Question 1

If the quantity of pineapples demanded increases by 4% when the price of papayas increases by 16%, the cross-price elasticity of demand between pineapples and papayas is

Accepted Answer

A)  -4. 
B)  0.25. 
C)  4. 
D)  64. 
A)  -4. 
B)  0.25. 
C)  4. 
D)  64.

Question 2

When demand is elastic, an increase in price will result in an increase in total revenue.

Accepted Answer

A) True 
 B)False

Question 3

A positive income elasticity value indicates that the good is a normal good.

Accepted Answer

A) True 
 B)False

Question 4

The income elasticity of demand for education is 3.5. Thus, a 4% increase in income will

Accepted Answer

A)  decrease the quantity of education demanded by 3.5%. 
B)  decrease the quantity of education demanded by 14%. 
C)  increase the quantity of education demanded by 4%. 
D)  increase the quantity of education demanded by 14%. 
A)  decrease the quantity of education demanded by 3.5%. 
B)  decrease the quantity of education demanded by 14%. 
C)  increase the quantity of education demanded by 4%. 
D)  increase the quantity of education demanded by 14%.

Question 5

Price elasticity of demand is calculated as the change in price divided by the change in quantity demanded.

Accepted Answer

A) True 
 B)False

Question 6

Price and total revenue are inversely related when demand is

Accepted Answer

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

Question 7

Demand determines ________ entirely when ________ is perfectly inelastic.

Accepted Answer

A)  quantity; supply 
B)  price and quantity; supply 
C)  price; supply 
D)  price and quantity; demand 
A)  quantity; supply 
B)  price and quantity; supply 
C)  price; supply 
D)  price and quantity; demand

Question 8

If the quantity of pretzels demanded decreases by 8% when the price of beer increases by 6%, the cross-price elasticity of demand between pretzels and beer is

Accepted Answer

A)  -14. 
B)  -1.33. 
C)  -0.75. 
D)  2. 
A)  -14. 
B)  -1.33. 
C)  -0.75. 
D)  2.

Question 9

When the price of cheddar cheese increases 15%, quantity demanded decreases 15%. The price elasticity of demand for cheddar cheese is ________ and total revenue from cheddar cheese sales will ________.

Accepted Answer

A)  elastic; decrease 
B)  elastic; increase 
C)  inelastic; decrease 
D)  unit elastic; not change 
A)  elastic; decrease 
B)  elastic; increase 
C)  inelastic; decrease 
D)  unit elastic; not change

Question 10

Luxury items tend to have ________ demand, and necessities tend to have ________ demand.

Accepted Answer

A)  relatively elastic; inelastic 
B)  relatively inelastic; elastic 
C)  perfectly elastic; perfectly inelastic 
D)  unit elastic; perfectly inelastic 
A)  relatively elastic; inelastic 
B)  relatively inelastic; elastic 
C)  perfectly elastic; perfectly inelastic 
D)  unit elastic; perfectly inelastic

Question 11

Refer to the information provided in Figure 5.7 below to answer the question(s) that follow.   Figure 5.7
The above figure represents the market for pumpkins both before and after the imposition of an excise tax, which is represented by the shift of the supply curve.
-Refer to Figure 5.7. The demand for pumpkins from the equilibrium point before the imposition of the tax to the equilibrium point after the imposition of the tax is

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  perfectly elastic. 
A)  elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  perfectly elastic.

Question 12

A negative income elasticity implies that the good is an inferior good.

Accepted Answer

A) True 
 B)False

Question 13

Refer to the information provided in Figure 5.5 below to answer the question that follows.   Figure 5.5
-Refer to Figure 5.5. As the price of good W increased, the demand for good Y shifted from D1 to D2. The cross-price elasticity of demand between W and Y is

Accepted Answer

A)  positive. 
B)  negative. 
C)  zero. 
D)  indeterminate from this information. 
A)  positive. 
B)  negative. 
C)  zero. 
D)  indeterminate from this information.

Question 14

How total revenue changes when a price changes can be predicted using price elasticity of demand.

Accepted Answer

A) True 
 B)False

Question 15

When demand is inelastic, a decrease in price will result in a decrease in total revenue.

Accepted Answer

A) True 
 B)False

Question 16

At a price of $40, a store can sell 35 toasters a day. At a price of $35 the store can sell 39 toasters a day. Since total revenue ________ by the price decrease, demand must be ________.

Accepted Answer

A)  is increased; elastic 
B)  is decreased; inelastic 
C)  is increased; unit elastic 
D)  is decreased; elastic 
A)  is increased; elastic 
B)  is decreased; inelastic 
C)  is increased; unit elastic 
D)  is decreased; elastic

Question 17

Refer to the information provided in Figure 5.4 below to answer the question(s) that follow.   Figure 5.4
-Refer to Figure 5.4. The demand for milkshakes is unit elastic at Point C. If a store reduces the price of a milkshake from P3 to P4, its total revenue will

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain constant. 
D)  either increase or decrease. 
A)  increase. 
B)  decrease. 
C)  remain constant. 
D)  either increase or decrease.

Question 18

In order to discourage consumers from eating unhealthy fast food, the government is considering placing a tax on all fast food sales. Which of the following statements is true?

