Question 1

Which of the following represents a price elastic supply?

Accepted Answer

A)  The quantity demanded increases 18 percent as a result of a decrease in the price of 8 percent. 
B)  The price rises by 8 percent causing the quantity demanded to fall by 10 percent. 
C)  The quantity supplied increases by 21 percent as a result of an increase in the price of 12 percent. 
D)  The price rises by 22 percent causing the quantity supplied to increase by 3 percent. 
A)  The quantity demanded increases 18 percent as a result of a decrease in the price of 8 percent. 
B)  The price rises by 8 percent causing the quantity demanded to fall by 10 percent. 
C)  The quantity supplied increases by 21 percent as a result of an increase in the price of 12 percent. 
D)  The price rises by 22 percent causing the quantity supplied to increase by 3 percent.

Question 2

According to the total revenue test, a price cut increases total revenue if demand is

Accepted Answer

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

Question 3

The income elasticity of demand for store brands of soda (that is, non-name brands) is negative. What does this fact indicate about consumers' perceptions about the store brands?

Accepted Answer

The negative income elasticity indicates

Question 4

-The demand curve in the figure above illustrates the demand for a product with

Accepted Answer

A)  zero price elasticity of demand at all prices. 
B)  infinite price elasticity of demand. 
C)  unit price elasticity of demand at all prices. 
D)  a price elasticity of demand that is different at all prices. 
A)  zero price elasticity of demand at all prices. 
B)  infinite price elasticity of demand. 
C)  unit price elasticity of demand at all prices. 
D)  a price elasticity of demand that is different at all prices.

Question 5

If the price of a movie ticket increases by 4 percent and the quantity of movies demanded falls by 2 percent, the price elasticity of demand is

Accepted Answer

A)  2.0. 
B)  4.0. 
C)  0.5. 
D)  some amount that cannot be determined without more information. 
A)  2.0. 
B)  4.0. 
C)  0.5. 
D)  some amount that cannot be determined without more information.

Question 6

When the price of a CD is $13 per CD, 39,000,000 CDs per year are supplied. When the price is $15 per CD, 41,000,000 CDs per year are supplied. What is the elasticity of supply for CDs?

Accepted Answer

A)  2.86 
B)  0.35 
C)  0.14 
D)  0.05 
A)  2.86 
B)  0.35 
C)  0.14 
D)  0.05

Question 7

To maximize its revenue,

Accepted Answer

A)  a firm facing inelastic demand should always raise its price. 
B)  a firm facing elastic demand should always raise its price. 
C)  a firm should always charge the highest price possible regardless of the elasticity of demand. 
D)  None of the above answers is correct. 
A)  a firm facing inelastic demand should always raise its price. 
B)  a firm facing elastic demand should always raise its price. 
C)  a firm should always charge the highest price possible regardless of the elasticity of demand. 
D)  None of the above answers is correct.

Question 8

The demand for a good is less price elastic

Accepted Answer

A)  if closer substitutes are available. 
B)  if the good is a luxury rather than a necessity. 
C)  if the share of the good in the average consumer's budget is smaller. 
D)  in the long run than in the short run. 
A)  if closer substitutes are available. 
B)  if the good is a luxury rather than a necessity. 
C)  if the share of the good in the average consumer's budget is smaller. 
D)  in the long run than in the short run.

Question 9

Goods or services that can be produced only by using unique or rare productive resources tend to have a low elasticity of supply.

Accepted Answer

A) True 
 B)False

Question 10

-The table above gives the demand schedule for peas. Between point A and point B, the price elasticity of demand equals

Accepted Answer

A)  0.11. 
B)  0.50. 
C)  0.22. 
D)  9.09. 
A)  0.11. 
B)  0.50. 
C)  0.22. 
D)  9.09.

Question 11

If OPEC, a group of oil producing nations, cuts oil production to increase the total revenue, OPEC presumes that the demand for oil is

Accepted Answer

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

Question 12

-The elasticity of demand along the demand curve shown in the above figure is constant and equal to 1. Thus,

Accepted Answer

A)  area 0BCF equals area 0AGF. 
B)  area 0BCF equals area FGDE. 
C)  area 0BCF equals area 0ADE. 
D)  area ABCG equals area 0AGF. 
A)  area 0BCF equals area 0AGF. 
B)  area 0BCF equals area FGDE. 
C)  area 0BCF equals area 0ADE. 
D)  area ABCG equals area 0AGF.

Question 13

Aglets are the metal or plastic tips on shoelaces that make it easier to lace your shoes. The demand for aglets is probably

Accepted Answer

A)  inelastic. 
B)  unit elastic. 
C)  elastic but not perfectly elastic. 
D)  perfectly elastic. 
A)  inelastic. 
B)  unit elastic. 
C)  elastic but not perfectly elastic. 
D)  perfectly elastic.

