Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Page 1
1.
The cross-price elasticity of electricity with respect to the price of natural gas has been
estimated as being equal to 0.2. This implies that:
A)
natural gas and electricity are both normal goods.
B)
electricity and natural gas are complements.
C)
electricity and natural gas are substitutes.
D)
one of the two goods is inferior and the other is normal, but we need additional
information to determine which of them is normal.
2.
For which goods is the cross-price elasticity of demand most likely a large positive
number?
A)
hockey pucks and hockey sticks
B)
DVDs and milk
C)
french fries and onion rings
D)
all of these because the cross-price elasticity is always a positive number
3.
Suppose the cross-price elasticity of demand for butter and margarine is equal to 0.96
but the cross-price elasticity for water and lemons is -0.13. This means that butter and
margarine are _____, while water and lemons are _____.
A)
complements; substitutes
B)
substitutes; complements
C)
inelastic goods; elastic goods
D)
elastic goods; complements
4.
Suppose the cross-price elasticity between demand for Chipotle burritos and the price of
Qdoba burritos is 0.8. If Qdoba increases the price of its burritos by 10%:
A)
Chipotle will sell 10% more burritos.
B)
Chipotle will sell 8% more burritos.
C)
Chipotle will sell 8% fewer burritos.
D)
We cannot tell what will happen to Chipotle, but Qdoba will sell 8% fewer
burritos.
5.
Suppose the price of cereal rose by 25% and the quantity of milk sold decreased by
50%. We know that the:
A)
cross-price elasticity between cereal and milk is -2.
B)
cross-price elasticity between cereal and milk is -0.5.
C)
price elasticity of demand for milk is 2.
D)
cross-price elasticity of demand between cereal and milk is 2.
Page 2
6.
If two goods are substitutes, their cross-price elasticity of demand should be:
A)
less than 0.
B)
negative but almost equal to 0.
C)
equal to 0.
D)
greater than 0.
7.
If two goods are complements, their cross-price elasticity of demand is:
A)
less than 0.
B)
equal to 0.
C)
positive but almost equal to 0.
D)
greater than 0.
8.
If the price of chocolate-covered peanuts increases and the demand for strawberry
licorice twists increases, this indicates that these two goods are _____ goods.
A)
complementary
B)
normal
C)
inferior
D)
substitute
9.
The pair of items that is likely to have the LARGEST positive cross-price elasticity of
demand is:
A)
coffee and tea.
B)
skis and ski boots.
C)
pizza and pepperoni.
D)
milk and cookies.
10.
The cross-price elasticity of demand of complementary goods is:
A)
less than 0.
B)
equal to 0.
C)
greater than 0.
D)
between 0 and 1.
11.
If the price of chocolate-covered peanuts increases and the demand for
strawberry-flavored soft drinks decreases, this indicates that these two goods are _____
goods.
A)
unrelated
B)
complementary
C)
inferior
D)
substitute
Page 3
12.
The pair of items that is most likely to have a negative cross-price elasticity of demand
is:
A)
aspirin and hamburgers.
B)
hot dogs and mustard.
C)
margarine and butter.
D)
ketchup and coffee.
13.
If your purchases of good A increase from 9 units per year to 11 units per year when the
price of good B increases from $8 to $12, all other things equal, for you, good A and
good B are considered _____ goods.
A)
inferior
B)
luxury
C)
substitute
D)
complementary
14.
If your purchases of good A decrease from 11 units per year to 9 units per year when the
price of good B increases from $8 to $12, all other things equal, for you, good A and
good B are considered _____ goods.
A)
inferior
B)
luxury
C)
substitute
D)
complementary
15.
If your purchases of good A remain constant at 9 units per year when the price of good
B increases from $8 to $12, all other things equal, for you, shoes and shirts are
considered _____ goods.
A)
inferior
B)
unrelated
C)
substitute
D)
complementary
16.
The cross-price elasticity of demand for Coke with respect to the price of Pepsi has been
estimated to be 0.61. If the price of Pepsi falls by 10%, all other things unchanged, the
quantity demanded of Coke will:
A)
decrease by less than 6.1%.
