Question 1

(Consider This) Elastic demand is analogous to a , and inelastic demand to a .

Accepted Answer

A) normal wrench; socket wrench 
B) tight rubber band; loose rubber band 
C) Ace bandage; firm rubber tie-down 
D) one-foot ruler; tape measure 
A) normal wrench; socket wrench 
B) tight rubber band; loose rubber band 
C) Ace bandage; firm rubber tie-down 
D) one-foot ruler; tape measure

Question 2

Suppose that a 20 percent increase in the price of normal good Y causes a 10 percent decline 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 3

The price elasticity of demand for widgets is 0.80.Assuming no change in the demand curve for widgets, a 16 percent increase in sales implies a

Accepted Answer

A) 1 percent reduction in price. 
B) 12 percent reduction in price. 
C) 20 percent reduction in price. 
D) 40 percent reduction in price. 
A) 1 percent reduction in price. 
B) 12 percent reduction in price. 
C) 20 percent reduction in price. 
D) 40 percent reduction in price.

Question 4

The price elasticity of supply determines how much price would change as a result of a change in demand.

Accepted Answer

A) True 
 B)False

Question 5

The total revenue received by sellers of a good is the same amount as the

Accepted Answer

A) total income earned by the buyers. 
B) total amount spent on the good by the buyers. 
C) price paid by the buyers for each unit of the good. 
D) profits earned by the sellers of the good. 
A) total income earned by the buyers. 
B) total amount spent on the good by the buyers. 
C) price paid by the buyers for each unit of the good. 
D) profits earned by the sellers of the good.

Question 6

Which of the following is correct?

Accepted Answer

A) If demand is elastic, an increase in price will increase total revenue. 
B) If demand is elastic, a decrease in price will decrease total revenue. 
C) If demand is elastic, a decrease in price will increase total revenue. 
D) If demand is inelastic, an increase in price will decrease total revenue. 
A) If demand is elastic, an increase in price will increase total revenue. 
B) If demand is elastic, a decrease in price will decrease total revenue. 
C) If demand is elastic, a decrease in price will increase total revenue. 
D) If demand is inelastic, an increase in price will decrease total revenue.

Question 7

If the quantity demanded for good A increases from 40 to 60 when price decreases from $9 to $7, price elasticity of demand in this price range is 1.6.

Accepted Answer

A) True 
 B)False

Question 8

If the demand for farm products is price inelastic, a good harvest will cause farm revenues to

Accepted Answer

A) increase. 
B) decrease. 
C) be unchanged. 
D) either increase or decrease, depending on what happens to supply. 
A) increase. 
B) decrease. 
C) be unchanged. 
D) either increase or decrease, depending on what happens to supply.

Question 9

If the elasticity coefficient of supply is 0.7, supply is elastic.

Accepted Answer

A) True 
 B)False

Question 10

When the percentage change in price is greater than the resulting percentage change in quantity demanded,

Accepted Answer

A) a decrease in price will increase total revenue. 
B) demand may be either elastic or inelastic. 
C) an increase in price will increase total revenue. 
D) demand is elastic. 
A) a decrease in price will increase total revenue. 
B) demand may be either elastic or inelastic. 
C) an increase in price will increase total revenue. 
D) demand is elastic.

Question 11

If the University Chamber Music Society decides to raise ticket prices to provide more funds to finance concerts, the Society is assuming that the demand for tickets is

Accepted Answer

A) parallel to the horizontal axis. 
B) shifting to the left. 
C) inelastic. 
D) elastic. 
A) parallel to the horizontal axis. 
B) shifting to the left. 
C) inelastic. 
D) elastic.

Question 12

If the demand for wheat is highly price inelastic, an extraordinarily large crop may reduce farm incomes.

Accepted Answer

A) True 
 B)False

Question 13

Refer to the table.Over the $8-$6 price range, supply is

Accepted Answer

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

Question 14

The demand schedules for such products as eggs, bread, and electricity tend to be

Accepted Answer

A) perfectly price elastic. 
B) of unit price elasticity. 
C) relatively price inelastic. 
D) relatively price elastic. 
A) perfectly price elastic. 
B) of unit price elasticity. 
C) relatively price inelastic. 
D) relatively price elastic.

