Question 1

In which of the following cases will total revenue increase?

Accepted Answer

A) Price falls and demand is inelastic. 
B) Price falls and supply is elastic. 
C) Price rises and demand is inelastic. 
D) Price rises and demand is elastic. 
A) Price falls and demand is inelastic. 
B) Price falls and supply is elastic. 
C) Price rises and demand is inelastic. 
D) Price rises and demand is elastic.

Question 2

In the immediate market period for a highly perishable crop like tomatoes, the individual farmer's supply curve tends to be

Accepted Answer

A) perfectly inelastic. 
B) perfectly elastic. 
C) quite flat. 
D) downward-sloping. 
A) perfectly inelastic. 
B) perfectly elastic. 
C) quite flat. 
D) downward-sloping.

Question 3

Suppose that a 10 percent increase in the price of normal good Y causes a 20 percent increase in the quantity demanded of normal good X.The coefficient of cross elasticity of demand is

Accepted Answer

A) negative, and therefore these goods are substitutes. 
B) negative, and therefore these goods are complements. 
C) positive, and therefore these goods are substitutes. 
D) positive, and therefore these goods are complements. 
A) negative, and therefore these goods are substitutes. 
B) negative, and therefore these goods are complements. 
C) positive, and therefore these goods are substitutes. 
D) positive, and therefore these goods are complements.

Question 4

The price elasticity of demand for beef is about 0.60.Other things equal, this means that a 20 percent increase in the price of beef will cause the quantity of beef demanded to

Accepted Answer

A) increase by approximately 12 percent. 
B) decrease by approximately 12 percent. 
C) decrease by approximately 32 percent. 
D) decrease by approximately 26 percent. 
A) increase by approximately 12 percent. 
B) decrease by approximately 12 percent. 
C) decrease by approximately 32 percent. 
D) decrease by approximately 26 percent.

Question 5

Suppose Aiyanna's Pizzeria currently faces a linear demand curve and is charging a very high price per pizza and doing very little business.Aiyanna now decides to lower pizza prices by 5 percent per week for an indefinite period of time.We can expect that each successive week,

Accepted Answer

A) demand will become more price elastic. 
B) price elasticity of demand will not change as price is lowered. 
C) demand will become less price elastic. 
D) the elasticity of supply will increase. 
A) demand will become more price elastic. 
B) price elasticity of demand will not change as price is lowered. 
C) demand will become less price elastic. 
D) the elasticity of supply will increase.

Question 6

If the demand for bacon is relatively elastic, a 10 percent decline in the price of bacon will

Accepted Answer

A) decrease the amount demanded by more than 10 percent. 
B) increase the amount demanded by more than 10 percent. 
C) decrease the amount demanded by less than 10 percent. 
D) increase the amount demanded by less than 10 percent. 
A) decrease the amount demanded by more than 10 percent. 
B) increase the amount demanded by more than 10 percent. 
C) decrease the amount demanded by less than 10 percent. 
D) increase the amount demanded by less than 10 percent.

Question 7

If a 10 percent increase in the price of good A results in an increase of 5 percent in the quantity demanded of good B, then it can be concluded that goods A and B are

Accepted Answer

A) complementary goods. 
B) substitute goods. 
C) independent goods. 
D) normal goods. 
A) complementary goods. 
B) substitute goods. 
C) independent goods. 
D) normal goods.

Question 8

Assume that a 6 percent increase in income in the economy produces a 3 percent increase in the quantity demanded of good X.The coefficient of income elasticity of demand is

Accepted Answer

A) negative, and therefore X is an inferior good. 
B) positive but less than one; therefore X is an inferior good. 
C) positive, and therefore X is an inferior good. 
D) positive, and therefore X is a normal good. 
A) negative, and therefore X is an inferior good. 
B) positive but less than one; therefore X is an inferior good. 
C) positive, and therefore X is an inferior good. 
D) positive, and therefore X is a normal good.

Question 9

Which of the following statements is inconsistent with an elastic demand curve?

Accepted Answer

A) The price-elasticity coefficient is greater than 1. 
B) Total revenue increases when price increases. 
C) Buyers are relatively sensitive to price changes. 
D) The relative change in quantity exceeds the relative change in price. 
A) The price-elasticity coefficient is greater than 1. 
B) Total revenue increases when price increases. 
C) Buyers are relatively sensitive to price changes. 
D) The relative change in quantity exceeds the relative change in price.

Question 10

Price elasticity of demand is generally

Accepted Answer

A) greater in the long run than in the short run. 
B) greater in the short run than in the long run. 
C) the same in both the short run and the long run. 
D) greater for "necessities" than it is for "luxuries." 
A) greater in the long run than in the short run. 
B) greater in the short run than in the long run. 
C) the same in both the short run and the long run. 
D) greater for "necessities" than it is for "luxuries."

Question 11

Blossom, Inc., sells 500 bottles of perfume a month when the price is $7.A huge increase in resource costs forces Blossom to raise the price to $9, and the firm only manages to sell 460 bottles of perfume.Using the midpoint formula, the price elasticity of demand coefficient is

Accepted Answer

A) 0.33 and elastic. 
B) 3.0 and elastic. 
C) 0.33 and inelastic. 
D) 3.0 and inelastic. 
A) 0.33 and elastic. 
B) 3.0 and elastic. 
C) 0.33 and inelastic. 
D) 3.0 and inelastic.

Question 12

If price and total revenue are directly related, demand is inelastic.

Accepted Answer

A) True 
 B)False

Question 13

(Last Word) Which of the following is not an example of pricing based on group differences in elasticity of demand?

