Question 1

When Sam's annual income was only $15,000, he purchased 50 pounds of bananas a year. When his income rose to $18,000, he purchased 55 pounds a year. Therefore

Accepted Answer

A)  for Sam, bananas are an inferior good. 
B)  his income elasticity of demand for bananas is negative. 
C)  his income elasticity and price elasticity of demand for bananas are both greater than one. 
D)  for Sam, bananas are a normal good. 
A)  for Sam, bananas are an inferior good. 
B)  his income elasticity of demand for bananas is negative. 
C)  his income elasticity and price elasticity of demand for bananas are both greater than one. 
D)  for Sam, bananas are a normal good.

Question 2

If cable TV subscriptions and movie rentals are substitutes for each other, what is the effect in each of these markets of an increase in wages for people who work for the cable TV company? Use your analysis to determine the sign of the cross elasticity of demand between the quantity of movie rentals and the price of cable TV.

Accepted Answer

The supply curve of cable TV shifts left

Question 3

If demand for Farmer John's maple syrup is inelastic, then when Farmer John raises the price of maple syrup, his total revenue will

Accepted Answer

A)  increase. 
B)  decrease. 
C)  stay the same. 
D)  probably change, but more information is needed to determine if the total revenue increases, decreases, or stays the same. 
A)  increase. 
B)  decrease. 
C)  stay the same. 
D)  probably change, but more information is needed to determine if the total revenue increases, decreases, or stays the same.

Question 4

If at a given moment, no matter what the price, producers cannot change the quantity supplied, the momentary supply

Accepted Answer

A)  has zero elasticity. 
B)  has unit elasticity. 
C)  has infinite elasticity. 
D)  does not exist. 
A)  has zero elasticity. 
B)  has unit elasticity. 
C)  has infinite elasticity. 
D)  does not exist.

Question 5

The greater the substitutability between Northwest timber and Southeast timber, the ________ is the cross elasticity of demand between timber from the two regions and the ________ is the elasticity of demand for Northwest timber.

Accepted Answer

A)  smaller; smaller 
B)  smaller; larger 
C)  larger; smaller 
D)  larger; larger 
A)  smaller; smaller 
B)  smaller; larger 
C)  larger; smaller 
D)  larger; larger

Question 6

The price elasticity of demand measures

Accepted Answer

A)  how often the price of a good changes. 
B)  the slope of a budget curve. 
C)  how sensitive the quantity demanded is to changes in demand. 
D)  the responsiveness of the quantity demanded to changes in price. 
A)  how often the price of a good changes. 
B)  the slope of a budget curve. 
C)  how sensitive the quantity demanded is to changes in demand. 
D)  the responsiveness of the quantity demanded to changes in price.

Question 7

Price elasticity of demand is a units-free measure.

Accepted Answer

A) True 
 B)False

Question 8

Suppose inter-city bus travel is a substitute for transportation by train. Which of the following could then be TRUE?

Accepted Answer

A)  The cross elasticity between bus and train travel could equal 0.65. 
B)  The cross elasticity between bus and train travel could equal 1.0. 
C)  The cross elasticity between bus and train travel could equal 1.25. 
D)  All of the above could be true. 
A)  The cross elasticity between bus and train travel could equal 0.65. 
B)  The cross elasticity between bus and train travel could equal 1.0. 
C)  The cross elasticity between bus and train travel could equal 1.25. 
D)  All of the above could be true.

Question 9

-The above figure illustrates the demand curve for a good. The good has

Accepted Answer

A)  no substitutes. 
B)  only one substitute. 
C)  only a few substitutes. 
D)  many substitutes. 
A)  no substitutes. 
B)  only one substitute. 
C)  only a few substitutes. 
D)  many substitutes.

Question 10

If the total revenue received by sellers of DVDs increases by 20 percent when price increases by 10 percent, then demand for DVDs is

Accepted Answer

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

Question 11

The taxicab fare in Newville is regulated. The fare currently charged is $6 a ride. Newville taxicab drivers want to obtain government's permission to lower the fare, which they think will increase their total revenue. From this we can conclude that the drivers believe that the demand for taxicab rides is

Accepted Answer

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

Question 12

If the cross elasticity of demand between goods A and B is negative

Accepted Answer

A)  the demands for A and B are both price elastic. 
B)  the demands for A and B are both price inelastic. 
C)  A and B are complements. 
D)  A and B are substitutes. 
A)  the demands for A and B are both price elastic. 
B)  the demands for A and B are both price inelastic. 
C)  A and B are complements. 
D)  A and B are substitutes.