B)
decrease by 6.1%.
C)
not change because many people prefer Coke to Pepsi.
D)
increase.
Page 4
17.
Suppose that the cross-price elasticity of demand for Mountain Dew with respect to the
price of Coke is 0.7. This implies that the two goods are:
A)
substitutes.
B)
complements.
C)
inferior.
D)
normal.
18.
Which pair of goods is MOST likely to have a cross-price elasticity of demand that is
greater than zero?
A)
shoes and shoelaces
B)
apples and bananas
C)
pancakes and bacon
D)
gasoline and cars
19.
If you know the cross-price elasticity between two goods is positive, then it suggests
that the two goods are:
A)
substitutes.
B)
complements.
C)
normal goods.
D)
inferior goods.
20.
Raina consumes 100% more mechanical pencils when the price of felt-tip pens increases
by 50%. For Raina, pencils and pens are _____, and the cross-price elasticity of demand
is _____.
A)
complements; 0.5
B)
substitutes; -0.5
C)
complements; 2
D)
substitutes; 2
21.
Goods are _____ when the cross-price elasticity of demand is positive and _____ when
the cross-price elasticity of demand is negative.
A)
substitutes; complements
B)
complements; substitutes
C)
elastic; inelastic
D)
inelastic; elastic
Page 5
22.
The percentage change in quantity demanded of one good or service divided by the
percentage change in the price of a related good or service is the _____ of demand.
A)
price elasticity
B)
quantity elasticity
C)
income elasticity
D)
cross-price elasticity
23.
If two goods are substitutes, their cross-price elasticity of demand is:
A)
less than 0.
B)
greater than 0.
C)
equal to 0.
D)
impossible to determine without more information.
24.
If two goods are complements, their cross-price elasticity of demand is:
A)
less than 0.
B)
equal to 0.
C)
greater than 0.
D)
impossible to determine without more information.
25.
The cross-price elasticity of demand of substitute goods is:
A)
less than 0.
B)
greater than 0.
C)
equal to 0.
D)
impossible to determine without more information.
26.
Since the demand for cashews increases as the price of walnuts increases, we can
assume that these two goods are:
A)
unrelated.
B)
superior.
C)
inferior.
D)
substitutes.
27.
The pair of items that is likely to have the HIGHEST cross-price elasticity of demand is:
A)
baseball and baseball glove.
B)
spaghetti and meatballs.
C)
coffee and tea.
D)
peanut butter and jelly.
Page 6
28.
If two goods are complementary, we can assume that the cross-price elasticity of
demand for these goods is:
A)
greater than 1.
B)
equal to 0.
C)
less than 0.
D)
impossible to determine without more information.
29.
The price of pretzels increases and the demand for tortilla chips decreases, so we can
assume that these two goods are:
A)
unrelated.
B)
inferior.
C)
complementary.
D)
substitutes.
30.
The pair of items that is most likely to have a negative cross-price elasticity of demand
is:
A)
cashews and peanuts.
B)
hamburgers and ketchup.
C)
coffee and tea.
D)
mustard and aspirin.
31.
The percent change in quantity demanded of a good divided by the percent change in
income, all other things unchanged, is the _____ elasticity of demand.
A)
price
B)
quantity
C)
income
D)
cross-price
32.
If the income elasticity of demand for a good is positive, the good is said to be:
A)
inferior.
B)
a substitute.
C)
normal.
D)
positive.
33.
The income elasticity of demand of a normal good is always:
A)
greater than 0.
B)
less than 0.
C)
equal to 0.
D)
impossible to determine without more information about the type of good in
question.
Page 7
34.
If your income increases and your consumption of bagels increases, other things equal,
bagels are considered a(n) _____ good.
A)
negative
B)
positive
C)
inferior
D)
normal
35.
If the income elasticity of demand for a good is negative, the good is said to be:
A)
inferior.
B)
negative.
C)
positive.
D)
normal.
36.
If your purchases of shoes increase from 9 pairs per year to 11 pairs per year when your
income increases from $19,000 to $21,000 a year, other things equal, for you, shoes are
considered a(n) _____ good.
