Micro Quiz 5 – Flashcards

When consumers face rising gasoline prices, they typically a. do not reduce their quantity demanded in the short run or the long run. b. increase their quantity demanded in the short run but reduce their quantity demanded in the long run. c. reduce their quantity demanded more in the long run than in the short run. d. reduce their quantity demanded more in the short run than in the long run.

Which of the following is not a determinant of the price elasticity of demand for a good? a. the definition of the market for the good b. the time horizon c. the availability of substitutes for the good d. the steepness or flatness of the supply curve for the good

Economists compute the price elasticity of demand as the a. percentage change in quantity demanded divided by the percentage change in income. b. percentage change in price divided by the percentage change in quantity demanded. c. change in quantity demanded divided by the change in the price. d. percentage change in quantity demanded divided by the percentage change in price.

Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-2? a. A is a good several years after a price increase, and B is that same good several days after the price increase. b. A is a luxury, and B is a necessity. c. A is a Kit Kat bar, and B is candy. d. A has fewer substitutes than B.

Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-2? a. A is bicycles, and B is mopeds. b. A is gourmet coffee, and B is dentist's visits. c. A is airline tickets in the short run, and B is airline tickets in the long run. d. A is root beer, and B is carbonated beverages.

If the price elasticity of demand for a good is 0.2, then a 3 percent decrease in price results in a a. 0.6 percent increase in the quantity demanded. b. 6 percent increase in the quantity demanded. c. 1.5 percent increase in the quantity demanded. d. 2 percent increase in the quantity demanded.

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? a. The good is a luxury. b. The market for the good is broadly defined. c. The relevant time horizon is short. d. There are no close substitutes for this good.

Demand is elastic if the price elasticity of demand is a. greater than 1. b. less than 1. c. equal to 1. d. equal to 0.

When the price of a bracelet was $25 each, the jewelry shop sold 20 per month. When it raised the price to $35 each, it sold 14 per month. Using the midpoint method, the price elasticity of demand for bracelets is about a. 1.66. b. 0.60. c. 0.94. d. 1.06.

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 a. 20. b. 2.33. c. 10. d. 0.43.

Refer to Figure 5-2. As price falls from Pa to Pb, which demand curve represents the most elastic demand? a. D1 b. D2 c. D3 d. All of the above are equally elastic.

Refer to Figure 5-3. The demand curve representing the demand for a luxury good with several close substitutes is a. A. b. B. c. C. d. D.

Fiona's Fish Emporium increased its total monthly revenue from $1,500 to $1,800 when it raised the price of tropical fish from $5 to $9. The price elasticity of demand for Fiona's Fish Emporium is a. 0.57. b. 0.70. c. 2.20. d. 1.43.

Melvin's Magnets earned $200 in total revenue last month when it sold 100 souvenir magnets. This month it earned $300 in total revenue when it sold 60 souvenir magnets. The price elasticity of demand for Marvin's Magnets is a. 1.71. b. 0.27. c. 0.58. d. 1.25.

Suppose that demand is inelastic within a certain price range. For that price range, a. a decrease in price would not affect total revenue. b. an increase in price would increase total revenue because the decrease in quantity demanded is proportionately less than the increase in price. c. a decrease in price would increase total revenue because the increase in quantity demanded is proportionately smaller than the decrease in price. d. an increase in price would decrease total revenue because the decrease in quantity demanded is proportionately greater than the increase in price.

Which of the following could be the price elasticity of demand for a good for which a decrease in price would decrease revenue? a. 0.5 b. 1 c. 1.5 d. All of the above could be correct.

Refer to Figure 5-4. Suppose the point labeled B is the "halfway point" on the demand curve and it corresponds to a price of $5.00. Then, between prices of $4.99 and $5.01, the price elasticity of demand is a. less than 1 but greater than zero. b. greater than 1. c. equal to zero. d. equal to 1.

Refer to Figure 5-4. The section of the demand curve from A to B represents the a. perfectly elastic section of the demand curve. b. unit elastic section of the demand curve. c. elastic section of the demand curve. d. inelastic section of the demand curve.

Which of the following is an illustration of the market for original paintings by deceased artist Vincent Van Gogh? a. mc019-1.jpg b. mc019-2.jpg c. mc019-3.jpg d. mc019-4.jpg

Refer to Figure 5-18. Which supply curve represents perfectly inelastic supply? a. S1 b. S2 c. S3 d. None of the supply curves is perfectly inelastic.

A decrease in supply will cause the largest increase in price when a. both supply and demand are inelastic. b. demand is inelastic and supply is elastic. c. both supply and demand are elastic. d. demand is elastic and supply is inelastic.

Scenario 5-2 The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%. Refer to Scenario 5-2. The equilibrium price will a. decrease in the aged cheddar cheese market and increase in the bread market. b. decrease in both the aged cheddar cheese and bread markets. c. increase in both the aged cheddar cheese and bread markets. d. increase in the aged cheddar cheese market and decrease in the bread market.

If marijuana were legalized, it is likely that there would be an increase in the supply of marijuana. Advocates of marijuana legalization argue that this would significantly reduce the amount of revenue going to the criminal organizations that currently supply marijuana. These advocates believe that the a. supply for marijuana is inelastic. b. demand for marijuana is elastic. c. demand for marijuana is inelastic. d. supply for marijuana is elastic.

Under which of the following conditions would the interdiction of illegal drugs result in a decrease in the quantity of drugs sold and in a decrease in total spending on illegal drugs by drug users? a. The price elasticity of demand for illegal drugs is 1.3. b. The interdiction has the effect of shifting the demand curve for illegal drugs to the right. c. As a result of the interdiction, the price of illegal drugs increases by 20 percent and the quantity of illegal drugs sold decreases by 16 percent. d. The price elasticity of supply for illegal drugs is 0.8.