.PDF

# ECON 213 quiz 7 Liberty University complete answers

ECON 213 quiz 7 Liberty University complete answers

Buy this one and get an A grade for sure! Complete all different versions!

LUO TA and liberty university professor guide versions all the solutions are here.

Question 1 If the price elasticity of supply is 1.5, we know that supply is:

Question 2 Refer to the accompanying table. When the price drops from \$5 to \$3, price elasticity of demand for sushi (using the midpoint method) at an income of \$30,000 is:

Question 3 If the income elasticity of demand for noodles is –2 and the percentage change in the quantity consumed is 5%, what is the percentage change in income?

Question 4 At higher prices, the price elasticity of demand is likely to be __________, whereas it is likely to be __________ at lower prices.

Question 5 If the cross­price elasticity between Good A and Good B is –1.5 and the percentage change in quantity demanded of Good B is 15%, what is the percentage change in the price of Good A?

Question 6 Super Economy Brand products have an income elasticity of –1.4. Thus, these are __________ goods.

Question 7 To keep the percentage change in quantity demanded equally proportional to the percentage change in price when the prices rise by 5%, a consumer would need to ________ quantity demanded by ________.

Question 8 If the percentage change in the quantity consumed of pizza is 8% and the percentage change in income is 2%, what is the income elasticity of demand for pizza?

Question 9 Demand for which of the following goods/services is likely to be the LEAST elastic in a Minnesota winter?

Question 10 The income elasticity of demand for a good measures the responsiveness of ________ to a change in ________.

Question 11 While there are many pizza places in Curtisville, Pappy’s Pizza is known for its distinctive deep­dish pizza with an almost pie­like crust, whereas Momma’s Pizza Pizzazz is comparable to many other restaurants. Pappy’s is likely to find that it can ________ prices to increase total revenue, and Mommas must ________ prices to increase total revenue.

Question 12 The initial price of picture frames is \$6 and suppliers offer 20 frames. When the price falls to \$4, suppliers offer only 10. The price elasticity of supply is:

Question 13 A producer knows that the price elasticity for his product is –0.5. He wants to increase quantity demanded by 30%. By what percentage does he need to change the price?

Question 14 A 15% increase in the price of cookies results in a 9% decrease in the quantity of cookies sold. The revenue received by cookie suppliers will ________ because the price elasticity of demand for cookies is ________.

Question 15 If the owner of Sally’s Salty Treats finds that, in the long run, she can trade one type of input for another, the price elasticity of supply is:

Question 16 Which one of the following pairs of goods is likely to have a negative cross­price elasticity of demand?

Question 17 Winged Wonders is a specialty store that sells butterfly ornaments. The owner wants to increase her total revenue and knows that the price elasticity of demand for her product is –0.4. What should she do to her price?

Question 18 We would expect to see a positive cross­price elasticity between:

Question 19 The Sunny Softball league found that, when it changed its ticket prices from \$10 to \$5, there was a more than proportional but not infinite increase in attendance. The price elasticity of demand is:

Question 20 If the cross­price elasticity of demand between Good A and Good B is 3, the price of Good B increases, and the price elasticity of demand for Good B is inelastic, we can expect to see a(n) ________ change in the quantity demanded for Good A.

Question 1 When the price of softballs is high, a __________ in price will raise total revenue. When the price is low, the seller should __________ the price to increase total revenue.

Question 2 If the cross­price elasticity of demand is –5, Good A and Good B are:

Question 3 If the price elasticity of supply is 1.5, we know that supply is:

Question 4 A local sandwich shop can quickly place an order for food with its local vendors if it uses up its existing resources quickly. This indicates that the price elasticity of supply is:

Question 5 If the owner of Sally’s Salty Treats finds that, in the long run, she can trade one type of input for another, the price elasticity of supply is:

Question 6 While there are many pizza places in Curtisville, Pappy’s Pizza is known for its distinctive deepdish pizza with an almost pie­like crust, whereas Momma’s Pizza Pizzazz is comparable to many other restaurants. Pappy’s is likely to find that it can ________ prices to increase total revenue, and Mommas must ________ prices to increase total revenue.

Question 7 Demand for which of the following goods/services is likely to be the LEAST elastic in a Minnesota winter?

Question 8 Which one of the following pairs of goods is likely to have a negative cross­price elasticity of demand?

Question 9 The income elasticity of demand for a good measures the responsiveness of ________ to a change in ________.

Question 10 What good is most likely to have a negative income elasticity of demand?

Question 11 The price elasticity supply of doctors could be considered ________ because it takes a minimum of four to six years of training to be able to work as a physician.

Question 12 Henry raised his quantity demanded of hockey pucks from 100 to 150 when the price fell from \$5 to \$3 per puck. Using the midpoint method, his price elasticity of demand is:

Question 13 If the percentage change in quantity demanded of Good B is 2% and the percentage change in the price of Good A is –10%, what is the cross­price elasticity of demand?

Question 14 When the price increases by 30% and the quantity demanded drops by 30%, the price elasticity of demand is:

Question 15 What good is most likely to have an income elasticity of demand equal to 0.3?

Question 16 The Sunny Softball league found that, when it changed its ticket prices from \$10 to \$5, there was a more than proportional but not infinite increase in attendance. The price elasticity of demand is:

Question 17 “No matter the price, I will always buy five gallons of ice cream a week. I love ice cream!” This statement reflects a price elasticity of demand that is:

Question 18 The percentage change in price is 5%, while the price elasticity of supply is 0. The percentage change in quantity supplied:

Question 19 Income elasticity of demand for professional haircuts is found to be 1.7. This service is a:

Question 20 When Sue received a promotion at work, her income rose by 50%. The income elasticity of demand for steak was found to be 1.5. For her, steak is a(n):

Question 1

The local bakery calculates the price elasticity of demand for its cinnamon rolls to be –1.25. This tells them that demand is ________ and price is ________ to the buyer.

Question 2

The income elasticity of demand for a good measures the responsiveness of ________ to a change in ________.

Question 3

Used car dealers find that their sales rise in a recession. We can be certain that consumers view used cars as:

Question 4

Price elasticity of demand measures the change in:

Question 5

Henry raised his quantity demanded of hockey pucks from 100 to 150 when the price fell from \$5 to

\$3 per puck. Using the midpoint method, his price elasticity of demand is:

Question 6

When the price elasticity of demand is elastic, a consumer is:

Question 7

If the income elasticity of demand for good smartphone apps is 5 and the percentage change in income is 10%, what is the percentage change in the quantity consumed?

Question 8

The local National Hockey League (NHL) team decides to lower its ticket prices in order to attract more fans. They are hoping that the:

Question 9

Refer to the following graphs to answer the questions that follow:

Graph ________ most likely shows the price elasticity of demand for the following situation: Bob’s Boots can sell out its entire stock of shoe polish at \$2.50 but can sell none if it raises the price to \$2.55.

Question 10

If the income elasticity of demand is 1.2, the good will be a(n):

Question 11

Firms supplying twistyties decrease the quantity supplied of inputs by 10% when the price decreases by 5%. The price elasticity of supply for twistyties is:

Question 12

If the percentage change in the quantity consumed of pizza is 8% and the percentage change in income is 2%, what is the income elasticity of demand for pizza?

Question 13

What good is most likely to have an income elasticity of demand equal to 8?

Question 14

Consider two labor markets. In the first, the elasticity of supply is relatively elastic, while it is relatively inelastic in the latter. Imposing a minimum wage in each market would result in ________ unemployment in the first market and ________ unemployment in the second.

Question 15

If the crossprice elasticity between Good A and Good B is –1.5 and the percentage change in quantity demanded of Good B is 15%, what is the percentage change in the price of Good A?

Question 16

If the price elasticity of supply is 2.5, we know that it is:

Question 17

The price elasticity supply of doctors could be considered ________ because it takes a minimum of four to six years of training to be able to work as a physician.

Question 18

Robert’s Furniture produces highquality wooden bedroom sets that take approximately 4 months to make, from start to finish. The price elasticity of supply for these bedroom sets in the short term is:

Question 19

If your friend says, “I am never going to buy another Avicii remix again!” his price elasticity of demand for Avicii remixes is:

Question 20

Price elasticity of demand is measured as the:

Question 1 Which one of the following pairs of goods is likely to have a positive cross­price elasticity of demand?

Question 2 If the income elasticity of demand for noodles is –2 and the percentage change in the quantity consumed is 5%, what is the percentage change in income?

