Question 1

The income elasticity of demand for eggs has been estimated to be 0.57. If income grows by 5% in a period, all other things unchanged, demand will:

Accepted Answer

A)  increase by more than 5.7%. 
B)  increase by about 2.9%. 
C)  decrease by more than 5.7%. 
D)  decrease by less than 5.7%. 
A)  increase by more than 5.7%. 
B)  increase by about 2.9%. 
C)  decrease by more than 5.7%. 
D)  decrease by less than 5.7%.

Question 2

Assume the price elasticity of demand for corn has been estimated to be 2.33. Flash floods destroy 10% of the nation's crop of corn. Which of the following best describes how this will affect total expenditures on corn, 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 3

When a public transit system (such as a subway or bus line) raises its fares, its total revenue may increase. This suggests that demand is:

Accepted Answer

A)  unstable. 
B)  price-inelastic. 
C)  price-elastic. 
D)  price unit-elastic. 
A)  unstable. 
B)  price-inelastic. 
C)  price-elastic. 
D)  price unit-elastic.

Question 4

If you wanted to make sure that your calculation of elasticity between two points was the same regardless of your initial point, you would use:

Accepted Answer

A)  the absolute value of elasticity. 
B)  supply elasticity. 
C)  the midpoint formula calculation of elasticity. 
D)  the point formula calculation of elasticity. 
A)  the absolute value of elasticity. 
B)  supply elasticity. 
C)  the midpoint formula calculation of elasticity. 
D)  the point formula calculation of elasticity.

Question 5

If the price elasticity of demand is found to be 6, then demand is:

Accepted Answer

A)  price-inelastic. 
B)  price-elastic. 
C)  price unit-elastic. 
D)  horizontal. 
A)  price-inelastic. 
B)  price-elastic. 
C)  price unit-elastic. 
D)  horizontal.

Question 6

If the demand for golf is unit-price elastic 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)  a decrease 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)  a decrease in the amount of golf played on the course. 
D)  no change in the amount of golf played on the course.

Question 7

Use the following to answer questions:
Figure: The Market for Lattes  
-(Figure: The Market for Lattes) Look at the figure The Market for Lattes. What is the price elasticity of demand between $2 and $2.50 per cup, using the midpoint formula?

Accepted Answer

A)  1.00 
B)  1.29 
C)  2.51 
D)  3.00 
A)  1.00 
B)  1.29 
C)  2.51 
D)  3.00

Question 8

If a change in price causes total revenue to change in the same direction, we can conclude that the demand is:

Accepted Answer

A)  price inelastic. 
B)  price elastic. 
C)  price unit-elastic. 
D)  zero elastic. 
A)  price inelastic. 
B)  price elastic. 
C)  price unit-elastic. 
D)  zero elastic.

Question 9

The price elasticity of demand for cabbage has been estimated to be 0.25. If an insect infestation destroys 20% of the nation's cabbage crop (and thus reduces supply), how will that affect total expenditures on cabbage, all other things equal?

Accepted Answer

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

Question 10

If the price of emergency visits to the doctor rose, we would expect:

Accepted Answer

A)  a large decline in the number of emergency visits to the doctor. 
B)  only a slight decline in the number of emergency visits to the doctor. 
C)  the number of emergency visits to the doctor to increase. 
D)  the total income of doctors to fall dramatically. 
A)  a large decline in the number of emergency visits to the doctor. 
B)  only a slight decline in the number of emergency visits to the doctor. 
C)  the number of emergency visits to the doctor to increase. 
D)  the total income of doctors to fall dramatically.

Question 11

Since for most people, eating in restaurants is a luxury and eating at home is a necessity, the price elasticity of demand for food eaten at home is less than the price elasticity of demand for eating in restaurants.

Accepted Answer

A) True 
 B)False

Question 12

The cross-price elasticity of electricity with respect to the price of natural gas has been estimated as being equal to 0.2. This implies that:

Accepted Answer

A)  natural gas and electricity are both normal goods. 
B)  electricity and natural gas are complements. 
C)  electricity and natural gas are substitutes. 
D)  one of the two goods is inferior and the other is normal, but we need additional information to determine which of them is normal. 
A)  natural gas and electricity are both normal goods. 
B)  electricity and natural gas are complements. 
C)  electricity and natural gas are substitutes. 
D)  one of the two goods is inferior and the other is normal, but we need additional information to determine which of them is normal.

