Question : Figure 6-8 17) Refer to Figure 6-8.  Identify the two goods : 1387544

Figure 6-8

17) Refer to Figure 6-8.  Identify the two goods which are substitutes.

A) Good X and Good Y

B) Good Y and Good Z

C) Good X and Good Z

D) It is not possible to distinguish any relationship among the goods.

18) Refer to Figure 6-8.  Identify the two goods which are complements.

A) Good X and Good Y

B) Good Y and Good Z

C) Good X and Good Z

D) It is not possible to distinguish any relationship among the goods.

19) In September 2006, the Food and Drug Administration recommended that Americans avoid eating bagged raw spinach in the wake of an outbreak of E. coli bacteria. Following this recommendation, the food industry looked at alternatives and many turned to arugula. One Chicago distributor claimed, “The sale of the stuff has gone through the roof.” Based on this information,

A) arugula is a normal good while raw spinach is an inferior good.

B) the cross-price elasticity between arugula and spinach is negative.

C) the cross-price elasticity between arugula and spinach is positive.

D) the price elasticity of arugula is positive while the price elasticity of spinach falls to zero.

20) For people who live near a bus route, a subway station, or a commuter rail line, public transportation provides a substitute to driving their own cars. So, for these people, the cross-price elasticity of demand between gasoline and public transportation is

A) positive.

B) negative.

C) zero.

D) infinity.

21) If a firm is in an antitrust court case being accused of monopolizing a product, the firm would hire an economist to show

A) the cross-price elasticity of demand between the firm’s good and another is negative.

B) the cross-price elasticity of demand between the firm’s good and another is positive.

C) the price elasticity of demand for the firm’s good is highly inelastic.

D) the income elasticity of the firm’s good is inferior.

22) 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.

23) If the cross-price elasticity of demand between Breeze Detergent and Faber Detergent is a relatively large positive number, then it indicates that

A) the two brands are probably made by the same company.

B) the two brands of detergent are close substitutes.

C) consumers have a distinct preference for one brand versus the other.

D) detergents are necessities.

24) The cross-price elasticity of demand between an unlimited texting option and an unlimited call minutes option offered from a cell phone provider would be

A) positive if subscribers consider the services substitutes for each other.

B) positive if subscribers consider the services complements to each other.

C) negative if subscribers consider the services substitutes for each other.

D) negative no matter if subscribers consider the services substitutes or complements for each other.

25) The income elasticity of demand measures

A) the responsiveness of quantity demanded to changes in income.

B) how a consumer’s purchasing power is affected by a change in the price of a product.

C) the percentage change in the price of a product divided by the percentage change in consumer income.

D) the income effect of a change in price.

26) If a good has a negative income elasticity of demand, this indicates that the good is

A) a substitute with another good.

B) a complement with another good.

C) inferior.

D) normal.