Question 3 The reason that Darren buys a lot more paintings when the price of art falls is that:

Question 4 Howard buys 5 suits a year when he earns \$70,000. When his income increases to \$200,000, he buys 15 suits a year. From the midpoint method, his income elasticity of demand for suits is:

Question 5 Henry raised his quantity demanded of hockey pucks from 100 to 150 when the price fell from \$5 to \$3 per puck. Using the midpoint method, his price elasticity of demand is:

Question 6 Robert’s Furniture produces high­quality wooden bedroom sets that take approximately 4 months to make, from start to finish. The price elasticity of supply for these bedroom sets in the short term is:

Question 7 The Sunny Softball league found that, when it changed its ticket prices from \$10 to \$5, there was a more than proportional but not infinite increase in attendance. The price elasticity of demand is:

Question 8 We would expect to see a positive cross­price elasticity between:

Question 9 What good is most likely to have an income elasticity of demand equal to 0.3?

Question 10 Jane says that she will always spend \$20 a week on lattes. Jane’s demand for lattes is price:

Question 11 As you move left along the demand curve, the price elasticity of demand:

Question 12 Firms are indifferent to changing prices when the price elasticity of demand is:

Question 13 Refer to the following graphs to answer the questions that follow: Which of these graphs most likely depicts a price elasticity of demand of –5?

Question 14 If the cross­price elasticity of demand between Good A and Good B is 3, the price of Good B increases, and the price elasticity of demand for Good B is inelastic, we can expect to see a ________ change in the quantity demanded for Good A:

Question 15 If your friend says, “I am never going to buy another Avicii remix again!” his price elasticity of demand for Avicii remixes is:

Question 16 Shawna wins the lottery and her income increases by 60%. She used to buy 10 pints of cottage cheese per month and now she buys 12 pints. Her income elasticity of demand for cottage cheese is ________, making it a(n) ________ good.

Question 17 The initial price of picture frames is \$6 and suppliers offer 20 frames. When the price falls to \$4, suppliers offer only 10. The price elasticity of supply is:

Question 18 Price elasticity of demand is measured as the:

Question 19 When the price of erasers increases from \$1.50 to \$2.50, the quantity demanded of pencils is unchanged. The cross­price elasticity of demand between erasers and pencils is ________ because erasers and pencils ________.

Question 20 A 15% increase in the price of cookies results in a 9% decrease in the quantity of cookies sold. The revenue received by cookie suppliers will ________ because the price elasticity of demand for cookies is ________.

Question 1 Over time, the price elasticity of supply for sunglasses will become more:

Question 2 Demand is almost always more price elastic in the long run because:

Question 3 If the income elasticity of demand is 1.2, the good will be a(n):

Question 4 Winged Wonders is a specialty store that sells butterfly ornaments. The owner wants to increase her total revenue and knows that the price elasticity of demand for her product is – 0.4. What should she do to her price?

Question 5 If a business finds that demand for its good is very price elastic, it knows that:

Question 6 While there are many pizza places in Curtisville, Pappy’s Pizza is known for its distinctive deep­dish pizza with an almost pie­like crust, whereas Momma’s Pizza Pizzazz is comparable to many other restaurants. Pappy’s is likely to find that it can ________ prices to increase total revenue, and Mommas must ________ prices to increase total revenue.

Question 7 When the price of erasers increases from \$1.50 to \$2.50, the quantity demanded of pencils is unchanged. The cross­price elasticity of demand between erasers and pencils is ________ because erasers and pencils ________.

Question 8 If the owner of Sally’s Salty Treats finds that, in the long run, she can trade one type of input for another, the price elasticity of supply is:

Question 9 Refer to the information in the accompanying table. Without any calculations, you know that sushi is a(n):

Question 10 If the cross­price elasticity of demand between Good A and Good B is –2, the price of Good B increases, and the price elasticity of demand for Good B is elastic, we can expect to see a ________ change in the quantity demanded for Good A.

Question 11 Which one of the following pairs of goods is likely to have a positive cross­price elasticity of demand?

Question 12 Use the following scenario to answer the questions that follow: Dairy Dream, a local ice cream store, finds that it sells out of ice cream sandwiches at the current price of \$1. It raises the price to increase its revenues and finds that no one buys ice cream sandwiches anymore. The owners raised the price because they believed that the demand for ice cream sandwiches is:

Question 13 The introduction of new gaming systems that can compete effectively with the Nintendo console will make the demand for the Nintendo console become:

Question 14 A local merchant raises the price of his good and finds that his total revenues increase. The demand for this good is:

Question 15 Refer to the accompanying table. When the price drops from \$5 to \$3, price elasticity of demand for sushi (using the midpoint method) at an income of \$30,000 is:

Question 16 When the price elasticity of demand is elastic, a consumer is:

Question 17 For which of the following products should sellers raise the price in order to increase total revenue from college students?

Question 18 Shawna wins the lottery and her income increases by 60%. She used to buy 10 pints of cottage cheese per month and now she buys 12 pints. Her income elasticity of demand for cottage cheese is ________, making it a(n) ________ good.

Question 19 Super Economy Brand products have an income elasticity of –1.4. Thus, these are __________ goods.

Question 20 Which one of the following pairs of goods is likely to have a negative cross­price elasticity of demand?

Question 1 When you change your quantity demanded of one good because of a change in price of another good, you are acting according to the principle of:

Question 2 Used car dealers find that their sales rise in a recession. We can be certain that consumers view used cars as:

Question 3 Refer to the following graphs to answer the questions that follow:

Which of these graphs most likely depicts a price elasticity of demand of –5?

Question 4 When the price of scooters drops by 5%, the quantity demanded changes by 20%. You know that the price elasticity of demand for scooters is:

Question 5 If the cross­price elasticity of demand between Good A and Good B is 3, the price of Good B increases, and the price elasticity of demand for Good B is inelastic, we can expect to see a ________ change in the quantity demanded for Good A:

Question 6 Refer to the accompanying table. The price elasticity of demand of erasers is __________ when the price is lowered from \$1.50 to \$1.00. Sellers of erasers will __________ their total revenue from this price change.

Question 7 The price elasticity supply of doctors could be considered ________ because it takes a minimum of four to six years of training to be able to work as a physician.

Question 8 If the cross­price elasticity of demand between Good A and Good B is 2 and the percentage change in price of Good A is 5%, what is the percentage change in quantity demanded of Good B?

Question 9 Price elasticity of demand is measured as the:

Question 10 When the price increases by 30% and the quantity demanded drops by 30%, the price elasticity of demand is:

Question 11 At higher prices, the price elasticity of demand is likely to be __________, whereas it is likely to be __________ at lower prices.

Question 12 Consider two labor markets. In the first, the elasticity of supply is relatively elastic, while it is relatively inelastic in the latter. Imposing a minimum wage in each market would result in ________ unemployment in the first market and ________ unemployment in the second.

Question 13 If a business finds that demand for its good is very price elastic, it knows that:

Question 14 If the income elasticity of demand is 0.5, the good will be a(n):

Question 15 In the accompanying graph, the price elastic portion of demand is found in the ________ region and the price inelastic portion of demand is found in the ________ region of the graph.

Question 16 Use the following scenario to answer the questions that follow: Dairy Dream, a local ice cream store, finds that it sells out of ice cream sandwiches at the current price of \$1. It raises the price to increase its revenues and finds that no one buys ice cream sandwiches anymore. The owners raised the price because they believed that the demand for ice cream sandwiches is:

Question 17 Shawna wins the lottery and her income increases by 60%. She used to buy 10 pints of cottage cheese per month and now she buys 12 pints. Her income elasticity of demand for cottage cheese is ________, making it a(n) ________ good.

Question 18 If the cross­price elasticity of demand is 6, Good A and Good B are:

Question 19 The introduction of new gaming systems that can compete effectively with the Nintendo console will make the demand for the Nintendo console become:

Question 20 Chris runs a sporting goods store and knows that the price elasticity of demand for his sports clothing line is –1.5. He is planning to lower prices by 10%. The percentage change in quantity demanded will be:

When Nina decreases her price of lipstick from \$7 to \$5, she finds that her sales increase from 6 to 7. She faces ________ demand for her product, and this price change will ________ her total revenue.

Select one:

a. inelastic; lower

b. perfectly elastic; raise

c. elastic; raise

d. perfectly inelastic; lower

e. unitary elastic; not change

Use the following scenario to answer the questions that follow:

Dairy Dream, a local ice cream store, finds that it sells out of ice cream sandwiches at the current price of \$1. It raises the price to increase its revenues and finds that no one buys ice cream sandwiches anymore.

The owners raised the price because they believed that the demand for ice cream sandwiches is:

Select one:

a. perfectly elastic.

b. inelastic

c. relatively price sensitive

d. elastic

e. unitary elastic.

