Question 1

If a rise in the price of good B increases the demand for good A,then

Accepted Answer

A) A and B are substitutes. 
B) A and B are complements. 
C) the cross elasticity of demand between A and B is negative. 
D) A is a resource used in the production of B. 
E) the demand for A is price elastic. 
A) A and B are substitutes. 
B) A and B are complements. 
C) the cross elasticity of demand between A and B is negative. 
D) A is a resource used in the production of B. 
E) the demand for A is price elastic.

Question 2

When the price of peanut butter rises by 4 percent,total revenue decreases by 8 percent.The demand for peanut butter

Accepted Answer

A) is elastic. 
B) is inelastic. 
C) is unit elastic. 
D) has a price elasticity equal to 1/2. 
E) has a price elasticity equal to 2. 
A) is elastic. 
B) is inelastic. 
C) is unit elastic. 
D) has a price elasticity equal to 1/2. 
E) has a price elasticity equal to 2.

Question 3

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

Accepted Answer

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

Question 4

A technological breakthrough lowers the cost of photocopiers.If the demand for photocopiers is price inelastic,we predict that photocopier sales

Accepted Answer

A) fall and total revenue increases. 
B) fall and total revenue decreases. 
C) rise and total revenue increases. 
D) rise and total revenue decreases. 
E) rise, but changes in total revenue will depend on elasticity of supply. 
A) fall and total revenue increases. 
B) fall and total revenue decreases. 
C) rise and total revenue increases. 
D) rise and total revenue decreases. 
E) rise, but changes in total revenue will depend on elasticity of supply.

Question 5

If the price elasticity of demand is zero,then demand is

Accepted Answer

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

Question 6

Suppose the government of Nova Scotia wants to reduce the consumption of electricity by 5 percent.The price elasticity of demand for electricity is 0.40.You advise the Nova Scotia government to

Accepted Answer

A) raise the price of electricity by 12.5 percent. 
B) raise the price of electricity by 2 percent. 
C) lower the price of electricity by 12.5 percent. 
D) stay away from the market for electricity and let the market mechanism fix the problem. 
E) lower the price of electricity by 2 percent. 
A) raise the price of electricity by 12.5 percent. 
B) raise the price of electricity by 2 percent. 
C) lower the price of electricity by 12.5 percent. 
D) stay away from the market for electricity and let the market mechanism fix the problem. 
E) lower the price of electricity by 2 percent.

Question 7

If a turnip is a normal good then

Accepted Answer

A) a small decrease in income increases the quantity of turnips demanded at the current price by a large amount. 
B) a large decrease in income increases the quantity of turnips demanded at the current price by a small amount. 
C) an increase in income increases the quantity demanded at the current price. 
D) an increase in income decreases the quantity demanded at the current price. 
E) an increase in price decreases the quantity demanded. 
A) a small decrease in income increases the quantity of turnips demanded at the current price by a large amount. 
B) a large decrease in income increases the quantity of turnips demanded at the current price by a small amount. 
C) an increase in income increases the quantity demanded at the current price. 
D) an increase in income decreases the quantity demanded at the current price. 
E) an increase in price decreases the quantity demanded.

Question 8

Suppose Clyde always eats ice cream and chocolate syrup together.If the price of syrup increases by 10 percent,and the cross elasticity of demand is -2,the quantity of ice cream demanded

Accepted Answer

A) increases by 5 percent. 
B) increases by 20 percent. 
C) decreases by 5 percent. 
D) decreases by 20 percent. 
E) decreases by 2 percent. 
A) increases by 5 percent. 
B) increases by 20 percent. 
C) decreases by 5 percent. 
D) decreases by 20 percent. 
E) decreases by 2 percent.

Question 9

When the price of a bicycle falls from $220 to $180 and other things remain the same
I.the quantity demanded of bicycles increases from 150 to 250 an hour
II.the quantity demanded of skateboards decreases from 125 to 75 an hour
III.the quantity demanded of bicycle helmets increases from 170 to 230 an hour.
Skateboards and bicycles are ________ because a fall in the price of a bicycle brings ________ in the quantity demanded of skateboards.The cross elasticity of demand for skateboards with respect to bicycles is ________.

