Question 1

If 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 2

Goods are _____ when the cross-price elasticity of demand is positive and _____ when the cross-price elasticity of demand is negative.

Accepted Answer

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

Question 3

As you move down a linear demand curve, the price elasticity of demand will:

Accepted Answer

A)  increase. 
B)  decrease. 
C)  increase and then decrease. 
D)  decrease and then increase. 
A)  increase. 
B)  decrease. 
C)  increase and then decrease. 
D)  decrease and then increase.

Question 4

If an increase in the price of cotton increases total revenue, then the price effect is _____ the quantity effect.

Accepted Answer

A)  equal to 
B)  stronger than 
C)  weaker than 
D)  not comparable to 
A)  equal to 
B)  stronger than 
C)  weaker than 
D)  not comparable to

Question 5

If your purchases of shoes decrease from 11 pairs per year to 9 pairs per year when the price of shirts increases from $8 to $12, for you, shoes and shirts are considered:

Accepted Answer

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

Question 6

If total revenue goes down 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 7

The price elasticity of demand along a demand curve with a constant slope:

Accepted Answer

A)  is equal to the slope. 
B)  is greater than the slope. 
C)  is less than the slope. 
D)  increases in absolute value as the price rises. 
A)  is equal to the slope. 
B)  is greater than the slope. 
C)  is less than the slope. 
D)  increases in absolute value as the price rises.

Question 8

Determining the price elasticity of demand involves all of the following factors EXCEPT:

Accepted Answer

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

Question 9

You manage a nightclub, and lately revenues have been disappointing. Your bouncer suggests that raising drink prices will increase revenues, but your bartender suggests that decreasing drink prices will increase revenues. You aren't sure who is right, but you do know that your bouncer thinks the demand for drinks is _____ and your bartender thinks the demand for drinks is _____.

Accepted Answer

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

Question 10

A shirt manufacturer sold 10 dozen shirts per day at $4 per shirt but sold 15 dozen shirts per day at $3 per shirt. The price elasticity of demand (by the midpoint method) is:

Accepted Answer

A)  greater than zero but less than 1. 
B)  equal to 1. 
C)  greater than 1 but less than 3. 
D)  greater than 3. 
A)  greater than zero but less than 1. 
B)  equal to 1. 
C)  greater than 1 but less than 3. 
D)  greater than 3.

Question 11

The price elasticity of demand measures the:

Accepted Answer

A)  responsiveness of quantity demanded to a change in price. 
B)  responsiveness of price to a change in quantity demanded. 
C)  extent to which prices are flexible and respond to market forces. 
D)  responsiveness of demand when price is held constant and demand increases or decreases. 
A)  responsiveness of quantity demanded to a change in price. 
B)  responsiveness of price to a change in quantity demanded. 
C)  extent to which prices are flexible and respond to market forces. 
D)  responsiveness of demand when price is held constant and demand increases or decreases.

Question 12

Use the following to answer questions:
Figure: Supply Curves  
-(Figure: Supply Curves) Look at the figure Supply Curves. Which graph shows a perfectly elastic supply curve?

Accepted Answer

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

Question 13

The price elasticity of the supply of paintings by Rembrandt is greater than 1.

Accepted Answer

A) True 
 B)False

Question 14

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 $3 and $4 is approximately:

Accepted Answer

A)  0.19. 
B)  0.54. 
C)  1.00 
D)  1.86. 
A)  0.19. 
B)  0.54. 
C)  1.00 
D)  1.86.

Question 15

An important determinant of the price elasticity of demand is the:

Accepted Answer

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

Question 16

If the price elasticity of demand is calculated to be 0.75, then demand is:

Accepted Answer

A)  price-inelastic. 
B)  price-elastic. 
C)  price unit-elastic. 
D)  positively sloped. 
A)  price-inelastic. 
B)  price-elastic. 
C)  price unit-elastic. 
D)  positively sloped.

Question 17

When Joe's income is $100 per week, he spends $20 per week on pizza. When his income rises to $110 per week, he spends $25 per week on pizza. If the price of pizza remains constant, this information implies that for Joe:

Accepted Answer

A)  pizza is a normal good and a luxury. 
B)  pizza is a normal good and a necessity. 
C)  pizza is an inferior good, since his expenditure rose by less than the increase in income. 
D)  demand for pizza is price-elastic. 
A)  pizza is a normal good and a luxury. 
B)  pizza is a normal good and a necessity. 
C)  pizza is an inferior good, since his expenditure rose by less than the increase in income. 
D)  demand for pizza is price-elastic.

