Question 1

Use the figure below to calculate the cross-price elasticity of demand for good X when the price of good Y increases from $12 to $14:

Accepted Answer

A)  0.645 
B)  0.42 
C)  0.20 
D)  2.00 
E)  15.38 
A)  0.645 
B)  0.42 
C)  0.20 
D)  2.00 
E)  15.38

Question 2

Refer to the following graph:
  
-Suppose price rises from $90 to $110. Using representative arrows, the price effect is a relatively ________ (short, long) arrow pointing _______ (upward, downward).

Accepted Answer

A)  short; upward 
B)  short; downward 
C)  long; upward 
D)  long; downward 
A)  short; upward 
B)  short; downward 
C)  long; upward 
D)  long; downward

Question 3

-If price INCREASES from $60 to $80, an arrow representing the PRICE effect

Accepted Answer

A)  will point upward. 
B)  will point downward. 
C)  will be longer than (and in opposite direction of) the arrow representing the quantity effect. 
D)  will be shorter than (and in the opposite direction of) the arrow representing the quantity effect. 
E)  both a and d 
A)  will point upward. 
B)  will point downward. 
C)  will be longer than (and in opposite direction of) the arrow representing the quantity effect. 
D)  will be shorter than (and in the opposite direction of) the arrow representing the quantity effect. 
E)  both a and d

Question 4

Which of the following would tend to DECREASE the elasticity of demand for good X?

Accepted Answer

A)  The cost of producing X decreases. 
B)  Several firms which used to produce substitutes for X go out of business. 
C)  Consumers begin spending a smaller percentage of their income on X. 
D)  both b and c 
E)  all of the above 
A)  The cost of producing X decreases. 
B)  Several firms which used to produce substitutes for X go out of business. 
C)  Consumers begin spending a smaller percentage of their income on X. 
D)  both b and c 
E)  all of the above

Question 5

Refer to the following table showing a demand schedule:

$\begin{array}{ll}
\text { Price } & \text { Quantity } \
 &\text { demanded } \
\$ 200 &1000\
150 & 1400 \
100 & 1800
\end{array}$
-As output increases from 1,000 to 1,400 what is marginal revenue?

Accepted Answer

A)  $25 
B)  $50 
C)  -$400 
D)  -$25 
E)  -$75 
A)  $25 
B)  $50 
C)  -$400 
D)  -$25 
E)  -$75

Question 6

Refer to the following graph:
  
-Suppose price rises from $90 to $110. Using representative arrows, the quantity effect is a relatively ________ (short, long) arrow pointing _______ (upward, downward).

Accepted Answer

A)  short; upward 
B)  short; downward 
C)  long; upward 
D)  long; downward 
A)  short; upward 
B)  short; downward 
C)  long; upward 
D)  long; downward

Question 7

"When the British government tripled university fees for foreign students in Great Britain, about one-half of them left to study in other countries."
-The implied price elasticity of demand by foreigners for a British education is (in absolute value)

Accepted Answer

A)  less than 1. 
B)  equal to 1. 
C)  between 1.0 and 1.5. 
D)  greater than 1.5. 
A)  less than 1. 
B)  equal to 1. 
C)  between 1.0 and 1.5. 
D)  greater than 1.5.

Question 8

When marginal revenue is positive,

Accepted Answer

A)  demand is elastic. 
B)  marginal revenue is greater than price. 
C)  decreasing price will decrease total revenue. 
D)  both b and c 
E)  all of the above 
A)  demand is elastic. 
B)  marginal revenue is greater than price. 
C)  decreasing price will decrease total revenue. 
D)  both b and c 
E)  all of the above

Question 9

The demand for heart surgery is price inelastic. So it follows that

Accepted Answer

A)  the percentage change in price is less than the resulting percentage change in quantity demanded. 
B)  if the price of heart surgery increases, total expenditure by consumers on heart surgery will rise. 
C)  changes in price do not affect the number of operations demanded. 
D)  both a and b 
E)  all of the above 
A)  the percentage change in price is less than the resulting percentage change in quantity demanded. 
B)  if the price of heart surgery increases, total expenditure by consumers on heart surgery will rise. 
C)  changes in price do not affect the number of operations demanded. 
D)  both a and b 
E)  all of the above

Question 10

Which of the following will NOT affect the elasticity of demand for a product?

