Question 1

If the quantity of walkie-talkies supplied increases by 5 percent when price increases by 12 percent, then

Accepted Answer

A)  the supply of walkie-talkies is inelastic. 
B)  the supply of walkie-talkies is elastic. 
C)  the walkie-talkie supply curve will shift to the right. 
D)  the walkie-talkie supply curve will shift to the left. 
A)  the supply of walkie-talkies is inelastic. 
B)  the supply of walkie-talkies is elastic. 
C)  the walkie-talkie supply curve will shift to the right. 
D)  the walkie-talkie supply curve will shift to the left.

Question 2

If demand is inelastic, the absolute value of the price elasticity coefficient is greater than one.

Accepted Answer

A) True 
 B)False

Question 3

If demand for a product is perfectly inelastic, a change in price will not change total revenue.

Accepted Answer

A) True 
 B)False

Question 4

If the market for a product is broadly defined, then

Accepted Answer

A)  the good has many complements. 
B)  there are few substitutes for the product and the demand for the product is relatively inelastic. 
C)  there are many substitutes for the product and the demand for the product is relatively elastic. 
D)  the expenditure on the good is likely to make up a large share of one's budget. 
A)  the good has many complements. 
B)  there are few substitutes for the product and the demand for the product is relatively inelastic. 
C)  there are many substitutes for the product and the demand for the product is relatively elastic. 
D)  the expenditure on the good is likely to make up a large share of one's budget.

Question 5

Suppose a decrease in the supply of paper results in an increase in revenue. This indicates that

Accepted Answer

A)  the demand for paper is inelastic. 
B)  the demand for paper is elastic. 
C)  the supply of paper is inelastic. 
D)  the supply of paper is elastic. 
A)  the demand for paper is inelastic. 
B)  the demand for paper is elastic. 
C)  the supply of paper is inelastic. 
D)  the supply of paper is elastic.

Question 6

Which of the following statements is true?

Accepted Answer

A)  Whenever a firm raises its price its total revenue will increase. 
B)  When a firm lowers its price its total revenue may either increase or decrease. 
C)  Whenever a firm increases its quantity sold its revenue will increase. 
D)  Total revenue will equal zero when the demand for a product is unit elastic. 
A)  Whenever a firm raises its price its total revenue will increase. 
B)  When a firm lowers its price its total revenue may either increase or decrease. 
C)  Whenever a firm increases its quantity sold its revenue will increase. 
D)  Total revenue will equal zero when the demand for a product is unit elastic.

Question 7

Price elasticity of demand measures

Accepted Answer

A)  how responsive suppliers are to price changes. 
B)  how responsive sales are to changes in the price of a related good. 
C)  how responsive quantity demanded is to a change in price. 
D)  how responsive sales are to a change in buyers' incomes. 
A)  how responsive suppliers are to price changes. 
B)  how responsive sales are to changes in the price of a related good. 
C)  how responsive quantity demanded is to a change in price. 
D)  how responsive sales are to a change in buyers' incomes.

Question 8

Suppose the absolute value of the price elasticity of demand for meals at Fortune Buffet House is ∞. What happens to sales revenue if the restaurant increases its price by 5 percent?

Accepted Answer

A)  Sales revenue falls by less than 5 percent. 
B)  Sales revenue remains unchanged. 
C)  Sales revenue falls by 100 percent. 
D)  It cannot be determined without information on prices. 
A)  Sales revenue falls by less than 5 percent. 
B)  Sales revenue remains unchanged. 
C)  Sales revenue falls by 100 percent. 
D)  It cannot be determined without information on prices.

Question 9

According to a study of the price elasticities of products sold in supermarkets, the price elasticity of demand for toothpaste is estimated at -0.45. Which of the following could explain why the price elasticity of demand for toothpaste is so low?

Accepted Answer

A)  The toothpaste industry is highly competitive. 
B)  Toothpaste is relatively inexpensive. 
C)  Toothpaste is considered a luxury good. 
D)  There are few close substitutes for toothpaste. 
A)  The toothpaste industry is highly competitive. 
B)  Toothpaste is relatively inexpensive. 
C)  Toothpaste is considered a luxury good. 
D)  There are few close substitutes for toothpaste.

Question 10

The most important determinant of the price elasticity of demand for a good is

Accepted Answer

A)  the definition of the market for a good. 
B)  the availability of substitutes for the good. 
C)  the share of the good in the consumer's budget. 
D)  whether the good is a necessity or a luxury. 
A)  the definition of the market for a good. 
B)  the availability of substitutes for the good. 
C)  the share of the good in the consumer's budget. 
D)  whether the good is a necessity or a luxury.

Question 11

Inelastic supply occurs whenever the elasticity of supply value is

Accepted Answer

A)  negative and  1. 
D)  positive and < 1. 
A)  negative and  1. 
D)  positive and < 1.

