Question 1

A normal good is defined as a good for which the demand curve

Accepted Answer

A)  shifts leftward as income increases. 
B)  shifts rightward as income increases. 
C)  slopes downward to the right. 
D)  is perfectly price elastic. 
A)  shifts leftward as income increases. 
B)  shifts rightward as income increases. 
C)  slopes downward to the right. 
D)  is perfectly price elastic.

Question 2

Microsoft raises the price of its Office software by 10 percent. As a result, the quantity of personal computers demanded at the current price decreases by 5 percent. What is the cross elasticity of demand for personal computers with respect to the price of Microsoft Office software?

Accepted Answer

A)  -2.0 
B)  -0.5 
C)  0.5 
D)  2.0 
A)  -2.0 
B)  -0.5 
C)  0.5 
D)  2.0

Question 3

Studies show that smoking cigars is inversely related to income. Thus cigars are an inferior good.

Accepted Answer

A) True 
 B)False

Question 4

A fall in the price of cabbage from $10.50 to $9.50 per bushel increases the quantity demanded from 18,800 to 21,200 bushels. The price elasticity of demand is

Accepted Answer

A)  0.80. 
B)  1.20. 
C)  1.25. 
D)  8.00. 
A)  0.80. 
B)  1.20. 
C)  1.25. 
D)  8.00.

Question 5

An important determinant of the price elasticity of supply is the extent to which

Accepted Answer

A)  the commodity is a luxury or a necessity. 
B)  the demand for it is both price and income elastic. 
C)  the product has many complements or substitutes. 
D)  production requires the use of particularly scarce or specialized resources. 
A)  the commodity is a luxury or a necessity. 
B)  the demand for it is both price and income elastic. 
C)  the product has many complements or substitutes. 
D)  production requires the use of particularly scarce or specialized resources.

Question 6

When the price of a movie ticket falls from $14 to $10, the quantity of tickets demanded increases from 500 to 700 a day. What is the price elasticity of demand for movie tickets? (Use the midpoint method.)

Accepted Answer

The price elasticity of demand = (percen

Question 7

If a decrease in price increases total revenue, what can you determine about the elasticity of demand for the good?

Accepted Answer

If a decrease in price increas

Question 8

When the price of oil is $80 per barrel, the quantity of oil supplied is 74 million barrels per day. When the price of oil is $60 per barrel, the quantity of oil supplied is 71 million barrels per day. What is the elasticity of supply of oil? (Use the midpoint method.)

Accepted Answer

The price elasticity of supply = (percen

Question 9

California is the sole producer of almonds in the United States. Suppose the price for a pound of almonds has increased during the past year. It is also predicted that almond prices will remain high. Over time, we predict that the

Accepted Answer

A)  elasticity of supply will increase. 
B)  elasticity of supply will decrease. 
C)  elasticity of supply will remain constant. 
D)  elasticity of supply will increase and then decrease. 
A)  elasticity of supply will increase. 
B)  elasticity of supply will decrease. 
C)  elasticity of supply will remain constant. 
D)  elasticity of supply will increase and then decrease.

Question 10

About six months ago, Pat lost the job as vice president of a local bank. Since losing the job, Pat still has the Sunday newspaper delivered every week. For Pat, the Sunday newspaper is

Accepted Answer

A)  income inelastic. 
B)  price inelastic. 
C)  an inferior good. 
D)  a normal good because Pat still buys the paper even with a big loss of income. 
A)  income inelastic. 
B)  price inelastic. 
C)  an inferior good. 
D)  a normal good because Pat still buys the paper even with a big loss of income.

Question 11

If the quantity demanded changes by a relatively small amount for a given change in price, then demand is

Accepted Answer

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

Question 12

Most college courses have a required textbook. Previously, textbooks were only available through the campus bookstore, but now, these texts can be purchased from online retailers, other bookstores, or students can buy an electronic version of the text. Because of this, we can predict the price elasticity of demand for textbooks from the campus bookstore is ________.

Accepted Answer

A)  increasing 
B)  decreasing 
C)  staying the same 
D)  increasing and then decreasing 
A)  increasing 
B)  decreasing 
C)  staying the same 
D)  increasing and then decreasing

Question 13

-The increase in the demand for widgets, shown in the figure above, is the result of a decrease in the price of McBoover devices. Therefore,

Accepted Answer

A)  widgets and McBoover devices are substitutes. 
B)  widgets and McBoover devices are complements. 
C)  widgets are a normal good. 
D)  McBoover devices are a normal good. 
A)  widgets and McBoover devices are substitutes. 
B)  widgets and McBoover devices are complements. 
C)  widgets are a normal good. 
D)  McBoover devices are a normal good.

Question 14

The elasticity of the momentary supply curve for any good always equals

Accepted Answer

A)  zero. 
B)  one. 
C)  positive infinity. 
D)  None of the above answers is correct. 
A)  zero. 
B)  one. 
C)  positive infinity. 
D)  None of the above answers is correct.

