Refer to the above diagram for the milk market. In this market, the equilibrium price is ____ and equilibrium quantity is ___.
a. $1.50 per gallon; 28 million gallons
b. $1.50 per gallon; 30 million gallons
c. $28 per gallon; 150 million gallons
d. $1.00 per gallon; 35 million gallons
6. The table below shows the weekly demand for hamburger in a market where there are just three buyers.
Suppose now that there are 200 buyers in a market, each with a demand schedule identical to Buyer 2 in the table above (no one is similar to either Buyer 1 or Buyer 3). What would the weekly quantity of hamburger demanded in the market at a price of $4 be?
7. College students living off-campus frequently consume large amounts of ramen noodles and boxed macaroni and cheese. When they finish school and start careers, their consumption of both goods frequently declines. This suggests that ramen noodles and boxed macaroni and cheese are
a. inferior goods.
b. normal goods.
c. complementary goods.
d. substitute goods.
8. A decrease in demand and an increase in supply will
a. affect price in an indeterminate way and decrease the equilibrium quantity.
b. increase price and affect the equilibrium quantity in an indeterminate way.
c. decrease price and affect the equilibrium quantity in an indeterminate way.
d. increase price and increase the equilibrium quantity.
9. The demand for most products varies directly with changes in consumer incomes. Such products are known as
a. complementary goods.
b. competitive goods.
c. inferior goods.
d. normal goods.
10. (Advanced analysis) The demand for commodity X is represented by the equation P = 100 – 2Q and supply by the equation P = 10 + 4Q. The equilibrium quantity is
11. Income elasticity measures the effect of a change in income on the purchases of some good or service.
12. The more time consumers have to adjust to a change in price,
a. the smaller will be the price elasticity of demand.
b. the greater will be the price elasticity of demand.
c. the more likely the product is a normal good.
d. the more likely the product is an inferior good.
13. The Bear 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 Bear 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.
Refer to the information. Over the $7–$5 price range, demand is
a. perfectly elastic.
b. perfectly inelastic.
15. An income elasticity coefficient of −1.8 means the product is a normal good.
16. Supply curves tend to be
a. perfectly elastic in the long run because consumer demand will have sufficient time to adjust fully to changes in supply.
b. more elastic in the long run because there is time for firms to enter or leave the industry.
c. perfectly inelastic in the long run because the law of scarcity imposes absolute limits on production.
d. less elastic in the long run because there is time for firms to enter or leave an industry.
17. If quantity demanded is completely unresponsive to price changes, demand is
a. perfectly inelastic.
b. perfectly elastic.
c. relatively inelastic.
d. relatively elastic.
18. A perfectly inelastic demand schedule
a. rises upward and to the right but has a constant slope.
b. can be represented by a line parallel to the vertical axis.
c. cannot be shown on a two-dimensional graph.
d. can be represented by a line parallel to the horizontal axis.
19. We would expect the cross elasticity of demand between Pepsi and Coke to be
a. positive, indicating normal goods.
b. positive, indicating inferior goods.
c. positive, indicating substitute goods.
d. negative, indicating substitute goods.
20. If the demand for bacon is relatively elastic, a 10 percent decline in the price of bacon will
a. decrease the amount demanded by more than 10 percent.
b. increase the amount demanded by more than 10 percent.
c. decrease the amount demanded by less than 10 percent.
d. increase the amount demanded by less than 10 percent.
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