Question 1

As one moves down a straight-line demand curve, the elasticity increases.

Accepted Answer

A) True 
 B)False

Question 2

The cross elasticity between two goods has been measured at -1.2.How are the goods related? Explain.Give an example of goods for which this might be a reasonable measure of cross elasticity.

Accepted Answer

The goods are complements.An increase in

Question 3

Figure 6-3
  
-In Figure 6-3(b), as price falls from $15 to $6, total expenditure

Accepted Answer

A)  falls. 
B)  increases. 
C)  remains constant. 
D)  first falls and then increases. 
A)  falls. 
B)  increases. 
C)  remains constant. 
D)  first falls and then increases.

Question 4

If demand is elastic, a rise in price will decrease total expenditure.

Accepted Answer

A) True 
 B)False

Question 5

Figure 6-6
  
-An article in the Wall Street Journal reports that "most cable TV operators are aware that cable is price sensitive, and there comes a point where people won't pay the price." Which demand curve in Figure 6-6 best illustrates this situation?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 6

Which of the following goods will have the most inelastic demand at any time?

Accepted Answer

A)  jewelry 
B)  Big Macs 
C)  electricity 
D)  pork chops 
A)  jewelry 
B)  Big Macs 
C)  electricity 
D)  pork chops

Question 7

After a $5 million ad campaign, Coca-Cola measured its effectiveness by calculating the cross elasticity of demand between Coke and Pepsi.A successful campaign would be indicated if the cross elasticity went from

Accepted Answer

A)  0.9 to 0.5. 
B)  0.9 to 1.5. 
C)  -0.5 to -0.2. 
D)  -0.9 to -1.5. 
A)  0.9 to 0.5. 
B)  0.9 to 1.5. 
C)  -0.5 to -0.2. 
D)  -0.9 to -1.5.

Question 8

The emigration of some of Whoville's workers reduces the quantity of thingamabobs supplied at every price by 50.The new supply curve will ____ the old supply curve.

Accepted Answer

A)  be steeper and less elastic at every price than 
B)  have the same slope and the same elasticity at every price as 
C)  have the same slope and be more elastic at every price than 
D)  More information is needed to predict the relationship between the elasticities of the two supply curves. 
A)  be steeper and less elastic at every price than 
B)  have the same slope and the same elasticity at every price as 
C)  have the same slope and be more elastic at every price than 
D)  More information is needed to predict the relationship between the elasticities of the two supply curves.

Question 9

The elasticity of a demand curve at any point can be ascertained by its steepness.

Accepted Answer

A) True 
 B)False

Question 10

Figure 6-5
  
-In Figure 6-5, if price falls from point A to point B along the unit-elastic demand curve,

Accepted Answer

A)  total expenditure remains unchanged. 
B)  total expenditure increases. 
C)  total expenditure decreases. 
D)  total expenditure first increases and then declines. 
A)  total expenditure remains unchanged. 
B)  total expenditure increases. 
C)  total expenditure decreases. 
D)  total expenditure first increases and then declines.

Question 11

Certain goods are related such that an increase in the price of one good decreases the quantity demanded of the other.These goods are

Accepted Answer

A)  complements. 
B)  substitutes. 
C)  luxury goods. 
D)  competing goods. 
A)  complements. 
B)  substitutes. 
C)  luxury goods. 
D)  competing goods.

Question 12

Chicken and fish are substitutes.Therefore, the cross elasticity of demand between chicken and fish is

Accepted Answer

A)  negative. 
B)  positive. 
C)  zero. 
D)  Any of the above is possible. 
A)  negative. 
B)  positive. 
C)  zero. 
D)  Any of the above is possible.

Question 13

If Polaroid wanted damages against Kodak for infringing on its instant development film process, and the courts found a high positive cross elasticity between purchases of Polaroid instant film and 35mm regular film, would that have strengthened or weakened Polaroid's claim against Kodak?

Accepted Answer

A large positive cross elasticity showed

Question 14

Elasticity provides a guide to both

Accepted Answer

A)  market stability and change in revenue as price changes. 
B)  responsiveness of quantity demanded to a change in price and market stability. 
C)  responsiveness of quantity demanded to a change in price and change in revenue as price changes. 
D)  technological change and change in revenue as price changes. 
A)  market stability and change in revenue as price changes. 
B)  responsiveness of quantity demanded to a change in price and market stability. 
C)  responsiveness of quantity demanded to a change in price and change in revenue as price changes. 
D)  technological change and change in revenue as price changes.

