41
36) If two products are substitutes, the ________ elasticity of demand is ________.
A) income; positive
B) income; negative
C) cross–price; positive
D) cross–price; negative
Topic: Other Important Elasticities
Skill: Definition
Learning Outcome: Micro-6
37) If the quantity of pineapples demanded increases by 4% when the price of papayas increases by 16%,
the cross–price elasticity of demand between pineapples and papayas is
A) –4.
B) 0.25.
C) 4.
D) 64.
Topic: Other Important Elasticities
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-6
38) If the quantity of glazed donuts demanded increases by 6% when the price of cinnamon rolls
increases by 9%, the cross–price elasticity of demand between glazed donuts and cinnamon rolls is
A) –1.5.
B) –0.33.
C) 0.67.
D) 1.5.
Topic: Other Important Elasticities
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-6
39) If the quantity of pretzels demanded decreases by 8% when the price of beer increases by 6%, the
cross–price elasticity of demand between pretzels and beer is
A) –14.
B) –1.33.
C) –0.75.
D) 2.
Topic: Other Important Elasticities
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-6
42
40) If the cross–price elasticity of demand between shrimp and oysters is 4, then a 2% decrease in the price
of shrimp will result in a(n) ________ in the quantity of oysters demanded.
A) 0.5% decrease
B) 8% decrease
C) 4% decrease
D) 2% increase
Topic: Other Important Elasticities
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-6
41) The cross–price elasticity of demand between good X and good Y is –0.8. Given this information,
which of the following statements is true?
A) The demand for goods X and Y is elastic.
B) Goods X and Y are substitutes.
C) Goods X and Y are complements.
D) The demand for goods X and Y is income elastic.
Topic: Other Important Elasticities
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
42) The cross–price elasticity of demand between good X and good Y is 2.75. Given this information,
which of the following statements is true?
A) The demand for goods X and Y is inelastic.
B) Goods X and Y are substitutes.
C) Goods X and Y are complements.
D) The demand for goods X and Y is income inelastic.
Topic: Other Important Elasticities
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
43) In ________ markets, the elasticity of supply tends to be positive.
A) input
B) labor
C) output
D) all
Topic: Other Important Elasticities
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
43
44) If the elasticity of labor supply is negative, the labor supply curve would be
A) horizontal.
B) vertical.
C) downward sloping.
D) upward sloping.
Topic: Other Important Elasticities
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
45) At a price of $4, quantity supplied is 120, and at a price of $10, quantity supplied is 300. Using the
midpoint formula, the price elasticity of supply is ________ and supply is ________.
A) 0.1; inelastic
B) 0.40; inelastic
C) 2.5; elastic
D) 1; unit elastic
Topic: Other Important Elasticities
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-6
46) A movie theater charges ticket prices of $4.50 during weekday afternoon matinee hours and $8.50
during evening and weekend hours. Economists explain the ticket price difference by the fact that the
demand for movie tickets during the weekday afternoon matinee hours is ________, but during the
evening and weekend hours it is ________.
A) more elastic; more inelastic
B) perfectly elastic; perfectly inelastic
C) more inelastic; more elastic
D) unit elastic; relatively inelastic
Topic: Other Important Elasticities
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
47) If the supply of oranges is unit elastic, the price elasticity of supply of oranges is
A) 1.0.
B) 0.0.
C) –1.0.
D) –100.0.
Topic: Other Important Elasticities
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-6
44
48) Related to the Economics in Practice on p. 102: Researchers found that a ten percent reduction in the tax
rate induced a twenty percent increase in migration in Europe. This indicates that labor migration in
Europe is
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly inelastic
Topic: Other Important Elasticities: Economics in Practice
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
49) Related to the Economics in Practice on p. 102: Researchers found that after a few years of a tax relief
policy for foreigners, the fraction of foreigners in the top 0.5 percent of income earners in Denmark
almost doubled. The researchers concluded that for this group of workers, labor supply seems to be
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly inelastic
Topic: Other Important Elasticities: Economics in Practice
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
50) A positive cross–price elasticity between two goods implies that the two goods are substitutes.
Topic: Other Important Elasticities
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
51) A positive income elasticity value indicates that the good is a normal good.
Topic: Other Important Elasticities
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
45
52) Inferior goods will experience increasing demand when incomes increase.
Topic: Other Important Elasticities
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
53) If a group has a negative elasticity of labor supply (above some income level), then continued
increases in wages will result in decreases in the quantity of labor supplied.
Topic: Other Important Elasticities
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
54) A negative income elasticity implies that the good is an inferior good.
Topic: Other Important Elasticities
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
55) It is possible that an increase in wages will lead to a decrease in the quantity of labor supplied.
Topic: Other Important Elasticities
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
56) Normal goods will experience decreasing demand when incomes decrease.
Topic: Other Important Elasticities
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
57) If a group has a positive elasticity of labor supply, then increases in wages will result in continued
increases in the quantity of labor supplied.
Answer: TRUE
Diff: 2
Topic: Other Important Elasticities
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
46
Copyright © 2017 Pearson Education, Inc.
5.5 What Happens When We Raise Taxes: Using Elasticity
Refer to the information provided in Figure 5.7 below to answer the question(s) that follow.
Figure 5.7
The above figure represents the market for pumpkins both before and after the imposition of an
excise tax, which is represented by the shift of the supply curve.
1) Refer to Figure 5.7. Before the tax, store owners are willing to sell ________ pumpkins at a price of
________ each.
A) 1,200; $5.50
B) 700; $7.25
C) 0; $8.50
D) 1,200; $8.50
Topic: Elasticity and Taxes
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-6
47
2) Refer to Figure 5.7. After the tax, store owners are willing to sell ________ pumpkins at a price of
________ each.
A) 1,200; $5.50
B) 700; $7.25
C) 0; $8.50
D) 1,200; $7.25
Topic: Elasticity and Taxes
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-6
3) Refer to Figure 5.7. The amount of the tax is ________ per pumpkin.
A) $1.25
B) $1.75
C) $3.00
D) $7.25
Topic: Elasticity and Taxes
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-6
4) Refer to Figure 5.7. The amount by which the store owners will raise the price of pumpkins after the
imposition of the tax is ________ per pumpkin.
A) $1.25
B) $1.75
C) $3.00
D) $7.25
Topic: Elasticity and Taxes
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-6
5) Refer to Figure 5.7. The amount the store owners will receive per pumpkin after paying the tax is
A) $1.75.
B) $3.00.
C) $4.25.
D) $7.25.
Topic: Elasticity and Taxes
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-6