Question 1

The price of gasoline rises 5% and the quantity of gasoline purchased falls 1%. The price elasticity of demand is equal to _____, and demand is described as _____.

Accepted Answer

A)  0.2; inelastic 
B)  5; inelastic 
C)  0.2; elastic 
D)  5; elastic 
A)  0.2; inelastic 
B)  5; inelastic 
C)  0.2; elastic 
D)  5; elastic

Question 2

Kayla and Jada are roommates in New York City. Both Kayla and Jada recently received raises. Kayla now buys more album downloads than before, but Jada buys fewer. Kayla behaves as if album downloads are _____ goods, and Jada's income elasticity of demand for album downloads is _____.

Accepted Answer

A)  normal; positive 
B)  normal; negative 
C)  inferior; positive 
D)  inferior; negative 
A)  normal; positive 
B)  normal; negative 
C)  inferior; positive 
D)  inferior; negative

Question 3

The mayor advocates raising the entrance fee at the city's pools to increase revenue for the city. The mayor is right only if the price effect dominates the quantity effect.

Accepted Answer

A) True 
 B)False

Question 4

Other things being equal, the price elasticity of demand for a product will be lower:

Accepted Answer

A)  if many substitutes are available. 
B)  if it is a large part of the consumer's budget. 
C)  in the long run than in the short run. 
D)  if there are few or no substitutes available. 
A)  if many substitutes are available. 
B)  if it is a large part of the consumer's budget. 
C)  in the long run than in the short run. 
D)  if there are few or no substitutes available.

Question 5

If an increase in income leads to an increase in the demand for a good, then the good is said to be:

Accepted Answer

A)  normal. 
B)  a luxury. 
C)  inferior. 
D)  a staple. 
A)  normal. 
B)  a luxury. 
C)  inferior. 
D)  a staple.

Question 6

A group of dairy farmers is trying to raise milk prices by 10%. If the price elasticity of demand for milk is 0.75 and the price elasticity of supply for milk is 0, by how much should farmers reduce their milk production to obtain the 10% increase?

Accepted Answer

A)  10% 
B)  7.5% 
C)  15% 
D)  13% 
A)  10% 
B)  7.5% 
C)  15% 
D)  13%

Question 7

Suppose at $10 the quantity demanded is 100. When the price falls to $8, the quantity demanded increases to 130. The price elasticity of demand (using the midpoint formula) between $10 and $8 is approximately:

Accepted Answer

A)  1.17. 
B)  1.50. 
C)  0.85. 
D)  1.00. 
A)  1.17. 
B)  1.50. 
C)  0.85. 
D)  1.00.

Question 8

The price elasticity of demand for gasoline in the long run has been estimated to be 1.5. If an extended war in the Middle East caused the price of oil (from which gasoline is made) to increase and remain high for a decade, how would that affect total expenditures on gasoline in the long run, all other things equal?

Accepted Answer

A)  Total expenditures would rise. 
B)  Total expenditures would fall. 
C)  Total expenditures would remain unchanged. 
D)  The information is insufficient to answer the question. 
A)  Total expenditures would rise. 
B)  Total expenditures would fall. 
C)  Total expenditures would remain unchanged. 
D)  The information is insufficient to answer the question.

Question 9

When the price of pencils decreases from $3 to $1, the quantity demanded increases from 100 to 200 pencils. By the midpoint method, the price elasticity of demand equals:

Accepted Answer

A)  0.17. 
B)  0.5. 
C)  0.67. 
D)  1.5. 
A)  0.17. 
B)  0.5. 
C)  0.67. 
D)  1.5.

Question 10

A price floor above equilibrium will cause a larger surplus when demand is _____ and supply is _____.

Accepted Answer

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

Question 11

The percentage change in quantity demanded of one good or service divided by the percentage change in the price of a related good or service is the _____ of demand.

Accepted Answer

A)  price elasticity 
B)  quantity elasticity 
C)  income elasticity 
D)  cross-price elasticity 
A)  price elasticity 
B)  quantity elasticity 
C)  income elasticity 
D)  cross-price elasticity

Question 12

If the cross-price elasticity of demand between hamburgers and cheese is positive, these two goods must be complements.

