Economics Chapter 6 Question Answer Points The Price Coffee Increases

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Question A price floor will cause a larger surplus when demand is ________ and supply is

________.

Answer elastic; inelastic

301. Multiple Choice: A price ceiling will cause a larger s...

Question A price ceiling will cause a larger shortage when demand is ________ and supply

is ________.

Answer elastic; inelastic

302. Multiple Choice: There is no total revenue test for pr...

Question There is no total revenue test for price elasticity of supply because:

Answer price and quantity are usually inversely related.

303. Multiple Choice: Assume the supply curve shifts to the...

Question 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:

Answer price-elastic and supply is more price-elastic.

Points: 0

304. Multiple Choice: When the absolute value of the percen...

Question When the absolute value of the percentage change in quantity demanded is less

than the absolute value of the percentage change in price, demand is:

unknown.

305. Multiple Choice: If the price elasticity of demand bet…

Question If the price elasticity of demand between two points on a demand curve is 0.75,

then the demand between those two points is:

Answer price unit-elastic.

306. Multiple Choice: If the absolute value of the price el…

Question If the absolute value of the price elasticity of demand is greater than 1, then:

changes in the price will have no impact on changes in the quantity demanded.

307. Multiple Choice: Suppose the price of e-books is initi…

Question

Points: 0

Suppose the price of e-books is initially $20 but then decreases to $15. The

absolute value of the percentage change in price (using the midpoint method) is:

308. Multiple Choice: If you wanted to make sure that your ...

Question If you wanted to make sure that your calculation of elasticity between two points

was the same regardless of your initial point, you would use:

Answer the absolute value of elasticity.

309. Multiple Choice: A demand curve that is perfectly inel...

Question A demand curve that is perfectly inelastic is:

Answer horizontal.

310. Multiple Choice: If the price elasticity of demand equ...

Question If the price elasticity of demand equals 0, then this means the demand curve is:

Answer horizontal.

Points: 0

311. Multiple Choice: The price of a gallon of gasoline inc...

Question The price of a gallon of gasoline increases 10% this year. As a result, which of the

following events is most likely to occur?

Answer More people will drive their cars.

312. Multiple Choice: Figure: The Linear Demand Curve Refer…

Question Figure: The Linear Demand Curve

Reference: Ref 6-20

(Figure: The Linear Demand Curve) Look at the figure The Linear Demand Curve. If

the price is initially $10, then falls to $9, this will result in a(n):

Answer decrease in quantity demanded and a decrease in total revenue.

decrease in quantity demanded and an increase in total revenue.

Points: 0

313. Multiple Choice: Figure: The Linear Demand Curve Refer…

Question Figure: The Linear Demand Curve

Reference: Ref 6-20

(Figure: The Linear Demand Curve) Look again at the figure The Linear Demand

Curve. As a producer, you are interested in maximizing your total revenues in this

market. What is the price at which you should sell your good? What is the

corresponding total revenue?

$5; $100

314. Multiple Choice: Figure: The Linear Demand Curve Refer…

Question

Points: 0

Figure: The Linear Demand Curve

Reference: Ref 6-20

(Figure: The Linear Demand Curve) Look again at the figure The Linear Demand

Curve. If you currently sell scarves at $7 and you increase the price to $8, your

total revenue will ________, and you notice that your price elasticity of demand is

________.

Answer increase; elastic

315. Multiple Choice: Figure: The Linear Demand Curve II Re…

Question

Points: 0

Figure: The Linear Demand Curve II

Reference: Ref 6-21

(Figure: The Linear Demand Curve II) Look at the figure Linear Demand Curve II. At

prices greater than $8, demand is ________, while prices below $8 are ________,

and demand at $8 is ________.

equal to 0; elastic; inelastic

316. Multiple Choice: Figure: The Linear Demand Curve II Re…

Question

Points: 0

Figure: The Linear Demand Curve II

Reference: Ref 6-21

(Figure: The Linear Demand Curve II) Look at the figure Linear Demand Curve II. If

price was initially set at $8 and then increased to $10, total revenue would:

317. Multiple Choice: All of the following are characterist...

Question All of the following are characteristics of elastic demand except:

318. Multiple Choice: Goods A and B have a positive cross-p...

Question Goods A and B have a positive cross-price elasticity of demand. This means goods

A and B are:

Answer normal goods.

