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Exam 6: Elasticity: the Responsiveness of Demand and Supply

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Question 121

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The price elasticity of an upward-sloping supply curve is always

A) positive.
B) negative.
C) greater than one.
D) impossible to determine.

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Question 122

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If at a price of $24,Octavia sells 36 home-grown orchids and at $30 she sells 24 home-grown orchids,the demand for her orchids is

A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly elastic.

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Question 123

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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.

When there few close substitutes available for a good,demand tends to be

Suppose a decrease in the supply of paper results in an increase in revenue.This indicates that

Holding everything else constant,the absolute value of the price elasticity of demand for Saucony tennis shoes is ________ the price elasticity of demand for tennis shoes in general.

The market demand for The Federalist Papers is likely to be more elastic than the market demand for a best-selling mystery novel.

When the price of Starbucks coffee increased by 8 percent,the quantity demanded of Peet's coffee increased by 10 percent.Calculate the cross-price elasticity of demand between Starbucks coffee and Peet's coffee.What is the relationship between the two products?

Suppose Tinsel Town Videos lowers the price of its movie club membership by 10 percent and as a result,CineArts Videos experienced a 16 percent decline in its movie club membership.What is the value of the cross-price elasticity between the two movie club memberships?

Which of the following could explain why the demand for table salt is inelastic?

Suppose you are considering buying stock in the stock market,and your objective is to maximize your net worth.Furthermore,your study of the market reveals that the economy will be slowing down over the next several months.Under these conditions,it would be best to purchase stock in companies that produce

Table 6-5 $\begin{array} { | c | c | } \hline \begin{array} { c } \text { Hourly } \\\text { Rental Rate } \\\text { (dollars) }\end{array} & \begin{array} { c } \text { Quantity Demanded } \\\text { (hours) }\end{array} \\\hline \$ 60 & 40 \\\hline 75 & 32 \\\hline 80 & 30 \\\hline 100 & 24 \\\hline\end{array}$ -Refer to Table 6-5.Katie Graham owns a kayak rental service in Santa Barbara.Table 6.5 shows her estimated demand schedule for kayak rentals per week.She would like to increase her sales revenue by changing the price she charges for rentals.At present she charges $75.Based on the information in the table,Katie

Article Summary Just days before the 2015 Super Bowl was played in Glendale,Arizona,the average price of a ticket on the secondary resale market was $10,352,more than three times the average price for the 2014 game.People who were able to purchase tickets at face value directly from the NFL paid prices ranging from $800 to $1,900 per ticket.The day before the game,ticket broker StubHub listed its least expensive seat at $8,049,while the most expensive seat was priced at more than $65,000. -Refer to the Article Summary.How would the NFL know if it was operating on the elastic portion of the demand curve for Super Bowl tickets?

The Mass Rapid Transit (MRT)System in Hong Kong has been running significant losses.Transport Ministry officials have argued over whether to raise fares to combat the losses.One argument against a fare increase is that it will aggravate traffic congestion on the streets during peak commuter hours.Suppose that the current fare is $4 and the government is considering raising it to $6.Officials estimate that this reduces the number of rides purchased from 10,000 to 8,000 per day. a.Using the midpoint formula,what is the estimated elasticity of demand for MRT rides? b.What does this elasticity of demand suggest to you about what will happen to total revenue earned by the transit system if the fare increase happens? c.Last year,the MRT system incurred a loss of $50,000 per day.Do you think the fare increase will resolve the deficit problem as well as Ministry officials anticipate? Explain.

The value of the price elasticity of supply depends primarily on how quickly firms can acquire inputs to increase quantity supplied when price increases.

Suppose you have surveyed a few industries and obtained information about the income elasticity of demand for their products.If you expect that the economy is headed for a long recession,you would advise people to look for jobs in an industry with

Suppose a frost destroys the tomato crop in California but farmers see an increase in their revenues.Which of the following best explains this?

Using cross-sectional data from the two Housing Assistance Supply Experiment (HASE) sites-Brown County,Wisconsin,and St.Joseph County,Indiana-John Mulford of Rand Research estimates the long-run "permanent" income elasticity of housing expenditures to be 0.45 for owners.Using this information,what is likely to happen to housing expenditures if the government increases income transfers to recipients in HASE sites?

Figure 6-10 -Refer to Figure 6-10.The supply curve on which price elasticity changes at every point is shown in

If tolls on a toll road can be raised significantly before commuters will consider using a free alternative,demand for using the toll road must be