ECON 201 CH 6

1 February 2023
4.9 (155 reviews)
50 test answers

Unlock all answers in this set

Unlock answers (46)
question
In the P1P2 price range, demand is:
answer
relatively elastic.
question
which is a rectangular hyperbola, that is, a curve such that each rectangle drawn from any point on the curve will be of identical area. If this rectangular hyperbola was a demand curve, we could say that it would be:
answer
of unit elasticity throughout.
question
The price elasticity of demand for widgets is 0.80. Assuming no change in the demand curve for widgets, a 16 percent increase in sales implies a:
answer
20 percent reduction in price.
question
The price of product X is reduced from $100 to $90 and, as a result, the quantity demanded increases from 50 to 60 units. Therefore, demand for X in this price range:
answer
is elastic.
question
Which type of goods is most adversely affected by recessions?
answer
Goods for which the income elasticity coefficient is relatively high and positive.
question
In the P3P4 price range, demand is:
answer
relatively inelastic.
question
The price of old baseball cards rises rapidly with increases in demand because:
answer
the supply of old baseball cards is price inelastic.
question
For an increase in demand, the price effect is smallest and the quantity effect is largest:
answer
in the long run.
question
Refer to the information and assume the stadium capacity is 5,000. The supply of seats for the game:
answer
is perfectly inelastic.
question
If the demand for farm products is price inelastic, a good harvest will cause farm revenues to:
answer
decrease.
question
The supply of product X is inelastic (but not perfectly inelastic) if the price of X rises by:
answer
7 percent and quantity supplied rises by 5 percent.
question
Elasticity can be thought of as degree of relative:
answer
quantity stretch.
question
For a linear demand curve:
answer
demand is elastic at high prices.
question
In which case would the coefficient of cross elasticity of demand be negative?
answer
C
question
If the University Chamber Music Society decides to raise ticket prices to provide more funds to finance concerts, the Society is assuming that the demand for tickets is:
answer
Inelastic
question
If the demand for wheat is highly price inelastic, an extraordinarily large crop may reduce farm incomes.
answer
true
question
Suppose the price elasticity of demand for bread is 0.20. If the price of bread falls by 10 percent, the quantity demanded will increase by:
answer
2 percent and total expenditures on bread will fall.
question
The diagram concerns supply adjustments to an increase in demand (D1 to D2) in the immediate market period, the short run, and the long run. On the basis of this illustration, we can conclude that:
answer
supply is more elastic the greater the amount of time producers have to adjust to a change in demand.
question
If demand for a product is elastic, the value of the price elasticity coefficient is:
answer
greater than one.
question
The smaller the number of good substitutes for a product, the greater will be the price elasticity of demand for it.
answer
false
question
Price elasticity of demand is generally:
answer
greater in the long run than in the short run.
question
Suppose that as the price of Y falls from $2.00 to $1.90, the quantity of Y demanded increases from 110 to 118. Then the absolute value of the price elasticity (midpoint method) is:
answer
1.37.
question
Generally speaking, the demand for luxury goods is more price elastic than is the demand for necessities.
answer
true
question
Suppose Aiyanna's Pizzeria currently faces a linear demand curve and is charging a very high price per pizza and doing very little business. Aiyanna now decides to lower pizza prices by 5 percent per week for an indefinite period of time. We can expect that each successive week:
answer
demand will become less price elastic.
question
Which of the following is not an example of pricing based on group differences in elasticity of demand?
answer
Cash rebates for purchases of automobiles.
question
Refer to the diagram and assume a single good. If the price of the good decreases from $6.30 to $5.70, consumer expenditure would:
answer
decrease if demand were D2 only.
question
The price elasticity of demand for beef is about 0.60. Other things equal, this means that a 20 percent increase in the price of beef will cause the quantity of beef demanded to:
answer
decrease by approximately 12 percent.
question
A manufacturer of frozen pizzas found that total revenue decreased when price was lowered from $5 to $4. It was also found that total revenue decreased when price was raised from $5 to $6. Thus,
answer
the demand for pizza is elastic above $5 and inelastic below $5.
question
The supply of product X is elastic if the price of X rises by:
answer
5 percent and quantity supplied rises by 7 percent.
question
If the demand for product X is inelastic, a 4 percent increase in the price of X will:
answer
decrease the quantity of X demanded by less than 4 percent.
question
Suppose the income elasticity of demand for toys is +2.00. This means that:
answer
a 10 percent increase in income will increase the purchase of toys by 20 percent.
question
If price changes and total revenue changes in the opposite direction, demand is relatively elastic.
answer
true
question
Refer to the diagrams. In which case would the coefficient of income elasticity be negative?
answer
B
question
Suppose that the price of product X rises by 20 percent and the quantity supplied of X increases by 15 percent. The coefficient of price elasticity of supply for good X is:
answer
less than 1 and therefore supply is inelastic.
question
A leftward shift in the supply curve of product X will increase equilibrium price to a greater extent the:
answer
more inelastic the demand for the product.
question
The supply curve of antique reproductions is:
answer
relatively elastic.
question
If quantity demanded is completely unresponsive to price changes, demand is:
answer
perfectly inelastic.
question
Suppose the price elasticity coefficients of demand are 1.43, 0.67, 1.11, and 0.29 for products W, X, Y, and Z respectively. A 1 percent decrease in price will increase total revenue in the case(s) of:
answer
W and Y.
question
We would expect the cross elasticity of demand between Pepsi and Coke to be:
answer
positive, indicating substitute goods.
question
The price elasticity of demand of a straight-line demand curve is:
answer
elastic in high-price ranges and inelastic in low-price ranges.
question
The narrower the definition of a product:
answer
the larger the number of substitutes and the greater the price elasticity of demand.
question
The supply curve of a one-of-a-kind original painting is:
answer
perfectly inelastic.
question
Income elasticity measures the effect of a change in income on the purchases of some good or service.
answer
true
question
which is a rectangular hyperbola, that is, a curve such that each rectangle drawn from any point on the curve will be of identical area. In comparing the price elasticity and the slope of this demand curve, we can conclude that the:
answer
slope of the curve varies, but its elasticity is constant.
question
A supply curve that is parallel to the horizontal axis suggests that:
answer
a change in demand will change the equilibrium quantity but not price.
question
Which of the following is correct?
answer
If demand is elastic, a decrease in price will increase total revenue.
question
An increase in demand will increase equilibrium price to a greater extent:
answer
the less elastic the supply curve.
question
The state legislature has cut Gigantic State University's appropriations. GSU's Board of Regents decides to increase tuition and fees to compensate for the loss of revenue. The board is assuming that the:
answer
demand for education at GSU is inelastic.
question
Refer to the diagrams. In which case would the coefficient of cross elasticity of demand be positive?
answer
D
question
The supply of higher education in the United States is:
answer
highly price inelastic.