Question 1

Assuming demand is inelastic, if a firm wants to increase its total revenue, it should raise price.

Accepted Answer

A) True 
 B)False

Question 2

When calculating the arc elasticity of demand, the percentage change in price quantity) should be based on the average of the starting and ending prices quantities).

Accepted Answer

A) True 
 B)False

Question 3

While the demand for beer is relatively price inelastic, the price elasticity of demand for a particular brand is relatively high, due in large part to availability of close substitutes.

Accepted Answer

A) True 
 B)False

Question 4

Provide a simple definition of the price elasticity of demand and explain why knowing the price elasticity for her product is useful to the firm's manager.

Accepted Answer

The price elasticity of demand is a meas

Question 5

If electricity demand is inelastic, and electric rates increase, which of the following is likely to occur?

Accepted Answer

A)  Quantity demanded will fall by a relatively large amount. 
B)  Quantity demanded will fall by a relatively small amount. 
C)  Quantity demanded will rise in the short run, but fall in the long run. 
D)  Quantity demanded will fall in the short run, but rise in the long run. 
A)  Quantity demanded will fall by a relatively large amount. 
B)  Quantity demanded will fall by a relatively small amount. 
C)  Quantity demanded will rise in the short run, but fall in the long run. 
D)  Quantity demanded will fall in the short run, but rise in the long run.

Question 6

When the percentage change in price is greater than the corresponding change in quantity demanded, demand is inelastic.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is not considered to be a determinant of the price elasticity of demand for a particular good?

Accepted Answer

A)  The number of available substitutes. 
B)  The cost of the good relative to total income. 
C)  The quantity of the good that is supplied to the market. 
D)  The time period under consideration. 
A)  The number of available substitutes. 
B)  The cost of the good relative to total income. 
C)  The quantity of the good that is supplied to the market. 
D)  The time period under consideration.

Question 8

When demand is unit elastic, an increase in price will cause total revenue to increase, stay the same, or decrease, depending on the corresponding change in quantity demanded.

Accepted Answer

A) True 
 B)False

Question 9

The price elasticity of demand for pleasure travel -1.9) and business travel -0.8) suggests that air travel for pleasure is a luxury and air travel for business is a necessity.

Accepted Answer

A) True 
 B)False

Question 10

Explain why the price elasticity of demand varies along a demand curve, even if the demand curve is linear.

Accepted Answer

As we move down a demand curve, the perc

Question 11

Which of the following pairs of goods would be expected to have a positive cross-price elasticity of demand?

Accepted Answer

A)  coffee and tea. 
B)  gasoline and large SUVs. 
C)  tennis racquets and tennis balls. 
D)  hot dogs and hot dog buns. 
A)  coffee and tea. 
B)  gasoline and large SUVs. 
C)  tennis racquets and tennis balls. 
D)  hot dogs and hot dog buns.

Question 12

Based on empirical evidence, the "farm problem" that has confronted U.S. policymakers for many years is attributable, in large part, to the relatively inelastic demand for many agricultural products.

Accepted Answer

A) True 
 B)False

Assuming demand is inelastic, if a firm wants to increase its total revenue, it should raise price.

When calculating the arc elasticity of demand, the percentage change in price quantity) should be based on the average of the starting and ending prices quantities).

While the demand for beer is relatively price inelastic, the price elasticity of demand for a particular brand is relatively high, due in large part to availability of close substitutes.

Provide a simple definition of the price elasticity of demand and explain why knowing the price elasticity for her product is useful to the firm's manager.

If electricity demand is inelastic, and electric rates increase, which of the following is likely to occur?

When the percentage change in price is greater than the corresponding change in quantity demanded, demand is inelastic.

Which of the following is not considered to be a determinant of the price elasticity of demand for a particular good?

When demand is unit elastic, an increase in price will cause total revenue to increase, stay the same, or decrease, depending on the corresponding change in quantity demanded.

The price elasticity of demand for pleasure travel -1.9) and business travel -0.8) suggests that air travel for pleasure is a luxury and air travel for business is a necessity.

Explain why the price elasticity of demand varies along a demand curve, even if the demand curve is linear.

Which of the following pairs of goods would be expected to have a positive cross-price elasticity of demand?

Based on empirical evidence, the "farm problem" that has confronted U.S. policymakers for many years is attributable, in large part, to the relatively inelastic demand for many agricultural products.

Managers and Economics

Demand, Supply, and Equilibrium Prices

Techniques for Understanding Consumer Demand and Behavior

Production and Cost Analysis in the Short Run

Production and Cost Analysis in the Long Run

Market Structure: Perfect Competition

Market Structure: Monopoly and Monopolistic Competition

Market Structure: Oligopoly

Pricing Strategies for the Firm

Measuring Macroeconomic Activity

Spending by Individuals, Firms, and Governments on Real Goods and Services

The Role of Money in the Macro Economy

The Aggregate Model of the Macro Economy

International and Balance of Payments Issues in the Macro Economy

Combining Micro and Macro Analysis for Managerial Decision Making

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Exam 3: Demand Elasticities

Assuming demand is inelastic, if a firm wants to increase its total revenue, it should raise price.

When calculating the arc elasticity of demand, the percentage change in price quantity) should be based on the average of the starting and ending prices quantities).

While the demand for beer is relatively price inelastic, the price elasticity of demand for a particular brand is relatively high, due in large part to availability of close substitutes.

Provide a simple definition of the price elasticity of demand and explain why knowing the price elasticity for her product is useful to the firm's manager.

If electricity demand is inelastic, and electric rates increase, which of the following is likely to occur?

When the percentage change in price is greater than the corresponding change in quantity demanded, demand is inelastic.

Which of the following is not considered to be a determinant of the price elasticity of demand for a particular good?

When demand is unit elastic, an increase in price will cause total revenue to increase, stay the same, or decrease, depending on the corresponding change in quantity demanded.

The price elasticity of demand for pleasure travel -1.9) and business travel -0.8) suggests that air travel for pleasure is a luxury and air travel for business is a necessity.

Explain why the price elasticity of demand varies along a demand curve, even if the demand curve is linear.

Which of the following pairs of goods would be expected to have a positive cross-price elasticity of demand?

Based on empirical evidence, the "farm problem" that has confronted U.S. policymakers for many years is attributable, in large part, to the relatively inelastic demand for many agricultural products.

Managers and Economics

Demand, Supply, and Equilibrium Prices

Techniques for Understanding Consumer Demand and Behavior

Production and Cost Analysis in the Short Run

Production and Cost Analysis in the Long Run

Market Structure: Perfect Competition

Market Structure: Monopoly and Monopolistic Competition

Market Structure: Oligopoly

Pricing Strategies for the Firm

Measuring Macroeconomic Activity

Spending by Individuals, Firms, and Governments on Real Goods and Services

The Role of Money in the Macro Economy

The Aggregate Model of the Macro Economy

International and Balance of Payments Issues in the Macro Economy

Combining Micro and Macro Analysis for Managerial Decision Making

Filters