Econ 213 quiz 7 liberty university answers solutions 100

ECON 213 quiz 7 Liberty University answers solutions 100

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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 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 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:

________ 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:

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:

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 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 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 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 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 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 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 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 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 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 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 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 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 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 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

in the quantity demanded for Good A.

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 ________


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 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 increa se

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

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

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:

a. infinite

b. relatively large.

c. proportional to the shift in demand.

d. 0 (zero).

e. relatively small.

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.

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

c. relatively elastic

d. unitary elastic.



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

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.

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 .

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

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.

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 −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

, 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-


Which one of the following pairs of goods is likely to have a negative cross-


Which one of the following pairs of goods is likely to have a negative cross-


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:

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:


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. 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:


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

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:


b. inelastic.

c. unitary elastic.

d. elastic.


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

d. D

e. E

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

a. inelastic.


c. elastic.

d. unitary elastic.


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.


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.


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.

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

e. a

d. normal goods.

e. luxury goods.

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


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.

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:



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.




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.





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



d. unitary elastic.


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


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

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 ________


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.

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 ou t-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.

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

a. 1/2 painting

b. 1/3 painting

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?

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.

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.

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.

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.

c. unitary elastic.

d. elastic.


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

e. a download on iTunes

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.

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

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

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.

40. The total costs of a market activity paid for by individuals in the market as well as individuals

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.

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.

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.

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.

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.

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. -.-

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:

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?

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:

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 possibil ities frontier (PPF)?

Which allocation point in the short-run production

possibilities frontier (PPF) will lead to NO GROWTH in the long-run PPF?

an inferior good if the demand for the good

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,

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.

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

________.

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:

Which is a correct statement about a rent control law?

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Econ 213 quiz 7 liberty university answers solutions 100

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