Question 1

If a study shows that two goods have a high negative cross elasticity of demand value, then the two goods are competing in the same market.

Accepted Answer

A) True 
 B)False

Question 2

If goods X and Y are complements, the

Accepted Answer

A) quantities demanded of X and Y tend to move in opposite directions. 
B) quantities demanded of X and Y tend to move in the same direction. 
C) prices of X and Y tend to move in the same direction. 
D) supply curves for X and Y tend to move in the same direction. 
A) quantities demanded of X and Y tend to move in opposite directions. 
B) quantities demanded of X and Y tend to move in the same direction. 
C) prices of X and Y tend to move in the same direction. 
D) supply curves for X and Y tend to move in the same direction.

Question 3

Figure 6-9  
-In 1983, government price supports raised the price of sugar above its equilibrium value.Which graph in Figure 6-9 illustrates the impact of sugar price supports on the sugar substitute fructose?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 4

If price goes up 20 percent and quantity demanded declines by 10 percent, total revenue will rise.

Accepted Answer

A) True 
 B)False

Question 5

Necessities, such as food and shelter, are product purchases that consumers are sensitive to, so the demand is elastic for these goods.

Accepted Answer

A) True 
 B)False

Question 6

If two goods are complements, their cross elasticity of demand will normally be

Accepted Answer

A) zero. 
B) a negative number. 
C) a positive number. 
D) infinity. 
A) zero. 
B) a negative number. 
C) a positive number. 
D) infinity.

Question 7

In a past fare war, U.S.Air reduced the price of its Charlotte, North Carolina, to New York City round-trip fare from $198 to $138 to match American Airlines.U.S.Air did so reluctantly, saying it would cost the company millions of dollars in revenue.American, on the other hand, believed the fare cut would increase its revenue.What different assumptions about the underlying price elasticity of demand did each airline believe true?

Accepted Answer

U.S.Air must have believed demand in thi

Question 8

The quantity demanded in a market depends on many things, but the concept of elasticity focuses on the effect of changes in the price of the good.

Accepted Answer

A) True 
 B)False

Question 9

Two goods with a low cross elasticity of demand are competing in the same market.

Accepted Answer

A) True 
 B)False

Question 10

The sales manager of a retail outlet suggests that the best way to increase customers is to have a sale.If a 10 percent price cut doesn't bring in enough customers, then he'll cut prices 20 percent.Increased cash flow should take care of profits.Do you agree? Explain.

Accepted Answer

A price cut will (usually) lea

Question 11

Figure 6-4  
-If the elasticity of demand for cigarettes is 0.4, then an increase in the price of a pack of cigarettes from $5.00 to $6.00 would reduce quantities demanded by about

Accepted Answer

A) 7 percent. 
B) 40 percent. 
C) 42 percent. 
D) 220 percent. 
A) 7 percent. 
B) 40 percent. 
C) 42 percent. 
D) 220 percent.

Question 12

If demand is inelastic, a drop in price will raise total expenditure.

Accepted Answer

A) True 
 B)False

Question 13

The Sandy Deli operates near a college campus.It has been selling 325 sandwiches a day at $1.75 each and is considering a price cut.It estimates 450 sandwiches would sell per day at $1.50 each.Calculate the marginal revenue of such a price cut and the elasticity between the two points.

Accepted Answer

Revenue is currently 325 × $1.75 = $568.

Question 14

A demand curve to remain unit elastic along its entire length should

Accepted Answer

A) cross the X axis. 
B) touch the X axis but not the Y axis. 
C) never touch either the X or the Y axis. 
D) touch the Y axis but not the X axis. 
A) cross the X axis. 
B) touch the X axis but not the Y axis. 
C) never touch either the X or the Y axis. 
D) touch the Y axis but not the X axis.

Question 15

If demand for a seller's product is elastic, a price decrease will increase total revenue.

Accepted Answer

A) True 
 B)False

Question 16

Elasticity of demand is calculated using percentage changes in both price and quantity.

Accepted Answer

A) True 
 B)False

Question 17

When the goods of competing companies are identical, consumers have no reason to prefer one product over the other, so the demand curve for each manufacturer will be perfectly elastic.

Accepted Answer

A) True 
 B)False

Question 18

The elasticity of a straight-line demand curve is the same as its slope.

Accepted Answer

A) True 
 B)False

Question 19

If the price elasticity of supply of doodads equals 0.50 and the price rises by 3 percent, then the quantity supplied of doodads will rise by ____.

Accepted Answer

A) 0.50 percent. 
B) 1.50 percent. 
C) 6.00 percent. 
D) 15 percent. 
A) 0.50 percent. 
B) 1.50 percent. 
C) 6.00 percent. 
D) 15 percent.

Question 20

The price elasticity of new automobile purchases is about 1.2.This implies that an increase of $1,000 on a $10,000 automobile will

Accepted Answer

A) reduce the number of autos sold by approximately 1.2 percent. 
B) increase the consumer expenditures on autos by approximately 1.2 percent. 
C) reduce the number of autos sold by approximately 12 percent. 
D) increase consumer expenditures on autos by approximately 12 percent. 
A) reduce the number of autos sold by approximately 1.2 percent. 
B) increase the consumer expenditures on autos by approximately 1.2 percent. 
C) reduce the number of autos sold by approximately 12 percent. 
D) increase consumer expenditures on autos by approximately 12 percent.

Exam 6: Demand and Elasticity

If a study shows that two goods have a high negative cross elasticity of demand value, then the two goods are competing in the same market.

If goods X and Y are complements, the

Figure 6-9 -In 1983, government price supports raised the price of sugar above its equilibrium value.Which graph in Figure 6-9 illustrates the impact of sugar price supports on the sugar substitute fructose?

If price goes up 20 percent and quantity demanded declines by 10 percent, total revenue will rise.

Necessities, such as food and shelter, are product purchases that consumers are sensitive to, so the demand is elastic for these goods.

If two goods are complements, their cross elasticity of demand will normally be

The quantity demanded in a market depends on many things, but the concept of elasticity focuses on the effect of changes in the price of the good.

Two goods with a low cross elasticity of demand are competing in the same market.

The sales manager of a retail outlet suggests that the best way to increase customers is to have a sale.If a 10 percent price cut doesn't bring in enough customers, then he'll cut prices 20 percent.Increased cash flow should take care of profits.Do you agree? Explain.

Figure 6-4 -If the elasticity of demand for cigarettes is 0.4, then an increase in the price of a pack of cigarettes from $5.00 to $6.00 would reduce quantities demanded by about

If demand is inelastic, a drop in price will raise total expenditure.

The Sandy Deli operates near a college campus.It has been selling 325 sandwiches a day at $1.75 each and is considering a price cut.It estimates 450 sandwiches would sell per day at $1.50 each.Calculate the marginal revenue of such a price cut and the elasticity between the two points.

A demand curve to remain unit elastic along its entire length should

If demand for a seller's product is elastic, a price decrease will increase total revenue.

Elasticity of demand is calculated using percentage changes in both price and quantity.

When the goods of competing companies are identical, consumers have no reason to prefer one product over the other, so the demand curve for each manufacturer will be perfectly elastic.

The elasticity of a straight-line demand curve is the same as its slope.

If the price elasticity of supply of doodads equals 0.50 and the price rises by 3 percent, then the quantity supplied of doodads will rise by ____.

The price elasticity of new automobile purchases is about 1.2.This implies that an increase of $1,000 on a $10,000 automobile will

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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