Question 1

The cross-price elasticity of demand of substitute goods is:

Accepted Answer

A)  between -1 and 0. 
B)  less than 0. 
C)  equal to 0. 
D)  greater than 0. 
A)  between -1 and 0. 
B)  less than 0. 
C)  equal to 0. 
D)  greater than 0.

Question 2

The university hopes to raise more revenue by increasing parking fees. This plan will work only if:

Accepted Answer

A)  the price effect is larger than the quantity effect. 
B)  the price effect is smaller than the quantity effect. 
C)  the price effect and quantity effect are the same. 
D)  there is no price or quantity effect. 
A)  the price effect is larger than the quantity effect. 
B)  the price effect is smaller than the quantity effect. 
C)  the price effect and quantity effect are the same. 
D)  there is no price or quantity effect.

Question 3

The pair of items that is most likely to have a negative cross-price elasticity of demand is:

Accepted Answer

A)  aspirin and hamburgers. 
B)  hot dogs and mustard. 
C)  margarine and butter. 
D)  ketchup and coffee. 
A)  aspirin and hamburgers. 
B)  hot dogs and mustard. 
C)  margarine and butter. 
D)  ketchup and coffee.

Question 4

One would expect to see the supply become more price _____ as harvest season approaches and crops are being brought in from the fields.

Accepted Answer

A)  elastic 
B)  inelastic 
C)  unit-elastic 
D)  inferior 
A)  elastic 
B)  inelastic 
C)  unit-elastic 
D)  inferior

Question 5

If the price of a good increases by 15% and quantity demanded changes by 20%, then the price elasticity of demand is equal to:

Accepted Answer

A)  0.75. 
B)  approximately 0.33. 
C)  approximately 1.33. 
D)  1. 
A)  0.75. 
B)  approximately 0.33. 
C)  approximately 1.33. 
D)  1.

Question 6

Which of the following is NOT a factor in determining the price elasticity of demand?

Accepted Answer

A)  the number of available substitutes 
B)  time 
C)  the proportion of the budget spent on the item 
D)  the slope of the supply curve 
A)  the number of available substitutes 
B)  time 
C)  the proportion of the budget spent on the item 
D)  the slope of the supply curve

Question 7

In the market for computers, if the demand curve is elastic and the price of a computer decreases, we expect total revenue to _____. If the demand curve is inelastic and the price of a computer decreases, we expect total revenue to _____.

Accepted Answer

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

Question 8

After a price decrease, the quantity effect tends to:

Accepted Answer

A)  decrease total revenue. 
B)  increase total revenue. 
C)  make the price effect stronger. 
D)  make the price effect weaker. 
A)  decrease total revenue. 
B)  increase total revenue. 
C)  make the price effect stronger. 
D)  make the price effect weaker.

Question 9

If the quantity demanded is 5,000 gallons at $3.00 per gallon, the price elasticity of demand for gasoline is 0.5, and the price rises to $3.15 per gallon, how many gallons of gas will be sold at this higher price? (Use the conventional method, not the midpoint method, of calculating price elasticity of demand.)

Accepted Answer

A rise from $3.00 to $3.15 is a 5% incre

Question 10

Suppose that an increase in the price of a good leads to an increase in total revenue. Ignoring other factors (like supply), at its current price the good must be:

Accepted Answer

A)  price-inelastic. 
B)  price-elastic. 
C)  perfectly price-elastic. 
D)  inferior. 
A)  price-inelastic. 
B)  price-elastic. 
C)  perfectly price-elastic. 
D)  inferior.

Question 11

Use the following to answer questions:
Figure: Demand Curves  
-(Figure: Demand Curves) Look at the figure Demand Curves. Which graph shows a perfectly inelastic demand curve?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 12

The cross-price elasticity of demand of complementary goods is:

Accepted Answer

A)  less than 0. 
B)  equal to 0. 
C)  greater than 0. 
D)  between 0 and 1. 
A)  less than 0. 
B)  equal to 0. 
C)  greater than 0. 
D)  between 0 and 1.

