Econ Micro Midterm 1-HW 4

Refer to Figure 5-7. Using the midpoint method, what is the price elasticity of supply between point B and point C? a. 1.44 b. 1.29 c. 0.96 d. 0.69

a. 1.44

. Refer to Figure 5-4. Total revenue when the price is P1 is represented by... a. areas B + D. b. areas A + B. c. areas C + D. d. area D.

a. areas B + D.

Refer to Figure 5-2. If the price decreases in the region of the demand curve between points B to C, we can expect total revenue to... a. decrease. b. stay the same. c. increase. d. first decrease, then increase until total revenue is maximized.

a. decrease.

When small changes in price lead to infinite changes in quantity demanded, demand is perfectly... a. elastic, and the demand curve will be horizontal. b. inelastic, and the demand curve will be horizontal. c. elastic, and the demand curve will be vertical. d. inelastic, and the demand curve will be vertical.

a. elastic, and the demand curve will be horizontal.

When the price of candy bars is $1.10, the quantity demanded is 480 per day. When the price falls to $0.90, the quantity demanded increases to 530. Given this information and using the midpoint method, we know that the demand for candy bars is... a. inelastic. b. elastic. c. unit elastic. d. perfectly inelastic.

a. inelastic.

Skip's Sealcoating Service increased its total monthly revenue from $12,000 to $13,500 when it raised the price of driveway repairs from $600 to $750. The price elasticity of demand for Skip's Sealcoating Service is... a. 0.11. b. 0.47. c. 1.12. d. 2.11.

b. 0.47.

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 1.45. Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded? a. An increase of 14.5 percent in the price of the good b. An increase of 6.90 percent in the price of the good c. An increase in the price of the good from $14.50 to $10 d. An increase in the price of the good from $10 to $24.50

b. An increase of 6.90 percent in the price of the good

Which of the following is likely to have the most price inelastic demand? a. White chocolate chip with macadamia nut cookies b. Salt c. Hardback novels d. Box seats at a major league baseball game

b. Salt

The demand for grape-flavored Hubba Bubba bubble gum is likely... a. inelastic because there are many close substitutes for grape-flavored Hubba Bubba. b. elastic because there are many close substitutes for grape-flavored Hubba Bubba. c. inelastic because the market is broadly defined. d. elastic because the market is broadly defined.

b. elastic because there are many close substitutes for grape-flavored Hubba Bubba.

Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the... a. steeper the demand curve will be. b. flatter the demand curve will be. c. further to the right the demand curve will sit. d. closer to the vertical axis the demand curve will sit.

b. flatter the demand curve will be

Refer to Scenario 5-2. The change in equilibrium quantity will be... a. greater in the pickles market than in the rice market. b. greater in the rice market than in the pickles market. c. the same in the pickles and rice markets. d. unknown without more information.

b. greater in the rice market than in the pickles market.

If the price elasticity of supply is 1.5, and price increased by 7 percent, quantity supplied would... a. increase by 4.67 percent. b. increase by 10.50 percent. c. decrease by 4.67 percent. d. decrease by 10.50 percent.

b. increase by 10.50 percent.

If two goods are complements, their cross-price elasticity will be... a. positive. b. negative. c. zero. d. equal to the difference between the income elasticities of demand for the two goods.

b. negative.

The price elasticity of supply measures how much ... a. the quantity supplied responds to changes in input prices. b. the quantity supplied responds to changes in the price of the good. c. the price of the good responds to changes in supply. d. sellers respond to changes in technology.

b. the quantity supplied responds to changes in the price of the good.

Zima says that she will spend exactly $25 each month on new apps for her mobile device, regardless of the price of apps. Zima's demand for apps is... a. perfectly elastic. b. unit elastic. c. perfectly inelastic. d. somewhat inelastic, but not perfectly inelastic.

b. unit elastic.

Refer to Table 5-3. Using the midpoint method, the income elasticity of demand for good Y is... a. 2.33, and good Y is a normal good. b. −2.33, and good Y is an inferior good. c. −0.43, and good Y is a normal good. d. −0.43, and good Y is an inferior good.

b. −2.33, and good Y is an inferior good.

