Econ Test #2

If the Sunset Café reduces prices by 20%, and the number of customers increases by 40%, what is the elasticity of demand? 0.5 2.0 20 40

2.0

Suppose that Michael's Bowling Alley offers 50% off bowling on Mondays, and as a result, drink sales increase by 40%. What is the cross elasticity of demand between bowling and drinks? 0.80 -0.80 1.25 -1.25

-0.80

If the Aspen ski lodge doubles its room rates, what is likely to happen to the demand for lift tickets sold by the lodge? A)Demand for lift tickets, a substitute good, will fall. B)Demand for lift tickets, a complement good, will fall. C)Demand for lift tickets, a substitute good, will rise. D)Demand for lift tickets, a complement good, will rise.

B)Demand for lift tickets, a complement good, will fall.

I'm trying to predict whether or not my roommate will buy more or less milk this week than last week. All he tells me is that his Oreo-price elasticity of demand for milk is always positive. I also know that the price of milk is the same as it was last week. In fact, everything is the same as last week, except that the price of Oreos is lower. Given all this, I know for sure that A)My roommate will buy the same amount of milk B)My roommate will buy less milk C)My roommate will buy more milk D)There is not enough information to determine whether my roommate will buy more or less milk

B)My roommate will buy less milk

When the price of a Lady Gaga concert ticket in Boulder is 100 dollars per seat, the ticket office can sell 10,000 tickets. When the price of a ticket is 150 dollars per seat, they can sell 8,000 tickets. Which of the following statements is true? A)The demand for this ticket is price elastic, and so an increase in the price of the ticket will decrease the total revenue of the ticket seller B)The demand for this ticket is price inelastic, and so an increase in the price of the ticket will increase the total revenue of the ticket seller C)The demand for this ticket is price inelastic, and so an increase in the price of the ticket will decrease the total revenue of the ticket seller D)The demand for this ticket is price elastic, and so an increase in the price of the ticket will increase the total revenue of the ticket seller

B)The demand for this ticket is price inelastic, and so an increase in the price of the ticket will increase the total revenue of the ticket seller

What do you expect the relationship between the Uber price elasticity of demand for airport parking of the US and Europe to be? Both Positive with a greater magnitude in the US Both Negative with a greater magnitude in the US Both positive with a greater magnitude in Europe Both negative with a greater magnitude in Europe

Both Positive with a greater magnitude in the US

If demand for a good is inelastic, what would the demand curve for this good look like? A)It would be completely horizontal B)It would be upward sloping C)It would be downward sloping and relatively flat D)It would be downward sloping and relatively steep

D)It would be downward sloping and relatively steep

For most automobile manufacturers, what happens to the elasticity of supply over time? Elasticity of supply increases. Elasticity of supply will not change. Elasticity of supply decreases. Elasticity of supply will fall to zero.

Elasticity of supply increases.

If I know the price elasticity of demand for a good then I know the slope of the demand curve for that good True False

False

In recent years many new restaurants have opened around Collegetown. If you want to pay the lowest price possible for restaurant meals, should you hope that demand for restaurant meals is elastic or inelastic? elastic inelastic it does not matter

Inelastic

What are the factors that determine the price elasticity of demand?

Luxury vs. Neccesity Availability of Substitutes Income Level Price level & Share of total expenditure High price more elastic Goods with multiple uses Time horizon Classification of the good (Narrow vs. Broad)

Price Elasticity of Supply has to do with how easily producers can change quantity supplied in response to a change in price

Nature of the industry Ex: Gold vs. Textiles Natural Constraints Rubber trees take a long time to grow Nature of the good, availability of substitutes in production Farmers can change their crops on a year to year basis Definition of the commodity Ex: Tailor can switch from making red skirts to either green skirts or men's pants

If demand for a good is price elastic, which effect is bigger? The price effect The quantity effect

The quantity effect

Frank recently lost his job as a photo lab technician. To get by while he searches for a new career, he increases his purchases of spaghetti. For Frank, spaghetti is: a normal good an inferior good a superior good an exceptional good

an inferior good

Because there are dozens of brands of tablet computers to choose from, the elasticity of demand for the tablet market is: inelastic elastic unitary elastic perfectly inelastic

elastic

Which of the following goods would likely be very inelastic? a new sofa a condo on the beach medication for a sick pet gourmet box of chocolates

medication for a sick pet

Assume the price elasticity of demand for oil is negative. If at the current price, the price elasticity of demand for oil is ___ than ___, marginally lowering the price will ___ OPEC's total revenue from the sale of oil. greater, -1, decrease less, -1, increase less, -1, decrease more than one of the other answers is correct

more than one of the other answers is correct