Question 1

If price and total revenue are directly related, demand is inelastic.

Accepted Answer

A) True 
 B)False  True

Question 2

Whenever a product is put on special sale at a discounted price, total revenue from the product increases. This indicates that the coefficient of elasticity for the product is greater than 1.

Accepted Answer

A) True 
 B)False  True

Question 3

Suppose the income elasticity of demand for jewelry is 2. Other things equal, a 10 percent increase in consumer income will

Accepted Answer

A) decrease the quantity of jewelry purchased by 20 percent. 
B) increase the quantity of jewelry purchased by 5 percent. 
C) decrease the quantity of jewelry purchased by 5 percent. 
D) increase the quantity of jewelry purchased by 20 percent. 
A) decrease the quantity of jewelry purchased by 20 percent. 
B) increase the quantity of jewelry purchased by 5 percent. 
C) decrease the quantity of jewelry purchased by 5 percent. 
D) increase the quantity of jewelry purchased by 20 percent. D

Question 4

The relationship between a consumer's monthly income and monthly consumption of four products, A-D, is shown below.   Which product listed is an example of an inferior good?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 5

Considering the price-elasticity of demand for wheat, we would expect that if the supply of wheat increases, other factors constant, then wheat farmers' total revenues would

Accepted Answer

A) increase because the demand is price-inelastic. 
B) decrease because the demand is price-inelastic. 
C) increase because the demand is price-elastic. 
D) decrease because the demand is price-elastic. 
A) increase because the demand is price-inelastic. 
B) decrease because the demand is price-inelastic. 
C) increase because the demand is price-elastic. 
D) decrease because the demand is price-elastic.

Question 6

Farmers often find that large bumper crops are associated with declines in their gross incomes. This suggests that

Accepted Answer

A) farm products are normal goods. 
B) farm products are inferior goods. 
C) the price elasticity of demand for farm products is less than 1. 
D) the price elasticity of demand for farm products is greater than 1. 
A) farm products are normal goods. 
B) farm products are inferior goods. 
C) the price elasticity of demand for farm products is less than 1. 
D) the price elasticity of demand for farm products is greater than 1.

Question 7

Suppose the price elasticity of demand for beef is about 0.6. Other things equal, this means that a 20 percent increase in the price of beef will cause the quantity of beef demanded to

Accepted Answer

A) increase by approximately 12 percent. 
B) decrease by approximately 12 percent. 
C) decrease by approximately 32 percent. 
D) decrease by approximately 26 percent. 
A) increase by approximately 12 percent. 
B) decrease by approximately 12 percent. 
C) decrease by approximately 32 percent. 
D) decrease by approximately 26 percent.

Question 8

The demand for a luxury good whose purchase would exhaust a big portion of one's income is

Accepted Answer

A) perfectly price inelastic. 
B) perfectly price elastic. 
C) relatively price inelastic. 
D) relatively price elastic. 
A) perfectly price inelastic. 
B) perfectly price elastic. 
C) relatively price inelastic. 
D) relatively price elastic.

Question 9

The cross elasticity of demand between Quaker State motor oil and Texaco motor oil is likely to be

Accepted Answer

A) zero. 
B) a positive number. 
C) a small negative number. 
D) a large negative number. 
A) zero. 
B) a positive number. 
C) a small negative number. 
D) a large negative number.

Question 10

The supply of product X is perfectly inelastic if the price of X rises by

Accepted Answer

A) 2 percent and quantity supplied rises by 3 percent. 
B) 10 percent and quantity supplied rises by 10 percent. 
C) 6 percent and quantity supplied stays the same. 
D) 12 percent and quantity supplied rises by 10 percent. 
A) 2 percent and quantity supplied rises by 3 percent. 
B) 10 percent and quantity supplied rises by 10 percent. 
C) 6 percent and quantity supplied stays the same. 
D) 12 percent and quantity supplied rises by 10 percent.

Question 11

If the quantity demanded for Good A increases from 40 to 60 when price decreases from $9 to $7, price elasticity of demand in this price range is 1.6.

Accepted Answer

A) True 
 B)False

Question 12

Price elasticity of demand tends to be low for goods with few close substitutes.

Accepted Answer

A) True 
 B)False

Question 13

The smaller the number of good substitutes for a product, the greater will be the price elasticity of demand for it.

Accepted Answer

A) True 
 B)False

Question 14

The elasticity of supply of product X is unitary if the price of X rises by

Accepted Answer

A) 5 percent and quantity supplied rises by 7 percent. 
B) 8 percent and quantity supplied rises by 8 percent. 
C) 10 percent and quantity supplied stays the same. 
D) 7 percent and quantity supplied rises by 5 percent. 
A) 5 percent and quantity supplied rises by 7 percent. 
B) 8 percent and quantity supplied rises by 8 percent. 
C) 10 percent and quantity supplied stays the same. 
D) 7 percent and quantity supplied rises by 5 percent.