A)
normal
B)
inferior
C)
complementary
D)
substitute
37.
If your purchases of shoes decrease from 11 pairs per year to 9 pairs per year when your
income increases from $19,000 to $21,000 a year, other things equal, for you, shoes are
considered a(n) _____ good.
A)
normal
B)
inferior
C)
complementary
D)
substitute
38.
The income elasticity of demand for peaches has been estimated to be 1.43. If income
grows by 15%, all other things unchanged, total revenue will:
A)
rise.
B)
fall.
C)
remain unchanged.
D)
The information is insufficient to answer the question.
Page 8
39.
The income elasticity of demand for eggs has been estimated to be 0.57. If income
grows by 5% in a period, all other things unchanged, demand will:
A)
increase by more than 5.7%.
B)
increase by about 2.9%.
C)
decrease by more than 5.7%.
D)
decrease by less than 5.7%.
40.
Eric's income increased from $40,000 to $50,000 per year. Eric's consumption of tickets
to pro football games increased from two to four per year. By the midpoint formula, his
income elasticity of demand for pro football game tickets is equal to _____, and football
game tickets are _____ goods.
A)
-0.33; inferior
B)
+0.67; normal
C)
-3; inferior
D)
+3; normal
41.
Nico rents 10% more DVDs when his income increases by 20%. Based on this
information, we know that DVDs:
A)
are a normal good.
B)
are an inferior good.
C)
have many substitutes.
D)
have come down in price.
42.
If the income elasticity for hybrid cars is positive:
A)
there are many substitutes for hybrid cars.
B)
there are few substitutes for hybrid cars.
C)
hybrid cars are a normal good.
D)
hybrid cars are an inferior good.
43.
Kayla and Jada are roommates in New York City. Both Kayla and Jada recently
received raises. Kayla now purchases more mp3 albums online than before, but Jada
buys fewer. Kayla behaves as if mp3 albums are _____ goods, and Jada's income
elasticity of demand for mp3 albums is _____.
A)
normal; positive
B)
normal; negative
C)
inferior; positive
D)
inferior; negative
Page 9
44.
When Joe's income is $100 per week, he spends $20 per week on pizza. When his
income rises to $110 per week, he spends $25 per week on pizza. If the price of pizza
remained constant during this time, this information implies that, for Joe:
A)
pizza is a normal good.
B)
pizza is an inferior good.
C)
pizza is a substitute good.
D)
demand for pizza is price-elastic.
45.
Suppose you manage a convenience mart and are in charge of ordering products, but the
home office sets the prices. In your area, the income elasticity of demand for peanut
butter is -0.5. Because of local factory closings, you expect local incomes to decrease by
20% on average in the next month. As a result, you should stock _____ peanut butter.
A)
20% more
B)
5% more
C)
10% more
D)
10% less
Use the following to answer questions 46-48:
46.
(Ref 13-1 Table: Market for Pizza) Use Figure 13-1: Table: Market for Pizza. When
income changes from $1,000 to $1,400 per month, the income elasticity of demand for
pizza, by the midpoint method, at a price of $14 per pizza is:
A)
-1.
B)
1.
C)
1.25.
D)
1.5.
Page 10
47.
(Ref 13-1 Table: Market for Pizza) Use Figure 13-1: Table: Market for Pizza. If
income changes from $1,000 to $1,400 per month, by the midpoint method, the income
elasticity of demand at a price of $10 per pizza is:
A)
1.2.
B)
-1.2.
C)
0.825.
D)
0.40.
48.
(Ref 13-1 Table: Market for Pizza) Use Figure 13-1: Table: Market for Pizza. If income
changes from $1,000 to $1,400 per month, by the midpoint method, the income
elasticity of demand at a price of $18 per pizza is:
A)
0.33.
B)
0.50.
C)
0.95.
D)
2.
49.
Which statement is true?
A)
When the income elasticity of demand is positive, the good is inferior.
B)
When the income elasticity of demand is negative, the good is normal.
C)
Income elasticity of demand measures how much the quantity demanded of a good
is affected by changes in consumers' incomes.