Question 15

A linear demand curve has a constant elasticity over the full range of the curve.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is not characteristic of a product with relatively inelastic demand?

Accepted Answer

A) The good is regarded by consumers as a necessity. 
B) There are a large number of good substitutes for the good. 
C) Buyers spend a small percentage of their total income on the product. 
D) Consumers have had only a short time period to adjust to changes in price. 
A) The good is regarded by consumers as a necessity. 
B) There are a large number of good substitutes for the good. 
C) Buyers spend a small percentage of their total income on the product. 
D) Consumers have had only a short time period to adjust to changes in price.

Question 17

A cross elasticity of demand coefficient of +2.5 indicates that the two products are substitutes.Difficulty: 03 Hard
Learning Objective: 06-05 Apply cross elasticity of demand and income elasticity of demand.Topic: Cross Elasticity and Income Elasticity of Demand

Accepted Answer

A) True 
 B)False

Question 18

If the income elasticity of demand for store brand macaroni and cheese is −3.00, this means that

Accepted Answer

A) store brand macaroni and cheese is a substitute for name brand macaroni and cheese. 
B) store brand macaroni and cheese is a normal good. 
C) store brand macaroni and cheese is an inferior good. 
D) more store brand macaroni and cheese will be purchased when its price falls. 
A) store brand macaroni and cheese is a substitute for name brand macaroni and cheese. 
B) store brand macaroni and cheese is a normal good. 
C) store brand macaroni and cheese is an inferior good. 
D) more store brand macaroni and cheese will be purchased when its price falls.

Question 19

The formula for cross elasticity of demand is percentage change in

Accepted Answer

A) quantity demanded of X/percentage change in price of X. 
B) quantity demanded of X/percentage change in income. 
C) quantity demanded of X/percentage change in price of Y. 
D) price of X/percentage change in quantity demanded of Y. 
A) quantity demanded of X/percentage change in price of X. 
B) quantity demanded of X/percentage change in income. 
C) quantity demanded of X/percentage change in price of Y. 
D) price of X/percentage change in quantity demanded of Y.

Question 20

The supply of antiques is highly inelastic.Thus,increases in demand would have a small effect on price.

Accepted Answer

A) True 
 B)False

Exam 6: Elasticity

(Consider This) Elastic demand is analogous to a , and inelastic demand to a .

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

The price elasticity of demand for widgets is 0.80.Assuming no change in the demand curve for widgets, a 16 percent increase in sales implies a

The price elasticity of supply determines how much price would change as a result of a change in demand.

The total revenue received by sellers of a good is the same amount as the

Which of the following is correct?

If the quantity demanded for good A increases from 40 to 60 when price decreases from $9 to $7, price elasticity of demand in this price range is 1.6.

If the demand for farm products is price inelastic, a good harvest will cause farm revenues to

If the elasticity coefficient of supply is 0.7, supply is elastic.

When the percentage change in price is greater than the resulting percentage change in quantity demanded,

If the University Chamber Music Society decides to raise ticket prices to provide more funds to finance concerts, the Society is assuming that the demand for tickets is

If the demand for wheat is highly price inelastic, an extraordinarily large crop may reduce farm incomes.

Refer to the table.Over the $8-$6 price range, supply is

The demand schedules for such products as eggs, bread, and electricity tend to be

A linear demand curve has a constant elasticity over the full range of the curve.

Which of the following is not characteristic of a product with relatively inelastic demand?

A cross elasticity of demand coefficient of +2.5 indicates that the two products are substitutes.Difficulty: 03 Hard Learning Objective: 06-05 Apply cross elasticity of demand and income elasticity of demand.Topic: Cross Elasticity and Income Elasticity of Demand

If the income elasticity of demand for store brand macaroni and cheese is −3.00, this means that

The formula for cross elasticity of demand is percentage change in

The supply of antiques is highly inelastic.Thus,increases in demand would have a small effect on price.

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

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