Question 1

For most consumer goods,the own price elasticity of demand is

Accepted Answer

A) negative only when price decreases. 
B) negative regardless of the direction of the price change. 
C) positive only when price decreases. 
D) positive regardless of the direction of the price change. 
A) negative only when price decreases. 
B) negative regardless of the direction of the price change. 
C) positive only when price decreases. 
D) positive regardless of the direction of the price change.

Question 2

Elasticity measures

Accepted Answer

A) the slope of a demand curve. 
B) the inverse of the slope of a demand curve. 
C) the percentage change in one variable in response to a one percent increase in another variable. 
D) sensitivity of price to a change in quantity. 
A) the slope of a demand curve. 
B) the inverse of the slope of a demand curve. 
C) the percentage change in one variable in response to a one percent increase in another variable. 
D) sensitivity of price to a change in quantity.

Question 3

The cross-price elasticity of demand for peanut butter with respect to the price of jelly is -0.3.If we expect the price of jelly to decline by 15%,what is the expected change in the quantity demanded for peanut butter?

Accepted Answer

A) +15% 
B) +45% 
C) +4.5% 
D) -4.5% 
A) +15% 
B) +45% 
C) +4.5% 
D) -4.5%

Question 4

The price elasticity of gasoline supply in the U.S.is 0.4.If the price of gasoline rises by 8%,what is the expected change in the quantity of gasoline supplied in the U.S.?

Accepted Answer

A) +3.2% 
B) -3.2% 
C) +32.0% 
D) +0.32% 
A) +3.2% 
B) -3.2% 
C) +32.0% 
D) +0.32%

Question 5

Which of the following will cause the price of beer to rise?

Accepted Answer

A) A shift to the right in the demand curve for beer 
B) A shift to the left in the supply curve of beer 
C) both A and B 
D) none of the above 
A) A shift to the right in the demand curve for beer 
B) A shift to the left in the supply curve of beer 
C) both A and B 
D) none of the above

Question 6

Figure 2.1
-Refer to Figure 2.1.At point A,demand is:

Accepted Answer

A) completely inelastic. 
B) inelastic,but not completely inelastic. 
C) unit elastic. 
D) elastic,but not infinitely elastic. 
E) infinitely elastic. 
A) completely inelastic. 
B) inelastic,but not completely inelastic. 
C) unit elastic. 
D) elastic,but not infinitely elastic. 
E) infinitely elastic.

Question 7

If two goods are substitutes,the cross price elasticity of demand must be

Accepted Answer

A) negative. 
B) positive. 
C) zero. 
D) infinite. 
A) negative. 
B) positive. 
C) zero. 
D) infinite.

Question 8

Suppose that the short-run world demand and supply elasticities for crude oil are -0.076 and 0.088,respectively.The current price per barrel is $30 and the short-run equilibrium quantity is 23.84 billion barrels per year.Derive the linear demand and supply equations.

Accepted Answer

If the demand curve is linear,it is in t

Question 9

Figure 2.1
-Refer to Figure 2.1.At point E,demand is:

Accepted Answer

A) completely inelastic. 
B) inelastic,but not completely inelastic. 
C) unit elastic. 
D) elastic,but not infinitely elastic. 
E) infinitely elastic. 
A) completely inelastic. 
B) inelastic,but not completely inelastic. 
C) unit elastic. 
D) elastic,but not infinitely elastic. 
E) infinitely elastic.

Question 10

When an industry's raw material costs increase,other things remaining the same,

Accepted Answer

A) the supply curve shifts to the left. 
B) the supply curve shifts to the right. 
C) output increases regardless of the market price and the supply curve shifts upward. 
D) output decreases and the market price also decreases. 
A) the supply curve shifts to the left. 
B) the supply curve shifts to the right. 
C) output increases regardless of the market price and the supply curve shifts upward. 
D) output decreases and the market price also decreases.

Question 11

The current price charged by a local movie theater is $8 per ticket.The concession stand at the theater averages $5 in revenue for each ticket sold.At the current ticket price,the theater typically sells 300 tickets per showing.If the theater raises ticket prices to $9,the theater will sell 270 tickets.What is the price elasticity of demand at $8? What happens to ticket revenue if the theater increases ticket prices to $9 from $8? What happens to concession revenue if the theater increases ticket prices? If the theater wants to maximize the sum of ticket and concession revenue,should they raise ticket prices to $9?

Accepted Answer

The price elasticity of demand at $8 is

Question 12

Suppose a new discovery in computer manufacturing has just made computer production cheaper.Also,the popularity and usefulness of computers continues to grow.Use Supply and Demand analysis to predict how these shocks will affect equilibrium price and quantity of computers.Is there enough information to determine if market prices will rise or fall? Why?

