Question 1

If demand is unit elastic, revenue

Accepted Answer

A) and price rise and fall together. 
B) rises as price falls. 
C) falls as price rises. 
D) remains constant as price rises or falls. 
A) and price rise and fall together. 
B) rises as price falls. 
C) falls as price rises. 
D) remains constant as price rises or falls.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Regarding demand elasticity, which of the following statements is correct?

Accepted Answer

A) If demand for seller's product is elastic, a price increase will decrease total revenue. 
B) If demand for seller's product is elastic, a price increase will increase total revenue. 
C) If demand is exactly unit elastic, an increase in price will raise total revenue 
D) If demand is exactly unit elastic, an increase in price will raise total revenue. 
A) If demand for seller's product is elastic, a price increase will decrease total revenue. 
B) If demand for seller's product is elastic, a price increase will increase total revenue. 
C) If demand is exactly unit elastic, an increase in price will raise total revenue 
D) If demand is exactly unit elastic, an increase in price will raise total revenue.

Question 4

At $5 per cup, customers will buy 8 cups of coffee per week.At a price of $3, consumers are willing to buy 12 cups per week.The elasticity of the market demand curve for coffee between P = $5 and P = $3 (dropping all minus signs) is

Accepted Answer

A) 0.40. 
B) 1.0 
C) 1.25. 
D) 0.80. 
A) 0.40. 
B) 1.0 
C) 1.25. 
D) 0.80.

Question 5

Computations of the price elasticity focus on the calculated magnitude due to of the law of demand.

Accepted Answer

A) True 
 B)False

Question 6

Along a straight-line demand curve, the

Accepted Answer

A) slope is constant. 
B) ratio P / Q constantly changes. 
C) elasticity grows much smaller toward the right-hand end. 
D) All of the responses are correct. 
A) slope is constant. 
B) ratio P / Q constantly changes. 
C) elasticity grows much smaller toward the right-hand end. 
D) All of the responses are correct.

Question 7

A 10 percent increase in the cost of restaurant meals, which are a luxury, will most likely

Accepted Answer

A) increase the purchase of meals by 10 percent. 
B) increase the purchase of meals by less than 10 percent. 
C) decrease the purchase of meals by more than 10 percent. 
D) decrease the purchase of meals by less than 10 percent. 
A) increase the purchase of meals by 10 percent. 
B) increase the purchase of meals by less than 10 percent. 
C) decrease the purchase of meals by more than 10 percent. 
D) decrease the purchase of meals by less than 10 percent.

Question 8

What are the main determinants of demand elasticity? Explain their importance.

Accepted Answer

First is the nature of the good.Necessit

Question 9

The formula for the price elasticity of demand

Accepted Answer

A) relies on statistical data. 
B) is based fully on knowledge of the slope of the demand curve. 
C) in practice drops the sign and focuses on the magnitude. 
D) is valid only when the price of product increases. 
A) relies on statistical data. 
B) is based fully on knowledge of the slope of the demand curve. 
C) in practice drops the sign and focuses on the magnitude. 
D) is valid only when the price of product increases.

Question 10

Two goods are substitutes if a decrease in the price of one raises the quantity demanded of the other.

Accepted Answer

A) True 
 B)False

Question 11

Total expenditure equals price times quantity.

Accepted Answer

A) True 
 B)False

Question 12

If soft drink brands are close substitutes for each other, this implies that the price elasticity for individual brands would be low.

Accepted Answer

A) True 
 B)False

Question 13

The price elasticity of demand for widgets at any particular price is determined by

Accepted Answer

A) whether widgets are luxuries or necessities. 
B) how much of their budgets do consumers spend on widgets. 
C) whether there are any good substitutes for widgets. 
D) All of the responses are correct. 
A) whether widgets are luxuries or necessities. 
B) how much of their budgets do consumers spend on widgets. 
C) whether there are any good substitutes for widgets. 
D) All of the responses are correct.

Question 14

A unit-elastic demand curve will be concave toward the origin .

Accepted Answer

A) True 
 B)False

Question 15

A tax on cigarettes can be expected to reduce teen smoking more than it reduces adult smoking.

Accepted Answer

A) True 
 B)False

Question 16

The price of coffee rose 50 percent and coffee sales fell 25 percent.Doughnut sales also fell 25 percent.From this information, we can conclude that

Accepted Answer

A) demand for coffee is inelastic. 
B) coffee and doughnuts are complements. 
C) the cross elasticity of demand is minus 0.5 percent. 
D) All of the responses are correct. 
A) demand for coffee is inelastic. 
B) coffee and doughnuts are complements. 
C) the cross elasticity of demand is minus 0.5 percent. 
D) All of the responses are correct.

Question 17

If, as price increases by 10 percent, total revenue decreases by 10 percent, demand is

Accepted Answer

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

Question 18

The law of demand states that a lower price increases the amount of a commodity that people are willing to buy.

Accepted Answer

A) True 
 B)False

Question 19

The definition of cross elasticity of demand for two products X and Y is

Accepted Answer

A) percentage change in quantity of X demanded/percentage change in quantity of Y demanded. 
B) percentage change in price of Y/percentage change in quantity of X demanded. 
C) percentage change in price of Y/percentage change in price of X. 
D) percentage change in quantity of X demanded/percentage change in price of Y. 
A) percentage change in quantity of X demanded/percentage change in quantity of Y demanded. 
B) percentage change in price of Y/percentage change in quantity of X demanded. 
C) percentage change in price of Y/percentage change in price of X. 
D) percentage change in quantity of X demanded/percentage change in price of Y.

Question 20

Figure 6-6  
-The purchase of premium cable channels is an "all-or-nothing" choice.Which graph in Figure 6-6 best illustrates the cable market demand curve?

Accepted Answer

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

Exam 6: Demand and Elasticity

If demand is unit elastic, revenue

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

Regarding demand elasticity, which of the following statements is correct?

At $5 per cup, customers will buy 8 cups of coffee per week.At a price of $3, consumers are willing to buy 12 cups per week.The elasticity of the market demand curve for coffee between P = $5 and P = $3 (dropping all minus signs) is

Computations of the price elasticity focus on the calculated magnitude due to of the law of demand.

Along a straight-line demand curve, the

A 10 percent increase in the cost of restaurant meals, which are a luxury, will most likely

What are the main determinants of demand elasticity? Explain their importance.

The formula for the price elasticity of demand

Two goods are substitutes if a decrease in the price of one raises the quantity demanded of the other.

Total expenditure equals price times quantity.

If soft drink brands are close substitutes for each other, this implies that the price elasticity for individual brands would be low.

The price elasticity of demand for widgets at any particular price is determined by

A unit-elastic demand curve will be concave toward the origin .

A tax on cigarettes can be expected to reduce teen smoking more than it reduces adult smoking.

The price of coffee rose 50 percent and coffee sales fell 25 percent.Doughnut sales also fell 25 percent.From this information, we can conclude that

If, as price increases by 10 percent, total revenue decreases by 10 percent, demand is

The law of demand states that a lower price increases the amount of a commodity that people are willing to buy.

The definition of cross elasticity of demand for two products X and Y is

Figure 6-6 -The purchase of premium cable channels is an "all-or-nothing" choice.Which graph in Figure 6-6 best illustrates the cable market demand curve?

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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