Question 18

Use the following to answer questions:
Figure: The Demand for Shirts  
-(Figure: The Demand for Shirts) Look at the figure The Demand for Shirts. If the price is below _____, demand is inelastic.

Accepted Answer

A)  $10 
B)  $20 
C)  $30 
D)  $40 
A)  $10 
B)  $20 
C)  $30 
D)  $40

Question 19

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 (using the midpoint formula) between $2.50 and $2.25?

Accepted Answer

A)  9 
B)  19 
C)  119 
D)  0.5 
A)  9 
B)  19 
C)  119 
D)  0.5

Question 20

The price of coffee increases by 10%, and as a result, Alex purchases fewer doughnuts. For Alex, coffee and doughnuts are:

Accepted Answer

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

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

Goods are _ when the cross-price elasticity of demand is positive and _ when the cross-price elasticity of demand is negative.

As you move down a linear demand curve, the price elasticity of demand will:

If an increase in the price of cotton increases total revenue, then the price effect is _____ the quantity effect.

If your purchases of shoes decrease from 11 pairs per year to 9 pairs per year when the price of shirts increases from $8 to $12, for you, shoes and shirts are considered:

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

The price elasticity of demand along a demand curve with a constant slope:

Determining the price elasticity of demand involves all of the following factors EXCEPT:

A shirt manufacturer sold 10 dozen shirts per day at $4 per shirt but sold 15 dozen shirts per day at $3 per shirt. The price elasticity of demand (by the midpoint method) is:

The price elasticity of demand measures the:

Use the following to answer questions: Figure: Supply Curves -(Figure: Supply Curves) Look at the figure Supply Curves. Which graph shows a perfectly elastic supply curve?

The price elasticity of the supply of paintings by Rembrandt is greater than 1.

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 $3 and $4 is approximately:

An important determinant of the price elasticity of demand is the:

If the price elasticity of demand is calculated to be 0.75, then demand is:

When Joe's income is $100 per week, he spends $20 per week on pizza. When his income rises to $110 per week, he spends $25 per week on pizza. If the price of pizza remains constant, this information implies that for Joe:

Use the following to answer questions: Figure: The Demand for Shirts -(Figure: The Demand for Shirts) Look at the figure The Demand for Shirts. If the price is below _____, demand is inelastic.

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 (using the midpoint formula) between $2.50 and $2.25?

The price of coffee increases by 10%, and as a result, Alex purchases fewer doughnuts. For Alex, coffee and doughnuts are:

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

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

Goods are _____ when the cross-price elasticity of demand is positive and _____ when the cross-price elasticity of demand is negative.

As you move down a linear demand curve, the price elasticity of demand will:

If an increase in the price of cotton increases total revenue, then the price effect is _____ the quantity effect.

If your purchases of shoes decrease from 11 pairs per year to 9 pairs per year when the price of shirts increases from $8 to $12, for you, shoes and shirts are considered:

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

The price elasticity of demand along a demand curve with a constant slope:

Determining the price elasticity of demand involves all of the following factors EXCEPT:

A shirt manufacturer sold 10 dozen shirts per day at $4 per shirt but sold 15 dozen shirts per day at $3 per shirt. The price elasticity of demand (by the midpoint method) is:

The price elasticity of demand measures the:

Use the following to answer questions: Figure: Supply Curves -(Figure: Supply Curves) Look at the figure Supply Curves. Which graph shows a perfectly elastic supply curve?

The price elasticity of the supply of paintings by Rembrandt is greater than 1.

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 $3 and $4 is approximately:

An important determinant of the price elasticity of demand is the:

If the price elasticity of demand is calculated to be 0.75, then demand is:

When Joe's income is $100 per week, he spends $20 per week on pizza. When his income rises to $110 per week, he spends $25 per week on pizza. If the price of pizza remains constant, this information implies that for Joe:

Use the following to answer questions: Figure: The Demand for Shirts -(Figure: The Demand for Shirts) Look at the figure The Demand for Shirts. If the price is below _____, demand is inelastic.

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 (using the midpoint formula) between $2.50 and $2.25?

The price of coffee increases by 10%, and as a result, Alex purchases fewer doughnuts. For Alex, coffee and doughnuts are:

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

Goods are _ when the cross-price elasticity of demand is positive and _ when the cross-price elasticity of demand is negative.