Question 15

If the demand for product X is inelastic, a 10 percent decrease in the price of X will

Accepted Answer

A) decrease the quantity of X demanded by more than 10 percent. 
B) decrease the quantity of X demanded by less than 10 percent. 
C) increase the quantity of X demanded by more than 10 percent. 
D) increase the quantity of X demanded by less than 10 percent. 
A) decrease the quantity of X demanded by more than 10 percent. 
B) decrease the quantity of X demanded by less than 10 percent. 
C) increase the quantity of X demanded by more than 10 percent. 
D) increase the quantity of X demanded by less than 10 percent.

Question 16

The demand for autos is likely to be

Accepted Answer

A) less price elastic than the demand for Honda Accords. 
B) more price elastic than the demand for Honda Accords. 
C) of the same price elasticity as the demand for Honda Accords. 
D) perfectly inelastic. 
A) less price elastic than the demand for Honda Accords. 
B) more price elastic than the demand for Honda Accords. 
C) of the same price elasticity as the demand for Honda Accords. 
D) perfectly inelastic.

Question 17

Suppose the price elasticity coefficients of demand are 1.43, 0.67, 1.11, and 0.29 for products W, X, Y, and Z, respectively. A 1 percent decrease in price will increase total revenue in the cases of

Accepted Answer

A) W and Y. 
B) Y and Z. 
C) X and Z. 
D) Z and W. 
A) W and Y. 
B) Y and Z. 
C) X and Z. 
D) Z and W.

Question 18

Why do economists use percentages rather than absolute amounts in measuring the responsiveness of consumers to changes in price?

Accepted Answer

There are two reasons why we use percent

Question 19

Suppose that the price of peanuts falls from $3 to $2 per bushel and that, as a result, the total revenue received by peanut farmers changes from $16 to $14 billion. Thus,

Accepted Answer

A) the demand for peanuts is elastic. 
B) the demand for peanuts is inelastic. 
C) the demand curve for peanuts has shifted to the left. 
D) no inference can be made as to the elasticity of demand for peanuts. 
A) the demand for peanuts is elastic. 
B) the demand for peanuts is inelastic. 
C) the demand curve for peanuts has shifted to the left. 
D) no inference can be made as to the elasticity of demand for peanuts.

Question 20

For an increase in demand, the price effect is smallest and the quantity effect is largest

Accepted Answer

A) when supply is least elastic. 
B) in the long run. 
C) in the short run. 
D) in the immediate market period. 
A) when supply is least elastic. 
B) in the long run. 
C) in the short run. 
D) in the immediate market period.

Exam 6: Elasticity

If price and total revenue are directly related, demand is inelastic.

Whenever a product is put on special sale at a discounted price, total revenue from the product increases. This indicates that the coefficient of elasticity for the product is greater than 1.

Suppose the income elasticity of demand for jewelry is 2. Other things equal, a 10 percent increase in consumer income will

The relationship between a consumer's monthly income and monthly consumption of four products, A-D, is shown below. Which product listed is an example of an inferior good?

Considering the price-elasticity of demand for wheat, we would expect that if the supply of wheat increases, other factors constant, then wheat farmers' total revenues would

Farmers often find that large bumper crops are associated with declines in their gross incomes. This suggests that

Suppose the price elasticity of demand for beef is about 0.6. Other things equal, this means that a 20 percent increase in the price of beef will cause the quantity of beef demanded to

The demand for a luxury good whose purchase would exhaust a big portion of one's income is

The cross elasticity of demand between Quaker State motor oil and Texaco motor oil is likely to be

The supply of product X is perfectly inelastic if the price of X rises by

If the quantity demanded for Good A increases from 40 to 60 when price decreases from $9 to $7, price elasticity of demand in this price range is 1.6.

Price elasticity of demand tends to be low for goods with few close substitutes.

The smaller the number of good substitutes for a product, the greater will be the price elasticity of demand for it.

The elasticity of supply of product X is unitary if the price of X rises by

If the demand for product X is inelastic, a 10 percent decrease in the price of X will

The demand for autos is likely to be

Suppose the price elasticity coefficients of demand are 1.43, 0.67, 1.11, and 0.29 for products W, X, Y, and Z, respectively. A 1 percent decrease in price will increase total revenue in the cases of

Why do economists use percentages rather than absolute amounts in measuring the responsiveness of consumers to changes in price?

Suppose that the price of peanuts falls from $3 to $2 per bushel and that, as a result, the total revenue received by peanut farmers changes from $16 to $14 billion. Thus,

For an increase in demand, the price effect is smallest and the quantity effect is largest

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, RD, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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