Question 13

The demand for agricultural output is price inelastic. This means that if farmers, taken collectively, have a bumper crop, they will have _____ prices, _____ quantities sold, and _____ incomes.

Accepted Answer

A)  lower; greater; lower 
B)  lower; greater; higher 
C)  lower; lower; lower 
D)  higher; higher; higher 
A)  lower; greater; lower 
B)  lower; greater; higher 
C)  lower; lower; lower 
D)  higher; higher; higher

Question 14

If the price of tacos increases from $1 to $2 and customers decrease their consumption from 10 tacos to 8 tacos, what is the price elasticity of demand (by the midpoint method)?

Accepted Answer

A)  1.5 
B)  1 
C)  0.33 
D)  0.5 
A)  1.5 
B)  1 
C)  0.33 
D)  0.5

Question 15

The price of a gallon of gasoline increases 10% this year. As a result, which of the following events is MOST likely to occur?

Accepted Answer

A)  More people will drive their cars. 
B)  Public transportation usage will decrease. 
C)  Gasoline expenditures will increase if gasoline is an inelastic good. 
D)  Fewer people will ride bicycles, a substitute for car travel. 
A)  More people will drive their cars. 
B)  Public transportation usage will decrease. 
C)  Gasoline expenditures will increase if gasoline is an inelastic good. 
D)  Fewer people will ride bicycles, a substitute for car travel.

Question 16

The price elasticity of demand for fresh tomatoes has been estimated to be 2.22. If a new insecticide and fertilizer treatment yields a 20% increase in the nation's fresh tomato crop, how will that affect total revenue from fresh tomatoes, all other things unchanged?

Accepted Answer

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

Question 17

If the cross-price elasticity of demand between rice and beans is -0.25, rice and beans are complements.

Accepted Answer

A) True 
 B)False

Question 18

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 $3, total revenue is _____. If the price is $4, total revenue is _____.

Accepted Answer

A)  $21; $24 
B)  $21; $18 
C)  $12; 28 
D)  $7; $13 
A)  $21; $24 
B)  $21; $18 
C)  $12; 28 
D)  $7; $13

Question 19

Use the following to answer questions:
Figure: The Market for Lattes  
-(Figure: The Market for Lattes) Look at the figure The Market for Lattes. What is the price elasticity of supply between the prices of $2 and $2.50 per cup, using the midpoint formula?

Accepted Answer

A)  1.00 
B)  1.29 
C)  1.51 
D)  3.00 
A)  1.00 
B)  1.29 
C)  1.51 
D)  3.00

Question 20

Suppose the price elasticity of demand for blueberries is 1.5. If climate change destroys one-fourth of the nation's blueberry crop, how will that affect total revenue, all other things unchanged?

Accepted Answer

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

The income elasticity of demand for eggs has been estimated to be 0.57. If income grows by 5% in a period, all other things unchanged, demand will:

Assume the price elasticity of demand for corn has been estimated to be 2.33. Flash floods destroy 10% of the nation's crop of corn. Which of the following best describes how this will affect total expenditures on corn, all other things equal?

When a public transit system (such as a subway or bus line) raises its fares, its total revenue may increase. This suggests that demand is:

If you wanted to make sure that your calculation of elasticity between two points was the same regardless of your initial point, you would use:

If the price elasticity of demand is found to be 6, then demand is:

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

Use the following to answer questions: Figure: The Market for Lattes -(Figure: The Market for Lattes) Look at the figure The Market for Lattes. What is the price elasticity of demand between $2 and $2.50 per cup, using the midpoint formula?

If a change in price causes total revenue to change in the same direction, we can conclude that the demand is:

The price elasticity of demand for cabbage has been estimated to be 0.25. If an insect infestation destroys 20% of the nation's cabbage crop (and thus reduces supply), how will that affect total expenditures on cabbage, all other things equal?

If the price of emergency visits to the doctor rose, we would expect:

Since for most people, eating in restaurants is a luxury and eating at home is a necessity, the price elasticity of demand for food eaten at home is less than the price elasticity of demand for eating in restaurants.

