Question 1

-In the above figure, at point b on the demand curve, a price cut of one dollar will

Accepted Answer

A)  increase total revenue. 
B)  decrease total revenue. 
C)  leave total revenue unchanged. 
D)  have an indeterminate effect on total revenue. 
A)  increase total revenue. 
B)  decrease total revenue. 
C)  leave total revenue unchanged. 
D)  have an indeterminate effect on total revenue.

Question 2

When the demand for a good is inelastic and its price increases, the total revenue from the sale of the good will

Accepted Answer

A)  increase. 
B)  decrease initially and then increase. 
C)  decrease. 
D)  not change. 
A)  increase. 
B)  decrease initially and then increase. 
C)  decrease. 
D)  not change.

Question 3

If demand is price elastic

Accepted Answer

A)  a 1 percent decrease in the price leads to an increase in the quantity demanded that exceeds 1 percent. 
B)  a 1 percent increase in the price leads to an increase in the quantity demanded that exceeds 1 percent. 
C)  a 1 percent decrease in the price leads to a decrease in the quantity demanded that is less than 1 percent. 
D)  the price is very sensitive to any shift of the supply curve. 
A)  a 1 percent decrease in the price leads to an increase in the quantity demanded that exceeds 1 percent. 
B)  a 1 percent increase in the price leads to an increase in the quantity demanded that exceeds 1 percent. 
C)  a 1 percent decrease in the price leads to a decrease in the quantity demanded that is less than 1 percent. 
D)  the price is very sensitive to any shift of the supply curve.

Question 4

For Product X, the income elasticity of demand is 1.16. Which of the following is therefore definitely TRUE?

Accepted Answer

A)  Product X is a necessity. 
B)  Product X is income elastic. 
C)  Product X is a substitute for some other good. 
D)  Product X is something that mostly poor people will buy. 
A)  Product X is a necessity. 
B)  Product X is income elastic. 
C)  Product X is a substitute for some other good. 
D)  Product X is something that mostly poor people will buy.

Question 5

When consumers' incomes increased 10 percent, the quantity of milk bought increased 5 percent. This result means

Accepted Answer

A)  the demand for milk is income elastic. 
B)  milk is a necessity. 
C)  milk is a luxury. 
D)  milk is an inferior good. 
A)  the demand for milk is income elastic. 
B)  milk is a necessity. 
C)  milk is a luxury. 
D)  milk is an inferior good.

Question 6

The price elasticity of demand for oranges ________ change if the units of the quantity was changed from pounds to kilograms and ________ change if the units of the price was changed from dollars to cents.

Accepted Answer

A)  would; would 
B)  would; would not 
C)  would not; would 
D)  would not; would not 
A)  would; would 
B)  would; would not 
C)  would not; would 
D)  would not; would not

Question 7

The price elasticity of demand depends on

Accepted Answer

A)  the units used to measure price and the units used to measure quantity. 
B)  the units used to measure price but not the units used to measure quantity. 
C)  the units used to measure quantity but not the units used to measure price. 
D)  neither the units used to measure price nor the units used to measure quantity. 
A)  the units used to measure price and the units used to measure quantity. 
B)  the units used to measure price but not the units used to measure quantity. 
C)  the units used to measure quantity but not the units used to measure price. 
D)  neither the units used to measure price nor the units used to measure quantity.

Question 8

Suppose that accountants increase the price for calculating income taxes owed by 20 percent. The short-run demand for their service is less elastic than the long-run demand because in the long run consumers will

Accepted Answer

A)  spend less on this service. 
B)  experience an increase in income. 
C)  try to avoid paying their income tax. 
D)  find other ways to calculate the income tax they must pay. 
A)  spend less on this service. 
B)  experience an increase in income. 
C)  try to avoid paying their income tax. 
D)  find other ways to calculate the income tax they must pay.

Question 9

Apple, the consumer electronics giant, on Tuesday rolled out new versions of its popular iPhone. The CEO decided to decrease the price of iPhones in an attempt to increase total revenue from iPhone sales. One of his employees, Jess, disagrees and suggests that an iPhone price increase will increase total revenue. Who is CORRECT?

Accepted Answer

A)  The CEO is correct if demand is price elastic. 
B)  The CEO is correct if demand is price inelastic. 
C)  Jess is correct if demand is price elastic. 
D)  Jess is correct if demand is unit elastic. 
A)  The CEO is correct if demand is price elastic. 
B)  The CEO is correct if demand is price inelastic. 
C)  Jess is correct if demand is price elastic. 
D)  Jess is correct if demand is unit elastic.

