CH 5. Name: Class: Date: Multiple Choice Identify the choice that best completes the statement or answers the question.

Transcription

1 Name: Class: Date: CH 5 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. Using the midpoint method, if the price of an airline ticket from Orlando to Pittsburgh falls from $275 to $238, the percentage change in price is a percent. b percent. c percent. d percent. e percent. 2. When the percentage change in the quantity demanded equals the percentage change in price, then demand is a. inelastic. b. unit elastic. c. elastic. d. irrelevant. e. undefined. 3. Which of the following statements is correct? a. The demand for New Balance shoes is more elastic than the demand for shoes in general. b. The demand for salt is very elastic. c. The demand for luxuries is less elastic than the demand for necessities. d. The demand for a narrowly defined good is less elastic than the demand for a more broadly defined good. e. The larger the proportion of income spent on a good, the smaller the elasticity of demand. 4. If the price elasticity of demand for a product is 3.0, then when its price falls from $1.50 to $1.25, the quantity demanded will increase by (Hint: Use the midpoint method for the percentage change in price.) a percent. b percent. c percent. d percent. e percent. 5. Using the data in the table above, when the price of a skirt rises from $20 to $35, what is the price elasticity of demand? (Use the midpoint method.) a b c d e

2 Name: 6. If a 2 percent rise in price leads to a 4 percent decrease in quantity demanded, then demand is a. elastic and total revenue decreases. b. elastic and total revenue increases. c. inelastic and total revenue decreases. d. elastic, but we cannot tell what happens to total revenue without more information. e. total revenue decreases but we cannot tell if the demand is elastic or inelastic without more information. 7. If an Atlanta bakery raises the price of their rye bread by 11 percent and the quantity demanded decreases by 11 percent, then the demand for the rye bread is and the bakery's total revenue. a. unit elastic; does not change b. unit elastic; increases c. unit elastic; decreases d. elastic; does not change e. inelastic; does not change 8. In the figure above, if the price falls from $8 to $7 demand is a. elastic. b. inelastic. c. unit elastic. d. income elastic. e. perfectly elastic. 9. Suppose an increase in demand causes the price to increase from $2 to $4 and the quantity to increase from 1,000 to 1,800. Using the midpoint method, the elasticity of supply equals a b c d e. None of the above answers is correct. 2

3 Name: 10. Because the price elasticity of supply for jumbo jets is 0.35, the supply of jumbo jets is a. elastic. b. unit elastic. c. inelastic. d. perfectly elastic. e. perfectly inelastic. 11. The cross elasticity of demand is a measure of how a. responsive consumers are to changes in the price of a product. b. responsive suppliers are to changes in the price of a product. c. demand for a product changes when the price of a substitute or complement changes. d. total revenue changes when the price of a product changes. e. demand for a product changes when income changes. 12. The price of coffee rose 40 percent and the quantity of coffee demanded fell by 20 percent. The quantity of doughnuts demanded also fell by 20 percent. From this information, we can conclude that a. the demand for coffee is elastic. b. the demand for coffee is unit elastic. c. coffee is an inferior good. d. the cross elasticity demand between coffee and doughnuts is 0.5. e. the income elasticity of demand for coffee is The cross elasticity of demand for butter and margarine is likely to be a. positive because they are substitutes. b. positive because they are complements. c. negative because they are substitutes. d. negative because they are complements. e. positive because they are normal goods. 14. If an increase in the price of green ketchup increases the demand for red ketchup, then a. red and green ketchup are substitutes. b. red and green ketchup are normal goods. c. the cross elasticity of demand for these two kinds of ketchup is positive. d. Both answers A and C are correct. e. Both answers A and B are correct. 15. When two goods are related such that an increase in the price of one good decreases the quantity demanded of the other good, these goods are definitely a. normal goods. b. luxury goods. c. complements. d. substitutes. e. inferior goods. 16. If two goods are, then an increase in the price of one leads to in the quantity demanded of the other. a. complements; a decrease b. complements; no change c. substitutes; a decrease d. substitutes; no change e. normal; an increase 3

4 Name: 17. Which of the following statements is correct? The a. income elasticity of demand for inferior goods is positive. b. cross elasticity of demand for substitutes is negative. c. income elasticity of demand for normal goods is positive. d. cross elasticity of demand for complements is positive. e. income elasticity of demand for inferior goods is zero. 18. What is an inferior good? a. a product of low quality that we do not want to purchase b. a product for which demand increases when income increases, and demand decreases when income decreases c. a product for which demand increases when income decreases, and demand decreases when income increases d. a product that is complementary e. a product that is a substitute for another, better good 19. If a product is an inferior good, then its income elasticity of demand is a. zero. b. positive. c. negative. d. indeterminate. e. undefined. 20. The price elasticity of demand measures the extent to which the quantity demanded changes when a. the price of the good changes. b. the price of a related good changes. c. the expected future price of a good changes. d. consumer preferences change. e. both the demand and supply of the good change. 21. If the price of a good rises, then moving along a demand curve the percentage change in the quantity demanded will be a. positive. b. negative. c. zero. d. either positive, negative, or zero depending on how the demand curve shifted. e. undefined. 22. Suppose the price of a box of cereal rises from $4 to $6. Using the midpoint method, what is the percentage change in price? a. 50 percent b. 40 percent c. 33 percent d. 67 percent e. None of the above answers is correct. 23. If the percentage change in price is 10 percent and the demand is elastic, then the percentage change in the quantity demanded a. is greater than 0 percent but less than 10 percent. b. is larger than 10 percent. c. equals 0 percent. d. equals 10 percent. e. More information is needed to determine the magnitude of the change in the quantity demanded. 4