Question 13

Use the following to answer questions:
Figure: The Demand for Shirts  
-(Figure: The Demand for Shirts) Look at the figure The Demand for Shirts. At a price of $30, total revenue is _____, and at a price of $10, total revenue is _____.

Accepted Answer

A)  $9,000; $12,000 
B)  $3,000; $5,000 
C)  $9,000; $5,000 
D)  $5,000; $9,000 
A)  $9,000; $12,000 
B)  $3,000; $5,000 
C)  $9,000; $5,000 
D)  $5,000; $9,000

Question 14

The price elasticity of demand for fresh zucchini has been estimated to be 2.25. A new irrigation system yields a 25% increase in the nation's crop of fresh zucchini. Which of the following best describes how this will affect total expenditures on zucchini, 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 15

A good is likely to have an inelastic demand curve if:

Accepted Answer

A)  the consumer has significant time to respond to the price change. 
B)  the good has few available substitutes. 
C)  the good is a luxury. 
D)  the good accounts for a large share of consumer income. 
A)  the consumer has significant time to respond to the price change. 
B)  the good has few available substitutes. 
C)  the good is a luxury. 
D)  the good accounts for a large share of consumer income.

Question 16

If total revenue goes up when the price falls, demand is said to:

Accepted Answer

A)  be price-inelastic. 
B)  be price unit-elastic. 
C)  be price-elastic. 
D)  have positive price elasticity. 
A)  be price-inelastic. 
B)  be price unit-elastic. 
C)  be price-elastic. 
D)  have positive price elasticity.

Question 17

Suppose the price elasticity of demand for fishing lures equals 1.5 in South Carolina and 0.63 in Alabama. To increase revenue, fishing lure manufacturers should:

Accepted Answer

A)  lower prices in each state. 
B)  raise prices in each state. 
C)  lower prices in South Carolina and raise prices in Alabama. 
D)  leave prices unchanged in South Carolina and raise prices in Alabama. 
A)  lower prices in each state. 
B)  raise prices in each state. 
C)  lower prices in South Carolina and raise prices in Alabama. 
D)  leave prices unchanged in South Carolina and raise prices in Alabama.

Question 18

The price elasticity of demand for ground beef has been estimated to be 1.0. If mad cow disease strikes the United States and a large percentage of the cattle are removed from the market, how will that affect total expenditures on ground beef, all other things equal?

Accepted Answer

A)  Total expenditures will remain unchanged. 
B)  Total expenditures will fall by more than 1%. 
C)  Demand will fall by 1%, but total expenditures will fall by less than 1%. 
D)  Total expenditures will rise. 
A)  Total expenditures will remain unchanged. 
B)  Total expenditures will fall by more than 1%. 
C)  Demand will fall by 1%, but total expenditures will fall by less than 1%. 
D)  Total expenditures will rise.

Question 19

An important determinant of the price elasticity of demand is:

Accepted Answer

A)  time. 
B)  the price of related goods. 
C)  the level of technology. 
D)  the quantity of the good supplied. 
A)  time. 
B)  the price of related goods. 
C)  the level of technology. 
D)  the quantity of the good supplied.

Question 20

The price elasticity of demand measures the:

Accepted Answer

A)  responsiveness of the change in quantity demanded to a change in price. 
B)  change in price versus a change in quantity demanded. 
C)  responsiveness of the change in the slope of the demand curve to a change in price. 
D)  change in the slope of the demand curve versus a change in the quantity demanded. 
A)  responsiveness of the change in quantity demanded to a change in price. 
B)  change in price versus a change in quantity demanded. 
C)  responsiveness of the change in the slope of the demand curve to a change in price. 
D)  change in the slope of the demand curve versus a change in the quantity demanded.

The cross-price elasticity of demand of substitute goods is:

The university hopes to raise more revenue by increasing parking fees. This plan will work only if:

The pair of items that is most likely to have a negative cross-price elasticity of demand is:

One would expect to see the supply become more price _____ as harvest season approaches and crops are being brought in from the fields.

