Question 1

Suppose the supply of product X is perfectly inelastic. If there is an increase in the demand for this product, equilibrium price

Accepted Answer

A) will decrease, but equilibrium quantity will increase. 
B) and quantity will both decrease. 
C) will increase, but equilibrium quantity will decline. 
D) will increase, but equilibrium quantity will be unchanged. 
A) will decrease, but equilibrium quantity will increase. 
B) and quantity will both decrease. 
C) will increase, but equilibrium quantity will decline. 
D) will increase, but equilibrium quantity will be unchanged.

Question 2

The more time consumers have to adjust to a change in price,

Accepted Answer

A) the smaller will be the price elasticity of demand. 
B) the greater will be the price elasticity of demand. 
C) the more likely the product is a normal good. 
D) the more likely the product is an inferior good. 
A) the smaller will be the price elasticity of demand. 
B) the greater will be the price elasticity of demand. 
C) the more likely the product is a normal good. 
D) the more likely the product is an inferior good.

Question 3

Blossom, Inc., sells 900 bottles of perfume a month when the price is $10. A huge increase in resource costs forces Blossom to raise the price to $12, and the firm only manages to sell 750 bottles of perfume. Using the midpoint formula, the price elasticity of demand coefficient is

Accepted Answer

A) 1 and elastic. 
B) 1.4 and elastic. 
C) 1 and unit elastic. 
D) 1.67 and elastic. 
A) 1 and elastic. 
B) 1.4 and elastic. 
C) 1 and unit elastic. 
D) 1.67 and elastic.

Question 4

The total revenue received by sellers of a good is computed by

Accepted Answer

A) multiplying the price times the quantity sold. 
B) adding the price and the quantity sold. 
C) multiplying the percentage change in price times the percentage change in quantity. 
D) dividing the percentage change in quantity by the percentage change in price. 
A) multiplying the price times the quantity sold. 
B) adding the price and the quantity sold. 
C) multiplying the percentage change in price times the percentage change in quantity. 
D) dividing the percentage change in quantity by the percentage change in price.

Question 5

We would expect the income elasticity of demand for steak to be positive, and that for hamburger to be negative.

Accepted Answer

A) True 
 B)False

Question 6

In markets entered by Southwest Airlines, gains in passenger traffic and profits

Accepted Answer

A) went primarily to airlines already in those markets. 
B) were evenly distributed among airlines in those markets. 
C) went almost entirely to Southwest. 
D) were minimal, as the highly inelastic demand for air travel meant reduced revenues for all airlines in those markets. 
A) went primarily to airlines already in those markets. 
B) were evenly distributed among airlines in those markets. 
C) went almost entirely to Southwest. 
D) were minimal, as the highly inelastic demand for air travel meant reduced revenues for all airlines in those markets.

Question 7

Refer to the above graph. If the price is P₃, then the total revenue is represented by area

Accepted Answer

A) B + C + D. 
B) E + F + G. 
C) B + C + D + E + F + G. 
D) A + B + C + D + E + F + G. 
A) B + C + D. 
B) E + F + G. 
C) B + C + D + E + F + G. 
D) A + B + C + D + E + F + G.

Question 8

An antidrug policy that reduces the supply of heroin might

Accepted Answer

A) increase street crime because the addict's demand for heroin is highly inelastic. 
B) reduce street crime because the addict's demand for heroin is highly elastic. 
C) reduce street crime because the addict's demand for heroin is highly inelastic. 
D) increase street crime because the addict's demand for heroin is highly elastic. 
A) increase street crime because the addict's demand for heroin is highly inelastic. 
B) reduce street crime because the addict's demand for heroin is highly elastic. 
C) reduce street crime because the addict's demand for heroin is highly inelastic. 
D) increase street crime because the addict's demand for heroin is highly elastic.

Question 9

Given that the demand for grains is price-inelastic, we would expect that if the harvest of grains increases significantly, other factors constant, then grain farmers' total revenues would increase.

Accepted Answer

A) True 
 B)False

Question 10

The diagram suggests that

Accepted Answer

A) X and Y are both inferior goods. 
B) X and Y are both normal goods. 
C) X and Y are substitute goods. 
D) X and Y are independent goods. 
A) X and Y are both inferior goods. 
B) X and Y are both normal goods. 
C) X and Y are substitute goods. 
D) X and Y are independent goods.

Question 11

It is argued that, with a rising demand for college education, if the supply were to become more elastic, then college tuition costs would

Accepted Answer

A) rise faster. 
B) decrease slowly. 
C) increase more slowly. 
D) decrease steeply. 
A) rise faster. 
B) decrease slowly. 
C) increase more slowly. 
D) decrease steeply.

