Microeconomics - Testbank 1 (Hubbard/O'Brien)

Chapter 6 Easticit!" The #esponsi$eness o% &emand and 'upp!

1)
(rice easticit! o% demand measures"
)
)
ho* responsi$e to price chan+es suppiers are,
B
)
ho* responsi$e saes are to chan+es in the price o% a reated +ood,
C
)
ho* responsi$e -uantit! demanded is to a chan+e in price,
&
)
ho* responsi$e saes are to a chan+e in bu!ers' incomes,
.)
The price easticit! o% demand is e-ua to"
)
)
the sope $aue o% the supp! cur$e,
B
)
the sope $aue o% the demand cur$e,
C
)
the percenta+e chan+e in price di$ided b! the percenta+e chan+e in
-uantit! demanded,
&
)
the percenta+e chan+e in -uantit! demanded di$ided b! the percenta+e
chan+e in price,
/)
0% the price o% +asoine increases /1 percent and this causes the -uantit!
demanded to %a 12 percent3 the easticit! o% demand is e-ua to"
)
)
minus 421,
B
)
minus .,
C
)
minus 1,2,
&
)
minus 12,
4)
The easticit! o% demand is a*a!s ne+ati$e because"
)
)
o% the a* o% supp!,
B
)
o% the a* o% demand,
C )
it depends on percenta+es,
&
)
it depends on *hether or not demand shi%ts or not *hen price chan+es,
2)
0% the percenta+e chan+e in price is .1 percent and the easticit! o%
demand $aue is minus 23 then -uantit! demanded"
)
)
*i increase 111 percent,
B
)
*i increase b! 2 percent,
C
)
*i decrease b! 111 percent,
&
)
0mpossibe to determine *ithout additiona in%ormation,
6)
) hori5onta demand cur$e is"
)
)
per%ect! ineastic,
B
)
per%ect! eastic,
C
)
unit eastic,
&
)
reati$e! eastic,
6)
) $ertica demand cur$e is"
)
)
per%ect! ineastic,
B
)
per%ect! eastic,
C
)
unit eastic,
&
)
reati$e! eastic,
#e%er to 6,1 %or the -uestions beo*,
7i+ure 6,1

8)
0n %i+ure 6,13 the demand cur$e that is per%ect! ineastic is"
)
)
+raph a,
B
)
+raph b,
C
)
+raph c,
&
)
none o% the abo$e,
9)
0n %i+ure 6,13 the demand cur$e that is per%ect! eastic is"
)
)
+raph a,
B
)
+raph b,
C
)
+raph c,
&
)
none o% the abo$e,
11)
0n %i+ure 6,13 the demand cur$e on *hich easticit! chan+es at e$er!
point is"
)
)
+raph a,
B
)
+raph b,
C
)
+raph c,
&
)
none o% the abo$e,
11)
0% .1 units are sod at a price o% :61 and /1 units are sod at a price o%
:413 then the easticit! o% demand cacuated usin+ the midpoint %ormua
is"
)
)
minus 1,
B
)
minus 1,8,
C
)
minus ,16,
&
)
none o% the abo$e,
1.)
0% .1 units are sod at a price o% :21 and /1 units are sod at a price o%
:413 then the easticit! o% demand cacuated usin+ the midpoint %ormua
is"
)
)
minus 1,26,
B
)
minus 1,8,
C
)
minus 1,
&
)
none o% the abo$e,
1/)
0%3 *hen price chan+es b! 21 percent3 the -uantit! demanded chan+es b!
12 percent3 *hat is the easticit! o% demand $aue;
)
)
/,//
B
)
minus /,//
C
)
1,/1
&
)
minus 1,/1
14)
The ran+e o% possibe $aues %or the easticit! o% demand $aue is"
)
)
5ero to in%init!,
B
)
positi$e in%init! to ne+ati$e in%init!,
C )
5ero to minus in%init!