D)
Income elasticity of demand measures the effect of the change in one good's price
on the quantity demanded of the other good.
50.
If the income elasticity of demand for a good is _____, the good is said to be _____.
A)
positive; inferior
B)
negative; a substitute
C)
positive; normal
D)
positive; positive
51.
For a good to be considered normal, the _____ elasticity of demand must be _____.
A)
income; between 1 and 0
B)
cross-price; less than 0
C)
cross-price; equal to 0
D)
income; greater than 0
Page 11
52.
If your income increases and your consumption of a good increases, for you, that good
is considered:
A)
negative.
B)
positive.
C)
inferior.
D)
normal.
53.
If the income elasticity of demand for a good is _____, the good is said to be _____.
A)
negative; inferior
B)
negative; negative
C)
positive; positive
D)
negative; normal
54.
The income elasticity of demand of an inferior good:
A)
is less than 0.
B)
is equal to 0.
C)
is greater than 0.
D)
cannot be determined.
55.
Assume that as your income increases, your consumption of burgers increases. We can
assume that you consider burgers a(n) _____ good.
A)
negative
B)
positive
C)
inferior
D)
normal
56.
The consumption of a(n) _____good increases when income decreases.
A)
substitute
B)
complementary
C)
normal
D)
inferior
57.
The income elasticity of demand measures:
A)
how much the quantity demanded changes in response to a price change.
B)
how much a consumer can buy at given income levels.
C)
how much consumer purchasing power is affected when prices change.
D)
how the quantity demanded of a good changes in response to changes in income.
Page 12
58.
If an increase in income leads to a decrease in the demand for a good, then the good is
said to be:
A)
normal.
B)
a luxury.
C)
inferior.
D)
a staple.
59.
If an increase in income leads to an increase in the demand for a good, then the good is
said to be:
A)
normal.
B)
a luxury.
C)
inferior.
D)
a staple.
60.
For a normal good, the income elasticity of demand will be:
A)
negative.
B)
positive.
C)
zero.
D)
determined by the direction of the change in income.
61.
For an inferior good, the income elasticity of demand will be:
A)
negative.
B)
positive.
C)
zero.
D)
determined by the direction of the change in income.
Use the following to answer question 62:
Page 13
62.
(Ref 13-2 Table: Johnson's Income and Expenditures) Use Table 13-2: Johnson's
Income and Expenditures. Johnson's income elasticity of demand for steaks is:
A)
greater than 1.
B)
1.
C)
between 0 and 1.
D)
0.
63.
(Ref 13-2 Table: Johnson's Income and Expenditures) Use Table 13-2: Johnson's
Income and Expenditures. Johnson's income elasticity of demand for magazines is:
A)
negative.
B)
0.
C)
between 0 and 1.
D)
1.
64.
(Ref 13-2 Table: Johnson's Income and Expenditures) Use Table 13-2: Johnson's
Income and Expenditures. For Johnson, magazines are a(n) _____ good.
A)
negative
B)
inferior
C)
normal
D)
neutral
Use the following to answer questions 65-67:
65.
(Ref 13-2 Table: Johnson's Income and Expenditures) Use Table 13-2: Johnson's
Income and Expenditures. By the midpoint method, Johnson's income elasticity of
demand for movies is:
A)
infinite.
B)
1.
C)
0.
D)
-1.
Page 14
66.
(Ref 13-2 Table: Johnson's Income and Expenditures) Use Table 13-2: Johnson's
Income and Expenditures. By the midpoint method, Johnson's income elasticity of
demand for pizzas is:
A)
-1.4.
B)
approximately -0.7.
C)
0.
D)
approximately 0.7.
67.
(Ref 13-2 Table: Johnson's Income and Expenditures) Use Table 13-2: Johnson's
Income and Expenditures. For Johnson, pizzas are a(n) _____ good.
A)
inferior
B)
positive
C)
neutral
D)
normal
68.
Suppose the income of canned pinto bean consumers rises. All else equal, we can
conclude that the:
A)
income elasticity of demand is positive if beans are a normal good.
B)
income elasticity of demand is positive if beans are an inferior good.
