Question 1

-In the above figure, if the two goods A and B, are complements, which of the following is TRUE?

Accepted Answer

A)  The shift from D0 to D1 for good B leads to a shift from S0 to S1 for good A. 
B)  The shift from S0 to S1 for good A leads to the shift from D0 to D1 for good B. 
C)  The law of demand is violated in both markets. 
D)  The cross elasticity of demand between them is positive. 
A)  The shift from D0 to D1 for good B leads to a shift from S0 to S1 for good A. 
B)  The shift from S0 to S1 for good A leads to the shift from D0 to D1 for good B. 
C)  The law of demand is violated in both markets. 
D)  The cross elasticity of demand between them is positive.

Question 2

The cab fare in Horseville is regulated. Recently, the government decided to raise it from $2.00 to $2.50 per ride. After this rise in fare, cab ridership decreased by 10 percent.
a) What is the price elasticity of demand for cab rides in Horseville? (Use the midpoint formula to calculate the percentage change in the price.) Is the demand for rides elastic or inelastic?
b) According to your estimate, what happened to the cab drivers' revenue after the fare rose? Explain.
c) Why might your estimate of elasticity be inaccurate?

Accepted Answer

a) The percentage change in the price is

Question 3

When the price of Ford pickup trucks rises from $18,000 to $19,000, the quantity of Chevy trucks demanded increases from 112,000 to 144,000. What is the cross elasticity of demand between Ford and Chevy trucks?

Accepted Answer

In this case, the cross elasticity of de

Question 4

If the demand is unit elastic, a price cut will leave the quantity demanded unchanged.

Accepted Answer

A) True 
 B)False

Question 5

The price elasticity of demand for cigarettes is 0.4. If government wants to reduce smoking by 10 percent, by how much should it raise the price of cigarettes by imposing a tax?

Accepted Answer

A)  by 10 percent 
B)  by 20 percent 
C)  by 25 percent 
D)  by 50 percent 
A)  by 10 percent 
B)  by 20 percent 
C)  by 25 percent 
D)  by 50 percent

Question 6

Suppose a drought increased the price of corn by 25 percent while it decreased the quantity by 50 percent. The price elasticity of demand equals

Accepted Answer

A)  2.00. 
B)  0.50. 
C)  20.0. 
D)  zero. 
A)  2.00. 
B)  0.50. 
C)  20.0. 
D)  zero.

Question 7

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) Despite the larger quantity of lobster caught, the total revenue of the fisherman decreased. This fact means that the demand for lobster is

Accepted Answer

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

Question 8

A 10 percent increase in income has caused a 5 percent decrease in the quantity demanded. The income elasticity is

Accepted Answer

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

Question 9

-The above figure shows the demand curve for movie rentals from Redbox. If Redbox raised its price from $2.50 to $3.00, between these two prices the price elasticity of demand equals

Accepted Answer

A)  1.2. 
B)  0.8. 
C)  2.0. 
D)  0.5. 
A)  1.2. 
B)  0.8. 
C)  2.0. 
D)  0.5.

Question 10

If the cross elasticity of demand between two goods is -0.56, then a fall in the price of one good leads to a ________ shift in the ________ of the other good.

Accepted Answer

A)  rightward; demand 
B)  rightward; supply 
C)  leftward; demand 
D)  leftward; supply 
A)  rightward; demand 
B)  rightward; supply 
C)  leftward; demand 
D)  leftward; supply

Question 11

If a rise in the price of oranges from $7 to $9 a bushel increases the quantity of bushels supplied from 4,500 to 5,500 bushels, the

Accepted Answer

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

Question 12

Suppose Clem's Chemical Company wants to increase its total revenue. If there are few substitutes for Clem's Chemicals

Accepted Answer

A)  Clem should increase the price of his chemicals. 
B)  Clem should decrease the price of his chemicals. 
C)  the demand for chemicals is elastic. 
D)  Clem will not be able to change the price of his chemicals. 
A)  Clem should increase the price of his chemicals. 
B)  Clem should decrease the price of his chemicals. 
C)  the demand for chemicals is elastic. 
D)  Clem will not be able to change the price of his chemicals.

Question 13

A determinant of the price elasticity of demand is

Accepted Answer

A)  whether the good is a durable or a nondurable. 
B)  the availability of resources used in the production of the product. 
C)  how well consumers like the good. 
D)  the proportion of the consumer's total budget spent on the good. 
A)  whether the good is a durable or a nondurable. 
B)  the availability of resources used in the production of the product. 
C)  how well consumers like the good. 
D)  the proportion of the consumer's total budget spent on the good.

Question 14

Suppose the price elasticity of demand for oil is 0.1. In order to lower the price of oil by 20 percent, the quantity of oil supplied must be increased by

Accepted Answer

A)  200 percent. 
B)  20 percent. 
C)  2 percent. 
D)  0.2 percent. 
A)  200 percent. 
B)  20 percent. 
C)  2 percent. 
D)  0.2 percent.

Question 15

If the demand curve is a downward sloping straight line, the price elasticity of demand always

Accepted Answer

A)  increases as the demand curve shifts rightward. 
B)  increases as the demand curve shifts leftward. 
C)  increases with movements upward along the demand curve. 
D)  decreases with movements upward along the demand curve. 
A)  increases as the demand curve shifts rightward. 
B)  increases as the demand curve shifts leftward. 
C)  increases with movements upward along the demand curve. 
D)  decreases with movements upward along the demand curve.