If the price of a good increases by 15% and quantity demanded changes by 20%, then the price elasticity of demand is equal to:

Which of the following is NOT a factor in determining the price elasticity of demand?

In the market for computers, if the demand curve is elastic and the price of a computer decreases, we expect total revenue to _. If the demand curve is inelastic and the price of a computer decreases, we expect total revenue to _.

After a price decrease, the quantity effect tends to:

Suppose that an increase in the price of a good leads to an increase in total revenue. Ignoring other factors (like supply), at its current price the good must be:

Use the following to answer questions: Figure: Demand Curves -(Figure: Demand Curves) Look at the figure Demand Curves. Which graph shows a perfectly inelastic demand curve?

The cross-price elasticity of demand of complementary goods 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. At a price of $30, total revenue is _, and at a price of $10, total revenue is _.

The price elasticity of demand for fresh zucchini has been estimated to be 2.25. A new irrigation system yields a 25% increase in the nation's crop of fresh zucchini. Which of the following best describes how this will affect total expenditures on zucchini, all other things equal?

A good is likely to have an inelastic demand curve if:

If total revenue goes up when the price falls, demand is said to:

Suppose the price elasticity of demand for fishing lures equals 1.5 in South Carolina and 0.63 in Alabama. To increase revenue, fishing lure manufacturers should:

The price elasticity of demand for ground beef has been estimated to be 1.0. If mad cow disease strikes the United States and a large percentage of the cattle are removed from the market, how will that affect total expenditures on ground beef, all other things equal?

An important determinant of the price elasticity of demand is:

The price elasticity of demand measures the:

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 cross-price elasticity of demand of substitute goods is:

The university hopes to raise more revenue by increasing parking fees. This plan will work only if:

The pair of items that is most likely to have a negative cross-price elasticity of demand is:

One would expect to see the supply become more price _____ as harvest season approaches and crops are being brought in from the fields.

If the price of a good increases by 15% and quantity demanded changes by 20%, then the price elasticity of demand is equal to:

Which of the following is NOT a factor in determining the price elasticity of demand?

In the market for computers, if the demand curve is elastic and the price of a computer decreases, we expect total revenue to _____. If the demand curve is inelastic and the price of a computer decreases, we expect total revenue to _____.

After a price decrease, the quantity effect tends to:

Suppose that an increase in the price of a good leads to an increase in total revenue. Ignoring other factors (like supply), at its current price the good must be:

Use the following to answer questions: Figure: Demand Curves -(Figure: Demand Curves) Look at the figure Demand Curves. Which graph shows a perfectly inelastic demand curve?

The cross-price elasticity of demand of complementary goods 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. At a price of $30, total revenue is _____, and at a price of $10, total revenue is _____.

The price elasticity of demand for fresh zucchini has been estimated to be 2.25. A new irrigation system yields a 25% increase in the nation's crop of fresh zucchini. Which of the following best describes how this will affect total expenditures on zucchini, all other things equal?

A good is likely to have an inelastic demand curve if:

If total revenue goes up when the price falls, demand is said to:

Suppose the price elasticity of demand for fishing lures equals 1.5 in South Carolina and 0.63 in Alabama. To increase revenue, fishing lure manufacturers should:

The price elasticity of demand for ground beef has been estimated to be 1.0. If mad cow disease strikes the United States and a large percentage of the cattle are removed from the market, how will that affect total expenditures on ground beef, all other things equal?

An important determinant of the price elasticity of demand is:

The price elasticity of demand measures the:

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

In the market for computers, if the demand curve is elastic and the price of a computer decreases, we expect total revenue to _. If the demand curve is inelastic and the price of a computer decreases, we expect total revenue to _.

Use the following to answer questions: Figure: The Demand for Shirts -(Figure: The Demand for Shirts) Look at the figure The Demand for Shirts. At a price of $30, total revenue is _, and at a price of $10, total revenue is _.