Question 1

The price of a gallon of gasoline increases 10% this year.As a result,which event is MOST likely to occur?

Accepted Answer

A) More people will drive their cars. 
B) Public transportation usage will decrease. 
C) Gasoline expenditures will increase if gasoline is an inelastic good. 
D) Fewer people will ride bicycles,a substitute for car travel. 
A) More people will drive their cars. 
B) Public transportation usage will decrease. 
C) Gasoline expenditures will increase if gasoline is an inelastic good. 
D) Fewer people will ride bicycles,a substitute for car travel.

Question 2

The price elasticity of demand for gasoline in the short run has been estimated to be 0.1.If a war in the Middle East causes the price of oil (from which gasoline is made)to increase,how will that affect total expenditures on gasoline in the short run,all other things equal?

Accepted Answer

A) Quantity demanded will stay the same,but total expenditures will fall. 
B) Quantity demanded will decrease a massive amount,but total expenditures will rise. 
C) Total expenditures will remain unchanged. 
D) Quantity demanded will not change much,but total expenditures will rise. 
A) Quantity demanded will stay the same,but total expenditures will fall. 
B) Quantity demanded will decrease a massive amount,but total expenditures will rise. 
C) Total expenditures will remain unchanged. 
D) Quantity demanded will not change much,but total expenditures will rise.

Question 3

The price elasticity of demand measures the responsiveness of the change in the:

Accepted Answer

A) quantity demanded to a change in the price. 
B) price to a change in the quantity demanded. 
C) slope of the demand curve to a change in the price. 
D) slope of the demand curve to a change in the quantity demanded. 
A) quantity demanded to a change in the price. 
B) price to a change in the quantity demanded. 
C) slope of the demand curve to a change in the price. 
D) slope of the demand curve to a change in the quantity demanded.

Question 4

Since the demand for cashews increases as the price of walnuts increases,we can assume that these two goods are:

Accepted Answer

A) unrelated. 
B) superior. 
C) inferior. 
D) substitutes. 
A) unrelated. 
B) superior. 
C) inferior. 
D) substitutes.

Question 5

When the price goes down,the quantity demanded goes up.The price elasticity of demand measures:

Accepted Answer

A) how much the price goes down. 
B) how much the equilibrium price goes up. 
C) the responsiveness of the price change to an income change. 
D) the responsiveness of the quantity change to the price change. 
A) how much the price goes down. 
B) how much the equilibrium price goes up. 
C) the responsiveness of the price change to an income change. 
D) the responsiveness of the quantity change to the price change.

Question 6

Use the following to answer question:  
-(Figure: Demand for Notebook Computers)Use Figure: The Demand for Notebook Computers.The change in total revenue resulting from a change in price from P to T suggests that demand is:

Accepted Answer

A) inelastic. 
B) price-elastic. 
C) price-inelastic. 
D) price unit-elastic. 
A) inelastic. 
B) price-elastic. 
C) price-inelastic. 
D) price unit-elastic.

Question 7

The price elasticity of demand can be found by:

Accepted Answer

A) examining only the slope of the demand curve. 
B) measuring absolute changes in price and quantity demanded. 
C) comparing the percentage change in quantity demanded to the percentage change in price. 
D) knowing that when price changes,quantity demanded goes in the opposite direction. 
A) examining only the slope of the demand curve. 
B) measuring absolute changes in price and quantity demanded. 
C) comparing the percentage change in quantity demanded to the percentage change in price. 
D) knowing that when price changes,quantity demanded goes in the opposite direction.

Question 8

Which statement is NOT true regarding a price-elastic demand curve?

Accepted Answer

A) Total revenue increases when the price falls. 
B) The absolute value of the price elasticity is a fraction greater than 0 but 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. 
A) Total revenue increases when the price falls. 
B) The absolute value of the price elasticity is a fraction greater than 0 but 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.

Question 9

The price elasticity of demand for a good such as water is likely to be very low because:

Accepted Answer

A) the price is a small percentage of most budgets. 
B) water has some good substitutes. 
C) water is considered a luxury. 
D) the share of income spent on water is large. 
A) the price is a small percentage of most budgets. 
B) water has some good substitutes. 
C) water is considered a luxury. 
D) the share of income spent on water is large.

Question 10

When Joe's income is $100 per week,he spends $20 per week on pizza.When his income rises to $110 per week,he spends $25 per week on pizza.If the price of pizza remained constant during this time,this information implies that,for Joe:

Accepted Answer

A) pizza is a normal good. 
B) pizza is an inferior good. 
C) pizza is a substitute good. 
D) demand for pizza is price-elastic. 
A) pizza is a normal good. 
B) pizza is an inferior good. 
C) pizza is a substitute good. 
D) demand for pizza is price-elastic.

Question 11

Use the following to answer question:  
-(Figure: The Demand for e-Books)If the price of e-Books increases from $6 to $8,total revenue _____,which means that demand is _____.

Accepted Answer

A) increases;elastic 
B) decreases;inelastic 
C) remains constant;elastic 
D) decreases;elastic 
A) increases;elastic 
B) decreases;inelastic 
C) remains constant;elastic 
D) decreases;elastic

Question 12

The price elasticity of demand along a demand curve with a constant slope:

Accepted Answer

A) is equal to the slope. 
B) is greater than the slope. 
C) is less than the slope. 
D) increases in absolute value as the price rises. 
A) is equal to the slope. 
B) is greater than the slope. 
C) is less than the slope. 
D) increases in absolute value as the price rises.

