Verified Test Bank Ch6 Demand And Elasticity - Microeconomics Principles and Policy 14e | Test Bank by Baumol by William J. Baumol. DOCX document preview.
Indicate whether the statement is true or false. |
1. A vertical demand curve has an elasticity of demand equal to zero.
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2. Two goods with a low cross elasticity of demand are competing in the same market.
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3. A seller who wishes to increase the revenues should always increase the price of the product.
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4. Total expenditure equals price times quantity.
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5. The value of the price elasticity of demand for a straight-line demand curve starts with low elasticity values at high prices and has high elasticity values at low prices.
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6. If demand is elastic, a rise in price will decrease total expenditure.
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7. Necessities such as food and shelter have inelastic demand.
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8. Perfectly inelastic demand curves are vertical.
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9. If demand is unit elastic, then a 10 percent increase in price will lead to a 10 percent drop in quantity demanded.
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10. If demand is inelastic, a drop in price will raise total expenditure.
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11. A unit-elastic demand curve will be concave toward the origin .
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12. A buyer’s response to a change in income is an example of a “change in demand.”
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13. A demand curve with an elasticity of 1.0 is a unit-elastic demand curve.
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14. Demand elasticity equals quantity times price.
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15. A rise in price will always result in an increase in the total amount that consumers spend on a product.
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16. A decrease in the price of a good will cause a movement along the demand schedule to a higher quantity demanded.
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17. When the goods of competing companies are identical, consumers have no reason to prefer one product over the other, so the demand curve for each manufacturer will be perfectly elastic.
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18. A demand curve with an elasticity of 1.0 is said to be an elastic demand curve.
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19. As one moves down a straight-line demand curve, the elasticity increases.
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20. The slope of the demand curve conveys all the useful information about elasticity.
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21. Elasticity computations related to demand carry a minus sign to show that the demand curve is negatively sloped.
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22. The difference between slope and elasticity is that slope measures absolute change and elasticity measures percentage change.
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23. Elasticity is a measure of the responsiveness of change in quantity demanded to a change in price.
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24. The quantity demanded in a market depends on many things, but the concept of elasticity focuses on the effect of changes in the price of the good.
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25. Since an individual spends a small share of the income on salt, the elasticity of demand is likely to be low.
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26. The unit-elastic demand curve bends in the middle toward the origin of the graph and at either end moves closer to the axes.
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27. If there are many close substitutes available for a good, its elasticity of demand will be higher.
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28. The elasticity of a demand curve at any point can be ascertained by its steepness.
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29. If a product constitutes a large portion of a consumer’s income, demand will be more inelastic.
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30. Historical demand curves are always suspect because their demand curves are likely to have shifted over time.
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31. A line that is perfectly elastic has an elasticity of demand of zero.
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32. Elasticity of demand is likely to be higher for less-expensive goods, other things being equal.
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33. Using historical statistics is likely to produce accurate estimates of demand curves since such studies have large amounts of data to draw on.
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34. All straight-line demand curves have the same elasticity value since the slope is constant.
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35. Elasticity of demand is another way to measure slope.
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36. The elasticity of a straight-line demand curve is the same as its slope.
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37. The price elasticity of demand measure is generally stated as an absolute value.
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38. If demand for a seller’s product is elastic, a price increase will decrease total revenue.
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39. Price elasticity of demand is a numerical measure of how much quantity demanded rises as price falls or quantity demanded falls as price rises.
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40. Elasticity of demand is calculated using percentage changes in both price and quantity.
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41. The elasticity of demand is determined partly by whether the good is a necessity or a luxury.
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42. Perfectly elastic demand curves are vertical.
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43. Computations of the price elasticity focus on the calculated magnitude due to of the law of demand.
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44. A fall in the price of a competing product will produce an outward shift in the demand curve for most products.
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45. Cross elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good.
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46. An accurate demand curve can be derived by examining the quantities of a good that are sold over time as the price varies.
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47. If the reciprocal of the slope of a demand curve is calculated, this value is equal to the price elasticity of demand for that good.
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48. A price increase will always cause a firm’s revenue to fall because they will sell less of the good.
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49. Whenever the elasticity value for a demand curve is greater than zero, then the demand is labeled as “elastic.”
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50. As one moves down a straight-line demand curve, the elasticity decreases.
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51. A straight-line demand curve has the same elasticity throughout its length.
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52. If an increase in quantity demanded of a product reduces the quantity demanded of another, then the two goods are said to be substitutes.
