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Tutorial Review 1 1
Tutorial Review 1 1
Tutorial Review 1 1
MPC-SUPPLY&DEMAND&ELASTICITY
1. By 2017, Pepsi and Coke were attempting to increase their profits in the bottled water
market by introducing premium water brands. Pepsi and Coke introduced LIFEWTR and
Smartwater, respectively, while competitors like Nestle and Danone produced their own
versions of premium water. The premium water brands marketed to compete with LIFEWTR
and Smartwater would be considered
A) complements to LIFEWTR and Smartwater.
B) substitutes for LIFEWTR and Smartwater.
C) inferior goods compared to LIFEWTR and Smartwater. TAP WATER
D) normal goods compared to LIFEWTR and Smartwater.
2. If the amount of carbonated sodas consumed continues to decline as consumers
continue to choose to buy healthier products, this will likely
A) increase the demand for premium water, because premium water and carbonated sodas are
considered complements.
B) increase the demand for premium water, because premium water and carbonated sodas are
considered substitutes.
C) decrease the demand for premium water, because premium water is considered an inferior
good and carbonated sodas are considered normal goods.
D) decrease the demand for premium water, because premium water is considered a normal good
and carbonated sodas are considered inferior goods.
3. Which of the following will shift the demand curve for a good?
A) a change in the technology used to produce the good
B) an increase in the price of the good -> Quantity demanded
C) a decrease in the price of a complementary good
D) a decrease in the price of the good
Figure 3-1
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7. Refer to Figure 3-1. A decrease in the price of the product would be represented by a
movement from
A) A to B.
B) B to A.
C) D1 to D2.
D) D2 to D1.
8. Refer to Figure 3-1. A decrease in the price of a substitute good (C, D) would be
represented by a movement from
A) A to B.
B) B to A.
C) D1 to D2.
D) D2 to D1.
9. Refer to Figure 3-1. A decrease in the price of a complementary good would be represented
by a movement from
A) A to B.
B) B to A.
C) D1 to D2.
D) D2 to D1.
10. Refer to Figure 3-1. An increase in the expected future price of the product would be
represented by a movement from
A) A to B.
B) B to A.
C) D1 to D2. Face mask
D) D2 to D1.
11. Refer to Figure 3-1. If the product represented is a normal good, a decrease in income would
be represented by a movement from
A) A to B.
B) B to A.
C) D1 to D2.
D) D2 to D1.
12. The Internet has created a new category in the book selling market, namely, the "barely used"
book. How does the availability of barely used books affect the market for new books?
A) The demand curve for new books shifts to the right.
B) The demand curve for new books shifts to the left.
C) The supply curve for new books shifts to the right.
D) The supply curve for new books shifts to the left.
13. Tomas increased his consumption of potato chips when the price of pistachios increased. For
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19. Refer to Figure 3-2. An increase in price of inputs would be represented by a movement
from
A) A to B.
B) B to A.
C) S1 to S2.
D) S2 to S1.
20. Refer to Figure 3-2. An increase in the number of firms in the market would be represented
by a movement from
A) A to B.
B) B to A.
C) S1 to S2.
D) S2 to S1.
21. Refer to Figure 3-2. An increase in the price of substitutes in production would be
represented by a movement from
A) A to B.
B) B to A.
C) S1 to S2.
D) S2 to S1.
22. Refer to Figure 3-2. A decrease in the price of the product would be represented by a
movement from
A) A to B.
B) B to A.
C) S1 to S2.
D) S2 to S1.
23. Refer to Figure 3-2. A decrease in productivity would be represented by a movement from
A) A to B.
B) B to A.
C) S1 to S2.
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D) S2 to S1.
24. Harvey Rabbitt pays for monthly cable TV service. Last week, the cable company informed
Harvey that his monthly cable price would go down because the city council has granted
approval for three new cable companies to service his area. How is the market for cable TV
services affected by this?-> number of sellers increase
A) There is an increase in the supply of cable TV service.
B) There is a decrease in the demand for cable TV service.
C) There is a decrease in the quantity of cable TV service supplied.
D) There is a decrease in the supply of cable TV service.
25. The popularity of digital cameras has enticed large discount stores like Walmart and Costco
to offer digital photo printing services. How does the offering of the printing service by Walmart
and Costco affect the digital photo printing market?
A) The demand curve for digital photo printing services shifts to the right.
B) The demand curve for digital photo printing services shifts to the left.
C) The supply curve for digital photo printing services shifts to the right.
D) The supply curve for digital photo printing services shifts to the left.
26. Which of the following would shift the supply curve for MP3 players to the left?
A)an increase in the price of an input used to produce MP3 players-> S left
B) a decrease in consumer tastes for MP3 players->D decrease
C) an increase in the number of firms that produce MP3 players->S right
D)an increase in the productivity of the workers who produce MP3 players->S right
27. If a firm expects that the price of its product will be higher in the future than it is today, then
A) the firm will go out of business.