Question 15

Elasticity of demand is another way to measure slope.

Accepted Answer

A) True 
 B)False

Question 16

If the income of buyers increases and a company maintains the same price, what is the most likely impact on quantity sold? Explain.Draw a graphical display of the result.

Accepted Answer

The most likely result will be

Question 17

If the price of gasoline rises by 20 percent and consumption of gasoline falls 5 percent,

Accepted Answer

A)  demand is elastic. 
B)  demand is unit-elastic. 
C)  demand is inelastic. 
D)  elasticity of demand cannot be calculated. 
A)  demand is elastic. 
B)  demand is unit-elastic. 
C)  demand is inelastic. 
D)  elasticity of demand cannot be calculated.

Question 18

If demand is unit elastic, then a 10 percent increase in price will lead to a 10 percent drop in quantity demanded.

Accepted Answer

A) True 
 B)False

Question 19

The formula for price elasticity of demand that is used in practice

Accepted Answer

A)  usually drops all minus signs. 
B)  usually takes on different values at different points on the demand curve. 
C)  may calculate the percentage change in price between P₁ and P₂ as " (P₂ - P₁) as a percentage of (P₁ + P₂)/2." 
D)  All of the above are correct. 
A)  usually drops all minus signs. 
B)  usually takes on different values at different points on the demand curve. 
C)  may calculate the percentage change in price between P₁ and P₂ as " (P₂ - P₁) as a percentage of (P₁ + P₂)/2." 
D)  All of the above are correct.

Question 20

John's Bait Shop was surprised to learn that when it raised prices by 10 percent, total revenue was unaffected.This is because the elasticity for bait is

Accepted Answer

A)  unit elastic. 
B)  inelastic. 
C)  elastic. 
D)  Not enough information is given. 
A)  unit elastic. 
B)  inelastic. 
C)  elastic. 
D)  Not enough information is given.

Exam 6: Demand and Elasticity

As one moves down a straight-line demand curve, the elasticity increases.

The cross elasticity between two goods has been measured at -1.2.How are the goods related? Explain.Give an example of goods for which this might be a reasonable measure of cross elasticity.

Figure 6-3 -In Figure 6-3(b), as price falls from $15 to $6, total expenditure

If demand is elastic, a rise in price will decrease total expenditure.

Figure 6-6 -An article in the Wall Street Journal reports that "most cable TV operators are aware that cable is price sensitive, and there comes a point where people won't pay the price." Which demand curve in Figure 6-6 best illustrates this situation?

Which of the following goods will have the most inelastic demand at any time?

After a $5 million ad campaign, Coca-Cola measured its effectiveness by calculating the cross elasticity of demand between Coke and Pepsi.A successful campaign would be indicated if the cross elasticity went from

The emigration of some of Whoville's workers reduces the quantity of thingamabobs supplied at every price by 50.The new supply curve will ____ the old supply curve.

The elasticity of a demand curve at any point can be ascertained by its steepness.

Figure 6-5 -In Figure 6-5, if price falls from point A to point B along the unit-elastic demand curve,

Certain goods are related such that an increase in the price of one good decreases the quantity demanded of the other.These goods are

Chicken and fish are substitutes.Therefore, the cross elasticity of demand between chicken and fish is

If Polaroid wanted damages against Kodak for infringing on its instant development film process, and the courts found a high positive cross elasticity between purchases of Polaroid instant film and 35mm regular film, would that have strengthened or weakened Polaroid's claim against Kodak?

Elasticity provides a guide to both

Elasticity of demand is another way to measure slope.

If the income of buyers increases and a company maintains the same price, what is the most likely impact on quantity sold? Explain.Draw a graphical display of the result.

If the price of gasoline rises by 20 percent and consumption of gasoline falls 5 percent,

If demand is unit elastic, then a 10 percent increase in price will lead to a 10 percent drop in quantity demanded.

The formula for price elasticity of demand that is used in practice

John's Bait Shop was surprised to learn that when it raised prices by 10 percent, total revenue was unaffected.This is because the elasticity for bait is

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

Filters