Question 1

Damage from floods and hurricanes which destroy a large portion of this year's crop of oranges will definitely make oranges more price inelastic in supply.

Accepted Answer

A) True 
 B)False

Question 2

A 10 percent increase in income has caused a 5 percent decrease in the quantity demanded. The income elasticity is

Accepted Answer

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

Question 3

The price elasticity of demand is 5.0 if a 10 percent increase in the price results in a ________ decrease in the quantity demanded.

Accepted Answer

A)  2 percent 
B)  5 percent 
C)  10 percent 
D)  50 percent 
A)  2 percent 
B)  5 percent 
C)  10 percent 
D)  50 percent

Question 4

A 10 percent increase in income increases the quantity of orange juice demanded from 19,200 to 20,800 gallons. The income elasticity of demand for orange juice is

Accepted Answer

A)  0.5. 
B)  0.8. 
C)  1.0. 
D)  1.2. 
A)  0.5. 
B)  0.8. 
C)  1.0. 
D)  1.2.

Question 5

When the price elasticity of demand for a good equals

Accepted Answer

A)  0, the demand curve is vertical. 
B)  0, the demand curve is horizontal. 
C)  1, the demand curve is vertical. 
D)  1, the demand curve is horizontal. 
A)  0, the demand curve is vertical. 
B)  0, the demand curve is horizontal. 
C)  1, the demand curve is vertical. 
D)  1, the demand curve is horizontal.

Question 6

The price elasticity of demand equals magnitude of the

Accepted Answer

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

Question 7

If demand is price elastic,

Accepted Answer

A)  a 1 percent decrease in the price leads to an increase in the quantity demanded that exceeds 1 percent. 
B)  a 1 percent increase in the price leads to an increase in the quantity demanded that exceeds 1 percent. 
C)  a 1 percent decrease in the price leads to a decrease in the quantity demanded that is less than 1 percent. 
D)  the price is very sensitive to any shift of the supply curve. 
A)  a 1 percent decrease in the price leads to an increase in the quantity demanded that exceeds 1 percent. 
B)  a 1 percent increase in the price leads to an increase in the quantity demanded that exceeds 1 percent. 
C)  a 1 percent decrease in the price leads to a decrease in the quantity demanded that is less than 1 percent. 
D)  the price is very sensitive to any shift of the supply curve.

Question 8

Studies have shown that the price elasticity of demand for necessities, such as food, are higher in developing countries and lower in developed countries. What is the reason for this difference in elasticity?

Accepted Answer

One of the determinants of elasticity is

Question 9

The price elasticity of demand for movies is approximately 1 and 500,000 tickets are sold per day. If the average price of a movie ticket increases by 20 percent, the number of tickets sold each day decreases to ________.

Accepted Answer

A)  400,000 
B)  300,000 
C)  420,000 
D)  475,000 
A)  400,000 
B)  300,000 
C)  420,000 
D)  475,000

Question 10

Florida State University has just lowered the price of its season football tickets from $350.00 to $300.00. As a result, there was an increase in the number of season tickets purchased from 43,000 to 47,000. The price elasticity of demand for season tickets equals

Accepted Answer

A)  1.71. 
B)  1.58. 
C)  0.71. 
D)  0.58. 
A)  1.71. 
B)  1.58. 
C)  0.71. 
D)  0.58.

Question 11

A shift of the supply curve of DVDs raises the price of a DVD from $9.50 to $10.50 a DVD and reduces the quantity demanded from 41 million to 39 million DVDs a month. The price elasticity of demand for DVDs is

Accepted Answer

A)  2 million DVDs a month per dollar. 
B)  $1 per 2 million barrels a day. 
C)  0.5. 
D)  2.0. 
A)  2 million DVDs a month per dollar. 
B)  $1 per 2 million barrels a day. 
C)  0.5. 
D)  2.0.

Question 12

Suppose that accountants increase the price for calculating income taxes owed by 20 percent. The short-run demand for their service is less elastic than the long-run demand because in the long run consumers will ________.

Accepted Answer

A)  spend less on this service 
B)  experience an increase in income 
C)  try to avoid paying their income tax 
D)  find other ways to calculate the income tax they must pay 
A)  spend less on this service 
B)  experience an increase in income 
C)  try to avoid paying their income tax 
D)  find other ways to calculate the income tax they must pay

Question 13

Which of the following factors will make the demand for a product more elastic?

Accepted Answer

A)  The product has no close substitutes. 
B)  A very small proportion of income is spent on the good. 
C)  A long time period has elapsed since the product's price changed. 
D)  The change in the product's price was unexpected. 
A)  The product has no close substitutes. 
B)  A very small proportion of income is spent on the good. 
C)  A long time period has elapsed since the product's price changed. 
D)  The change in the product's price was unexpected.

