The larger the positive cross elasticity coefficient of demand between products X and Y, the: |
greater their substitutability. |

We would expect the cross elasticity of demand between dress shirts and ties to be |
negative, indicating complementary goods. |

Which of the following is correct? |
If demand is elastic, a decrease in price will increase total revenue. |

Suppose that the price of peanuts falls from $3 to $2 per bushel and that, as a result, the total revenue received by peanut farmers changes from $16 to $14 billion. Thus: |
the demand for peanuts is inelastic. |

The more time consumers have to adjust to a change in price: |
If the demand for farm products is price inelastic, a good harvest will cause farm revenues to: |

The price elasticity of demand for widgets is 0.80. Assuming no change in the demand curve for widgets, a 16 percent increase in sales implies a: |
20 percent reduction in orice |

Suppose that the above total revenue curve is derived from a particular linear demand curve. That demand curve must be: |
unit elastic for price increases that reduce quantity demanded from 5 units to 4 units. |

If the income elasticity of demand for lard is -3.00, this means that: |
ard is an inferior good. |

Suppose that a 20 percent increase in the price of normal good Y causes a 10 percent decline in the quantity demanded of normal good X. The coefficient of cross elasticity of demand is: |
negative and therefore these goods are complements |

The main determinant of elasticity of supply is the: |
amount of time the producer has to adjust inputs in response to a price change |

Refer to the above information and assume the stadium capacity is 5,000. If the Mudhens’ management charges $7 per ticket: |
there will be 1,000 empty seats. |

The price of old baseball cards rises rapidly with increases in demand because: |
the supply of old baseball cards is inelastic. |

The demand for a product is inelastic with respect to price if: |
consumers are largely unresponsive to a per unit price change |

If a price reduction reduces a firm’s total revenue: |
the demand for the product is inelastic in this price range |

In which of the following instances will total revenue decline? |
price rises and demand is elastic |

Suppose the income elasticity of demand for toys is +2.00. This means that: |
a 10 percent increase in income will increase the purchase of toys by 20 percent. |

Answer the next question(s) on the basis of the following demand schedule:Refer to the above data. Which of the following is correct? |
Although the slope of the demand curve is constant, price elasticity declines as we move from high to low price ranges. |

The maker of a particular breakfast cereal found that increasing the price from $3.00 to $3.25 per box had no impact on total revenue, but increasing the price further to $3.50 reduced total revenue by 2%. Thus, the demand for the cereal is: |
unit elastic over the range $3.00 to $3.25 and elastic over the range $3.25 to $3.50 |

Refer to the diagram. In this competitive market, combined consumer and producer surplus is maximized at: |
H |

Most demand curves are relatively elastic in the upper-left portion because the original price: |
from which the percentage price change is calculated is large and the original quantity from which the percentage change in quantity is calculated is small |

The coefficient of price elasticity is 0.2. Demand is thus |
relatively inelastic |

Assume there is an increase in the demand for hand calculators. The subsequent: |
increase in price will be greater the greater the inelasticity of supply. |

Refer to the above information and assume the stadium capacity is 5,000. The supply of seats for the game: |
is perfectly inelastic. |

Refer to the above information. Over the 5 price range, demand is |
inelsatic |

Refer to the diagram. Between the prices of $10 and $8, the price elasticity of demand is |
.9 |

The cross elasticity of demand between two goods is reported to be +0.2. This implies that: |
2 goods are substitues |

The supply of product X is inelastic (but not perfectly inelastic) if the price of X rises b |
7 percent and quantity supplied rises by 5 percent |

Suppose legalizationand subsequent regulationof heroin and cocaine reduces their prices by 50%. Estimates suggest the total quantity of heroin and cocaine demanded would rise by 83% and 42%, respectively. Consequently, legalization would: |
increase total expenditures on heroine and decrease total expenditures on cocaine |

Refer to the diagram. Suppose total revenue at price P3 is the same as at price P2. Then, over the price range from P2 to P3, demand is: |
unit elastic |

Suppose Aiyanna’s Pizzeria currently faces a linear demand curve and is charging a very high price per pizza and doing very little business. Aiyanna now decides to lower pizza prices by 5 percent per week for an indefinite period of time. We can expect that each successive week: |
demand will become less price elastic |

The elasticity of demand for a product is likely to be greater: |
the greater the amount of time over which buyers adjust to a price change |

Suppose that a 2% increase in income in the economy decreases the quantity of gadgets demanded by 1% at every possible price. This implies that |
income elasticity is negative and gadgets are an inferior good |

The demand for autos is likely to be: |
less elastic than the demand for Honda Accords. |

Cross elasticity of demand measures how sensitive purchases of a specific product are to changes in: |
the price of some other product. |

The demand for a necessity whose cost is a small component of one’s total income is: |
relatively inelastic |

Over the 8 price range, the elasticity coefficient of supply is: |
less than 1. |

Suppose that when your income increases from $28,000 to $30,000 per year, your purchases of X increase from 4 to 5 units because of that income increase. Thus: |
the demand for X is elastic with respect to income. |

If the price elasticity of demand for a product is 2.5, then a price cut from $2.00 to $1.80 will: |
increase the quantity demanded by about 25 percent. |

Assume that the price of product Y decreases by 5% and the quantity supplied decreases by 2%. The coefficient of price elasticity of supply for good Y is |
less than one and therefore supply is inelastic |

Which of the following is likely to have the most elastic demand? |
Dole brand bananas |

Assume that a 4 percent increase in income in the economy produces an 8 percent increase in the quantity demanded of good X. The coefficient of income elasticity of demand is: |
positive and therefore X is a normal good. |

Suppose that the above total revenue curve is derived from a particular linear demand curve. That demand curve must be: |
inelastic for price declines that increase quantity demanded from 6 units to 7 units. |

Refer to the above information and assume the stadium capacity is 5,000. If the Mudhens’ management wanted a full house for the game, it would |
set ticket prices at $5 |

Suppose that the above total revenue curve is derived from a particular linear demand curve. That demand curve must be |
elastic for price increases that reduce quantity demanded from 4 units to 3 units. |

The elasticity of supply of product X is unitary if the price of X rises by: |
8 percent and quantity supplied rises by 8 percent. |

We would expect the cross elasticity of demand between Pepsi and Coke to be |
positive, indicating substitute goods. |

Amanda buys a ruby for $330 for which she was willing to pay $340. The minimum acceptable price to the seller, Tony, was $140. Amanda experiences: |
a consumer surplus of $10 and Tony experiences a producer surplus of $190. |

If the price of hand calculators falls from $10 to $9 and, as a result, the quantity demanded increases from 100 to 125, then |
demand is elastic |

# macro chapter 2

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