Accepted Answer

A) senior-citizen discounts at restaurants and motels 
B) cash rebates for purchases of automobiles 
C) child discounts for admission to theme parks 
D) discounted student prices for visits to museums 
A) senior-citizen discounts at restaurants and motels 
B) cash rebates for purchases of automobiles 
C) child discounts for admission to theme parks 
D) discounted student prices for visits to museums

Question 14

The law of supply indicates that the price-elasticity of supply coefficient would have a negative sign.

Accepted Answer

A) True 
 B)False

Question 15

Suppose that as the price of Y falls from $2.00 to $1.90, the quantity of Y demanded increases from 110 to 118.Then the absolute value of the price elasticity (using the midpoint formula) is

Accepted Answer

A) 4.00. 
B) 2.09. 
C) 1.37. 
D) 3.94. 
A) 4.00. 
B) 2.09. 
C) 1.37. 
D) 3.94.

Question 16

It is argued that, with a rising demand for college education, if the supply were to become more elastic, then college tuition costs would

Accepted Answer

A) rise faster. 
B) decrease slowly. 
C) increase more slowly. 
D) decrease steeply. 
A) rise faster. 
B) decrease slowly. 
C) increase more slowly. 
D) decrease steeply.

Question 17

Which of these pairs of concepts can be positively, as well as negatively, related?

Accepted Answer

A) the income of consumers and the demand for a product 
B) the price of a product and the quantity of that product demanded 
C) the price of a product and the demand for a complementary product 
D) the cost of resources required to make a product and its supply 
A) the income of consumers and the demand for a product 
B) the price of a product and the quantity of that product demanded 
C) the price of a product and the demand for a complementary product 
D) the cost of resources required to make a product and its supply

Question 18

Given that the demand for grains is price-inelastic, we would expect that if the harvest of grains increases significantly, other factors constant, then grain farmers' total revenues would increase.

Accepted Answer

A) True 
 B)False

Question 19

The Illinois Central Railroad once asked the Illinois Commerce Commission for permission to increase its commuter rates by 20 percent.The railroad argued that declining revenues made this rate increase essential.Opponents of the rate increase contended that the railroad's revenues would fall because of the rate hike.It can be concluded that

Accepted Answer

A) both groups felt that the demand was elastic but for different reasons. 
B) both groups felt that the demand was inelastic but for different reasons. 
C) the railroad felt that the demand for passenger service was inelastic and opponents of the rate increase felt it was elastic. 
D) the railroad felt that the demand for passenger service was elastic and opponents of the rate increase felt it was inelastic. 
A) both groups felt that the demand was elastic but for different reasons. 
B) both groups felt that the demand was inelastic but for different reasons. 
C) the railroad felt that the demand for passenger service was inelastic and opponents of the rate increase felt it was elastic. 
D) the railroad felt that the demand for passenger service was elastic and opponents of the rate increase felt it was inelastic.

Question 20

The elasticity of demand for a product is likely to be greater,

Accepted Answer

A) if the product is a necessity, rather than a luxury good. 
B) the greater the amount of time over which buyers adjust to a price change. 
C) the smaller the proportion of one's income spent on the product. 
D) the smaller the number of substitute products available. 
A) if the product is a necessity, rather than a luxury good. 
B) the greater the amount of time over which buyers adjust to a price change. 
C) the smaller the proportion of one's income spent on the product. 
D) the smaller the number of substitute products available.

Exam 6: Elasticity

In which of the following cases will total revenue increase?

In the immediate market period for a highly perishable crop like tomatoes, the individual farmer's supply curve tends to be

Suppose that a 10 percent increase in the price of normal good Y causes a 20 percent increase in the quantity demanded of normal good X.The coefficient of cross elasticity of demand is

The price elasticity of demand for beef is about 0.60.Other things equal, this means that a 20 percent increase in the price of beef will cause the quantity of beef demanded to

Suppose Aiyanna's Pizzeria currently faces a linear demand curve and is charging a very high price per pizza and doing very little business.Aiyanna now decides to lower pizza prices by 5 percent per week for an indefinite period of time.We can expect that each successive week,

If the demand for bacon is relatively elastic, a 10 percent decline in the price of bacon will

If a 10 percent increase in the price of good A results in an increase of 5 percent in the quantity demanded of good B, then it can be concluded that goods A and B are

Assume that a 6 percent increase in income in the economy produces a 3 percent increase in the quantity demanded of good X.The coefficient of income elasticity of demand is

Which of the following statements is inconsistent with an elastic demand curve?

Price elasticity of demand is generally

Blossom, Inc., sells 500 bottles of perfume a month when the price is $7.A huge increase in resource costs forces Blossom to raise the price to $9, and the firm only manages to sell 460 bottles of perfume.Using the midpoint formula, the price elasticity of demand coefficient is

If price and total revenue are directly related, demand is inelastic.

(Last Word) Which of the following is not an example of pricing based on group differences in elasticity of demand?

The law of supply indicates that the price-elasticity of supply coefficient would have a negative sign.

Suppose that as the price of Y falls from $2.00 to $1.90, the quantity of Y demanded increases from 110 to 118.Then the absolute value of the price elasticity (using the midpoint formula) is

It is argued that, with a rising demand for college education, if the supply were to become more elastic, then college tuition costs would

Which of these pairs of concepts can be positively, as well as negatively, related?

Given that the demand for grains is price-inelastic, we would expect that if the harvest of grains increases significantly, other factors constant, then grain farmers' total revenues would increase.

The elasticity of demand for a product is likely to be greater,

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters