Question 1

Demand is said to be elastic when percentage changes in quantity demanded are

Accepted Answer

A) less than the percentage changes in price. 
B) higher than the percentage changes in price. 
C) equal to the percentage changes in price. 
D) zero when price changes. 
A) less than the percentage changes in price. 
B) higher than the percentage changes in price. 
C) equal to the percentage changes in price. 
D) zero when price changes.

Question 2

The current price of concert t-shirts is $20 each, and the company has been selling 400 per week.If price elasticity is 2.5 and the price changes to $21, how many t-shirts will be sold per week?

Accepted Answer

The percentage change in price is 1/20.5

Question 3

If a 10 percent rise in price leads to a reduction in quantity demanded of more than 10 percent,

Accepted Answer

A) demand is elastic. 
B) demand is inelastic. 
C) elasticity of demand is unitary. 
D) None of the above is correct. 
A) demand is elastic. 
B) demand is inelastic. 
C) elasticity of demand is unitary. 
D) None of the above is correct.

Question 4

A price cut will increase the revenue a firm receives if the demand for its product is

Accepted Answer

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

Question 5

Figure 6-1  
-Other things equal, it can be concluded that in Figure 6-1, that

Accepted Answer

A) D1 is the more elastic demand curve than D2, but only below P2. 
B) D1 is the more elastic demand curve than D2. 
C) D1 is the less elastic demand curve than D2. 
D) D1 is the more elastic demand curve than D2, but only above P2. 
A) D1 is the more elastic demand curve than D2, but only below P2. 
B) D1 is the more elastic demand curve than D2. 
C) D1 is the less elastic demand curve than D2. 
D) D1 is the more elastic demand curve than D2, but only above P2.

Question 6

What is the shape of a perfectly elastic demand curve? Explain its significance for a seller.

Accepted Answer

The perfectly elastic demand curve is ho

Question 7

Elasticity of demand is calculated by dividing the change in quantity by the change in the price of a good.

Accepted Answer

A) True 
 B)False

Question 8

Since an individual spends a small share of the income on salt, the elasticity of demand is likely to be low.

Accepted Answer

A) True 
 B)False

Question 9

What does cross elasticity of demand between goods reveal about the nature of relationship between them?

Accepted Answer

Its sign reveals whether the goods are s

Question 10

The elasticity formula solves the units problem because percentages are unaffected by the units of measure.

Accepted Answer

A) True 
 B)False

Question 11

The emigration of some of Whoville's workers reduces the quantity of thingamabobs supplied at every price by 50.The new supply curve will ____ the old supply curve.

Accepted Answer

A) be steeper and less elastic at every price than 
B) have the same slope and the same elasticity at every price as 
C) have the same slope and be more elastic at every price than 
D) More information is needed to predict the relationship between the elasticities of the two supply curves. 
A) be steeper and less elastic at every price than 
B) have the same slope and the same elasticity at every price as 
C) have the same slope and be more elastic at every price than 
D) More information is needed to predict the relationship between the elasticities of the two supply curves.

Question 12

A price increase will always increase a firm's revenue.

Accepted Answer

A) True 
 B)False

Question 13

As we move down a straight-line demand curve, the price elasticity becomes

Accepted Answer

A) larger. 
B) smaller. 
C) larger and then smaller. 
D) smaller and then larger. 
A) larger. 
B) smaller. 
C) larger and then smaller. 
D) smaller and then larger.

Question 14

Price elasticity of demand is defined as

Accepted Answer

A) slope divided by price. 
B) percentage change in price divided by percentage change in quantity demanded. 
C) percentage change in quantity demanded divided by percentage change in price. 
D) the inverse of the price elasticity of supply. 
A) slope divided by price. 
B) percentage change in price divided by percentage change in quantity demanded. 
C) percentage change in quantity demanded divided by percentage change in price. 
D) the inverse of the price elasticity of supply.

Question 15

Which of the following will lead to a movement along the same demand curve?

Accepted Answer

A) Changes in income 
B) Changes in the price of substitute goods 
C) Changes in the price of the product 
D) Changes in the preference of the consumer 
A) Changes in income 
B) Changes in the price of substitute goods 
C) Changes in the price of the product 
D) Changes in the preference of the consumer

Question 16

Figure 6-4  
-If the price of apples decreases by 2 percent and causes apple consumption to increase by 4 percent, the price elasticity of demand is ____, indicating the demand is ____.

Accepted Answer

A) 2; elastic 
B) 2; inelastic 
C) 0.5; elastic 
D) 0.5; inelastic 
A) 2; elastic 
B) 2; inelastic 
C) 0.5; elastic 
D) 0.5; inelastic

Question 17

Figure 6-3  
-In Figure 6-3(a), at any price above $6, quantity demanded

Accepted Answer

A) falls to zero. 
B) becomes infinitely large. 
C) equals price. 
D) equals the elasticity of demand. 
A) falls to zero. 
B) becomes infinitely large. 
C) equals price. 
D) equals the elasticity of demand.

Question 18

If Polaroid wanted damages against Kodak for infringing on its instant development film process, and the courts found a high positive cross elasticity between purchases of Polaroid instant film and 35 mm regular film, would that have strengthened or weakened Polaroid's claim against Kodak?

Accepted Answer

A large positive cross elasticity showed

Question 19

Would a profit-maximizing firm sell at a price where demand is inelastic? Explain.

Accepted Answer

No.If demand is inelastic, the

Question 20

As a price change persists over a long period of time, we should expect the demand elasticity to fall.

Accepted Answer

A) True 
 B)False

Exam 6: Demand and Elasticity

Demand is said to be elastic when percentage changes in quantity demanded are

The current price of concert t-shirts is $20 each, and the company has been selling 400 per week.If price elasticity is 2.5 and the price changes to $21, how many t-shirts will be sold per week?

If a 10 percent rise in price leads to a reduction in quantity demanded of more than 10 percent,

A price cut will increase the revenue a firm receives if the demand for its product is

Figure 6-1 -Other things equal, it can be concluded that in Figure 6-1, that

What is the shape of a perfectly elastic demand curve? Explain its significance for a seller.

Elasticity of demand is calculated by dividing the change in quantity by the change in the price of a good.

Since an individual spends a small share of the income on salt, the elasticity of demand is likely to be low.

What does cross elasticity of demand between goods reveal about the nature of relationship between them?

The elasticity formula solves the units problem because percentages are unaffected by the units of measure.

The emigration of some of Whoville's workers reduces the quantity of thingamabobs supplied at every price by 50.The new supply curve will ____ the old supply curve.

A price increase will always increase a firm's revenue.

As we move down a straight-line demand curve, the price elasticity becomes

Price elasticity of demand is defined as

Which of the following will lead to a movement along the same demand curve?

Figure 6-4 -If the price of apples decreases by 2 percent and causes apple consumption to increase by 4 percent, the price elasticity of demand is ____, indicating the demand is ____.

Figure 6-3 -In Figure 6-3(a), at any price above $6, quantity demanded

If Polaroid wanted damages against Kodak for infringing on its instant development film process, and the courts found a high positive cross elasticity between purchases of Polaroid instant film and 35 mm regular film, would that have strengthened or weakened Polaroid's claim against Kodak?

Would a profit-maximizing firm sell at a price where demand is inelastic? Explain.

As a price change persists over a long period of time, we should expect the demand elasticity to fall.

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

Filters

Figure 6-4 -If the price of apples decreases by 2 percent and causes apple consumption to increase by 4 percent, the price elasticity of demand is , indicating the demand is .