Accepted Answer

A) True 
 B)False

Question 13

On a linear demand curve:

Accepted Answer

A)  demand is elastic at high prices. 
B)  demand is inelastic at high prices. 
C)  elasticity is the same at all points on the demand curve. 
D)  demand is elastic at low prices. 
A)  demand is elastic at high prices. 
B)  demand is inelastic at high prices. 
C)  elasticity is the same at all points on the demand curve. 
D)  demand is elastic at low prices.

Question 14

Raina consumes 100% more mechanical pencils when the price of felt-tip pens increases by 50%. For Raina, pencils and pens are _____, and the cross-price elasticity of demand is _____.

Accepted Answer

A)  complements; 0.5 
B)  substitutes; -0.5 
C)  complements; 2 
D)  substitutes; 2 
A)  complements; 0.5 
B)  substitutes; -0.5 
C)  complements; 2 
D)  substitutes; 2

Question 15

The price elasticity of demand is measured by _____ the percentage change in _____ the percentage change in _____.

Accepted Answer

A)  dividing; price by; quantity demanded 
B)  dividing; quantity demanded by; price 
C)  subtracting; price from; quantity demanded 
D)  adding; price to; quantity demanded 
A)  dividing; price by; quantity demanded 
B)  dividing; quantity demanded by; price 
C)  subtracting; price from; quantity demanded 
D)  adding; price to; quantity demanded

Question 16

If a good is a necessity with few substitutes, then demand will tend to:

Accepted Answer

A)  be more price-elastic. 
B)  be more price-inelastic. 
C)  have price elasticity equal to 1. 
D)  be the same as that of a luxury good. 
A)  be more price-elastic. 
B)  be more price-inelastic. 
C)  have price elasticity equal to 1. 
D)  be the same as that of a luxury good.

Question 17

The price elasticity of demand for milk has been estimated to be somewhere between 0.49 and 0.63. If a new system of feeding and milking cows yields a 15% increase in the production of milk throughout the country, how will that affect total expenditures on milk, all other things equal?

Accepted Answer

A)  Total expenditures will remain unchanged. 
B)  Total expenditures will fall. 
C)  Total expenditures will rise. 
D)  The information is insufficient to answer the question. 
A)  Total expenditures will remain unchanged. 
B)  Total expenditures will fall. 
C)  Total expenditures will rise. 
D)  The information is insufficient to answer the question.

Question 18

If the price of chocolate-covered peanuts increases and the demand for strawberry licorice twists increases, this indicates that these two goods are:

Accepted Answer

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

Question 19

Decreases in input costs and a longer time since a price change will tend to:

Accepted Answer

A)  increase the price elasticity of supply. 
B)  decrease price elasticity of supply. 
C)  have no impact on the price elasticity of supply. 
D)  increase price elasticity of supply with decreases in input costs but decrease price elasticity of supply with length of time. 
A)  increase the price elasticity of supply. 
B)  decrease price elasticity of supply. 
C)  have no impact on the price elasticity of supply. 
D)  increase price elasticity of supply with decreases in input costs but decrease price elasticity of supply with length of time.

Question 20

For which of the following is the cross-price elasticity of demand most likely a large positive number?

Accepted Answer

A)  hockey pucks and hockey sticks 
B)  DVDs and milk 
C)  french fries and onion rings 
D)  all of these, because the cross-price elasticity is always a positive number 
A)  hockey pucks and hockey sticks 
B)  DVDs and milk 
C)  french fries and onion rings 
D)  all of these, because the cross-price elasticity is always a positive number

The price of gasoline rises 5% and the quantity of gasoline purchased falls 1%. The price elasticity of demand is equal to _, and demand is described as _.

Kayla and Jada are roommates in New York City. Both Kayla and Jada recently received raises. Kayla now buys more album downloads than before, but Jada buys fewer. Kayla behaves as if album downloads are _ goods, and Jada's income elasticity of demand for album downloads is _.

The mayor advocates raising the entrance fee at the city's pools to increase revenue for the city. The mayor is right only if the price effect dominates the quantity effect.

Other things being equal, the price elasticity of demand for a product will be lower:

If an increase in income leads to an increase in the demand for a good, then the good is said to be:

A group of dairy farmers is trying to raise milk prices by 10%. If the price elasticity of demand for milk is 0.75 and the price elasticity of supply for milk is 0, by how much should farmers reduce their milk production to obtain the 10% increase?

Suppose at $10 the quantity demanded is 100. When the price falls to $8, the quantity demanded increases to 130. The price elasticity of demand (using the midpoint formula) between $10 and $8 is approximately:

When the price of pencils decreases from $3 to $1, the quantity demanded increases from 100 to 200 pencils. By the midpoint method, the price elasticity of demand equals:

A price floor above equilibrium will cause a larger surplus when demand is _ and supply is _.

