Microeconomics - Practice Problems Chapter 6 - Custom Scholars
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Microeconomics – Practice Problems Chapter 6

question
Price elasticity of demand measures
answer
how responsive quantity demanded is to a change in price.
question
Suppose the value of the price elasticity of demand is -3. What does this mean?
answer
A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent.
question
If the percentage increase in price is 15 percent and the value of the price elasticity of demand is -3, then quantity demanded...
answer
will decrease by 45 percent.
question
If demand is inelastic, the absolute value of the price elasticity of demand is...
answer
less than one.
question
If 50 units are sold at a price of $20 and 80 units are sold at a price of $15, what is the absolute value of the price elasticity of demand? Use the midpoint formula.
answer
1.62
question
Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from $120 a ton to $180 a ton and quantity sold decreased from 800 tons to 240 tons. What is the absolute value of the price elasticity of demand?
answer
2.69
question
Jaycee Jeans sold 40 pairs of jeans at a price of $40. When it lowered its price to $20, the quantity sold increased to 60 pairs. Calculate the absolute value of the price elasticity of demand. Use the midpoint formula.
answer
0.6
question
If a 35 percent increase in price of golf balls led to a 42 percent decrease in quantity demanded, then the demand for golf balls is...
answer
relatively elastic.
question
When there few close substitutes available for a good, demand tends to be...
answer
relatively inelastic.
question
Which of the following goods would have the most inelastic demand?
answer
bread
question
Total revenue equals
answer
price per unit times quantity sold.
question
When demand is elastic, a fall in price causes total revenue to rise because
answer
the increase in quantity sold is large enough to offset the lower price.
question
If the price elasticity of demand for canned soup is estimated at -1.62. What happens to sales revenue if the price of canned soup rises?
answer
It falls.
question
Calculate the income elasticity if an 8 percent increase in income leads to a 4 percent increase in quantity demanded for organic produce.
answer
0.5
question
If the cross-price elasticity of demand for computers and software is negative, this means the two goods are
answer
complements
question
Suppose Pump-U-Up lowers the price of its gym membership by 10 percent and as a result, Sweat-It-Out experienced a 16 percent decline in its gym membership. What is the value of the cross-price elasticity between the two gym memberships?
answer
1.6
question
If the cross-price elasticity of demand between Breeze Detergent and Faber Detergent is a relatively large positive number, then it indicates that
answer
the two brands of detergent are close substitutes.
question
If a 5 percent increase in income leads to a 10 percent decrease in quantity demanded for a product,
answer
an inferior good.
question
Last year, Joan bought 50 pounds of hamburger when her household income was $40,000. This year, her household income was only $30,000 and Joan bought 60 pounds of hamburger. Holding everything else constant, Joan's income elasticity of demand for hamburger is
answer
negative, so Joan considers hamburger to be an inferior good.
question
Suppose a 4 percent increase in price results in a 2 percent increase in the quantity supplied of a good. Calculate the price elasticity of supply and characterize the product.
answer
0.5; The product is inelastic.
question
Suppose that the price of a money clip increases from $0.75 to $0.90 and quantity supplied rises from 8,000 units to 10,000 units. Use the midpoint formula to calculate the price elasticity of supply.
answer
1.22
question
The price elasticity of the supply of teenage labor services is approximately 1.36. Suppose the minimum wage rises from $7.25 per hour to $8.75. Using the midpoint formula, what is theapproximate change in the quantity of teenage labor supplied?
answer
25.5 percent
question
The price elasticity of supply is usually a positive number because
answer
quantity supplied increases in response to price increases.
1 of 23
question
Price elasticity of demand measures
answer
how responsive quantity demanded is to a change in price.
question
Suppose the value of the price elasticity of demand is -3. What does this mean?
answer
A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent.
question
If the percentage increase in price is 15 percent and the value of the price elasticity of demand is -3, then quantity demanded...
answer
will decrease by 45 percent.
question
If demand is inelastic, the absolute value of the price elasticity of demand is...
answer
less than one.
question
If 50 units are sold at a price of $20 and 80 units are sold at a price of $15, what is the absolute value of the price elasticity of demand? Use the midpoint formula.
answer
1.62
question
Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from $120 a ton to $180 a ton and quantity sold decreased from 800 tons to 240 tons. What is the absolute value of the price elasticity of demand?
answer
2.69
question
Jaycee Jeans sold 40 pairs of jeans at a price of $40. When it lowered its price to $20, the quantity sold increased to 60 pairs. Calculate the absolute value of the price elasticity of demand. Use the midpoint formula.
answer
0.6
question
If a 35 percent increase in price of golf balls led to a 42 percent decrease in quantity demanded, then the demand for golf balls is...
answer
relatively elastic.
question
When there few close substitutes available for a good, demand tends to be...
answer
relatively inelastic.
question
Which of the following goods would have the most inelastic demand?
answer
bread
question
Total revenue equals
answer
price per unit times quantity sold.
question
When demand is elastic, a fall in price causes total revenue to rise because
answer
the increase in quantity sold is large enough to offset the lower price.
question
If the price elasticity of demand for canned soup is estimated at -1.62. What happens to sales revenue if the price of canned soup rises?
answer
It falls.
question
Calculate the income elasticity if an 8 percent increase in income leads to a 4 percent increase in quantity demanded for organic produce.
answer
0.5
question
If the cross-price elasticity of demand for computers and software is negative, this means the two goods are
answer
complements
question
Suppose Pump-U-Up lowers the price of its gym membership by 10 percent and as a result, Sweat-It-Out experienced a 16 percent decline in its gym membership. What is the value of the cross-price elasticity between the two gym memberships?
answer
1.6
question
If the cross-price elasticity of demand between Breeze Detergent and Faber Detergent is a relatively large positive number, then it indicates that
answer
the two brands of detergent are close substitutes.
question
If a 5 percent increase in income leads to a 10 percent decrease in quantity demanded for a product,
answer
an inferior good.
question
Last year, Joan bought 50 pounds of hamburger when her household income was $40,000. This year, her household income was only $30,000 and Joan bought 60 pounds of hamburger. Holding everything else constant, Joan's income elasticity of demand for hamburger is
answer
negative, so Joan considers hamburger to be an inferior good.
question
Suppose a 4 percent increase in price results in a 2 percent increase in the quantity supplied of a good. Calculate the price elasticity of supply and characterize the product.
answer
0.5; The product is inelastic.
question
Suppose that the price of a money clip increases from $0.75 to $0.90 and quantity supplied rises from 8,000 units to 10,000 units. Use the midpoint formula to calculate the price elasticity of supply.
answer
1.22
question
The price elasticity of the supply of teenage labor services is approximately 1.36. Suppose the minimum wage rises from $7.25 per hour to $8.75. Using the midpoint formula, what is theapproximate change in the quantity of teenage labor supplied?
answer
25.5 percent
question
The price elasticity of supply is usually a positive number because
answer
quantity supplied increases in response to price increases.
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