Question 1

If a firm raises the price of its product, its total revenue will

Accepted Answer

A) always increase 
B) increase only if demand is price inelastic 
C) increase only if demand is price elastic 
D) remain constant, regardless of price elasticity of demand 
E) never increase 
A) always increase 
B) increase only if demand is price inelastic 
C) increase only if demand is price elastic 
D) remain constant, regardless of price elasticity of demand 
E) never increase

Question 2

If demand is price elastic, total revenue is

Accepted Answer

A) directly related to quantity demanded 
B) inversely related to quantity demanded 
C) directly related to price 
D) directly related to price and inversely related to quantity demanded 
E) not related to either price or to quantity demanded 
A) directly related to quantity demanded 
B) inversely related to quantity demanded 
C) directly related to price 
D) directly related to price and inversely related to quantity demanded 
E) not related to either price or to quantity demanded

Question 3

Exhibit 5-8   Which of the following is not true in the range of the total revenue curve labeled A in Exhibit 5-8?

Accepted Answer

A) Demand is inelastic. 
B) Total revenue is increasing. 
C) Total revenue is positive. 
D) Demand is elastic. 
E) Demand elasticity decreases as total revenue increases. 
A) Demand is inelastic. 
B) Total revenue is increasing. 
C) Total revenue is positive. 
D) Demand is elastic. 
E) Demand elasticity decreases as total revenue increases.

Question 4

Elasticity measures

Accepted Answer

A) whether a price increase causes quantity demanded to increase or decrease 
B) the strength of an economy's tendency to recover from recession 
C) the responsiveness of decision makers to changes in prices, income, or other variables 
D) the profitability of investment in an industry 
E) the long-run flexibility of prices in the economy 
A) whether a price increase causes quantity demanded to increase or decrease 
B) the strength of an economy's tendency to recover from recession 
C) the responsiveness of decision makers to changes in prices, income, or other variables 
D) the profitability of investment in an industry 
E) the long-run flexibility of prices in the economy

Question 5

The demand for most agricultural products tends to be

Accepted Answer

A) both price and income elastic 
B) both price and income inelastic 
C) price inelastic and income elastic 
D) price elastic and income inelastic 
E) unit elastic in terms of price elasticity and income elastic 
A) both price and income elastic 
B) both price and income inelastic 
C) price inelastic and income elastic 
D) price elastic and income inelastic 
E) unit elastic in terms of price elasticity and income elastic

Question 6

All other things constant, goods will have more __________ demand if their price uses up a __________ proportion of a consumer's budget.

Accepted Answer

A) price-elastic; greater 
B) unit-elastic; smaller 
C) price-elastic; smaller 
D) price-inelastic; greater 
E) stable; greater 
A) price-elastic; greater 
B) unit-elastic; smaller 
C) price-elastic; smaller 
D) price-inelastic; greater 
E) stable; greater

Question 7

Another word for elasticity is

Accepted Answer

A) responsiveness 
B) happiness 
C) bonus 
D) profit 
E) surplus 
A) responsiveness 
B) happiness 
C) bonus 
D) profit 
E) surplus

Question 8

If people have more time to adjust to a price change,

Accepted Answer

A) demand becomes more elastic, and supply becomes less elastic 
B) demand becomes less elastic, and supply becomes more elastic 
C) both supply and demand become less elastic 
D) both supply and demand become more elastic 
E) elasticity of both demand and supply tends toward unity 
A) demand becomes more elastic, and supply becomes less elastic 
B) demand becomes less elastic, and supply becomes more elastic 
C) both supply and demand become less elastic 
D) both supply and demand become more elastic 
E) elasticity of both demand and supply tends toward unity

Question 9

Exhibit 5-2   Based on the information in Exhibit 5-2, the demand for the good is __________ and an increase in price from $40 to $60 per unit will __________ total revenue.

Accepted Answer

A) unit elastic; increase 
B) elastic; decrease 
C) unit elastic; not change 
D) inelastic; increase 
A) unit elastic; increase 
B) elastic; decrease 
C) unit elastic; not change 
D) inelastic; increase

Question 10

The value of cross-price elasticity of demand between golf balls and golf clubs is

Accepted Answer

A) negative 
B) positive 
C) 0 
D) greater than 1 
E) less than 1 
A) negative 
B) positive 
C) 0 
D) greater than 1 
E) less than 1

Question 11

If demand is inelastic, the percentage change in price is greater than the resulting percentage change in quantity demanded.

Accepted Answer

A) True 
 B)False

Question 12

The price elasticity of demand is equal to the slope of the demand curve.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following does not determine a good's price elasticity of demand?

Accepted Answer

A) the time interval considered 
B) the number of substitutes there are for the good 
C) expenditures on the good as a percentage of the total consumer budget 
D) the slope of the demand curve 
E) the more of a luxury a particular good is 
A) the time interval considered 
B) the number of substitutes there are for the good 
C) expenditures on the good as a percentage of the total consumer budget 
D) the slope of the demand curve 
E) the more of a luxury a particular good is

Question 14

For which of the following goods is the value of income elasticity most likely to be negative?

