Question 1

A major determinant of the price elasticity of demand is the availability of substitutes.

Accepted Answer

A) True 
 B)False

Question 2

We predict the long-run price elasticity of demand for gasoline to be _____ the short-run price elasticity of demand for it.

Accepted Answer

A)  less than 
B)  larger than 
C)  equal to 
D)  not comparable to 
A)  less than 
B)  larger than 
C)  equal to 
D)  not comparable to

Question 3

If the quantity supplied responds substantially to a relatively small change in price, supply is:

Accepted Answer

A)  price-elastic. 
B)  price-inelastic. 
C)  negatively sloped. 
D)  insensitive to changes in price. 
A)  price-elastic. 
B)  price-inelastic. 
C)  negatively sloped. 
D)  insensitive to changes in price.

Question 4

Use the following to answer questions:
Figure: The Demand Curve  
-(Figure: The Demand Curve) Look at the figure The Demand Curve. By the midpoint method, the price elasticity of demand between $6 and $8 is approximately:

Accepted Answer

A)  0.23. 
B)  0.45. 
C)  2.33. 
D)  4.50. 
A)  0.23. 
B)  0.45. 
C)  2.33. 
D)  4.50.

Question 5

Suppose that the cross-price elasticity of demand for Mountain Dew with respect to the price of Coke is 0.7. This implies that the two goods are:

Accepted Answer

A)  substitutes. 
B)  complements. 
C)  inferior. 
D)  normal. 
A)  substitutes. 
B)  complements. 
C)  inferior. 
D)  normal.

Question 6

If two goods are substitutes, their cross-price elasticity of demand should be:

Accepted Answer

A)  less than 0. 
B)  negative but almost equal to 0. 
C)  equal to 0. 
D)  greater than 0. 
A)  less than 0. 
B)  negative but almost equal to 0. 
C)  equal to 0. 
D)  greater than 0.

Question 7

Use the following to answer questions:
Figure: The Demand Curve  
-(Figure: The Demand Curve) Look at the figure The Demand Curve. If the price is $8, total revenue is _____. If the price is $7, total revenue is _____.

Accepted Answer

A)  $24; $16 
B)  $14; $21 
C)  $16; $21 
D)  $10; $10 
A)  $24; $16 
B)  $14; $21 
C)  $16; $21 
D)  $10; $10

Question 8

A restaurant manager has estimated that the price elasticity of demand for meals is 2. If the restaurant increases menu prices by 5%, she can expect the number of meals sold to decrease by _____ and total revenue to _____.

Accepted Answer

A)  10%; increase 
B)  5%; stay constant 
C)  10%; fall 
D)  2.5%; fall 
A)  10%; increase 
B)  5%; stay constant 
C)  10%; fall 
D)  2.5%; fall

Question 9

When the price of chocolate-covered peanuts decreases from $1.10 to $0.95, the quantity demanded increases from 190 bags to 215 bags. In this price range, the demand for chocolate covered peanuts is _____, and total revenue will _____ when price decreases.

Accepted Answer

A)  elastic; increase 
B)  elastic; decrease 
C)  inelastic; increase 
D)  inelastic; decrease 
A)  elastic; increase 
B)  elastic; decrease 
C)  inelastic; increase 
D)  inelastic; decrease

Question 10

Suppose the cross-price elasticity of demand for butter and margarine is equal to 0.96 but the cross-price elasticity for water and lemons is -0.13. This means that butter and margarine are _____, while water and lemons are _____.

Accepted Answer

A)  complements; substitutes 
B)  substitutes; complements 
C)  inelastic goods; elastic goods 
D)  elastic goods; complements 
A)  complements; substitutes 
B)  substitutes; complements 
C)  inelastic goods; elastic goods 
D)  elastic goods; complements

Question 11

The university president believes that increasing student tuition by 5% will increase revenues. If the president is correct that revenues will increase, then the tuition increase will _____ the number of students enrolling by _____.

Accepted Answer

A)  reduce; less than 5% 
B)  reduce; more than 5% 
C)  reduce; exactly 5% 
D)  increase; 5% 
A)  reduce; less than 5% 
B)  reduce; more than 5% 
C)  reduce; exactly 5% 
D)  increase; 5%

Question 12

If funeral homes discover that the price elasticity of demand for caskets equals 0.55 at the current price, funeral homes should increase prices to increase revenue.

Accepted Answer

A) True 
 B)False

Question 13

If someone did not regard health care as very important, often using home remedies and other substitutes, his or her demand curve for health care would most likely be more _____ than that of other people.

Accepted Answer

A)  price-elastic 
B)  price-inelastic 
C)  nearly horizontal 
D)  nearly vertical 
A)  price-elastic 
B)  price-inelastic 
C)  nearly horizontal 
D)  nearly vertical

Question 14

When the price of chocolate-covered peanuts increases from $1.55 to $2.00, the quantity demanded decreases from 220 to 180. If the price is $1.55, total revenue is _____, and if the price is $2.00, total revenue is _____.

