Econ 101: Exam 2 Questions And Answers Verified 100% Correct

Econ 101: Exam 2 Questions And Answers Verified 100% Correct The university president believes that increasing student tuition by 5% will increase revenues. If the president is correct that revenues will increase, then the tuition increase will _____ the number of students enrolling by _____. A) reduce; less than 5% B) reduce; more than 5% C) reduce; exactly 5% D) increase; 5% - ANSWER A The university hopes to raise more revenue by increasing parking fees. This plan will work only if: A) the price effect is larger than the quantity effect. B) the price effect is smaller than the quantity effect. C) the price effect and quantity effect are the same. D) there is no price or quantity effect. - ANSWER A A perfectly price-inelastic demand curve is: A) horizontal. B) downward-sloping. C) upward-sloping. D) vertical. - ANSWER D If demand is elastic, the _____ effect dominates the _____ effect, and a(n) _____ in price will cause total revenue to rise. A) price; quantity; decrease B) price; quantity; increase C) quantity; price; increase. D) quantity; price; decrease - ANSWER D Suppose the price elasticity of demand for fishing lures equals 1.5 in South Carolina and 0.63 in Alabama. To increase revenue, fishing lure manufacturers should: A) lower prices in each state. B) raise prices in each state. C) lower prices in South Carolina and raise prices in Alabama. D) leave prices unchanged in South Carolina and raise prices in Alabama. - ANSWER C The price elasticity of demand for fresh tomatoes has been estimated to be 2.22. If a new insecticide and fertilizer treatment yields a 20% increase in the nation's fresh tomato crop, how will that affect total revenue from fresh tomatoes, all other things unchanged? A) Total revenue will remain unchanged. B) Total revenue will fall. C) Total revenue will rise. D) The information is insufficient toANSWER the question. - ANSWER C When demand is _____, a rise in price leads to a(n) _____ in total revenue. A) perfectly inelastic; decrease B) perfectly elastic; increase C) inelastic; increase D) elastic; decrease - ANSWER C,D Which of the following is NOT true regarding a price-elastic demand curve? A) Total revenue increases when the price falls. B) The absolute value of the price elasticity is a fraction less than 1. C) The absolute value of the price elasticity is greater than 1. D) The percent changes in the quantity demanded exceed the percent changes in the price for any small change in price. - ANSWER B If total revenue goes up when the price falls, demand is said to: A) be price-inelastic. B) be price unit-elastic. C) be price-elastic. D) have positive price elasticity. - ANSWER C Total revenue will decrease if the price goes _____ and demand is _____. A) up; perfectly price-inelastic B) up; price-inelastic C) down; price-elastic D) up; price-elastic - ANSWER D If demand _____ and the University of Michigan increases the price of football tickets, revenues will increase. A) is price-inelastic B) is price-elastic C) has price elasticity equal to 1 D) is perfectly price-elastic - ANSWER A Which of the following is NOT a factor in determining the price elasticity of demand? A) the number of available substitutes B) time C) the proportion of the budget spent on the item D) the slope of the supply curve - ANSWER D If a good has a price-inelastic demand, then which of the following is NOT likely to be characteristic of this good? A) It is a necessity and is relatively small proportion of the household budget. B) It has many substitutes. C) Consumers spend a small percentage of their income on it. D) Consumers do not have much time to adjust to market changes. - ANSWER B . If the price of emergency visits to the doctor rose, we would expect: A) a large decline in the number of emergency visits to the doctor. B) only a slight decline in the number of emergency visits to the doctor. C) the number of emergency visits to the doctor to increase. D) the total income of doctors to fall dramatically. - ANSWER B A newspaper typically consumes a smaller fraction of a consumer's budget than a home entertainment system. Therefore, you would expect the demand for: A) a home entertainment system to be more price-elastic. B) a home entertainment system to be more price-inelastic. C) newspapers to be more price-elastic. D) the two to be equally price-elastic. - ANSWER A The demand for textbooks is price-inelastic. Which of the following would explain this? A) Many alternative textbooks can be used as substitutes. B) Students have a lot of time to adjust to price changes. C) Textbook purchases consume a large portion of most students' income. D) Textbooks are a necessity. - ANSWER D Which of the following goods is likely to have the largest price elasticity of demand? A) a bicycle B) a mountain bike C) a Cannondale mountain bike D) a green Cannondale mountain bike - ANSWER D We predict the long-run price elasticity of demand for gasoline to be _____ the short-run price elasticity of demand for it. A) less than B) larger than C) equal to D) not comparable to - ANSWER B Which of the following is most likely to have a vertical supply curve? A)