question

In a market for a single antique Roman vase, supply is

answer

perfectly inelastic

question

Consider a market in which the demand curve is downward sloping. A firm currently sells a quantity at which the price elasticity of demand (in absolute value) is equal to 0.5. At that quantity, the price charged by the firm equals the corresponding value of the demand curve. If this firm were to increase the price it charges slightly, how will its revenue change?

answer

revenue will increase

question

Which of the following goods would you expect has the highest price elasticity of demand (in absolute value)?

answer

Soda or cigarettes

question

Consider the market for rental units in NYC, where prices are regulated by a price ceiling. Suppose further that the price ceiling currently imposed is such that we observe a shortage of housing. Which of the following statements is true?

The higher the price elasticity of demand (in absolute value) for housing, the lower the shortage

The higher the price elasticity of demand (in absolute value) for housing, the higher the shortage

The higher the price elasticity of demand (in absolute value) for housing, the lower the shortage

The higher the price elasticity of demand (in absolute value) for housing, the higher the shortage

answer

The higher the price elasticity of demand (in absolute value) for housing, the higher the shortage

question

In the market for a single antique Roman vase, what would the supply curve look like?

answer

vertical line

question

Consider a market in which the demand curve is downward sloping. A firm currently sells a quantity at which the price elasticity of demand (in absolute value) is equal to 1.4. At that quantity, the price charged by the firm equals the corresponding value given by the demand curve. If this firm were to increase the price it charges slightly, how will its revenue change?

answer

revenue will decrease

question

Suppose the supply curve is given by the equation

P = 10 + 2 Q.

Suppose that price increases from $16 to $24. Compute the price elasticity of supply between these two points (i.e., between the point corresponding to a price of $16 and the point corresponding to a price of $24).

P = 10 + 2 Q.

Suppose that price increases from $16 to $24. Compute the price elasticity of supply between these two points (i.e., between the point corresponding to a price of $16 and the point corresponding to a price of $24).

answer

2

question

Suppose that technological progress in the market for crude oil allows producers to exploit new deposits so that the quantity supplied increases at every price level. Which statement is true in this situation?

-If the price elasticity of demand (in absolute value) is low, the equilibrium price will sharply increase.

-If the price elasticity of demand (in absolute value) is high, the equilibrium price will sharply decrease.

-If the price elasticity of demand (in absolute value) is low, the equilibrium quantity will sharply increase.

-If the price elasticity of demand (in absolute value) is high, the equilibrium quantity will sharply increase.

-If the price elasticity of demand (in absolute value) is low, the equilibrium price will sharply increase.

-If the price elasticity of demand (in absolute value) is high, the equilibrium price will sharply decrease.

-If the price elasticity of demand (in absolute value) is low, the equilibrium quantity will sharply increase.

-If the price elasticity of demand (in absolute value) is high, the equilibrium quantity will sharply increase.

answer

If the price elasticity of demand (in absolute value) is high, the equilibrium quantity will sharply increase.

question

Assume the price elasticity of supply is equal to 0.8. Which of the following is true?

-When the price goes up by 1%, the quantity supplied increases by 0.8%

-When the price goes up by 1%, the quantity supplied stays constant.

-When the price goes up by 1%, the quantity supplied decreases by 0.8%

-When the price goes up by 1%, the quantity supplied increases by 0.8%

-When the price goes up by 1%, the quantity supplied stays constant.

-When the price goes up by 1%, the quantity supplied decreases by 0.8%

answer

When the price goes up by 1%, the quantity supplied increases by 0.8%

question

Good A has a price elasticity of demand (in absolute value) of 1.4 while good B has a price elasticity of demand (in absolute value) of 0.8. Suppose now that the prices of both goods increase by 1%. What is more likely to happen?

The percentage change in the quantity demanded of good A will be less than the percentage change in the quantity demanded of good B.

The percentage change in the quantity demanded of good A will be greater than the percentage change in the quantity demanded of good B.

The percentage change in the quantity demanded of good A will be less than the percentage change in the quantity demanded of good B.

The percentage change in the quantity demanded of good A will be greater than the percentage change in the quantity demanded of good B.

answer

The percentage change in the quantity demanded of good A will be greater than the percentage change in the quantity demanded of good B.

question

Suppose that the quantity of bread consumed in a year falls from 20 loaves to 10 loaves when average annual income rises from $25,000 to $35,000, all else equal. Calculate the income elasticity of demand for bread between these two points (i.e., the point corresponding to an income of $25,000 and the point corresponding to an income of $35,000).

answer

-2

question

Suppose that the quantity of bread consumed in a year falls from 20 loaves to 18 loaves when average annual income rises from $25,000 to $28,625, all else equal. Between these two income levels, is bread an inferior good or a normal good?

answer

inferior good

question

Suppose that the demand curve is given by the equation

P = 48 - 6 Q.

Consider a change in the quantity demanded from 5 to 3. Using the midpoint formula, what is the absolute value of the price elasticity of demand between these two points (i.e., the price elasticity of demand between the point corresponding to a quantity demanded of 5 and the point corresponding to a quantity demanded of 3)?

P = 48 - 6 Q.

Consider a change in the quantity demanded from 5 to 3. Using the midpoint formula, what is the absolute value of the price elasticity of demand between these two points (i.e., the price elasticity of demand between the point corresponding to a quantity demanded of 5 and the point corresponding to a quantity demanded of 3)?

answer

1

question

Consider two goods A and B. We observe that when the price of good B increases from $7 to $8, the quantity demanded of good A increases from 11 to 19. Compute the cross-price elasticity of demand for good A with respect to the price of good B (between these two points).

answer

4

question

Suppose the cross-price elasticity of demand of good A with respect to the price of good B is positive and equal to 1. Which of the following is true?

answer

A and B are substitutes