5 Name: 24. Of the following, which good has the most elastic demand? a. Pepsi b. food c. insulin d. oil e. salt 25. In view of the income effect on the price elasticity of demand, which of the following goods has a more elastic demand? a. salt b. chewing gum c. Band-aids d. housing e. magazines 26. A 10 percent increase in price leads to a 20 percent decrease in the quantity demanded. The price elasticity of demand is equal to a b c d e When the price falls from $10.00 to $8.50, the quantity demanded increases from 700 units to 725 units. Using the midpoint method, the price elasticity of demand equals a b c d e A firm can sell 10 units if the price is $100 and can sell 8 units if the price is $125. Using the midpoint method, what is the price elasticity of demand? a b c d e When the price of a cup of coffee falls from $3.00 to $2.50, the quantity demanded increases from 1,000 per month to 1,150 per month. Using the midpoint method, the price elasticity of demand is a b c d e When hamburger is $3 per pound, Ms. Rush buys 6 pounds. When hamburger is $2 per pound, Mrs. Rush buys 10 pounds. Describe Ms. Rush's demand between these two prices. a. elastic b. unit elastic c. inelastic d. perfectly inelastic e. perfectly elastic 5

6 Name: 31. Moving downward along a linear (straight-line) downward sloping demand curve, the a. slope is constant. b. price is constant. c. quantity is constant. d. elasticity is constant. e. None of the above answers is correct. 32. Total revenue equals a. price multiplied by the price elasticity of demand. b. quantity multiplied by the price elasticity of demand. c. price multiplied by quantity. d. price times quantity multiplied by the price elasticity of demand. e. the percentage change in the price multiplied by the percentage change in the quantity. 33. If a product is considered by buyers to be a luxury item, is priced high relative to buyers' incomes, and has substitutes, though not perfect substitutes, the price elasticity of demand for this product is likely to be a. elastic. b. unit elastic. c. inelastic. d. zero. e. perfectly elastic. 34. In the figure above, what is the total revenue at point A? a. $20 b. $150 c. $170 d. $3,000 e. 150 quantity units 6

7 Name: 35. In the figure above, using the midpoint method, what is the price elasticity of demand between points A and B? a b c d e The price elasticity of demand is a measure of the extent to which the quantity demanded of a good changes when changes. a. income b. the price of a related good c. the price of the good d. the demand alone e. both the demand and the supply simultaneously 37. If the supply curve is, the elasticity of supply is. a. vertical; infinite b. vertical; 0 c. horizontal; 1 d. horizontal; 0 e. a straight, upward sloping line through the origin; Which of the following explains why supply is more elastic as more time passes? a. It is difficult or impossible to increase the quantity produced in a short period of time. b. Consumers have more time to search for substitutes. c. Sellers try to take advantage of a high price in the short term. d. The supply curve becomes generally steeper as more time passes. e. There is no explanation for this phenomenon. 7

8 Name: 39. Supply is unit elastic when the a. supply curve is upward sloping. b. price elasticity of supply is positive. c. percentage change in the quantity supplied equals the percentage change in price. d. supply curve is horizontal. e. supply curve is vertical. 40. The supply of beachfront property on St. Simon's Island is a. elastic. b. unit elastic. c. negative. d. inelastic. e. perfectly elastic. 41. Many manufactured goods have an supply if production plans have only a short period to change and as time passes and all production adjustments are made, the supply of the good from the initial response. a. inelastic; increases b. elastic; decreases c. elastic; increases d. inelastic; decreases e. inelastic; does not change 42. If a lower price for a Pepsi decreases the demand for a Coke, the cross elasticity value for Pepsi and Coke is a. definitely negative. b. definitely equal to zero. c. definitely positive. d. definitely greater than one. e. possibly negative, positive, or zero, but there is not enough information to decide. 43. If the cross elasticity of demand is negative, that means the goods a. have elastic demands. b. have inelastic demands. c. are complements. d. are substitutes. e. are inferior. 44. A product that has a negative income elasticity of demand is good. a. a complementary b. a substitute c. a normal d. an inferior e. a negative 45. Joe receives a 20 percent increase in his income from his part time job and as a consequence decreases his consumption of Ramen noodles by 10 percent. Hence to Joe, Ramen noodles are a. a normal good with a price elasticity of demand of 0.5. b. a substitute good with a cross elasticity of 0.5. c. a good with a price elasticity of supply of d. an inferior good with an income elasticity of e. an inferior good with an income elasticity of

9 Name: 46. For a good such as a large screen, high-definition LCD television set, the income elasticity would likely be a. negative. b. equal to zero. c. positive and less than one. d. positive and greater than one. e. undefined because large screen, high-definition LCD TVs are bought by only a handful of consumers. 47. Generally speaking, luxuries have income elasticities that are a. larger than those of necessities. b. smaller than those of necessities. c. the same as those of necessities. d. negative. e. zero. 48. If two goods have a cross elasticity of demand of -2, then when the price of one good increases, the demand curve for the other good a. shifts rightward. b. shifts leftward. c. remains unchanged and the supply curve also remains unchanged. d. might shift rightward, leftward, or remain unchanged. e. remains unchanged but the supply curve shifts leftward. 49. When income increases by 6 percent, the demand for potatoes decreases by 2 percent. The income elasticity of demand for potatoes equals a b c d e The income elasticity of demand for used cars is less than zero. So, used cars are a. inferior goods. b. normal goods. c. inelastic goods. d. perfectly inelastic goods. e. substitute goods. 9