&
)
minus one to minus in%init!,
12)
<hich o% the %oo*in+ statements about easticit! o% demand is
0=CO##ECT;
)
)
The easticit! o% demand $aue is the reciproca o% the demand cur$e's
sope $aue,
B
)
0% -uantit! demanded chan+es b! a ar+er percenta+e than the
percenta+e chan+e in price3 demand is eastic,
C
)
The easticit! o% demand $aue is a*a!s ne+ati$e,
&
)
) strai+ht ine demand cur$e has a $ar!in+ easticit! o% demand $aue,
16)
<hen there man! +ood substitutes a$aiabe %or a +ood3 demand tends to
be"
)
)
per%ect! ineastic,
B )
per%ect! eastic,
C
)
reati$e! ineastic,
&
)
reati$e! eastic,
16)
<hich o% the %oo*in+ statements about easticit! o% demand is correct;
)
)
The easticit! o% demand %or a +ood in +enera is e-ua to the easticit! o%
demand %or a speci%ic brand o% the +ood,
B
)
The absoute $aue o% the easticit! o% demand ran+es %rom 5ero to one,
C
)
&emand is more eastic in a on+ time period than it is in a short time
period,
&
)
&emand is more eastic the smaer percenta+e o% the consumer's bud+et
the item takes up,
18)
<hich o% the %oo*in+ t!pes o% +oods has the most ineastic demand;
)
)
=ecessities
B
)
>u?uries
C
)
@oods *ith man! substitutes
&
)
@oods *hose price is hi+h reati$e to consumers' bud+ets
19)
0% the demand %or a i%esa$in+ dru+ *ere per%ect! ineastic and the price
doubed3 the -uantit! demanded *oud"
)
)
doube aso,
B
)
decrease b! 21 percent,
C
)
be cut in ha%,
&
)
remain constant,
.1)
0% a percenta+e chan+e in price causes a smaer percenta+e chan+e in
-uantit! demanded3 then demand is"
)
)
unit eastic,
B
)
per%ect! eastic,
C
)
reati$e! ineastic,
&
)
more in%ormation is needed,
.1)
Tota re$enue e-uas"
)
)
price per unit times -uantit! sod,
B
)
chan+e in price per unit times -uantit! sod,
C
)
price per unit times chan+e in -uantit! -uantit! sod,
&
)
price per unit di$ided b! -uantit! sod,
..)
) demand cur$e that is hori5onta indicates that the commodit!"
)
)
has %e* substitutes,
B
)
must be $er! cheap,
C
)
is a necessit!,
&
)
has a ar+e number o% substitutes,
./)
<hich o% the %oo*in+ +oods *oud most ike! ha$e the most ineastic
demand;
)
)
'ki $acations
B
)
Bread
C
)
>u?ur! cars
&
)
Bi+ screen TAs
.4)
) t!pe o% demand cur$e that does not ha$e the same price easticit! o%
demand $aue at e$er! point is"
)
)
a $ertica demand,
B
)
a do*n sopin+ strai+ht ine demand,
C
)
a hori5onta demand,
&
)
a o% the abo$e,
.2)
7or a pro%it-makin+ seer3 the best t!pe o% demand easticit! *oud be"
)
)
hi+h! eastic,
B
)
hi+h! ineastic,
C
)
unit eastic,
&
)
an! easticit! as demand easticit! does not matter to the seer,
.6)
<hen demand is price ineastic3 a %a in price causes tota re$enue to
%a3 because"
)
)
an!time price decreases3 tota re$enue *i decrease aso,
B
)
-uantit! sod remains the same and thus tota re$enue has to %a,
C
)
the increase in -uantit! sod is not ar+e enou+h to o%%set the drop in
price,
&
)
a o% the abo$e,

.6)
<hen demand is unit price eastic3 a chan+e in price causes tota re$enue
to sta! the same because"
)
)
the chan+e in -uantit! demanded e?act! o%%sets the opposite chan+e in
price,
B
)
bu!ers are bu!in+ the same -uantit!,