The local National Hockey League (NHL) team decides to lower its ticket prices in order to attract more fans. They are hoping that the:

Select one:

a. quantity increase matters more than the price decrease to total revenue.

b. price elasticity of demand is perfectly inelastic.

c. price decrease matters more than the quantity increase to total revenue.

d. price elasticity of demand is perfectly elastic.

e. price elasticity of demand is unitary elastic.

Income elasticity of demand for professional haircuts is found to be 1.7. This service is a:

Select one:

a. substitute good.

b. normal good and necessity good.

c. luxury good but not a normal good.

d. necessity good but not a normal good.

e. normal good and a luxury good.

If the income elasticity of demand is 0.5, the good will be a(n):

Select one:

a. complement good.

b. substitute good

c. luxury good.

d. inferior good.

e. necessity good.

If the percentage change in the quantity consumed of pizza is 8% and the percentage change in income is 2%, what is the income elasticity of demand for pizza?

Select one:

a. –0.25

b. 0.25

c. –1

d. 4

e. –4

If the cross-price elasticity of demand between Good A and Good B is 2 and the percentage change in price of Good A is 5%, what is the percentage change in quantity demanded of Good B?

Select one:

a. –3%

b. –1.25%

c. 10%

d. 1.50%

e. 3%

Question text

Refer to the accompanying table to answer the questions that follow.

The price of erasers increases from \$0.50 to \$1.00 per eraser. Use the midpoint method to calculate the cross-price elasticity of demand between pencils and erasers.

Select one:

a. –3

b. 0.13

c. –7.67

d. 7.67

e. –0.13

The price elasticity supply of doctors could be considered ________ because it takes a minimum of four to six years of training to be able to work as a physician.

Select one:

a. unitary elastic

b. relatively elastic

c. relatively inelastic

d. perfectly inelastic

e. perfectly elastic

If the price elasticity of supply is 1.5, we know that supply is:

Select one:

a. relatively inelastic.

b. perfectly elastic.

c. relatively elastic

d. unitary elastic.

e. perfectly inelastic.

Price elasticity of demand measures the change in:

The reason that Darren buys a lot more paintings when the price of art falls is that:

If your friend says, “I am never going to buy another Avicii remix again!” his price elasticity of demand for Avicii remixes is:

From the accompanying table, we would expect that, for recreational skaters, the price elasticity of demand for ice skates between \$10 and \$20 to be                        than that of hockey players because

Nita is a devoted Coca-Cola consumer, whereas Becky can drink either Coca-Cola or Peps products Nita’s demand for Coca-Cola will be relatively more  while Becky’s demand will be relatively more

Assume that a family spends 35% of its income on housing, 20% on travel-related expenses,

10% on utilities, 25% on health care, and 5% on miscellaneous items. Demand for which category will be most responsive to a change in price?

Jill has a fixed budget and buys all of the items listed below. When will a 20% reduction in price cause her to change the amount she buys the most?

When the price of scooters drops by 5%, the quantity demanded changes by 20%. You know that the price elasticity of demand for scooters is:

At a price of \$2, the quantity demanded for pens is 12. When the price increases to \$3, the quantity demanded for pens is 10. The price elasticity of demand for pens is:

At a price of \$5/hour, Bob wants to hire three workers. When the price rises to \$7/hour, Bob wants to hire only two workers. Bob’s price elasticity of demand for workers is:

Zumba classes sell all 20 participant spots at a price of \$4.50 each. When the instructor raised the prices to \$5.50, 10 people attended the class. From the midpoint method, the price elasticity of demand for Zumba is:

Chris runs a sporting goods store and knows that the price elasticity of demand for his sports clothing line is −1.5. He is planning to lower prices by 10%. The percentage change in quantity demanded will be:

In the accompanying table, assume that the price of ice skates increases from \$10 to \$20 per pair. Using the midpoint method, calculate the price elasticity of demand for ice skates for hockey players.

Price elasticity of demand measures the change in:

Select one:

a. price due to the change in demand.

b. quantity demanded due to the change in price.

c. demand due to the change in price.

d. quantity demanded due to the change in price of another good/service.

e. price due to a change in quantity demanded.

If your friend says, “I am never going to buy another Avicii remix again!” his price elasticity of demand for Avicii remixes is:

Select one:

a. inelastic.

b. perfectly elastic.

c. elastic.

d. Yes

e. perfectly inelastic.

From the accompanying table, we would expect that, for recreational skaters, the price elasticity of demand for ice skates between \$10 and \$20 to be ________ than that of hockey players because ________.

Select one:

a. less elastic; hockey players need skates

b. the same; they both skate

c. more elastic; recreational skaters can substitute other activities

d. less elastic; ice skates are an inferior good

e. more elastic; ice skates are a normal good

Assume that a family spends 35% of its income on housing, 20% on travel-related expenses, 10% on utilities, 25% on health care, and 5% on miscellaneous items. Demand for which category will be most responsive to a change in price?

Select one:

a. miscellaneous

b. travel-related expenses

c. utilities

d. health care

e. housing

Question 5

When the price of scooters drops by 5%, the quantity demanded changes by 20%. You know that the price elasticity of demand for scooters is:

Select one:

a. perfectly elastic

b. perfectly inelastic.

c. elastic

d. unitary elastic.

e. inelastic

In the accompanying table, assume that the price of ice skates increases from \$10 to \$20 per pair. Using the midpoint method, calculate the price elasticity of demand for ice skates for hockey players.

Select one:

a. 0.67

b. 3.00

c. –0.16

d. –6.00

e. 0.11

A producer knows that the price elasticity for his product is –0.5. He wants to increase quantity demanded by 30%. By what percentage does he need to change the price?

Select one:

a. –6%

b. 10%

c. 6%

d. –60%

e. –9.5%

If the price elasticity of demand for Good A is –0.2 and the price increases from \$2.25 to \$2.75, the percentage change in the quantity demanded of Good A is:

Select one:

a. –100%.

b. –4.0%.

c. unknown because not enough information is provided.

d. 4.0%

e. 100%.

If a business finds that demand for its good is very price elastic, it knows that:

Select one:

a. price is unrelated.

b. the quantity consumers buy is unimportant.

c. price is very important.

d. the effect of price is less important than the impact of the quantity consumers buy.

e. price is unimportant.

Assume that the market for pencils is in equilibrium and that demand is very price elastic. The popularity of digital tablets and electronic pens increases and demand for pencils declines. The equilibrium change in quantity demanded is:

Select one:

a. infinite

b. relatively large.

c. proportional to the shift in demand.

d. 0 (zero).

e. relatively small.

To keep the percentage change in quantity demanded equally proportional to the percentage change in price when the prices rise by 5%, a consumer would need to         quantity demanded by                       .

If a business finds that demand for its good is very price elastic, it knows that:

When quantity demanded and price increase by 10%, you know that price and quantity are                      to the consumer.

Kevin tells the manager at Moo’s Ice Cream that he won’t buy any ice cream cones costing more than \$2, but he will buy a limitless number at any price less than \$2. His price elasticity of demand for ice cream cones is:

The local bakery calculates the price elasticity of demand for its cinnamon rolls to be −1.25. This tells them that demand is                        and price is buyer.

Assume that the market for pencils is in equilibrium and that demand is very price elastic. The popularity of digital tablets and electronic pens increases and demand for pencils declines. The equilibrium change in quantity demanded is:

Jane says that she will always spend \$20 a week on lattes. Jane’s demand for lattes is price:

Refer to the following graphs to answer the next five questions.

Graph A

Graph B

Graph C

Graph D

Graph E

Which of these graphs represents relatively price elastic demand for a good?

Which of these graphs represents perfectly price inelastic demand for a good?

Which of these graphs most likely depicts a price elasticity of demand of −5?

Which of these graphs most likely depicts a price elasticity of demand of −0.2?

Graph                            most likely shows the price elasticity of demand for the following situation: Bob’s Boots can sell out its entire stock of shoe polish at \$2.50 but can sell none if it raises the price to \$2.55.

Firms are indifferent to changing prices when the price elasticity of demand is:

A 15% increase in the price of cookies results in a 9% decrease in the quantity of cookies sold. The revenue received by cookie suppliers will because the price elasticity of demand for cookies

The city of Barlow is known for its wide variety of ice cream shops. What will happen if Nick’s Ice Cream Palace raises the price of its shakes?

Use the following scenario to answer the next two questions: Dairy Dream, a local ice cream store, finds that it sells out of ice cream sandwiches at the current price of \$1. It raises the price to increase its revenues and finds that no one buys ice cream sandwiches anymore.