Question 10

If a 20 percent decrease in the price of a good leads to a 15 percent increase in the quantity demanded, then demand is ________ and total revenue will ________ as a result of the fall in price.

Accepted Answer

A)  elastic; increase 
B)  elastic; decrease 
C)  inelastic; increase 
D)  inelastic; decrease 
A)  elastic; increase 
B)  elastic; decrease 
C)  inelastic; increase 
D)  inelastic; decrease

Question 11

Consider two goods: peanut butter and jelly. If the price of jelly increases from $2 a jar to $3 per jar and the quantity demanded of peanut butter decreases from 50 jars to 45 jars, what is the cross elasticity of demand? Are the goods substitutes or complements?

Accepted Answer

The cross elasticity

Question 12

According to the total revenue test, a price cut increases total revenue if demand is

Accepted Answer

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

Question 13

When the price of a movie ticket increases from $5 to $7, the quantity of tickets demanded decreases from 600 to 400 a day. What is the price elasticity of demand for movie tickets?

Accepted Answer

A)  0.83 
B)  1.20 
C)  1.00 
D)  2.32 
A)  0.83 
B)  1.20 
C)  1.00 
D)  2.32

Question 14

If a 5 percent change in the price of a good leads to a 10 percent change in the quantity supplied, then the supply of the good is ________ and the elasticity of supply is ________.

Accepted Answer

A)  inelastic; 0.5 
B)  inelastic; 2.0 
C)  elastic; 0.5 
D)  elastic; 2.0 
A)  inelastic; 0.5 
B)  inelastic; 2.0 
C)  elastic; 0.5 
D)  elastic; 2.0

Question 15

For which of the following pairs of goods is the cross elasticity of demand positive?

Accepted Answer

A)  tennis balls and tennis rackets 
B)  videotapes and laundry detergent 
C)  airline trips and textbooks 
D)  beef and chicken 
A)  tennis balls and tennis rackets 
B)  videotapes and laundry detergent 
C)  airline trips and textbooks 
D)  beef and chicken

Question 16

Redbox rents DVDs for $1 per day via self-service kiosks located across the United States. The CFO of Redbox wants to identify how responsive consumers are to an increase or decrease in the daily price of a rental. The economic concept the CFO wants to understand is

Accepted Answer

A)  price elasticity of demand. 
B)  elasticity of supply. 
C)  changes in demand. 
D)  changes in supply. 
A)  price elasticity of demand. 
B)  elasticity of supply. 
C)  changes in demand. 
D)  changes in supply.

Question 17

A 10 percent increase in income increases the quantity of apple juice demanded from 18,800 to 21,200 gallons. The income elasticity of demand for apple juice is

Accepted Answer

A)  0.5. 
B)  0.8. 
C)  1.0. 
D)  1.2. 
A)  0.5. 
B)  0.8. 
C)  1.0. 
D)  1.2.

Question 18

Total revenue received by surfboard manufacturers increases by $2 million when the price of a surfboard decreases by $10. The price the elasticity of demand for surfboards is

Accepted Answer

A)  between 0 and 1. 
B)  greater than 1. 
C)  equal to 0. 
D)  some amount that is impossible to determine without more information. 
A)  between 0 and 1. 
B)  greater than 1. 
C)  equal to 0. 
D)  some amount that is impossible to determine without more information.

Question 19

The price elasticity of demand is defined as the magnitude of the

Accepted Answer

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

Question 20

If a 10 percent increase in income results in an 8 percent increase in the quantity demanded of a good, the income elasticity of demand equals ________ and the good is ________ good.

Accepted Answer

A)  0.80; an inferior 
B)  1.2; a normal 
C)  0.80; a normal 
D)  -1.2; an inferior 
A)  0.80; an inferior 
B)  1.2; a normal 
C)  0.80; a normal 
D)  -1.2; an inferior

-In the above figure, at point b on the demand curve, a price cut of one dollar will

When the demand for a good is inelastic and its price increases, the total revenue from the sale of the good will

If demand is price elastic

For Product X, the income elasticity of demand is 1.16. Which of the following is therefore definitely TRUE?

When consumers' incomes increased 10 percent, the quantity of milk bought increased 5 percent. This result means

The price elasticity of demand for oranges change if the units of the quantity was changed from pounds to kilograms and change if the units of the price was changed from dollars to cents.

