Question 1

The demand for a good is price inelastic if

Accepted Answer

A) a rise in price results in an increase in total revenue. 
B) a rise in price results in a decrease in total revenue. 
C) an increase in income results in a decrease in total revenue. 
D) an increase in income results in an increase in total revenue. 
E) the good is a luxury. 
A) a rise in price results in an increase in total revenue. 
B) a rise in price results in a decrease in total revenue. 
C) an increase in income results in a decrease in total revenue. 
D) an increase in income results in an increase in total revenue. 
E) the good is a luxury.

Question 2

Short-run supply is

Accepted Answer

A) more elastic than momentary supply but less elastic than long-run supply. 
B) less elastic than momentary supply but more elastic than long-run supply. 
C) less elastic than both momentary and long-run supply. 
D) more elastic than both momentary and long-run supply. 
E) as elastic as either the momentary or the long-run supply. 
A) more elastic than momentary supply but less elastic than long-run supply. 
B) less elastic than momentary supply but more elastic than long-run supply. 
C) less elastic than both momentary and long-run supply. 
D) more elastic than both momentary and long-run supply. 
E) as elastic as either the momentary or the long-run supply.

Question 3

Demand will be more inelastic the

Accepted Answer

A) higher the income level. 
B) lower the income level. 
C) longer the passage of time after a price increase. 
D) fewer good substitutes that are available. 
E) larger the fraction of income spent on the good. 
A) higher the income level. 
B) lower the income level. 
C) longer the passage of time after a price increase. 
D) fewer good substitutes that are available. 
E) larger the fraction of income spent on the good.

Question 4

Suppose your annual income is $65 000 and your favourite TV Guide magazine costs you $28 a year.Your demand for the TV Guide magazine is likely to be

Accepted Answer

A) perfectly elastic. 
B) inelastic. 
C) unit elastic. 
D) elastic. 
E) elastic -- the same as your demand for all other goods. 
A) perfectly elastic. 
B) inelastic. 
C) unit elastic. 
D) elastic. 
E) elastic -- the same as your demand for all other goods.

Question 5

Business people speak about price elasticity of demand without using the actual term.Which one of the following statements reflects elastic demand for a good?

Accepted Answer

A) "A price cut won't help me.It won't increase sales, and I'll just get less money for each unit." 
B) "I don't think a price cut will make any difference to my bottom line.What I may gain from selling more I would lose on the lower price." 
C) "My customers are real bargain hunters.Since I set my prices just a few cents below my competitors, customers have flocked to the store, and sales are booming." 
D) "With the recent economic recovery, people have more income to spend and sales are booming, even at the previous prices." 
E) none of the above 
A) "A price cut won't help me.It won't increase sales, and I'll just get less money for each unit." 
B) "I don't think a price cut will make any difference to my bottom line.What I may gain from selling more I would lose on the lower price." 
C) "My customers are real bargain hunters.Since I set my prices just a few cents below my competitors, customers have flocked to the store, and sales are booming." 
D) "With the recent economic recovery, people have more income to spend and sales are booming, even at the previous prices." 
E) none of the above

Question 6

If the demand for a good is unit elastic,then a 5 percent increase in price results in

Accepted Answer

A) a 5 percent increase in total revenue. 
B) a 5 percent decrease in total revenue. 
C) no change in total revenue. 
D) an increase in total revenue greater than 5 percent. 
E) an increase in total revenue less than 5 percent. 
A) a 5 percent increase in total revenue. 
B) a 5 percent decrease in total revenue. 
C) no change in total revenue. 
D) an increase in total revenue greater than 5 percent. 
E) an increase in total revenue less than 5 percent.

Question 7

Suppose that Simon Fraser University decides to raise tuition fees to increase the total revenue it receives from students.This policy works only if the demand for a Simon Fraser University education is

Accepted Answer

A) unit elastic. 
B) inelastic. 
C) elastic. 
D) greater than the demand for a University of Western Ontario education. 
E) perfectly elastic. 
A) unit elastic. 
B) inelastic. 
C) elastic. 
D) greater than the demand for a University of Western Ontario education. 
E) perfectly elastic.