Accepted Answer

A)  the number of substitutes 
B)  how long consumers have to adapt to price changes 
C)  the cost of producing the product 
D)  the percentage of the consumer's budget spent on the product 
E)  all of the above will affect the elasticity of demand for a product 
A)  the number of substitutes 
B)  how long consumers have to adapt to price changes 
C)  the cost of producing the product 
D)  the percentage of the consumer's budget spent on the product 
E)  all of the above will affect the elasticity of demand for a product

Question 11

Use the figure below, which shows a linear demand curve and the associated total revenue curve, to answer the  questions.

-The price at which total revenue is maximized is $_____.

Accepted Answer

A)  10 
B)  15 
C)  20 
D)  25 
E)  30 
A)  10 
B)  15 
C)  20 
D)  25 
E)  30

Question 12

If the price elasticity of demand for a good is -0.8 and quantity demanded decreases by 40%, price must have

Accepted Answer

A)  increased by 5%. 
B)  increased by 32%. 
C)  decreased by 20%. 
D)  decreased by 32%. 
E)  none of the above 
A)  increased by 5%. 
B)  increased by 32%. 
C)  decreased by 20%. 
D)  decreased by 32%. 
E)  none of the above

Question 13

Refer to the following figure:
  
-When price is $5 and quantity demanded is 3,000, what is the point elasticity of demand?

Accepted Answer

A)  -3 
B)  -1/3 
C)  -1 
D)  -5 
E)  -2/3 
A)  -3 
B)  -1/3 
C)  -1 
D)  -5 
E)  -2/3

Question 14

Demand is (more elastic / less elastic) in the short run than in the long run

Accepted Answer

A)  (more elastic) because goods account for a larger percentage of the consumer's budget in the short run than in the long run. 
B)  (less elastic) because goods account for a smaller percentage of the consumer's budget in the short run than in the long run. 
C)  (more elastic) because consumers have less time to adapt to a price change in the short run than in the long run. 
D)  (less elastic) because consumers have less time to adapt to a price change in the short run than in the long run. 
A)  (more elastic) because goods account for a larger percentage of the consumer's budget in the short run than in the long run. 
B)  (less elastic) because goods account for a smaller percentage of the consumer's budget in the short run than in the long run. 
C)  (more elastic) because consumers have less time to adapt to a price change in the short run than in the long run. 
D)  (less elastic) because consumers have less time to adapt to a price change in the short run than in the long run.

Question 15

-If price INCREASES from $40 to $60, an arrow representing the PRICE effect

Accepted Answer

A)  will point upward. 
B)  will point downward. 
C)  will be longer than (and in opposite direction of) the arrow representing the quantity effect. 
D)  will be shorter than (and in the opposite direction of) the arrow representing the quantity effect. 
E)  both a and c 
A)  will point upward. 
B)  will point downward. 
C)  will be longer than (and in opposite direction of) the arrow representing the quantity effect. 
D)  will be shorter than (and in the opposite direction of) the arrow representing the quantity effect. 
E)  both a and c

Question 16

Refer to the following figure:
  
-When price is $15 and quantity demanded is 1,000, what is the point elasticity of demand?

Accepted Answer

A)  -3 
B)  -1/3 
C) -1 
D)  -5 
E)  -2/3 
A)  -3 
B)  -1/3 
C) -1 
D)  -5 
E)  -2/3

Question 17

Use the figure below, which shows a linear demand curve and the associated total revenue curve, to answer the  questions.

-The price for which 100 units can be sold is $_____.

Accepted Answer

A)  10 
B)  15 
C)  25 
D)  45 
E)  50 
A)  10 
B)  15 
C)  25 
D)  45 
E)  50

Question 18

If a drought increases the price of corn by 10% and decreases the quantity of corn demanded by 5%, then demand for corn is

Accepted Answer

A)  elastic and total revenue to corn farmers will decrease. 
B)  inelastic and total revenue to corn farmers will decrease. 
C)  elastic and total revenue to corn farmers will increase. 
D)  inelastic and total revenue to corn farmers will increase. 
A)  elastic and total revenue to corn farmers will decrease. 
B)  inelastic and total revenue to corn farmers will decrease. 
C)  elastic and total revenue to corn farmers will increase. 
D)  inelastic and total revenue to corn farmers will increase.