Accepted Answer

A)  $360; $440 
B)  $341; $279 
C)  $440; $279 
D)  $341; $360 
A)  $360; $440 
B)  $341; $279 
C)  $440; $279 
D)  $341; $360

Question 15

Use the following to answer questions:
Figure: The Demand for Shirts  
-(Figure: The Demand for Shirts) Look at the figure The Demand for Shirts. Total revenue is maximized if the price is:

Accepted Answer

A)  $30. 
B)  $40. 
C)  $50. 
D)  $60. 
A)  $30. 
B)  $40. 
C)  $50. 
D)  $60.

Question 16

Assume that as your income increases, your consumption of burgers increases. We can assume that you consider burgers a(n) _____ good.

Accepted Answer

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

Question 17

Use the following to answer questions:
Table: Price Elasticity  
-(Table: Price Elasticity) Look at the table Price Elasticity. What is the price elasticity of demand between $1.75 and $1.50?

Accepted Answer

A)  0.42 
B)  1.50 
C)  1.86 
D)  0.08 
A)  0.42 
B)  1.50 
C)  1.86 
D)  0.08

Question 18

Use the following to answer questions:
Table: Price Elasticity  
-(Table: Price Elasticity) Look at the table Price Elasticity. What is the price elasticity of demand between $1.50 and $1.25?

Accepted Answer

A)  1.00 
B)  1.22 
C)  1.50 
D)  1.75 
A)  1.00 
B)  1.22 
C)  1.50 
D)  1.75

Question 19

Local cable companies recently increased the price of basic services. A news expert reporting on the increase stated, "While prices have increased 40%, the cable company reports only a 20% increase in revenue." This remark suggests the demand for basic cable service is elastic.

Accepted Answer

A) True 
 B)False

Question 20

Use the following to answer questions:  
-(Table: Market for Pizza) If income changes from $1,000 to $1,400 per month, by the midpoint method, the income elasticity of demand at a price of $10 per pizza is:

Accepted Answer

A)  0.33 
B)  0.57 
C)  0.95 
D)  1.2 
A)  0.33 
B)  0.57 
C)  0.95 
D)  1.2

A major determinant of the price elasticity of demand is the availability of substitutes.

We predict the long-run price elasticity of demand for gasoline to be _____ the short-run price elasticity of demand for it.

If the quantity supplied responds substantially to a relatively small change in price, supply is:

Use the following to answer questions: Figure: The Demand Curve -(Figure: The Demand Curve) Look at the figure The Demand Curve. By the midpoint method, the price elasticity of demand between $6 and $8 is approximately:

Suppose that the cross-price elasticity of demand for Mountain Dew with respect to the price of Coke is 0.7. This implies that the two goods are:

If two goods are substitutes, their cross-price elasticity of demand should be:

Use the following to answer questions: Figure: The Demand Curve -(Figure: The Demand Curve) Look at the figure The Demand Curve. If the price is $8, total revenue is _. If the price is $7, total revenue is _.

A restaurant manager has estimated that the price elasticity of demand for meals is 2. If the restaurant increases menu prices by 5%, she can expect the number of meals sold to decrease by _ and total revenue to _.

When the price of chocolate-covered peanuts decreases from $1.10 to $0.95, the quantity demanded increases from 190 bags to 215 bags. In this price range, the demand for chocolate covered peanuts is _, and total revenue will _ when price decreases.

Suppose the cross-price elasticity of demand for butter and margarine is equal to 0.96 but the cross-price elasticity for water and lemons is -0.13. This means that butter and margarine are _, while water and lemons are _.

The university president believes that increasing student tuition by 5% will increase revenues. If the president is correct that revenues will increase, then the tuition increase will _ the number of students enrolling by _.

If funeral homes discover that the price elasticity of demand for caskets equals 0.55 at the current price, funeral homes should increase prices to increase revenue.

If someone did not regard health care as very important, often using home remedies and other substitutes, his or her demand curve for health care would most likely be more _____ than that of other people.

When the price of chocolate-covered peanuts increases from $1.55 to $2.00, the quantity demanded decreases from 220 to 180. If the price is $1.55, total revenue is _, and if the price is $2.00, total revenue is _.

Use the following to answer questions: Figure: The Demand for Shirts -(Figure: The Demand for Shirts) Look at the figure The Demand for Shirts. Total revenue is maximized if the price is:

Assume that as your income increases, your consumption of burgers increases. We can assume that you consider burgers a(n) _____ good.

Use the following to answer questions: Table: Price Elasticity -(Table: Price Elasticity) Look at the table Price Elasticity. What is the price elasticity of demand between $1.75 and $1.50?

