Economics Chapter 6 Multiple Choice Egg Producers Know

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Microeconom ics, 3e

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1. True/False: The price elasticity of demand is the…

Question The price elasticity of demand is the ratio of the percent change in the quantity

demanded to the percent change in the price as one moves along the demand

curve.

2. True/False: A perfectly inelastic demand curve fo...

Question A perfectly inelastic demand curve for insulin would mean that the quantity

demanded does not respond at all to changes in the price of insulin.

3. True/False: If funeral homes discover that the pr…

Question If funeral homes discover that the price elasticity of demand for caskets equals

0.55, funeral homes should increase prices to increase revenue.

4. True/False: Sarah has been told she has only one ...

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Question Sarah has been told she has only one week to finish some pottery for a show.

Sarah has exhausted her supply of clay and considers new clay absolutely

necessary for finishing her products. For Sarah, the price elasticity of demand for

new clay is elastic.

5. True/False: If demand is perfectly inelastic, cha...

Question If demand is perfectly inelastic, changes in price leave total revenue unchanged.

6. True/False: The director of River City Public Tra...

Question The director of River City Public Transport recently stated, “The last seven times we

increased bus fares, revenues dropped.” This remark suggests the demand for bus

service is elastic.

7. True/False: The mayor advocates raising the entra...

Question The mayor advocates raising the entrance fee at the city‘s pools to increase

revenue for the city. The mayor is right only if the price effect dominates the

quantity effect.

8. True/False: Local cable companies recently increa...

Question Local cable companies recently increased the price of basic services. A news

expert reporting on the increase stated, “While prices have increased 40%, the

cable company reports only a 20% increase in revenue.” This remark suggests the

demand for basic cable service is elastic.

9. True/False: Given a price increase for any good, ...

Question Given a price increase for any good, the price effect on revenue is always larger

than the quantity effect on revenue.

10. True/False: The price elasticity of demand for ga…

Question

Points: 0

The price elasticity of demand for gasoline is likely to be higher in the long run than

in the short run.

11. True/False: A major determinant of the price elas…

Question A major determinant of the price elasticity of demand is the availability of

substitutes.

12. True/False: Demand for Wendy‘s hamburgers is more…

Question Demand for Wendy‘s hamburgers is more inelastic than the demand for all fast

food.

13. True/False: Since for most people, eating in rest...

Question Since for most people, eating in restaurants is a luxury and eating at home is a

necessity, the price elasticity of demand for food eaten at home is less than the

price elasticity of demand for eating in restaurants.

14. True/False: You are the manager of a supermarket,…

Question 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.

15. True/False: If the cross-price elasticity of dema...

Question If the cross-price elasticity of demand between hamburgers and cheese is positive,

these two goods must be complements.

16. True/False: If the cross-price elasticity of dema...

Question If the cross-price elasticity of demand between rice and beans is –0.25, rice and

beans are complements.

Points: 0

17. True/False: The income elasticity of demand for a…

Question The income elasticity of demand for an inferior good, such as a macaroni and

cheese dinner, is negative.

18. True/False: The price elasticity of the supply of...

Question The price elasticity of the supply of paintings by Rembrandt is greater than 1.

19. Multiple Choice: The price elasticity of demand measur…

Question The price elasticity of demand measures the responsiveness of the change in the:

20. Multiple Choice: When the price goes down, the quantit...

Question When the price goes down, the quantity demanded goes up. This price elasticity

measures how:

Answer much the price goes down.

21. Multiple Choice: If the price of a good increases by 2…

Question If the price of a good increases by 20% and the quantity demanded changes by

15%, then the price elasticity of demand is equal to:

Points: 0

22. Multiple Choice: The price elasticity of demand is com…

Question The price elasticity of demand is computed as the percentage change in the:

Answer quantity demanded divided by the percentage change in the quantity supplied.

23. Multiple Choice: The price of gasoline rises 5% and th...

Question The price of gasoline rises 5% and the quantity of gasoline purchased falls 1%. The

price elasticity of demand is equal to ________ and demand is described as

________.

5; elastic

24. Multiple Choice: A local restaurant has estimated that...

Question A local restaurant has estimated that the price elasticity of demand for meals is

equal to 2. If the restaurant increases menu prices by 5%, they can expect the

number of customers to decrease by ________and total revenue to ________.

Answer 10%; increase

Points: 0

25. Multiple Choice: The ratio of the percentage change in...

Question The ratio of the percentage change in the quantity demanded to the percentage

change in price is the:

cross-price elasticity of demand.

26. Multiple Choice: Which of the following best describes...

Question Which of the following best describes the price elasticity of demand?

The price elasticity of demand measures the change in the slope of the

demand curve versus a change in the quantity demanded.

27. Multiple Choice: The price elasticity of demand is mea...

Question The price elasticity of demand is measured by:

Answer dividing the percentage change in the price by the percentage change in the

quantity demanded.