Accepted Answer

A)  Given the numerous alternatives, consumers' demand for fast food is relatively inelastic and the tax will not likely work to discourage fast food consumption. 
B)  The tax on fast food will likely raise considerable revenue but will be unlikely to reduce the consumption of fast food by consumers. 
C)  The tax on fast food will likely increase the demand for home cooked meals. 
D)  A tax on fast food will only be effective if demand is perfectly inelastic. 
A)  Given the numerous alternatives, consumers' demand for fast food is relatively inelastic and the tax will not likely work to discourage fast food consumption. 
B)  The tax on fast food will likely raise considerable revenue but will be unlikely to reduce the consumption of fast food by consumers. 
C)  The tax on fast food will likely increase the demand for home cooked meals. 
D)  A tax on fast food will only be effective if demand is perfectly inelastic.

Question 19

If the demand for cigarettes is more ________ for underage smokers as compared to that of adult smokers, then compared to adults, a tax on cigarettes would have ________ impact on the demand for cigarettes for teenagers.

Accepted Answer

A)  elastic; more 
B)  elastic; less 
C)  inelastic; more 
D)  inelastic; an equal 
A)  elastic; more 
B)  elastic; less 
C)  inelastic; more 
D)  inelastic; an equal

Question 20

When the price of tea decreases 7%, quantity demanded increases 12%. The price elasticity of demand for tea is ________ and total revenue from tea sales will ________.

Accepted Answer

A)  inelastic; increase 
B)  inelastic; decrease 
C)  elastic; increase 
D)  elastic; decrease 
A)  inelastic; increase 
B)  inelastic; decrease 
C)  elastic; increase 
D)  elastic; decrease

Exam 5: Elasticity

If the quantity of pineapples demanded increases by 4% when the price of papayas increases by 16%, the cross-price elasticity of demand between pineapples and papayas is

When demand is elastic, an increase in price will result in an increase in total revenue.

A positive income elasticity value indicates that the good is a normal good.

The income elasticity of demand for education is 3.5. Thus, a 4% increase in income will

Price elasticity of demand is calculated as the change in price divided by the change in quantity demanded.

Price and total revenue are inversely related when demand is

Demand determines ________ entirely when ________ is perfectly inelastic.

If the quantity of pretzels demanded decreases by 8% when the price of beer increases by 6%, the cross-price elasticity of demand between pretzels and beer is

When the price of cheddar cheese increases 15%, quantity demanded decreases 15%. The price elasticity of demand for cheddar cheese is ________ and total revenue from cheddar cheese sales will ________.

Luxury items tend to have ________ demand, and necessities tend to have ________ demand.

A negative income elasticity implies that the good is an inferior good.

Refer to the information provided in Figure 5.5 below to answer the question that follows. Figure 5.5 -Refer to Figure 5.5. As the price of good W increased, the demand for good Y shifted from D1 to D2. The cross-price elasticity of demand between W and Y is

How total revenue changes when a price changes can be predicted using price elasticity of demand.

When demand is inelastic, a decrease in price will result in a decrease in total revenue.

At a price of $40, a store can sell 35 toasters a day. At a price of $35 the store can sell 39 toasters a day. Since total revenue ________ by the price decrease, demand must be ________.

Refer to the information provided in Figure 5.4 below to answer the question(s) that follow. Figure 5.4 -Refer to Figure 5.4. The demand for milkshakes is unit elastic at Point C. If a store reduces the price of a milkshake from P3 to P4, its total revenue will

In order to discourage consumers from eating unhealthy fast food, the government is considering placing a tax on all fast food sales. Which of the following statements is true?

If the demand for cigarettes is more ________ for underage smokers as compared to that of adult smokers, then compared to adults, a tax on cigarettes would have ________ impact on the demand for cigarettes for teenagers.

When the price of tea decreases 7%, quantity demanded increases 12%. The price elasticity of demand for tea is ________ and total revenue from tea sales will ________.

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: the Labor and Land Markets

Input Demand: the Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Externalities, Public Goods, and Common Resources

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: the Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

Demand determines entirely when is perfectly inelastic.

When the price of cheddar cheese increases 15%, quantity demanded decreases 15%. The price elasticity of demand for cheddar cheese is and total revenue from cheddar cheese sales will .

Luxury items tend to have demand, and necessities tend to have demand.

Refer to the information provided in Figure 5.5 below to answer the question that follows. Figure 5.5 -Refer to Figure 5.5. As the price of good W increased, the demand for good Y shifted from D₁ to D₂. The cross-price elasticity of demand between W and Y is

At a price of $40, a store can sell 35 toasters a day. At a price of $35 the store can sell 39 toasters a day. Since total revenue by the price decrease, demand must be .

Refer to the information provided in Figure 5.4 below to answer the question(s) that follow. Figure 5.4 -Refer to Figure 5.4. The demand for milkshakes is unit elastic at Point C. If a store reduces the price of a milkshake from P₃ to P₄, its total revenue will

If the demand for cigarettes is more for underage smokers as compared to that of adult smokers, then compared to adults, a tax on cigarettes would have impact on the demand for cigarettes for teenagers.

When the price of tea decreases 7%, quantity demanded increases 12%. The price elasticity of demand for tea is and total revenue from tea sales will .