The percentage change in quantity demanded of one good or service divided by the percentage change in the price of a related good or service is the _____ of demand.

If the cross-price elasticity of demand between hamburgers and cheese is positive, these two goods must be complements.

On a linear demand curve:

Raina consumes 100% more mechanical pencils when the price of felt-tip pens increases by 50%. For Raina, pencils and pens are _, and the cross-price elasticity of demand is _.

The price elasticity of demand is measured by ___ the percentage change in _ the percentage change in ___.

If a good is a necessity with few substitutes, then demand will tend to:

The price elasticity of demand for milk has been estimated to be somewhere between 0.49 and 0.63. If a new system of feeding and milking cows yields a 15% increase in the production of milk throughout the country, how will that affect total expenditures on milk, all other things equal?

If the price of chocolate-covered peanuts increases and the demand for strawberry licorice twists increases, this indicates that these two goods are:

Decreases in input costs and a longer time since a price change will tend to:

For which of the following is the cross-price elasticity of demand most likely a large positive number?

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Taxes

International Trade

Decision Making by Individuals Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

Exam 6: Elasticity

The price of gasoline rises 5% and the quantity of gasoline purchased falls 1%. The price elasticity of demand is equal to _____, and demand is described as _____.

Kayla and Jada are roommates in New York City. Both Kayla and Jada recently received raises. Kayla now buys more album downloads than before, but Jada buys fewer. Kayla behaves as if album downloads are _____ goods, and Jada's income elasticity of demand for album downloads is _____.

The mayor advocates raising the entrance fee at the city's pools to increase revenue for the city. The mayor is right only if the price effect dominates the quantity effect.

Other things being equal, the price elasticity of demand for a product will be lower:

If an increase in income leads to an increase in the demand for a good, then the good is said to be:

A group of dairy farmers is trying to raise milk prices by 10%. If the price elasticity of demand for milk is 0.75 and the price elasticity of supply for milk is 0, by how much should farmers reduce their milk production to obtain the 10% increase?

Suppose at $10 the quantity demanded is 100. When the price falls to $8, the quantity demanded increases to 130. The price elasticity of demand (using the midpoint formula) between $10 and $8 is approximately:

When the price of pencils decreases from $3 to $1, the quantity demanded increases from 100 to 200 pencils. By the midpoint method, the price elasticity of demand equals:

A price floor above equilibrium will cause a larger surplus when demand is _____ and supply is _____.

The percentage change in quantity demanded of one good or service divided by the percentage change in the price of a related good or service is the _____ of demand.

If the cross-price elasticity of demand between hamburgers and cheese is positive, these two goods must be complements.

On a linear demand curve:

Raina consumes 100% more mechanical pencils when the price of felt-tip pens increases by 50%. For Raina, pencils and pens are _____, and the cross-price elasticity of demand is _____.

The price elasticity of demand is measured by _____ the percentage change in _____ the percentage change in _____.

If a good is a necessity with few substitutes, then demand will tend to:

The price elasticity of demand for milk has been estimated to be somewhere between 0.49 and 0.63. If a new system of feeding and milking cows yields a 15% increase in the production of milk throughout the country, how will that affect total expenditures on milk, all other things equal?

If the price of chocolate-covered peanuts increases and the demand for strawberry licorice twists increases, this indicates that these two goods are:

Decreases in input costs and a longer time since a price change will tend to:

For which of the following is the cross-price elasticity of demand most likely a large positive number?

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Taxes

International Trade

Decision Making by Individuals Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

The price of gasoline rises 5% and the quantity of gasoline purchased falls 1%. The price elasticity of demand is equal to _, and demand is described as _.

Kayla and Jada are roommates in New York City. Both Kayla and Jada recently received raises. Kayla now buys more album downloads than before, but Jada buys fewer. Kayla behaves as if album downloads are _ goods, and Jada's income elasticity of demand for album downloads is _.

A price floor above equilibrium will cause a larger surplus when demand is _ and supply is _.

Raina consumes 100% more mechanical pencils when the price of felt-tip pens increases by 50%. For Raina, pencils and pens are _, and the cross-price elasticity of demand is _.

The price elasticity of demand is measured by ___ the percentage change in _ the percentage change in ___.