Question 19

Refer to the following table showing a demand schedule:

$\begin{array}{ll}
\text { Price } & \text { Quantity } \
 &\text { demanded } \
\$ 200 &1000\
150 & 1400 \
100 & 1800
\end{array}$
-If price rises from $100 to $150,

Accepted Answer

A)  arrows representing the price and quantity effects both point upward. 
B)  an arrow representing the price effect points upward and is shorter than an arrow for the quantity effect, which points downward. 
C)  total revenue moves up, or increase, as indicated by the direction of the arrow representing the price effect. 
D)  the arrow representing the price effect points down and the arrow representing the quantity effect points up. 
E)  both c and d 
A)  arrows representing the price and quantity effects both point upward. 
B)  an arrow representing the price effect points upward and is shorter than an arrow for the quantity effect, which points downward. 
C)  total revenue moves up, or increase, as indicated by the direction of the arrow representing the price effect. 
D)  the arrow representing the price effect points down and the arrow representing the quantity effect points up. 
E)  both c and d

Question 20

Refer to the following table showing a demand schedule:

$\begin{array}{ll}
\text { Price } & \text { Quantity } \
 &\text { demanded } \
\$ 200 &1000\
150 & 1400 \
100 & 1800
\end{array}$
-If price falls from $150 to $100,

Accepted Answer

A)  arrows representing the price and quantity effects both point down. 
B)  an arrow representing the price effect points down and is shorter than an arrow for the quantity effect. 
C)  total revenue moves in the same direction as the arrow representing the price effect. 
D)  the arrow representing the price effect points down and the arrow representing the quantity effect points up. 
E)  both c and d 
A)  arrows representing the price and quantity effects both point down. 
B)  an arrow representing the price effect points down and is shorter than an arrow for the quantity effect. 
C)  total revenue moves in the same direction as the arrow representing the price effect. 
D)  the arrow representing the price effect points down and the arrow representing the quantity effect points up. 
E)  both c and d

Use the figure below to calculate the cross-price elasticity of demand for good X when the price of good Y increases from $12 to $14:

Refer to the following graph: -Suppose price rises from $90 to $110. Using representative arrows, the price effect is a relatively __ (short, long) arrow pointing _ (upward, downward).

-If price INCREASES from $60 to $80, an arrow representing the PRICE effect

Which of the following would tend to DECREASE the elasticity of demand for good X?

Refer to the following table showing a demand schedule: Price Quantity demanded \ 200 1000 150 1400 100 1800 -As output increases from 1,000 to 1,400 what is marginal revenue?

Refer to the following graph: -Suppose price rises from $90 to $110. Using representative arrows, the quantity effect is a relatively __ (short, long) arrow pointing _ (upward, downward).

"When the British government tripled university fees for foreign students in Great Britain, about one-half of them left to study in other countries." -The implied price elasticity of demand by foreigners for a British education is (in absolute value)

When marginal revenue is positive,

The demand for heart surgery is price inelastic. So it follows that

Which of the following will NOT affect the elasticity of demand for a product?

Use the figure below, which shows a linear demand curve and the associated total revenue curve, to answer the questions. -The price at which total revenue is maximized is $_____.

If the price elasticity of demand for a good is -0.8 and quantity demanded decreases by 40%, price must have

Refer to the following figure: -When price is $5 and quantity demanded is 3,000, what is the point elasticity of demand?

Demand is (more elastic / less elastic) in the short run than in the long run

-If price INCREASES from $40 to $60, an arrow representing the PRICE effect

Refer to the following figure: -When price is $15 and quantity demanded is 1,000, what is the point elasticity of demand?

Use the figure below, which shows a linear demand curve and the associated total revenue curve, to answer the questions. -The price for which 100 units can be sold is $_____.

