. D. The more substitutes for a good, the higher the price elasticity of demand, ceteris paribus.

C

A normal good is A. any good that consumers normally buy. B. any good for which other goods can substitute. C. a good for which the demand rises as income falls. D. a good for which the demand rises as income rises. E. a good for which the quantity demanded rises as its price falls.

D

When companies hire celebrities to advertise their products, they are attempting to make the demand for their product more ____________. If this strategy is successful, the firm can raise both ____________ and ________________. A. elastic; price; total revenue B. elastic; quantity; total cost C. inelastic; quantity; total revenue D. inelastic; price; total revenue

D

If quantity demanded is completely unresponsive to changes in price, demand is A. inelastic B. unit elastic. C. elastic. D. perfectly elastic. E. perfectly inelastic.

E

If supply is perfectly inelastic, it follows that a A. rise in price will not change quantity supplied. B. fall in price will not change quantity supplied. C. rise in price will change quantity supplied by more than a fall in price. D. fall in price will change quantity supplied by more than a rise in price. E. 1 and 2

E