13. The shift from S to S’ is called:

04 Jun 13. The shift from S to S’ is called:

Question
Question Points

1. If a 20% increase in the pricea of a good results in a 15% decrease in quantity demanded, the price elasticity of demand is:

a. 0.75.

b. 1.25.

c. 1.33.

d. 1.60.

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2. The case of perfectly elastic demand is illustrated by a demand curve that is:

a. vertical.

b. horizontal.

c. downward-sloping but relatively steep.

d. downward-sloping but relatively flat.

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3. Consider the market for new DVDs. If DVD players became cheaper, buyers expected DVD prices to fall next year, used DVDs became more expensive, and DVD production technology improved, then we could safely conclude that the equilibrium price of a new DVD would:

a. rise.

b. fall.

c. stay the same.

d. We couldn’t be sure what it might do.

4. Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is:

a. negative and therefore the good is an inferior good.

b. negative and therefore the good is a normal good.

c. positive and therefore the good is an inferior good.

d. positive and therefore the good is a normal good.

5. Suppose that quantity demand falls by 30% as a result of a 5% increase in price. The price elasticity of demand for this good is:

a. inelastic and equal to 6.

b. elastic and equal to 6.

c. inelastic and equal to 0.17.

d. elastic and equal to 0.17.

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6. Suppose scientists provide evidence that chocolate pudding increases the bad cholesterol levels of those who eat it. We would expect to see:

a. no change in the demand for chocolate pudding.

b. a decrease in the demand for chocolate pudding.

c. an increase in the demand for chocolate pudding.

d. a decrease in the supply of chocolate pudding.

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7. When a shortage exists in a market, sellers:

a. raise price, which increases quantity demanded and decreases quantity supplied, until the shortage is eliminated.

b. raise price, which decreases quantity demanded and increases quantity supplied, until the shortage is eliminated.

c. lower price, which increases quantity demanded and decreases quantity supplied, until the shortage is eliminated.

d. lower price, which decreases quantity demanded and increases quantity supplied, until the shortage is eliminated.

8. Total revenue will be at its largest value on a linear demand curve at:

a. the top of the curve, where prices are highest.

b. the midpoint of the curve.

c. the low end of the curve, where quantity demanded is highest.

d. None of the choices apply.

9. Currently you purchase 6 packages of hot dogs a month. You will graduate from college in December, and you will start a new job in January. You have no plans to purchase hot dogs in January. For you, hot dogs are:

a. a substitute good.

b. a normal good.

c. an inferior good.

d. a complementary good.

10. Today’s supply curve for gasoline could shift in response to:

a. a change in today’s price of gasoline.

b. a change in the expected future price of gasoline.

c. a change in the number of buyers of gasoline.

d. All of the choices apply.

11. When quantity demanded increases at every possible price, we know that the demand curve has:

a. shifted to the left.

b. shifted to the right.

c. not shifted; rather, we have moved along the demand curve to a new point on the same curve.

d. not shifted; rather, the demand curve has become steeper.

12. If the cross-price elasticity of two goods is positive, then those two goods are:

a. substitutes.

b. complements.

c. normal goods.

d. inferior goods.

13. The shift from S to S’ is called:

a. a decrease in supply.

b. a decrease in quantity supplied.

c. an increase in supply.

d. an increase in quantity supplied.

14. Pizza is a normal good if:

a. the demand for pizza rises when income rises.

b. the demand for pizza rises when the price of pizza falls.

c. the demand curve for pizza slopes downward.

d. the demand curve for pizza shifts to the right when the price of burritos rises, assuming pizza and burritos are substitutes.

15. At a price of $35:

a. there would be a shortage of 400 units.

b. there would be a surplus of 200 units.

c. there would be a surplus of 400 units.

d. there would be a surplus of 600 units.

16. Which of the following would be true as the price elasticity of supply approaches infinity?

a. Very small changes in price lead to very large changes in quantity supplied.

b. Very large changes in price lead to very small changes in quantity supplied.

c. Very small changes in price lead to no change in quantity supplied.

d. Very large changes in price lead to no change in quantity supplied.

17. If the demand for a product decreases, then we would expect:

a. equilibrium price to increase and equilibrium quantity to decrease.

b. equilibrium price to decrease and equilibrium quantity to increase.

c. equilibrium price and equilibrium quantity to both increase.

d. equilibrium price and equilibrium quantity to both decrease.

18. Which of the following could be the price elasticity of demand for a good for which an increase in price would decrease revenue?

a. 0

b. 0.5

c. 1

d. 1.5

19. In this market, equilibrium price and quantity, respectively, are:

a. $15 and 400.

b. $20 and 600.

c. $25 and 500.

d. $25 and 800.

20.

At a price of $20, which of the following statements in not correct?

a. The market is in equilibrium.

b. Equilibrium price is equal to equilibrium quantity.

c. There is no pressure for price to change.

d. The quantity of the good that is bought and sold is 600.