Accepted Answer

The increase in demand due to the useful

Question 13

From 1970 to 1993,the real price of eggs decreased.Which of the following would cause an unambiguous decrease in the real price of eggs?

Accepted Answer

A) A shift to the right in the supply curve for eggs and a shift to the right in the demand curve for eggs. 
B) A shift to the right in the supply curve for eggs and a shift to the left in the demand curve for eggs. 
C) A shift to the left in the supply curve for eggs and a shift to the right in the demand curve for eggs. 
D) A shift to the left in the supply curve for eggs and a shift to the left in the demand curve for eggs. 
A) A shift to the right in the supply curve for eggs and a shift to the right in the demand curve for eggs. 
B) A shift to the right in the supply curve for eggs and a shift to the left in the demand curve for eggs. 
C) A shift to the left in the supply curve for eggs and a shift to the right in the demand curve for eggs. 
D) A shift to the left in the supply curve for eggs and a shift to the left in the demand curve for eggs.

Question 14

In the long run,new firms can enter an industry and so the supply elasticity tends to be

Accepted Answer

A) more elastic than in the short run. 
B) less elastic than in the short run. 
C) perfectly elastic. 
D) perfectly inelastic. 
A) more elastic than in the short run. 
B) less elastic than in the short run. 
C) perfectly elastic. 
D) perfectly inelastic.

Question 15

Which of the following would cause a rightward shift in the demand curve for gasoline? I.A large increase in the price of public transportation.
II)A large decrease in the price of automobiles.
III)A large reduction in the costs of producing gasoline.

Accepted Answer

A) I only 
B) II only 
C) I and II only 
D) II and III only 
E) I,II,and III 
A) I only 
B) II only 
C) I and II only 
D) II and III only 
E) I,II,and III

Question 16

Midcontinent Plastics makes 80 fiberglass truck hoods per day for large truck manufacturers.Each hood sells for $500.00.Midcontinent sells all of its product to the large truck manufacturers.Suppose the own price elasticity of demand for hoods is 0.4 and the price elasticity of supply is 1.5.
a.Compute the slope and intercept coefficients for the linear supply and demand equations.
b.If the local county government imposed a per unit tax of $25.00 per hood manufactured,what would be the new equilibrium price of hoods to the truck manufacturer?
c.Would a per unit tax on hoods change the revenue received by Midcontinent?

Accepted Answer

Given: P^* = $500 Q^* = 80 hoods per day E_d =

Question 17

We observe that both the price of and quantity sold of golf balls are rising over time.This is due to:

Accepted Answer

A) continual improvements in the technology used to produce golf balls. 
B) increases in the price of golf clubs over time. 
C) decreases in membership fees for country clubs with golf facilities. 
D) more stringent professional requirements on the quality of golf balls requiring producers to use more expensive raw materials. 
A) continual improvements in the technology used to produce golf balls. 
B) increases in the price of golf clubs over time. 
C) decreases in membership fees for country clubs with golf facilities. 
D) more stringent professional requirements on the quality of golf balls requiring producers to use more expensive raw materials.

Question 18

From 1970 to 1993,the real price of eggs decreased and the total annual consumption of eggs decreased.Which of the following would cause an unambiguous decrease in the real price of eggs and an unambiguous decrease in the quantity of eggs consumed?

Accepted Answer

A) A shift to the right in the supply curve for eggs and a shift to the right in the demand curve for eggs. 
B) A shift to the left in the supply curve for eggs and a shift to the right in the demand curve for eggs. 
C) A shift to the left in the supply curve for eggs and a shift to the left in the demand curve for eggs. 
D) none of the above 
A) A shift to the right in the supply curve for eggs and a shift to the right in the demand curve for eggs. 
B) A shift to the left in the supply curve for eggs and a shift to the right in the demand curve for eggs. 
C) A shift to the left in the supply curve for eggs and a shift to the left in the demand curve for eggs. 
D) none of the above

Question 19

Which of these measures the responsiveness of the quantity of one good demanded to an increase in the price of another good?

Accepted Answer

A) price elasticity. 
B) income elasticity. 
C) cross price elasticity. 
D) cross substitution elasticity. 
A) price elasticity. 
B) income elasticity. 
C) cross price elasticity. 
D) cross substitution elasticity.

Question 20

Consider a supply curve of the form: Q = c + dP.If d equals zero,then supply is:

Accepted Answer

A) completely inelastic. 
B) inelastic,but not completely inelastic. 
C) elastic,but not infinitely elastic. 
D) infinitely elastic 
A) completely inelastic. 
B) inelastic,but not completely inelastic. 
C) elastic,but not infinitely elastic. 
D) infinitely elastic

For most consumer goods,the own price elasticity of demand is

Elasticity measures

The cross-price elasticity of demand for peanut butter with respect to the price of jelly is -0.3.If we expect the price of jelly to decline by 15%,what is the expected change in the quantity demanded for peanut butter?