B) the firm has an incentive to increase supply now and decrease supply in the future.
C) the firm has an incentive to decrease quantity supplied now and increase quantity supplied in
the future.
D) the firm has an incentive to decrease supply now and increase supply in the future.
28. A decrease in the price of GPS systems will result in
A) a smaller quantity of GPS systems supplied.
B) a larger quantity of GPS systems supplied.
C) a decrease in the demand for GPS systems.
D) an increase in the supply of GPS systems.
29. An increase in the price of pineapples will result in
A) a smaller quantity of pineapples supplied.
B) a larger quantity of pineapples supplied.
C) a decrease in the demand for pineapples.
D) an increase in the supply of pineapples.
30. In 2004, hurricanes damaged a large portion of Florida's orange crop. As a result of this,
many orange growers were not able to supply fruit to the market. If, following the hurricane, the
price remained at its pre-hurricane level, we would expect to see
A) a surplus of oranges.
B) the quantity demanded equal to the quantity supplied.
C) a shortage of oranges.
D) an increase in the demand for oranges.
31. Auctions in recent years have resulted in higher prices paid for letters written by John Wilkes
Booth than those written by Abraham Lincoln. Which of the following events would cause the
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41. Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply
curves for bicycle helmets. Which panel best describes what happens in this market if there is a
substantial increase in the price of bicycles?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
42. Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply
curves for women's clothing. Which panel best describes what happens in this market when the
wages of seamstresses rise?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
Answer: B
43. Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply
curves for almonds. Which panel best describes what happens in this market when there is an
increase in the productivity of almond harvesters?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
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44. Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply
curves for Fruitopia, a soft drink. Which panel describes what happens in the market for
Fruitopia when the price of Snapple, a substitute product, decreases?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
45. Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply
curves for potatoes and that steak and potatoes are complements. What panel describes what
happens in this market when the price of steak rises?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
46. Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply
curves for rice. What happens in this market if buyers expect the price of rice to fall?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
47. Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply
curves for used clothing, an inferior good. Which panel describes what happens in this market as
a result of a decrease in income?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
48. Positive technological change in the production of LCD televisions caused the price of LCD
televisions to fall. Holding everything else constant, how would this affect the market for Blu-ray
players (a complement to LCD televisions)?
A) The supply of Blu-ray players would increase and the equilibrium price of Blu-ray players
would decrease.
B) The demand for Blu-ray players would increase and the equilibrium price of Blu-ray players
would increase.
C) The demand for Blu-ray players would decrease because consumers could afford to buy fewer
LCD televisions and Blu-ray players.
D) The demand for Blu-ray players would increase and the equilibrium price of Blu-ray players
would decrease.
49. An increase in input costs in the production of electric automobiles caused the price of
electric automobiles to rise. Holding everything else constant, how would this affect the market
for gasoline-powered automobiles (a substitute for electric automobiles)?
A) The supply of gasoline-powered automobiles would increase and the equilibrium price of
gasoline-powered automobiles would decrease.
B) The demand for gasoline-powered automobiles would increase and the equilibrium price of
gasoline-powered automobiles would increase.
C) The demand for gasoline-powered automobiles would decrease because consumers could
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Figure 3-8
55. The graph in this figure illustrates an initial competitive equilibrium in the market for apples
at the intersection of D1 and S1 (point A). If the price of oranges, a substitute for apples,
decreases and the wages of apple workers increase, how will the equilibrium point change?
A) The equilibrium point will move from A to E.
B) The equilibrium point will move from A to B.
C) The equilibrium point will move from A to C.
D) The equilibrium will first move from A to B, then return to A.
56. Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in
the market for apples at the intersection of D1 and S1 (point A). If there is a shortage of apples,
how will the equilibrium point change?
A) The equilibrium point will move from A to B.
B) The equilibrium point will move from A to C.
C) There will be no change in the equilibrium point.
D) The equilibrium point will move from A to E.
57. Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in
the market for sugar at the intersection of D1 and S1 (point A). If there is an increase in the price
of fertilizer used on sugar cane and there is a decrease in tastes for sugar-sweetened soft drinks,
how will the equilibrium point change?
A) The equilibrium point will move from A to B.
B) The equilibrium point will move from A to C.
C) There will be no change in the equilibrium point.
D) The equilibrium point will move from A to E.
58. Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in
the market for sugar at the intersection of D1 and S2 (point B). If there is a decrease in the price
of fertilizer used on sugar cane and there is a decrease in tastes for sugar-sweetened soft drinks,
how will the equilibrium point change?
A) The equilibrium point will move from B to A.
B) The equilibrium point will move from B to C.
