Question 1

The World View "Rebounding Oil Price Spurs More Rigs" related to oil prices and oil rigs suggests.

Accepted Answer

A) As the price of oil rises,the quantity supplied falls. 
B) As the price of oil increases,there is an increase in oil rigs and thus the amount of quantity supplied,indicating that supply is elastic. 
C) Oil rigs around the world have had difficulty finding additional sources of oil,indicating that the elasticity of supply is inelastic. 
D) Oil rigs have found new supplies of oil,indicating that the demand for oil is inelastic. 
A) As the price of oil rises,the quantity supplied falls. 
B) As the price of oil increases,there is an increase in oil rigs and thus the amount of quantity supplied,indicating that supply is elastic. 
C) Oil rigs around the world have had difficulty finding additional sources of oil,indicating that the elasticity of supply is inelastic. 
D) Oil rigs have found new supplies of oil,indicating that the demand for oil is inelastic. B

Question 2

If the price increases by 10 percent,and the quantity demanded falls by 5 percent,the absolute value of the price elasticity will be

Accepted Answer

A) 0.5. 
B) 5.0. 
C) 50. 
D) -5.0. 
A) 0.5. 
B) 5.0. 
C) 50. 
D) -5.0. A

Question 3

For inferior goods,when incomes rise the demand for these goods falls.

Accepted Answer

A) True 
 B)False  True

Question 4

If demand is perfectly elastic,

Accepted Answer

A) The demand curve is vertical. 
B) The demand curve is very steep. 
C) The demand curve is horizontal. 
D) The demand curve has a zero slope. 
A) The demand curve is vertical. 
B) The demand curve is very steep. 
C) The demand curve is horizontal. 
D) The demand curve has a zero slope.

Question 5

The price elasticity of demand is equal to

Accepted Answer

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

Question 6

Which of the following does not influence the price elasticity of demand?

Accepted Answer

A) The availability of substitutes. 
B) The price of the item relative to the consumer's budget. 
C) Costs of production. 
D) The length of time. 
A) The availability of substitutes. 
B) The price of the item relative to the consumer's budget. 
C) Costs of production. 
D) The length of time.

Question 7

Which of the following is likely to have the most inelastic price elasticity of demand?

Accepted Answer

A) Automobiles. 
B) Pickup trucks. 
C) Hondas. 
D) The Hondas one Honda dealer sells. 
A) Automobiles. 
B) Pickup trucks. 
C) Hondas. 
D) The Hondas one Honda dealer sells.

Question 8

How does advertising influence the demand for goods and the shape of the demand curve?

Accepted Answer

Advertising can increase the demand for

Question 9

Demand is more inelastic for luxury goods.

Accepted Answer

A) True 
 B)False

Question 10

Nobel Prize-winning economist Gary Becker corrected President Clinton's elasticity estimate for cigarette smoking by

Accepted Answer

A) Showing that cigarettes were actually price-elastic. 
B) Showing that the long-run response to a price increase in cigarettes was likely to be more elastic than the president had estimated. 
C) Showing that the demand for cigarettes in the short run was more inelastic than the president calculated. 
D) Correcting the president's math. 
A) Showing that cigarettes were actually price-elastic. 
B) Showing that the long-run response to a price increase in cigarettes was likely to be more elastic than the president had estimated. 
C) Showing that the demand for cigarettes in the short run was more inelastic than the president calculated. 
D) Correcting the president's math.

Question 11

If income falls 4 percent for a year and as a result the quantity of new homes demanded falls from 23 million to 20 million units for the year,the value of the income elasticity of demand for new homes is closest to

Accepted Answer

A) 0.6. 
B) 1.8. 
C) 2.9. 
D) 3.5. 
A) 0.6. 
B) 1.8. 
C) 2.9. 
D) 3.5.

Question 12

Which of the following products will have more inelastic demand?

Accepted Answer

A) New cars. 
B) Fresh flowers. 
C) Fast food. 
D) Medicines. 
A) New cars. 
B) Fresh flowers. 
C) Fast food. 
D) Medicines.

Question 13

During a recession the sales of autos fall,and the best measure of this is to use cross-price elasticity.

Accepted Answer

A) True 
 B)False

Question 14

Demand is more inelastic in the long run.

