Question 1

All straight-line demand curves have the same elasticity value since the slope is constant.

Accepted Answer

A) True 
 B)False

Question 2

When price falls, demand rises.

Accepted Answer

A) True 
 B)False

Question 3

A straight-line demand curve has the same elasticity throughout its length.

Accepted Answer

A) True 
 B)False

Question 4

Perfectly elastic demand curves are vertical.

Accepted Answer

A) True 
 B)False

Question 5

A vertical demand curve has an elasticity of demand equal to zero.

Accepted Answer

A) True 
 B)False

Question 6

In the DuPont cellophane case, rivals accused DuPont of monopolizing cellophane.DuPont claimed that the relevant market was flexible wrapping material, such as wax paper and aluminum foil, rather than just cellophane.DuPont won the case.What type of evidence constituted DuPont's defense?

Accepted Answer

DuPont needed to show that other flexibl

Question 7

Income elasticity of demand describes how change in income affects the quantity demanded of a good.

Accepted Answer

A) True 
 B)False

Question 8

Elasticity of demand equals the ratio of the percentage change in the quantity demanded to the percentage change in the price of the good.

Accepted Answer

A) True 
 B)False

Question 9

If an increase in quantity demanded of a product reduces the quantity demanded of another, then the two goods are said to be substitutes.

Accepted Answer

A) True 
 B)False

Question 10

A correct formula (dropping all minus signs) for the calculation of the elasticity of demand between point Q1, P1 and point Q2, P2 is

Accepted Answer

A) [(P2 − P1)/(P2 + P1)]/[(Q2 − Q1)/(Q2 + Q1)]. 
B) [(P2 − P1)/P1]/[(Q2 − Q1)/Q1]. 
C) [(Q2 − Q1)/(Q2 + Q1)]/[(P2 − P1)/(P2 + P1)]. 
D) [(Q2 − Q1)/Q2)]/[(P2 − P1)/P2]. 
A) [(P2 − P1)/(P2 + P1)]/[(Q2 − Q1)/(Q2 + Q1)]. 
B) [(P2 − P1)/P1]/[(Q2 − Q1)/Q1]. 
C) [(Q2 − Q1)/(Q2 + Q1)]/[(P2 − P1)/(P2 + P1)]. 
D) [(Q2 − Q1)/Q2)]/[(P2 − P1)/P2].

Question 11

A rise in price will always result in an increase in the total amount that consumers spend on a product.

Accepted Answer

A) True 
 B)False

Question 12

A craze for apples in Riverdale increases the quantity demanded at every price by five bushels.Between any two prices, the new demand curve will be ____ the old demand curve.

Accepted Answer

A) more elastic than 
B) less elastic than 
C) equal in elasticity to 
D) More information is needed to predict the relationship. 
A) more elastic than 
B) less elastic than 
C) equal in elasticity to 
D) More information is needed to predict the relationship.

Question 13

Figure 6-3  
-Along the elastic portion of a demand curve, the

Accepted Answer

A) change in price will always be greater than the change in quantity demanded. 
B) percentage change in quantity demanded will be less than the percentage change in price. 
C) change in price will always be less than the change in quantity demanded. 
D) percentage change in price will be less than the percentage change in quantity demanded. 
A) change in price will always be greater than the change in quantity demanded. 
B) percentage change in quantity demanded will be less than the percentage change in price. 
C) change in price will always be less than the change in quantity demanded. 
D) percentage change in price will be less than the percentage change in quantity demanded.

Question 14

Historical demand curves are always suspect because their demand curves are likely to have shifted over time.

Accepted Answer

A) True 
 B)False

Question 15

The value of zero is used to distinguish between elastic and inelastic price elasticity of demand for a product; so, if the elasticity is greater than zero, it is elastic and if it is less than zero, then it is inelastic.