Question 12

If a firm raised its price and discovered that its total revenue fell, then the demand for its product is

Accepted Answer

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

Question 13

Suppose the supply of bicycles is price elastic. This means that

Accepted Answer

A)  consumers will respond significantly to an increase in the quantity of bicycles supplied. 
B)  suppliers will increase the quantity of bicycles supplied, but not immediately. 
C)  suppliers face many substitutes for bicycles. 
D)  suppliers will respond significantly to changes in the price of bicycles. 
A)  consumers will respond significantly to an increase in the quantity of bicycles supplied. 
B)  suppliers will increase the quantity of bicycles supplied, but not immediately. 
C)  suppliers face many substitutes for bicycles. 
D)  suppliers will respond significantly to changes in the price of bicycles.

Question 14

What does price elasticity of demand measure? When is demand elastic? Inelastic? Unit elastic?

Accepted Answer

Price elasticity of demand measures the

Question 15

Last year, Joan bought 50 pounds of hamburger when her household income was $40,000. This year, her household income was only $30,000 and Joan bought 60 pounds of hamburger. Holding everything else constant, Joan's income elasticity of demand for hamburger is

Accepted Answer

A)  positive, so Joan considers hamburger to be an inferior good. 
B)  negative, so Joan considers hamburger to be an inferior good. 
C)  positive, so Joan considers hamburger to be a normal good and a necessity. 
D)  negative, so Joan considers hamburger to be a normal good. 
A)  positive, so Joan considers hamburger to be an inferior good. 
B)  negative, so Joan considers hamburger to be an inferior good. 
C)  positive, so Joan considers hamburger to be a normal good and a necessity. 
D)  negative, so Joan considers hamburger to be a normal good.

Question 16

Table 6-6
  
-Refer to the Article Summary. Based on the difference between the face value of 'Hamilton' tickets sold by the Pantages Theater and Ticketmaster, and the prices being charged in the resellers like StubHub and SeatGeek, the demand at the face value of the tickets is

Accepted Answer

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

Question 17

What is the relationship between price elasticity of demand and total revenue?

Accepted Answer

If demand is elastic, an increase in pri

Question 18

Necessities tend to have more inelastic demand than luxuries.

Accepted Answer

A) True 
 B)False

Question 19

Assume that when the price of cantaloupes is $2.50 the demand for cantaloupes is unit-elastic, and that the demand curve for cantaloupes is linear and downward sloping. If firms lower the price of cantaloupes to $2.00 which of the following statements can be made regarding the price elasticity of demand for cantaloupes?

Accepted Answer

A)  The demand for cantaloupes at $2.00 must be inelastic. 
B)  We cannot determine whether the demand for cantaloupes is elastic or inelastic without knowing what the quantity demanded is at each price. 
C)  The demand for cantaloupes at $2.00 must be elastic. 
D)  The demand for cantaloupes at $2.00 must be unit elastic. 
A)  The demand for cantaloupes at $2.00 must be inelastic. 
B)  We cannot determine whether the demand for cantaloupes is elastic or inelastic without knowing what the quantity demanded is at each price. 
C)  The demand for cantaloupes at $2.00 must be elastic. 
D)  The demand for cantaloupes at $2.00 must be unit elastic.

Question 20

For each pair of items below determine which product would have the higher price elasticity of demand (in absolute value).
a. Insulin for a diabetic or aspirin for someone suffering a headache.
b. A new Whirlpool 27 cu.ft. side-by-side refrigerator or electricity to power your all-electric home.
c. A can of Red Bull or soft drinks in general.

Accepted Answer

a. The demand for aspirin is more price

Exam 6: Elasticity: the Responsiveness of Demand and Supply

If the quantity of walkie-talkies supplied increases by 5 percent when price increases by 12 percent, then

If demand is inelastic, the absolute value of the price elasticity coefficient is greater than one.

If demand for a product is perfectly inelastic, a change in price will not change total revenue.

If the market for a product is broadly defined, then

Suppose a decrease in the supply of paper results in an increase in revenue. This indicates that

Which of the following statements is true?

Price elasticity of demand measures

Suppose the absolute value of the price elasticity of demand for meals at Fortune Buffet House is ∞. What happens to sales revenue if the restaurant increases its price by 5 percent?

According to a study of the price elasticities of products sold in supermarkets, the price elasticity of demand for toothpaste is estimated at -0.45. Which of the following could explain why the price elasticity of demand for toothpaste is so low?

The most important determinant of the price elasticity of demand for a good is

Inelastic supply occurs whenever the elasticity of supply value is

If a firm raised its price and discovered that its total revenue fell, then the demand for its product is

Suppose the supply of bicycles is price elastic. This means that

What does price elasticity of demand measure? When is demand elastic? Inelastic? Unit elastic?

Last year, Joan bought 50 pounds of hamburger when her household income was $40,000. This year, her household income was only $30,000 and Joan bought 60 pounds of hamburger. Holding everything else constant, Joan's income elasticity of demand for hamburger is

Table 6-6 -Refer to the Article Summary. Based on the difference between the face value of 'Hamilton' tickets sold by the Pantages Theater and Ticketmaster, and the prices being charged in the resellers like StubHub and SeatGeek, the demand at the face value of the tickets is

What is the relationship between price elasticity of demand and total revenue?

Necessities tend to have more inelastic demand than luxuries.

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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