Question 1

For product X,the price elasticity of demand has an absolute value of 3.5.This means that quantity demanded will increase by

Accepted Answer

A) 1 percent for each 3.5 percent decrease in price,ceteris paribus. 
B) 1 unit for each $3.50 decrease in price,ceteris paribus. 
C) 3.5 percent for each 1 percent decrease in price,ceteris paribus. 
D) 3.5 units for each $1 decrease in price,ceteris paribus. 
A) 1 percent for each 3.5 percent decrease in price,ceteris paribus. 
B) 1 unit for each $3.50 decrease in price,ceteris paribus. 
C) 3.5 percent for each 1 percent decrease in price,ceteris paribus. 
D) 3.5 units for each $1 decrease in price,ceteris paribus.

Question 2

To find the percentage change in price,

Accepted Answer

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

Question 3

If income rises by 10 percent and the quantity sold of a particular vehicle falls by 7 percent,then this particular type of vehicle is

Accepted Answer

A) A normal good. 
B) An inferior good. 
C) An irregular good. 
D) A substandard good. 
A) A normal good. 
B) An inferior good. 
C) An irregular good. 
D) A substandard good.

Question 4

Ceteris paribus,the longer the time period,the

Accepted Answer

A) Smaller the income elasticity for the good. 
B) Less elastic the demand for the good. 
C) More unitary elastic the demand for the good. 
D) More elastic the demand for the good. 
A) Smaller the income elasticity for the good. 
B) Less elastic the demand for the good. 
C) More unitary elastic the demand for the good. 
D) More elastic the demand for the good.

Question 5

If the price is reduced from $100 to $80 in Figure 20.1,ceteris paribus,

Accepted Answer

A) Total revenue will decrease. 
B) Demand will increase. 
C) Quantity demanded will decrease. 
D) Total revenue will increase. 
A) Total revenue will decrease. 
B) Demand will increase. 
C) Quantity demanded will decrease. 
D) Total revenue will increase.

Question 6

Cross-price elasticity refers to

Accepted Answer

A) How responsive consumers are to a change in price. 
B) How responsive consumers are to a change in income. 
C) How responsive consumers of one good are to a change in the price of another good. 
D) How responsive consumers are to a change in quantity demanded. 
A) How responsive consumers are to a change in price. 
B) How responsive consumers are to a change in income. 
C) How responsive consumers of one good are to a change in the price of another good. 
D) How responsive consumers are to a change in quantity demanded.

Question 7

The World View article on the rise in gold prices indicates that

Accepted Answer

A) The quantity supplied falls when the price of gold rises. 
B) The law of supply is true: as the price of gold rises,miners around the world search for new deposits of gold. 
C) The law of supply is true because as the price of gold rises,the quantity supplied of gold actually falls. 
D) The law of supply is not really relevant to the article. 
A) The quantity supplied falls when the price of gold rises. 
B) The law of supply is true: as the price of gold rises,miners around the world search for new deposits of gold. 
C) The law of supply is true because as the price of gold rises,the quantity supplied of gold actually falls. 
D) The law of supply is not really relevant to the article.

Question 8

Cross-price elasticity looks at the impact that income changes have on sales.

Accepted Answer

A) True 
 B)False

Question 9

If the demand for a product is elastic,then

Accepted Answer

A) The percentage change in quantity demanded is greater than the percentage in price. 
B) The percentage change in price is greater than the percentage change in quantity demanded. 
C) The change in the quantity demanded is greater than the change in income. 
D) Buyers are not very sensitive to a change in price. 
A) The percentage change in quantity demanded is greater than the percentage in price. 
B) The percentage change in price is greater than the percentage change in quantity demanded. 
C) The change in the quantity demanded is greater than the change in income. 
D) Buyers are not very sensitive to a change in price.

Question 10

If the price elasticity of demand is 0.6,then a 10 percent increase in the price of the good will lead to a ________ in the quantity demanded.

Accepted Answer

A) 6 percent increase 
B) 6 percent decrease 
C) 0.6 percent increase 
D) 0.6 percent decrease 
A) 6 percent increase 
B) 6 percent decrease 
C) 0.6 percent increase 
D) 0.6 percent decrease

Question 11

Which of the following would most likely have a price elasticity coefficient less than 1?