Accepted Answer

A) True 
 B)False

Question 16

If the demand for gasoline becomes more elastic over time,

Accepted Answer

A) the demand curve will shift out. 
B) the demand curve will become flatter. 
C) other things being equal, the equilibrium price of gasoline must fall. 
D) other things being equal, the equilibrium quantity of gasoline must fall. 
A) the demand curve will shift out. 
B) the demand curve will become flatter. 
C) other things being equal, the equilibrium price of gasoline must fall. 
D) other things being equal, the equilibrium quantity of gasoline must fall.

Question 17

All of the following observations concerning the elasticity formula are true except

Accepted Answer

A) the changes with which it deals is measured as a percentage change. 
B) each of the percentage changes is calculated in terms of the average values. 
C) the calculation considers both positive and negative signs. 
D) each percentage change is taken as an "absolute value." 
A) the changes with which it deals is measured as a percentage change. 
B) each of the percentage changes is calculated in terms of the average values. 
C) the calculation considers both positive and negative signs. 
D) each percentage change is taken as an "absolute value."

Question 18

The elasticity of any demand curve is the same as its slope.

Accepted Answer

A) True 
 B)False

Question 19

Demand is said to be price elastic at a point on a demand curve if a

Accepted Answer

A) 1 percent rise in price reduces the quantity demanded by more than 1 percent. 
B) 1 percent rise in price reduces the quantity demanded by less than 1 percent. 
C) 1 percent rise in price reduces the quantity demanded by more than 10 percent. 
D) 10 percent rise in price reduces the quantity demanded by less than 10 percent. 
A) 1 percent rise in price reduces the quantity demanded by more than 1 percent. 
B) 1 percent rise in price reduces the quantity demanded by less than 1 percent. 
C) 1 percent rise in price reduces the quantity demanded by more than 10 percent. 
D) 10 percent rise in price reduces the quantity demanded by less than 10 percent.

Question 20

When the price of penicillin tablets increases by $5 per dozen, the drug company's revenue increases by $6 million.Its elasticity of demand (in absolute terms) must be

Accepted Answer

A) zero. 
B) greater than one. 
C) less than one. 
D) infinitely large. 
A) zero. 
B) greater than one. 
C) less than one. 
D) infinitely large.

Exam 6: Demand and Elasticity

All straight-line demand curves have the same elasticity value since the slope is constant.

When price falls, demand rises.

A straight-line demand curve has the same elasticity throughout its length.

Perfectly elastic demand curves are vertical.

A vertical demand curve has an elasticity of demand equal to zero.

In the DuPont cellophane case, rivals accused DuPont of monopolizing cellophane.DuPont claimed that the relevant market was flexible wrapping material, such as wax paper and aluminum foil, rather than just cellophane.DuPont won the case.What type of evidence constituted DuPont's defense?

Income elasticity of demand describes how change in income affects the quantity demanded of a good.

Elasticity of demand equals the ratio of the percentage change in the quantity demanded to the percentage change in the price of the good.

If an increase in quantity demanded of a product reduces the quantity demanded of another, then the two goods are said to be substitutes.

A correct formula (dropping all minus signs) for the calculation of the elasticity of demand between point Q1, P1 and point Q2, P2 is

A rise in price will always result in an increase in the total amount that consumers spend on a product.

A craze for apples in Riverdale increases the quantity demanded at every price by five bushels.Between any two prices, the new demand curve will be ____ the old demand curve.

Figure 6-3 -Along the elastic portion of a demand curve, the

Historical demand curves are always suspect because their demand curves are likely to have shifted over time.

The value of zero is used to distinguish between elastic and inelastic price elasticity of demand for a product; so, if the elasticity is greater than zero, it is elastic and if it is less than zero, then it is inelastic.

If the demand for gasoline becomes more elastic over time,

All of the following observations concerning the elasticity formula are true except

The elasticity of any demand curve is the same as its slope.

Demand is said to be price elastic at a point on a demand curve if a

When the price of penicillin tablets increases by $5 per dozen, the drug company's revenue increases by $6 million.Its elasticity of demand (in absolute terms) must be

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

A correct formula (dropping all minus signs) for the calculation of the elasticity of demand between point Q₁, P₁ and point Q₂, P₂ is