Question 1

Total revenue will decrease if the price goes _____ and demand is _____.

Accepted Answer

A)  up; perfectly price-inelastic 
B)  up; price-inelastic 
C)  down; price-elastic 
D)  up; price-elastic 
A)  up; perfectly price-inelastic 
B)  up; price-inelastic 
C)  down; price-elastic 
D)  up; price-elastic

Question 2

Nico rents 10% more DVDs when his income increases by 20%. Based on this information, we know that DVDs:

Accepted Answer

A)  are a normal good. 
B)  are an inferior good. 
C)  have many substitutes. 
D)  have come down in price. 
A)  are a normal good. 
B)  are an inferior good. 
C)  have many substitutes. 
D)  have come down in price.

Question 3

Use the following to answer questions:
Figure: The Demand Curve for Crossings  
-(Figure: The Demand Curve for Bridge Crossings) Look at the figure The Demand Curve for Bridge Crossings. Demand is price_____ between $0.90 and $1.10, since total revenue _____ when the price _____.

Accepted Answer

A)  elastic; increases; decreases 
B)  inelastic; stays the same; decreases 
C)  unit-elastic; stays the same; increases 
D)  inelastic; increases; increases 
A)  elastic; increases; decreases 
B)  inelastic; stays the same; decreases 
C)  unit-elastic; stays the same; increases 
D)  inelastic; increases; increases

Question 4

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)  1.2 
B)  -1.2 
C)  0.825 
D)  0.40 
A)  1.2 
B)  -1.2 
C)  0.825 
D)  0.40

Question 5

If an increase in the price of a good leads to an increase in total revenue, the _____ curve is price _____.

Accepted Answer

A)  supply; inelastic 
B)  demand; inelastic 
C)  supply; elastic 
D)  demand; elastic 
A)  supply; inelastic 
B)  demand; inelastic 
C)  supply; elastic 
D)  demand; elastic

Question 6

Suppose the income of canned pinto bean consumers rises. All else equal, we can conclude that:

Accepted Answer

A)  the income elasticity of demand is positive if beans are a normal good. 
B)  the income elasticity of demand is positive if beans are an inferior good. 
C)  the cross-price elasticity between beans and other goods is positive. 
D)  the cross-price elasticity between beans and other goods is negative. 
A)  the income elasticity of demand is positive if beans are a normal good. 
B)  the income elasticity of demand is positive if beans are an inferior good. 
C)  the cross-price elasticity between beans and other goods is positive. 
D)  the cross-price elasticity between beans and other goods is negative.

Question 7

There are several close substitutes for Bayer aspirin but fewer substitutes for a complete medical examination. Therefore, all other things equal, you would expect the demand for:

Accepted Answer

A)  medical exams to be more price-elastic. 
B)  Bayer aspirin to be more price-elastic. 
C)  Bayer aspirin to be more price-inelastic. 
D)  the two to be equally price-elastic. 
A)  medical exams to be more price-elastic. 
B)  Bayer aspirin to be more price-elastic. 
C)  Bayer aspirin to be more price-inelastic. 
D)  the two to be equally price-elastic.

Question 8

Use the following to answer questions:
Figure: The Demand Curve for Oil  
-(Figure: The Demand Curve for Oil) Look at the figure The Demand Curve for Oil. Demand is price _____ between $20 and $21, since total revenue _____ when the price _____.

Accepted Answer

A)  elastic; increases; decreases 
B)  inelastic; stays the same; decreases 
C)  elastic; decreases; increases 
D)  inelastic; increases; increases 
A)  elastic; increases; decreases 
B)  inelastic; stays the same; decreases 
C)  elastic; decreases; increases 
D)  inelastic; increases; increases

Question 9

A demand curve that is perfectly inelastic is:

Accepted Answer

A)  horizontal. 
B)  vertical. 
C)  downward-sloping. 
D)  upward-sloping. 
A)  horizontal. 
B)  vertical. 
C)  downward-sloping. 
D)  upward-sloping.

Question 10

Use the following to answer questions:
Figure: The Demand for Notebook Computers  
-(Figure: Demand for Notebook Computers) Look at the figure The Demand for Notebook Computers. Total revenue at point V equals the:

Accepted Answer

A)  area 0TVN. 
B)  area 0PSVN. 
C)  distance 0T. 
D)  distance NV. 
A)  area 0TVN. 
B)  area 0PSVN. 
C)  distance 0T. 
D)  distance NV.

