Question 1

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

Accepted Answer

A) Cigarettes. 
B) Gasoline in the short run. 
C) Electricity. 
D) Airline travel in the long run. 
A) Cigarettes. 
B) Gasoline in the short run. 
C) Electricity. 
D) Airline travel in the long run.

Question 2

To increase U.S.energy independence,prices must be lowered on gasoline and electricity.

Accepted Answer

A) True 
 B)False

Question 3

When income falls,the demand for an inferior goods

Accepted Answer

A) Increases. 
B) Decreases. 
C) Has a smaller change than the income change. 
D) Stays the same. 
A) Increases. 
B) Decreases. 
C) Has a smaller change than the income change. 
D) Stays the same.

Question 4

If the price of a good rises by 10 percent and quantity demanded falls by 20 percent,we can predict that

Accepted Answer

A) The company's total revenue will increase. 
B) The company's total profit will rise. 
C) The company's total revenue will decrease. 
D) The company's total revenue will remain the same. 
A) The company's total revenue will increase. 
B) The company's total profit will rise. 
C) The company's total revenue will decrease. 
D) The company's total revenue will remain the same.

Question 5

Sam owns a taco restaurant,and he conducted a consumer survey that indicates that the price elasticity of demand for his restaurant is 3.5.You would advise Sam to

Accepted Answer

A) Raise his price to increase revenues. 
B) Keep his price the same to maximize revenues. 
C) Lower his price to increase revenue. 
D) Offer more high-priced products. 
A) Raise his price to increase revenues. 
B) Keep his price the same to maximize revenues. 
C) Lower his price to increase revenue. 
D) Offer more high-priced products.

Question 6

The basic formula for price elasticity of demand is

Accepted Answer

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

Question 7

Price elasticity looks at

Accepted Answer

A) The law of demand and the law of supply. 
B) How much the quantity demanded or supplied changes after a change in price. 
C) The degree to which price changes with a change in the quantity demanded or supplied. 
D) Why the law of supply and the law of demand are untrue. 
A) The law of demand and the law of supply. 
B) How much the quantity demanded or supplied changes after a change in price. 
C) The degree to which price changes with a change in the quantity demanded or supplied. 
D) Why the law of supply and the law of demand are untrue.

Question 8

If the price of sandals increases by 10 percent and the quantity demanded falls by 20 percent,then the price elasticity of demand in absolute value is

Accepted Answer

A) .2. 
B) 2. 
C) 20 percent. 
D) 2 percent. 
A) .2. 
B) 2. 
C) 20 percent. 
D) 2 percent.

Question 9

Technically the elasticity number is negative because

Accepted Answer

A) When price falls quantity demanded will rise,but for simplicity economists take the absolute value of the elasticity number. 
B) When price falls quantity demanded will fall,but for simplicity economists take the absolute value of the elasticity number. 
C) When price rises quantity demanded will rise,but for simplicity economists take the absolute value of the elasticity number. 
D) The demand curve is upward-sloping. 
A) When price falls quantity demanded will rise,but for simplicity economists take the absolute value of the elasticity number. 
B) When price falls quantity demanded will fall,but for simplicity economists take the absolute value of the elasticity number. 
C) When price rises quantity demanded will rise,but for simplicity economists take the absolute value of the elasticity number. 
D) The demand curve is upward-sloping.

Question 10

Assume that store brand cereal is an inferior good.If income rises,then the price of store brand cereal will ________ and the quantity sold of store brand cereal will ________.

Accepted Answer

A) rise;rise 
B) rise;fall 
C) fall;fall 
D) fall;rise 
A) rise;rise 
B) rise;fall 
C) fall;fall 
D) fall;rise

Question 11

Price elasticity of demand refers to

Accepted Answer

A) How responsive producers are to a change in the cost of production. 
B) How sensitive buyers are to a change in price. 
C) How buyers respond to a change in income. 
D) How buyers react to a change in the price of a substitute good. 
A) How responsive producers are to a change in the cost of production. 
B) How sensitive buyers are to a change in price. 
C) How buyers respond to a change in income. 
D) How buyers react to a change in the price of a substitute good.

Question 12

The demand will be ________ if the consumer has ________ substitute goods to choose from

Accepted Answer

A) elastic;less 
B) inelastic;more 
C) elastic;more 
D) elastic;no 
A) elastic;less 
B) inelastic;more 
C) elastic;more 
D) elastic;no

Question 13

Assume a good has a downward-sloping,linear demand curve.Starting at a price of zero,as the price of the good increases,total revenue

Accepted Answer

A) Increases indefinitely. 
B) Decreases indefinitely because the quantity sold will decrease. 
C) Is constant. 
D) Increases,then decreases. 
A) Increases indefinitely. 
B) Decreases indefinitely because the quantity sold will decrease. 
C) Is constant. 
D) Increases,then decreases.

