CH 19 & 20 HW

Question 1

At a price of ​$17.00 to play 18 holes on a golf​ course, 125 consumers pay to play a game of golf each day. Increasing the price to ​$21.50 causes the number of consumers to decline to 85.

What is the price elasticity of​ demand, expressed as a positive​ number? _____ (Round your answer to two decimal​ places.)

The demand is _____

Answer 1

-1.65

elastic

Question 2

It is very difficult to find goods with perfectly elastic or perfectly inelastic demand. We​ can, however, find goods that lie near these extremes. Characterize the demand for the following goods as being near perfectly elastic or near perfectly inelastic.

a. Corn grown and harvested by a small farmer in Iowa
b. Heroin for a drug addict
c. Water for a desert hiker
d. One of several optional textbooks in a​ pass-fail course

Answer 2

near perfectly elastic demand

near perfectly inelastic demand

near perfectly inelastic demand

near perfectly elastic demand

Question 3

In a local​ market, the monthly price of Internet access service decreases from ​$30 to ​$20​, and the total quantity of monthly accounts across all Internet access providers increases from 90 comma 000 to 190 comma 000.

What is the value price elasticity of​ demand, expressed as a positive​ number? ​_____ (Round your answer to two decimal​ places.)

The demand is _____

Answer 3

1.79

elastic

Question 4

What does the price elasticity of demand​ measure?

Answer 4

The responsiveness of quantity demanded to a change in the price of a good.

Question 5

If a firm increases the price of their product in the elastic portion of the demand​ curve, total revenues will

Answer 5

decrease

Question 6

Total revenues are maximized

Answer 6

at the point of​ unit-elasticity on the demand curve.

Question 7

A DVD store lowered the price of its DVDs from ​$20 to ​$16. ​Correspondingly, sales increased from 1 comma 200 units to 2 comma 000 units per month.

Using total revenue​ calculations, we can say​ that, given this change in​ price, total revenue _____

In this​ case, demand is _____

Answer 7

increased

elastic

Question 8

The absolute value of the​ short-run elasticity of demand for bread has been estimated to be 0.15. Its​ long-run elasticity of demand is

Answer 8

more than 0.15

Question 9

The price elasticity of demand for a particular commodity depends upon all of the following except

Answer 9

availability of complementary goods.

Question 10

For Kelly, there is no substitute for Diet Coke. It is the only thing she likes to drink.

Based only from this information, Kelly’s demand for Diet Coke would be expected to be _____

Answer 10

relatively inelastic

Question 11

An 8 percent increase in the price of digital apps reduces the amount of tablet devices demanded by 7 percent.

The cross price elasticity of demand is _____ ​(Enter your response rounded to two decimal places and include a minus sign if​ necessary.)

The cross price elasticity of demand indicates that tablet devices and digital apps are _____

Answer 11

-0.87

compliments

Question 12

Which of the following is​ true?
A. Income elasticity is positive for normal goods where the quantity demanded falls as income falls.

B. Income elasticity is negative for inferior goods where the quantity demanded falls as income rises.

C. Income elasticity is positive for normal goods where the quantity demanded rises as income rises.

D. Income elasticity is negative for inferior goods where the quantity demanded rises as income falls.

E. All of the above.

If the income elasticity of demand for hot dogs is negative 1.32​, hot dogs are _____ good and if the income elasticity of demand for lobster is 1.25​, lobster is _____ good.

Answer 12

All of the above

an inferior

a normal

Question 13

Price elasticity of supply is calculated by dividing the percentage change in _____ by the percentage change in _____.
​
Usually, price elasticities of supply are _____ – higher prices yield _____ quantities supplied.
​
Long-run supply curves are _____ elastic than​ short-run supply curves because the _____ the time​ allowed, the more resources can flow into or out of an industry when price changes.

Answer 13

quantity supplied; price

positive, greater

more; longer

Question 14

The campus pizzeria sells a large pizza for ​$14. When you buy a second large pizza​, ​however, its price is only ​$10. How does this relate to marginal​ utility?

Answer 14

Since marginal utility falls as additional units of the good are​ consumed, consumers are only willing to purchase more as the price falls.

