Liberty
University ECON 213 quiz 7 solutions answers right
How
many versions: 11 different versions
Question 1 When you change your quantity demanded of one good
because of a change in price of another good, you are acting according to the
principle of:
Question 2 Used car dealers find that their sales rise in a
recession. We can be certain that consumers view used cars as:
Question 3 Refer to the following graphs to answer the questions
that follow:
Which of these graphs most likely depicts a price elasticity of
demand of –5?
Question 4 When the price of scooters drops by 5%, the quantity
demanded changes by 20%. You know that the price elasticity of demand for
scooters is:
Question 5 If the crossprice elasticity of demand between Good A
and Good B is 3, the price of Good B increases, and the price elasticity of
demand for Good B is inelastic, we can expect to see a ________ change in the
quantity demanded for Good A:
Question 6 Refer to the accompanying table. The price elasticity of
demand of erasers is __________ when the price is lowered from $1.50 to $1.00.
Sellers of erasers will __________ their total revenue from this price change.
Question 7 The price elasticity supply of doctors could be
considered ________ because it takes a minimum of four to six years of training
to be able to work as a physician.
Question 8 If the crossprice elasticity of demand between Good A
and Good B is 2 and the percentage change in price of Good A is 5%, what is the
percentage change in quantity demanded of Good B?
Question 9 Price elasticity of demand is measured as the:
Question 10 When the price increases by 30% and the quantity
demanded drops by 30%, the price elasticity of demand is:
Question 11 At higher prices, the price elasticity of demand is
likely to be __________, whereas it is likely to be __________ at lower prices.
Question 12 Consider two labor markets. In the first, the elasticity
of supply is relatively elastic, while it is relatively inelastic in the
latter. Imposing a minimum wage in each market would result in ________
unemployment in the first market and ________ unemployment in the second.
Question 13 If a business finds that demand for its good is very
price elastic, it knows that:
Question 14 If the income elasticity of demand is 0.5, the good will
be a(n):
Question 15 In the accompanying graph, the price elastic portion of
demand is found in the ________ region and the price inelastic portion of
demand is found in the ________ region of the graph.
Question 16 Use the following scenario to answer the questions that
follow: Dairy Dream, a local ice cream store, finds that it sells out of ice
cream sandwiches at the current price of $1. It raises the price to increase
its revenues and finds that no one buys ice cream sandwiches anymore. The
owners raised the price because they believed that the demand for ice cream
sandwiches is:
Question 17 Shawna wins the lottery and her income increases by 60%.
She used to buy 10 pints of cottage cheese per month and now she buys 12 pints.
Her income elasticity of demand for cottage cheese is ________, making it a(n)
________ good.
Question 18 If the crossprice elasticity of demand is 6, Good A and
Good B are:
Question 19 The introduction of new gaming systems that can compete
effectively with the Nintendo console will make the demand for the Nintendo
console become:
Question 20 Chris runs a sporting goods store and knows that the
price elasticity of demand for his sports clothing line is –1.5. He is planning
to lower prices by 10%. The percentage change in quantity demanded will be:
Question 1 When the price of softballs is high, a __________ in
price will raise total revenue. When the price is low, the seller should
__________ the price to increase total revenue.
Question 2 If the crossprice elasticity of demand is –5, Good A and
Good B are:
Question 3 If the price elasticity of supply is 1.5, we know that
supply is:
Question 4 A local sandwich shop can quickly place an order for food
with its local vendors if it uses up its existing resources quickly. This
indicates that the price elasticity of supply is:
Question 5 If the owner of Sally’s Salty Treats finds that, in the
long run, she can trade one type of input for another, the price elasticity of
supply is:
Question 6 While there are many pizza places in Curtisville, Pappy’s
Pizza is known for its distinctive deepdish pizza with an almost pielike
crust, whereas Momma’s Pizza Pizzazz is comparable to many other restaurants.
Pappy’s is likely to find that it can ________ prices to increase total
revenue, and Mommas must ________ prices to increase total revenue.
Question 7 Demand for which of the following goods/services is
likely to be the LEAST elastic in a Minnesota winter?
Question 8 Which one of the following pairs of goods is likely to
have a negative crossprice elasticity of demand?
Question 9 The income elasticity of demand for a good measures the
responsiveness of ________ to a change in ________.
Question 10 What good is most likely to have a negative income
elasticity of demand?
Question 11 The price elasticity supply of doctors could be considered
________ because it takes a minimum of four to six years of training to be able
to work as a physician.
Question 12 Henry raised his quantity demanded of hockey pucks from
100 to 150 when the price fell from $5 to $3 per puck. Using the midpoint
method, his price elasticity of demand is:
Question 13 If the percentage change in quantity demanded of Good B
is 2% and the percentage change in the price of Good A is –10%, what is the
crossprice elasticity of demand?
Question 14 When the price increases by 30% and the quantity
demanded drops by 30%, the price elasticity of demand is:
Question 15 What good is most likely to have an income elasticity of
demand equal to 0.3?
Question 16 The Sunny Softball league found that, when it changed
its ticket prices from $10 to $5, there was a more than proportional but not
infinite increase in attendance. The price elasticity of demand is:
Question 17 “No matter the price, I will always buy five gallons of
ice cream a week. I love ice cream!” This statement reflects a price elasticity
of demand that is:
Question 18 The percentage change in price is 5%, while the price
elasticity of supply is 0. The percentage change in quantity supplied:
Question 19 Income elasticity of demand for professional haircuts is
found to be 1.7. This service is a:
Question 20 When Sue received a promotion at work, her income rose
by 50%. The income elasticity of demand for steak was found to be 1.5. For her,
steak is a(n):
Question 1
The local bakery calculates the price elasticity of
demand for its cinnamon rolls to be –1.25. This tells them that demand is
________ and price is ________ to the buyer.
Question 2
The income elasticity of demand for a good measures the
responsiveness of ________ to a change in ________.
Question 3
Used car dealers find that their sales rise in a
recession. We can be certain that consumers view used cars as:
Question 4
Price elasticity of demand measures the change in:
Question 5
Henry raised his quantity demanded of hockey pucks from
100 to 150 when the price fell from $5 to
$3 per puck. Using the midpoint method, his price
elasticity of demand is:
Question 6
When the price elasticity of demand is elastic, a
consumer is:
Question 7
If the income elasticity of demand for good smartphone
apps is 5 and the percentage change in income is 10%, what is the percentage
change in the quantity consumed?
Question 8
The local National Hockey League (NHL) team decides to
lower its ticket prices in order to attract more fans. They are hoping that
the:
Question 9
Refer to
the following graphs to answer the questions that follow:
Graph ________ most likely shows the price elasticity of
demand for the following situation: Bob’s Boots can sell out its entire stock
of shoe polish at $2.50 but can sell none if it raises the price to $2.55.
Question 10
If the income elasticity of demand is 1.2, the good will
be a(n):
Question 11
Firms supplying twistyties decrease the quantity supplied
of inputs by 10% when the price decreases by 5%. The price elasticity of supply
for twistyties is:
Question 12
If the percentage change in the quantity consumed of
pizza is 8% and the percentage change in income is 2%, what is the income
elasticity of demand for pizza?
Question 13
What good is most likely to have an income elasticity of
demand equal to 8?
Question 14
Consider two labor markets. In the first, the elasticity
of supply is relatively elastic, while it is relatively inelastic in the
latter. Imposing a minimum wage in each market would result in ________
unemployment in the first market and ________ unemployment in the second.
Question 15
If the crossprice elasticity between Good A and Good B is
–1.5 and the percentage change in quantity demanded of Good B is 15%, what is
the percentage change in the price of Good A?
Question 16
If the price elasticity of supply is 2.5, we know that it
is:
Question 17
The price elasticity supply of doctors could be
considered ________ because it takes a minimum of four to six years of training
to be able to work as a physician.
Question 18
Robert’s Furniture produces highquality wooden bedroom
sets that take approximately 4 months to make, from start to finish. The price
elasticity of supply for these bedroom sets in the short term is:
Question 19
If your friend says, “I am never going to buy another
Avicii remix again!” his price elasticity of demand for Avicii remixes is:
Question 20
Price elasticity of demand is measured as the:
Question 1 Which one of the following pairs
of goods is likely to have a positive crossprice elasticity of demand?
Question 2 If the income elasticity of
demand for noodles is –2 and the percentage change in the quantity consumed is
5%, what is the percentage change in income?