Points: 0

319. Multiple Choice: Suppose the cross-price elasticity be…

Question 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:

Answer decrease by 15%.

320. Multiple Choice: Jessica‘s income increased by 10% thi…

Question 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:

Answer both milk and bread are inferior goods.

321. Multiple Choice: If the percentage change in the quant...

Question 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:

less than 1 and it is an inferior good.

Points: 0

322. Multiple Choice: Reference: Ref 6-22 (Table: Prices, …

Question

Reference: Ref 6-22

(Table: Prices, Quantity Demanded, and Income for Jeremy) Look at the table

Prices, Quantity Demanded, and Income for Jeremy. Between the two years listed,

Jeremy‘s income elasticity of demand for coffee equals ________ and donuts are

a(n) ________ good.

0.20; normal good

323. Multiple Choice: The price of coffee increases by 10%,…

Question The price of coffee increases by 10%, and as a result, Alex purchases fewer

doughnuts. For Alex, coffee and doughnuts are:

normal goods.

324. Multiple Choice: Tomas produces 100 cartons of free ra...

Question 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?

Points: 0

325. Multiple Choice: One would expect to see the supply be…

Question One would expect to see the supply become more price ________ as harvest

season approaches and crops are being brought in from the fields.

inferior

326. Multiple Choice: Decreases in input costs and a longer…

Question Decreases in input costs and a longer time since a price change will tend to:

increase price elasticity of supply with decreases in input costs but decrease

price elasticity of supply with length of time.

327. Essay: If the quantity demanded is 5,000 gal...

Question If the quantity demanded is 5,000 gallons at $3.00 per gallon, the price elasticity of

demand for gasoline is 0.5, and the price rises to $3.15 per gallon, how many

gallons of gas will be sold at this higher price?

328. Essay: A university bookstore decreased the ...

Question A university bookstore decreased the price of a sweatshirt from $20 to $18 and

discovered that sweatshirt sales increased from 100 per week to 120 per week.

Use the midpoint formula to compute the price elasticity of demand for sweatshirts.

Points: 0

329. Essay: The city government is losing million…

Question The city government is losing millions of dollars on the mass transit system (buses

and subways). The government proposes to increase the fare of a ticket by 20% to

raise revenue and has asked your advice. You know that the price elasticity of

demand for mass transit in the city is approximately equal to 0.75. What do you

think of the proposal to increase the fare to raise revenue for the city? Be as

specific as possible.

330. Essay: Suppose the price elasticity of deman…

Question Suppose the price elasticity of demand for electricity is equal to 0.15 in the short

run but is equal to 0.5 in the long run. What explains this difference, and what does

this imply about the demand curve for electricity in the short run versus the long

run?

331. Essay: Suppose the cross-price elasticity of…

Question 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%?

332. Essay: Suppose the cross-price elasticity be…

Question Suppose the cross–price elasticity between two goods is equal to zero. What does

this tell you about these two goods?

333. Essay: Suppose the income elasticity for cro...

Question Suppose the income elasticity for cross-country bus trips is equal to –2 and the

income elasticity for cross-country plane trips is equal to +2. Does this make

sense? Explain your answer.

Answer

Points: 0

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334. Essay: Suppose you are told that the short-r…

Question Suppose you are told that the short–run price elasticity of supply for a movie theatre

is zero. Does this make sense?

335. Essay: All else equal, when the demand for o...

Question 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.

336. Essay: You have hired a student intern to ca…

Question 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 theatre 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 cereal with respect to the

Points: 0