Question 1

A fall in the price of lemons from $10.50 to $9.50 per bushel increases the quantity demanded from 19,200 to 20,800 bushels. The price elasticity of demand is

Accepted Answer

A)  0.80. 
B)  1.20. 
C)  1.25. 
D)  8.00. 
A)  0.80. 
B)  1.20. 
C)  1.25. 
D)  8.00.

Question 2

Which of the following statements is FALSE?

Accepted Answer

A)  A good with a vertical demand curve has a perfectly inelastic demand. 
B)  A good with a straight line, downward sloping demand curve has a demand whose elasticity is constant. 
C)  A good with a horizontal demand curve has a perfectly elastic demand. 
D)  All of the above statements are false. 
A)  A good with a vertical demand curve has a perfectly inelastic demand. 
B)  A good with a straight line, downward sloping demand curve has a demand whose elasticity is constant. 
C)  A good with a horizontal demand curve has a perfectly elastic demand. 
D)  All of the above statements are false.

Question 3

-The table above gives the demand schedule for museum visits.
a) You, as the resident economist, have been given the task of maximizing the museum's total revenue. What admission price should you charge?
b) What is the elasticity of demand between $6 and $4?
c) Moving along the demand schedule from $10 to $8 to $6 and ultimately to $4, how does the price elasticity of demand change in size?

Accepted Answer

a) The admission price you should charge

Question 4

-In the above figure, if the price of good A falls from P0 to P1 and the demand for good B increases from D0 to D1, then goods A and B

Accepted Answer

A)  are substitute goods. 
B)  are inferior goods. 
C)  will have a negative cross elasticity of demand. 
D)  are both price elastic but not perfectly price elastic. 
A)  are substitute goods. 
B)  are inferior goods. 
C)  will have a negative cross elasticity of demand. 
D)  are both price elastic but not perfectly price elastic.

Question 5

Can electric utility companies always raise their total revenue by raising their rates?

Accepted Answer

No. As electric companies continue to ra

Question 6

The income elasticity of demand for restaurant meals is 1.61. So

Accepted Answer

A)  if income increases by 16.1 percent, the quantity demanded of restaurant meals will increase by 10 percent. 
B)  if income increases by 10 percent, the quantity demanded of restaurant meals will increase by 16.1 percent. 
C)  restaurant meals are an income elastic normal good. 
D)  Both answers B and C are correct. 
A)  if income increases by 16.1 percent, the quantity demanded of restaurant meals will increase by 10 percent. 
B)  if income increases by 10 percent, the quantity demanded of restaurant meals will increase by 16.1 percent. 
C)  restaurant meals are an income elastic normal good. 
D)  Both answers B and C are correct.

Question 7

The price elasticity of demand for DVDs is 2. If the price of a DVD increased by 2 percent, the quantity demanded will

Accepted Answer

A)  decrease by 2 percent. 
B)  not change. 
C)  decrease by 4 percent. 
D)  decrease by 1 percent. 
A)  decrease by 2 percent. 
B)  not change. 
C)  decrease by 4 percent. 
D)  decrease by 1 percent.

Question 8

If a 20 percent increase in the price of a used car results in a 10 percent decrease in the quantity of used cars demanded, then the price elasticity of demand equals

Accepted Answer

A)  0.5. 
B)  1.0. 
C)  2.0. 
D)  10.0. 
A)  0.5. 
B)  1.0. 
C)  2.0. 
D)  10.0.

Question 9

-Consider the straight-line demand curve illustrated in the figure above. At a price of $6, demand is

Accepted Answer

A)  inelastic. 
B)  elastic. 
C)  unit elastic. 
D)  More information is needed to determine if the demand is elastic, unit elastic, or inelastic. 
A)  inelastic. 
B)  elastic. 
C)  unit elastic. 
D)  More information is needed to determine if the demand is elastic, unit elastic, or inelastic.

Question 10

The elasticity of demand is constant along a downward sloping straight-line demand curve.