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53. If price goes up 20 percent and quantity demanded declines by 10 percent, total revenue will rise.
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54. Elasticity of demand equals the ratio of the percentage change in the price of a good to the percentage change in the quantity demanded.
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55. As one moves down a straight-line demand curve away from the vertical axis, demand becomes less elastic and then inelastic.
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56. Buyers’ expenditures and sellers’ revenues are always identical.
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57. If demand is elastic, an increase in price will increase total revenue.
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58. A demand curve with unit elasticity can never touch either the vertical or horizontal axes.
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59. Elasticity of demand equals the ratio of the percentage change in the quantity demanded to the percentage change in the price of the good.
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60. When price falls, demand rises.
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61. Knowing the value of the cross elasticity of demand allows us to distinguish between inferior goods and normal goods.
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62. The elasticity formula solves the units problem because percentages are unaffected by the units of measure.
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63. The value of zero is used to distinguish between elastic and inelastic price elasticity of demand for a product; so, if the elasticity is greater than zero, it is elastic and if it is less than zero, then it is inelastic.
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64. The elasticity of any demand curve is the same as its slope.
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65. The market demand curve shows how the quantity demanded of a product, during a specified time period, changes as the price of that product changes.
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66. If a study shows that two goods have a high negative cross elasticity of demand value, then the two goods are competing in the same market.
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67. The ratio of the percentage change in quantity demanded to the percentage change in income is known as the cross elasticity of demand.
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68. Since housing generally represents a large part of most household budget, the elasticity of demand for housing is likely to be large.
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69. A negative cross elasticity indicates that two goods are complements.
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70. A price increase will always increase a firm’s revenue.
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71. If demand is unit elastic, then a 10 percent increase in the price will lead to a 10 percent increase in quantity demanded.
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72. If seller increases the price of the good and the total revenue increases, this implies that the demand for the product is inelastic.
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73. If seller increases the price of the good and the total revenue increases, this implies that the demand for the product is elastic.
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74. A tax on cigarettes can be expected to reduce teen smoking more than it reduces adult smoking.
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75. A positive value for the cross elasticity of demand between two good implies that these two goods are substitutes.
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76. If soft drink brands are close substitutes for each other, this implies that the price elasticity for individual brands would be low.
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77. Cross elasticity of demand could be used to measure the responsiveness of the quantity demanded of swimming pools to a change in the price of picnic tables.
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78. If demand is elastic, an increase in price will decrease total revenue.
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79. Necessities, such as food and shelter, are product purchases that consumers are sensitive to, so the demand is elastic for these goods.
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80. The law of demand states that a lower price increases the amount of a commodity that people are willing to buy.
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81. The demand curve depicts quantities demanded that have been gathered as prices have changed over time.
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82. If a demand curve is unit elastic, then P times Q will remain constant when P changes.
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83. A horizontal demand curve is perfectly elastic because a change in price will induce an infinite change in quantity demanded.
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84. Two goods are substitutes if a decrease in the price of one raises the quantity demanded of the other.
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85. Price elasticity of demand can be written as percentage change in Q divided by percentage change in P.
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86. The sign of the elasticity computation is important because the value of the price elasticity can be negative or positive.
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87. A horizontal demand curve is perfectly elastic because a change in price will not induce a change in quantity demanded.
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88. The elasticity of demand for gasoline is likely to be relatively low in the short term and higher as the period of time gets longer.
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89. If demand for a seller’s product is elastic, a price decrease will increase total revenue.
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90. A straight-line demand curve has an elasticity that becomes smaller as we move from left to right along the schedule.
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91. As a price change persists over a long period of time, we should expect the demand elasticity to fall.
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92. If the price changes for a good for which the demand is perfectly inelastic, the response will be infinitely large.
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93. Elasticity of demand is calculated by dividing the change in quantity by the change in the price of a good.
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94. Total expenditure equals price times elasticity.
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95. Income elasticity of demand describes how change in income affects the quantity demanded of a good.
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96. Demand curves often do not remain stationary; they shift because of changes in other variables.
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Indicate the answer choice that best completes the statement or answers the question. |
97. The demand for French Roast coffee is likely to be
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98. In 1975, New York City increased regulated taxi fares by 17.5 percent and expected taxi revenue to increase a like amount. The taxi commission believed taxi demand was
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99. If a firm increases its prices when the demand is inelastic, then the firm will see
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100. Would a profit-maximizing firm sell where demand is inelastic?
