Chapter 5 Multiple-Choice

Question 1

Use the following information to answer question two and three

The city is considering a fair hike for its city bus service. At the current fair of two dollars, daily ridership is 24,000 people. The city estimates that if it is Reeses fares to $2.50, ridership will decline to 21,000

Using the midpoint method of calculating elasticity, what is the price elasticity of demand

If the city wants to raise more revenue from his bus system what should they do

Answer 1

Price elasticity of demand is 0.6

They should raise the price to $2.50

Question 2

Suppose the Minister of health wants to redo cigarette smoking by increasing tobacco taxes. Which one of the following describes why it will probably take a fairly large tobacco tax to make much of a difference

Answer 2

The demand for cigarettes is relatively inelastic

Question 3

As income rises during economic upturns, consumption of potatoes declines, yet as income falls during economic downturn’s, consumption of potato rises, what is the likely explanation for the changes and potato consumption?

Answer 3

Negative income elasticity of demand

Question 4

A negative cross price elasticity for two goods good day and good B would arise if A and b were

Answer 4

Complements

Question 5

Suppose there is excess capacity in the production facility of Judas bakery. The bakery supply curve is said to be

Answer 5

Price elastic

Question 6

A fisherman must sell all of his daily cash before it spoils for whatever price is offered. The Fishermens price elasticity of supply for fresh fish is

Answer 6

Zero

Question 7

Which of the following is the income elasticity of demand for housing if people always been 25% of their income on housing

Answer 7

1.00

Question 8

What is the likely outcome of prevailing vase aimed at reducing the supply of illegal drugs

Answer 8

The laws reduce drug consumption but increased drug related income and crime

Question 9

When the percentage change in the price of the service changes the quantity demanded for that service significantly, the demand for that service is

Answer 9

Price elastic

Question 10

If the 20% decline in price leads to a 30% increase in quantity supplied, The price elasticity of demand would be

Answer 10

1.5

Question 11

If the price elasticity of demand is 0.5, which of the following with the 20% price hike be two?

Answer 11

10% drop in quantity demanded