C
)
tota re$enue ne$er chan+es *ith price chan+es,
&
)
a o% the abo$e,
.8)
0% a %irm raised its price and disco$ered that its tota re$enue %e3 then
the demand %or its product is"
)
)
per%ect! ineastic,
B
)
reati$e! ineastic,
C
)
per%ect! eastic,
&
)
reati$e! eastic,
.9)
0% a %irm raised its price and %ound that tota re$enue %e to 5ero3 then
the demand %or its product is"
)
)
per%ect! ineastic,
B
)
reati$e! ineastic,
C
)
per%ect! eastic,
&
)
reati$e! eastic,
/1)
0% a %irm o*ered the price o% the product it ses and %ound that tota
re$enue did not chan+e3 then the demand %or its product is"
)
)
per%ect! ineastic,
B
)
per%ect! eastic,
C
)
unit-eastic,
&
)
reati$e! eastic,
/1)
0% a %irm *anted to kno* *hether the demand %or its product *as eastic3
unit eastic3 or ineastic3 then the %irm coud"
)
)
sur$e! competitors and ask them *hat the! think demand easticit! %or
the product is,
B
)
tak to its customers,
C
)
chan+e price a itte bit and obser$e *hat happens to tota re$enue,
&
)
do not do an!thin+ as there is no *a! to %ind an easticit! $aue,
/.)
<hen a %irm chan+es its price3 the chan+e in tota re$enue"
)
)
depends on the easticit! o% demand $aue and the direction o% the price
chan+e,
B
)
is 5ero,
C
)
is positi$e,
&
)
is ne+ati$e,
//)
Ho* does easticit! o% demand beha$e on a do*n sopin+ strai+ht ine
demand cur$e;
) )
0t is ineastic at hi+h prices and eastic at o* prices,
B
)
0t is the same $aue at e$er! point,
C
)
0t is eastic at hi+h prices and ineastic at o* prices,
&
)
=one o% these is correct,
/4)
On a do*n sopin+3 strai+ht ine demand cur$e3 tota re$enue is the
+reatest"
)
)
*here demand is norma,
B
)
*here demand is the most ineastic,
C
)
*here demand is the most eastic,
&
)
*here demand is unit eastic,
/2)
<hich o% the %oo*in+ does =OT a%%ect the price easticit! o% demand
%or a product;
)
)
The number o% cose substitutes a$aiabe %or the product,
B
)
E?penditures on the product reati$e to bu!ers' incomes,
C
)
Ho* on+ bu!ers ha$e to respond to an! price chan+e,
&
)
Ho* much demand shi%ts *hen bu!ers' incomes chan+e,

/6)
0% at a price o% :123 .1 units are sod *hie at :.13 11 units are sod3 then
the price easticit! o% demand %or this +ood is"
)
)
eastic,
B
)
ineastic,
C
)
unit eastic,
&
)
per%ect! eastic,
/6)
0% at a price o% :213 .1 units are sod and at a price o% :613 1 units are
sod3 the price easticit! o% demand o% the +ood is"
)
)
eastic,
B
)
per%ect! eastic,
C
)
unit eastic,
&
)
per%ect! ineastic,
/8)
0% at a price o% :113 %i$e units are sod *hie at a price o% :813 %i$e units
are sod3 then the easticit! o% demand %or this +ood is"
)
)
per%ect! eastic,
B
)
ineastic,
C
)
per%ect! ineastic,
&
)
unit eastic,
/9)
0% at a price o% :213 .1 units are sod *hie at a price o% :413 .2 units are
sod3 then the easticit! o% demand %or this +ood is"
)
)
eastic,
B
)
ineastic,
C
)
per%ect! ineastic,
&
)
unit eastic,
41)
Cross-price easticit! o% demand is cacuated as the"
)
)
percenta+e chan+e in -uantit! demanded di$ided b! percenta+e chan+e
in price o% a +ood,
B
)
percenta+e chan+e in -uantit! demanded o% one +ood di$ided b!