C)
cross-price elasticity between beans and other goods is positive.
D)
cross-price elasticity between beans and other goods is negative.
69.
Which good(s) is/are most likely to have a vertical supply curve?
A)
salt
B)
oil
C)
insulin
D)
paintings by Van Gogh
70.
Suppose the price of university sweatshirts increases from $10 to $20 and the quantity
supplied increases from 20 to 30. The price elasticity of supply, using the midpoint
formula, is:
A)
0.66.
B)
1.50.
C)
0.60.
D)
1.66.
Page 15
71.
A perfectly elastic supply curve is:
A)
horizontal.
B)
downward sloping.
C)
upward sloping.
D)
vertical.
72.
Suppose the price of real estate increases by 37.11% in Oakland next year. If the
quantity of new homes supplied does not change, this means that the price elasticity of
_____ will be perfectly _____ in Oakland next year.
A)
demand; elastic
B)
supply; inelastic
C)
demand; inelastic
D)
supply; elastic
73.
If quantity supplied responds substantially to a relatively small change in price, supply
is:
A)
price-elastic.
B)
price-inelastic.
C)
negatively sloped.
D)
insensitive to changes in price.
74.
If the price elasticity of supply is greater than 1:
A)
supply is price-elastic.
B)
supply is price-inelastic.
C)
supply is price unit-elastic.
D)
the quantity supplied is relatively unresponsive to price changes.
75.
If the price elasticity of supply is less than 1, then supply is:
A)
price-elastic.
B)
price-inelastic.
C)
price unit-elastic.
D)
very responsive to price changes.
76.
The price elasticity of supply is computed as the percentage change in _____ divided by
the percentage change in _____.
A)
quantity supplied; quantity demanded
B)
quantity supplied; price
C)
price; quantity supplied
D)
quantity supplied; consumer income
Page 16
77.
An attorney supplies 40 hours of work per week when her fee is $100 per hour but
supplies 60 hours of work per week when her fee rises to $120 per hour. Using the
midpoint formula, her elasticity of supply is equal to:
A)
1.
B)
0.8.
C)
2.2.
D)
0.45.
78.
A hotel has a fixed capacity of 100 rooms in the short run. Which statement best
describes the short-run elasticity of supply for rooms at this hotel?
A)
The supply is elastic at quantities above 100 rooms but inelastic at quantities below
100 rooms.
B)
The elasticity of supply is equal to 1 in the short run but infinitely elastic in the
long run.
C)
The elasticity of supply is zero in the short run because the short-run supply curve
is vertical.
D)
The supply is infinitely elastic in the short run but perfectly inelastic in the long
run.
79.
Paolo owns a pizza shop. The price of pizza recently increased from $3 to $5 a slice.
Paolo responded by increasing the quantity of slices he supplied from 100 to 150 slices
per day. By the midpoint method, Paolo's price elasticity of supply is:
A)
1.25.
B)
0.8.
C)
0.75.
D)
2.5.
Use the following to answer questions 80-81:
Page 17
80.
(Ref 13-3 Figure: Supply Curves) Use Figure 13-3: Supply Curves. Which graph shows
a perfectly inelastic supply curve?
A)
A
B)
B
C)
C
D)
D
81.
(Ref 13-3 Figure: Supply Curves) Use Figure 13-3: Supply Curves. Which graph shows
a perfectly elastic supply curve?
A)
A
B)
B
C)
C
D)
D
82.
The price elasticity of supply for a good is 3 if a _____ in price leads to a 3% decrease
in the quantity supplied.
A)
1% increase
B)
1% decrease
C)
9% decrease
D)
9% increase
83.
The price elasticity of supply measures:
A)
the response of a supply shift to changes in technology.
B)
how much supply changes when the prices of inputs change.
C)
the responsiveness of the quantity supplied to changes in the price of the good.
D)
the response of a supply shift to changes in technology and to changes in prices.
84.
If the quantity supplied responds substantially to a relatively small change in price,
supply is:
A)
price-elastic.
B)
price-inelastic.
C)
negatively sloped.
D)
insensitive to changes in price.
