Question 1

Demand is said to be price elastic at a point on a demand curve if a

Accepted Answer

A)  1 percent rise in price reduces the quantity demanded by more than 1 percent. 
B)  1 percent rise in price reduces the quantity demanded by less than 1 percent. 
C)  1 percent rise in price reduces the quantity demanded by more than 10 percent. 
D)  10 percent rise in price reduces the quantity demanded by less than 10 percent. 
A)  1 percent rise in price reduces the quantity demanded by more than 1 percent. 
B)  1 percent rise in price reduces the quantity demanded by less than 1 percent. 
C)  1 percent rise in price reduces the quantity demanded by more than 10 percent. 
D)  10 percent rise in price reduces the quantity demanded by less than 10 percent.

Question 2

Why is it customary to report price elasticity of demand in absolute value terms, while cross elasticities and income elasticities are reported with their sign attached?

Accepted Answer

Price elasticity of demand is always neg

Question 3

Perfectly elastic demand curves are vertical.

Accepted Answer

A) True 
 B)False

Question 4

Buyers' expenditures and sellers' revenues are always identical.

Accepted Answer

A) True 
 B)False

Question 5

The following table contains information regarding price and output for a firm.For each point except the first, calculate the elasticity between it and the point above.
 $$\begin{array} { c c c } 
 \underline { \text { Price} } &  \underline { \text { Quantity} } &  \underline { \text { Elasticity} } \
\$ 7 & 10 &  \underline {   \quad  \quad  \quad  \quad  } \
6 & 20 &   \underline {   \quad  \quad  \quad  \quad  }\
5 & 30 &   \underline {   \quad  \quad  \quad  \quad  } \
4 & 40 &   \underline {   \quad  \quad  \quad  \quad  }\
3 & 50 &   \underline {   \quad  \quad  \quad  \quad  } \
2 & 60 &  \underline {   \quad  \quad  \quad  \quad  }\
1 & 70 &   \underline {   \quad  \quad  \quad  \quad  }
\end{array}$$

Accepted Answer

\[\begin{array} { c c c } 
 \underline {

Question 6

A straight-line demand curve has the same elasticity throughout its length.

Accepted Answer

A) True 
 B)False

Question 7

A craze for apples in Riverdale increases the quantity demanded at every price by five bushels.Between any two prices, the new demand curve will be ____ the old demand curve.

Accepted Answer

A)  more elastic than 
B)  less elastic than 
C)  equal in elasticity to 
D)  More information is needed to predict the relationship. 
A)  more elastic than 
B)  less elastic than 
C)  equal in elasticity to 
D)  More information is needed to predict the relationship.

Question 8

When Scuba, Inc., lowered the price of a tank of compressed air by 20 percent, it sold 10 percent more tankfuls.The price elasticity for compressed air is

Accepted Answer

A)  2. 
B)  1/2. 
C)  1. 
D)  20. 
A)  2. 
B)  1/2. 
C)  1. 
D)  20.

Question 9

A demand curve is described as perfectly inelastic if

Accepted Answer

A)  the same quantity is purchased regardless of price. 
B)  the same price is charged regardless of quantity sold. 
C)  neither price nor quantity demanded ever change. 
D)  only quantity demanded can change. 
A)  the same quantity is purchased regardless of price. 
B)  the same price is charged regardless of quantity sold. 
C)  neither price nor quantity demanded ever change. 
D)  only quantity demanded can change.

Question 10

When Johanna cut prices in her jewelry store by 20 percent, the dollar value of her sales fell by 20 percent.This indicates that

Accepted Answer

A)  demand was elastic. 
B)  demand was inelastic. 
C)  demand was unit elastic. 
D)  the demand curve was vertical. 
A)  demand was elastic. 
B)  demand was inelastic. 
C)  demand was unit elastic. 
D)  the demand curve was vertical.

Question 11

The elasticity formula solves the units problem because percentages are unaffected by the units of measure.

Accepted Answer

A) True 
 B)False

Question 12

A vertical demand curve has an elasticity of demand equal to zero.

Accepted Answer

A) True 
 B)False

Question 13

The measure used to determine whether two products are substitutes or complements is called

Accepted Answer

A)  price elasticity of demand. 
B)  income elasticity of demand. 
C)  cross elasticity of demand. 
D)  inverse elasticity of demand. 
A)  price elasticity of demand. 
B)  income elasticity of demand. 
C)  cross elasticity of demand. 
D)  inverse elasticity of demand.

Question 14

The demand for French Roast coffee is likely to be

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  perfectly inelastic. 
A)  elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  perfectly inelastic.

Question 15

Why do economists measure responsiveness of demand to price in percentage changes rather than in absolute changes?

Accepted Answer

Different units of measurement will give

Question 16

The slope of the demand curve conveys all the useful information about elasticity.

Accepted Answer

A) True 
 B)False

Question 17

Arrange the following goods from least to most elastic, explaining your ordering: gasoline, Exxon gas, Exxon gas at a particular gas station.

Accepted Answer

Gasoline is least elastic, since there a

Question 18

If demand is elastic, an increase in price will increase total revenue.

Accepted Answer

A) True 
 B)False

Question 19

Perfectly inelastic demand curves are vertical.

Accepted Answer

A) True 
 B)False

Question 20

In a past fare war, U.S.Air reduced the price of its Charlotte, North Carolina, to New York City round-trip fare from $198 to $138 to match American Airlines.U.S.Air did so reluctantly, saying it would cost the company millions of dollars in revenue.American, on the other hand, believed the fare cut would increase its revenue.What different assumptions about the underlying price elasticity of demand did each airline believe true?

Accepted Answer

U.S.Air must have believed demand in thi

Exam 6: Demand and Elasticity

Demand is said to be price elastic at a point on a demand curve if a

Why is it customary to report price elasticity of demand in absolute value terms, while cross elasticities and income elasticities are reported with their sign attached?

Perfectly elastic demand curves are vertical.

Buyers' expenditures and sellers' revenues are always identical.

The following table contains information regarding price and output for a firm.For each point except the first, calculate the elasticity between it and the point above. \ 7 10 6 20 5 30 4 40 3 50 2 60 1 70

A straight-line demand curve has the same elasticity throughout its length.

A craze for apples in Riverdale increases the quantity demanded at every price by five bushels.Between any two prices, the new demand curve will be ____ the old demand curve.

When Scuba, Inc., lowered the price of a tank of compressed air by 20 percent, it sold 10 percent more tankfuls.The price elasticity for compressed air is

A demand curve is described as perfectly inelastic if

When Johanna cut prices in her jewelry store by 20 percent, the dollar value of her sales fell by 20 percent.This indicates that

The elasticity formula solves the units problem because percentages are unaffected by the units of measure.

A vertical demand curve has an elasticity of demand equal to zero.

The measure used to determine whether two products are substitutes or complements is called

The demand for French Roast coffee is likely to be

Why do economists measure responsiveness of demand to price in percentage changes rather than in absolute changes?

The slope of the demand curve conveys all the useful information about elasticity.

Arrange the following goods from least to most elastic, explaining your ordering: gasoline, Exxon gas, Exxon gas at a particular gas station.

If demand is elastic, an increase in price will increase total revenue.

Perfectly inelastic demand curves are vertical.

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

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