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Chap Pre-Test 06 e18 Student: ___________________________________________________________________________ 1. What is the most likely effect of the development of television, videocassette players, and rental movies on the movie theater industry? A. Decreased costs of producing movies B. Increased demand for movie theater tickets C. Movie theater tickets become an inferior good D. Increased price elasticity of demand for movie theater tickets 2. Tickets to a university football game always sell out. In this case, the: A. Demand for tickets is highly inelastic B. Demand for tickets is highly elastic C. Supply of tickets is highly inelastic D. Supply of tickets is highly elastic 3. If a product has a short-run elasticity of supply equal to zero, then an increase in the demand for the product will: A. Have no effect on price or quantity sold B. Increase price and leave quantity sold unchanged C. Increase price and reduce the quantity sold to zero D. Leave the price unchanged and reduce the quantity sold Answer the next question(s) based on the following table. 4. Refer to the above table. The price elasticity of demand in the range from $4 to $3 is: A. 1.25 B. 1.00 C. .75 D. .50 5. The Mear Corporation finds that its total spending on machine parts increases after the price of machine parts falls, other things being equal. Which of the following is true about the Mear Corporation's demand for machine parts with the price change? A. It is unit elastic B. It is price elastic C. It is price inelastic D. It is perfectly inelastic 6. Suppose the price elasticity of supply for crude oil is 2.5. How much would price have to rise to increase production by 20 percent? A. 8 percent B. 12.5 percent C. 20 percent D. 45 percent 7. An increase in the price of tickets to a popular sporting event will increase total revenue if: A. There are many substitutes for the product B. The ticket is considered to be a luxury C. The demand for tickets is inelastic D. The demand for tickets is elastic 8. Refer to the above graph. If the output level is now Q2, then the sum of the consumer and producer surplus is: A. acd B. ac0 C. abe0 D. bce + gcf 9. The supply curve for cars will be more elastic the: A. Greater the quantity demanded B. Longer the time interval considered C. Greater the decline in input prices D. Less able producers are to make other goods 10. Refer to the above table. If the equilibrium price increases, then the: A. Producer surplus will decrease B. Consumer surplus will increase C. Producer surplus will increase D. Consumer surplus will decrease 11. A study shows that the coefficient of the cross price elasticity of Coke and Sprite is positive. This information indicates that Coke and Sprite are: A. Normal goods B. Complementary goods C. Substitute goods D. Independent goods 12. The cross elasticity of demand between bikes and bike helmets is likely to be: A. Zero B. A negative number C. A positive number greater than 1 D. A positive number between zero and 1 13. In which range of the demand schedule below is demand price elastic? A. $0-$1 B. $1-$3 C. $3-$5 D. $5-$7 14. Consider the demand curve above. If area 0ABC is smaller than area 0DEF, we may conclude that demand in this range is: A. Price-inelastic B. Income-inelastic C. Price-elastic D. Income-elastic 15. The elasticity of supply for a product such as automobiles will normally be greater over a time period of: A. 1 month B. 6 months C. 1 year D. 5 years 16. At a price of $20 per unit, 140 units of good W are demanded and 100 units are supplied. When the price is raised to $30 per unit, 100 units are demanded and 140 units are supplied. The price elasticity of supply in this range is: A. 1.0 B. .833 C. .417 D. 1.20 17. Which is inconsistent with an elastic demand curve? A. The elasticity coefficient fractional is B. Total revenues fall when prices rise C. Buyers are relatively sensitive to price changes D. The relative change in quantity exceeds the relative change in price 18. A firm produces and sells two goods, A and B. Good A is known to have many close substitutes; good B makes up a significant portion of most families' budgets. A price increase for each good would most likely cause total revenues from good A to: A. Increase and total revenues from good B to decrease B. Increase and total revenues from good B to increase C. Decrease and total revenues from good B to increase D. Decrease and total revenues from good B to decrease Answer the next question(s) based on information in the following table. 19. Refer to the above table. Which product would be an inferior good? A. Product W B. Product X C. Product Y D. Product Z 20. Jena is willing to pay $75 for a pair of shoes and Jane is willing to pay $85 for a pair of shoes. The actual price that each has to pay for a pair of shoes is $65. What is the combined amount of consumer surplus of Jena and Jane? A. $20 B. $30 C. $130 D. $160 21. Which demand curve above is relatively more elastic between P1 and P2? A. D1 B. D2 C. D3 D. D4 Answer the next question(s) based on the following data. 22. Refer to the above data. Over which price range is the price elasticity of demand inelastic? A. $20-$18 B. $18-$16 C. $12-$10 D. $10-$8 23. A consumer's weekly income is $300 and the consumer buys 5 bars of chocolate per week. When income increases to $330, the consumer buys 6 bars per week. The income elasticity of demand for chocolate by this consumer is about: A. 0 B. .5 C. 1 D. 2 24. If a union argues that a price cut will boost revenues of the firm and management argues that the opposite is true, then the price elasticity of demand is: A. Unit-elastic from the union's perspective and unit-inelastic from management's perspective B. Perfectly inelastic from the union's perspective and perfectly elastic from management's perspective C. Elastic from the union's perspective; inelastic from management's perspective D. Inelastic from the union's perspective; elastic from management's perspective 25. Refer to the above table. The largest decline in total revenue is found between prices: (Use Q4) A. $5 and $4 B. $4 and $3 C. $3 and $2 D. $2 and $1 26. Refer to the above graph. If the output level is now Q1, then there are efficiency or deadweight losses shown by area (Use Q8) A. cfg B. bce C. cef D. bcg 27. Refer to the above graph. Consider a situation where price increases from P3 to P4. In this price range, demand is relatively: A. Inelastic because the loss in total revenue (areas E + F + G) is greater than the gain in total revenue (area A) B. Elastic because the loss in total revenue (areas E + F + G) is greater than the gain in total revenue (area A) C. Elastic because the loss in total revenue (area A) is greater than the gain in total revenue (areas E + F + G) D. Inelastic because the loss in total revenue (area A) is greater than the gain in total revenue (areas E + F + G) 28. Cross elasticity of demand between complementary products is: A. Positive but less than 1 B. Unitary C. Zero D. Negative 29. The difference between the maximum price a consumer is willing to pay for a product and the actual price the consumer pays is the consumer: A. Utility B. Surplus C. Supply D. Efficiency 30. The cross elasticity of demand between Quaker State motor oil and Texaco motor oil is likely to be: A. Zero B. A positive number C. A negative number less than -1 D. A negative number between zero and -1 Pre-Test Chap 06 e18 Key 1. D 2. C 3. B 4. D 5. B 6. A 7. C 8. b 9. B 10. C 11. C 12. B 13. D 14. C 15. D 16. B 17. A 18. D 19. C 20. B 21. A 22. D 23. D 24. C 25. D 26. B 27. B 28. D 29. B 30. B ... View Full Document

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