Question 13

In the summer 2012 the lobster catch in Maine was especially large, but instead of celebrating the fisherman were suffering from a lower total revenue. (Source: New York Times, July 28, 2012) As the lobster catch increases, there is

Accepted Answer

A)  a movement along the demand curve, resulting in a higher price and a decreased quantity. 
B)  a movement along the demand curve, resulting in a lower price and an increased quantity. 
C)  no change in either the price or the quantity. 
D)  a movement along the demand curve, resulting in a higher price and an increased quantity. 
A)  a movement along the demand curve, resulting in a higher price and a decreased quantity. 
B)  a movement along the demand curve, resulting in a lower price and an increased quantity. 
C)  no change in either the price or the quantity. 
D)  a movement along the demand curve, resulting in a higher price and an increased quantity.

Question 14

-The increase in the demand for widgets, shown in the figure above, is the result of a decrease in the price of McBoover devices from $11 to $9. Therefore, the cross-price elasticity for these two products is

Accepted Answer

A)  -2.0. 
B)  -0.5. 
C)  0.5. 
D)  2.0. 
A)  -2.0. 
B)  -0.5. 
C)  0.5. 
D)  2.0.

Question 15

If tea and coffee are substitutes, the cross elasticity of coffee with respect to the price of tea will be ________ and an increase in the price of tea will ________ the demand for coffee.

Accepted Answer

A)  positive; increase 
B)  negative; decrease 
C)  negative; increase 
D)  positive; decrease 
A)  positive; increase 
B)  negative; decrease 
C)  negative; increase 
D)  positive; decrease

Question 16

If the owner of a local movie theater wanted to increase the theater's total revenue from movie admissions, what should the owner do with ticket prices?

Accepted Answer

If moviegoers' demand is elastic, the ow

Question 17

An important determinant of the price elasticity of supply is the extent to which

Accepted Answer

A)  the commodity is a luxury or a necessity. 
B)  the demand for it is both price and income elastic. 
C)  the product has many complements or substitutes. 
D)  production requires the use of particularly scarce or specialized resources. 
A)  the commodity is a luxury or a necessity. 
B)  the demand for it is both price and income elastic. 
C)  the product has many complements or substitutes. 
D)  production requires the use of particularly scarce or specialized resources.

Question 18

If the price of a magazine increases from $5 to $7 and the quantity demanded of the magazines decreases from 10 million per month to 8 million per month, using the midpoint method, what is the price elasticity of demand? Show your work. Is the demand elastic, inelastic, or unit elastic?

Accepted Answer

The price elasticity of demand = (percen

Question 19

The price elasticity of demand equals magnitude of the

Accepted Answer

A)  change in the price divided by the change in quantity demanded. 
B)  change in the quantity demanded divided by the change in price. 
C)  percentage change in the price divided by the percentage change in the quantity demanded. 
D)  percentage change in the quantity demanded divided by the percentage change in the price. 
A)  change in the price divided by the change in quantity demanded. 
B)  change in the quantity demanded divided by the change in price. 
C)  percentage change in the price divided by the percentage change in the quantity demanded. 
D)  percentage change in the quantity demanded divided by the percentage change in the price.

Question 20

Many younger people eat peanut butter AND jelly, whereas many older people eat peanut butter OR jelly. This suggests that the cross elasticity of demand between peanut butter and jelly is

Accepted Answer

A)  negative for youngsters and positive for oldsters. 
B)  positive for youngsters and negative for oldsters. 
C)  negative for youngsters and zero for oldsters. 
D)  positive for youngsters and zero for oldsters. 
A)  negative for youngsters and positive for oldsters. 
B)  positive for youngsters and negative for oldsters. 
C)  negative for youngsters and zero for oldsters. 
D)  positive for youngsters and zero for oldsters.