28. Multiple Choice: When actually calculated for a normal...

Question

Points: 0

When actually calculated for a normal demand curve, the price elasticity of demand

will be:

Answer always positive.

29. Multiple Choice: The price elasticity of demand can be…

Question The price elasticity of demand can be found by:

Answer examining only the slope of the demand curve.

30. Multiple Choice: If the price of a good increases by 1…

Question If the price of a good increases by 15% and the quantity demanded changes by

20%, then the price elasticity of demand is equal to:

Answer 0.75.

31. Multiple Choice: The price elasticity of demand measur…

Question The price elasticity of demand measures the:

extent to which prices are flexible and respond to market forces.

Points: 0

32. Multiple Choice: Suppose the price of gasoline increas…

Question Suppose the price of gasoline increases 10% and quantity of gasoline demanded in

Orlando drops 5% per day. Demand for gasoline in Orlando is:

Answer price elastic.

33. Multiple Choice: If the estimated price elasticity of ...

Question If the estimated price elasticity of demand for foreign travel is 4, then:

a 20% increase in the price of foreign travel will increase the quantity

demanded by 80%.

34. Multiple Choice: Egg producers know that the elasticit…

Question Egg producers know that the elasticity of demand for eggs is 0.1. If they want to

increase sales by 5%, they will have to lower price by:

Answer 0.1%.

Points: 0

35. Multiple Choice: Gas prices recently increased by 25%....

Question Gas prices recently increased by 25%. In response, purchases of gasoline

decreased by 5%. Based on this data, the price elasticity of demand for gas is:

Answer 5.

36. Multiple Choice: The only producer of chocolate bunnie…

Question The only producer of chocolate bunnies in the world, Choco’s Bunny Company,

recently expanded its production capacity from 1,000 to 2,000 bunnies per day. If

the price elasticity of demand for bunnies is 3.33, by how much will the company

need to reduce its price to sell the additional 1,000 bunnies (using the midpoint

method)?

Answer 2.5%

37. Multiple Choice: The Cozy Chair Company believes it ca...

Question The Cozy Chair Company believes it can sell 200 chairs at $200 per chair or 300

chairs at $150 per chair. Using the midpoint formula, what do they think is the price

elasticity of demand?

Answer 2.5.

38. Multiple Choice: The publisher of an economics textboo...

Question The publisher of an economics textbook finds that when the book‘s price is lowered

from $70 to $60, sales rise from 10,000 to 15,000. Using the midpoint method, the

price elasticity of demand is:

Points: 0

Answer 500.

39. Multiple Choice: Reference: Ref 6-1 (Table: Market fo…

Question

Reference: Ref 6-1

(Table: Market for Pizza) Look at the table Market for Pizza. The price elasticity of

demand for pizza between the prices of $14 and $12 per pizza when income is

$1,000 per month is (use the midpoint method):

Answer 0.6.

40. Multiple Choice: Figure: The Demand Curve for Oil Refe…

Question

Points: 0

Figure: The Demand Curve for Oil

Reference: Ref 6-2

(Figure: Demand Curve for Oil) Look at the figure The Demand Curve for Oil. The

price elasticity of demand between $20 and $21, using the midpoint method, is

approximately:

4.9.

41. Multiple Choice: Suppose at a price of $10 the quantit…

Question Suppose at a price of $10 the quantity demanded is 100. When the price falls to

$8, the quantity demanded increases to 130. The price elasticity of demand

between the prices of $10 and $8, using the midpoint method, is approximately:

1.00.

42. Multiple Choice: Using the midpoint method to calculat...

Question Using the midpoint method to calculate the price elasticity of demand eliminates

the problem of computing:

Points: 0

43. Multiple Choice: A men’s tie store sold an average of …

Question A men’s tie store sold an average of 30 ties per day when the price was $5 per tie

but sold 50 of the same ties per day when the price was $3 per tie. The price

elasticity of demand, using the midpoint method, is:

Answer greater than zero but less than 1.

44. Multiple Choice: A men’s tie store sold an average of …

Question A men’s tie store sold an average of 30 ties per day when the price was $5 per tie.

The same store sold 60 of the same ties per day when the price was $3 per tie. In

this case, the price elasticity of demand (using the midpoint method) is:

Answer greater than zero but less than 1.

45. Multiple Choice: A shirt manufacturer sold 10 dozen sh…

Question A shirt manufacturer sold 10 dozen shirts per day when the price was $4 per shirt

but sold 15 dozen shirts per day when the price was $3 per shirt. The price

elasticity of demand (using the midpoint method) is:

Answer greater than zero but less than 1.

Points: 0

46. Multiple Choice: If the price of chocolate-covered pea...

Question If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the

quantity demanded increases from 190 bags to 210 bags, then the price elasticity

of demand (using the midpoint method) is:

Answer 0.