Question 16

If the price elasticity of demand equals 1.0, then as the price falls, the

Accepted Answer

A)  quantity demanded decreases. 
B)  total revenue falls. 
C)  quantity demanded does not change. 
D)  total revenue does not change. 
A)  quantity demanded decreases. 
B)  total revenue falls. 
C)  quantity demanded does not change. 
D)  total revenue does not change.

Question 17

Fantastic growing conditions that produce a bumper crop of oranges on each tree this year will definitely make the short run supply of oranges more price elastic.

Accepted Answer

A) True 
 B)False

Question 18

Suppose that the quantity of pizza demanded decreased by 15 percent after an increase in price of 10 percent. What is the price elasticity of demand for pizza?

Accepted Answer

A)  1.50 
B)  0.67 
C)  -1.50 
D)  -0.67 
A)  1.50 
B)  0.67 
C)  -1.50 
D)  -0.67

Question 19

-The figure above represents the behavior of total revenue as price falls along a straight-line demand curve. What is the price elasticity of demand if total revenue is given by point f?

Accepted Answer

A)  Demand is inelastic. 
B)  Demand is unit elastic. 
C)  Demand is elastic. 
D)  It is impossible to determine. 
A)  Demand is inelastic. 
B)  Demand is unit elastic. 
C)  Demand is elastic. 
D)  It is impossible to determine.

Question 20

If Taco Bell determines that the demand for its food is elastic, Taco Bell should raise its price to increase its total revenue.

Accepted Answer

A) True 
 B)False

-In the above figure, if the two goods A and B, are complements, which of the following is TRUE?

When the price of Ford pickup trucks rises from $18,000 to $19,000, the quantity of Chevy trucks demanded increases from 112,000 to 144,000. What is the cross elasticity of demand between Ford and Chevy trucks?

If the demand is unit elastic, a price cut will leave the quantity demanded unchanged.

The price elasticity of demand for cigarettes is 0.4. If government wants to reduce smoking by 10 percent, by how much should it raise the price of cigarettes by imposing a tax?

Suppose a drought increased the price of corn by 25 percent while it decreased the quantity by 50 percent. The price elasticity of demand equals

A 10 percent increase in income has caused a 5 percent decrease in the quantity demanded. The income elasticity is

-The above figure shows the demand curve for movie rentals from Redbox. If Redbox raised its price from $2.50 to $3.00, between these two prices the price elasticity of demand equals

If the cross elasticity of demand between two goods is -0.56, then a fall in the price of one good leads to a shift in the of the other good.

If a rise in the price of oranges from $7 to $9 a bushel increases the quantity of bushels supplied from 4,500 to 5,500 bushels, the

Suppose Clem's Chemical Company wants to increase its total revenue. If there are few substitutes for Clem's Chemicals

A determinant of the price elasticity of demand is

Suppose the price elasticity of demand for oil is 0.1. In order to lower the price of oil by 20 percent, the quantity of oil supplied must be increased by

If the demand curve is a downward sloping straight line, the price elasticity of demand always

If the price elasticity of demand equals 1.0, then as the price falls, the

Fantastic growing conditions that produce a bumper crop of oranges on each tree this year will definitely make the short run supply of oranges more price elastic.

Suppose that the quantity of pizza demanded decreased by 15 percent after an increase in price of 10 percent. What is the price elasticity of demand for pizza?

-The figure above represents the behavior of total revenue as price falls along a straight-line demand curve. What is the price elasticity of demand if total revenue is given by point f?

If Taco Bell determines that the demand for its food is elastic, Taco Bell should raise its price to increase its total revenue.

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

-In the above figure, if the two goods A and B, are complements, which of the following is TRUE?

When the price of Ford pickup trucks rises from $18,000 to $19,000, the quantity of Chevy trucks demanded increases from 112,000 to 144,000. What is the cross elasticity of demand between Ford and Chevy trucks?

If the demand is unit elastic, a price cut will leave the quantity demanded unchanged.

The price elasticity of demand for cigarettes is 0.4. If government wants to reduce smoking by 10 percent, by how much should it raise the price of cigarettes by imposing a tax?

Suppose a drought increased the price of corn by 25 percent while it decreased the quantity by 50 percent. The price elasticity of demand equals

A 10 percent increase in income has caused a 5 percent decrease in the quantity demanded. The income elasticity is

-The above figure shows the demand curve for movie rentals from Redbox. If Redbox raised its price from $2.50 to $3.00, between these two prices the price elasticity of demand equals

If the cross elasticity of demand between two goods is -0.56, then a fall in the price of one good leads to a ________ shift in the ________ of the other good.

If a rise in the price of oranges from $7 to $9 a bushel increases the quantity of bushels supplied from 4,500 to 5,500 bushels, the

Suppose Clem's Chemical Company wants to increase its total revenue. If there are few substitutes for Clem's Chemicals

A determinant of the price elasticity of demand is

Suppose the price elasticity of demand for oil is 0.1. In order to lower the price of oil by 20 percent, the quantity of oil supplied must be increased by

If the demand curve is a downward sloping straight line, the price elasticity of demand always

If the price elasticity of demand equals 1.0, then as the price falls, the

Fantastic growing conditions that produce a bumper crop of oranges on each tree this year will definitely make the short run supply of oranges more price elastic.

Suppose that the quantity of pizza demanded decreased by 15 percent after an increase in price of 10 percent. What is the price elasticity of demand for pizza?

-The figure above represents the behavior of total revenue as price falls along a straight-line demand curve. What is the price elasticity of demand if total revenue is given by point f?

If Taco Bell determines that the demand for its food is elastic, Taco Bell should raise its price to increase its total revenue.

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

If the cross elasticity of demand between two goods is -0.56, then a fall in the price of one good leads to a shift in the of the other good.