Question 3 The reason that Darren buys a
lot more paintings when the price of art falls is that:
Question 4 Howard buys 5 suits a year when
he earns $70,000. When his income increases to $200,000, he buys 15 suits a
year. From the midpoint method, his income elasticity of demand for suits is:
Question 5 Henry raised his quantity
demanded of hockey pucks from 100 to 150 when the price fell from $5 to $3 per
puck. Using the midpoint method, his price elasticity of demand is:
Question 6 Robert’s Furniture produces highquality
wooden bedroom sets that take approximately 4 months to make, from start to
finish. The price elasticity of supply for these bedroom sets in the short term
is:
Question 7 The Sunny Softball league found that,
when it changed its ticket prices from $10 to $5, there was a more than
proportional but not infinite increase in attendance. The price elasticity of
demand is:
Question 8 We would expect to see a
positive crossprice elasticity between:
Question 9 What good is most likely to have
an income elasticity of demand equal to 0.3?
Question 10 Jane says that she will always
spend $20 a week on lattes. Jane’s demand for lattes is price:
Question 11 As you move left along the
demand curve, the price elasticity of demand:
Question 12 Firms are indifferent to
changing prices when the price elasticity of demand is:
Question 13 Refer to the following graphs
to answer the questions that follow: Which of these graphs most likely depicts
a price elasticity of demand of –5?
Question 14 If the crossprice elasticity
of demand between Good A and Good B is 3, the price of Good B increases, and
the price elasticity of demand for Good B is inelastic, we can expect to see a
________ change in the quantity demanded for Good A:
Question 15 If your friend says, “I am
never going to buy another Avicii remix again!” his price elasticity of demand
for Avicii remixes is:
Question 16 Shawna wins the lottery and her
income increases by 60%. She used to buy 10 pints of cottage cheese per month
and now she buys 12 pints. Her income elasticity of demand for cottage cheese
is ________, making it a(n) ________ good.
Question 17 The initial price of picture
frames is $6 and suppliers offer 20 frames. When the price falls to $4, suppliers
offer only 10. The price elasticity of supply is:
Question 18 Price elasticity of demand is
measured as the:
Question 19 When the price of erasers
increases from $1.50 to $2.50, the quantity demanded of pencils is unchanged.
The crossprice elasticity of demand between erasers and pencils is ________
because erasers and pencils ________.
Question 20 A 15% increase in the price of
cookies results in a 9% decrease in the quantity of cookies sold. The revenue
received by cookie suppliers will ________ because the price elasticity of
demand for cookies is ________.
Question 1 If the price elasticity of
supply is 1.5, we know that supply is:
Question 2 Refer to the accompanying table.
When the price drops from $5 to $3, price elasticity of demand for sushi (using
the midpoint method) at an income of $30,000 is:
Question 3 If the income elasticity of
demand for noodles is –2 and the percentage change in the quantity consumed is
5%, what is the percentage change in income?
Question 4 At higher prices, the price
elasticity of demand is likely to be __________, whereas it is likely to be
__________ at lower prices.
Question 5 If the crossprice elasticity
between Good A and Good B is –1.5 and the percentage change in quantity
demanded of Good B is 15%, what is the percentage change in the price of Good
A?
Question 6 Super Economy Brand products
have an income elasticity of –1.4. Thus, these are __________ goods.
Question 7 To keep the percentage change in
quantity demanded equally proportional to the percentage change in price when
the prices rise by 5%, a consumer would need to ________ quantity demanded by
________.
Question 8 If the percentage change in the
quantity consumed of pizza is 8% and the percentage change in income is 2%,
what is the income elasticity of demand for pizza?
Question 9 Demand for which of the
following goods/services is likely to be the LEAST elastic in a Minnesota
winter?
Question 10 The income elasticity of demand
for a good measures the responsiveness of ________ to a change in ________.
Question 11 While there are many pizza
places in Curtisville, Pappy’s Pizza is known for its distinctive deepdish
pizza with an almost pielike crust, whereas Momma’s Pizza Pizzazz is
comparable to many other restaurants. Pappy’s is likely to find that it can
________ prices to increase total revenue, and Mommas must ________ prices to
increase total revenue.
Question 12 The initial price of picture
frames is $6 and suppliers offer 20 frames. When the price falls to $4,
suppliers offer only 10. The price elasticity of supply is:
Question 13 A producer knows that the price
elasticity for his product is –0.5. He wants to increase quantity demanded by
30%. By what percentage does he need to change the price?
Question 14 A 15% increase in the price of
cookies results in a 9% decrease in the quantity of cookies sold. The revenue
received by cookie suppliers will ________ because the price elasticity of
demand for cookies is ________.
Question 15 If the owner of Sally’s Salty
Treats finds that, in the long run, she can trade one type of input for
another, the price elasticity of supply is:
Question 16 Which one of the following
pairs of goods is likely to have a negative crossprice elasticity of demand?
Question 17 Winged Wonders is a specialty
store that sells butterfly ornaments. The owner wants to increase her total
revenue and knows that the price elasticity of demand for her product is –0.4.
What should she do to her price?
Question 18 We would expect to see a
positive crossprice elasticity between:
Question 19 The Sunny Softball league found
that, when it changed its ticket prices from $10 to $5, there was a more than
proportional but not infinite increase in attendance. The price elasticity of
demand is:
Question 20 If the crossprice elasticity
of demand between Good A and Good B is 3, the price of Good B increases, and
the price elasticity of demand for Good B is inelastic, we can expect to see
a(n) ________ change in the quantity demanded for Good A.
Question 1 Over time, the price elasticity
of supply for sunglasses will become more:
Question 2 Demand is almost always more
price elastic in the long run because:
Question 3 If the income elasticity of
demand is 1.2, the good will be a(n):
Question 4 Winged Wonders is a specialty
store that sells butterfly ornaments. The owner wants to increase her total
revenue and knows that the price elasticity of demand for her product is – 0.4.
What should she do to her price?
Question 5 If a business finds that demand
for its good is very price elastic, it knows that:
Question 6 While there are many pizza
places in Curtisville, Pappy’s Pizza is known for its distinctive deepdish
pizza with an almost pielike crust, whereas Momma’s Pizza Pizzazz is comparable
to many other restaurants. Pappy’s is likely to find that it can ________
prices to increase total revenue, and Mommas must ________ prices to increase
total revenue.
Question 7 When the price of erasers
increases from $1.50 to $2.50, the quantity demanded of pencils is unchanged.
The crossprice elasticity of demand between erasers and pencils is ________
because erasers and pencils ________.
Question 8 If the owner of Sally’s Salty
Treats finds that, in the long run, she can trade one type of input for
another, the price elasticity of supply is:
Question 9 Refer to the information in the
accompanying table. Without any calculations, you know that sushi is a(n):
Question 10 If the crossprice elasticity
of demand between Good A and Good B is –2, the price of Good B increases, and
the price elasticity of demand for Good B is elastic, we can expect to see a
________ change in the quantity demanded for Good A.
Question 11 Which one of the following
pairs of goods is likely to have a positive crossprice elasticity of demand?
Question 12 Use the following scenario to
answer the questions that follow: Dairy Dream, a local ice cream store, finds
that it sells out of ice cream sandwiches at the current price of $1. It raises
the price to increase its revenues and finds that no one buys ice cream
sandwiches anymore. The owners raised the price because they believed that the
demand for ice cream sandwiches is:
Question 13 The introduction of new gaming
systems that can compete effectively with the Nintendo console will make the
demand for the Nintendo console become:
Question 14 A local merchant raises the
price of his good and finds that his total revenues increase. The demand for
this good is:
Question 15 Refer to the accompanying
table. When the price drops from $5 to $3, price elasticity of demand for sushi
(using the midpoint method) at an income of $30,000 is:
Question 16 When the price elasticity of
demand is elastic, a consumer is:
Question 17 For which of the following
products should sellers raise the price in order to increase total revenue from
college students?
Question 18 Shawna wins the lottery and her
income increases by 60%. She used to buy 10 pints of cottage cheese per month
and now she buys 12 pints. Her income elasticity of demand for cottage cheese
is ________, making it a(n) ________ good.
Question 19 Super Economy Brand products
have an income elasticity of –1.4. Thus, these are __________ goods.
Question 20 Which one of the following
pairs of goods is likely to have a negative crossprice elasticity of demand?
Price
elasticity of demand measures the change in:
Select
one:
a.
price due to the change in demand.
b.
quantity demanded due to the change in price.
c.
demand due to the change in price.
d.
quantity demanded due to the change in price of another good/service.
e.
price due to a change in quantity demanded.
If
your friend says, “I am never going to buy another Avicii remix again!” his
price elasticity of demand for Avicii remixes is:
Select
one:
a.
inelastic.
b.
perfectly elastic.
c.
elastic.
d. Yes
e.
perfectly inelastic.
From
the accompanying table, we would expect that, for recreational skaters, the
price elasticity of demand for ice skates between $10 and $20 to be ________
than that of hockey players because ________.