Accepted Answer

A) macaroni and cheese 
B) champagne 
C) airline tickets 
D) clothes 
E) toothpaste 
A) macaroni and cheese 
B) champagne 
C) airline tickets 
D) clothes 
E) toothpaste

Question 15

Price elasticity of demand is defined as

Accepted Answer

A) the percentage change in price divided by the percentage change in quantity demanded 
B) the percentage change in quantity demanded divided by the percentage change in price 
C) the change in quantity demanded divided by the change in price 
D) the change in price divided by the change in quantity demanded 
E) the quantity demanded divided by the price 
A) the percentage change in price divided by the percentage change in quantity demanded 
B) the percentage change in quantity demanded divided by the percentage change in price 
C) the change in quantity demanded divided by the change in price 
D) the change in price divided by the change in quantity demanded 
E) the quantity demanded divided by the price

Question 16

The price elasticity of today's supply curve of classrooms on campus is likely to

Accepted Answer

A) be greater than 1 
B) be less than 1 
C) be equal to 1 
D) approach zero 
E) be infinity 
A) be greater than 1 
B) be less than 1 
C) be equal to 1 
D) approach zero 
E) be infinity

Question 17

Wheat farmers in Kansas would benefit from a devastating crop failure in North Dakota (another major wheat-producing state)if the U.S.demand for wheat is

Accepted Answer

A) inelastic 
B) elastic 
C) unit elastic 
D) downward sloping 
E) perfectly elastic 
A) inelastic 
B) elastic 
C) unit elastic 
D) downward sloping 
E) perfectly elastic

Question 18

Perfectly elastic demand curves are irrelevant, since real world demand curves are never perfectly elastic.

Accepted Answer

A) True 
 B)False

Question 19

If the price of Pepsi-Cola increases from 50 cents to 60 cents per can and the quantity demanded decreases from 100 cans to 50 cans, then the Pepsi-Cola Company could increase its total revenue by

Accepted Answer

A) lowering price 
B) decreasing quantity supplied 
C) leaving price the same 
D) raising price 
E) decreasing supply 
A) lowering price 
B) decreasing quantity supplied 
C) leaving price the same 
D) raising price 
E) decreasing supply

Question 20

Exhibit 5-21   What is the price elasticity of supply between $10 and $20 on supply curve S in Exhibit 5-21?

Accepted Answer

A) 0 
B) infinity 
C) 1 
D) 2 
E) 10 
A) 0 
B) infinity 
C) 1 
D) 2 
E) 10

Exam 5: Elasticity of Demand and Supply

If a firm raises the price of its product, its total revenue will

If demand is price elastic, total revenue is

Exhibit 5-8 Which of the following is not true in the range of the total revenue curve labeled A in Exhibit 5-8?

Elasticity measures

The demand for most agricultural products tends to be

All other things constant, goods will have more __________ demand if their price uses up a __________ proportion of a consumer's budget.

Another word for elasticity is

If people have more time to adjust to a price change,

Exhibit 5-2 Based on the information in Exhibit 5-2, the demand for the good is __________ and an increase in price from $40 to $60 per unit will __________ total revenue.

The value of cross-price elasticity of demand between golf balls and golf clubs is

If demand is inelastic, the percentage change in price is greater than the resulting percentage change in quantity demanded.

The price elasticity of demand is equal to the slope of the demand curve.

Which of the following does not determine a good's price elasticity of demand?

For which of the following goods is the value of income elasticity most likely to be negative?

Price elasticity of demand is defined as

The price elasticity of today's supply curve of classrooms on campus is likely to

Wheat farmers in Kansas would benefit from a devastating crop failure in North Dakota (another major wheat-producing state)if the U.S.demand for wheat is

Perfectly elastic demand curves are irrelevant, since real world demand curves are never perfectly elastic.

If the price of Pepsi-Cola increases from 50 cents to 60 cents per can and the quantity demanded decreases from 100 cans to 50 cans, then the Pepsi-Cola Company could increase its total revenue by

Exhibit 5-21 What is the price elasticity of supply between $10 and $20 on supply curve S in Exhibit 5-21?

The Art and Science of Economic Analysis

Appendix--Understanding Graphs

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Appendix--Price Elasticity and Tax Incidence

Consumer Choice and Demand

Appendix--Indifference Curves and Utility Maximization

Production and Cost in the Firm

A--Perfect Competition

B--Perfect Competition

A--Monopoly

B--Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Income Distribution and Poverty

International Trade

International Finance

Economic Development

Filters

All other things constant, goods will have more demand if their price uses up a proportion of a consumer's budget.

Exhibit 5-2 Based on the information in Exhibit 5-2, the demand for the good is and an increase in price from $40 to $60 per unit will total revenue.