Econ Exam 1 Quiz 4 Questions

Suppose the price of Twinkies is reduced from $1.45 to $1.25 and, as a result, the quantity of Twinkies demanded increases from 2,000 to 2,200. Using the midpoint method, the price elasticity of demand for Twinkies in the given price range is

.64

When the local used bookstore prices economics books at $15.00 each, they generally sell 70 per month. If they lower the price to $7.00 each they sell 90. Given this, we know that the elasticity of demand for economics books is

0.34, so this store should raise price to raise total revenue

The price elasticity of demand measures

a buyer's responsiveness to a change in the price of a good

A minimum wage will

alter both the quantity demanded and quantity supplied of labor

If an increase in income results in a decrease in the quantity demanded of a good, then the good is

an inferior good

The demand for salt is price inelastic and the supply of salt is price elastic. The demand for caviar is price elastic and the supply of caviar is price inelastic. Suppose that a tax of $1 per pound is levied on the sellers of salt and a tax of $1 per pound is levied on the buyers of caviar. We would expect that most of these taxes will be paid by the

buyers of salt and the sellers of caviar

You produce jewelry boxes. If the demand for jewelry boxes is elastic and you want to increase your total revenue, you should

decrease the price of your jewelry boxes

Because the demand for wheat tends to be inelastic, the development of a new, more productive hybrid wheat would tend to

decrease the total revenue of wheat farmers

Suppose that a tax is placed on books. If the buyer pays the majority of the tax we know that the

demand curve is more inelastic than the supply curve

Suppose the government increases the tax on gasoline in order to raise revenue. Since raising the gasoline tax would increase the price of gasoline, the government must be assuming that the

demand for gasoline is price inelastic

The burden of a tax placed on a product

depends on the supply and demand of that product

Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the demand curve will be

flatter

The midpoint method is used to compute elasticity because it

gives the same answer regardless of the direction of change

A price ceiling

is a legal maximum on the price at which a good can be sold

In general, a tax burden falls more heavily on the side of the market that is

less elastic

Demand is inelastic if elasticity is

less than 1

In any market, total revenue is price

multiplied by quantity

Chocolate Chip Cookie Dough ice cream would tend to have very elastic demand because

other flavors of ice cream are almost perfect substitutes

Demand is said to be inelastic if the

quantity demanded changes proportionately less than price

In the case of perfectly inelastic demand,

quantity demanded stays the same regardless of price changes

The local pizza restaurant makes such great bread sticks that consumers do not respond much to a change in the price. If the owner is only interested in increasing revenue, he should

raise the price of the bread sticks

A minimum wage imposed above a market's equilibrium wage will result in the quantity

supplied of labor being greater than the quantity demanded of labor and unemployment will occur

Suppose that a tax is placed on DVDs. If the seller ends up paying the majority of the tax we know that the

supply curve is more inelastic than the demand curve

A tax of $0.10 per bar on the sellers of Snickers will cause the

supply curve of Snickers to shift up by $0.10

If sellers do not respond at all to a change in price,

supply must be perfectly inelastic

If a price ceiling is not binding,

the equilibrium price is below the ceiling