Question 15

"The Department of Agriculture came out today with its prediction for food price next year-4 to 5 percent increases on top of this year's already steep gains… Eggs, dairy products and cereals are up 10 percent... But the USDA says another big part of the American diet has seen only moderate price increases. Beef, poultry and pork will be up only 3 percent this year." If Raul's demand for dairy products is unit elastic, his expenditure on dairy will

Accepted Answer

A)  not change. 
B)  increase less than 10 percent. 
C)  decrease by 10 percent. 
D)  increase by 10 percent. 
A)  not change. 
B)  increase less than 10 percent. 
C)  decrease by 10 percent. 
D)  increase by 10 percent.

Question 16

If the elasticity of supply of TV sets is equal to 3, then a 10 percent increase in the price of a TV will

Accepted Answer

A)  increase the quantity supplied by 3.33 percent. 
B)  increase the quantity supplied by 30.0 percent. 
C)  increase the quantity supplied by 0.33 percent. 
D)  decrease the quantity supplied by 30.0 percent. 
A)  increase the quantity supplied by 3.33 percent. 
B)  increase the quantity supplied by 30.0 percent. 
C)  increase the quantity supplied by 0.33 percent. 
D)  decrease the quantity supplied by 30.0 percent.

Question 17

Demand is income elastic if

Accepted Answer

A)  a large percentage increase in income results in a small percentage increase in quantity demanded. 
B)  a small percentage increase in income results in a large percentage increase in quantity demanded. 
C)  an increase in income does not affect the quantity demanded. 
D)  the good in question has close substitutes. 
A)  a large percentage increase in income results in a small percentage increase in quantity demanded. 
B)  a small percentage increase in income results in a large percentage increase in quantity demanded. 
C)  an increase in income does not affect the quantity demanded. 
D)  the good in question has close substitutes.

Question 18

-The figure illustrates the demand for eggs. At what price will egg sellers maximize their total revenue?

Accepted Answer

A)  above $0.75 a dozen 
B)  $0.75 a dozen 
C)  less than $0.75 a dozen 
D)  $1.50 a dozen 
A)  above $0.75 a dozen 
B)  $0.75 a dozen 
C)  less than $0.75 a dozen 
D)  $1.50 a dozen

Question 19

If the demand for a good is perfectly elastic, the price elasticity of demand is ________ and the demand curve is ________.

Accepted Answer

A)  infinite; vertical 
B)  zero; vertical 
C)  zero; horizontal 
D)  infinite; horizontal 
A)  infinite; vertical 
B)  zero; vertical 
C)  zero; horizontal 
D)  infinite; horizontal

Question 20

If Taco Bell determines that the demand for its food is elastic, Taco Bell should raise its price to increase its total revenue.

Accepted Answer

A) True 
 B)False

Exam 4: Elasticity

A normal good is defined as a good for which the demand curve

Microsoft raises the price of its Office software by 10 percent. As a result, the quantity of personal computers demanded at the current price decreases by 5 percent. What is the cross elasticity of demand for personal computers with respect to the price of Microsoft Office software?

Studies show that smoking cigars is inversely related to income. Thus cigars are an inferior good.

A fall in the price of cabbage from $10.50 to $9.50 per bushel increases the quantity demanded from 18,800 to 21,200 bushels. The price elasticity of demand is

An important determinant of the price elasticity of supply is the extent to which

When the price of a movie ticket falls from $14 to $10, the quantity of tickets demanded increases from 500 to 700 a day. What is the price elasticity of demand for movie tickets? (Use the midpoint method.)

If a decrease in price increases total revenue, what can you determine about the elasticity of demand for the good?

When the price of oil is $80 per barrel, the quantity of oil supplied is 74 million barrels per day. When the price of oil is $60 per barrel, the quantity of oil supplied is 71 million barrels per day. What is the elasticity of supply of oil? (Use the midpoint method.)

California is the sole producer of almonds in the United States. Suppose the price for a pound of almonds has increased during the past year. It is also predicted that almond prices will remain high. Over time, we predict that the

About six months ago, Pat lost the job as vice president of a local bank. Since losing the job, Pat still has the Sunday newspaper delivered every week. For Pat, the Sunday newspaper is

If the quantity demanded changes by a relatively small amount for a given change in price, then demand is

-The increase in the demand for widgets, shown in the figure above, is the result of a decrease in the price of McBoover devices. Therefore,

The elasticity of the momentary supply curve for any good always equals

If the elasticity of supply of TV sets is equal to 3, then a 10 percent increase in the price of a TV will

Demand is income elastic if

-The figure illustrates the demand for eggs. At what price will egg sellers maximize their total revenue?

If the demand for a good is perfectly elastic, the price elasticity of demand is ________ and the demand curve is ________.

If Taco Bell determines that the demand for its food is elastic, Taco Bell should raise its price to increase its total revenue.

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

Filters

If the demand for a good is perfectly elastic, the price elasticity of demand is and the demand curve is .