85.
If the price elasticity of supply is:
A)
greater than 1, then the supply is price-elastic.
B)
greater than 1, then the supply is price-inelastic.
C)
zero, then the supply is price unit-elastic.
D)
greater than 1, then the quantity supplied is relatively unresponsive to price
changes.
Page 18
86.
If the price elasticity of supply is:
A)
less than 1, then the supply is price-elastic.
B)
less than 1, then the supply is price-inelastic.
C)
zero, then price is unit-elastic.
D)
less than 1, then the supply is very responsive to price changes.
87.
Which statement is likely to be associated with inelastic supply?
A)
The time period under consideration is very long.
B)
The inputs necessary for production cannot readily be increased.
C)
The good is necessary for survival (e.g., a life-saving drug).
D)
Consumers are willing to pay any price for the good.
88.
The long-run price elasticity of supply of crude oil is _____ the short-run price elasticity
of supply of crude oil.
A)
less than
B)
greater than
C)
equal to
D)
not comparable to
89.
In the short run, the price elasticity of supply for foods low in carbohydrates is lower
than it will be in the long run because:
A)
in the short run, inputs are more available to produce these foods than in the long
run.
B)
in the short run, food producers do not have much time to respond to changes in
demand.
C)
in the short run, prices tend to stay constant.
D)
in the long run, the price elasticity of supply tends to be perfectly inelastic.
90.
Which factor is important in determining the price elasticity of supply?
A)
the time the producer has to adjust inputs and outputs
B)
the number of close substitutes
C)
the intensity of the need of consumers
D)
the number of alternative uses of the good
Page 19
91.
Supply curves tend to be more _____ the more time producers have to adjust to price
changes.
A)
price-inelastic
B)
price-elastic
C)
steeply sloped
D)
inflexible
92.
The supply curve for a good will be more elastic if:
A)
spending on the good accounts for a large share of a consumer's income.
B)
the good is a luxury item.
C)
production inputs are readily available at a relatively low cost.
D)
there is very little time for producers to respond to a price change.
93.
It is very difficult for Julia to find inexpensive inputs for her business. Because of this,
we predict that Julia's price elasticity of supply is:
A)
elastic.
B)
inelastic.
C)
unit-elastic.
D)
perfectly elastic.
94.
Consider the market for strawberries. Which statement most likely applies to the
strawberry market?
A)
The income elasticity of demand for strawberries is negative.
B)
The price elasticity of supply of strawberries is greater in the short run than in the
long run.
C)
The price elasticity of demand for strawberries is lower in the long run than in the
short run.
D)
The cross-price elasticity of demand for strawberries with respect to the price of
raspberries is positive.
Page 20
Use the following to answer question 95:
95.
(Ref 13-4 Figure: The Market for Lattes) Use Figure 13-4: The Market for Lattes. What
is the price elasticity of supply between the prices of $2 and $2.50 per cup, using the
midpoint formula?
A)
0.33
B)
1.00
C)
1.51
D)
3.00
96.
If the price elasticity of demand for tobacco is 0.5 and the income elasticity of demand
for tobacco is 0.4:
A)
an increase in the price of tobacco will decrease total revenue from sales of
tobacco.
B)
a 20% increase in the price of tobacco will decrease the quantity demanded of
tobacco by 8%.
C)
tobacco is an inferior good.
D)
a 50% increase in income will increase the quantity demanded of tobacco by 20%.
97.
Assume the supply curve shifts to the right by a given amount at each price. The price in
the market will decline the most if demand is more price-_____ and supply is more
price-_____.
A)
elastic; elastic
B)
inelastic; elastic
C)
elastic; inelastic
D)
inelastic; inelastic
Page 21
98.
Demand for Wendy's hamburgers is more inelastic than the demand for all fast food.
A)
True
B)
False
99.
You are the manager of a supermarket, and you know that the cross-price elasticity of
peanut butter to jelly is exactly -2.0. Because of a bad grape harvest, grape jelly prices
are expected to rise by 10% next year. To account for the change in demand, you should
stock 10% more peanut butter.
A)
True
B)
False
100.
