Econ 101 - Microeconomics » Summer 2021 » iVAT Chapter 6

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Question #1
The price elasticity of demand is defined as the:
A.   Percentage change in price divided by the percentage change in quantity demanded.
B.   Change in quantity above the equilibrium
C.   Change in price divided by the change in quantity demanded.
D.   Percentage change in quantity demanded divided by percentage change in price.
E.   Change in quantity demanded divided by the change in price.
Question #2
The price elasticity of demand for heroin, an extremely addictive substance, is most likely:
A.   Equal to 1.
B.   Between 0 and 1.5.
C.   Less than 1.
D.   Is elastic in the short run and inelastic in the long run.
E.   Greater than 1.
Question #3
Elasticity's independence from units is useful:
A.   Because it causes the demand curve to invert.
B.   Because it enables us to compare the price sensitivities of various markets.
C.   Because it complicates the analysis.
D.   Because it enables a greater variety of units.
Question #4
A price elasticity of demand of 0.6 means that:
A.   quantity demanded changes 8 units for every $1 change in price.
B.   quantity demanded changes for each 9% for each 1% change in price.
C.   quantity demanded changes 1.2% for each 2% change in price.
D.   quantity demanded changes .6 units for every $1 change in price.
E.   quantity demanded changes 6% for each 1% change in price.
Question #5
If an economist estimated the price elasticity of demand for new cars to be 0.93. If the price of cars rose by 20%, one would expect the quantity of new cars demanded to:
A.   Fall by 18.6%.
B.   Rise by 40%.
C.   Rise by 49%.
D.   Fall by 0.93%.
E.   Rise by 0.93%.
Question #6
Why is it important to utilize the end-point problem elasticity formula when calculating elasticity along a demand or supply curve?
A.   Because you will get differing elasticity figures depending on whether you are analyzing a price increase or price decrease.
B.   Because you will get differing quantity figures depending on whether you are analyzing a price increase or price decrease.
C.   None of the available answers.
D.   Because you will get differing elasticity figures depending on whether you are analyzing supply or demand.
Question #7
Suppose that an economist estimated that for every 1% increase in wages for fast food workers, workers increased their supply of labor by 1.45%. This indicates that the price elasticity of supply for fast food workers is:
A.   In equilibrium
B.   Perfectly inelastic
C.   inelastic
D.   Elastic
E.   Perfectly elastic
Question #8
If a supply curve is vertical, it is:
A.   Elastic
B.   Perfectly inelastic
C.   In equilibrium
D.   Perfectly elastic
E.   Inelastic
Question #9
As you move down a demand curve and drop the price further and further:
A.   The price elasticity of demand moves toward being hyper-elastic.
B.   The price elasticity of demand moves toward being elastic.
C.   None of the available answers.
D.   The price elasticity of demand moves toward being inelastic.
Question #10
Suppose we have the following information for the following markets: Luxury Watches: ED=5 Coffee: ED=0.3 Question: Suppose that the supply curves increase and shift to the right in both markets. Which market's equilibrium price will change by the greatest amount?
A.   The coffee market's equilibrium price will drop by a lesser amount, in percentage terms, relative to the luxury watch market.
B.   The luxury watch market's equilibrium price will drop by an equal amount, in percentage terms, relative to the coffee market.
C.   The coffee market's equilibrium price will drop by a greater amount, in percentage terms, relative to the luxury watch market.
D.   The luxury watch market's equilibrium price will drop by a greater amount, in percentage terms, relative to the coffee market.
Question #11
Elasticity of supply is lower the shorter the time period considered because the shorter the time period:
A.   The lower the marginal cost of production.
B.   The higher the equilibrium.
C.   The higher the marginal cost of production.
D.   The fewer the options available for consumers to change consumption.
E.   The fewer options that are available for producers to change production.
Question #12
Which good would we expect to be the most inelastic?
A.   Sunglasses.
B.   Luxury watch.
C.   Apple Computer.
D.   Wheelchair.
Question #13
The price elasticity of demand for soda:
A.   In the State of California is greater than the price elasticity of demand for Sacramento.
B.   In Sacramento is greater than the price elasticity of demand for the State of California.
C.   In Sacramento is equal to the price elasticity of demand for the State of California.
D.   In Sacramento is less than the price elasticity of demand for the State of California.
Question #14
Suppose we have the following information concerning the price elasticity of demand for calculators: ED=3 Question: If the calculator manufacturer increases production what will happen to total revenue (TR)?
A.   TR will decrease.
B.   TR will stay the same.
C.   TR will initially increase, but will subsequently decrease.
D.   TR will increase.
Question #15
Suppose that an economist has estimated elasticity of demand for commuter rail transportation to be 0.4 in the short-run and 1.8 in the long run. An increase in rail fares would:
A.   Raise revenue in the short run but decrease revenue in the long run.
B.   Decrease revenue in both the short and long run.
C.   Decrease revenue in the short run but raise revenue in the long run.
D.   Raise revenue in both the short and long run.
E.   Decrease revenue only in the short run.
Question #16
Suppose we have the following information concerning the price elasticity of demand for calculators: ED=0.7 Question: If the calculator manufacturer increases production what will happen to total revenue (TR)?
A.   TR will stay constant.
B.   TR will decrease.
C.   TR will initially decrease, but will then subsequently increase.
D.   TR will increase.
Question #17
The fact that airlines charge business travelers more for the same airplane seat than leisure travelers is an example of:
A.   disequilibrium.
B.   a price control where the carrier charges those with greater elasticity a higher fare
C.   price discrimination where the carrier charges those with greater elasticity a lower fare.
D.   a price control where the carrier charges those with greater elasticity an equal fare
E.   price discrimination where the carrier charges those with greater elasticity a higher fare.
Question #18
Which of the following goods should have a positive income elasticity of demand?
A.   Spam.
B.   Instant Coffee.
C.   Payless Shoes.
D.   Louis Vuitton Shoes.
Question #19
Which of the following goods should have a positive cross-price elasticity of demand between one another?
A.   Coffee and sugar.
B.   Peanut butter and jelly.
C.   Business suits and ties.
D.   Mercedes-Benz and BMW automobiles.

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