The demand for ice cream sandwiches is:

As price elasticity of supply becomes more elastic over time, the overall shape of the supply curve:

Robert’s Furniture produces high-quality wooden bedroom sets that take approximately 4 months to make, from start to finish. The price elasticity of supply for these bedroom sets in the short term is:

Firms supplying twisty-ties decrease the quantity supplied of inputs by 10% when the price decreases by 5%. The price elasticity of supply for twisty-ties is:

Consider two labor markets. In the first, the elasticity of supply is relatively elastic, while it is relatively inelastic in the latter. Imposing a minimum wage in each market would result in                          unemployment in the first market and

If the price elasticity of supply is 1.5, we know that supply is:

Price elasticity of demand measures the change in:

a. quantity demanded due to the change in price.

b. demand due to the change in price.

c. quantity demanded due to the change in price of another good/service.

d. price due to a change in quantity demanded.

e. price due to the change in demand.

The reason that Darren buys a lot more paintings when the price of art falls is that:

a. there are many substitutes for paintings.

b. paintings are a necessity.

c. they complement his home décor.

d. his income has risen.

e. art is a luxury.

If your friend says, “I am never going to buy another Avicii remix again!” his price elasticity of demand for Avicii remixes is:

a. perfectly elastic.

b. perfectly inelastic.

c. elastic.

d. inelastic.

e. unitary elastic.

From the accompanying table, we would expect that, for recreational skaters, the price elasticity of demand for ice skates between \$10 and \$20 to be ___________ than that of hockey players because ___________.

Price of Ice Skates
Quantity Demanded (hockey players)
Quantity Demanded (recreational skaters)
\$10
95
70
\$20
85
50
\$40
75
35
\$50
65
45
\$60
60
50
a. more elastic; ice skates are a normal good

b. less elastic; ice skates are an inferior good

c. the same; they both skate

d. more elastic; recreational skaters can substitute other activities

e. less elastic; hockey players need skates

Nita is a devoted Coca-Cola consumer, whereas Becky can drink either Coca-Cola or Pepsi products. Nita’s demand for Coca-Cola will be relatively more ___________, while Becky’s demand will be relatively more ___________.

a. elastic; inelastic

b. unrelated to price; elastic

c. perfectly elastic; elastic

d. inelastic; elastic

e. unitary elastic; inelastic

Assume that a family spends 35% of its income on housing, 20% on travel-related expenses, 10% on utilities, 25% on health care, and 5% on miscellaneous items. Demand for which category will be most responsive to a change in price?

a. miscellaneous

b. health care

c. utilities

d. travel-related expenses

e. housing

Jill has a fixed budget and buys all of the items listed below. When will a 20% reduction in price cause her to change the amount she buys the most?

a. scented candles, regular price is \$25

b. jasmine rice, regular price is \$4/lb

c. GAP jeans, regular price is \$75

d. flat-screen LCD TV, regular price is \$400

e. living room couch, regular price is \$300

When the price of scooters drops by 5%, the quantity demanded changes by 20%. You know that the price elasticity of demand for scooters is:

a. perfectly inelastic.

b. inelastic.

c. unitary elastic.

d. elastic.

e. perfectly elastic

At a price of \$2, the quantity demanded for pens is 12. When the price increases to \$3, the quantity demanded for pens is 10. The price elasticity of demand for pens is:

a. perfectly inelastic.

b. inelastic.

c. horizontal.

d. elastic.

e. perfectly elastic.

At a price of \$5/hour, Bob wants to hire three workers. When the price rises to \$7/hour, Bob wants to hire only two workers. Bob’s price elasticity of demand for workers is:

a. −0.83

b. −1.20

c. −0.33

d. −0.40

e. −0.10

Zumba classes sell all 20 participant spots at a price of \$4.50 each. When the instructor raised the prices to \$5.50, 10 people attended the class. From the midpoint method, the price elasticity of demand for Zumba is:

a. −0.50.

b. −3.33.

c. −2.50.

d. 0.20.

e. −0.20.

Chris runs a sporting goods store and knows that the price elasticity of demand for his sports clothing line is −1.5. He is planning to lower prices by 10%. The percentage change in quantity demanded will be:

a. 15%.

b. 0.15%.

c. 6.66%.

d. 0.06%.

e. 8.50%.

In the accompanying table, assume that the price of ice skates increases from \$10 to \$20 per pair. Using the midpoint method, calculate the price elasticity of demand for ice skates for hockey players

Price of Ice Skates
Quantity Demanded (hockey players)
Quantity Demanded (recreational skaters)
\$10
95
70
\$20
85
60
\$40
75
45
\$50
65
25
\$60
60
10
a. −6.00

b. 0.67

c. 0.11

d. −0.16

e. 3.00

Demand is almost always more price elastic in the long run because: 5

a. people’s preferences change.

b. newer versions of a good/service replace older ones.

c. production of the good/service stops.

d. more options become available and people can make different choices.

e. government regulations increase.

To keep the percentage change in quantity demanded equally proportional to the percentage change in price when the prices rise by 5%, a consumer would need to _________ quantity demanded by ___________.

a. increase; 5%

b. decrease; 5%

c. increase; 10%

d. decrease; 10%

e. increase; 2%

If a business finds that demand for its good is very price elastic, it knows that:

a. price is very important.

b. price is unimportant.

c. price is unrelated.

d. the effect of price is less important than the impact of the quantity consumers buy.

e. the quantity consumers buy is unimportant.

When quantity demanded and price increase by 10%, you know that price and quantity are __________ to the consumer.

a. equally important

b. everything

c. nothing

d. relatively important

e. relatively unimportant

Kevin tells the manager at Moo’s Ice Cream that he won’t buy any ice cream cones costing more than \$2, but he will buy a limitless number at any price less than \$2. His price elasticity of demand for ice cream cones is:

a. perfectly inelastic.

b. inelastic.

c. unitary elastic.

d. elastic.

e. perfectly elastic.

The owners raised the price because they believed that the demand for ice cream sandwiches is:

Refer to the accompanying table. The price elasticity of demand of erasers is                          when the price is lowered from \$1.50 to \$1.00. Sellers of erasers will                      their total revenue from this price change.

The income elasticity of demand for a good measures the responsiveness of                      to a change in                       .

Income elasticity of demand for professional haircuts is found to be 1.7. This service is a:

If the income elasticity of demand is 1.2, the good will be a(n):

If the income elasticity of demand is 0.5, the good will be a(n):

If the income elasticity of demand is −3, the good will be a(n):

A firm knows that Mike’s income elasticity of demand for hair ties is 5 while for Sally it is 0.2. A firm can reason that a hair tie is a(n)                good for Mike while it is Shawna wins the lottery and her income increases by 60%. She used to buy 10 pints of cottage cheese per month and now she buys 12 pints. Her income elasticity of demand for cottage cheese is a               , making it a(n)                      good

Howard buys 5 suits a year when he earns \$70,000. When his income increases to

\$200,000, he buys 15 suits a year. From the midpoint method, his income elasticity of demand for suits is:

Refer to the information in the accompanying table. Without any calculations, you know that sushi is a(n):

When Clayton starts working at his first full-time job out of college with a \$60,000 salary, he is likely to buy more                    and less                    .

When Sue received a promotion at work, her income rose by 50%. The income elasticity of demand for steak was found to be 1.5. For her, steak is a(n):

What good is most likely to have a negative income elasticity of demand?

What good is most likely to have an income elasticity of demand equal to 0.3?

If the cross-price elasticity of demand is −5, Good A and Good B are:

If the cross-price elasticity of demand is 6, Good A and Good B are:

Which one of the following pairs of goods is likely to have a positive cross-price elasticity of demand?

Which one of the following pairs of goods is likely to have a positive cross-price elasticity of demand?

Which one of the following pairs of goods is likely to have a negative cross-price elasticity of demand?

Which one of the following pairs of goods is likely to have a negative cross-price elasticity of demand?

If the cross-price elasticity of demand between Good A and Good B is 2 and the percentage change in price of Good A is 5%, what is the percentage change in quantity demanded of Good B?

When the price of erasers increases from \$1.50 to \$2.50, the quantity demanded of pencils is unchanged. The cross-price elasticity of demand between erasers and pencils is                      because erasers and pencils

If the cross-price elasticity of demand between Good A and Good B is 3, the price of Good B increases, and the price elasticity of demand for Good B is inelastic, we can expect to see a(n) change in the quantity demanded for Good A.

