Question 1

If the price of chocolate-covered peanuts increases and the demand for strawberries does not change, this indicates that these two goods are:

Accepted Answer

A)  unrelated goods. 
B)  inferior goods. 
C)  substitute goods. 
D)  complementary goods. 
A)  unrelated goods. 
B)  inferior goods. 
C)  substitute goods. 
D)  complementary goods.

Question 2

The cross price elasticity of demand of complementary goods is:

Accepted Answer

A)  less than 0. 
B)  equal to 0. 
C)  greater than 0. 
D)  between 0 and 1. 
A)  less than 0. 
B)  equal to 0. 
C)  greater than 0. 
D)  between 0 and 1.

Question 3

-(Exhibit: Demand and Price Elasticity 2) The price elasticity of demand between points C and D is:

Accepted Answer

A)  -.33 
B)  -.60 
C)  -1.0 
D)  -1.3 
A)  -.33 
B)  -.60 
C)  -1.0 
D)  -1.3

Question 4

-(Exhibit: Nonlinear Demand Curve) The values for quantity demanded along this nonlinear demand curve are given by the formula Q = 24/P. It:

Accepted Answer

A)  displays the same percentage changes in quantity as the percentage changes in price, for all price changes shown in the exhibit. 
B)  has lower total revenue as price falls. 
C)  is price elastic throughout. 
D)  is price inelastic throughout. 
A)  displays the same percentage changes in quantity as the percentage changes in price, for all price changes shown in the exhibit. 
B)  has lower total revenue as price falls. 
C)  is price elastic throughout. 
D)  is price inelastic throughout.

Question 5

-(Exhibit: Estimating Price Elasticity) The demand curve D4 shows that:

Accepted Answer

A)  there is no change in quantity demanded in response to a price change. 
B)  there is a quantity response only to a price decrease. 
C)  demand is perfectly price elastic. 
D)  demand is price elastic only in response to a price increase. 
A)  there is no change in quantity demanded in response to a price change. 
B)  there is a quantity response only to a price decrease. 
C)  demand is perfectly price elastic. 
D)  demand is price elastic only in response to a price increase.

Question 6

A men's tie store sold an average of 30 ties per day when the price was $5 per tie but sold 50 of the same ties per day when the price was $3 per tie. Hence, the absolute value of the price elasticity of demand is:

Accepted Answer

A)  greater than zero but less than 1. 
B)  equal to 1. 
C)  greater than 1 but less than 3. 
D)  greater than 3. 
A)  greater than zero but less than 1. 
B)  equal to 1. 
C)  greater than 1 but less than 3. 
D)  greater than 3.

Question 7

Along the lower half of a linear demand curve, the price elasticity of demand will be:

Accepted Answer

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

Question 8

If the price elasticity of demand is found to be -6, then demand is:

Accepted Answer

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

Question 9

A linear supply curve has a price elasticity coefficient equal to 1.

Accepted Answer

A) True 
 B)False

Question 10

The income elasticity of demand of an inferior good:

Accepted Answer

A)  is less than 0. 
B)  is equal to 0. 
C)  is greater than 0. 
D)  could be any one of the above. 
A)  is less than 0. 
B)  is equal to 0. 
C)  is greater than 0. 
D)  could be any one of the above.

Question 11

-(Exhibit: Demand for Macintosh Computers) The seller's total revenue at point S equals the:

Accepted Answer

A)  distance 0P. 
B)  distance MS. 
C)  area 0TUM. 
D)  area 0PSM. 
A)  distance 0P. 
B)  distance MS. 
C)  area 0TUM. 
D)  area 0PSM.

Question 12

A curve whose price elasticity of demand is the same at every point is:

Accepted Answer

A)  a constant elasticity of demand curve. 
B)  a straight, negatively sloped line. 
C)  a straight, positively sloped line. 
D)  none of the above. 
A)  a constant elasticity of demand curve. 
B)  a straight, negatively sloped line. 
C)  a straight, positively sloped line. 
D)  none of the above.

Question 13

A price elastic demand exists if a 10 percent change in the price of a good results in a percentage change (in absolute value terms) in quantity demanded that is:

Accepted Answer

A)  less than 0. 
B)  greater than 0 but less than 10. 
C)  equal to 10. 
D)  greater than 10. 
A)  less than 0. 
B)  greater than 0 but less than 10. 
C)  equal to 10. 
D)  greater than 10.

Question 14

The concept of price elasticity shows the relationship between a quantity response and a percentage change in price.

Accepted Answer

A) True 
 B)False

Question 15

Demand is price inelastic when:

Accepted Answer

A)  price falls and total revenue decreases. 
B)  price increases and total revenue decreases. 
C)  price decreases and total revenue stays the same. 
D)  price decreases and total revenue goes up. 
A)  price falls and total revenue decreases. 
B)  price increases and total revenue decreases. 
C)  price decreases and total revenue stays the same. 
D)  price decreases and total revenue goes up.