Question 8

The price elasticity of demand for purses is measured in

Accepted Answer

A) dollars. 
B) purses. 
C) dollars per purse. 
D) purses per dollar. 
E) none of the above. 
A) dollars. 
B) purses. 
C) dollars per purse. 
D) purses per dollar. 
E) none of the above.

Question 9

If an increase in the supply of good A increases the demand for good B,then

Accepted Answer

A) the demands for A and B are independent. 
B) the elasticity of supply for good A is greater than 1. 
C) A and B are complements. 
D) A and B are substitutes. 
E) the demand for A is price elastic. 
A) the demands for A and B are independent. 
B) the elasticity of supply for good A is greater than 1. 
C) A and B are complements. 
D) A and B are substitutes. 
E) the demand for A is price elastic.

Question 10

Luxury goods tend to have income elasticities of demand that are

Accepted Answer

A) greater than 1. 
B) greater than zero but less than 1. 
C) less than the income elasticities of demand for necessary goods. 
D) negative. 
E) first positive and then negative as income increases. 
A) greater than 1. 
B) greater than zero but less than 1. 
C) less than the income elasticities of demand for necessary goods. 
D) negative. 
E) first positive and then negative as income increases.

Question 11

Suppose there is an increase in the cost of resources used in the production of good A.Then

Accepted Answer

A) if the price of A rises, we know the demand for A is elastic. 
B) if the total revenue from sales of A rises, we know the demand for A is elastic. 
C) if the total revenue from sales of A falls, we know the demand for A is elastic. 
D) total revenue will increase because the price of A must rise. 
E) total revenue must fall because the quantity bought and sold of A must fall. 
A) if the price of A rises, we know the demand for A is elastic. 
B) if the total revenue from sales of A rises, we know the demand for A is elastic. 
C) if the total revenue from sales of A falls, we know the demand for A is elastic. 
D) total revenue will increase because the price of A must rise. 
E) total revenue must fall because the quantity bought and sold of A must fall.

Question 12

In the market for farm crops momentary supply is ________.In the market for farm crops,short-run supply is ________.

Accepted Answer

A) less elastic than short-run supply;less elastic than long-run supply 
B) more elastic than short-run supply;more elastic than long-run supply 
C) negative;positive 
D) positive;negative 
E) perfectly elastic;perfectly inelastic 
A) less elastic than short-run supply;less elastic than long-run supply 
B) more elastic than short-run supply;more elastic than long-run supply 
C) negative;positive 
D) positive;negative 
E) perfectly elastic;perfectly inelastic

Question 13

The price elasticity of demand for oranges ________ if the quantity is measured in pounds instead of kilograms and ________ if the price is measured in dollars instead of cents.

Accepted Answer

A) changes;changes 
B) changes;does not change 
C) does not change;changes 
D) does not change;does not change 
E) increases;decreases 
A) changes;changes 
B) changes;does not change 
C) does not change;changes 
D) does not change;does not change 
E) increases;decreases

Question 14

Total revenue is more likely to rise when the price rises if

Accepted Answer

A) there are few substitutes for the good. 
B) a high proportion of income is spent on the good. 
C) some extended period of time passes. 
D) all of the above. 
E) none of the above. 
A) there are few substitutes for the good. 
B) a high proportion of income is spent on the good. 
C) some extended period of time passes. 
D) all of the above. 
E) none of the above.

Question 15

Total revenue from the sale of a good will decrease if

Accepted Answer

A) income increases and the good is normal. 
B) its price rises and demand is elastic. 
C) its price rises and demand is inelastic. 
D) income falls and the good is an inferior good. 
E) its price falls and demand is elastic. 
A) income increases and the good is normal. 
B) its price rises and demand is elastic. 
C) its price rises and demand is inelastic. 
D) income falls and the good is an inferior good. 
E) its price falls and demand is elastic.

Question 16

If a 10 percent increase in income results in a 10 percent decrease in the consumption of widgets,then

Accepted Answer

A) the price elasticity of demand for widgets equals 1. 
B) the income elasticity of demand for widgets is negative. 
C) the income elasticity of demand for widgets equals 1. 
D) widgets are a normal good. 
E) the price elasticity demand for widgets is negative. 
A) the price elasticity of demand for widgets equals 1. 
B) the income elasticity of demand for widgets is negative. 
C) the income elasticity of demand for widgets equals 1. 
D) widgets are a normal good. 
E) the price elasticity demand for widgets is negative.