Select
one:
a.
less elastic; hockey players need skates
b. the
same; they both skate
c.
more elastic; recreational skaters can substitute other activities
d.
less elastic; ice skates are an inferior good
e.
more elastic; ice skates are a normal good
Assume
that a family spends 35% of its income on housing, 20% on travel-related
expenses, 10% on utilities, 25% on health care, and 5% on miscellaneous items.
Demand for which category will be most responsive to a change in price?
Select
one:
a.
miscellaneous
b.
travel-related expenses
c.
utilities
d.
health care
e.
housing
Question
5
When
the price of scooters drops by 5%, the quantity demanded changes by 20%. You
know that the price elasticity of demand for scooters is:
Select
one:
a.
perfectly elastic
b.
perfectly inelastic.
c.
elastic
d.
unitary elastic.
e.
inelastic
In the
accompanying table, assume that the price of ice skates increases from $10 to
$20 per pair. Using the midpoint method, calculate the price elasticity of
demand for ice skates for hockey players.
Select
one:
a. 0.67
b.
3.00
c.
–0.16
d.
–6.00
e.
0.11
A
producer knows that the price elasticity for his product is –0.5. He wants to
increase quantity demanded by 30%. By what percentage does he need to change
the price?
Select
one:
a. –6%
b. 10%
c. 6%
d.
–60%
e.
–9.5%
If the
price elasticity of demand for Good A is –0.2 and the price increases from
$2.25 to $2.75, the percentage change in the quantity demanded of Good A is:
Select
one:
a.
–100%.
b.
–4.0%.
c.
unknown because not enough information is provided.
d.
4.0%
e.
100%.
If a
business finds that demand for its good is very price elastic, it knows that:
Select
one:
a.
price is unrelated.
b. the
quantity consumers buy is unimportant.
c.
price is very important.
d. the
effect of price is less important than the impact of the quantity consumers
buy.
e.
price is unimportant.
Assume
that the market for pencils is in equilibrium and that demand is very price
elastic. The popularity of digital tablets and electronic pens increases and
demand for pencils declines. The equilibrium change in quantity demanded is:
Select
one:
a.
infinite
b.
relatively large.
c.
proportional to the shift in demand.
d. 0
(zero).
e.
relatively small.
When
Nina decreases her price of lipstick from $7 to $5, she finds that her sales
increase from 6 to 7. She faces ________ demand for her product, and this price
change will ________ her total revenue.
Select
one:
a.
inelastic; lower
b.
perfectly elastic; raise
c.
elastic; raise
d. perfectly
inelastic; lower
e.
unitary elastic; not change
Use
the following scenario to answer the questions that follow:
Dairy
Dream, a local ice cream store, finds that it sells out of ice cream sandwiches
at the current price of $1. It raises the price to increase its revenues and
finds that no one buys ice cream sandwiches anymore.
The
owners raised the price because they believed that the demand for ice cream
sandwiches is:
Select
one:
a.
perfectly elastic.
b.
inelastic
c.
relatively price sensitive
d.
elastic
e.
unitary elastic.
The
local National Hockey League (NHL) team decides to lower its ticket prices in
order to attract more fans. They are hoping that the:
Select
one:
a.
quantity increase matters more than the price decrease to total revenue.
b.
price elasticity of demand is perfectly inelastic.
c.
price decrease matters more than the quantity increase to total revenue.
d.
price elasticity of demand is perfectly elastic.
e.
price elasticity of demand is unitary elastic.
Income
elasticity of demand for professional haircuts is found to be 1.7. This service
is a:
Select
one:
a.
substitute good.
b.
normal good and necessity good.
c.
luxury good but not a normal good.
d.
necessity good but not a normal good.
e.
normal good and a luxury good.
If the
income elasticity of demand is 0.5, the good will be a(n):
Select
one:
a.
complement good.
b.
substitute good
c.
luxury good.
d.
inferior good.
e.
necessity good.
If the
percentage change in the quantity consumed of pizza is 8% and the percentage
change in income is 2%, what is the income elasticity of demand for pizza?
Select
one:
a.
–0.25
b.
0.25
c. –1
d. 4
e. –4
If the
cross-price elasticity of demand between Good A and Good B is 2 and the
percentage change in price of Good A is 5%, what is the percentage change in
quantity demanded of Good B?
Select
one:
a. –3%
b.
–1.25%
c. 10%
d.
1.50%
e. 3%
Question
text
Refer
to the accompanying table to answer the questions that follow.
The
price of erasers increases from $0.50 to $1.00 per eraser. Use the midpoint
method to calculate the cross-price elasticity of demand between pencils and
erasers.
Select
one:
a. –3
b.
0.13
c.
–7.67
d.
7.67
e.
–0.13
The
price elasticity supply of doctors could be considered ________ because it
takes a minimum of four to six years of training to be able to work as a
physician.
Select
one:
a.
unitary elastic
b.
relatively elastic
c.
relatively inelastic
d.
perfectly inelastic
e.
perfectly elastic
If the
price elasticity of supply is 1.5, we know that supply is:
Select
one:
a.
relatively inelastic.
b.
perfectly elastic.
c.
relatively elastic
d.
unitary elastic.
e.
perfectly inelastic.
The reason that Darren buys a lot more paintings when the price of art falls is that:
If your friend says, “I am never going to buy another Avicii remix again!” his price elasticity of demand for Avicii remixes is:
From the accompanying table, we would expect that, for recreational skaters, the price elasticity of demand for ice skates between $10 and $20 to be than that of hockey players because
Nita is a devoted Coca-Cola consumer, whereas Becky can drink either Coca-Cola or Peps products Nita’s demand for Coca-Cola will be relatively more while Becky’s demand will be relatively more
Assume that a family spends 35% of its income on housing, 20% on travel-related expenses,
10% on utilities, 25% on health care, and 5% on miscellaneous items. Demand for which category will be most responsive to a change in price?
Jill has a fixed budget and buys all of the items listed below. When will a 20% reduction in price cause her to change the amount she buys the most?
When the price of scooters drops by 5%, the quantity demanded changes by 20%. You know that the price elasticity of demand for scooters is:
At a price of $2, the quantity demanded for pens is 12. When the price increases to $3, the quantity demanded for pens is 10. The price elasticity of demand for pens is:
At a price of $5/hour, Bob wants to hire three workers. When the price rises to $7/hour, Bob wants to hire only two workers. Bob’s price elasticity of demand for workers is:
Zumba classes sell all 20 participant spots at a price of $4.50 each. When the instructor raised the prices to $5.50, 10 people attended the class. From the midpoint method, the price elasticity of demand for Zumba is:
Chris runs a sporting goods store and knows that the price elasticity of demand for his sports clothing line is −1.5. He is planning to lower prices by 10%. The percentage change in quantity demanded will be:
In the accompanying table, assume that the price of ice skates increases from $10 to $20 per pair. Using the midpoint method, calculate the price elasticity of demand for ice skates for hockey players.
To keep the percentage change in quantity demanded equally proportional to the percentage change in price when the prices rise by 5%, a consumer would need to quantity demanded by .
If a business finds that demand for its good is very price elastic, it knows that:
When quantity demanded and price increase by 10%, you know that price and quantity are to the consumer.
Kevin tells the manager at Moo’s Ice Cream that he won’t buy any ice cream cones costing more than $2, but he will buy a limitless number at any price less than $2. His price elasticity of demand for ice cream cones is:
The local bakery calculates the price elasticity of demand for its cinnamon rolls to be −1.25. This tells them that demand is and price is buyer.
Assume that the market for pencils is in equilibrium and that demand is very price elastic. The popularity of digital tablets and electronic pens increases and demand for pencils declines. The equilibrium change in quantity demanded is:
Jane says that she will always spend $20 a week on lattes. Jane’s demand for lattes is price:
Refer to the following graphs to answer the next five questions.
Graph A
Graph B
Graph C
Graph D
Graph E
Which of these graphs represents relatively price elastic demand for a good?
Which of these graphs represents perfectly price inelastic demand for a good?
Which of these graphs most likely depicts a price elasticity of demand of −5?
Which of these graphs most likely depicts a price elasticity of demand of −0.2?
Graph most likely shows the price elasticity of demand for the following situation: Bob’s Boots can sell out its entire stock of shoe polish at $2.50 but can sell none if it raises the price to $2.55.
Firms are indifferent to changing prices when the price elasticity of demand is:
A 15% increase in the price of cookies results in a 9% decrease in the quantity of cookies sold. The revenue received by cookie suppliers will because the price elasticity of demand for cookies
The city of Barlow is known for its wide variety of ice cream shops. What will happen if Nick’s Ice Cream Palace raises the price of its shakes?