If the cross-price elasticity of demand between Good A and Good B is 3, the price of Good B increases, and the price elasticity of demand for Good B is inelastic, we can

A professional hockey arena has a maximum seating capacity of 20,000 people. The price elasticity of supply is:

If the owner of Sally’s Salty Treats finds that, in the long run, she can trade one type of input for another, the price elasticity of supply is:

A local sandwich shop can quickly place an order for food with its local vendors if it uses up its existing resources quickly. This indicates that the price elasticity of supply is:

The local bakery calculates the price elasticity of demand for its cinnamon rolls to be −1.25. This tells them that demand is ___________ and price is ___________ to the buyer.

a. inelastic; less important than the quantity

b. elastic; more important than the quantity

c. unitary elastic; on the same level as quantity

d. perfectly inelastic; everything

e. perfectly elastic; meaningless

Assume that the market for pencils is in equilibrium and that demand is very price elastic. The popularity of digital tablets and electronic pens increases and demand for pencils declines. The equilibrium change in quantity demanded is:

a. 0 (zero).

b. relatively small.

c. proportional to the shift in demand.

d. relatively large.

e. infinite.

Jane says that she will always spend \$20 a week on lattes. Jane’s demand for lattes is price:

a. inelastic.

b. elastic.

c. perfectly inelastic.

d. perfectly elastic. 7

e. unitary elastic.

Refer to the following graphs to answer the next five questions

Which of these graphs represents relatively price elastic demand for a good?

a. Graph A

b. Graph B

c. Graph C

d. Graph D

e. Graph E

Which of these graphs represents perfectly price inelastic demand for a good?

a. Graph A

b. Graph B

c. Graph C

d. Graph D

e. Graph E

Which of these graphs most likely depicts a price elasticity of demand of −5?

a. Graph A

b. Graph B

c. Graph C

d. Graph D

e. Graph E

Which of these graphs most likely depicts a price elasticity of demand of −0.2?

a. Graph A

b. Graph B

c. Graph C 9

d. Graph D

e. Graph E

If the cross-price elasticity of demand is 6, Good A and Good B are:

a. inferior goods.

b. complements.

c. substitutes.

d. normal goods.

e. luxury goods.

Which one of the following pairs of goods is likely to have a positive cross-price elasticity of demand?

a. pancakes and waffles

b. fruit and bacon

c. butter and toast

d. potatoes and sausage

e. milk and coffee

Which one of the following pairs of goods is likely to have a positive cross-price elasticity of demand?

a. chocolate ice cream and sprinkles

b. ice cream shakes and hamburgers

c. fries and ketchup

d. Pepsi and Coke

e. onion rings and chicken strips

Which one of the following pairs of goods is likely to have a negative cross-price elasticity of demand?

a. tea and coffee

b. soda and water

c. spaghetti and ravioli

d. tennis shoes and flip flops

e. coffee and cream

Which one of the following pairs of goods is likely to have a negative cross-price elasticity of demand?

a. purses and backpacks

b. sofas and dining room tables

c. manicures and pedicures

d. shoes and socks

e. trucks and sedans

If the cross-price elasticity of demand between Good A and Good B is 2 and the percentage change in price of Good A is 5%, what is the percentage change in quantity demanded of Good B?

a. 3%

b. 10%

c. −1.25%

d. 1.50%

e. −3%

When the price of erasers increases from \$1.50 to \$2.50, the quantity demanded of pencils is unchanged. The cross-price elasticity of demand between erasers and pencils is __________ because erasers and pencils ___________.

a. 1; are substitutes

b. ½; are complements

c. 0; are normal goods

d. 0; are unrelated

e. −½; are complements

If the cross-price elasticity of demand between Good A and Good B is 3, the price of Good B increases, and the price elasticity of demand for Good B is inelastic, we can expect to see a(n) __________ change in the quantity demanded for Good A.

a. zero

b. small

c. infinite

d. one-for-one

e. large

If the cross-price elasticity of demand between Good A and Good B is 3, the price of Good B increases, and the price elasticity of demand for Good B is inelastic, we can expect to see a ____________ change in the quantity demanded for Good A:

a. positive, zero

b. positive, small

c. negative, infinite 17

d. negative, one-for-one

e. positive, large

A professional hockey arena has a maximum seating capacity of 20,000 people. The price elasticity of supply is:

a. perfectly inelastic.

b. perfectly elastic.

c. inelastic.

d. relatively elastic.

e. elastic.

If the owner of Sally’s Salty Treats finds that, in the long run, she can trade one type of input for another, the price elasticity of supply is:

a. relatively elastic.

b. relatively inelastic.

c. perfectly elastic.

d. perfectly inelastic.

e. unitary elastic.

A local sandwich shop can quickly place an order for food with its local vendors if it uses up its existing resources quickly. This indicates that the price elasticity of supply is:

a. unitary elastic.

b. perfectly elastic.

c. perfectly inelastic.

d. relatively elastic.

e. relatively inelastic.

As price elasticity of supply becomes more elastic over time, the overall shape of the supply curve:

a. becomes more vertical.

b. remains unchanged. 18

c. becomes closer to 45 degrees from the origin.

d. becomes completely vertical.

e. becomes more horizontal.

Robert’s Furniture produces high-quality wooden bedroom sets that take approximately 4 months to make, from start to finish. The price elasticity of supply for these bedroom sets in the short term is:

a. unitary elastic.

b. relatively inelastic.

c. perfectly inelastic.

d. relatively elastic.

e. perfectly elastic.

Firms supplying twisty-ties decrease the quantity supplied of inputs by 10% when the price decreases by 5%. The price elasticity of supply for twisty-ties is:

a. 4.0.

b. 0.4.

c. 2.0.

d. 0.2.

e. 1.0.

Consider two labor markets. In the first, the elasticity of supply is relatively elastic, while it is relatively inelastic in the latter. Imposing a minimum wage in each market would result in ____________ unemployment in the first market and ___________ unemployment in the second.

a. lower; lower

b. higher; higher

c. unchanged; unchanged

d. lower; higher

e. higher; lower

If the price elasticity of supply is 1.5, we know that supply is:

a. relatively elastic. 19

b. relatively inelastic.

c. perfectly inelastic.

d. unitary elastic.

e. perfectly elastic.

The reason that Darren buys a lot more paintings when the price of art falls is that

Which one of the following pairs of goods is likely to have a positive cross-price elasticity of demand

The local bakery calculates the price elasticity of demand for its cinnamon rolls to be –1.25. This tells them that demand is ________ and price is ________ to the buyer

Zumba classes sell all 20 participant spots at a price of \$4.50 each. When the instructor raised the prices to \$5.50, 10 people attended the class. From the midpoint method, the price elasticity of demand for Zumba is

When Nina decreases her price of lipstick from \$7 to \$5, she finds that her sales increase from 6 to 7. She faces ________ demand for her product, and this price change will ________ her total revenue

A local merchant raises the price of his good and finds that his total revenues increase. The demand for this good is

Refer to the following graphs to answer the questions that follow:
Which of these graphs represents perfectly price inelastic demand for a good?

The city of Barlow is known for its wide variety of ice cream shops. What will happen if Nick’s Ice Cream Palace raises the price of its shakes?

Refer to the following graphs to answer the questions that follow:
Graph ________ most likely shows the price elasticity of demand for the following situation: Bob’s Boots can sell out its entire stock of shoe polish at \$2.50 but can sell none if it raises the price to \$2.55

If the percentage change in quantity demanded of Good B is 2% and the percentage change in the price of Good A is –10%, what is the cross-price elasticity of demand

When the price increases by 30% and the quantity demanded drops by 30%, the price elasticity of demand is

If the percentage change in the quantity consumed of pizza is 8% and the percentage change in income is 2%, what is the income elasticity of demand for pizza

When would oil producers see the largest percentage decline in the quantity demanded for oil due to an increase in the price of oil today

Demand is almost always more price elastic in the long run because

For which of the following products should sellers raise the price in order to increase total revenue from college students

Kevin tells the manager at Moo’s Ice Cream that he won’t buy any ice cream cones costing more than \$2, but he will buy a limitless number at any price less than \$2. His price elasticity of demand for ice cream cones is

When the price of erasers increases from \$1.50 to \$2.50, the quantity demanded of pencils is unchanged. The cross-price elasticity of demand between erasers and pencils is ________ because erasers and pencils ________.