In January, the price of dark chocolate candy bars was $2.00, and Willy's Chocolate Factory produced 80 pounds. In February, the price of dark chocolate candy bars was $2.50, and Willy's produced 110 pounds. In March, the price of dark chocolate candy bars was $3.00, and Willy's produced 140 pounds. Using the midpoint method, the price elasticity of supply of Willy's dark chocolate candy bars was about... a. 0.70 when the price increased from $2.00 to $2.50 and 0.76 when the price increased from $2.50 to $3.00. b. 0.88 when the price increased from $2.00 to $2.50 and 1.08 when the price increased from $2.50 to $3.00. c. 1.42 when the price increased from $2.00 to $2.50 and 1.32 when the price increased from $2.50 to $3.00. d. 1.50 when the price increased from $2.00 to $2.50 and 1.18 when the price increased from $2.50 to $3.00.

c. 1.42 when the price increased from $2.00 to $2.50 and 1.32 when the price increased from $2.50 to $3.00.

Refer to Figure 5-1. Between point A and point B, price elasticity of demand is equal to... a. 0.33. b. 0.67. c. 1.5. d. 2.67.

c. 1.5.

If the price elasticity of demand for a good is 2, then a 10 percent increase in price results in a... a. 0.20 percent decrease in the quantity demanded. b. 5.00 percent decrease in the quantity demanded. c. 20.00 percent decrease in the quantity demanded. d. 40.00 percent decrease in the quantity demanded.

c. 20.00 percent decrease in the quantity demanded.

Suppose the price elasticity of supply for cheese is 0.6 in the short run and 1.4 in the long run. If an increase in the demand for cheese causes the price of cheese to increase by 15 percent, then the quantity supplied of cheese will increase by... a. 0.4 percent in the short run and 4.6 percent in the long run. b. 1.7 percent in the short run and 0.7 percent in the long run. c. 9 percent in the short run and 21 percent in the long run. d. 25 percent in the short run and 10.7 percent in the long run.

c. 9 percent in the short run and 21 percent in the long run.

When her income increased from $10,000 to $20,000, Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds. Using the midpoint method, we can conclude that for Heather, macaroni... a. and soy-burgers are both normal goods with income elasticities equal to 1. b. is an inferior good and soy-burgers are normal goods; both have income elasticities of 1. c. is an inferior good with an income elasticity of -1 and soy-burgers are normal goods with an income elasticity of 1. d. and soy-burgers are both inferior goods with income elasticities equal to -1.

c. is an inferior good with an income elasticity of -1 and soy-burgers are normal goods with an income elasticity of 1.

Last year, Russell bought 8 pairs of shoes when his income was $42,000. This year, his income is $54,000, and he purchased 6 pairs of shoes. Holding other factors constant and using the midpoint method, it follows that Russell's income elasticity of demand is about... a. -0.88, and Russell regards pairs of shoes as normal goods. b. -0.88, and Russell regards pairs of shoes as inferior goods. c. -1.14, and Russell regards pairs of shoes as normal goods. d. -1.14, and Russell regards pairs of shoes as inferior goods.

d. -1.14, and Russell regards pairs of shoes as inferior goods.

Refer to Figure 5-1. Between point A and point B on the graph, demand is... a. perfectly elastic. b. inelastic. c. unit elastic. d. elastic, but not perfectly elastic.

d. elastic, but not perfectly elastic.

The supply of a good will be more elastic, the... a. more the good is considered a luxury. b. broader is the definition of the market for the good. c. larger the number of close substitutes for the good. d. longer the time period being considered.

d. longer the time period being considered.

Refer to Scenario 5-1. Using the midpoint method, if the price of good X is constant at $10 and the price of good Y decreases from $10 to $8, the cross-price elasticity of demand is about... a. 0.57, and X and Y are substitutes. b. −0.22, and X and Y are complements. c. −0.80, and X and Y are complements. d. −2.57, and X and Y are complements.

d. −2.57, and X and Y are complements.