Use the following scenario to answer the next two questions: Dairy Dream, a local ice cream store, finds that it sells out of ice cream sandwiches at the current price of $1. It raises the price to increase its revenues and finds that no one buys ice cream sandwiches anymore.
The demand for ice cream sandwiches is:
The owners raised the price because they believed that the demand for ice cream sandwiches is:
Refer to the accompanying table. The price elasticity of demand of erasers is when the price is lowered from $1.50 to $1.00. Sellers of erasers will their total revenue from this price change.
The income elasticity of demand for a good measures the responsiveness of to a change in .
Income elasticity of demand for professional haircuts is found to be 1.7. This service is a:
If the income elasticity of demand is 1.2, the good will be a(n):
If the income elasticity of demand is 0.5, the good will be a(n):
If the income elasticity of demand is −3, the good will be a(n):
A firm knows that Mike’s income elasticity of demand for hair ties is 5 while for Sally it is 0.2. A firm can reason that a hair tie is a(n) good for Mike while it is Shawna wins the lottery and her income increases by 60%. She used to buy 10 pints of cottage cheese per month and now she buys 12 pints. Her income elasticity of demand for cottage cheese is a , making it a(n) good
Howard buys 5 suits a year when he earns $70,000. When his income increases to
$200,000, he buys 15 suits a year. From the midpoint method, his income elasticity of demand for suits is:
Refer to the information in the accompanying table. Without any calculations, you know that sushi is a(n):
When Clayton starts working at his first full-time job out of college with a $60,000 salary, he is likely to buy more and less .
When Sue received a promotion at work, her income rose by 50%. The income elasticity of demand for steak was found to be 1.5. For her, steak is a(n):
What good is most likely to have a negative income elasticity of demand?
What good is most likely to have an income elasticity of demand equal to 0.3?
If the cross-price elasticity of demand is −5, Good A and Good B are:
If the cross-price elasticity of demand is 6, Good A and Good B are:
Which one of the following pairs of goods is likely to have a positive cross-price elasticity of demand?
Which one of the following pairs of goods is likely to have a positive cross-price elasticity of demand?
Which one of the following pairs of goods is likely to have a negative cross-price elasticity of demand?
Which one of the following pairs of goods is likely to have a negative cross-price elasticity of demand?
If the cross-price elasticity of demand between Good A and Good B is 2 and the percentage change in price of Good A is 5%, what is the percentage change in quantity demanded of Good B?
When the price of erasers increases from $1.50 to $2.50, the quantity demanded of pencils is unchanged. The cross-price elasticity of demand between erasers and pencils is because erasers and pencils
If the cross-price elasticity of demand between Good A and Good B is 3, the price of Good B increases, and the price elasticity of demand for Good B is inelastic, we can expect to see a(n) change in the quantity demanded for Good A.
If the cross-price elasticity of demand between Good A and Good B is 3, the price of Good B increases, and the price elasticity of demand for Good B is inelastic, we can
A professional hockey arena has a maximum seating capacity of 20,000 people. The price elasticity of supply is:
If the owner of Sally’s Salty Treats finds that, in the long run, she can trade one type of input for another, the price elasticity of supply is:
A local sandwich shop can quickly place an order for food with its local vendors if it uses up its existing resources quickly. This indicates that the price elasticity of supply is:
As price elasticity of supply becomes more elastic over time, the overall shape of the supply curve:
Robert’s Furniture produces high-quality wooden bedroom sets that take approximately 4 months to make, from start to finish. The price elasticity of supply for these bedroom sets in the short term is:
Firms supplying twisty-ties decrease the quantity supplied of inputs by 10% when the price decreases by 5%. The price elasticity of supply for twisty-ties is:
Consider two labor markets. In the first, the elasticity of supply is relatively elastic, while it is relatively inelastic in the latter. Imposing a minimum wage in each market would result in unemployment in the first market and
If the price elasticity of supply is 1.5, we know that supply is:
Price elasticity of demand measures the
change in:
a. quantity demanded due to the change in
price.
b. demand due to the change in price.
c. quantity demanded due to the change in
price of another good/service.
d. price due to a change in quantity
demanded.
e. price due to the change in demand.
The reason that Darren buys a lot more
paintings when the price of art falls is that:
a. there are many substitutes for paintings.
b. paintings are a necessity.
c. they complement his home décor.
d. his income has risen.
e. art is a luxury.
If your friend says, “I am never going to buy
another Avicii remix again!” his price elasticity of demand for Avicii remixes
is:
a. perfectly elastic.
b. perfectly inelastic.
c. elastic.
d. inelastic.
e. unitary elastic.
From the accompanying table, we would expect
that, for recreational skaters, the price elasticity of demand for ice skates
between $10 and $20 to be ___________ than that of hockey players because
___________.
|
Price of Ice Skates
|
Quantity Demanded (hockey players)
|
Quantity Demanded (recreational skaters)
|
|
$10
|
95
|
70
|
|
$20
|
85
|
50
|
|
$40
|
75
|
35
|
|
$50
|
65
|
45
|
|
$60
|
60
|
50
|
a. more elastic; ice skates are a normal good
b. less elastic; ice skates are an inferior
good
c. the same; they both skate
d. more elastic; recreational skaters can
substitute other activities
e. less elastic; hockey players need skates
Nita is a devoted Coca-Cola consumer, whereas
Becky can drink either Coca-Cola or Pepsi products. Nita’s demand for Coca-Cola
will be relatively more ___________, while Becky’s demand will be relatively
more ___________.
a. elastic; inelastic
b. unrelated to price; elastic
c. perfectly elastic; elastic
d. inelastic; elastic
e. unitary elastic; inelastic
Assume that a family spends 35% of its income
on housing, 20% on travel-related expenses, 10% on utilities, 25% on health
care, and 5% on miscellaneous items. Demand for which category will be most
responsive to a change in price?
a. miscellaneous
b. health care
c. utilities
d. travel-related expenses
e. housing
Jill has a fixed budget and buys all of the
items listed below. When will a 20% reduction in price cause her to change the
amount she buys the most?
a. scented candles, regular price is $25
b. jasmine rice, regular price is $4/lb
c. GAP jeans, regular price is $75
d. flat-screen LCD TV, regular price is $400
e. living room couch, regular price is $300
When the price of scooters drops by 5%, the
quantity demanded changes by 20%. You know that the price elasticity of demand
for scooters is:
a. perfectly inelastic.
b. inelastic.
c. unitary elastic.
d. elastic.
e. perfectly elastic
At a price of $2, the quantity demanded for
pens is 12. When the price increases to $3, the quantity demanded for pens is
10. The price elasticity of demand for pens is:
a. perfectly inelastic.
b. inelastic.
c. horizontal.
d. elastic.
e. perfectly elastic.
At a price of $5/hour, Bob wants to hire
three workers. When the price rises to $7/hour, Bob wants to hire only two
workers. Bob’s price elasticity of demand for workers is:
a. −0.83
b. −1.20
c. −0.33
d. −0.40
e. −0.10
Zumba classes sell all 20 participant spots
at a price of $4.50 each. When the instructor raised the prices to $5.50, 10
people attended the class. From the midpoint method, the price elasticity of
demand for Zumba is:
a. −0.50.
b. −3.33.
c. −2.50.
d. 0.20.
e. −0.20.
Chris runs a sporting goods store and knows
that the price elasticity of demand for his sports clothing line is −1.5. He is
planning to lower prices by 10%. The percentage change in quantity demanded
will be:
a. 15%.
b. 0.15%.
c. 6.66%.
d. 0.06%.
e. 8.50%.
In the accompanying table, assume that the
price of ice skates increases from $10 to $20 per pair. Using the midpoint
method, calculate the price elasticity of demand for ice skates for hockey
players
|
Price of Ice Skates
|
Quantity Demanded (hockey players)
|
Quantity Demanded (recreational skaters)
|
|
$10
|
95
|
70
|
|
$20
|
85
|
60
|
|
$40
|
75
|
45
|
|
$50
|
65
|
25
|
|
$60
|
60
|
10
|
a. −6.00
b. 0.67
c. 0.11
d. −0.16
e. 3.00
Demand is almost always more price elastic in
the long run because: 5
a. people’s preferences change.
b. newer versions of a good/service replace
older ones.
c. production of the good/service stops.
d. more options become available and people
can make different choices.
e. government regulations increase.
To keep the percentage change in quantity
demanded equally proportional to the percentage change in price when the prices
rise by 5%, a consumer would need to _________ quantity demanded by
___________.
a. increase; 5%
b. decrease; 5%
c. increase; 10%
d. decrease; 10%
e. increase; 2%
If a business finds that demand for its good
is very price elastic, it knows that:
a. price is very important.
b. price is unimportant.
c. price is unrelated.
d. the effect of price is less important than
the impact of the quantity consumers buy.
e. the quantity consumers buy is unimportant.