Accepted Answer

A) True 
 B)False

Question 15

Assume the price elasticity of demand for MC Pretzel Co.pretzels is 0.8.If the company increases the price of each bag of pretzels,total revenue will

Accepted Answer

A) Decrease because fewer bags will be sold. 
B) Increase because demand is elastic and revenue will rise. 
C) Increase because the percentage increase in price is greater than the percentage change in quantity demanded. 
D) Be impossible to predict because the percentage change in price is not known. 
A) Decrease because fewer bags will be sold. 
B) Increase because demand is elastic and revenue will rise. 
C) Increase because the percentage increase in price is greater than the percentage change in quantity demanded. 
D) Be impossible to predict because the percentage change in price is not known.

Question 16

Which of the following is not a determinant of the price elasticity of demand?

Accepted Answer

A) The number of substitute goods available. 
B) The share of a consumer's budget. 
C) The amount of income the consumer has. 
D) The time frame-whether it is in the short run or long run. 
A) The number of substitute goods available. 
B) The share of a consumer's budget. 
C) The amount of income the consumer has. 
D) The time frame-whether it is in the short run or long run.

Question 17

If the elasticity of demand is 3,then a 10 percent increase in price will cause quantity demanded to fall by 3 percent.

Accepted Answer

A) True 
 B)False

Question 18

Over the price range from $180 to $120 in Figure 20.1,ceteris paribus,

Accepted Answer

A) Demand is elastic. 
B) Total revenue is maximized. 
C) Demand is increasing. 
D) Utility is maximized. 
A) Demand is elastic. 
B) Total revenue is maximized. 
C) Demand is increasing. 
D) Utility is maximized.

Question 19

If Carmen's Coffee Company wants to increase total revenue and the price elasticity of demand is 0.43,the company should

Accepted Answer

A) Increase the price of its coffee. 
B) Decrease the price of its coffee. 
C) Keep the price constant since a price increase or decrease will cause total revenue to fall. 
D) Advertise since this is the only option that will increase total revenue. 
A) Increase the price of its coffee. 
B) Decrease the price of its coffee. 
C) Keep the price constant since a price increase or decrease will cause total revenue to fall. 
D) Advertise since this is the only option that will increase total revenue.

Question 20

Smart phones and apps are complementary goods.The cross price elasticity of demand between smart phones and apps is expected to be.

Accepted Answer

A) Positive. 
B) Negative. 
C) Equal to zero. 
D) Undefined. 
A) Positive. 
B) Negative. 
C) Equal to zero. 
D) Undefined.

Exam 20: Elasticity

The World View "Rebounding Oil Price Spurs More Rigs" related to oil prices and oil rigs suggests.

If the price increases by 10 percent,and the quantity demanded falls by 5 percent,the absolute value of the price elasticity will be

For inferior goods,when incomes rise the demand for these goods falls.

If demand is perfectly elastic,

The price elasticity of demand is equal to

Which of the following does not influence the price elasticity of demand?

Which of the following is likely to have the most inelastic price elasticity of demand?

How does advertising influence the demand for goods and the shape of the demand curve?

Demand is more inelastic for luxury goods.

Nobel Prize-winning economist Gary Becker corrected President Clinton's elasticity estimate for cigarette smoking by

If income falls 4 percent for a year and as a result the quantity of new homes demanded falls from 23 million to 20 million units for the year,the value of the income elasticity of demand for new homes is closest to

Which of the following products will have more inelastic demand?

During a recession the sales of autos fall,and the best measure of this is to use cross-price elasticity.

Demand is more inelastic in the long run.

Assume the price elasticity of demand for MC Pretzel Co.pretzels is 0.8.If the company increases the price of each bag of pretzels,total revenue will

Which of the following is not a determinant of the price elasticity of demand?

If the elasticity of demand is 3,then a 10 percent increase in price will cause quantity demanded to fall by 3 percent.

Over the price range from $180 to $120 in Figure 20.1,ceteris paribus,

If Carmen's Coffee Company wants to increase total revenue and the price elasticity of demand is 0.43,the company should

Smart phones and apps are complementary goods.The cross price elasticity of demand between smart phones and apps is expected to be.

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Aggregate Demand

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

The Costs of Production

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

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Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

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