If the cross-price elasticity of demand between hamburgers and cheese is positive, these
two goods must be complements.
A)
True
B)
False
101.
If the cross-price elasticity of demand between rice and beans is -0.25, rice and beans
are complements.
A)
True
B)
False
102.
The income elasticity of demand for an inferior good, such as a macaroni and cheese
dinner, is negative.
A)
True
B)
False
103.
The price elasticity of the supply of paintings by Rembrandt is greater than 1.
A)
True
B)
False
104.
Suppose the cross-price elasticity of demand for pork with respect to the price of
chicken is equal to +0.4. What does this tell you about the relation between pork and
chicken? What will happen to consumption of pork if the price of chicken falls by 20%?
105.
Suppose the cross-price elasticity between two goods is zero. What does this tell you
about these two goods?
Page 22
106.
Suppose the income elasticity for cross-country bus trips is -2 and the income elasticity
for cross-country plane trips is +2. Does this make sense? Explain your answer.
107.
Suppose you are told that the short-run price elasticity of supply for a movie theater is
zero. Does this make sense?
108.
All else equal, when the demand for oil increases, the price will increase. Some
economists say that this is only a short-run worry because in the long run a more elastic
supply curve will benefit consumers. Do you agree? Explain.
109.
You have hired a student intern to calculate some elasticity measures so that you can
present the findings at a prestigious economics conference. For the measures that
follow, provide a quick interpretation, and then determine whether you should trust the
intern's work or not. After all, it will be you in front of that critical audience of
professionals, not the intern.
A) “The income elasticity of demand for movie theater tickets is -1.5.”
B) “The price elasticity of demand for milk is 0.4 in the short run and 0.9 in the long
run.”
C) “The cross-price elasticity of demand for Cheerios with respect to the price of
Wheaties is -2.”
110.
Goods A and B have a positive cross-price elasticity of demand. This means that goods
A and B are:
A)
normal.
B)
substitutes.
C)
complements.
D)
inferior.
111.
Suppose the cross-price elasticity between two goods is 1.5. If the price of one good
increases by 10%, then the quantity demanded of the other good will:
A)
decrease by 15%.
B)
increase by 15%.
C)
decrease by 1.5%.
D)
increase by 1.5%.
Page 23
112.
Jessica's income increased by 10% this year. In the same year, Jessica's quantity
demanded of milk increased by 10% and her quantity demanded for bread increased by
5%. This means that, for Jessica:
A)
both milk and bread are inferior goods.
B)
both milk and bread are normal goods.
C)
milk is an inferior good, but bread is a normal good.
D)
milk is a normal good, but bread is an inferior good.
113.
If the percentage change in the quantity demanded of a good is greater than the
percentage change in income and in the same direction, then this good will have an
income elasticity _____1, and it is a(n) _____ good.
A)
greater than; normal
B)
less than; normal
C)
equal to; normal
D)
greater than; inferior
114.
(Table: Prices, Quantity Demanded, and Income for Jeremy) Use Table: Prices,
Quantity Demanded, and Income for Jeremy. Between the two years listed, by the
midpoint method, Jeremy's income elasticity of demand for coffee equals _____ and
doughnuts are a(n) _____ good.
A)
0.20; inferior
B)
2; normal
C)
2; inferior
D)
0.20; normal
115.
The price of coffee increases by 10%, and as a result, Alex purchases fewer doughnuts.
For Alex, coffee and doughnuts are:
A)
complements.
B)
substitutes.
C)
inferior goods.
D)
normal goods.
Page 24
116.
Tomas produces 100 cartons of free range eggs when the price is $5 and 150 cartons of
free range eggs when the price is $7. What is the value of Tomas's price elasticity of
supply?
A)
1.2
B)
2.0
C)
1.0
D)
3.2
117.
Decreases in input costs and a longer time since a price change will tend to:
A)
increase the price elasticity of supply.
B)
decrease price elasticity of supply.
C)
have no impact on the price elasticity of supply.
D)
increase price elasticity of supply with decreases in input costs but decrease price
elasticity of supply with length of time.
Page 26
Page 27
