Question 1

1pts

Using the midpoints method, calculate the price elasticity of demand of Good X using the following information: When the price of good X is $50, the quantity demanded of good X is 400 units. When the price of good X rises to $60, the quantity demanded of good X falls to 300 units.

Group of answer choices

The price elasticity of demand for good X = 1.57.

The price elasticity of demand for good X = 1.23.

The price elasticity of demand for good X = 0.64.

Flag this Question

Question 2

1pts

When a 5% increase in income causes a 3% drop in quantity demanded of a good

Group of answer choices

the income elasticity is .6 and the good is an inferior good.

the cross-price elasticity is .6 and the good is an inferior good.

the income elasticity is 1.67 and the good is a normal good.

Flag this Question

Question 3

1pts

Teenage workers are assumed to have ________ labor supply, therefore a 5% increase in wage would result in ________ percentage change in quantity of labor supplied.

Group of answer choices

elastic, less

inelastic, greater

elastic, greater

Flag this Question

Question 4

1pts

You are the manager of a restaurant and would like to increase revenue. The host staff suggests that you should increase the price of drinks and food, but the servers suggest decreasing the price of drinks and food. You are unsure if you should increase or decrease price, but you know that

Group of answer choices

the servers thinks demand for drinks and food is elastic.

the host staff thinks demand for drinks and food is elastic.

the servers think demand for drinks and food is inelastic.

Flag this Question

Question 5

1pts

Suppose you are in charge of sales at a pharmaceutical company, and your firm has a new drug that causes bald men to grow hair. Assume that the company wants to earn as much revenue as possible from this drug. If the elasticity of demand for your company's product at the current price is 1.4, what would you advise the company to do?

Group of answer choices

keep the price the same

lower the price

raise the price

Flag this Question

Question 6

1pts

A person who takes life-saving prescription drugs most likely has a(n) ________demand for that drug. Therefore an increase in the price of the drug will result in ________ total revenue for the drug company.

Group of answer choices

inelastic; decreased

inelastic; increased

elastic; increased

Flag this Question

Question 7

1pts

Suppose there is a major technological advance in the production of a good that causes production costs to fall. If demand for the product is relatively inelastic, what will happen in the market?

Group of answer choices

Price will relatively decrease less than the increase in quantity.

Price and quantity will change by the same amount.

Price will relatively decrease greater than the increase in quantity.

Flag this Question

Question 8

1pts

When income increases and the demand for a good increases, the good is considered a

Group of answer choices

complementary good.

normal good.

inferior good.

Flag this Question

Question 9

1pts

If consumers find cola and iced tea good substitutes, then it is likely that

Group of answer choices

the goods' price elasticities of demand are less than one.

the goods' income elasticities are less than zero.

the goods' cross price elasticities are greater than zero.

Flag this Question

Question 10

1pts

Suppose there is a major technological advance in the production of a good that causes production costs to fall. If demand for the product is relatively inelastic, what will happen in the market?

Group of answer choices

Price and quantity will change by the same amount.

Price will relatively decrease less than the increase in quantity.

Price will relatively decrease greater than the increase in quantity.