When quantity demanded and price increase by
10%, you know that price and quantity are __________ to the consumer.
a. equally important
b. everything
c. nothing
d. relatively important
e. relatively unimportant
Kevin tells the manager at Moo’s Ice Cream
that he won’t buy any ice cream cones costing more than $2, but he will buy a
limitless number at any price less than $2. His price elasticity of demand for
ice cream cones is:
a. perfectly inelastic.
b. inelastic.
c. unitary elastic.
d. elastic.
e. perfectly elastic.
The local bakery calculates the price
elasticity of demand for its cinnamon rolls to be −1.25. This tells them that
demand is ___________ and price is ___________ to the buyer.
a. inelastic; less important than the
quantity
b. elastic; more important than the quantity
c. unitary elastic; on the same level as
quantity
d. perfectly inelastic; everything
e. perfectly elastic; meaningless
Assume that the market for pencils is in
equilibrium and that demand is very price elastic. The popularity of digital tablets
and electronic pens increases and demand for pencils declines. The equilibrium
change in quantity demanded is:
a. 0 (zero).
b. relatively small.
c. proportional to the shift in demand.
d. relatively large.
e. infinite.
Jane says that she will always spend $20 a
week on lattes. Jane’s demand for lattes is price:
a. inelastic.
b. elastic.
c. perfectly inelastic.
d. perfectly elastic. 7
e. unitary elastic.
Refer to the following graphs to answer the
next five questions
Which of these graphs represents relatively
price elastic demand for a good?
a. Graph A
b. Graph B
c. Graph C
d. Graph D
e. Graph E
Which of these graphs represents perfectly
price inelastic demand for a good?
a. Graph A
b. Graph B
c. Graph C
d. Graph D
e. Graph E
Which of these graphs most likely depicts a
price elasticity of demand of −5?
a. Graph A
b. Graph B
c. Graph C
d. Graph D
e. Graph E
Which of these graphs most likely depicts a
price elasticity of demand of −0.2?
a. Graph A
b. Graph B
c. Graph C 9
d. Graph D
e. Graph E
Graph _____________ most likely shows the
price elasticity of demand for the following situation: Bob’s Boots can sell
out its entire stock of shoe polish at $2.50 but can sell none if it raises the
price to $2.55.
a. A
b. B
c. C
d. D
e. E
Firms are indifferent to changing prices when
the price elasticity of demand is:
a. inelastic.
b. perfectly elastic.
c. elastic.
d. unitary elastic.
e. perfectly inelastic.
A 15% increase in the price of cookies
results in a 9% decrease in the quantity of cookies sold. The revenue received
by cookie suppliers will ___________ because the price elasticity of demand for
cookies is _____________.
a. decrease; inelastic
b. increase; elastic
c. decrease; elastic
d. not change; unitary elastic
e. increase; inelastic
The city of Barlow is known for its wide
variety of ice cream shops. What will happen if Nick’s Ice Cream Palace raises
the price of its shakes?
a. Demand will decrease by a greater
proportion than the price.
b. Demand will increase by a greater
proportion than the price.
c. The quantity demanded will decrease by a
greater proportion than the price.
d. The quantity demanded will increase by a
greater proportion than the price.
e. Demand will not change.
Use the following scenario to answer the next
two questions: Dairy Dream, a local ice cream store, finds that it sells out of
ice cream sandwiches at the current price of $1. It raises the price to
increase its revenues and finds that no one buys ice cream sandwiches anymore.
The demand for ice cream sandwiches is:
a. inelastic.
b. elastic.
c. perfectly inelastic.
d. perfectly elastic.
e. unitary elastic.
The owners raised the price because they
believed that the demand for ice cream sandwiches is:
a. inelastic.
b. elastic.
c. relatively price sensitive.
d. perfectly elastic.
e. unitary elastic.
Refer to the accompanying table. The price
elasticity of demand of erasers is ____________ when the price is lowered from
$1.50 to $1.00. Sellers of erasers will __________ their total revenue from
this price change.
|
Price of Erasers
|
Quantity Demanded of Erasers
|
Quantity Demanded of Pencils
|
||
|
$0.50
|
10
|
12
|
||
|
$1.00
|
8
|
11
|
||
|
$1.50
|
7
|
10
|
||
|
$2.00
|
6
|
9
|
||
|
$2.50
|
5 8
|
|||
a. perfectly elastic; not change
b. elastic; raise
c. elastic; lower
d. inelastic; lower
e. inelastic; raise
The income elasticity of demand for a good
measures the responsiveness of __________ to a change in ___________.
a. quantity demanded; price of a related good
b. quantity demanded; income
c. demand; price of good
d. quantity demanded; price of a good
e. income; quantity demanded
Income elasticity of demand for professional
haircuts is found to be 1.7. This service is a:
a. normal good and necessity good.
b. luxury good but not a normal good.
c. necessity good but not a normal good.
d. substitute good.
e. normal good and a luxury good.
If the income elasticity of demand is 1.2,
the good will be a(n):
a. complement good.
b. substitute good.
c. necessity good.
d. inferior good.
e. luxury good.
If the income elasticity of demand is 0.5,
the good will be a(n): 12
a. complement good.
b. substitute good.
c. necessity good.
d. inferior good.
e. luxury good.
If the income elasticity of demand is −3, the
good will be a(n):
a. complement good.
b. substitute good.
c. necessity good.
d. inferior good.
e. luxury good.
A firm knows that Mike’s income elasticity of
demand for hair ties is 5 while for Sally it is 0.2. A firm can reason that a
hair tie is a(n) __________ good for Mike while it is a(n) ____________ good
for Sally.
a. normal; inferior
b. complement; substitute
c. necessity; luxury
d. inferior; normal
e. luxury; necessity
Shawna wins the lottery and her income
increases by 60%. She used to buy 10 pints of cottage cheese per month and now
she buys 12 pints. Her income elasticity of demand for cottage cheese is
___________, making it a(n) __________ good.
a. 3; luxury
b. 3.59; normal
c. 0.33; necessity
d. 0.28; inferior
e. −0.33; inferior
Howard buys 5 suits a year when he earns
$70,000. When his income increases to $200,000, he buys 15 suits a year. From
the midpoint method, his income elasticity of demand for suits is:
a. 1.04
b. 0.96
c. −1.04
d. −0.96
e. 0.08
Refer to the information in the accompanying
table. Without any calculations, you know that sushi is a(n):
|
Price (per roll)
|
Quantity Demanded (income = $10,000/year)
|
Quantity Demanded (income = $30,000/year)
|
|
$1
|
5
|
9
|
|
$2
|
4
|
8
|
|
$3
|
3
|
7
|
|
$4
|
2
|
6
|
|
$5
|
1
|
5
|
a. necessity.
b. substitute for fish sticks.
c. normal good.
d. inferior good.
e. complement to sake
When Clayton starts working at his first
full-time job out of college with a $60,000 salary, he is likely to buy more
_________ and less __________.
a. sushi; canned tuna
b. ramen noodles; steak
c. BMWs; Kias
d. computer hardware; computer software
e. hamburger; salmon
When Sue received a promotion at work, her
income rose by 50%. The income elasticity of demand for steak was found to be
1.5. For her, steak is a(n):
a. inferior good. 14
b. necessity.
c. complement to potatoes.
d. substitute for chicken.
e. luxury.
What good is most likely to have a negative
income elasticity of demand?
a. steak
b. caviar
c. designer clothing
d. pizza
e. instant noodles
What good is most likely to have an income
elasticity of demand equal to 0.3?
a. medication
b. takeout dinner
c. used clothing
d. laptop
e. a download on iTunes
If the cross-price elasticity of demand is
−5, Good A and Good B are:
a. inferior goods.
b. complements.
c. substitutes.
d. normal goods.
e. luxury goods.
If the cross-price elasticity of demand is 6,
Good A and Good B are:
a. inferior goods.
b. complements.
c. substitutes.
d. normal goods.
e. luxury goods.