Accepted Answer

A) Coffee. 
B) Televisions. 
C) Fresh fish. 
D) New cars. 
A) Coffee. 
B) Televisions. 
C) Fresh fish. 
D) New cars.

Question 12

The local baseball team owner hires you to help maximize the team's profits.Assume your task is to maximize revenues from ticket sales.Your advice to the owner should be to

Accepted Answer

A) Set the ticket price in the inelastic region of the demand curve in order to increase revenues. 
B) Raise the price as high as possible until the number of tickets sold begins to fall. 
C) Set the price as low as possible to make sure the stadium is always full. 
D) Set the price of tickets at the unitary elasticity price. 
A) Set the ticket price in the inelastic region of the demand curve in order to increase revenues. 
B) Raise the price as high as possible until the number of tickets sold begins to fall. 
C) Set the price as low as possible to make sure the stadium is always full. 
D) Set the price of tickets at the unitary elasticity price.

Question 13

Explain why it is so important for a business to understand the concept of price elasticity and be able to measure this for its products.

Accepted Answer

The choice of what prices will maximize

Question 14

Price elasticity of demand shows how

Accepted Answer

A) To compute the slope of the demand curve. 
B) Responsive the quantity demanded is to a change in price. 
C) Responsive the quantity demanded is to a change in the price of related goods. 
D) Responsive the price is to a change in demand. 
A) To compute the slope of the demand curve. 
B) Responsive the quantity demanded is to a change in price. 
C) Responsive the quantity demanded is to a change in the price of related goods. 
D) Responsive the price is to a change in demand.

Question 15

If the price of Good X falls and total revenue rises,then

Accepted Answer

A) Demand for Good X is inelastic. 
B) Demand for Good X is unitary elastic. 
C) Demand for Good X is elastic. 
D) The price elasticity of demand for Good X is equal to 1. 
A) Demand for Good X is inelastic. 
B) Demand for Good X is unitary elastic. 
C) Demand for Good X is elastic. 
D) The price elasticity of demand for Good X is equal to 1.

Question 16

The price elasticity number for necessities will be greater than 1.

Accepted Answer

A) True 
 B)False

Question 17

The price elasticity of demand is calculated by dividing the percentage change in quantity demanded by the percentage change in price.

Accepted Answer

A) True 
 B)False

Question 18

Along a linear or straight-line demand curve,demand is more elastic at higher prices.

Accepted Answer

A) True 
 B)False

Question 19

The cross-price elasticity sign for substitute goods is negative.

Accepted Answer

A) True 
 B)False

Question 20

If demand is inelastic,a reduction in price will lead to a drop in total revenue.

Accepted Answer

A) True 
 B)False

Exam 20: Elasticity

For product X,the price elasticity of demand has an absolute value of 3.5.This means that quantity demanded will increase by

To find the percentage change in price,

If income rises by 10 percent and the quantity sold of a particular vehicle falls by 7 percent,then this particular type of vehicle is

Ceteris paribus,the longer the time period,the

If the price is reduced from $100 to $80 in Figure 20.1,ceteris paribus,

Cross-price elasticity refers to

The World View article on the rise in gold prices indicates that

Cross-price elasticity looks at the impact that income changes have on sales.

If the demand for a product is elastic,then

If the price elasticity of demand is 0.6,then a 10 percent increase in the price of the good will lead to a ________ in the quantity demanded.

Which of the following would most likely have a price elasticity coefficient less than 1?

The local baseball team owner hires you to help maximize the team's profits.Assume your task is to maximize revenues from ticket sales.Your advice to the owner should be to

Explain why it is so important for a business to understand the concept of price elasticity and be able to measure this for its products.

Price elasticity of demand shows how

If the price of Good X falls and total revenue rises,then

The price elasticity number for necessities will be greater than 1.

The price elasticity of demand is calculated by dividing the percentage change in quantity demanded by the percentage change in price.

Along a linear or straight-line demand curve,demand is more elastic at higher prices.

The cross-price elasticity sign for substitute goods is negative.

If demand is inelastic,a reduction in price will lead to a drop in total revenue.

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

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

International Finance

Global Poverty

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