If a drought increases the price of corn by 10% and decreases the quantity of corn demanded by 5%, then demand for corn is

Refer to the following table showing a demand schedule: Price Quantity demanded \ 200 1000 150 1400 100 1800 -If price rises from $100 to $150,

Refer to the following table showing a demand schedule: Price Quantity demanded \ 200 1000 150 1400 100 1800 -If price falls from $150 to $100,

Managers, Profits, and Markets

Demand, Supply, and Market Equilibrium

Marginal Analysis for Optimal Decisions

Basic Estimation Techniques

Theory of Consumer Behavior

Demand Estimation and Forecasting

Production and Cost in the Short Run

Production and Cost in the Long Run

Production and Cost Estimation

Managerial Decisions in Competitive Markets

Managerial Decisions for Firms With Market Power

Strategic Decision Making in Oligopoly Markets

Advanced Pricing Techniques

Decisions Under Risk and Uncertainty

Government Regulation of Business

Filters

Exam 6: Elasticity and Demand

Use the figure below to calculate the cross-price elasticity of demand for good X when the price of good Y increases from $12 to $14:

Refer to the following graph: -Suppose price rises from $90 to $110. Using representative arrows, the price effect is a relatively ________ (short, long) arrow pointing _______ (upward, downward).

-If price INCREASES from $60 to $80, an arrow representing the PRICE effect

Which of the following would tend to DECREASE the elasticity of demand for good X?

Refer to the following table showing a demand schedule: Price Quantity demanded \ 200 1000 150 1400 100 1800 -As output increases from 1,000 to 1,400 what is marginal revenue?

Refer to the following graph: -Suppose price rises from $90 to $110. Using representative arrows, the quantity effect is a relatively ________ (short, long) arrow pointing _______ (upward, downward).

"When the British government tripled university fees for foreign students in Great Britain, about one-half of them left to study in other countries." -The implied price elasticity of demand by foreigners for a British education is (in absolute value)

When marginal revenue is positive,

The demand for heart surgery is price inelastic. So it follows that

Which of the following will NOT affect the elasticity of demand for a product?

Use the figure below, which shows a linear demand curve and the associated total revenue curve, to answer the questions. -The price at which total revenue is maximized is $_____.

If the price elasticity of demand for a good is -0.8 and quantity demanded decreases by 40%, price must have

Refer to the following figure: -When price is $5 and quantity demanded is 3,000, what is the point elasticity of demand?

Demand is (more elastic / less elastic) in the short run than in the long run

-If price INCREASES from $40 to $60, an arrow representing the PRICE effect

Refer to the following figure: -When price is $15 and quantity demanded is 1,000, what is the point elasticity of demand?

Use the figure below, which shows a linear demand curve and the associated total revenue curve, to answer the questions. -The price for which 100 units can be sold is $_____.

If a drought increases the price of corn by 10% and decreases the quantity of corn demanded by 5%, then demand for corn is

Refer to the following table showing a demand schedule: Price Quantity demanded \ 200 1000 150 1400 100 1800 -If price rises from $100 to $150,

Refer to the following table showing a demand schedule: Price Quantity demanded \ 200 1000 150 1400 100 1800 -If price falls from $150 to $100,

Managers, Profits, and Markets

Demand, Supply, and Market Equilibrium

Marginal Analysis for Optimal Decisions

Basic Estimation Techniques

Theory of Consumer Behavior

Demand Estimation and Forecasting

Production and Cost in the Short Run

Production and Cost in the Long Run

Production and Cost Estimation

Managerial Decisions in Competitive Markets

Managerial Decisions for Firms With Market Power

Strategic Decision Making in Oligopoly Markets

Advanced Pricing Techniques

Decisions Under Risk and Uncertainty

Government Regulation of Business

Filters

Refer to the following graph: -Suppose price rises from $90 to $110. Using representative arrows, the price effect is a relatively __ (short, long) arrow pointing _ (upward, downward).

Refer to the following graph: -Suppose price rises from $90 to $110. Using representative arrows, the quantity effect is a relatively __ (short, long) arrow pointing _ (upward, downward).