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101. A relatively large increase in the cost of electricity would likely
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102. A correct formula (dropping all minus signs) for the calculation of the elasticity of demand between point Q1, P1 and point Q2, P2 is
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103. A demand curve to remain unit elastic along its entire length should
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104. Demand is said to be price elastic at a point on a demand curve if a
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105. When Johanna cut prices in her jewelry store by 20 percent, the dollar value of her sales fell by 20 percent. This indicates that
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106. The relationships between elasticity and total revenue hold because
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107. Certain goods are related such that an increase in the price of one good decreases the quantity demanded of the other. These goods are
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108. Which of the following is more likely to be the price elasticity of demand for the snake bite treatment antivenom?
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109. Julia knows that the price elasticity of movie rentals is 3. She knows, therefore, that if she raises her price from $2 to $2.50, her rentals will drop by approximately
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110. Elasticity provides a guide to both
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Figure 6-8  |
111. Libya sold more crude oil in 1985 than it sold five years earlier, but revenues were 17 percent less. Which graph in Figure 6-8 is consistent with this set of facts?
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112. As a result of a decline in interest rates and a rise in household income, the demand curve for housing has shifted to the right, but has retained the same slope. Consequently, the elasticity of demand for housing
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113. Two economists from Ohio University estimated that the demand curve for kerosene in Indonesia was such that a 10 percent increase in the price reduced the quantity demanded by 2.2 percent and that a 10 percent increase in the price of electricity increased the demand for kerosene by 1.6 percent. This indicates that (i) the demand for kerosene is price inelastic and (ii) kerosene and electricity are substitutes. Which of these two statements is correct?
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Figure 6-5  |
114. In Figure 6-5, if price falls from point A to point B along the unit-elastic demand curve,
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115. To avoid an increase in the local property tax, Sullivan County, New York, proposed a 2 percent hotel tax, which presumably would be passed on to tourists. The hotel industry argued that the tax would hurt hotel business. They are really arguing that
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Figure 6-2  |
116. Using Figure 6-2, calculate the price elasticity of demand (dropping all minus signs) between P = 4 and P = 6.
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117. A perfectly elastic demand curve for a firm
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118. Along a straight-line demand curve, the
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119. If the price elasticity of demand for smart watches is 1.4 (dropping the minus sign), then a 50 percent increase in the price of smart watches will lead to
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120. Scientific evidence suggests that consumption of foods rich in fiber lowers cholesterol. As a result, the demand for bran increases at every price by 5,000 bushels and the supply curve for bran is perfectly price elastic. The quantity of bran consumed will
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121. Suppose that Carol owns a property with a mineral spring. It costs zero for Carol to sell water to customers since buyers come to her property and bring their own bottles and fill them themselves. If Carol wants to maximize her profits from the sale of her mineral water, she should choose the output level
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122. If the demand curve is vertical, the elasticity is
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123. Hot dogs and hot dog buns are found to be related by the cross elasticity of demand. If they are complementary goods, the cross elasticity will be
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124. Along the elastic portion of a demand curve, the
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125. Suppose that the supply of insulin is perfectly elastic and the demand for insulin perfectly inelastic. Then the result of an excise tax would be
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126. A decrease in the price of rice from 50 cents to 40 cents a pound increases consumption from 16 to 20 tons a week in Gainesville and from 160 to 200 tons in the larger city of Miami. The elasticity of demand for rice is
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127. The price of an airline ticket rises as the amount of time between purchase and flight departure gets smaller. The airlines base the policy on the assumption that
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128. At $5 per cup, customers will buy 8 cups of coffee per week. At a price of $3, consumers are willing to buy 12 cups per week. The elasticity of the market demand curve for coffee between P = $5 and P = $3 (dropping all minus signs) is
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129. Cross elasticity of demand for
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130. If the demand curve for a good is unit elastic, then total expenditure will _____ as the price of the good decreases.
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131. Compared to the demand for coffee, the market demand for French Roast coffee is likely to be
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132. If both matches and automobile prices increase by 10 percent, consumers will likely buy
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Figure 6-4  |
133. Based on Figure 6-4, it can be determined that total expenditure ____ as price falls from P = 6 to P = 4.
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134. If the price of apples decreases by 2 percent and causes apple consumption to increase by 4 percent, the price elasticity of demand is ____, indicating the demand is ____.
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135. The price elasticity of a vertical demand curve is always
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136. The elasticity of supply is calculated by
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137. A good will tend to be more price elastic if it
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138. Which of the following goods will have the most elastic demand at any time?