Accepted Answer

A) True 
 B)False

Question 11

To maximize its revenue

Accepted Answer

A)  a firm facing inelastic demand should always raise its price. 
B)  a firm facing elastic demand should always raise its price. 
C)  a firm should always charge the highest price possible regardless of the elasticity of demand. 
D)  None of the above answers is correct. 
A)  a firm facing inelastic demand should always raise its price. 
B)  a firm facing elastic demand should always raise its price. 
C)  a firm should always charge the highest price possible regardless of the elasticity of demand. 
D)  None of the above answers is correct.

Question 12

The elasticity of supply measures the sensitivity of

Accepted Answer

A)  supply to changes in costs. 
B)  quantity supplied to quantity demanded. 
C)  quantity supplied to a change in price. 
D)  price to changes in supply. 
A)  supply to changes in costs. 
B)  quantity supplied to quantity demanded. 
C)  quantity supplied to a change in price. 
D)  price to changes in supply.

Question 13

If peanut butter and jelly are complements, then their cross elasticity of demand must be

Accepted Answer

A)  infinitely high. 
B)  a positive number that might be greater than 1. 
C)  a number between zero and one. 
D)  a negative number. 
A)  infinitely high. 
B)  a positive number that might be greater than 1. 
C)  a number between zero and one. 
D)  a negative number.

Question 14

A shift of the supply curve of oil raises the price from $60 a barrel to $75 a barrel and reduces the quantity demanded from 40 million to 20 million barrels a day. You can conclude that the

Accepted Answer

A)  demand for oil is elastic. 
B)  demand for oil is inelastic. 
C)  supply of oil is elastic. 
D)  supply of oil is inelastic. 
A)  demand for oil is elastic. 
B)  demand for oil is inelastic. 
C)  supply of oil is elastic. 
D)  supply of oil is inelastic.

Question 15

Paul's monthly income decreased from $2,500 to $2,300. As a result, he decreased the number of DVDs he rents per month from 5 to 4. Paul's demand for DVD rentals is

Accepted Answer

A)  price elastic. 
B)  price inelastic. 
C)  income elastic. 
D)  income inelastic. 
A)  price elastic. 
B)  price inelastic. 
C)  income elastic. 
D)  income inelastic.

Question 16

-The above figure shows the demand curve for movie rentals from Redbox. At which of the following prices does Redbox have the maximum total revenue?

Accepted Answer

A)  $5.00 
B)  $3.50 
C)  $2.50 
D)  $0.00 
A)  $5.00 
B)  $3.50 
C)  $2.50 
D)  $0.00

Question 17

If Sam wants to increase her total revenue from her sales of flowers and she knows that the demand for flowers is price inelastic, she should

Accepted Answer

A)  lower her price to increase the demand and shift the demand curve rightward. 
B)  raise her price because she knows that the quantity demanded will also increase. 
C)  raise her price because she knows that the percentage decrease in the quantity demanded will be smaller than the percentage increase in price. 
D)  lower her price because she knows that the percentage increase in the quantity demanded will be greater than the percentage decrease in price. 
A)  lower her price to increase the demand and shift the demand curve rightward. 
B)  raise her price because she knows that the quantity demanded will also increase. 
C)  raise her price because she knows that the percentage decrease in the quantity demanded will be smaller than the percentage increase in price. 
D)  lower her price because she knows that the percentage increase in the quantity demanded will be greater than the percentage decrease in price.

Question 18

A local pizzeria raised its price from $9 to $11 for each pizza and the sales of its pizza decreased from 150 to 100 per day. What is the price elasticity of demand in this case?

Accepted Answer

A)  1/2 
B)  -2 
C)  -1/2 
D)  2 
A)  1/2 
B)  -2 
C)  -1/2 
D)  2

Question 19

If a product has very few substitutes, demand elasticity is likely to be

Accepted Answer

A)  1. 
B)  elastic. 
C)  infinitely elastic. 
D)  inelastic. 
A)  1. 
B)  elastic. 
C)  infinitely elastic. 
D)  inelastic.

Question 20

Toothpaste and toothbrushes are complements, so the ________ elasticity of demand is ________.