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Table 6-1
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Price Quantity
$35 40
25 50
75. Refer to Table 6-1. Suppose you own a bookstore. You believe that you can sell 40 copies
per day of the latest John Grisham novel when the price is $35. You consider lowering the price
to $25 and believe this will increase the quantity sold to 50 books per day. Compute the price
elasticity of demand using the midpoint formula and these data. Select the correct implication
from your work.
A) The demand for the John Grisham book is inelastic. Revenue will fall if the price is lowered.
B) The demand for the John Grisham book is elastic. Revenue will rise if the price is lowered.
C) The demand for the John Grisham book is inelastic. Revenue will rise if the price is lowered.
D) The demand for the John Grisham book is elastic. Revenue will fall if the price is lowered.
76. Suppose that when the price per ream (500 sheets of paper) of recycled printer paper rises
from $4 to $4.50, the quantity demanded falls from 800 to 600 reams per day. Using the
midpoint formula, what is the price elasticity of demand (in absolute value) over this range?
A) 0.003
B) 0.41
C) 2.43
D) 4
77. According to a study of the price elasticities of products sold in supermarkets, the price
elasticity of demand for toothpaste is estimated at -0.45. Which of the following could explain
why the price elasticity of demand for toothpaste is so low?
A) The toothpaste industry is highly competitive.-> more elastic
B) Toothpaste is relatively inexpensive.->incorrect
C) Toothpaste is considered a luxury good.->incorrect
D) There are few close substitutes for toothpaste.
78. Rank these three items in terms of the elasticity of the demand for them at any given price,
from most elastic to least elastic: hot beverages, coffee and Peet's Coffee.
A) hot beverages, coffee, Peet's Coffee
B) Peet's Coffee, coffee, hot beverages (more detailed, narrowly, broadly)
C) coffee, Peet's Coffee, hot beverages
D) coffee, hot beverages, Peet's Coffee
79. Most people buy salt infrequently and in small quantities. Even a doubling of the price of salt
is likely to result in a small decline in the quantity of salt demanded. Therefore
A) the demand for salt will be perfectly inelastic. Ed=0=> Qd1=Qd0
B) salt is a normal good.-> Ey or Income
C) the demand for salt is relatively inelastic.
D) the price elasticity of demand for salt is greater than 1 (in absolute value).
Table 6-2
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80. Refer to Table 6-2. Assume that an economist has estimated the price elasticity of demand
values in the table above. Use the data in the table to select the correct statement.
A) The demand for Coca-Cola is inelastic.
B) The elasticity for "All soft drinks" is less than the elasticity for Coca-Cola because Coca-Cola
is more of a luxury than a necessity; "All soft drinks" represent goods that are more necessity
than luxury.
C) The difference in elasticity values is explained by the fact that the more narrowly we define a
market the more elastic the demand will be.
D) There are fewer substitutes for "All carbonated soft drinks" than there are for "All soft
drinks."
81. In general, a "big ticket item" such as a house or new car will-> luxury
A) tend to have a more elastic demand than a lower-priced good.-> procrastination
B) tend to have an inelastic demand because spending on the item takes up a large share of the
average consumer's budget.
C) tend to have an inelastic demand because it has many substitutes.-> preferences
D) tend to have a more inelastic demand the more time that passes.
82. A convenience store owner in Philadelphia was worried that the implementation of the 1.5
cents per ounce tax on sweetened beverages would cause the quantity demanded to fall by so
much that he would be in a worse situation if he passed the tax on to customers by raising prices
than if he did not raise prices. If raising the price of sweetened beverages would cause the owner
to receive less total revenue from the sale of sweetened beverages, the demand for sweetened
beverages is
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly inelastic.
Table 6-5
83. Refer to Table 6-5. Katie Graham owns a kayak rental service in Santa Barbara. Table 6.5
shows her estimated demand schedule for kayak rentals per week. She would like to increase her
sales revenue by changing the price she charges for rentals. At present she charges $75. Based on
the information in the table, Katie
A) is not able to increase her revenue by changing her price because the demand for kayak
rentals is unit elastic.
B) should lower her price to $60 to increase her revenue because the demand for kayak rentals is
price elastic.
C) should raise her price to $80 to increase her revenue because the demand for kayak rentals is
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price inelastic.
D) should raise her price to earn the most revenue.
84. When Nablom's Bakery raised the price of its breads by 10 percent, the quantity demanded
fell by 15 percent. What was the effect on sales revenue?=> Ed=-15/10=/-1.5/->Elastic
A) Sales revenue increased.
B) Sales revenue remained unchanged.
C) Sales revenue decreased.
D) It cannot be determined without information on prices.
85. If tolls on a toll road can be raised significantly before commuters will consider using a free
alternative, then an increase in tolls will result in
A) a decrease in total revenue.