When Sam's annual income was only $15,000, he purchased 50 pounds of bananas a year. When his income rose to $18,000, he purchased 55 pounds a year. Therefore

If demand for Farmer John's maple syrup is inelastic, then when Farmer John raises the price of maple syrup, his total revenue will

If at a given moment, no matter what the price, producers cannot change the quantity supplied, the momentary supply

The greater the substitutability between Northwest timber and Southeast timber, the is the cross elasticity of demand between timber from the two regions and the is the elasticity of demand for Northwest timber.

The price elasticity of demand measures

Price elasticity of demand is a units-free measure.

Suppose inter-city bus travel is a substitute for transportation by train. Which of the following could then be TRUE?

-The above figure illustrates the demand curve for a good. The good has

If the total revenue received by sellers of DVDs increases by 20 percent when price increases by 10 percent, then demand for DVDs is

If the cross elasticity of demand between goods A and B is negative

In the summer 2012 the lobster catch in Maine was especially large, but instead of celebrating the fisherman were suffering from a lower total revenue. (Source: New York Times, July 28, 2012) As the lobster catch increases, there is

-The increase in the demand for widgets, shown in the figure above, is the result of a decrease in the price of McBoover devices from $11 to $9. Therefore, the cross-price elasticity for these two products is

If tea and coffee are substitutes, the cross elasticity of coffee with respect to the price of tea will be and an increase in the price of tea will the demand for coffee.

If the owner of a local movie theater wanted to increase the theater's total revenue from movie admissions, what should the owner do with ticket prices?

An important determinant of the price elasticity of supply is the extent to which

If the price of a magazine increases from $5 to $7 and the quantity demanded of the magazines decreases from 10 million per month to 8 million per month, using the midpoint method, what is the price elasticity of demand? Show your work. Is the demand elastic, inelastic, or unit elastic?

The price elasticity of demand equals magnitude of the

Many younger people eat peanut butter AND jelly, whereas many older people eat peanut butter OR jelly. This suggests that the cross elasticity of demand between peanut butter and jelly 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

When Sam's annual income was only $15,000, he purchased 50 pounds of bananas a year. When his income rose to $18,000, he purchased 55 pounds a year. Therefore

If demand for Farmer John's maple syrup is inelastic, then when Farmer John raises the price of maple syrup, his total revenue will

If at a given moment, no matter what the price, producers cannot change the quantity supplied, the momentary supply

The greater the substitutability between Northwest timber and Southeast timber, the ________ is the cross elasticity of demand between timber from the two regions and the ________ is the elasticity of demand for Northwest timber.

The price elasticity of demand measures

Price elasticity of demand is a units-free measure.

Suppose inter-city bus travel is a substitute for transportation by train. Which of the following could then be TRUE?

-The above figure illustrates the demand curve for a good. The good has

If the total revenue received by sellers of DVDs increases by 20 percent when price increases by 10 percent, then demand for DVDs is

If the cross elasticity of demand between goods A and B is negative

In the summer 2012 the lobster catch in Maine was especially large, but instead of celebrating the fisherman were suffering from a lower total revenue. (Source: New York Times, July 28, 2012) As the lobster catch increases, there is

-The increase in the demand for widgets, shown in the figure above, is the result of a decrease in the price of McBoover devices from $11 to $9. Therefore, the cross-price elasticity for these two products is

If tea and coffee are substitutes, the cross elasticity of coffee with respect to the price of tea will be ________ and an increase in the price of tea will ________ the demand for coffee.

If the owner of a local movie theater wanted to increase the theater's total revenue from movie admissions, what should the owner do with ticket prices?

An important determinant of the price elasticity of supply is the extent to which

If the price of a magazine increases from $5 to $7 and the quantity demanded of the magazines decreases from 10 million per month to 8 million per month, using the midpoint method, what is the price elasticity of demand? Show your work. Is the demand elastic, inelastic, or unit elastic?

The price elasticity of demand equals magnitude of the

Many younger people eat peanut butter AND jelly, whereas many older people eat peanut butter OR jelly. This suggests that the cross elasticity of demand between peanut butter and jelly 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

The greater the substitutability between Northwest timber and Southeast timber, the is the cross elasticity of demand between timber from the two regions and the is the elasticity of demand for Northwest timber.

If tea and coffee are substitutes, the cross elasticity of coffee with respect to the price of tea will be and an increase in the price of tea will the demand for coffee.