Question 14

Assume the price elasticity of demand for JT Chip Co.chips is 4.0.If the company decreases the price of each bag of chips from $1.89 to $1.49,the number of bags sold will

Accepted Answer

A) Decrease by 78 percent. 
B) Increase by 95 percent. 
C) Increase by 48 percent. 
D) Increase by 78 percent. 
A) Decrease by 78 percent. 
B) Increase by 95 percent. 
C) Increase by 48 percent. 
D) Increase by 78 percent.

Question 15

In the article "After iPhone Price Cut,Sales Are Up by 200 Percent,"

Accepted Answer

A) The demand for iPhones is inelastic. 
B) The survey of quantity demanded after a price change for the iPhones showed that iPhones are an inferior good. 
C) The demand for iPhones is highly elastic. 
D) There was no way to calculate the price elasticity of demand. 
A) The demand for iPhones is inelastic. 
B) The survey of quantity demanded after a price change for the iPhones showed that iPhones are an inferior good. 
C) The demand for iPhones is highly elastic. 
D) There was no way to calculate the price elasticity of demand.

Question 16

Oil and alternative sources of energy such as wind and solar are

Accepted Answer

A) Complementary goods. 
B) Substitute goods. 
C) Inferior goods. 
D) Income-elastic goods. 
A) Complementary goods. 
B) Substitute goods. 
C) Inferior goods. 
D) Income-elastic goods.

Question 17

If demand is elastic,then

Accepted Answer

A) The elasticity number E is greater than 1. 
B) The elasticity number E is less than 1. 
C) The elasticity number E is equal to 1. 
D) The elasticity number E is 0. 
A) The elasticity number E is greater than 1. 
B) The elasticity number E is less than 1. 
C) The elasticity number E is equal to 1. 
D) The elasticity number E is 0.

Question 18

If the price elasticity of demand is 0.4,a 5 percent increase in price will quantity demanded to fall by 2 percent.

Accepted Answer

A) True 
 B)False

Question 19

Supply is very elastic when

Accepted Answer

A) The quantity supplied does not change much when price rises. 
B) The quantity supplied has a large increase in response to an increase in price. 
C) The quantity supply does not respond to an increase in price. 
D) The quantity demanded causes the quantity supplied to increase. 
A) The quantity supplied does not change much when price rises. 
B) The quantity supplied has a large increase in response to an increase in price. 
C) The quantity supply does not respond to an increase in price. 
D) The quantity demanded causes the quantity supplied to increase.

Question 20

Assume the price elasticity of demand for U.S.Frisbee Co.Frisbees is 0.5.If the company increases the price of each Frisbee from $12 to $16,the number of Frisbees demanded will

Accepted Answer

A) Decrease by 14.3 percent. 
B) Decrease by 33.3 percent. 
C) Increase by 20.0 percent. 
D) Increase by 7.0 percent. 
A) Decrease by 14.3 percent. 
B) Decrease by 33.3 percent. 
C) Increase by 20.0 percent. 
D) Increase by 7.0 percent.

Exam 20: Elasticity

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

To increase U.S.energy independence,prices must be lowered on gasoline and electricity.

When income falls,the demand for an inferior goods

If the price of a good rises by 10 percent and quantity demanded falls by 20 percent,we can predict that

Sam owns a taco restaurant,and he conducted a consumer survey that indicates that the price elasticity of demand for his restaurant is 3.5.You would advise Sam to

The basic formula for price elasticity of demand is

Price elasticity looks at

If the price of sandals increases by 10 percent and the quantity demanded falls by 20 percent,then the price elasticity of demand in absolute value is

Technically the elasticity number is negative because

Assume that store brand cereal is an inferior good.If income rises,then the price of store brand cereal will ________ and the quantity sold of store brand cereal will ________.

Price elasticity of demand refers to

The demand will be ________ if the consumer has ________ substitute goods to choose from

Assume a good has a downward-sloping,linear demand curve.Starting at a price of zero,as the price of the good increases,total revenue

Assume the price elasticity of demand for JT Chip Co.chips is 4.0.If the company decreases the price of each bag of chips from $1.89 to $1.49,the number of bags sold will

In the article "After iPhone Price Cut,Sales Are Up by 200 Percent,"

Oil and alternative sources of energy such as wind and solar are

If demand is elastic,then

If the price elasticity of demand is 0.4,a 5 percent increase in price will quantity demanded to fall by 2 percent.

Supply is very elastic when

Assume the price elasticity of demand for U.S.Frisbee Co.Frisbees is 0.5.If the company increases the price of each Frisbee from $12 to $16,the number of Frisbees demanded will

Economics: the Core Issues

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Theory Versus Reality

Consumer Choice

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Assume that store brand cereal is an inferior good.If income rises,then the price of store brand cereal will and the quantity sold of store brand cereal will .

The demand will be if the consumer has substitute goods to choose from