percenta+e chan+e in price o% a di%%erent +ood,
C
)
percenta+e chan+e in -uantit! sod di$ided b! percenta+e chan+e in
bu!ers' incomes,
&
)
percenta+e chan+e in -uantit! suppied di$ided b! percenta+e chan+e in
price o% a +ood,
41)
0% the cross-price easticit! o% demand %or +oods ) and B is a ne+ati$e
$aue3 this means the t*o +oods are"
)
)
substitutes,
B
)
compements,
C
)
in%erior,
&
)
norma,
4.)
0% a %irm is in an anti-trust court case accused o% monopoi5in+ a product3
the %irm *oud hire an economist to sho*"
)
)
the cross-price easticit! o% demand bet*een the %irm's +ood and another
is ne+ati$e,
B )
the cross-price easticit! o% demand bet*een the %irm's +ood and another
is positi$e,
C
)
the price easticit! o% demand %or the %irm's +ood is hi+h! ineastic,
&
)
the income easticit! o% the %irm's +ood is in%erior,
4/)
0% the cross-price easticit! o% demand %or +oods ) and B is 5ero3 this
means the t*o +oods are"
)
)
substitutes,
B
)
compements,
C
)
in%erior,
&
)
unreated,
44)
0ncome easticit! measures"
)
)
ho* a +ood's -uantit! demanded responds to chan+e in the +oods price,
B
)
ho* a +ood's -uantit! demanded responds to chan+e in the price o%
another +ood,
C
)
ho* a +ood's saes responds to chan+e in bu!ers' incomes,
&
)
ho* a +ood's saes respond to producers' incomes,
42)
0% a +ood's income easticit! o% demand is positi$e3 this means"
)
)
saes o% the +ood are responsi$e to chan+es in price,
B
)
saes o% the +ood are responsi$e to chan+es in the price o% another +ood,
C
)
saes o% the +ood %a *hen bu!ers' income increase,
&
)
saes o% the +ood increase *hen bu!ers' incomes increase,
46)
0% a +ood has a ne+ati$e income easticit! o% demand3 this indicates the
+ood is"
)
)
a substitute *ith another +ood,
B
)
a compement *ith another +ood,
C
)
in%erior,
&
)
norma,
46)
0% !ou e?pect the econom! is +oin+ to be in a recession %or se$era !ears,3
!ou shoud ook %or a Bob in an industr! *ith an income easticit! o%"
)
)
positi$e %i$e,
B
)
positi$e three,
C
)
ne+ati$e %i$e,
&
)
none o% abo$e,
48)
<h! has income o% sma %ami! %arms decreased o$er time;
)
)
Technoo+! has increase %arm producti$it! and market supp!,
B
)
The demand %or %arm products is price ineastic,
C
)
The demand %or %arm products is income ineastic,
&
)
) o% abo$e,
49)
The income easticit! %or in%erior +oods is a*a!s"
)
)
positi$e in $aue,
B
)
ne+ati$e in $aue,
C
)
impossibe to determine,
&
)
e-ua to one,
21)
The price easticit! o% supp! is a*a!s"
)
)
positi$e,
B
)
ne+ati$e,
C
)
+reater than one,
&
)
impossibe to determine,
21)
(rice ineastic supp! occurs *hene$er the easticit! o% supp! $aue is"
)
)
ne+ati$e,
B
)
positi$e and +reater than %i$e,
C
)
positi$e and +reater than one,
&
)
positi$e and ess than one,
2.)
(rice eastic supp! occurs *hene$er the easticit! o% supp! $aue is"
)
)
ne+ati$e,
B
)
positi$e and +reater than %i$e,
C
)
positi$e and +reater than one,
&
)
positive and less than one.