Question 17

If the quantity of carrots demanded increases by a small percentage when income increases by a large amount,we know that the demand for carrots is

Accepted Answer

A) price elastic. 
B) price inelastic. 
C) income inferior. 
D) income elastic. 
E) income inelastic. 
A) price elastic. 
B) price inelastic. 
C) income inferior. 
D) income elastic. 
E) income inelastic.

Question 18

Use the figure below to answer the following questions.
   
Figure 4.1.2
-Figure 4.1.2 illustrates a linear demand curve.If the price falls from $13 to $11,

Accepted Answer

A) total revenue increases. 
B) total revenue decreases. 
C) total revenue remains unchanged. 
D) total revenue initially increases then decreases. 
E) total revenue initially decreases then increases. 
A) total revenue increases. 
B) total revenue decreases. 
C) total revenue remains unchanged. 
D) total revenue initially increases then decreases. 
E) total revenue initially decreases then increases.

Question 19

In the nation of Transporta,the income elasticity of demand for used cars is -2.66.If incomes in this nation increase by 10 percent,

Accepted Answer

A) the quantity of used cars demanded increase by 26.6 percent. 
B) used cars will be normal goods. 
C) the quantity of used cars demanded decrease by 26.6 percent. 
D) the demand curve for used cars shifts rightward. 
E) the supply curve of used cars shifts rightward. 
A) the quantity of used cars demanded increase by 26.6 percent. 
B) used cars will be normal goods. 
C) the quantity of used cars demanded decrease by 26.6 percent. 
D) the demand curve for used cars shifts rightward. 
E) the supply curve of used cars shifts rightward.

Question 20

All normal goods have

Accepted Answer

A) an income elasticity of demand greater than 1.0. 
B) a price elasticity of demand greater than 1.0. 
C) a negative price elasticity of demand. 
D) a positive income elasticity of demand. 
E) a negative cross elasticity of demand 
A) an income elasticity of demand greater than 1.0. 
B) a price elasticity of demand greater than 1.0. 
C) a negative price elasticity of demand. 
D) a positive income elasticity of demand. 
E) a negative cross elasticity of demand

Exam 4: Elasticity

The demand for a good is price inelastic if

Short-run supply is

Demand will be more inelastic the

Suppose your annual income is $65 000 and your favourite TV Guide magazine costs you $28 a year.Your demand for the TV Guide magazine is likely to be

Business people speak about price elasticity of demand without using the actual term.Which one of the following statements reflects elastic demand for a good?

If the demand for a good is unit elastic,then a 5 percent increase in price results in

Suppose that Simon Fraser University decides to raise tuition fees to increase the total revenue it receives from students.This policy works only if the demand for a Simon Fraser University education is

The price elasticity of demand for purses is measured in

If an increase in the supply of good A increases the demand for good B,then

Luxury goods tend to have income elasticities of demand that are

Suppose there is an increase in the cost of resources used in the production of good A.Then

In the market for farm crops momentary supply is ________.In the market for farm crops,short-run supply is ________.

The price elasticity of demand for oranges ________ if the quantity is measured in pounds instead of kilograms and ________ if the price is measured in dollars instead of cents.

Total revenue is more likely to rise when the price rises if

Total revenue from the sale of a good will decrease if

If a 10 percent increase in income results in a 10 percent decrease in the consumption of widgets,then

If the quantity of carrots demanded increases by a small percentage when income increases by a large amount,we know that the demand for carrots is

Use the figure below to answer the following questions. Figure 4.1.2 -Figure 4.1.2 illustrates a linear demand curve.If the price falls from $13 to $11,

In the nation of Transporta,the income elasticity of demand for used cars is -2.66.If incomes in this nation increase by 10 percent,

All normal goods have

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In the market for farm crops momentary supply is .In the market for farm crops,short-run supply is .

The price elasticity of demand for oranges if the quantity is measured in pounds instead of kilograms and if the price is measured in dollars instead of cents.