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139. Historical data on prices and quantities sold do not provide the basis for drawing an accurate demand curve because
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Figure 6-4 |
140. In Figure 6-4, total expenditure ____ as price falls from P = 12 to P = 10.
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141. As we move down a straight-line demand curve, the price elasticity becomes
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Figure 6-9  |
142. In 1983, government price supports raised the price of sugar above its equilibrium value. Which graph in Figure 6-9 illustrates the impact of sugar price supports on the sugar substitute fructose?
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143. The price elasticity of new automobile purchases is about 1.2. This implies that an increase of $1,000 on a $10,000 automobile will
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144. A price cut will increase the revenue a firm receives if the demand for its product is
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145. The elasticity measure that has been employed by the courts to assess the degree of market competition is
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146. The price elasticity of a horizontal demand curve is always
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147. The demand for potatoes at current prices is likely to be
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148. Big Alice Ice Cream Parlor reduced its price of an ice cream cone from $1 to 90 cents. Sales consequently increased from 1,000 cones per week to 1,050 cones per week. The approximate price elasticity is
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149. If the price of gasoline rises by 20 percent and consumption of gasoline falls 5 percent,
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Figure 6-3  |
150. In Figure 6-3(a), demand is
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Figure 6-2 |
151. From Figure 6-2, we can determine that demand is ____ between P = 12 and P = 10 and ____ between P = 6 and P = 4.
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152. Elasticity
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153. The term “unit elasticity” is used to describe a situation in which a rise in price is accompanied by
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154. The relationship between a change in consumer income and a resulting change in demand for a good is
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155. If the elasticity of demand for cigarettes is 0.4, then an increase in the price of a pack of cigarettes from $5.00 to $6.00 would reduce quantities demanded by about
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156. Chicken and fish are substitutes. Therefore, the cross elasticity of demand between chicken and fish is
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157. If the cross elasticity of demand for potato chips and pretzels equals 1.5,
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158. At $6 per steak, consumers are willing to buy two steaks. At a price of $2, consumers are willing to buy six steaks. The elasticity of the market demand curve between P = $6 and P = $2 (dropping all minus signs) is
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159. Along a perfectly elastic demand curve,
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160. A demand curve is described as perfectly inelastic if
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161. If the marginal cost of producing vanity license plates is virtually zero (by prison inmates with little else to do), then states would maximize their profits on plate sales at the point on a linear demand curve where
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Figure 6-6  |
162. An article in the Wall Street Journal reports that “most cable TV operators are aware that cable is price sensitive, and there comes a point where people won’t pay the price.” Which demand curve in Figure 6-6 best illustrates this situation?
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163. The formula for the price elasticity of demand
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164. The price elasticity of demand for widgets at any particular price is determined by
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165. In an attempt to raise sales, Hannah cut prices in her bookstore by 20 percent. If the dollar value of her sales remained constant, that indicates
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Figure 6-2 |
166. In Figure 6-2, the price elasticity of demand (dropping all minus signs) is ____ between P = 4 and P = 6 than between P = 10 and P = 12 because between the lower set of prices the percentage change in price is ____.
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167. If demand is unit elastic, revenue
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168. A price cut will decrease the revenue a firm receives if the demand for its product is
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169. The demand for Exxon gasoline is ____ the demand for all gasoline.
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170. A rightward shift in the demand curve for a product will ordinarily result from
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171. After a number of acquisitions, Air American controls 75 percent of the U.S. market. It has been charged with “monopolizing” the U.S. air markets by the Justice Department. In its defense, the airline would want to introduce evidence that
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172. All of the following observations concerning the elasticity formula are true except
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173. A craze for apples in Riverdale increases the quantity demanded at every price by five bushels. Between any two prices, the new demand curve will be ____ the old demand curve.