Question 16

The cross price elasticity of demand of unrelated goods:

Accepted Answer

A)  is less than 0. 
B)  is equal to 0. 
C)  is greater than 0. 
D)  could be any of the above. 
A)  is less than 0. 
B)  is equal to 0. 
C)  is greater than 0. 
D)  could be any of the above.

Question 17

Suppose that the price elasticity of demand for grapefruit is -2.8. The introduction of a new variety that is cheaper to grow should cause consumer expenditures for grapefruit to:

Accepted Answer

A)  rise. 
B)  fall. 
C)  remain unchanged. 
D)  it is not possible to answer with the information given. 
A)  rise. 
B)  fall. 
C)  remain unchanged. 
D)  it is not possible to answer with the information given.

Question 18

The Demand for Bungalow Bob's Bagels
  
-(Exhibit: The Demand for Bungalow Bob's Bagels) Total revenue decreases if the price ________ from ________.

Accepted Answer

A)  decreases; $0.60 to $0.50 
B)  decreases; $0.70 to $0.60 
C)  increases; $0.40 to $0.50 
D)  increases; $0.70 to $0.80 
A)  decreases; $0.60 to $0.50 
B)  decreases; $0.70 to $0.60 
C)  increases; $0.40 to $0.50 
D)  increases; $0.70 to $0.80

Question 19

The income elasticity of demand for peaches has been estimated to be 1.43. If income grows by 15 percent in a period, how will that affect total expenditures on peaches in that period, all other things unchanged?

Accepted Answer

A)  total expenditures will rise 
B)  total expenditures will fall 
C)  total expenditures will remain unchanged 
D)  not enough information is given to answer the question 
A)  total expenditures will rise 
B)  total expenditures will fall 
C)  total expenditures will remain unchanged 
D)  not enough information is given to answer the question

Question 20

The pair of items that is likely to have the highest cross price elasticity of demand is:

Accepted Answer

A)  coffee and tea. 
B)  skis and ski boots. 
C)  pizza and pepperoni. 
D)  milk and cookies. 
A)  coffee and tea. 
B)  skis and ski boots. 
C)  pizza and pepperoni. 
D)  milk and cookies.

Exam 5: Elasticity

If the price of chocolate-covered peanuts increases and the demand for strawberries does not change, this indicates that these two goods are:

The cross price elasticity of demand of complementary goods is:

-(Exhibit: Demand and Price Elasticity 2) The price elasticity of demand between points C and D is:

-(Exhibit: Nonlinear Demand Curve) The values for quantity demanded along this nonlinear demand curve are given by the formula Q = 24/P. It:

-(Exhibit: Estimating Price Elasticity) The demand curve D4 shows that:

A men's tie store sold an average of 30 ties per day when the price was $5 per tie but sold 50 of the same ties per day when the price was $3 per tie. Hence, the absolute value of the price elasticity of demand is:

Along the lower half of a linear demand curve, the price elasticity of demand will be:

If the price elasticity of demand is found to be -6, then demand is:

A linear supply curve has a price elasticity coefficient equal to 1.

The income elasticity of demand of an inferior good:

-(Exhibit: Demand for Macintosh Computers) The seller's total revenue at point S equals the:

A curve whose price elasticity of demand is the same at every point is:

A price elastic demand exists if a 10 percent change in the price of a good results in a percentage change (in absolute value terms) in quantity demanded that is:

The concept of price elasticity shows the relationship between a quantity response and a percentage change in price.

Demand is price inelastic when:

The cross price elasticity of demand of unrelated goods:

Suppose that the price elasticity of demand for grapefruit is -2.8. The introduction of a new variety that is cheaper to grow should cause consumer expenditures for grapefruit to:

The Demand for Bungalow Bob's Bagels -(Exhibit: The Demand for Bungalow Bob's Bagels) Total revenue decreases if the price ________ from ________.

The income elasticity of demand for peaches has been estimated to be 1.43. If income grows by 15 percent in a period, how will that affect total expenditures on peaches in that period, all other things unchanged?

The pair of items that is likely to have the highest cross price elasticity of demand is:

Welcome to Economics

Demand and Supply

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Cost and Industry Structure

Perfect Competition

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Environmental Protection and Negative Externalities

Positive Externalities and Public Goods

Poverty and Economic Inequality

Issues in Labor Markets: Unions, Discrimination, Immigration

Information, Risk, and Insurance

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Public Economy

The Macroeconomic Perspective

Economic Growth

Unemployment

Inflation

The International Trade and Capital Flows

The Aggregate Demandaggregate Supply Model

The Keynesian Perspective

The Neoclassical Perspective

Money and Banking

Monetary Policy and Bank Regulation

Exchange Rates and International Capital Flows

Government Budgets and Fiscal Policy

The Impacts of Government Borrowing

Macroeconomic Policy Around the World

International Trade

Globalization and Protectionism

Filters

-(Exhibit: Estimating Price Elasticity) The demand curve D₄ shows that:

The Demand for Bungalow Bob's Bagels -(Exhibit: The Demand for Bungalow Bob's Bagels) Total revenue decreases if the price from .