Microeconomic Ch 6 Quiz

Economists distinguish among the immediate market period, the short run, and the long run by noting that:

Supply is most elastic in the long run, and least elastic in the immediate market period

If a 5 percent cut in the price of a product causes the quantity demanded to rise by 10 percent, the demand is:

Elastic

A 4 percent reduction in the price of a product has zero effect on the dollar amount of consumer expenditure on the product. The price elasticity of demand is:

Equal to 1

Refer to the table above. If the price starts falling from $5, at what price range does demand become inelastic?

From $3 to $2

If the government imposes an excise tax on a good, it will collect the most tax revenues from it if the demand for the good is:

Inelastic

Consider the demand curve above. If the price is A, then the total revenues of sellers would be the area:

0ABC

Refer to the above graph. Consider a situation where price decreases from P2 to P1. In this price range, demand is relatively:

Inelastic because the gain in total revenue (area J) is less than the loss in total revenue (areas C + F + H)

In some markets consumers may buy many different brands of a product. Which of the statements below best represents a situation where demand for a particular brand would be very elastic?

"The different brands are almost identical. I always buy the cheapest"

Refer to the table above. Total revenues will decrease if price rises from:

$4 to $5

Refer to the table above. At a price of $3, the total revenues of sellers will be:

$45

Refer to the above data. Over which price range is the demand inelastic?

$8-$6

Blossom, Inc. sells 500 bottles of perfume a month when the price is $7. A huge increase in resource costs forces Blossom to raise price to $9, and the firm only manages to sell 460 bottles of perfume. The price elasticity of demand is:

0.33 and inelastic

At a price of $4 per unit, Gadgets Inc. is willing to supply 20,000 gadgets, while United Gadgets is willing to supply 10,000 gadgets. If the price were to rise to $8 per unit, their respective quantities supplied would rise to 45,000 and 25,000. If these are the only two firms supplying gadgets, what is the elasticity of supply in the market for gadgets?

1.2

When the price of a product is increased 10 percent, the quantity demanded decreases 15 percent. The price-elasticity of demand coefficient for this product is:

1.5

The price elasticity of demand for a textbook is estimated to be 1 no matter what the price or quantity demanded. In this case:

A 10 percent increase in price will result in a 10 percent decrease in the quantity demanded

Refer to the total revenue graph above. Demand is price-elastic between points:

A and B

If the demand for a product is elastic, then:

A higher tax on the product will generate less tax revenue

The relationship between a consumer's monthly income and monthly consumption of four products, A-D, is shown below. - Which product listed is an example of an inferior good?

C

We use the midpoint formula in computing the price elasticity of demand coefficient in order to:

Convert absolute changes into percent-changes

A straight-line downward-sloping demand curve has a price elasticity of demand which:

Decreases as price decreases

Refer to the above graphs. For which graph is the supply perfectly inelastic?

Graph C

If the demand for a product increases proportionately faster than the increase in consumers' incomes, then the income elasticity of demand for the product is:

Greater than zero

To economists, the main differences between "the short run" and "the long run" are that:

In the long run all resources are variable, while in the short run at least one resource is fixed

You are the only seller of eggs in town, and the price-elasticity coefficient for eggs is known to be 0.8. If you want to increase your sales quantity by 10% through a price-change, what should you do to price?

Increase price by 12.5%

If in the short run the demand for mass transit is inelastic and in the long run the demand is elastic, then a price:

Increase will increase total revenue in the short run but decrease total revenue in the long run

Refer to the above table. Which product is most responsive to a change in income?

Product Z

Refer to the total revenue graph above. An increase in the quantity of product X demanded from 14,000 to 16,000 units implies that the price of product X was:

Reduced and the demand is inelastic

If an increase in the supply of a product in the market results in a decrease in price, but no change in the quantity traded, then:

The price elasticity of demand is zero

Which is not characteristic of a product with relatively inelastic demand?

There are a large number of good substitutes for the good

Refer to the total revenue graph above. When the seller is earning maximum revenues from selling Product X, the demand is:

Unit-elastic