If the cross-price elasticity of demand between Good A and Good B is 3, the price of Good B increases, and the price elasticity of demand for Good B is inelastic, we can expect to see a(n) ________ change in the quantity demanded for Good A

Henry raised his quantity demanded of hockey pucks from 100 to 150 when the price fell from \$5 to \$3 per puck. Using the midpoint method, his price elasticity of demand is

Income elasticity of demand for professional haircuts is found to be 1.7. This service is a

1. Opportunity cost is the ______________ alternative forfeited when a choice is made.

a.         least-valued

b.        highest-valued

c.         most recently considered

d.        most convenient

e.         first

2. You decide whether to eat one more slice of pizza based on how hungry you feel. This statement best represents this economic concept:

A) resources are scarce.

B) the real cost of something is what you must give up to get it.

C) “How much” is a decision at the margin.

D) there are gains from trade.

Graph _____________ most likely shows the price elasticity of demand for the following situation: Bob’s Boots can sell out its entire stock of shoe polish at \$2.50 but can sell none if it raises the price to \$2.55.

a. A

b. B

c. C

d. D

e. E

Firms are indifferent to changing prices when the price elasticity of demand is:

a. inelastic.

b. perfectly elastic.

c. elastic.

d. unitary elastic.

e. perfectly inelastic.

A 15% increase in the price of cookies results in a 9% decrease in the quantity of cookies sold. The revenue received by cookie suppliers will ___________ because the price elasticity of demand for cookies is _____________.

a. decrease; inelastic

b. increase; elastic

c. decrease; elastic

d. not change; unitary elastic

e. increase; inelastic

The city of Barlow is known for its wide variety of ice cream shops. What will happen if Nick’s Ice Cream Palace raises the price of its shakes?

a. Demand will decrease by a greater proportion than the price.

b. Demand will increase by a greater proportion than the price.

c. The quantity demanded will decrease by a greater proportion than the price.

d. The quantity demanded will increase by a greater proportion than the price.

e. Demand will not change.

Use the following scenario to answer the next two questions: Dairy Dream, a local ice cream store, finds that it sells out of ice cream sandwiches at the current price of \$1. It raises the price to increase its revenues and finds that no one buys ice cream sandwiches anymore.

The demand for ice cream sandwiches is:

a. inelastic.

b. elastic.

c. perfectly inelastic.

d. perfectly elastic.

e. unitary elastic.

The owners raised the price because they believed that the demand for ice cream sandwiches is:

a. inelastic.

b. elastic.

c. relatively price sensitive.

d. perfectly elastic.

e. unitary elastic.

Refer to the accompanying table. The price elasticity of demand of erasers is ____________ when the price is lowered from \$1.50 to \$1.00. Sellers of erasers will __________ their total revenue from this price change.

Price of Erasers
Quantity Demanded of Erasers
Quantity Demanded of Pencils
\$0.50
10
12
\$1.00
8
11
\$1.50
7
10
\$2.00
6
9
\$2.50
5            8

a. perfectly elastic; not change

b. elastic; raise

c. elastic; lower

d. inelastic; lower

e. inelastic; raise

The income elasticity of demand for a good measures the responsiveness of __________ to a change in ___________.

a. quantity demanded; price of a related good

b. quantity demanded; income

c. demand; price of good

d. quantity demanded; price of a good

e. income; quantity demanded

Income elasticity of demand for professional haircuts is found to be 1.7. This service is a:

a. normal good and necessity good.

b. luxury good but not a normal good.

c. necessity good but not a normal good.

d. substitute good.

e. normal good and a luxury good.

If the income elasticity of demand is 1.2, the good will be a(n):

a. complement good.

b. substitute good.

c. necessity good.

d. inferior good.

e. luxury good.

If the income elasticity of demand is 0.5, the good will be a(n): 12

a. complement good.

b. substitute good.

c. necessity good.

d. inferior good.

e. luxury good.

If the income elasticity of demand is −3, the good will be a(n):

a. complement good.

b. substitute good.

c. necessity good.

d. inferior good.

e. luxury good.

A firm knows that Mike’s income elasticity of demand for hair ties is 5 while for Sally it is 0.2. A firm can reason that a hair tie is a(n) __________ good for Mike while it is a(n) ____________ good for Sally.

a. normal; inferior

b. complement; substitute

c. necessity; luxury

d. inferior; normal

e. luxury; necessity

Shawna wins the lottery and her income increases by 60%. She used to buy 10 pints of cottage cheese per month and now she buys 12 pints. Her income elasticity of demand for cottage cheese is ___________, making it a(n) __________ good.

a. 3; luxury

b. 3.59; normal

c. 0.33; necessity

d. 0.28; inferior

e. −0.33; inferior

Howard buys 5 suits a year when he earns \$70,000. When his income increases to \$200,000, he buys 15 suits a year. From the midpoint method, his income elasticity of demand for suits is:

a. 1.04

b. 0.96

c. −1.04

d. −0.96

e. 0.08

Refer to the information in the accompanying table. Without any calculations, you know that sushi is a(n):

Price (per roll)
Quantity Demanded (income = \$10,000/year)
Quantity Demanded (income = \$30,000/year)
\$1
5
9
\$2
4
8
\$3
3
7
\$4
2
6
\$5
1
5
a. necessity.

b. substitute for fish sticks.

c. normal good.

d. inferior good.

e. complement to sake

When Clayton starts working at his first full-time job out of college with a \$60,000 salary, he is likely to buy more _________ and less __________.

a. sushi; canned tuna

b. ramen noodles; steak

c. BMWs; Kias

d. computer hardware; computer software

e. hamburger; salmon

When Sue received a promotion at work, her income rose by 50%. The income elasticity of demand for steak was found to be 1.5. For her, steak is a(n):

a. inferior good. 14

b. necessity.

c. complement to potatoes.

d. substitute for chicken.

e. luxury.

What good is most likely to have a negative income elasticity of demand?

a. steak

b. caviar

c. designer clothing

d. pizza

e. instant noodles

What good is most likely to have an income elasticity of demand equal to 0.3?

a. medication

b. takeout dinner

c. used clothing

d. laptop

If the cross-price elasticity of demand is −5, Good A and Good B are:

a. inferior goods.

b. complements.

c. substitutes.

d. normal goods.

e. luxury goods.

3. Positive economics:

A) describes opinions and perspectives on how the world should work.

B) is based on opinion polls.

C) describes how the world does work

D) is the same as normative economics.

4. Economists use models to explain real-life situations because:

A) such models tend to be exactly what is occurring in each situation.

B) assumptions found in such models tend to make the problem more difficult.

C) simplifications and assumptions often yield answers that can help to explain the more difficult real-life situations

D) they do not; real-life situations are not relevant to the building of models.

5. Bob can hire someone to paint his house for \$2,000, or he can do it himself at no out-of-pocket cost.  It will take him 5 days.  Bob earns \$500 a day when he works outside the home.  Which option has the greater economic cost?

a.       hiring a painter

b.       painting the house himself

c.        they are the same cost

d.       not enough information to decide—one needs to know the marginal cost

6. When one producer has a comparative advantage in production,

a.         she can produce more output than someone else using the same quantity of resources.

b.        she can produce a good at a lower opportunity cost than someone else.

c.         she will not benefit from trade with other producers.

d.        she is unable to reach her production possibilities frontier (PPF).

e.         she will only trade with others who have the same comparative advantage.

7. The slope of a production possibilities frontier

a.  has no economic relevance or meaning.

b.  is always constant.

c.  is always varying.

d.  measures the opportunity cost of producing one more unit of a good

8. Increases in resources or improvements in technology will tend to cause a society's production possibility frontier to:

A) shift inward to the left.

B) shift outward to the right

C) remain unchanged.

D) become vertical.

9. Which point(s) in the PPF above are unattainable?

a)       Point A because it is outside the production possibilities frontier

b)       All the points because the production of each has an opportunity cost.

c)       None of the points because they all are feasible.

d)       Points B, C, and D because they are on the production possibilities frontier.

e)       Point E because it is inside the production possibilities frontier.

10. Michael and Angelo are both artists who can create sculptures or paint paintings each day. The following table describes their maximum outputs per day. Does either person have an absolute advantage?

Sculptures
Paintings
Michael
10
5
Angelo
6
2

a.       Yes, Michael has an absolute advantage in both sculptures and paintings

b.       Yes, Angelo has an absolute advantage in both sculptures and paintings.

c.        Yes, Michael has an absolute advantage in paintings, and Angelo has an absolute advantage in sculptures.

d.       Yes, Michael has an absolute advantage in sculptures, and Angelo has an absolute advantage in paintings.

e.        No, neither has an absolute advantage.

11. Michael and Angelo are both artists who can create sculptures or paintings each day. The following table describes their maximum outputs per day. What is Angelo’s opportunity cost of a sculpture?

