Exam 4: Market Efficiency and Market Failure

Inelastic supply occurs whenever the elasticity of supply value is

If,when price changes by 35 per cent,the quantity demanded changes by 7 per cent,then the absolute value of the price elasticity of demand is 5.

In the alcohol industry,both wine and spirits are considered to be substitutes for beer.

Which of the following statements is true?

The price elasticity of demand for canned soup is estimated at -1.62.What happens to sales revenue if the price of canned soup rises?

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

Assume that the market for barley is in equilibrium and the demand for barley is inelastic.Predict what happens to the revenue of barley farmers if a prolonged drought reduces the supply of barley.The drought will cause farm revenue to

If the price of steel increases drastically,the quantity of steel demanded by the building industry will fall significantly over the long run because

Suppose the demand curve for hybrid cars shifts to the right.This will cause a relatively small increase in the price of hybrid cars if

We should never assume that an inelastic demand curve is a perfectly inelastic demand curve because

When demand is elastic,a fall in price causes total revenue to rise because

Which of the following goods would have the most inelastic demand?

Figure 4-6 -Refer to Figure 4-6.A perfectly elastic supply curve is shown in

If the demand for iPods is price elastic,then

Suppose at the current price,the elasticity of demand for copper is estimated at -3.14.What happens to sales revenue if the government imposes a price ceiling below the free market equilibrium price in the copper market?

Figure 4-1 -Refer to Figure 4-1.A perfectly elastic demand curve is shown in

Suppose you have surveyed a few industries and obtained information about the income elasticity of demand for their products.If you expect that the economy is headed for a long recession,you would advise people to look for jobs in an industry with

For each pair of items below,determine which product would have the higher price elasticity of demand (in absolute value). a.Blood pressure medicine for someone who has high blood pressure and the purchase of Clairol hair colouring product b.A new Ford Fusion or a tank of petrol for your current car c.A Seiko watch or watches in general

Figure 4-6 -Refer to Figure 4-6.A unit-elastic supply curve is shown in

The demand for most farm products is relatively inelastic.A drought that reduces the supply of farm products will also cause farm revenues to fall.