Question 1

As one moves down a straight-line demand curve, the elasticity decreases.

Accepted Answer

A) True 
 B)False  True

Question 2

Historical data on prices and quantities sold do not provide the basis for drawing an accurate demand curve because

Accepted Answer

A) reporters who gather these data are often wrong. 
B) factors other than price may change over time. 
C) they do not include measures of price close to the quantity axis. 
D) they sometimes tend to be clustered around one point. 
A) reporters who gather these data are often wrong. 
B) factors other than price may change over time. 
C) they do not include measures of price close to the quantity axis. 
D) they sometimes tend to be clustered around one point. B

Question 3

If the price elasticity is 1.50 for the demand of vanilla lattes, then if the seller raises price by 10 percent, then quantity demanded for the product will

Accepted Answer

A) rise by 15 percent. 
B) fall by 15 percent. 
C) fall by 1.5 percent. 
D) fall by 67 percent. 
A) rise by 15 percent. 
B) fall by 15 percent. 
C) fall by 1.5 percent. 
D) fall by 67 percent. B

Question 4

The demand for a new effective drug for the cure of AIDS would most likely be

Accepted Answer

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

Question 5

A unit-elastic demand curve never touches or crosses either of the axes.Why?

Accepted Answer

When demand is unit elastic, total expen

Question 6

If the price changes for a good for which the demand is perfectly inelastic, the response will be infinitely large.

Accepted Answer

A) True 
 B)False

Question 7

Compared to the demand for coffee, the market demand for French Roast coffee is likely to be

Accepted Answer

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

Question 8

If the price of potatoes is reduced, consumers likely buy

Accepted Answer

A) significantly more potatoes. 
B) significantly fewer potatoes. 
C) roughly the same quantity of potatoes. 
D) an unknown quantity of potatoes; in this situation, consumers' actions cannot be predicted. 
A) significantly more potatoes. 
B) significantly fewer potatoes. 
C) roughly the same quantity of potatoes. 
D) an unknown quantity of potatoes; in this situation, consumers' actions cannot be predicted.

Question 9

Scientific evidence suggests that consumption of foods rich in fiber lowers cholesterol.As a result, the demand for bran increases at every price by 5,000 bushels and the supply curve for bran is perfectly price elastic.The quantity of bran consumed will

Accepted Answer

A) not change. 
B) change unless the demand curve is perfectly inelastic. 
C) rise by exactly 5,000 bushels. 
D) not rise by exactly 5,000 bushels unless the demand curve is perfectly inelastic. 
A) not change. 
B) change unless the demand curve is perfectly inelastic. 
C) rise by exactly 5,000 bushels. 
D) not rise by exactly 5,000 bushels unless the demand curve is perfectly inelastic.

Question 10

A buyer's response to a change in income is an example of a "change in demand."

Accepted Answer

A) True 
 B)False

Question 11

If seller increases the price of the good and the total revenue increases, this implies that the demand for the product is elastic.

Accepted Answer

A) True 
 B)False

Question 12

How might a market research analyst use measures of elasticity-price, cross, and income-in her work? Explain.

Accepted Answer

A market researcher is interested in det

Question 13

If a demand curve is unit elastic, then P times Q will remain constant when P changes.

Accepted Answer

A) True 
 B)False

Question 14

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 15

Total expenditure equals price times elasticity.

Accepted Answer

A) True 
 B)False

Question 16

A seller who wishes to increase the revenues should always increase the price of the product.

Accepted Answer

A) True 
 B)False

Question 17

How can one tell from cross elasticity what kind of relationship exists between any two goods?

Accepted Answer

If the price of X increases and the quan

Question 18

How might a court use cross elasticity in an antitrust case?

Accepted Answer

One major issue a court must settle is t

Question 19

Hot dogs and hot dog buns are found to be related by the cross elasticity of demand.If they are complementary goods, the cross elasticity will be

Accepted Answer

A) positive. 
B) equal to zero. 
C) negative. 
D) unknown. 
A) positive. 
B) equal to zero. 
C) negative. 
D) unknown.

Question 20

Cross elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good.

Accepted Answer

A) True 
 B)False

Exam 6: Demand and Elasticity

As one moves down a straight-line demand curve, the elasticity decreases.

Historical data on prices and quantities sold do not provide the basis for drawing an accurate demand curve because

If the price elasticity is 1.50 for the demand of vanilla lattes, then if the seller raises price by 10 percent, then quantity demanded for the product will

The demand for a new effective drug for the cure of AIDS would most likely be

A unit-elastic demand curve never touches or crosses either of the axes.Why?

If the price changes for a good for which the demand is perfectly inelastic, the response will be infinitely large.

Compared to the demand for coffee, the market demand for French Roast coffee is likely to be

If the price of potatoes is reduced, consumers likely buy

Scientific evidence suggests that consumption of foods rich in fiber lowers cholesterol.As a result, the demand for bran increases at every price by 5,000 bushels and the supply curve for bran is perfectly price elastic.The quantity of bran consumed will

A buyer's response to a change in income is an example of a "change in demand."

If seller increases the price of the good and the total revenue increases, this implies that the demand for the product is elastic.

How might a market research analyst use measures of elasticity-price, cross, and income-in her work? Explain.

If a demand curve is unit elastic, then P times Q will remain constant when P changes.

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?

Total expenditure equals price times elasticity.

A seller who wishes to increase the revenues should always increase the price of the product.

How can one tell from cross elasticity what kind of relationship exists between any two goods?

How might a court use cross elasticity in an antitrust case?

Hot dogs and hot dog buns are found to be related by the cross elasticity of demand.If they are complementary goods, the cross elasticity will be

Cross elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good.

What Is Economics

The Economony: 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

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of 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

Contemporary Issues in the Useconomy

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