Which one of the following pairs of goods is
likely to have a positive cross-price elasticity of demand?
a. pancakes and waffles
b. fruit and bacon
c. butter and toast
d. potatoes and sausage
e. milk and coffee
Which one of the following pairs of goods is
likely to have a positive cross-price elasticity of demand?
a. chocolate ice cream and sprinkles
b. ice cream shakes and hamburgers
c. fries and ketchup
d. Pepsi and Coke
e. onion rings and chicken strips
Which one of the following pairs of goods is
likely to have a negative cross-price elasticity of demand?
a. tea and coffee
b. soda and water
c. spaghetti and ravioli
d. tennis shoes and flip flops
e. coffee and cream
Which one of the following pairs of goods is
likely to have a negative cross-price elasticity of demand?
a. purses and backpacks
b. sofas and dining room tables
c. manicures and pedicures
d. shoes and socks
e. trucks and sedans
If the cross-price elasticity of demand
between Good A and Good B is 2 and the percentage change in price of Good A is
5%, what is the percentage change in quantity demanded of Good B?
a. 3%
b. 10%
c. −1.25%
d. 1.50%
e. −3%
When the price of erasers increases from
$1.50 to $2.50, the quantity demanded of pencils is unchanged. The cross-price
elasticity of demand between erasers and pencils is __________ because erasers
and pencils ___________.
a. 1; are substitutes
b. ½; are complements
c. 0; are normal goods
d. 0; are unrelated
e. −½; are complements
If the cross-price elasticity of demand
between Good A and Good B is 3, the price of Good B increases, and the price
elasticity of demand for Good B is inelastic, we can expect to see a(n)
__________ change in the quantity demanded for Good A.
a. zero
b. small
c. infinite
d. one-for-one
e. large
If the cross-price elasticity of demand
between Good A and Good B is 3, the price of Good B increases, and the price
elasticity of demand for Good B is inelastic, we can expect to see a
____________ change in the quantity demanded for Good A:
a. positive, zero
b. positive, small
c. negative, infinite 17
d. negative, one-for-one
e. positive, large
A professional hockey arena has a maximum
seating capacity of 20,000 people. The price elasticity of supply is:
a. perfectly inelastic.
b. perfectly elastic.
c. inelastic.
d. relatively elastic.
e. elastic.
If the owner of Sally’s Salty Treats finds
that, in the long run, she can trade one type of input for another, the price
elasticity of supply is:
a. relatively elastic.
b. relatively inelastic.
c. perfectly elastic.
d. perfectly inelastic.
e. unitary elastic.
A local sandwich shop can quickly place an
order for food with its local vendors if it uses up its existing resources
quickly. This indicates that the price elasticity of supply is:
a. unitary elastic.
b. perfectly elastic.
c. perfectly inelastic.
d. relatively elastic.
e. relatively inelastic.
As price elasticity of supply becomes more
elastic over time, the overall shape of the supply curve:
a. becomes more vertical.
b. remains unchanged. 18
c. becomes closer to 45 degrees from the
origin.
d. becomes completely vertical.
e. becomes more horizontal.
Robert’s Furniture produces high-quality
wooden bedroom sets that take approximately 4 months to make, from start to
finish. The price elasticity of supply for these bedroom sets in the short term
is:
a. unitary elastic.
b. relatively inelastic.
c. perfectly inelastic.
d. relatively elastic.
e. perfectly elastic.
Firms supplying twisty-ties decrease the
quantity supplied of inputs by 10% when the price decreases by 5%. The price
elasticity of supply for twisty-ties is:
a. 4.0.
b. 0.4.
c. 2.0.
d. 0.2.
e. 1.0.
Consider two labor markets. In the first, the
elasticity of supply is relatively elastic, while it is relatively inelastic in
the latter. Imposing a minimum wage in each market would result in ____________
unemployment in the first market and ___________ unemployment in the second.
a. lower; lower
b. higher; higher
c. unchanged; unchanged
d. lower; higher
e. higher; lower
If the price elasticity of supply is 1.5, we
know that supply is:
a. relatively elastic. 19
b. relatively inelastic.
c. perfectly inelastic.
d. unitary elastic.
e. perfectly elastic.
The reason that Darren buys a lot more paintings when the price of art falls is that
Which one of the following pairs of goods is likely to have a positive cross-price elasticity of demand
The local bakery calculates the price elasticity of demand for its cinnamon rolls to be –1.25. This tells them that demand is ________ and price is ________ to the buyer
Zumba classes sell all 20 participant spots at a price of $4.50 each. When the instructor raised the prices to $5.50, 10 people attended the class. From the midpoint method, the price elasticity of demand for Zumba is
When Nina decreases her price of lipstick from $7 to $5, she finds that her sales increase from 6 to 7. She faces ________ demand for her product, and this price change will ________ her total revenue
A local merchant raises the price of his good and finds that his total revenues increase. The demand for this good is
Refer to the following graphs to answer the questions that follow:
Which of these graphs represents perfectly price inelastic demand for a good?
The city of Barlow is known for its wide variety of ice cream shops. What will happen if Nick’s Ice Cream Palace raises the price of its shakes?
Refer to the following graphs to answer the questions that follow:
Graph ________ most likely shows the price elasticity of demand for the following situation: Bob’s Boots can sell out its entire stock of shoe polish at $2.50 but can sell none if it raises the price to $2.55
If the percentage change in quantity demanded of Good B is 2% and the percentage change in the price of Good A is –10%, what is the cross-price elasticity of demand
When the price increases by 30% and the quantity demanded drops by 30%, the price elasticity of demand is
If the percentage change in the quantity consumed of pizza is 8% and the percentage change in income is 2%, what is the income elasticity of demand for pizza
When would oil producers see the largest percentage decline in the quantity demanded for oil due to an increase in the price of oil today
Demand is almost always more price elastic in the long run because
For which of the following products should sellers raise the price in order to increase total revenue from college students
Kevin tells the manager at Moo’s Ice Cream that he won’t buy any ice cream cones costing more than $2, but he will buy a limitless number at any price less than $2. His price elasticity of demand for ice cream cones is
When the price of erasers increases from $1.50 to $2.50, the quantity demanded of pencils is unchanged. The cross-price elasticity of demand between erasers and pencils is ________ because erasers and pencils ________.
If the cross-price elasticity of demand between Good A and Good B is 3, the price of Good B increases, and the price elasticity of demand for Good B is inelastic, we can expect to see a(n) ________ change in the quantity demanded for Good A
Henry raised his quantity demanded of hockey pucks from 100 to 150 when the price fell from $5 to $3 per puck. Using the midpoint method, his price elasticity of demand is
Income elasticity of demand for professional haircuts is found to be 1.7. This service is a
1. Opportunity cost is the ______________
alternative forfeited when a choice is made.
a. least-valued
b. highest-valued
c. most
recently considered
d. most
convenient
e. first
2. You decide whether to eat one more slice
of pizza based on how hungry you feel. This statement best represents this
economic concept:
A)
resources are scarce.
B) the
real cost of something is what you must give up to get it.
C)
“How much” is a decision at the margin.
D)
there are gains from trade.
3. Positive economics:
A)
describes opinions and perspectives on how the world should work.
B)
is based on opinion polls.
C)
describes how the world does work
D)
is the same as normative economics.
4. Economists use models to explain
real-life situations because:
A)
such models tend to be exactly what is occurring in each situation.
B)
assumptions found in such models tend to make the problem more difficult.
C)
simplifications and assumptions often yield answers that can help to explain
the more difficult real-life situations
D)
they do not; real-life situations are not relevant to the building of models.
5. Bob can hire someone to paint his house
for $2,000, or he can do it himself at no out-of-pocket cost. It will take him 5 days. Bob earns $500 a day when he works outside
the home. Which option has the greater
economic cost?
a. hiring a
painter
b. painting
the house himself
c.
they are the same cost
d. not
enough information to decide—one needs to know the marginal cost
6. When one producer has a comparative
advantage in production,
a. she
can produce more output than someone else using the same quantity of resources.
b. she
can produce a good at a lower opportunity cost than someone else.
c. she
will not benefit from trade with other producers.
d. she
is unable to reach her production possibilities frontier (PPF).
e. she
will only trade with others who have the same comparative advantage.
7. The slope of a production possibilities
frontier
a.
has no economic relevance or meaning.
b.
is always constant.
c.
is always varying.
d.
measures the opportunity cost of producing one more unit of a good
8. Increases in resources or improvements
in technology will tend to cause a society's production possibility frontier
to:
A)
shift inward to the left.
B)
shift outward to the right
C)
remain unchanged.
D)
become vertical.
9. Which point(s) in
the PPF above are unattainable?
a)
Point A because it is
outside the production possibilities frontier
b)
All the points because the
production of each has an opportunity cost.
c)
None of the points because
they all are feasible.
d)
Points B, C, and D because
they are on the production possibilities frontier.
e)
Point E because it is inside
the production possibilities frontier.
10. Michael and Angelo are both artists who
can create sculptures or paint paintings each day. The following table
describes their maximum outputs per day. Does either person have an absolute
advantage?
|
|
Sculptures
|
Paintings
|
|
Michael
|
10
|
5
|
|
Angelo
|
6
|
2
|
a. Yes,
Michael has an absolute advantage in both sculptures and paintings
b.