Question 11

In the short run, the price elasticity of supply for foods low in carbohydrates is lower than it will be in the long run because:

Accepted Answer

A)  in the short run, inputs are more available to produce these foods than in the long run. 
B)  in the short run, food producers do not have much time to respond to changes in demand. 
C)  in the short run, prices tend to stay constant. 
D)  in the long run, the price elasticity of supply tends to be perfectly inelastic. 
A)  in the short run, inputs are more available to produce these foods than in the long run. 
B)  in the short run, food producers do not have much time to respond to changes in demand. 
C)  in the short run, prices tend to stay constant. 
D)  in the long run, the price elasticity of supply tends to be perfectly inelastic.

Question 12

The percent change in quantity demanded of a good divided by the percent change in income, all other things unchanged, is the _____ elasticity of demand.

Accepted Answer

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

Question 13

The price elasticity of a good will tend to be larger:

Accepted Answer

A)  the longer the relevant time. 
B)  the fewer the number of substitute goods available. 
C)  if it is a staple or necessity with few substitutes. 
D)  if the share of income spent on the good is small. 
A)  the longer the relevant time. 
B)  the fewer the number of substitute goods available. 
C)  if it is a staple or necessity with few substitutes. 
D)  if the share of income spent on the good is small.

Question 14

Use the following to answer questions:
Figure: The Demand Curve for Oil  
-(Figure: The Demand Curve for Oil) Look at the figure The Demand Curve for Oil. The price elasticity of demand between $20 and $21, by the midpoint method, is approximately:

Accepted Answer

A)  0.21. 
B)  0.49. 
C)  2.1. 
D)  4.9. 
A)  0.21. 
B)  0.49. 
C)  2.1. 
D)  4.9.

Question 15

All else equal, when the demand for oil increases, the price will increase. Some economists say that this is only a short-run worry because in the long run a more elastic supply curve will benefit consumers. Do you agree? Explain.

Accepted Answer

It is probably true that the long-run su

Question 16

If the demand for golf is price-inelastic and your local public golf course increases the greens fees for using the course, you expect:

Accepted Answer

A)  a decrease in total revenue received by the course. 
B)  an increase in total revenue received by the course. 
C)  an increase in the amount of golf played on the course. 
D)  no change in the amount of golf played on the course. 
A)  a decrease in total revenue received by the course. 
B)  an increase in total revenue received by the course. 
C)  an increase in the amount of golf played on the course. 
D)  no change in the amount of golf played on the course.

Question 17

If the price elasticity of supply is less than 1, then supply is:

Accepted Answer

A)  price-elastic. 
B)  price-inelastic. 
C)  price unit-elastic. 
D)  very responsive to price changes. 
A)  price-elastic. 
B)  price-inelastic. 
C)  price unit-elastic. 
D)  very responsive to price changes.

Question 18

If the income elasticity of demand for a good is _____, the good is said to be _____.

Accepted Answer

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

Question 19

Use the following to answer questions:
Figure: The Linear Demand Curve  
-(Figure: The Linear Demand Curve) Look at the figure The Linear Demand Curve. As a producer, you are interested in maximizing your total revenues in this market. At what price should you sell your good? What is the corresponding total revenue?

Accepted Answer

A)  $10; $100 
B)  $20; $200 
C)  $0; $100 
D)  $5; $100 
A)  $10; $100 
B)  $20; $200 
C)  $0; $100 
D)  $5; $100

Question 20

Which of the following goods is likely to have the largest price elasticity of demand?

Accepted Answer

A)  a bicycle 
B)  a mountain bike 
C)  a Cannondale mountain bike 
D)  a green Cannondale mountain bike 
A)  a bicycle 
B)  a mountain bike 
C)  a Cannondale mountain bike 
D)  a green Cannondale mountain bike

Total revenue will decrease if the price goes _ and demand is _.

Nico rents 10% more DVDs when his income increases by 20%. Based on this information, we know that DVDs:

Use the following to answer questions: Figure: The Demand Curve for Crossings -(Figure: The Demand Curve for Bridge Crossings) Look at the figure The Demand Curve for Bridge Crossings. Demand is price___ between $0.90 and $1.10, since total revenue _ when the price ___.

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:

If an increase in the price of a good leads to an increase in total revenue, the _ curve is price _.

