Question 1

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. 
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.

Question 2

Assume apples and oranges are substitutes.Suppose apple growers launch a successful advertising campaign that convinces consumers apples are a better product.As a result the cross-price elasticity of apples and oranges will become

Accepted Answer

A) Less negative (move closer to zero). 
B) More negative. 
C) Less positive (move closer to zero). 
A) Less negative (move closer to zero). 
B) More negative. 
C) Less positive (move closer to zero).

Question 3

Price elasticity looks at

Accepted Answer

A) The law of demand. 
B) How much quantity demanded changes after a change in price. 
C) The degree to which price changes with a change in quantity demanded. 
A) The law of demand. 
B) How much quantity demanded changes after a change in price. 
C) The degree to which price changes with a change in quantity demanded.

Question 4

The article "SUV Sales Drop with Gasoline Price Rise" states

Accepted Answer

A) That gasoline and SUV sales have a cross-price elasticity that is negative. 
B) That gasoline and SUVs are substitute goods. 
C) That the cross-price elasticity for SUVs and gasoline is positive. 
A) That gasoline and SUV sales have a cross-price elasticity that is negative. 
B) That gasoline and SUVs are substitute goods. 
C) That the cross-price elasticity for SUVs and gasoline is positive.

Question 5

A demand curve that is perfectly inelastic is

Accepted Answer

A) Horizontal. 
B) Vertical. 
C) Upward-sloping. 
A) Horizontal. 
B) Vertical. 
C) Upward-sloping.

Question 6

To find the average percentage change in quantity demanded,

Accepted Answer

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

Question 7

A grocery store put salt on sale but found that total revenues fell.This can be explained by which of the following?

Accepted Answer

A) The demand for salt is very elastic. 
B) The demand curve for salt is vertical. 
C) The demand for salt is inelastic. 
A) The demand for salt is very elastic. 
B) The demand curve for salt is vertical. 
C) The demand for salt is inelastic.

Question 8

Policy proposals to make the United States energy-independent

Accepted Answer

A) Have arisen only recently because of the high price of oil. 
B) Were originally for national security reasons. 
C) Have never been proposed because the United States cannot become energy-independent. 
A) Have arisen only recently because of the high price of oil. 
B) Were originally for national security reasons. 
C) Have never been proposed because the United States cannot become energy-independent.

Question 9

Maximum total revenue occurs when

Accepted Answer

A) Total revenue is -1.0. 
B) The absolute value of the price elasticity of demand is 1.0. 
C) Price multiplied by quantity is 1.0. 
A) Total revenue is -1.0. 
B) The absolute value of the price elasticity of demand is 1.0. 
C) Price multiplied by quantity is 1.0.

Question 10

If the price of the iPod falls by 3 percent and the price elasticity of demand for iPods is 2.0,then quantity demanded will fall by what percentage?

Accepted Answer

A) 5 percent. 
B) 6 percent. 
C) 0.6 perent. 
A) 5 percent. 
B) 6 percent. 
C) 0.6 perent.

Question 11

A price change will have no effect on total revenue if demand is

Accepted Answer

A) Elastic. 
B) Unitary. 
C) Inelastic. 
A) Elastic. 
B) Unitary. 
C) Inelastic.

Question 12

Total revenue is

Accepted Answer

A) Price times income. 
B) Quantity sold times price. 
C) Equal to total profit. 
A) Price times income. 
B) Quantity sold times price. 
C) Equal to total profit.

Question 13

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. 
A) Raise his price to increase revenues. 
B) Keep his price the same to maximize revenues. 
C) Lower his price to increase revenue.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

If a good is normal,its

Accepted Answer

A) Price elasticity of demand is positive. 
B) Income elasticity of demand is negative. 
C) Income elasticity of demand is positive. 
A) Price elasticity of demand is positive. 
B) Income elasticity of demand is negative. 
C) Income elasticity of demand is positive.

Question 16

The 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 17

The article on the price cuts for the iPhone indicates that

Accepted Answer

A) The cross-price elasticity for iPhones and other cell phones produced by Palm and Motorola was negative. 
B) Apple lowered the price for the iPhone because the cross-price elasticity between it and the other competitors was positive. 
C) The percentage change in the quantity demanded for the substitute cell phones was increasing less than the percentage change in the price. 
A) The cross-price elasticity for iPhones and other cell phones produced by Palm and Motorola was negative. 
B) Apple lowered the price for the iPhone because the cross-price elasticity between it and the other competitors was positive. 
C) The percentage change in the quantity demanded for the substitute cell phones was increasing less than the percentage change in the price.

Question 18

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

Question 19

Which of the following products will have elastic demand?

Accepted Answer

A) Gasoline. 
B) Cigarettes. 
C) European travel. 
A) Gasoline. 
B) Cigarettes. 
C) European travel.

Question 20

Total revenue is equal to

Accepted Answer

A) The income from sales. 
B) Profit. 
C) Cost of production. 
A) The income from sales. 
B) Profit. 
C) Cost of production.

Exam 20: Elasticity

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

Assume apples and oranges are substitutes.Suppose apple growers launch a successful advertising campaign that convinces consumers apples are a better product.As a result the cross-price elasticity of apples and oranges will become

Price elasticity looks at

The article "SUV Sales Drop with Gasoline Price Rise" states

A demand curve that is perfectly inelastic is

To find the average percentage change in quantity demanded,

A grocery store put salt on sale but found that total revenues fell.This can be explained by which of the following?

Policy proposals to make the United States energy-independent

Maximum total revenue occurs when

If the price of the iPod falls by 3 percent and the price elasticity of demand for iPods is 2.0,then quantity demanded will fall by what percentage?

A price change will have no effect on total revenue if demand is

Total revenue is

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

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

If a good is normal,its

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

The article on the price cuts for the iPhone indicates that

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 _______.

Which of the following products will have elastic demand?

Total revenue is equal to

Economics: the Core Issues Appendix: Using Graphs

The Us Economy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Aggregate Demand Appendix: the Keynesian Cross

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 Appendix: Indifference Curves

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 Glossary Index Reference Tables

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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 _.