question
Refer to Table 5-2. Using the midpoint method, if the price falls from $80 to $60, the absolute value of the price elasticity of demand is
answer
2.33.
question
Which of the following could be the price elasticity of demand for a good for which an increase in price would increase revenue?
answer
0.2
question
Which of the following is likely to have the most price elastic demand?
answer
lattés
question
For a particular good, a 2 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?
answer
The good is a luxury.
question
If the price of gasoline rises, when is the price elasticity of demand likely to be the highest?
answer
one year after the price increase
question
Which of the following is likely to have the most price inelastic demand?
answer
gasoline in the short run
question
When small changes in price lead to infinite changes in quantity demanded, demand is perfectly
answer
elastic, and the demand curve will be horizontal.
question
Refer to Figure 5-14. Using the midpoint method, what is the price elasticity of supply between points D and G?
answer
0.53
question
Food and clothing tend to have
answer
small income elasticities because consumers, regardless of their incomes, choose to buy relatively constant quantities of these goods.
question
The price elasticity of supply measures how much
answer
the quantity supplied responds to changes in the price of the good.
question
While in college, John and Bethany each buy five packages of mac-n-cheese per week. After they graduate and have full-time jobs, John buys six packages per week, but Bethany buys only two packages per week. When looking at income elasticity of demand for mac-n-cheese, John's
answer
is positive, and Bethany's is negative.
question
Last year, Shelley bought 6 pairs of designer jeans when her income was $40,000. This year, her income is $50,000, and she purchased 10 pairs of designer jeans. Holding other factors constant, it follows that Shelley
answer
considers designer jeans to be a normal good.
question
If the quantity supplied responds only slightly to changes in price, then
answer
supply is said to be inelastic.
question
Refer to Figure 6-2. The price ceiling
answer
All of the above are correct.
(is binding; causes a shortage; causes the quantity demanded to exceed the quantity supplied)
(is binding; causes a shortage; causes the quantity demanded to exceed the quantity supplied)
question
Which of the following is not a function of prices in a market system?
answer
Prices ensure an equal distribution of goods and services among consumers.
question
To say that a price ceiling is binding is to say that the price ceiling
answer
causes quantity demanded to exceed quantity supplied.
question
Refer to Figure 6-9. A price ceiling set at
answer
$4 will be binding and will result in a shortage of 6 units.
question
Refer to Figure 6-6. If the government imposes a price ceiling of $12 on this market, then there will be
answer
no shortage.
question
A binding price ceiling
(i) causes a surplus.
(ii) causes a shortage.
(iii) is set at a price above the equilibrium price.
(iv) is set at a price below the equilibrium price.
(i) causes a surplus.
(ii) causes a shortage.
(iii) is set at a price above the equilibrium price.
(iv) is set at a price below the equilibrium price.
answer
(ii) and (iv) only
question
Economists generally believe that rent control is
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a highly inefficient way to help the poor raise their standard of living.
question
When a tax is placed on the buyers of cell phones, the size of the cell phone market
answer
and the effective price received by sellers both decrease.
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A tax burden falls more heavily on the side of the market that
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is more inelastic.
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The tax incidence
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is the manner in which the burden of a tax is shared among participants in a market.
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Suppose that in a particular market, the supply curve is highly elastic and the demand curve is highly inelastic. If a tax is imposed in this market, then the
answer
buyers will bear a greater burden of the tax than the sellers.
question
If the government removes a tax on a good, then the quantity of the good sold will
answer
increase.
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