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Which of the following pairs of goods is most likely to have a positive cross-price elasticity

Which of the following pairs of goods is most likely to have a positive cross-price elasticity?

A) Printers and ink cartridges

B) A privately-owned car and public transportation

C) Coffee and sugar

D) Motorcycles and typewriters

 

42) When the price of margarine is $2 per unit, 10 units of butter are demanded. When the price of margarine increases to $6 per unit, 30 units of butter are demanded. What is the cross-price elasticity between the two goods?

A) -1

B) 1

C) 2

D) 5

 

43) When the price of one pen is $1, 50 notebooks are demanded. When the price per pen increases to $5, the number of notebooks demanded decreases to 30. What is the cross-price elasticity of demand between the two goods using the arc method?

A) 0.1

B) -0.375

C) 3

D) -3

 

44) Which of the following statements correctly identifies the difference between cross-price elasticity of demand and income elasticity of demand?

A) The income elasticity of demand can take only positive values, whereas the cross-price elasticity of demand can take both positive and negative values.

B) The cross-price elasticity of demand can take only negative values, whereas the income-elasticity of demand can take both positive and negative values.

C) The income elasticity of demand for a good is independent of the price changes of related goods, whereas the cross-price elasticity of demand for a good is independent of the income changes of the consumer.

D) The income elasticity of demand for a good is zero for normal goods, whereas the cross-price elasticity of demand for a good is always positive for normal goods.

45) Suppose that the government enacts a tax on Good X. In order to estimate the effect of the tax on the quantity demanded of a related good, Good Y, we can use the concept of:

A) price elasticity of demand.

B) income elasticity of demand.

C) cross-price elasticity of demand.

D) cost elasticity of demand.

 

46) The ________ measures the change in the demand of a good due to a percentage change in the consumer's income.

A) substitution effect of a price change

B) income effect of a price change

C) cross-price elasticity of demand

D) income elasticity of demand

 

47) Which of the following statements is true about income elasticity of demand?

A) The income elasticity of demand for normal goods is always zero.

B) The income elasticity of demand for inferior goods is always zero.

C) The income elasticity of demand for normal goods is always positive.

D) The income elasticity of demand for inferior goods is always positive.

 

48) Which of the following statements best describes a normal good?

A) A normal good is a good which is rationed by the government.

B) A normal good is a good which is readily available in the market.

C) A normal good is a good whose supply increases as its price decreases.

D) A normal good is a good whose demand increases with an increase in consumers' income.

 

49) Which of the following statements best describes an inferior good?

A) An inferior good is a good whose quantity supplied always exceeds the quantity demanded.

B) An inferior good is a good whose demand decreases with an increase in consumers' income.

C) An inferior good is a good which sold at a subsidized price.

D) An inferior good is a good which is rationed by the government.

50) Luxury goods have income elasticity:

A) of less than zero.

B) between zero and one.

C) equal to one.

D) greater than one.

 

51) Gary consumes 10,000 units of electricity when his income is $500. When his income increases to $1,000, his consumption of electricity increases to 18,000 units. What is Gary's income elasticity of demand for electricity?

A) 0.5

B) 0.8

C) 1.8

D) 2

 

52) Which of the following goods is likely to have an income elasticity of demand greater than one?

A) Salt

B) Gasoline

C) Diamond jewelry

D) Bread

 

53) From a firm's point of view, when the demand for a good has a price elasticity of 0.5, then, all things remaining the same, a(n):

A) increase in the price of the good will decrease the firm's revenue.

B) increase in the price of the good will increase the firm's revenue.

C) change in the price of the good will not affect the firm's revenue.

D) change in the price of the good will not affect the quantity of the good demanded by the consumers.

Mar 14 2020 View more View Less

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