Accepted Answer

A) complements;an increase;-0.4 
B) complements;a decrease;0.4 
C) substitutes;an increase;-2.5 
D) substitutes;a decrease;2.5 
E) substitutes;a decrease;0.4 
A) complements;an increase;-0.4 
B) complements;a decrease;0.4 
C) substitutes;an increase;-2.5 
D) substitutes;a decrease;2.5 
E) substitutes;a decrease;0.4

Question 10

Demand will be more elastic 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 substitutes are available. 
E) smaller 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 substitutes are available. 
E) smaller the fraction of income spent on the good.

Question 11

If a 10 percent increase in price results in a 9 percent increase in quantity supplied,

Accepted Answer

A) the good is a normal good. 
B) the good is an inferior good. 
C) supply is unit elastic. 
D) supply is inelastic. 
E) supply is elastic. 
A) the good is a normal good. 
B) the good is an inferior good. 
C) supply is unit elastic. 
D) supply is inelastic. 
E) supply is elastic.

Question 12

Use the figure below to answer the following questions.
   
Figure 4.1.2
-For which one of the following will demand be the most price elastic?

Accepted Answer

A) daily newspapers 
B) Ontario newspapers 
C) Toronto newspapers 
D) The Toronto Star 
E) Each of the above will exhibit the same price elasticity of demand 
A) daily newspapers 
B) Ontario newspapers 
C) Toronto newspapers 
D) The Toronto Star 
E) Each of the above will exhibit the same price elasticity of demand

Question 13

Supply is inelastic if

Accepted Answer

A) a small percentage change in price results in a large percentage change in quantity supplied. 
B) a large percentage change in price results in a small percentage change in quantity supplied. 
C) the good is a normal good. 
D) the good is an inferior good. 
E) the good has many substitutes. 
A) a small percentage change in price results in a large percentage change in quantity supplied. 
B) a large percentage change in price results in a small percentage change in quantity supplied. 
C) the good is a normal good. 
D) the good is an inferior good. 
E) the good has many substitutes.

Question 14

Use the table below to answer the following question.
Table 4.1.5
  
-Refer to Table 4.1.5.The demand for hotel rooms is ________ because ________.

Accepted Answer

A) inelastic;if the price is set low enough, total revenue will decrease 
B) elastic;if the price is set high enough, total revenue will decrease 
C) unit elastic;a price cut leaves total revenue unchanged.Total revenue never reaches a maximum 
D) decreasing as the price falls;the demand curve for hotel rooms is a straight-line demand curve 
E) inelastic;if the price is set low enough, total revenue will increase 
A) inelastic;if the price is set low enough, total revenue will decrease 
B) elastic;if the price is set high enough, total revenue will decrease 
C) unit elastic;a price cut leaves total revenue unchanged.Total revenue never reaches a maximum 
D) decreasing as the price falls;the demand curve for hotel rooms is a straight-line demand curve 
E) inelastic;if the price is set low enough, total revenue will increase

Question 15

The price of gasoline rises by 25 percent and remains fixed at the new higher level.Choose the correct statement.

Accepted Answer

A) The demand for gasoline will increase after consumers adjust their consumption behaviour to the new higher price. 
B) The demand for gasoline will decrease after consumers adjust their consumption behaviour to the new higher price. 
C) Initially after the price change, the price elasticity of demand will be less elastic than it will be a few years after the price change. 
D) The price elasticity of demand for gasoline will decrease in the future. 
E) Initially after the price change, the price elasticity of demand will be more elastic than it will be a few years after the price change. 
A) The demand for gasoline will increase after consumers adjust their consumption behaviour to the new higher price. 
B) The demand for gasoline will decrease after consumers adjust their consumption behaviour to the new higher price. 
C) Initially after the price change, the price elasticity of demand will be less elastic than it will be a few years after the price change. 
D) The price elasticity of demand for gasoline will decrease in the future. 
E) Initially after the price change, the price elasticity of demand will be more elastic than it will be a few years after the price change.

Question 16

As a result of a poor growing season,the supply curve of apples shifted leftward,the equilibrium price of apples rose,and total revenue fell.This suggests that the price elasticity of demand for apples is

Accepted Answer

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

Question 17

A good has an income elasticity of +0.5.An increase in income from $15,000 to $25,000 will lead to a

Accepted Answer

A) 2.5 percent increase in the quantity demanded of the good. 
B) 5 percent increase in the quantity demanded of the good. 
C) 5 percent decrease in the quantity demanded of the good. 
D) 25 percent decrease in the quantity demanded of the good. 
E) 25 percent increase in the quantity demanded of the good. 
A) 2.5 percent increase in the quantity demanded of the good. 
B) 5 percent increase in the quantity demanded of the good. 
C) 5 percent decrease in the quantity demanded of the good. 
D) 25 percent decrease in the quantity demanded of the good. 
E) 25 percent increase in the quantity demanded of the good.