The price elasticity of demand depends on

Suppose that accountants increase the price for calculating income taxes owed by 20 percent. The short-run demand for their service is less elastic than the long-run demand because in the long run consumers will

If a 20 percent decrease in the price of a good leads to a 15 percent increase in the quantity demanded, then demand is and total revenue will as a result of the fall in price.

Consider two goods: peanut butter and jelly. If the price of jelly increases from $2 a jar to $3 per jar and the quantity demanded of peanut butter decreases from 50 jars to 45 jars, what is the cross elasticity of demand? Are the goods substitutes or complements?

According to the total revenue test, a price cut increases total revenue if demand is

When the price of a movie ticket increases from $5 to $7, the quantity of tickets demanded decreases from 600 to 400 a day. What is the price elasticity of demand for movie tickets?

If a 5 percent change in the price of a good leads to a 10 percent change in the quantity supplied, then the supply of the good is and the elasticity of supply is .

For which of the following pairs of goods is the cross elasticity of demand positive?

Redbox rents DVDs for $1 per day via self-service kiosks located across the United States. The CFO of Redbox wants to identify how responsive consumers are to an increase or decrease in the daily price of a rental. The economic concept the CFO wants to understand is

A 10 percent increase in income increases the quantity of apple juice demanded from 18,800 to 21,200 gallons. The income elasticity of demand for apple juice is

Total revenue received by surfboard manufacturers increases by $2 million when the price of a surfboard decreases by $10. The price the elasticity of demand for surfboards is

The price elasticity of demand is defined as the magnitude of the

If a 10 percent increase in income results in an 8 percent increase in the quantity demanded of a good, the income elasticity of demand equals and the good is good.

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, at point b on the demand curve, a price cut of one dollar will

When the demand for a good is inelastic and its price increases, the total revenue from the sale of the good will

If demand is price elastic

For Product X, the income elasticity of demand is 1.16. Which of the following is therefore definitely TRUE?

When consumers' incomes increased 10 percent, the quantity of milk bought increased 5 percent. This result means

The price elasticity of demand for oranges ________ change if the units of the quantity was changed from pounds to kilograms and ________ change if the units of the price was changed from dollars to cents.

The price elasticity of demand depends on

Suppose that accountants increase the price for calculating income taxes owed by 20 percent. The short-run demand for their service is less elastic than the long-run demand because in the long run consumers will

If a 20 percent decrease in the price of a good leads to a 15 percent increase in the quantity demanded, then demand is ________ and total revenue will ________ as a result of the fall in price.

Consider two goods: peanut butter and jelly. If the price of jelly increases from $2 a jar to $3 per jar and the quantity demanded of peanut butter decreases from 50 jars to 45 jars, what is the cross elasticity of demand? Are the goods substitutes or complements?

According to the total revenue test, a price cut increases total revenue if demand is

When the price of a movie ticket increases from $5 to $7, the quantity of tickets demanded decreases from 600 to 400 a day. What is the price elasticity of demand for movie tickets?

If a 5 percent change in the price of a good leads to a 10 percent change in the quantity supplied, then the supply of the good is ________ and the elasticity of supply is ________.

For which of the following pairs of goods is the cross elasticity of demand positive?

Redbox rents DVDs for $1 per day via self-service kiosks located across the United States. The CFO of Redbox wants to identify how responsive consumers are to an increase or decrease in the daily price of a rental. The economic concept the CFO wants to understand is

A 10 percent increase in income increases the quantity of apple juice demanded from 18,800 to 21,200 gallons. The income elasticity of demand for apple juice is

Total revenue received by surfboard manufacturers increases by $2 million when the price of a surfboard decreases by $10. The price the elasticity of demand for surfboards is

The price elasticity of demand is defined as the magnitude of the

If a 10 percent increase in income results in an 8 percent increase in the quantity demanded of a good, the income elasticity of demand equals ________ and the good is ________ good.

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 price elasticity of demand for oranges change if the units of the quantity was changed from pounds to kilograms and change if the units of the price was changed from dollars to cents.

If a 20 percent decrease in the price of a good leads to a 15 percent increase in the quantity demanded, then demand is and total revenue will as a result of the fall in price.

If a 5 percent change in the price of a good leads to a 10 percent change in the quantity supplied, then the supply of the good is and the elasticity of supply is .

If a 10 percent increase in income results in an 8 percent increase in the quantity demanded of a good, the income elasticity of demand equals and the good is good.