Use the following to answer questions: Table: Price Elasticity -(Table: Price Elasticity) Look at the table Price Elasticity. What is the price elasticity of demand between $1.50 and $1.25?

Local cable companies recently increased the price of basic services. A news expert reporting on the increase stated, "While prices have increased 40%, the cable company reports only a 20% increase in revenue." This remark suggests the demand for basic cable service is elastic.

Use the following to answer questions: -(Table: Market for Pizza) If income changes from $1,000 to $1,400 per month, by the midpoint method, the income elasticity of demand at a price of $10 per pizza is:

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

A major determinant of the price elasticity of demand is the availability of substitutes.

We predict the long-run price elasticity of demand for gasoline to be _____ the short-run price elasticity of demand for it.

If the quantity supplied responds substantially to a relatively small change in price, supply is:

Use the following to answer questions: Figure: The Demand Curve -(Figure: The Demand Curve) Look at the figure The Demand Curve. By the midpoint method, the price elasticity of demand between $6 and $8 is approximately:

Suppose that the cross-price elasticity of demand for Mountain Dew with respect to the price of Coke is 0.7. This implies that the two goods are:

If two goods are substitutes, their cross-price elasticity of demand should be:

Use the following to answer questions: Figure: The Demand Curve -(Figure: The Demand Curve) Look at the figure The Demand Curve. If the price is $8, total revenue is _____. If the price is $7, total revenue is _____.

A restaurant manager has estimated that the price elasticity of demand for meals is 2. If the restaurant increases menu prices by 5%, she can expect the number of meals sold to decrease by _____ and total revenue to _____.

When the price of chocolate-covered peanuts decreases from $1.10 to $0.95, the quantity demanded increases from 190 bags to 215 bags. In this price range, the demand for chocolate covered peanuts is _____, and total revenue will _____ when price decreases.

Suppose the cross-price elasticity of demand for butter and margarine is equal to 0.96 but the cross-price elasticity for water and lemons is -0.13. This means that butter and margarine are _____, while water and lemons are _____.

The university president believes that increasing student tuition by 5% will increase revenues. If the president is correct that revenues will increase, then the tuition increase will _____ the number of students enrolling by _____.

If funeral homes discover that the price elasticity of demand for caskets equals 0.55 at the current price, funeral homes should increase prices to increase revenue.

If someone did not regard health care as very important, often using home remedies and other substitutes, his or her demand curve for health care would most likely be more _____ than that of other people.

When the price of chocolate-covered peanuts increases from $1.55 to $2.00, the quantity demanded decreases from 220 to 180. If the price is $1.55, total revenue is _____, and if the price is $2.00, total revenue is _____.

Use the following to answer questions: Figure: The Demand for Shirts -(Figure: The Demand for Shirts) Look at the figure The Demand for Shirts. Total revenue is maximized if the price is:

Assume that as your income increases, your consumption of burgers increases. We can assume that you consider burgers a(n) _____ good.

Use the following to answer questions: Table: Price Elasticity -(Table: Price Elasticity) Look at the table Price Elasticity. What is the price elasticity of demand between $1.75 and $1.50?

Use the following to answer questions: Table: Price Elasticity -(Table: Price Elasticity) Look at the table Price Elasticity. What is the price elasticity of demand between $1.50 and $1.25?

Local cable companies recently increased the price of basic services. A news expert reporting on the increase stated, "While prices have increased 40%, the cable company reports only a 20% increase in revenue." This remark suggests the demand for basic cable service is elastic.

Use the following to answer questions: -(Table: Market for Pizza) If income changes from $1,000 to $1,400 per month, by the midpoint method, the income elasticity of demand at a price of $10 per pizza is:

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

Use the following to answer questions: Figure: The Demand Curve -(Figure: The Demand Curve) Look at the figure The Demand Curve. If the price is $8, total revenue is _. If the price is $7, total revenue is _.

A restaurant manager has estimated that the price elasticity of demand for meals is 2. If the restaurant increases menu prices by 5%, she can expect the number of meals sold to decrease by _ and total revenue to _.

When the price of chocolate-covered peanuts decreases from $1.10 to $0.95, the quantity demanded increases from 190 bags to 215 bags. In this price range, the demand for chocolate covered peanuts is _, and total revenue will _ when price decreases.

Suppose the cross-price elasticity of demand for butter and margarine is equal to 0.96 but the cross-price elasticity for water and lemons is -0.13. This means that butter and margarine are _, while water and lemons are _.

The university president believes that increasing student tuition by 5% will increase revenues. If the president is correct that revenues will increase, then the tuition increase will _ the number of students enrolling by _.

When the price of chocolate-covered peanuts increases from $1.55 to $2.00, the quantity demanded decreases from 220 to 180. If the price is $1.55, total revenue is _, and if the price is $2.00, total revenue is _.