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174. If a demand curve for a good is perfectly inelastic, then the seller could
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175. When the price of penicillin tablets increases by $5 per dozen, the drug company’s revenue increases by $6 million. Its elasticity of demand (in absolute terms) must be
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176. When Scuba, Inc., lowered the price of a tank of compressed air by 20 percent, it sold 10 percent more tankfuls. The price elasticity for compressed air is
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177. A recent study on enrollment at a liberal arts college concluded that demand elasticity is 0.91. The administration is considering a tuition increase to help balance the budget. The revenue-maximizing decision is to
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178. If, as price increases by 10 percent, total revenue decreases by 10 percent, demand is
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179. The definition of cross elasticity of demand for two products X and Y is
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180. Along a straight-line demand curve (dropping all minus signs), the price elasticity of demand
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181. If the demand curve is perfectly elastic, and if the price of the good is increased by 10 percent by the seller, then revenue from the sale of the good would
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182. Demand is said to be elastic when percentage changes in quantity demanded are
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183. John’s Bait Shop was surprised to learn that when it raised prices by 10 percent, total revenue was unaffected. This is because the elasticity for bait is
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184. A demand curve is described as perfectly elastic if
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185. If the price elasticity is 1.50 for the demand of vanilla lattes, then if the seller raises price by 10 percent, then quantity demanded for the product will
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186. A 10 percent increase in the cost of restaurant meals, which are a luxury, will most likely
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Figure 6-1  |
187. In Figure 6-1,
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188. If goods X and Y are complements, the
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189. Regarding demand elasticity, which of the following statements is correct?
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190. Regarding the price elasticities of demand, which of the following statements is true?
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191. When the price of a sweet roll is $2, the bakery sells 300 rolls per week. If it raises the price to $3, then it sells 150 rolls per week. Based on this, the price elasticity of a sweet roll between these prices is
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192. Along the inelastic portion of a demand curve, the
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193. If the price elasticity of supply of doodads equals 0.50 and the price rises by 3 percent, then the quantity supplied of doodads will rise by ____.
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194. If the price elasticity of demand for radios is 2.5 (dropping the minus sign), then a 50 percent reduction in the price of radios will lead to
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Figure 6-6 |
195. The purchase of premium cable channels is an “all-or-nothing” choice. Which graph in Figure 6-6 best illustrates the cable market demand curve?
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Figure 6-3 |
196. In Figure 6-3(b), as price falls from $15 to $6, total expenditure
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197. After a $5 million ad campaign, Coca-Cola measured its effectiveness by calculating the cross elasticity of demand between Coke and Pepsi. A successful campaign would be indicated if the cross elasticity went from
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198. Total expenditure by a buyer is equal to the
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Figure 6-5 |
199. If the demand curve in Figure 6-5 is unit elastic, then total expenditure at A is ____ total expenditure at B.
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200. Which of the following goods will have the most inelastic demand at any time?
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201. The emigration of some of Whoville’s workers reduces the quantity of thingamabobs supplied at every price by 50. The new supply curve will ____ the old supply curve.
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202. If the demand for gasoline becomes more elastic over time,
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203. The demand for a new effective drug for the cure of AIDS would most likely be
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204. A study of New York City (NYC) tax rates concluded that taxes on the nonmanufacturing sector should be higher since that sector has fewer alternatives. Manufacturers are more mobile and may move to avoid higher taxes. This means that
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205. The price of coffee rose 50 percent and coffee sales fell 25 percent. Doughnut sales also fell 25 percent. From this information, we can conclude that
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206. Price elasticity of demand is defined as
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207. If the price of potatoes is reduced, consumers likely buy
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Figure 6-3 |
208. Using Figure 6-3(b), as price falls from $15 to $6, the elasticity of demand is (dropping all minus signs)
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209. The local symphony recently raised its price for tickets to their summer concerts in the park. At the end of the summer season, the symphony was surprised to see that total revenue had actually decreased. The reason was that the elasticity of demand for tickets was
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Figure 6-7  |
210. In Figure 6-7, which total expenditure curve belongs to a demand curve that is unit elastic throughout?
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211. Big Al’s Burger Emporium lowered the price of its burgers from $8 to $6. The firm saw sales of burger increase from 1,200 per week to 2,000 per week. This implies that the price elasticity (dropping any negative signs) is
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212. If a 10 percent rise in price leads to a reduction in quantity demanded of more than 10 percent,
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213. The measure used to determine whether two products are substitutes or complements is called
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214. If two goods are complements, their cross elasticity of demand will normally be
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Figure 6-3 |
215. In Figure 6-3(a), at any price above $6, quantity demanded
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Figure 6-2 |
216. Other things equal, it can be concluded that in Figure 6-1, that
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217. Using Figure 6-2, calculate the price elasticity of demand (dropping all minus signs) between P = 10 and P = 12.
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218. The formula for price elasticity of demand that is used in practice
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219. Tele-Com, Inc., the nation’s largest cable TV company, tested the effect of a price reduction for the Disney Channel. It lowered prices from $10.75 to $7.95 and found that the number of customers more than doubled. This means the
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220. The demand for a product is inelastic whenever
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221. When OPEC raises the price of petroleum, American expenditures on oil imports increase, suggesting that
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222. Which of the following will lead to a movement along the same demand curve?
