Eco05L4

  • 1

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    The figure illustrates the demand for hamburgers. When the price is $1.00 a hamburger, the elasticity of demand is __________ and a 1 percent increase in the price will _________ the quantity of hamburgers demanded by __________ percent.

    eco05001.gif

    5.00; decrease; 5.00
    2.50; increase; 2.50
    1.00; decrease; 0.40
    0.40; decrease; 0.40

  • 2

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    A decrease in the supply of sugar increases the price from $0.95 a packet to $1.05 a packet. The quantity decreases from 55 packets a day to 45 packets a day. The price elasticity of demand of sugar is ______.

    2.0
    -0.5
    0.5
    -2.0

  • 3

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    Suppose that taxation accountants increase the price for their service by 20 percent. The short-run demand for their service is less elastic than the long-run demand because in the long run consumers will ________________.

    find other ways to calculate the income tax they must pay
    try to avoid paying their income tax
    spend less on this service
    experience an increase in income

  • 4

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    The figure illustrates the demand for magazines. Newsagents will maximize their total revenue when they ________________________.

    eco05002.gif

    sell 375 magazines a day
    sell as many magazines as it can
    charge $2.50 a magazine
    sell 750 magazines a day

  • 5

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    When the price of a Caesar salad is $5.00, the demand for Caesar salads is elastic, and when the price is $4.00, the demand is unit elastic. If Mike's Roadside Restaurant cuts the price from $5.00 to $4.00, its total revenue from Caesar salads ___________________.

    will increase
    will remain the same
    will decrease
    might increase, decrease, or remain the same

  • 6

    •

    The figure illustrates the demand for peanuts. If the price falls from $12 to $9 a bag, total revenue will ______________, but if the price rises from $3 to $6 a bag, total revenue will ______________.

    eco05003.gif

    increase; increase
    decrease; decrease
    decrease; increase
    increase; decrease

  • 7

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    If tea and coffee are substitutes, the cross elasticity of coffee with respect to the price of tea will be _________ and an increase in the price of tea will _________ the demand for coffee.

    positive; increase
    negative; decrease
    negative; increase
    positive; decrease

  • 8

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    If a 5 percent increase in the price of good A leads to a 4 percent decrease in the demand for good B, then __________________.

    the goods are complements
    only one good is a normal good
    both goods are normal goods
    the goods are substitutes

  • 9

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    The income elasticity of demand of vacations is 5. If incomes increase by 3 percent next year, the quantity of vacations demanded at today's price will increase by _________ percent.

    15
    5/3
    3
    5

  • 10

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    If a 10 percent change in the price of a good leads to a 5 percent change in the quantity supplied, then the supply of the good is _______________ and the elasticity of supply is _____________.

    inelastic; 0.5
    elastic; -2.0
    inelastic; -0.5
    elastic; 2.0

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