Yes, Angelo has an absolute advantage in both
sculptures and paintings.
c.
Yes, Michael has an absolute advantage in
paintings, and Angelo has an absolute advantage in sculptures.
d.
Yes, Michael has an absolute advantage in
sculptures, and Angelo has an absolute advantage in paintings.
e.
No, neither has an absolute advantage.
11. Michael and
Angelo are both artists who can create sculptures or paintings each day. The
following table describes their maximum outputs per day. What is Angelo’s
opportunity cost of a sculpture?
|
|
Sculptures
|
Paintings
|
|
Michael
|
10
|
5
|
|
Angelo
|
6
|
2
|
- 1/2 painting
- 1/3 painting
- 3 paintings
- 1/3 sculpture
- 6/10 sculpture
12. The
accompanying figure depicts the production possibilities frontiers (PPFs) for
two people who can allocate the same amount of time between making pizzas and
making stromboli. If Jim and Pam were to specialize and
trade, at what exchange rate would they find some quantity of trade to be
mutually beneficial?
a. 3
pizzas for 1 stromboli
b.
1 pizza for 1 stromboli
c.
10 pizzas for 2 stromboli
d.
1 pizza for 1/2 stromboli
e.
1 pizza for 1/4 of a stromboli
Figure: Production Possibility Frontier Curve for Tealand
13. (Figure: Production Possibility
Frontier for Tealand) In the figure, Tealand is producing at point C on its
production possibility frontier. What is the opportunity cost in Tealand of
increasing the production of tea from 20 million cups to 30 million cups?
A.
10 million cups of tea
B. 5
million scones
C.
10 million scones
D.
The answer is impossible to determine from the information given.
14. Consider the
production possibilities frontier below.
Which line(s) represents a change in technology for producing good A?
a. 1
b. 2
c. both
d. neither
15. Consider the production possibilities
frontier below. Which line(s) represents a change in the economy’s resources?
a. 1
b. 2
c.
both
d. neither
16. Use the
accompanying diagram to answer the question.
An increase in the number of buyers would
cause the demand curve to:
a. shift from D to D2.
b. remain at D.
c. shift from D to D1.
d. shift from D1 to D.
e. shift from D1 to D2.
Figure: Demand and Supply of Gasoline
17. (Figure: Demand and Supply of Gasoline)
Look at the figure Demand and Supply of Gasoline. The initial equilibrium price
and quantity (at intersection of S1 and D) of gasoline are:
A.$2.00 and 450 gallons.
B.
$1.50 and 400 gallons.
C.
$2.00 and 200 gallons.
D.
$2.50 and 300 gallons
18. (Figure: Demand and Supply of Gasoline)
Look at the figure Demand and Supply of Gasoline. Given the initial equilibrium
of S1 and D, any price lower than ________ will create pressure for the price
to ________.
A.
$2.00; fall
B.
$2.50; rise
C.
$3.00; rise
D.
$2.50; fall
19. (Figure: Demand and Supply of Gasoline)
Look at the figure Demand and Supply of Gasoline. A factor that may have
changed supply from S1 to S2 is:
A.
better technology in the production of gasoline
B.
increased demand.
C.
lower labor productivity in gasoline production.
D.
increased prices of substitutes for gasoline.
20. “In
2008, air travel decreased substantially despite significant reductions in
ticket prices.” If this information is correct, it indicates that the law of
demand did not apply to air travel in 2008.
A.
True
B.
False
21. A supply curve is:
a. downward
sloping because suppliers prefer lower costs
b. upward
sloping because suppliers prefer lower costs
c.
upward sloping because
suppliers will offer for sale more at a higher price
d. downward
sloping because suppliers will offer more for sale at a higher price
22. The demand curve shift shown in the
figure above was caused by a(n):
a. increase
in the input cost of the good.
b. increase
in the price of a substitute of the good.
c. decrease
in the number of firms selling the good.
d. decrease
in the number of buyers in the market for the good.
e. expectation
that the future price of this good will be higher than it currently is.
23. According to the diagram above, if the
price is at $10, there is a:
a. shortage of 15 units.
b. surplus of 15 units
c. shortage of 30 units.
d. surplus of 30 units.
e. surplus of 22 units.
24. When both supply and demand shift to
the left,
a. the equilibrium price will always rise.
b. the equilibrium price will always fall.
c. the equilibrium quantity will always
fall.
d. the equilibrium quantity will always
rise.
e. the equilibrium quantity is indeterminate.
25. According to the figure below, at the
price of $5:
a. the equilibrium quantity is 500.
b. the quantity demanded is 500.
c. the demand is 500.
d. there is a surplus.
e. there is a shortage.
26. When the price increases by 30% and the
quantity demanded drops by 30%, the price elasticity of demand is:
a. perfectly
inelastic.
b. inelastic.
c. unitary
elastic.
d. elastic.
e. perfectly
inelastic.
27. What good is most likely to have an
income elasticity of demand equal to 0.3?
a. medication
b. take-out
dinner
c. used
clothing
d. laptop
e. a
download on iTunes
28. Demand for Coca-Cola is _____ price
elastic than cola products in general.
a. More
b. less
c.
equally
29. Peanut butter and jelly are
complements. If a tax is imposed on peanut butter, how will that affect the
market for jelly?
a. Demand for jelly will increase along
with the price.
b. Demand for jelly will decrease along
with the price
c. The supply of jelly will increase and
the price will decrease.
d. Both the supply and demand for jelly will
increase along with the price.
e. The supply of jelly will decrease and
the price will increase.
30. Pepsi and Coke are considered
substitute goods. Because of this, one would predict that, holding all else
constant, if the price of Pepsi increases,
a. we would see the demand curve for Coke
shift to the right.
b. we would see the demand curve for Coke
shift to the left.
c. we would see no change in the demand for
Coke.
d. we would see the demand curve for Pepsi
shift to the right.
e. we would see the demand curve for Pepsi
shift to the left.
31. Technological advances have resulted in
lower prices for digital cameras. What
is the impact of this on the market for traditional (non-digital) cameras?
a.
The demand curve for traditional cameras shifts to the right.
b.
The supply curve for traditional cameras shifts to the right.
c.
The demand curve for traditional cameras shifts to the left.
d.
The supply curve for traditional cameras shifts to the left.
32. A recent news story reported that ice
cream producers will increase the supply of ice cream during the summer. Summer
is traditionally a time of increased demand for ice cream. How would an
economist expect the price and quantity of ice cream to change from the spring
to the summer given knowledge of these two changes in the market for ice cream?
A. An
increase in the price and quantity.
B. An
increase in the price and an unpredictable change in the quantity.
C. An
unknown change in both the price and quantity.
D. An
unknown change in the price and an increase in the quantity.
33. Suppose the demand
curve for a product is vertical and the supply curve is upward sloping. If a
unit tax is imposed in the market for this product,
A) sellers bear the entire burden
of the tax.
B) buyers bear the entire burden
of the tax.
C) the tax burden will be shared
equally between buyers and sellers.
D) buyers share the burden of the
tax with government.
34. If demand is more elastic
than supply then:
A) sellers bear more of the
burden of the tax.
B) buyers bear more of the burden
of the tax.
C) the tax burden will be shared
equally between buyers and sellers.
D) buyers share the burden of the
tax with government.
35. In 1990 the U.S. government imposed a
special sales tax on yachts with a price of at least $100,000. The tax was
repealed in 1993 since it generated far less revenue than expected and led to
significant job losses in the yacht building industry. The sales tax was
unsuccessful because:
a) the
supply and the demand for yachts were relatively elastic.
b) the
supply and the demand for yachts were relatively inelastic.
c) the
tax rate was too low.
d) yachts
are a necessity.
36. Each point on a ________ curve shows
the willingness of consumers to purchase a product at different prices.
A) demand
B) supply
C) production possibilities
D) marginal cost
Use
this information for questions 36.1-36.3. Alfred
has a willingness to pay for one car of $35,000. The second car offers him a marginal benefit
of $25,000. A third car is worth
$10,000, and his willingness to pay for a fourth is 0. The market price for the car is $24,999.
36.1 Alfred’s willingness to pay for the
marginal car is falling. This pattern is
called
a. opportunity cost
b. diminishing marginal utility
c. price effect
d. consumer surplus
36.2. At the market price, Alfred would buy
___ cars.
a. 0
b. 1
c. 2
d. 3
e. 4
36.3 At this market price, his consumer
surplus is
a. 35,000
b. 24,999
c. 1
d. 10,002
Figure 4-6 above shows the demand
and supply curves for the almond market.
The government believes that the equilibrium price is too low and tries
to help almond growers by setting a price floor at Pf.
37. Refer to Figure 4-6. What area represents
consumer surplus prior to the imposition of the price floor?
