Economics: Supply and Demand Essay Example
Micro Chapter 18 Practice Problems #3 Key
1. Which is not characteristic of a product with relatively inelastic demand? A) The good is regarded by consumers as a necessity. B) There are a large number of good substitutes for the good. C) Buyers spend a small percentage of their total income on the product. D) Consumers have had only a short time period to adjust to changes in price.
Answer: B
2. The demand for Cheerios cereal is more price-elastic than the demand for cereals as a whole. This is best explained by the fact that: A) Cheerios are a luxury. B) cereals are a necessity. C) there are more substitutes for Cheerios than for cereals as a whole. D) consumption of cereals as a whole is greater than consumption of Cheerios.
Answer: C
3. The price elasticity of demand will increase with the length of the period to which the demand curve pertains because: A) consumers' incomes will increase. B) the demand curve will shift outward. C) all prices will increase over time. D) consumers will be better able to find substitutes.
Answer: D
4. To economists the main differences between "the short run" and "the long run" are that: A) the law of diminishing returns applies in the long run, but not in the short run. B) in the short run all resources are fixed, while in the long run all resources are variable. C) in the long run all resources are variable, while in the short run at least one resource is fixed. D) fixed costs are more important to decision making in the long run than they are in the short run.
Answer: C
5. A state government wants to increase the taxes on cigarettes to increase tax revenue. This tax would only be effective in raising new tax revenues if the price elasticity of demand is: A) unity. B) elastic. C) inelastic. D) perfectly elastic.
Answer: C
6. You are the newly appointed sales manager of the Rock Record Company and have been charged with the task of increasing
1. Which is not characteristic of a product with relatively inelastic demand? A) The good is regarded by consumers as a necessity. B) There are a large number of good substitutes for the good. C) Buyers spend a small percentage of their total income on the product. D) Consumers have had only a short time period to adjust to changes in price.
Answer: B
2. The demand for Cheerios cereal is more price-elastic than the demand for cereals as a whole. This is best explained by the fact that: A) Cheerios are a luxury. B) cereals are a necessity. C) there are more substitutes for Cheerios than for cereals as a whole. D) consumption of cereals as a whole is greater than consumption of Cheerios.
Answer: C
3. The price elasticity of demand will increase with the length of the period to which the demand curve pertains because: A) consumers' incomes will increase. B) the demand curve will shift outward. C) all prices will increase over time. D) consumers will be better able to find substitutes.
Answer: D
4. To economists the main differences between "the short run" and "the long run" are that: A) the law of diminishing returns applies in the long run, but not in the short run. B) in the short run all resources are fixed, while in the long run all resources are variable. C) in the long run all resources are variable, while in the short run at least one resource is fixed. D) fixed costs are more important to decision making in the long run than they are in the short run.
Answer: C
5. A state government wants to increase the taxes on cigarettes to increase tax revenue. This tax would only be effective in raising new tax revenues if the price elasticity of demand is: A) unity. B) elastic. C) inelastic. D) perfectly elastic.
Answer: C
6. You are the newly appointed sales manager of the Rock Record Company and have been charged with the task of increasing