Question 14

An important determinant of the price elasticity of supply is

Accepted Answer

A)  whether the good is a durable or a nondurable. 
B)  the time period firms have to adjust to a new price. 
C)  how well consumers like the commodity. 
D)  the proportion of the consumer's total budget spent on the good. 
A)  whether the good is a durable or a nondurable. 
B)  the time period firms have to adjust to a new price. 
C)  how well consumers like the commodity. 
D)  the proportion of the consumer's total budget spent on the good.

Question 15

The income elasticity of demand for restaurant meals is 1.61. So,

Accepted Answer

A)  if income increases by 16.1 percent, the quantity demanded of restaurant meals will increase by 10 percent. 
B)  if income increases by 10 percent, the quantity demanded of restaurant meals will increase by 16.1 percent. 
C)  restaurant meals are an income elastic normal good. 
D)  Both answers B and C are correct. 
A)  if income increases by 16.1 percent, the quantity demanded of restaurant meals will increase by 10 percent. 
B)  if income increases by 10 percent, the quantity demanded of restaurant meals will increase by 16.1 percent. 
C)  restaurant meals are an income elastic normal good. 
D)  Both answers B and C are correct.

Question 16

Because there are numerous choices for fast food purchases, the price elasticity of demand for Taco Bell food is likely

Accepted Answer

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

Question 17

If the income elasticity of demand for corn is 0.5, then as income increases

Accepted Answer

A)  the demand for corn will increase. 
B)  the demand for corn will decrease. 
C)  corn will prove to be an inferior good. 
D)  the supply curve of corn will shift leftward. 
A)  the demand for corn will increase. 
B)  the demand for corn will decrease. 
C)  corn will prove to be an inferior good. 
D)  the supply curve of corn will shift leftward.

Question 18

Producers' total revenue will increase if

Accepted Answer

A)  income increases and the good is an inferior good. 
B)  the price rises and demand is elastic. 
C)  the price rises and demand is inelastic. 
D)  income falls and the good is a normal good. 
A)  income increases and the good is an inferior good. 
B)  the price rises and demand is elastic. 
C)  the price rises and demand is inelastic. 
D)  income falls and the good is a normal good.

Question 19

When the price of oranges increases from $4 to $6 per bag, the quantity demanded of oranges decreases from 800 bags to 700 bags. The price elasticity of demand over this price range is equal to

Accepted Answer

A)  3. 
B)  3/7 or 0.4286. 
C)  1/3 or 0.3333. 
D)  1/4 or 0.25. 
A)  3. 
B)  3/7 or 0.4286. 
C)  1/3 or 0.3333. 
D)  1/4 or 0.25.

Question 20

You are the brand manager of Crest toothpaste and you observe that when you increase the price of Crest, your total revenue increases. How is that possible?

Accepted Answer

The demand for Crest toothpaste must be

Exam 4: Elasticity

Damage from floods and hurricanes which destroy a large portion of this year's crop of oranges will definitely make oranges more price inelastic in supply.

A 10 percent increase in income has caused a 5 percent decrease in the quantity demanded. The income elasticity is

The price elasticity of demand is 5.0 if a 10 percent increase in the price results in a ________ decrease in the quantity demanded.

A 10 percent increase in income increases the quantity of orange juice demanded from 19,200 to 20,800 gallons. The income elasticity of demand for orange juice is

When the price elasticity of demand for a good equals

The price elasticity of demand equals magnitude of the

If demand is price elastic,

Studies have shown that the price elasticity of demand for necessities, such as food, are higher in developing countries and lower in developed countries. What is the reason for this difference in elasticity?

The price elasticity of demand for movies is approximately 1 and 500,000 tickets are sold per day. If the average price of a movie ticket increases by 20 percent, the number of tickets sold each day decreases to ________.

Florida State University has just lowered the price of its season football tickets from $350.00 to $300.00. As a result, there was an increase in the number of season tickets purchased from 43,000 to 47,000. The price elasticity of demand for season tickets equals

A shift of the supply curve of DVDs raises the price of a DVD from $9.50 to $10.50 a DVD and reduces the quantity demanded from 41 million to 39 million DVDs a month. The price elasticity of demand for DVDs is

Suppose that accountants increase the price for calculating income taxes owed by 20 percent. The short-run demand for their service is less elastic than the long-run demand because in the long run consumers will ________.

Which of the following factors will make the demand for a product more elastic?

An important determinant of the price elasticity of supply is

The income elasticity of demand for restaurant meals is 1.61. So,

Because there are numerous choices for fast food purchases, the price elasticity of demand for Taco Bell food is likely

If the income elasticity of demand for corn is 0.5, then as income increases

Producers' total revenue will increase if

When the price of oranges increases from $4 to $6 per bag, the quantity demanded of oranges decreases from 800 bags to 700 bags. The price elasticity of demand over this price range is equal to

You are the brand manager of Crest toothpaste and you observe that when you increase the price of Crest, your total revenue increases. How is that possible?

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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