A) A + B + E
B) A + B + C
C) A + B + C + D + E
D) E + F
38. Refer to Figure 4-6. What
area represents consumer surplus after the imposition of the price floor?
A) A + B + E
B) A + B
C) A + B + E + F
D) A
39. The costs of a market activity paid for
by an individual NOT engaged in the market activity are:
a. external
costs.
b. internal
costs.
c. free-rider
costs.
d. social
costs.
e. common
costs.
40. The total costs of a market activity
paid for by individuals in the market as well as individuals not engaged in the
market activity are:
a. external
costs.
b. internal
costs.
c. free-rider
costs.
d. social
costs.
e. common
costs.
41. A firm’s willingness to supply their
product in the short run is represented on a graph by:
a. the
market supply curve.
b. the
entire marginal cost (MC) curve.
c. the
marginal revenue (MR) curve.
d. the
part of the marginal cost (MC) curve above minimum average total cost (ATC).
e. the
part of the marginal cost (MC) curve above minimum average variable cost (AVC).
42. Rachel quit her job
as a chef making $30,000 per year to start her own restaurant in New York City.
The first year, Rachel's restaurant earned $120,000 in revenue. Rachel pays
$50,000 per year in wages to the waitresses and hostess, $20,000 per year to
buy food and other supplies. She paid
$10,000 for rent and utilities, instead of earning 10% on that money in a bank
CD. What is Rachel's economic profit for the year?
A) $0
B) $9,000
C) $40,000
D) $80,000
43. What directly drives the entry and exit
of firms?
a. Revenues
b. Costs
c. Profits and losses
d. Marginal product of labor
44. The
law of diminishing returns states that
a) dividing the tasks to be performed
through division of labor will increase the marginal product of labor.
b) the long-run average cost of production
falls as output increases.
c)
adding more of a variable input to the same amount of a fixed input will
eventually cause the marginal product of the variable input to decline.
d) producing more output by adding more of
a variable input will eventually cause the marginal cost of production to
decline.
e)
adding more of a variable input to the same amount of a fixed input will
eventually cause the marginal product of the fixed input to decline.
45. According to the accompanying figure,
if a firm is producing a quantity of 100 and charging a price of $10,
a. the
firm should continue to produce 100 units but raise the price to $13 to
maximize profits.
b. the
firm should increase production to 150 units but raise the price to $25 to
maximize profits.
c. the
firm should continue to produce 100 units but raise the price to $25 to
maximize profits.
d. the
firm should increase production to 100 units and raise the price to $13 to
maximize profits.
e. the
firm is already maximizing profits and should not change the price or quantity
produced.
46. Which of the following
is not a characteristic of a perfectly competitive market structure?
A) There are a very large number
of firms that are small compared to the market.
B) All firms sell identical
products.
C) There are no restrictions to
entry by new firms.
D) There are restrictions on exit
of firms.
47. Both individual
buyers and sellers in perfect competition
A) can influence the market price
by their own individual actions.
B) can influence the market price
by joining with a few of their competitors.
C) have to take the market price
as a given.
D) have the market price dictated
to them by government.
48. In economics, we assume that firms make
decisions in order to:
a.
maximize revenues.
b.
minimize cost
c.
maximize profit.
d.
maximize production
e.
maximize the marginal product of labor
49.
A firm reflected in the following graph expanded its scale of production and
found that its average costs did not change.
Which of the curves shown would reflect this situation?
a. LRATC1
and LRATC2
b.
LRATC3
c.
LRATC2
d.
LRATC1
e.
LRATC1 and LRATC3
50. A firm’s economic profit will always be
less than its accounting profit because:
a. accounting
profit considers explicit costs, which economic profit does not.
b. economic
profit considers implicit costs, which accounting profit does not
c. economic
profit is always zero, no matter what kind of firm it is.
d. accounting
profit considers implicit costs, which economic profit does not.
e. accounting
profit is always positive, no matter what kind of firm it is.
51. Competitive markets exist when:
a. there are so many buyers and sellers
that each has only a small impact on the market price and the market output
b. there are more buyers than sellers,
giving the buyers market power.
c. there are more sellers than buyers,
giving the sellers market power.
d. accounting profits become zero because
of price wars.
e. prices are so low that everyone who
wants the good or service gets the good or service.
52. According to
the figure below, this firm’s short-run supply curve is represented by:
a. the average total cost (ATC) curve above $20.
b. the marginal cost (MC) curve above $15.
c. the marginal cost (MC) curve above $8.
d. the marginal cost (MC) curve above $20.
Figure: Long-Run Average Cost
53. Look at the figure Long-Run Average
Cost. This firm has ________ in the output region from 0 to A.
A. decreasing
returns to scale
B. constant
returns to scale
C. increasing
returns to scale
D. negative
costs of production
54. (Figure:
Long-Run Average Cost) Look at the figure Long-Run Average Cost. This firm has
________ in the output region from B to C.
A. constant
returns to scale
B. decreasing
returns to scale
C. increasing
returns to scale
D. falling
marginal cost
55. According to the figure, when this firm
is producing at the profit-maximizing price and quantity, its total revenue is:
a. $1,000
b. $1,950
c. $2,500
d. $3,750
e. $5,000
56. Which statement about firms’ economic
profits is true?
a. Monopolists and perfectly competitive
firms can earn profit in the short run only.
b. Monopolists can earn profit in the long
run; perfectly competitive can earn profit in the short run only. -.-
c. Monopolists and perfectly competitive
firms can earn profit in the long run only.
d. All firms always earn profit, else they
would exit the market.
In economics, choices are necessary because of the presence of:
Which of the following is a macroeconomic question?
Microeconomics is the branch of economics that focuses on the
An example of a direct negative incentive is:
Many professors have a policy that punishes individuals if they don’t come
to class. Instead of punishing students who don’t attend class, what could the
professor do to provide a positive incentive to come to class?
What is the opportunity cost of taking this exam?
Economists believe that optimal decisions are made up to the point where:
More oranges are grown in Florida than North Dakota because Florida’s warm
climate gives it a ________ in growing oranges.
Which of the following is a positive statement?
The important act of holding all other variables constant while examining
a particular variable is known as:
According to the law of demand, all other things being equal,
Something is an inferior good if the demand for the good
Pepsi and Coke are considered substitute goods. Because of this, one would
predict that, holding all else constant, if the price of Pepsi increases, we
would see:
If a new french fry–cutting machine works twice as fast as the old
machine, McDonald’s would:
When the number of firms in a market decreases,
According to the accompanying figure, if the price is $10, there is a:
When supply shifts to the right and demand stays constant, the equilibrium
price:
The difference between a tax and a subsidy is that when the government
places a tax on a good, it _________ the equilibrium price and _________ the
equilibrium quantity, whereas when the government places a subsidy on a good,
it _________ the equilibrium price and _________ the equilibrium quantity.
When both supply and demand shift to the right:
Many consumer items eventually go out of style, and because fewer people
want these items,
demand for them drops. When this happens, we usually see production of
these items stop. What happens to the equilibrium price and equilibrium
quantity in a market like this?
Nita is a devoted Coca-Cola consumer, whereas Becky can drink either
Coca-Cola or Pepsi products. Nita’s demand for Coca-Cola will be relatively
more ________, while Becky’s demand will be relatively more ________.
Assume that a family spends 35% of its income on housing, 20% on
travel-related expenses, 10% on utilities, 25% on health care, and 5% on
miscellaneous items. Demand for which category will be most responsive to a
change in price?
quantity demanded of hockey pucks from 100 to 150 when the price fell from
$5 to $3 per puck. Using the midpoint method, his price elasticity of demand is
Chris runs a sporting goods store and knows that the price elasticity of
demand for his sports clothing line is –1.5. He is planning to lower prices by
10%. The percentage change in quantity demanded will be:
Kevin tells the manager at Moo’s Ice Cream that he won’t buy any ice cream
cones costing more than $2, but he will buy a limitless number at any price
less than $2. His price elasticity of demand for ice cream cones is:
A 15% increase in the price of cookies results in a 9% decrease in the
quantity of cookies sold. The revenue received by cookie suppliers will
________ because the price elasticity of demand for cookies is ________.
As price elasticity of supply becomes more elastic over time, the overall
shape of the supply curve:
If the price elasticity of supply is 2.5, we know that it is:
A binding price ceiling will have the following consequences:
What would you expect the consequences to size and quality would be for a
product sold under a binding price ceiling?
What is the long-run consequence of a price ceiling law?
Which is a correct statement about a rent control law?
You are a senator from Kansas who wants to help farmers. You have worked
to encourage the passage of a law that would impose a binding price floor on
wheat. What would you expect your critics to say?
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