Question 18

A decrease in tuition fees will decrease the university's total revenue if the price elasticity of demand for university education is

Accepted Answer

A) negative. 
B) greater than zero but less than 1. 
C) equal to 1. 
D) greater than 1. 
E) less than the elasticity of supply. 
A) negative. 
B) greater than zero but less than 1. 
C) equal to 1. 
D) greater than 1. 
E) less than the elasticity of supply.

Question 19

Use the table below to answer the following question.
Table 4.1.3
  
-Refer to Table 4.1.3.The price elasticity of demand for Jolt is

Accepted Answer

A) 1. 
B) 2.5. 
C) 3.0. 
D) 0.33. 
E) cannot be calculated because income is not constant. 
A) 1. 
B) 2.5. 
C) 3.0. 
D) 0.33. 
E) cannot be calculated because income is not constant.

Question 20

Use the figure below to answer the following question.
   
Figure 4.1.1
-Figure 4.1.1 illustrates a linear demand curve.Comparing the price elasticity in the $2 to $3 price range with the elasticity in the $8 to $9 range,we can conclude

Accepted Answer

A) that demand is more elastic in the $8 to $9 price range. 
B) that demand is more elastic in the $2 to $3 price range. 
C) that the price elasticity of demand is the same in both price ranges. 
D) nothing without numerical information about quantities. 
E) that the price elasticity of demand is zero in both price ranges because the demand curve is a straight-line demand curve. 
A) that demand is more elastic in the $8 to $9 price range. 
B) that demand is more elastic in the $2 to $3 price range. 
C) that the price elasticity of demand is the same in both price ranges. 
D) nothing without numerical information about quantities. 
E) that the price elasticity of demand is zero in both price ranges because the demand curve is a straight-line demand curve.

Exam 4: Elasticity

If a rise in the price of good B increases the demand for good A,then

When the price of peanut butter rises by 4 percent,total revenue decreases by 8 percent.The demand for peanut butter

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

A technological breakthrough lowers the cost of photocopiers.If the demand for photocopiers is price inelastic,we predict that photocopier sales

If the price elasticity of demand is zero,then demand is

Suppose the government of Nova Scotia wants to reduce the consumption of electricity by 5 percent.The price elasticity of demand for electricity is 0.40.You advise the Nova Scotia government to

If a turnip is a normal good then

Suppose Clyde always eats ice cream and chocolate syrup together.If the price of syrup increases by 10 percent,and the cross elasticity of demand is -2,the quantity of ice cream demanded

Demand will be more elastic the

If a 10 percent increase in price results in a 9 percent increase in quantity supplied,

Use the figure below to answer the following questions. Figure 4.1.2 -For which one of the following will demand be the most price elastic?

Supply is inelastic if

Use the table below to answer the following question. Table 4.1.5 -Refer to Table 4.1.5.The demand for hotel rooms is ________ because ________.

The price of gasoline rises by 25 percent and remains fixed at the new higher level.Choose the correct statement.

As a result of a poor growing season,the supply curve of apples shifted leftward,the equilibrium price of apples rose,and total revenue fell.This suggests that the price elasticity of demand for apples is

A good has an income elasticity of +0.5.An increase in income from $15,000 to $25,000 will lead to a

A decrease in tuition fees will decrease the university's total revenue if the price elasticity of demand for university education is

Use the table below to answer the following question. Table 4.1.3 -Refer to Table 4.1.3.The price elasticity of demand for Jolt is

Use the figure below to answer the following question. Figure 4.1.1 -Figure 4.1.1 illustrates a linear demand curve.Comparing the price elasticity in the $2 to $3 price range with the elasticity in the $8 to $9 range,we can conclude

What Is Economics?

The Economic Problem

Demand and Supply

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: The Keynesian Model

Canadian Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Use the table below to answer the following question. Table 4.1.5 -Refer to Table 4.1.5.The demand for hotel rooms is because .