47. Multiple Choice: If the price of chocolate-covered pea...

Question If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the

quantity demanded increases from 180 bags to 220 bags, then the price elasticity

of demand (using the midpoint method) is:

Answer 0.

48. Multiple Choice: If the price of chocolate-covered pea...

Question If the price of chocolate-covered peanuts decreases from $1.05 to $0.95 and the

quantity demanded increases from 180 bags to 220 bags, then the price elasticity

of demand (using the midpoint method) is:

Answer 0.5.

Points: 0

49. Multiple Choice: If the price of chocolate-covered pea...

Question If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the

quantity demanded does not change, then the price elasticity of demand (using the

midpoint method) is:

50. Multiple Choice: If the price of chocolate-covered pea...

Question If the price of chocolate-covered peanuts decreases from $1.10 to $0.95 and the

quantity demanded increases from 190 bags to 215 bags, then the price elasticity

of demand (using the midpoint method) is:

Answer 1.25.

51. Multiple Choice: If the price of chocolate-covered pea...

Question If the price of chocolate-covered peanuts decreases from $2.00 to $1.55 and the

quantity demanded increases from 180 bags to 220 bags, then the price elasticity

of demand (using the midpoint method) is:

Answer 0.

52. Multiple Choice: If the price of chocolate-covered pea...

Question If the price of chocolate-covered peanuts decreases from $1.15 to $1.05 and the

quantity demanded increases from 190 bags to 220 bags, then the price elasticity

of demand (using the midpoint method) is:

Answer 0.5.

Points: 0

53. Multiple Choice: If the price of chocolate-covered pea...

Question If the price of chocolate-covered peanuts decreases from $1.15 to $0.90 and the

quantity demanded does not change, then the price elasticity of demand (using the

midpoint method) is:

Answer 0.5.

54. Multiple Choice: If the price of chocolate-covered pea...

Question If the price of chocolate-covered peanuts decreases from $1.15 to $0.90 and the

quantity demanded increases from 0 bags to 400 bags, then the price elasticity of

demand (using the midpoint method) is:

Answer 0.5.

55. Multiple Choice: Figure: The Demand for Shirts Referen…

Question

Points: 0

Figure: The Demand for Shirts

Reference: Ref 6-3

(Figure: The Demand for Shirts) Look at the figure The Demand for Shirts. The price

elasticity of demand for the segment AB, using the midpoint method, is:

Answer 13.

56. Multiple Choice: Figure: The Demand for Shirts Referen…

Question

Points: 0

Figure: The Demand for Shirts

Reference: Ref 6-3

(Figure: The Demand for Shirts) Look again at the figure The Demand for Shirts.

The price elasticity of demand for the segment BC, using the midpoint method, is:

Answer greater than 3.33.

0.33.

57. Multiple Choice: Figure: The Demand for Shirts Referen…

Question

Points: 0

Figure: The Demand for Shirts

Reference: Ref 6-3

(Figure: The Demand for Shirts) Look again at the figure The Demand for Shirts.

The price elasticity of demand for the segment EF, using the midpoint method, is:

Answer 1.3.

58. Multiple Choice: The price of notebooks is $5, and at …

Question The price of notebooks is $5, and at that price consumers demand 12 notebooks. If

the price rises to $7, consumers will decrease consumption to 4 notebooks. Using

the midpoint formula, what is the price elasticity of demand for notebooks?

Answer 1/3

59. Multiple Choice: When the price of pencils decreases f…

Question

Points: 0

When the price of pencils decreases from $3 to $1, the quantity demanded

increases from 100 to 200 pencils. Using the midpoint method, the price elasticity

of demand equals:

Answer 1/6.

60. Multiple Choice: If the price of tacos increases from …

Question If the price of tacos increases from $1 to $2 and customers decrease their

consumption from 10 tacos to 8 tacos, what is the price elasticity of demand

(using the midpoint method)?

Answer 3/2

61. Multiple Choice: If the price of burritos increases fr…

Question If the price of burritos increases from $4 to $6 and customers decrease their

consumption from 20 to 10 burritos, what is the price elasticity of demand (using

the midpoint method)?

62. Multiple Choice: Figure: The Demand for e-Books Refere…

Question

Points: 0

Figure: The Demand for e–Books

Reference: Ref 6-4

(Figure: The Demand for e-Books) Look at the figure The Demand for e-Books.

What is the price elasticity of demand (using the midpoint method) when the price

decreases from $6 to $4?

2/3

63. Multiple Choice: Figure: The Demand for e-Books Refere…

Question Figure: The Demand for e-Books

Reference: Ref 6-4

(Figure: The Demand for e-Books) Look again at the figure The Demand for e-

Books. What is the price elasticity of demand (using the midpoint method) when

the price increases from $6 to $8?

Answer 5/9

Points: 0