Question 14

A 10 percent increase in the quantity of spinach demanded results from a 20 percent decline in its price. The price elasticity of demand for spinach is

Accepted Answer

A)  0.5. 
B)  2.0. 
C)  10.0. 
D)  20.0. 
A)  0.5. 
B)  2.0. 
C)  10.0. 
D)  20.0.

Question 15

Suppose Sandy's Candies wants to increase its total revenues. If Sandy increases the price of her candy, she must be assuming that the demand for candy is

Accepted Answer

A)  unit elastic. 
B)  inelastic. 
C)  elastic. 
D)  income elastic. 
A)  unit elastic. 
B)  inelastic. 
C)  elastic. 
D)  income elastic.

Question 16

If the price of gasoline fell from $2.95 to $2.85 per gallon, your expenditure on gasoline would increase if your price elasticity of demand for gasoline equals

Accepted Answer

A)  1.1. 
B)  1.0. 
C)  0.9. 
D)  Total revenue would increase at all of the above elasticities. 
A)  1.1. 
B)  1.0. 
C)  0.9. 
D)  Total revenue would increase at all of the above elasticities.

Question 17

Suppose the price elasticity of demand for bouquets of flowers is 4.0. You are charging $8 per bouquet. If you want to increase the quantity of bouquets you sell by 20 percent, what price should you charge?

Accepted Answer

The price elasticity of demand = (percen

Question 18

If a 1 percent decrease in the price of a pound of squash results in a larger percentage decrease in the quantity supplied,

Accepted Answer

A)  demand is elastic. 
B)  demand is inelastic. 
C)  supply is elastic. 
D)  supply is inelastic. 
A)  demand is elastic. 
B)  demand is inelastic. 
C)  supply is elastic. 
D)  supply is inelastic.

Question 19

Fred's income has just risen from $940 per week to $1,060 per week. As a result, he decides to purchase 9 percent more steak per week. The income elasticity of Fred's demand for steak is

Accepted Answer

A)  0.75. 
B)  0.90. 
C)  1.00. 
D)  1.33. 
A)  0.75. 
B)  0.90. 
C)  1.00. 
D)  1.33.

Question 20

-The above table gives the demand schedule for Billy Bob's BBQ ribs. The demand for Billy Bob's ribs is unit elastic at which of the following prices?

Accepted Answer

A)  $10 
B)  $7 
C)  $5 
D)  $1 
A)  $10 
B)  $7 
C)  $5 
D)  $1

Exam 4: Elasticity

Which of the following represents a price elastic supply?

According to the total revenue test, a price cut increases total revenue if demand is

The income elasticity of demand for store brands of soda (that is, non-name brands) is negative. What does this fact indicate about consumers' perceptions about the store brands?

-The demand curve in the figure above illustrates the demand for a product with

If the price of a movie ticket increases by 4 percent and the quantity of movies demanded falls by 2 percent, the price elasticity of demand is

When the price of a CD is $13 per CD, 39,000,000 CDs per year are supplied. When the price is $15 per CD, 41,000,000 CDs per year are supplied. What is the elasticity of supply for CDs?

To maximize its revenue,

The demand for a good is less price elastic

Goods or services that can be produced only by using unique or rare productive resources tend to have a low elasticity of supply.

-The table above gives the demand schedule for peas. Between point A and point B, the price elasticity of demand equals

If OPEC, a group of oil producing nations, cuts oil production to increase the total revenue, OPEC presumes that the demand for oil is

-The elasticity of demand along the demand curve shown in the above figure is constant and equal to 1. Thus,

Aglets are the metal or plastic tips on shoelaces that make it easier to lace your shoes. The demand for aglets is probably

A 10 percent increase in the quantity of spinach demanded results from a 20 percent decline in its price. The price elasticity of demand for spinach is

Suppose Sandy's Candies wants to increase its total revenues. If Sandy increases the price of her candy, she must be assuming that the demand for candy is

If the price of gasoline fell from $2.95 to $2.85 per gallon, your expenditure on gasoline would increase if your price elasticity of demand for gasoline equals

Suppose the price elasticity of demand for bouquets of flowers is 4.0. You are charging $8 per bouquet. If you want to increase the quantity of bouquets you sell by 20 percent, what price should you charge?

If a 1 percent decrease in the price of a pound of squash results in a larger percentage decrease in the quantity supplied,

Fred's income has just risen from $940 per week to $1,060 per week. As a result, he decides to purchase 9 percent more steak per week. The income elasticity of Fred's demand for steak is

-The above table gives the demand schedule for Billy Bob's BBQ ribs. The demand for Billy Bob's ribs is unit elastic at which of the following prices?

What Is Economics

The Economic Problem

Demand and Supply

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices and Public Goods

Externalities and the Environment

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

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