The cross-price elasticity of electricity with respect to the price of natural gas has been estimated as being equal to 0.2. This implies that:

The demand for agricultural output is price inelastic. This means that if farmers, taken collectively, have a bumper crop, they will have ___ prices, _ quantities sold, and ___ incomes.

If the price of tacos increases from $1 to $2 and customers decrease their consumption from 10 tacos to 8 tacos, what is the price elasticity of demand (by the midpoint method)?

The price of a gallon of gasoline increases 10% this year. As a result, which of the following events is MOST likely to occur?

The price elasticity of demand for fresh tomatoes has been estimated to be 2.22. If a new insecticide and fertilizer treatment yields a 20% increase in the nation's fresh tomato crop, how will that affect total revenue from fresh tomatoes, all other things unchanged?

If the cross-price elasticity of demand between rice and beans is -0.25, rice and beans are complements.

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 $3, total revenue is _. If the price is $4, total revenue is _.

Use the following to answer questions: Figure: The Market for Lattes -(Figure: The Market for Lattes) Look at the figure The Market for Lattes. What is the price elasticity of supply between the prices of $2 and $2.50 per cup, using the midpoint formula?

Suppose the price elasticity of demand for blueberries is 1.5. If climate change destroys one-fourth of the nation's blueberry crop, how will that affect total revenue, all other things unchanged?

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 income elasticity of demand for eggs has been estimated to be 0.57. If income grows by 5% in a period, all other things unchanged, demand will:

Assume the price elasticity of demand for corn has been estimated to be 2.33. Flash floods destroy 10% of the nation's crop of corn. Which of the following best describes how this will affect total expenditures on corn, all other things equal?

When a public transit system (such as a subway or bus line) raises its fares, its total revenue may increase. This suggests that demand is:

If you wanted to make sure that your calculation of elasticity between two points was the same regardless of your initial point, you would use:

If the price elasticity of demand is found to be 6, then demand is:

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

Use the following to answer questions: Figure: The Market for Lattes -(Figure: The Market for Lattes) Look at the figure The Market for Lattes. What is the price elasticity of demand between $2 and $2.50 per cup, using the midpoint formula?

If a change in price causes total revenue to change in the same direction, we can conclude that the demand is:

The price elasticity of demand for cabbage has been estimated to be 0.25. If an insect infestation destroys 20% of the nation's cabbage crop (and thus reduces supply), how will that affect total expenditures on cabbage, all other things equal?

If the price of emergency visits to the doctor rose, we would expect:

Since for most people, eating in restaurants is a luxury and eating at home is a necessity, the price elasticity of demand for food eaten at home is less than the price elasticity of demand for eating in restaurants.

The cross-price elasticity of electricity with respect to the price of natural gas has been estimated as being equal to 0.2. This implies that:

The demand for agricultural output is price inelastic. This means that if farmers, taken collectively, have a bumper crop, they will have _____ prices, _____ quantities sold, and _____ incomes.

If the price of tacos increases from $1 to $2 and customers decrease their consumption from 10 tacos to 8 tacos, what is the price elasticity of demand (by the midpoint method)?

The price of a gallon of gasoline increases 10% this year. As a result, which of the following events is MOST likely to occur?

The price elasticity of demand for fresh tomatoes has been estimated to be 2.22. If a new insecticide and fertilizer treatment yields a 20% increase in the nation's fresh tomato crop, how will that affect total revenue from fresh tomatoes, all other things unchanged?

If the cross-price elasticity of demand between rice and beans is -0.25, rice and beans are complements.

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 $3, total revenue is _____. If the price is $4, total revenue is _____.

Use the following to answer questions: Figure: The Market for Lattes -(Figure: The Market for Lattes) Look at the figure The Market for Lattes. What is the price elasticity of supply between the prices of $2 and $2.50 per cup, using the midpoint formula?

Suppose the price elasticity of demand for blueberries is 1.5. If climate change destroys one-fourth of the nation's blueberry crop, how will that affect total revenue, all other things unchanged?

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 demand for agricultural output is price inelastic. This means that if farmers, taken collectively, have a bumper crop, they will have ___ prices, _ quantities sold, and ___ incomes.

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 $3, total revenue is _. If the price is $4, total revenue is _.