Suppose the income of canned pinto bean consumers rises. All else equal, we can conclude that:

There are several close substitutes for Bayer aspirin but fewer substitutes for a complete medical examination. Therefore, all other things equal, you would expect the demand for:

Use the following to answer questions: Figure: The Demand Curve for Oil -(Figure: The Demand Curve for Oil) Look at the figure The Demand Curve for Oil. Demand is price ___ between $20 and $21, since total revenue _ when the price ___.

A demand curve that is perfectly inelastic is:

Use the following to answer questions: Figure: The Demand for Notebook Computers -(Figure: Demand for Notebook Computers) Look at the figure The Demand for Notebook Computers. Total revenue at point V equals the:

In the short run, the price elasticity of supply for foods low in carbohydrates is lower than it will be in the long run because:

The percent change in quantity demanded of a good divided by the percent change in income, all other things unchanged, is the _____ elasticity of demand.

The price elasticity of a good will tend to be larger:

Use the following to answer questions: Figure: The Demand Curve for Oil -(Figure: The Demand Curve for Oil) Look at the figure The Demand Curve for Oil. The price elasticity of demand between $20 and $21, by the midpoint method, is approximately:

All else equal, when the demand for oil increases, the price will increase. Some economists say that this is only a short-run worry because in the long run a more elastic supply curve will benefit consumers. Do you agree? Explain.

If the demand for golf is price-inelastic and your local public golf course increases the greens fees for using the course, you expect:

If the price elasticity of supply is less than 1, then supply is:

If the income elasticity of demand for a good is _, the good is said to be _.

Which of the following goods is likely to have the largest price elasticity of demand?

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

Total revenue will decrease if the price goes _____ and demand is _____.

Nico rents 10% more DVDs when his income increases by 20%. Based on this information, we know that DVDs:

Use the following to answer questions: Figure: The Demand Curve for Crossings -(Figure: The Demand Curve for Bridge Crossings) Look at the figure The Demand Curve for Bridge Crossings. Demand is price_____ between $0.90 and $1.10, since total revenue _____ when the price _____.

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:

If an increase in the price of a good leads to an increase in total revenue, the _____ curve is price _____.

Suppose the income of canned pinto bean consumers rises. All else equal, we can conclude that:

There are several close substitutes for Bayer aspirin but fewer substitutes for a complete medical examination. Therefore, all other things equal, you would expect the demand for:

Use the following to answer questions: Figure: The Demand Curve for Oil -(Figure: The Demand Curve for Oil) Look at the figure The Demand Curve for Oil. Demand is price _____ between $20 and $21, since total revenue _____ when the price _____.

A demand curve that is perfectly inelastic is:

Use the following to answer questions: Figure: The Demand for Notebook Computers -(Figure: Demand for Notebook Computers) Look at the figure The Demand for Notebook Computers. Total revenue at point V equals the:

In the short run, the price elasticity of supply for foods low in carbohydrates is lower than it will be in the long run because:

The percent change in quantity demanded of a good divided by the percent change in income, all other things unchanged, is the _____ elasticity of demand.

The price elasticity of a good will tend to be larger:

Use the following to answer questions: Figure: The Demand Curve for Oil -(Figure: The Demand Curve for Oil) Look at the figure The Demand Curve for Oil. The price elasticity of demand between $20 and $21, by the midpoint method, is approximately:

All else equal, when the demand for oil increases, the price will increase. Some economists say that this is only a short-run worry because in the long run a more elastic supply curve will benefit consumers. Do you agree? Explain.

If the demand for golf is price-inelastic and your local public golf course increases the greens fees for using the course, you expect:

If the price elasticity of supply is less than 1, then supply is:

If the income elasticity of demand for a good is _____, the good is said to be _____.

Which of the following goods is likely to have the largest price elasticity of demand?

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

Total revenue will decrease if the price goes _ and demand is _.

Use the following to answer questions: Figure: The Demand Curve for Crossings -(Figure: The Demand Curve for Bridge Crossings) Look at the figure The Demand Curve for Bridge Crossings. Demand is price___ between $0.90 and $1.10, since total revenue _ when the price ___.

If an increase in the price of a good leads to an increase in total revenue, the _ curve is price _.

Use the following to answer questions: Figure: The Demand Curve for Oil -(Figure: The Demand Curve for Oil) Look at the figure The Demand Curve for Oil. Demand is price ___ between $20 and $21, since total revenue _ when the price ___.

If the income elasticity of demand for a good is _, the good is said to be _.