Question 12

When the percentage change in price is greater than the resulting percentage change in quantity demanded,

Accepted Answer

A) a decrease in price will increase total revenue. 
B) demand may be either elastic or inelastic. 
C) an increase in price will increase total revenue. 
D) demand is elastic. 
A) a decrease in price will increase total revenue. 
B) demand may be either elastic or inelastic. 
C) an increase in price will increase total revenue. 
D) demand is elastic.

Question 13

Suppose the total-revenue curve is derived from a particular linear demand curve. That demand curve must be

Accepted Answer

A) inelastic for price declines that increase quantity demanded from 2 units to 3 units. 
B) elastic for price declines that increase quantity demanded from 5 units to 6 units. 
C) inelastic for price increases that reduce quantity demanded from 4 units to 3 units. 
D) elastic for price increases that reduce quantity demanded from 4 units to 3 units. 
A) inelastic for price declines that increase quantity demanded from 2 units to 3 units. 
B) elastic for price declines that increase quantity demanded from 5 units to 6 units. 
C) inelastic for price increases that reduce quantity demanded from 4 units to 3 units. 
D) elastic for price increases that reduce quantity demanded from 4 units to 3 units.

Question 14

If quantity demanded is completely unresponsive to price changes, demand is

Accepted Answer

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

Question 15

In the graph above, what is the price elasticity of supply (using the midpoint formula)between points A and B?

Accepted Answer

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

Question 16

The price elasticity of demand for widgets is 0.8. Assuming no change in the demand curve for widgets, an increase in sales of 16 percent implies a(n)

Accepted Answer

A) 1 percent reduction in price. 
B) 12 percent reduction in price. 
C) 20 percent reduction in price. 
D) 40 percent reduction in price. 
A) 1 percent reduction in price. 
B) 12 percent reduction in price. 
C) 20 percent reduction in price. 
D) 40 percent reduction in price.

Question 17

Refer to the diagrams. The case of complementary goods is represented by figure

Accepted Answer

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

Question 18

List the four determinants of price elasticity of demand.

Accepted Answer

The four determinants are (1)s

Question 19

Refer to the total revenue graph above. If the quantity of product X demanded falls from 14,000 to 10,000 units, then it suggests that the price of X was

Accepted Answer

A) reduced and the demand is elastic. 
B) increased and the demand is elastic. 
C) reduced and the demand is inelastic. 
D) increased and the demand is inelastic. 
A) reduced and the demand is elastic. 
B) increased and the demand is elastic. 
C) reduced and the demand is inelastic. 
D) increased and the demand is inelastic.

Question 20

We would expect the coefficient of cross elasticity of demand for DVD players and DVDs to be positive.

Accepted Answer

A) True 
 B)False

Exam 6: Elasticity

Suppose the supply of product X is perfectly inelastic. If there is an increase in the demand for this product, equilibrium price

The more time consumers have to adjust to a change in price,

Blossom, Inc., sells 900 bottles of perfume a month when the price is $10. A huge increase in resource costs forces Blossom to raise the price to $12, and the firm only manages to sell 750 bottles of perfume. Using the midpoint formula, the price elasticity of demand coefficient is

The total revenue received by sellers of a good is computed by

We would expect the income elasticity of demand for steak to be positive, and that for hamburger to be negative.

In markets entered by Southwest Airlines, gains in passenger traffic and profits

Refer to the above graph. If the price is P₃, then the total revenue is represented by area

An antidrug policy that reduces the supply of heroin might

Given that the demand for grains is price-inelastic, we would expect that if the harvest of grains increases significantly, other factors constant, then grain farmers' total revenues would increase.

The diagram suggests that

It is argued that, with a rising demand for college education, if the supply were to become more elastic, then college tuition costs would

When the percentage change in price is greater than the resulting percentage change in quantity demanded,

Suppose the total-revenue curve is derived from a particular linear demand curve. That demand curve must be

If quantity demanded is completely unresponsive to price changes, demand is

In the graph above, what is the price elasticity of supply (using the midpoint formula)between points A and B?

The price elasticity of demand for widgets is 0.8. Assuming no change in the demand curve for widgets, an increase in sales of 16 percent implies a(n)

Refer to the diagrams. The case of complementary goods is represented by figure

List the four determinants of price elasticity of demand.

Refer to the total revenue graph above. If the quantity of product X demanded falls from 14,000 to 10,000 units, then it suggests that the price of X was

We would expect the coefficient of cross elasticity of demand for DVD players and DVDs to be positive.

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

Filters