Question 15

Consider the movements that take place from one point to the next​ (A to B to C and so​ on) along the total utility curve at right as the individual successively increases consumption by one more​ unit, and answer the questions that follow.

Which​ one-unit increase in consumption from one point to the next along the total utility curve generates the highest marginal​ utility?

Which​ one-unit increase in consumption from one point to the next along the total utility curve generates zero marginal​ utility?

Which​ one-unit increase in consumption from one point to the next along the total utility curve generates negative marginal​ utility?

Answer 15

A to B

E to F

F to G

Question 16

Consider the figures to the right. Suppose that the individual currently consumes 4 digital apps. What happens to the​ person’s total utility if he were to increase his consumption to 5 ​units? Why does this fact imply that the marginal utility curve cuts through the horizontal axis of the lower figure between the fourth and fifth app​ consumed?

Increasing consumption to 5 apps from 4 apps leaves total utility _____ at _____ utils in the upper figure.​ Hence, the marginal utility between these two quantities of apps equals _____, which is the value of the _____
axis in the lower figure.​ Thus, the marginal utility curve crosses the _____ axis of the lower figure between units 4 and 5. ​(Enter your responses as whole​ numbers.)

Answer 16

unchanged

20

0

horizontal

horizontal

Question 17

What is the difference between total utility and marginal​ utility?

Answer 17

Total utility is the total amount of satisfaction derived from consuming a certain amount of a good while marginal utility is the additional satisfaction gained from consuming an additional unit of the good.

Question 18

Ryan is deciding between attending Western State University and Eastern State University. He cannot attend both universities simultaneously. Both are fine​ universities, but the reputation of Western is slightly​ higher, as is the tuition. Let MU Subscript Upper E and MU Subscript Upper W be​ Ryan’s marginal utilities from attending Eastern and Western State Universities respectively and Upper P Subscript Upper E and Upper P Subscript Upper W be the prices of attending Eastern and Western State Universities. Using the rule of consumer​ optimum, Ryan will decide to

Answer 18

attend Eastern State​ University, if MU Subscript Upper E Over Upper P Subscript Upper E exceeds MU Subscript Upper W Over Upper P Subscript Upper W

Question 19

At a consumer optimum involving goods A and​ B, the marginal utility of good A is four times the marginal utility of good B.

The price of good B is ​$4.00. The price of good A is _____

Answer 19

$16.00

Question 20

Suppose the price of apples falls relative to other similar​ goods, and as a result the quantity of apples demanded increases. This is caused by _____

Answer 20

substitution effect

Question 21

When the price of gasoline increases​, Jonathan buys less gasoline and less of all other goods.

This information describes _____

Answer 21

the real income effect of a price increase.

Question 22

Tania spends her income on donuts and coffee. If Tania is at her consumer optimum and the price of donuts​ decreases, she will spend​ _____ on​ donuts, which will cause the marginal utility from consuming donuts to​ _____.

Answer 22

more; fall

Question 23

To remain in consumer​ optimum, a price decrease requires _____in consumption. A price increase requires
_____in consumption.

Each change in price has a substitution effect. When the price of a good _____, the consumer _____in favor of that relatively cheaper good.

Each change in price also has a ​real-income effect. When price _____, the​ consumer’s real purchasing power​ increases, causing the consumer to purchase _____of most goods. Assuming that the principle of diminishing marginal utility​ holds, the demand curve must slope downward.

The price of water is lower than the price of diamonds because people consume _____ water than​ diamonds, which results in a _____ marginal utility of water compared with the marginal utility of diamonds.

Answer 23

an increase; a decrease

falls; substitute

falls; more

more; lower

Question 24

Most economists

Answer 24

apply the assumption that people behave as if they act rationally with an aim to maximize utility.

Question 25

Advocates of applying behavioral economics to consumer choice theory argue that _____ prevents people from accounting for every feasible​ choice, which _____ their ability to pursue their​ long-term interests effectively.

The _____ economics approach to consumer behavior offers a wider range of possible predictions of a​ consumer’s choices than the _____ ​-maximization theory of a consumer​ optimum, which makes​ clear-cut predictions about​ consumers’ choices.

Answer 25

bounded rationality; limits

behavioral; utility