B) a decrease in non-toll road usage.
C) an increase in total revenue.
D) an increase in toll road usage.
Table 6-6
86. Refer to Table 6-6. Based on the data in the table, between a price of $9.99 and $14.99, the
demand for books is
A) elastic.
B) unit elastic.
C) inelastic.
D) perfectly inelastic.
87. Refer to Table 6-6. Based on the data in the table and using the midpoint formula, between a
price of $9.99 and $14.99, the price elasticity of demand for books is
A) -0.74.
B) -1.16.
C) -1.35.
D) -14.8.
Article Summary
Tickets for the Los Angeles production of the musical 'Hamilton' sold out quickly after going on
sale in April. These tickets, sold through the box office at the Pantages Theater and through
authorized seller Ticketmaster, were priced as low as $85 for mezzanine seats and $125 for
orchestra seats. Once the tickets sold out, the only available seats for the musical which ran
from August 11 through December 30, were through ticket resellers such as StubHub and
SeatGeek, with tickets selling at an average price of $467 to $510.
Ticket prices were the most expensive for August dates, with an average price of $624, and fell
for dates in the following months, with December prices averaging $335.
Source: Nicholas Cheng, "Don't have a ticket to 'Hamilton' yet? It's going to cost you," Los
Angeles Times, August 19, 2017.
88. Refer to the Article Summary. Based on the difference between the face value of 'Hamilton'
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tickets sold by the Pantages Theater and Ticketmaster, and the prices being charged in the
resellers like StubHub and SeatGeek, the demand at the face value of the tickets is
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly elastic.
89. Refer to the Article Summary. How would the Pantages Theater know if it was operating on
the elastic portion of the demand curve for 'Hamilton' tickets?
A) If they increased ticket prices and the total revenue from ticket sales increased.
B) If they increased ticket prices and the total revenue from ticket sales did not change.
C) If they increased ticket prices and the total revenue from ticket sales decreased.
D) If they decreased ticket prices and the total revenue from ticket sales did not change.
90. Economists estimated that the price elasticity of beer is -0.30 and the income elasticity of
beer is 0.09. This means that
A) an increase in the price of beer will increase the quantity demanded of beer and beer is a
normal good.
B) an increase in the price of beer will lead to an increase in revenue for beer sellers and beer is a
normal good.
C) a decrease in the price of beer will lead to an increase in revenue for beer sellers and beer is
an inferior good.
D) an increase in the price of beer will lead to a decrease in the quantity demanded of beer and
beer is a luxury.
91. Linesha, a college student working part-time received a wage increase. An avid movie buff,
she increased her purchases of Blu-ray discs and reduced her purchases of DVDs. Based on this
information
94. Suppose the California Nurses Union successfully secured a 12 percent increase in the wages
of registered nurses. If a hospital responds by reducing the quantity of registered nurses hired and
increasing the quantity of physician's assistants hired, what conclusion can you draw?
A) Physician's assistants are more valuable in terms of their productivity.
B) The price elasticity of demand for registered nurses is negative while the price elasticity of
demand for physician's assistants is positive.
C) The cross-price elasticity of demand between registered nurses and physician's assistants is
positive.
D) The cross-price elasticity of demand between registered nurses and physician's assistants is
negative.
95. Last year, Joan bought 50 pounds of hamburger when her household income was $40,000.
This year, her household income was only $30,000 and Joan bought 60 pounds of hamburger.
Holding everything else constant, Joan's income elasticity of demand for hamburger is
A) positive, so Joan considers hamburger to be an inferior good.
B) negative, so Joan considers hamburger to be an inferior good.
C) positive, so Joan considers hamburger to be a normal good and a necessity.
D) negative, so Joan considers hamburger to be a normal good.
96. Which of the following items is likely to have the highest income elasticity of demand?
A) a luxury cruise to several European countries
B) water
C) breakfast cereal
D) a hamburger
97. The cross-price elasticity of demand between Coca-Cola and Pepsi-Cola is calculated by
dividing
A) the percentage change in quantity demanded of Coca-Cola by the percentage change in the
quantity demanded of Pepsi-Cola.
B) the percentage change in the price of Pepsi-Cola by the percentage change in quantity
demanded of Coca-Cola.
C) the percentage change in the price of Coca-Cola by the percentage change in the price of
Pepsi-Cola.
D) the percentage change in the quantity demanded of Coca-Cola by the percentage change in
the price of Pepsi-Cola.
98. In order to prove that Motrin and Ibuprofen are substitutes, one should measure the
and get a . (pain and fever relieve)
A) cross-price elasticity; positive number
B) cross-price elasticity; negative number
C) price elasticity of demand; number greater than 1 (in absolute value)
D) price elasticity of demand; number less than 1 (in absolute value)
ENJOY
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