Sculptures
Paintings
Michael
10
5
Angelo
6
2

1/2 painting
1/3 painting
3 paintings
1/3 sculpture
6/10 sculpture

20.       “In 2008, air travel decreased substantially despite significant reductions in ticket prices.” If this information is correct, it indicates that the law of demand did not apply to air travel in 2008.

A. True

B. False

21. A supply curve is:

a.       downward sloping because suppliers prefer lower costs

b.       upward sloping because suppliers prefer lower costs

c.        upward sloping because suppliers will offer for sale more at a higher price

d.       downward sloping because suppliers will offer more for sale at a higher price

22. The demand curve shift shown in the figure above was caused by a(n):

a.         increase in the input cost of the good.

b.        increase in the price of a substitute of the good.

c.         decrease in the number of firms selling the good.

d.        decrease in the number of buyers in the market for the good.

e.         expectation that the future price of this good will be higher than it currently is.

23. According to the diagram above, if the price is at \$10, there is a:

a. shortage of 15 units.

b. surplus of 15 units

c. shortage of 30 units.

d. surplus of 30 units.

e. surplus of 22 units.

24. When both supply and demand shift to the left,

a. the equilibrium price will always rise.

b. the equilibrium price will always fall.

c. the equilibrium quantity will always fall.

d. the equilibrium quantity will always rise.

e. the equilibrium quantity is indeterminate.

25. According to the figure below, at the price of \$5:

a. the equilibrium quantity is 500.

b. the quantity demanded is 500.

c. the demand is 500.

d. there is a surplus.

e. there is a shortage.

26. When the price increases by 30% and the quantity demanded drops by 30%, the price elasticity of demand is:

a.         perfectly inelastic.

b.        inelastic.

c.         unitary elastic.

d.        elastic.

e.         perfectly inelastic.

27. What good is most likely to have an income elasticity of demand equal to 0.3?

a.         medication

b.        take-out dinner

c.         used clothing

d.        laptop

28. Demand for Coca-Cola is _____ price elastic than cola products in general.

a.       More

b.       less

c.        equally

29. Peanut butter and jelly are complements. If a tax is imposed on peanut butter, how will that affect the market for jelly?

a. Demand for jelly will increase along with the price.

b. Demand for jelly will decrease along with the price

c. The supply of jelly will increase and the price will decrease.

d. Both the supply and demand for jelly will increase along with the price.

e. The supply of jelly will decrease and the price will increase.

12. The accompanying figure depicts the production possibilities frontiers (PPFs) for two people who can allocate the same amount of time between making pizzas and making stromboli. If Jim and Pam were to specialize and trade, at what exchange rate would they find some quantity of trade to be mutually beneficial?

a.       3 pizzas for 1 stromboli

b.       1 pizza for 1 stromboli

c.        10 pizzas for 2 stromboli

d.       1 pizza for 1/2 stromboli

e.        1 pizza for 1/4 of a stromboli

Figure: Production Possibility Frontier Curve for Tealand

13. (Figure: Production Possibility Frontier for Tealand) In the figure, Tealand is producing at point C on its production possibility frontier. What is the opportunity cost in Tealand of increasing the production of tea from 20 million cups to 30 million cups?

A. 10 million cups of tea

B. 5 million scones

C. 10 million scones

D. The answer is impossible to determine from the information given.

14. Consider the production possibilities frontier below.  Which line(s) represents a change in technology for producing good A?

a.         1

b.        2

c.         both

d.        neither

15. Consider the production possibilities frontier below. Which line(s) represents a change in the economy’s resources?

a.       1

b.       2

c.        both

d.       neither

16. Use the accompanying diagram to answer the question.

An increase in the number of buyers would cause the demand curve to:

a. shift from D to D2.

b. remain at D.

c. shift from D to D1.

d. shift from D1 to D.

e. shift from D1 to D2.

Figure: Demand and Supply of Gasoline

17. (Figure: Demand and Supply of Gasoline) Look at the figure Demand and Supply of Gasoline. The initial equilibrium price and quantity (at intersection of S1 and D) of gasoline are:

A.\$2.00 and 450 gallons.

B. \$1.50 and 400 gallons.

C. \$2.00 and 200 gallons.

D. \$2.50 and 300 gallons

18. (Figure: Demand and Supply of Gasoline) Look at the figure Demand and Supply of Gasoline. Given the initial equilibrium of S1 and D, any price lower than ________ will create pressure for the price to ________.

A. \$2.00; fall

B. \$2.50; rise

C. \$3.00; rise

D. \$2.50; fall

19. (Figure: Demand and Supply of Gasoline) Look at the figure Demand and Supply of Gasoline. A factor that may have changed supply from S1 to S2 is:

A. better technology in the production of gasoline

B. increased demand.

C. lower labor productivity in gasoline production.

D. increased prices of substitutes for gasoline.

30. Pepsi and Coke are considered substitute goods. Because of this, one would predict that, holding all else constant, if the price of Pepsi increases,

a. we would see the demand curve for Coke shift to the right.

b. we would see the demand curve for Coke shift to the left.

c. we would see no change in the demand for Coke.

d. we would see the demand curve for Pepsi shift to the right.

e. we would see the demand curve for Pepsi shift to the left.

31. Technological advances have resulted in lower prices for digital cameras.  What is the impact of this on the market for traditional (non-digital) cameras?

a.  The demand curve for traditional cameras shifts to the right.

b.  The supply curve for traditional cameras shifts to the right.

c.  The demand curve for traditional cameras shifts to the left.

d.  The supply curve for traditional cameras shifts to the left.

32. A recent news story reported that ice cream producers will increase the supply of ice cream during the summer. Summer is traditionally a time of increased demand for ice cream. How would an economist expect the price and quantity of ice cream to change from the spring to the summer given knowledge of these two changes in the market for ice cream?

A.        An increase in the price and quantity.

B.        An increase in the price and an unpredictable change in the quantity.

C.        An unknown change in both the price and quantity.

D.        An unknown change in the price and an increase in the quantity.

33. Suppose the demand curve for a product is vertical and the supply curve is upward sloping. If a unit tax is imposed in the market for this product,

A) sellers bear the entire burden of the tax.

B) buyers bear the entire burden of the tax.

C) the tax burden will be shared equally between buyers and sellers.

D) buyers share the burden of the tax with government.

34. If demand is more elastic than supply then:

A) sellers bear more of the burden of the tax.

B) buyers bear more of the burden of the tax.

C) the tax burden will be shared equally between buyers and sellers.

D) buyers share the burden of the tax with government.

35. In 1990 the U.S. government imposed a special sales tax on yachts with a price of at least \$100,000. The tax was repealed in 1993 since it generated far less revenue than expected and led to significant job losses in the yacht building industry. The sales tax was unsuccessful because:

a)        the supply and the demand for yachts were relatively elastic.

b)        the supply and the demand for yachts were relatively inelastic.

c)         the tax rate was too low.

d)        yachts are a necessity.

36. Each point on a ________ curve shows the willingness of consumers to purchase a product at different prices.

A) demand

B) supply

C) production possibilities

D) marginal cost

Use this information for questions 36.1-36.3. Alfred has a willingness to pay for one car of \$35,000.  The second car offers him a marginal benefit of \$25,000.  A third car is worth \$10,000, and his willingness to pay for a fourth is 0.  The market price for the car is \$24,999.

36.1 Alfred’s willingness to pay for the marginal car is falling.  This pattern is called

a. opportunity cost

b. diminishing marginal utility

c. price effect

d. consumer surplus

36.2. At the market price, Alfred would buy ___ cars.

a. 0

b. 1

c. 2

d. 3

e. 4

36.3 At this market price, his consumer surplus is

a. 35,000

b. 24,999

c. 1

d. 10,002

Figure 4-6 above shows the demand and supply curves for the almond market.  The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at Pf.

37.  Refer to Figure 4-6. What area represents consumer surplus prior to the imposition of the price floor?

A) A + B + E

B) A + B + C

C) A + B + C + D + E

D) E + F

38. Refer to Figure 4-6. What area represents consumer surplus after the imposition of the price floor?

A) A + B + E

B) A + B

C) A + B + E + F

D) A

39. The costs of a market activity paid for by an individual NOT engaged in the market activity are:

a.         external costs.

b.        internal costs.

c.         free-rider costs.

d.        social costs.

e.         common costs.

52. According to the figure below, this firm’s short-run supply curve is represented by:

a.     the average total cost (ATC) curve above \$20.

b.     the marginal cost (MC) curve above \$15.

c.     the marginal cost (MC) curve above \$8.

d.     the marginal cost (MC) curve above \$20.