Question 13

If total revenue goes down when the price falls,demand is said to:

Accepted Answer

A) be price-inelastic. 
B) be price unit-elastic. 
C) be price-elastic. 
D) have positive price elasticity. 
A) be price-inelastic. 
B) be price unit-elastic. 
C) be price-elastic. 
D) have positive price elasticity.

Question 14

There is NO total revenue test for price elasticity of supply because:

Accepted Answer

A) price and quantity supplied are usually inversely related. 
B) price and quantity supplied are usually positively related. 
C) total revenue will not usually change in the direction of a supply price change. 
D) price and quantity supplied are always negatively related. 
A) price and quantity supplied are usually inversely related. 
B) price and quantity supplied are usually positively related. 
C) total revenue will not usually change in the direction of a supply price change. 
D) price and quantity supplied are always negatively related.

Question 15

When the percentage change in quantity demanded is larger than the percentage change in price,demand is said to be:

Accepted Answer

A) price-inelastic. 
B) price unit-elastic. 
C) price-elastic. 
D) perfectly price-inelastic. 
A) price-inelastic. 
B) price unit-elastic. 
C) price-elastic. 
D) perfectly price-inelastic.

Question 16

Since for most people,eating in restaurants is a luxury and eating at home is a necessity,the price elasticity of demand for food eaten at home is lower than the price elasticity of demand for eating in restaurants.

Accepted Answer

A) True 
 B)False

Question 17

Use the following to answer question:  
-(Figure: Estimating Price Elasticity)Use Figure: Estimating Price Elasticity.Between the two prices,P1 and P2,which demand curve has the LOWEST price elasticity?

Accepted Answer

A) D1 
B) D2 
C) D3 
D) D4 
A) D1 
B) D2 
C) D3 
D) D4

Question 18

Total revenue is:

Accepted Answer

A) total sales less total cost. 
B) the price of a good times the quantity of the good that is sold. 
C) the price effect times the quantity effect. 
D) the price of a good divided by the amount of the good sold. 
A) total sales less total cost. 
B) the price of a good times the quantity of the good that is sold. 
C) the price effect times the quantity effect. 
D) the price of a good divided by the amount of the good sold.

Question 19

If you know the cross-price elasticity between two goods is positive,then it suggests that the two goods are:

Accepted Answer

A) substitutes. 
B) complements. 
C) normal goods. 
D) inferior goods. 
A) substitutes. 
B) complements. 
C) normal goods. 
D) inferior goods.

Question 20

Jessica's income increased by 10% this year.In the same year,Jessica's quantity demanded of milk increased by 10% and her quantity demanded for bread increased by 5%.This means that,for Jessica:

Accepted Answer

A) both milk and bread are inferior goods. 
B) both milk and bread are normal goods. 
C) milk is an inferior good,but bread is a normal good. 
D) milk is a normal good,but bread is an inferior good. 
A) both milk and bread are inferior goods. 
B) both milk and bread are normal goods. 
C) milk is an inferior good,but bread is a normal good. 
D) milk is a normal good,but bread is an inferior good.

Exam 6: Elasticity

The price of a gallon of gasoline increases 10% this year.As a result,which event is MOST likely to occur?

The price elasticity of demand for gasoline in the short run has been estimated to be 0.1.If a war in the Middle East causes the price of oil (from which gasoline is made)to increase,how will that affect total expenditures on gasoline in the short run,all other things equal?

The price elasticity of demand measures the responsiveness of the change in the:

Since the demand for cashews increases as the price of walnuts increases,we can assume that these two goods are:

When the price goes down,the quantity demanded goes up.The price elasticity of demand measures:

Use the following to answer question: -(Figure: Demand for Notebook Computers)Use Figure: The Demand for Notebook Computers.The change in total revenue resulting from a change in price from P to T suggests that demand is:

The price elasticity of demand can be found by:

Which statement is NOT true regarding a price-elastic demand curve?

The price elasticity of demand for a good such as water is likely to be very low because:

When Joe's income is $100 per week,he spends $20 per week on pizza.When his income rises to $110 per week,he spends $25 per week on pizza.If the price of pizza remained constant during this time,this information implies that,for Joe:

Use the following to answer question: -(Figure: The Demand for e-Books)If the price of e-Books increases from $6 to $8,total revenue _____,which means that demand is _____.

The price elasticity of demand along a demand curve with a constant slope:

If total revenue goes down when the price falls,demand is said to:

There is NO total revenue test for price elasticity of supply because:

When the percentage change in quantity demanded is larger than the percentage change in price,demand is said to be:

Since for most people,eating in restaurants is a luxury and eating at home is a necessity,the price elasticity of demand for food eaten at home is lower than the price elasticity of demand for eating in restaurants.

Use the following to answer question: -(Figure: Estimating Price Elasticity)Use Figure: Estimating Price Elasticity.Between the two prices,P1 and P2,which demand curve has the LOWEST price elasticity?

Total revenue is:

If you know the cross-price elasticity between two goods is positive,then it suggests that the two goods are:

Jessica's income increased by 10% this year.In the same year,Jessica's quantity demanded of milk increased by 10% and her quantity demanded for bread increased by 5%.This means that,for Jessica:

First Principles

Economic Models: Trade-Offs and Trade

Consumer and Producer Surplus

Supply and Demand

Price Controls and Quotas: Meddling With Markets

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Graphs in Economics

Consumer Preferences and Consumer Choice

Filters

Use the following to answer question: -(Figure: The Demand for e-Books)If the price of e-Books increases from $6 to $8,total revenue _,which means that demand is _.

Use the following to answer question: -(Figure: Estimating Price Elasticity)Use Figure: Estimating Price Elasticity.Between the two prices,P₁ and P₂,which demand curve has the LOWEST price elasticity?