Accepted Answer

A)  cross; positive 
B)  income; negative 
C)  cross; negative 
D)  income; positive 
A)  cross; positive 
B)  income; negative 
C)  cross; negative 
D)  income; positive

A fall in the price of lemons from $10.50 to $9.50 per bushel increases the quantity demanded from 19,200 to 20,800 bushels. The price elasticity of demand is

Which of the following statements is FALSE?

-In the above figure, if the price of good A falls from P₀ to P₁ and the demand for good B increases from D₀ to D₁, then goods A and B

Can electric utility companies always raise their total revenue by raising their rates?

The income elasticity of demand for restaurant meals is 1.61. So

The price elasticity of demand for DVDs is 2. If the price of a DVD increased by 2 percent, the quantity demanded will

If a 20 percent increase in the price of a used car results in a 10 percent decrease in the quantity of used cars demanded, then the price elasticity of demand equals

-Consider the straight-line demand curve illustrated in the figure above. At a price of $6, demand is

The elasticity of demand is constant along a downward sloping straight-line demand curve.

To maximize its revenue

The elasticity of supply measures the sensitivity of

If peanut butter and jelly are complements, then their cross elasticity of demand must be

A shift of the supply curve of oil raises the price from $60 a barrel to $75 a barrel and reduces the quantity demanded from 40 million to 20 million barrels a day. You can conclude that the

Paul's monthly income decreased from $2,500 to $2,300. As a result, he decreased the number of DVDs he rents per month from 5 to 4. Paul's demand for DVD rentals is

-The above figure shows the demand curve for movie rentals from Redbox. At which of the following prices does Redbox have the maximum total revenue?

If Sam wants to increase her total revenue from her sales of flowers and she knows that the demand for flowers is price inelastic, she should

A local pizzeria raised its price from $9 to $11 for each pizza and the sales of its pizza decreased from 150 to 100 per day. What is the price elasticity of demand in this case?

If a product has very few substitutes, demand elasticity is likely to be

Toothpaste and toothbrushes are complements, so the elasticity of demand is .

What Is Economics

The Economic Problem

Demand and Supply

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

Exam 4: Elasticity

A fall in the price of lemons from $10.50 to $9.50 per bushel increases the quantity demanded from 19,200 to 20,800 bushels. The price elasticity of demand is

Which of the following statements is FALSE?

-In the above figure, if the price of good A falls from P0 to P1 and the demand for good B increases from D0 to D1, then goods A and B

Can electric utility companies always raise their total revenue by raising their rates?

The income elasticity of demand for restaurant meals is 1.61. So

The price elasticity of demand for DVDs is 2. If the price of a DVD increased by 2 percent, the quantity demanded will

If a 20 percent increase in the price of a used car results in a 10 percent decrease in the quantity of used cars demanded, then the price elasticity of demand equals

-Consider the straight-line demand curve illustrated in the figure above. At a price of $6, demand is

The elasticity of demand is constant along a downward sloping straight-line demand curve.

To maximize its revenue

The elasticity of supply measures the sensitivity of

If peanut butter and jelly are complements, then their cross elasticity of demand must be

A shift of the supply curve of oil raises the price from $60 a barrel to $75 a barrel and reduces the quantity demanded from 40 million to 20 million barrels a day. You can conclude that the

Paul's monthly income decreased from $2,500 to $2,300. As a result, he decreased the number of DVDs he rents per month from 5 to 4. Paul's demand for DVD rentals is

-The above figure shows the demand curve for movie rentals from Redbox. At which of the following prices does Redbox have the maximum total revenue?

If Sam wants to increase her total revenue from her sales of flowers and she knows that the demand for flowers is price inelastic, she should

A local pizzeria raised its price from $9 to $11 for each pizza and the sales of its pizza decreased from 150 to 100 per day. What is the price elasticity of demand in this case?

If a product has very few substitutes, demand elasticity is likely to be

Toothpaste and toothbrushes are complements, so the ________ elasticity of demand is ________.

What Is Economics

The Economic Problem

Demand and Supply

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

-In the above figure, if the price of good A falls from P₀ to P₁ and the demand for good B increases from D₀ to D₁, then goods A and B

Toothpaste and toothbrushes are complements, so the elasticity of demand is .