Figure: Long-Run Average Cost

53. Look at the figure Long-Run Average Cost. This firm has ________ in the output region from 0 to A.

A.        decreasing returns to scale

B.        constant returns to scale

C.        increasing returns to scale

D.        negative costs of production

54.       (Figure: Long-Run Average Cost) Look at the figure Long-Run Average Cost. This firm has ________ in the output region from B to C.

A.        constant returns to scale

B.        decreasing returns to scale

C.        increasing returns to scale

D.        falling marginal cost

55. According to the figure, when this firm is producing at the profit-maximizing price and quantity, its total revenue is:

a.     \$1,000

b.     \$1,950

c.     \$2,500

d.     \$3,750

e.     \$5,000

56. Which statement about firms’ economic profits is true?

a. Monopolists and perfectly competitive firms can earn profit in the short run only.

b. Monopolists can earn profit in the long run; perfectly competitive can earn profit in the short run only. -.-

c. Monopolists and perfectly competitive firms can earn profit in the long run only.

d. All firms always earn profit, else they would exit the market.

40. The total costs of a market activity paid for by individuals in the market as well as individuals not engaged in the market activity are:

a.         external costs.

b.        internal costs.

c.         free-rider costs.

d.        social costs.

e.         common costs.

41. A firm’s willingness to supply their product in the short run is represented on a graph by:

a.         the market supply curve.

b.        the entire marginal cost (MC) curve.

c.         the marginal revenue (MR) curve.

d.        the part of the marginal cost (MC) curve above minimum average total cost (ATC).

e.         the part of the marginal cost (MC) curve above minimum average variable cost (AVC).

42. Rachel quit her job as a chef making \$30,000 per year to start her own restaurant in New York City. The first year, Rachel's restaurant earned \$120,000 in revenue. Rachel pays \$50,000 per year in wages to the waitresses and hostess, \$20,000 per year to buy food and other supplies.  She paid \$10,000 for rent and utilities, instead of earning 10% on that money in a bank CD. What is Rachel's economic profit for the year?

A) \$0

B) \$9,000

C) \$40,000

D) \$80,000

43. What directly drives the entry and exit of firms?

a. Revenues

b. Costs

c. Profits and losses

d. Marginal product of labor

44.       The law of diminishing returns states that

a) dividing the tasks to be performed through division of labor will increase the marginal product of labor.

b) the long-run average cost of production falls as output increases.

c)  adding more of a variable input to the same amount of a fixed input will eventually cause the marginal product of the variable input to decline.

d) producing more output by adding more of a variable input will eventually cause the marginal cost of production to decline.

e)  adding more of a variable input to the same amount of a fixed input will eventually cause the marginal product of the fixed input to decline.

45. According to the accompanying figure, if a firm is producing a quantity of 100 and charging a price of \$10,

a.         the firm should continue to produce 100 units but raise the price to \$13 to maximize profits.

b.        the firm should increase production to 150 units but raise the price to \$25 to maximize profits.

c.         the firm should continue to produce 100 units but raise the price to \$25 to maximize profits.

d.        the firm should increase production to 100 units and raise the price to \$13 to maximize profits.

e.         the firm is already maximizing profits and should not change the price or quantity produced.

46. Which of the following is not a characteristic of a perfectly competitive market structure?

A) There are a very large number of firms that are small compared to the market.

B) All firms sell identical products.

C) There are no restrictions to entry by new firms.

D) There are restrictions on exit of firms.

47. Both individual buyers and sellers in perfect competition

A) can influence the market price by their own individual actions.

B) can influence the market price by joining with a few of their competitors.

C) have to take the market price as a given.

D) have the market price dictated to them by government.

48. In economics, we assume that firms make decisions in order to:

a.  maximize revenues.

b.  minimize cost

c.  maximize profit.

d.  maximize production

e.  maximize the marginal product of labor

49. A firm reflected in the following graph expanded its scale of production and found that its average costs did not change.  Which of the curves shown would reflect this situation?

a.       LRATC1 and LRATC2

b.       LRATC3

c.        LRATC2

d.       LRATC1

e.        LRATC1 and LRATC3

50. A firm’s economic profit will always be less than its accounting profit because:

a.         accounting profit considers explicit costs, which economic profit does not.

b.        economic profit considers implicit costs, which accounting profit does not

c.         economic profit is always zero, no matter what kind of firm it is.

d.        accounting profit considers implicit costs, which economic profit does not.

e.         accounting profit is always positive, no matter what kind of firm it is.

51. Competitive markets exist when:

a. there are so many buyers and sellers that each has only a small impact on the market price and the market output

b. there are more buyers than sellers, giving the buyers market power.

c. there are more sellers than buyers, giving the sellers market power.

d. accounting profits become zero because of price wars.

e. prices are so low that everyone who wants the good or service gets the good or service.

More oranges are grown in Florida than North Dakota because Florida’s warm climate gives it a ________ in growing oranges.

Which of the following is a positive statement?

The important act of holding all other variables constant while examining a particular variable is known as:

How is opportunity cost illustrated?

Unemployed resources are evident at:

Given your current resources, you would need even more hours in each day in order to attain:

Michael and Angelo are both artists who can create sculptures or paintings each day. The following table describes their maximum outputs per day. Does either one have a comparative advantage?

Suppose that Sheldon and Leonard can either run errands or wash dishes. Their maximum output per hour is listed in the following table. Given the same quantity of resources, at what terms of trade (relative price ratio) could they specialize and trade so that both consume outside their own production possibilities frontier (PPF)?

Which allocation point in the short-run production possibilities frontier (PPF) will lead to NO GROWTH in the long-run PPF?

According to the law of demand, all other things being equal,

Something is an inferior good if the demand for the good

In economics, choices are necessary because of the presence of:

Which of the following is a macroeconomic question?

Microeconomics is the branch of economics that focuses on the

An example of a direct negative incentive is:

Many professors have a policy that punishes individuals if they don’t come to class. Instead of punishing students who don’t attend class, what could the professor do to provide a positive incentive to come to class?

What is the opportunity cost of taking this exam?

Economists believe that optimal decisions are made up to the point where:

Pepsi and Coke are considered substitute goods. Because of this, one would predict that, holding all else constant, if the price of Pepsi increases, we would see:

Refer to the accompanying figure. When the price changes from P 1 to P 2, we will see a(n):

If a new french fry–cutting machine works twice as fast as the old machine, McDonald’s would:

When the number of firms in a market decreases,

Assume that a family spends 35% of its income on housing, 20% on travel-related expenses, 10% on utilities, 25% on health care, and 5% on miscellaneous items. Demand for which category will be most responsive to a change in price?

quantity demanded of hockey pucks from 100 to 150 when the price fell from \$5 to \$3 per puck. Using the midpoint method, his price elasticity of demand is

Chris runs a sporting goods store and knows that the price elasticity of demand for his sports clothing line is –1.5. He is planning to lower prices by 10%. The percentage change in quantity demanded will be:

Kevin tells the manager at Moo’s Ice Cream that he won’t buy any ice cream cones costing more than \$2, but he will buy a limitless number at any price less than \$2. His price elasticity of demand for ice cream cones is:

A 15% increase in the price of cookies results in a 9% decrease in the quantity of cookies sold. The revenue received by cookie suppliers will ________ because the price elasticity of demand for cookies is ________.

As price elasticity of supply becomes more elastic over time, the overall shape of the supply curve:

If the price elasticity of supply is 2.5, we know that it is:

A binding price ceiling will have the following consequences:

What would you expect the consequences to size and quality would be for a product sold under a binding price ceiling?

What is the long-run consequence of a price ceiling law?

Which is a correct statement about a rent control law?

You are a senator from Kansas who wants to help farmers. You have worked to encourage the passage of a law that would impose a binding price floor on wheat. What would you expect your critics to say?

According to the accompanying figure, if the price is \$10, there is a:

When supply shifts to the right and demand stays constant, the equilibrium price:

The difference between a tax and a subsidy is that when the government places a tax on a good, it _________ the equilibrium price and _________ the equilibrium quantity, whereas when the government places a subsidy on a good, it _________ the equilibrium price and _________ the equilibrium quantity.

When both supply and demand shift to the right:

Many consumer items eventually go out of style, and because fewer people want these items,

demand for them drops. When this happens, we usually see production of these items stop. What happens to the equilibrium price and equilibrium quantity in a market like this?

Nita is a devoted Coca-Cola consumer, whereas Becky can drink either Coca-Cola or Pepsi products. Nita’s demand for Coca-Cola will be relatively more ________, while Becky’s demand will be relatively more ________.