The price elasticity of gasoline supply in the U.S.is 0.4.If the price of gasoline rises by 8%,what is the expected change in the quantity of gasoline supplied in the U.S.?

Which of the following will cause the price of beer to rise?

Figure 2.1 -Refer to Figure 2.1.At point A,demand is:

If two goods are substitutes,the cross price elasticity of demand must be

Suppose that the short-run world demand and supply elasticities for crude oil are -0.076 and 0.088,respectively.The current price per barrel is $30 and the short-run equilibrium quantity is 23.84 billion barrels per year.Derive the linear demand and supply equations.

Figure 2.1 -Refer to Figure 2.1.At point E,demand is:

When an industry's raw material costs increase,other things remaining the same,

From 1970 to 1993,the real price of eggs decreased.Which of the following would cause an unambiguous decrease in the real price of eggs?

In the long run,new firms can enter an industry and so the supply elasticity tends to be

Which of the following would cause a rightward shift in the demand curve for gasoline? I.A large increase in the price of public transportation. II)A large decrease in the price of automobiles. III)A large reduction in the costs of producing gasoline.

We observe that both the price of and quantity sold of golf balls are rising over time.This is due to:

From 1970 to 1993,the real price of eggs decreased and the total annual consumption of eggs decreased.Which of the following would cause an unambiguous decrease in the real price of eggs and an unambiguous decrease in the quantity of eggs consumed?

Which of these measures the responsiveness of the quantity of one good demanded to an increase in the price of another good?

Consider a supply curve of the form: Q = c + dP.If d equals zero,then supply is:

Preliminaries

Consumer Behavior

Individual and Market Demand

Uncertainty and Consumer Behavior

Production

The Cost of Production

Profit Maximization and Competitive Supply

The Analysis of Competitive Markets

Market Power: Monopoly and Monopsony

Pricing With Market Power

Monopolistic Competition and Oligopoly

Game Theory and Competitive Strategy

Markets for Factor Inputs

Investment,time and Capital Markets

General Equilibrium and Economic Efficiency 1-83

Markets With Asymmetric Information

Externalities and Public Goods

Filters

Exam 2: The Basics of Supply and Demand

For most consumer goods,the own price elasticity of demand is

Elasticity measures

The cross-price elasticity of demand for peanut butter with respect to the price of jelly is -0.3.If we expect the price of jelly to decline by 15%,what is the expected change in the quantity demanded for peanut butter?

The price elasticity of gasoline supply in the U.S.is 0.4.If the price of gasoline rises by 8%,what is the expected change in the quantity of gasoline supplied in the U.S.?

Which of the following will cause the price of beer to rise?

Figure 2.1 -Refer to Figure 2.1.At point A,demand is:

If two goods are substitutes,the cross price elasticity of demand must be

Suppose that the short-run world demand and supply elasticities for crude oil are -0.076 and 0.088,respectively.The current price per barrel is $30 and the short-run equilibrium quantity is 23.84 billion barrels per year.Derive the linear demand and supply equations.

Figure 2.1 -Refer to Figure 2.1.At point E,demand is:

When an industry's raw material costs increase,other things remaining the same,

From 1970 to 1993,the real price of eggs decreased.Which of the following would cause an unambiguous decrease in the real price of eggs?

In the long run,new firms can enter an industry and so the supply elasticity tends to be

Which of the following would cause a rightward shift in the demand curve for gasoline? I.A large increase in the price of public transportation. II)A large decrease in the price of automobiles. III)A large reduction in the costs of producing gasoline.

We observe that both the price of and quantity sold of golf balls are rising over time.This is due to:

From 1970 to 1993,the real price of eggs decreased and the total annual consumption of eggs decreased.Which of the following would cause an unambiguous decrease in the real price of eggs and an unambiguous decrease in the quantity of eggs consumed?

Which of these measures the responsiveness of the quantity of one good demanded to an increase in the price of another good?

Consider a supply curve of the form: Q = c + dP.If d equals zero,then supply is:

Preliminaries

Consumer Behavior

Individual and Market Demand

Uncertainty and Consumer Behavior

Production

The Cost of Production

Profit Maximization and Competitive Supply

The Analysis of Competitive Markets

Market Power: Monopoly and Monopsony

Pricing With Market Power

Monopolistic Competition and Oligopoly

Game Theory and Competitive Strategy

Markets for Factor Inputs

Investment,time and Capital Markets

General Equilibrium and Economic Efficiency 1-83

Markets With Asymmetric Information

Externalities and Public Goods

Filters