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223. Suppose that a 15 percent decrease in price leads to an increase in the quantity demanded of 10 percent,
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224. Sun City’s public bus line has been operating at a deficit. The city decides to raise the fare from 50 cents to 75 cents, anticipating enough additional revenue to cover the deficit. What assumption is the city making about price elasticity? |
225. The cross elasticity between two goods has been measured at −1.2. How are the goods related? Explain. Give an example of goods for which this might be a reasonable measure of cross elasticity. |
226. The Sandy Deli operates near a college campus. It has been selling 325 sandwiches a day at $1.75 each and is considering a price cut. It estimates 450 sandwiches would sell per day at $1.50 each. Calculate the marginal revenue of such a price cut and the elasticity between the two points. |
227. Would a profit-maximizing firm sell at a price where demand is inelastic? Explain. |
228. Along a straight-line demand curve, why does the price elasticity of demand grow steadily smaller as we move from left to right? |
229. Suppose that elasticity has been reliably measured as 1.55 and the unit price decreases from $20 to $17.50. How much will quantity demanded increase? |
230. What does cross elasticity of demand between goods reveal about the nature of relationship between them? |
231. If Polaroid wanted damages against Kodak for infringing on its instant development film process, and the courts found a high positive cross elasticity between purchases of Polaroid instant film and 35 mm regular film, would that have strengthened or weakened Polaroid’s claim against Kodak? |
232. Explain what happens to the magnitude of price elasticity of demand as price increases along a straight-line demand curve. |
233. Why is it customary to report price elasticity of demand in absolute value terms while cross elasticities and income elasticities are reported with their sign attached? |
234. What is an optimal decision? |
235. If the income of buyers increases and a company maintains the same price, what is the most likely impact on quantity sold? Explain. Draw a graphical display of the result. |
236. The following table contains information regarding price and output for a firm. For each point except the first, calculate the elasticity between it and the point above.
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237. What is the shape of a perfectly elastic demand curve? Explain its significance for a seller. |
238. How might a court use cross elasticity in an antitrust case? |
239. The sales manager of a retail outlet suggests that the best way to increase customers is to have a sale. If a 10 percent price cut doesn’t bring in enough customers, then he’ll cut prices 20 percent. Increased cash flow should take care of profits. Do you agree? Explain. |
240. Why are time series data unlikely to give an accurate estimate of demand? |
241. A unit-elastic demand curve never touches or crosses either of the axes. Why? |
242. How might a market research analyst use measures of elasticity—price, cross, and income—in her work? Explain. |
243. Arrange the following goods from least to most elastic, explaining your ordering: gasoline, Exxon gas, Exxon gas at a particular gas station. |
244. What are the main determinants of demand elasticity? Explain their importance. |
245. How would an increase in cigarette taxes succeed according to the following criteria: collecting a large amount of tax revenue; distorting demand as little as possible; discouraging consumption of harmful commodities? |
246. For each pair of goods, explain which is more elastic: toothpicks vs. cars; electricity vs. yachts; IBM computers vs. Apple computers. |
247. Using the general concept of elasticity, would you expect the elasticity of demand for advertising to be positive or negative? Explain. |
248. The current price of concert t-shirts is $20 each, and the company has been selling 400 per week. If price elasticity is 2.5 and the price changes to $21, how many t-shirts will be sold per week? |
249. Why do economists measure responsiveness of demand to price in percentage changes rather than in absolute changes? |
250. In a past fare war, U.S. Air reduced the price of its Charlotte, North Carolina, to New York City round-trip fare from $198 to $138 to match American Airlines. U.S. Air did so reluctantly, saying it would cost the company millions of dollars in revenue. American, on the other hand, believed the fare cut would increase its revenue. What different assumptions about the underlying price elasticity of demand did each airline believe true? |
251. Define the following terms and explain their importance to the study of economics. a. price elasticity b. complements c. substitutes d. cross elasticity e. supply elasticity |
252. In the DuPont cellophane case, rivals accused DuPont of monopolizing cellophane. DuPont claimed that the relevant market was flexible wrapping material, such as wax paper and aluminum foil, rather than just cellophane. DuPont won the case. What type of evidence constituted DuPont’s defense? |
253. How can one tell from cross elasticity what kind of relationship exists between any two goods? |
254. Specifically, what might cause the quantity demanded of a particular good to double at a particular price? |
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Microeconomics Principles and Policy 14e | Test Bank by Baumol
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