Question 1

Consider the parallel demand curves in the figure above. Which curve is relatively more elastic at P₁?

Accepted Answer

A) AA 
B) BB 
C) The answer cannot be determined. 
D) Both have the same slope; therefore both have the same elasticity. 
A) AA 
B) BB 
C) The answer cannot be determined. 
D) Both have the same slope; therefore both have the same elasticity.

Question 2

Suppose the price elasticity of demand for bread is 0.2. If the price of bread falls by 10 percent, the quantity demanded will increase by

Accepted Answer

A) 2 percent and total expenditures on bread will rise. 
B) 2 percent and total expenditures on bread will fall. 
C) 20 percent and total expenditures on bread will fall. 
D) 20 percent and total expenditures on bread will rise. 
A) 2 percent and total expenditures on bread will rise. 
B) 2 percent and total expenditures on bread will fall. 
C) 20 percent and total expenditures on bread will fall. 
D) 20 percent and total expenditures on bread will rise.

Question 3

When the price of candy bars decreased from $0.55 to $0.45, the quantity demanded changed from 19,000 per day to 21,000 per day. In this price range, the price-elasticity coefficient (based on the midpoint formula)for candy bars is

Accepted Answer

A) 1. 
B) 2. 
C) 0.2. 
D) 0.5. 
A) 1. 
B) 2. 
C) 0.2. 
D) 0.5.

Question 4

The main reason for the high price of antiques is that

Accepted Answer

A) supply is relatively elastic and demand increases over time. 
B) supply is relatively inelastic and demand increases over time. 
C) demand is relatively elastic and supply increases over time. 
D) demand is relatively inelastic and supply increases over time. 
A) supply is relatively elastic and demand increases over time. 
B) supply is relatively inelastic and demand increases over time. 
C) demand is relatively elastic and supply increases over time. 
D) demand is relatively inelastic and supply increases over time.

Question 5

Answer the question on the basis of the following demand schedule.   The price elasticity of demand is relatively elastic

Accepted Answer

A) in the $6-$4 price range. 
B) over the entire $6-$1 price range. 
C) in the $3-$1 price range. 
D) in the $6-$5 price range only. 
A) in the $6-$4 price range. 
B) over the entire $6-$1 price range. 
C) in the $3-$1 price range. 
D) in the $6-$5 price range only.

Question 6

The coefficient of price-elasticity of supply for a product is 1.2 if

Accepted Answer

A) a 3 percent decrease in the price causes a 0.4 percent decrease in quantity supplied. 
B) a 3 percent decrease in price causes a 1.2 percent decrease in quantity supplied. 
C) a 3 percent decrease in price causes a 3.6 percent decrease in quantity supplied. 
D) a 1.2 percent decrease in price causes a 1.2 percent decrease in quantity supplied. 
A) a 3 percent decrease in the price causes a 0.4 percent decrease in quantity supplied. 
B) a 3 percent decrease in price causes a 1.2 percent decrease in quantity supplied. 
C) a 3 percent decrease in price causes a 3.6 percent decrease in quantity supplied. 
D) a 1.2 percent decrease in price causes a 1.2 percent decrease in quantity supplied.

Question 7

Suppose the price elasticity of demand for bread is 0.2. If the price of bread falls by 10 percent, the quantity demanded will increase by

Accepted Answer

A) 2 percent and total expenditures on bread will rise. 
B) 2 percent and total expenditures on bread will fall. 
C) 20 percent and total expenditures on bread will fall. 
D) 20 percent and total expenditures on bread will rise. 
A) 2 percent and total expenditures on bread will rise. 
B) 2 percent and total expenditures on bread will fall. 
C) 20 percent and total expenditures on bread will fall. 
D) 20 percent and total expenditures on bread will rise.

Question 8

Total revenue falls as the price of a good is raised, if the demand for the good is

Accepted Answer

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

Question 9

If the demand for bacon is relatively elastic, a 10 percent decline in the price of bacon will

Accepted Answer

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

Question 10

The diagram shows two product demand curves. On the basis of this diagram, we can say that

Accepted Answer

A) over range P₁P₂, price elasticity of demand is greater for D₁ than for D₂. 
B) over range P₁P₂, price elasticity of demand is greater for D₂ than for D₁. 
C) over range P₁P₂, price elasticity is the same for the two demand curves. 
D) not enough information is given to compare price elasticities. 
A) over range P₁P₂, price elasticity of demand is greater for D₁ than for D₂. 
B) over range P₁P₂, price elasticity of demand is greater for D₂ than for D₁. 
C) over range P₁P₂, price elasticity is the same for the two demand curves. 
D) not enough information is given to compare price elasticities.

Question 11

Refer to the diagram. Between prices of $5.70 and $6.30,

Accepted Answer

A) D₁ is more elastic than D₂. 
B) D₂ is an inferior good and D₁ is a normal good. 
C) D₁ and D₂ have identical elasticities. 
D) D₂ is more elastic than D₁. 
A) D₁ is more elastic than D₂. 
B) D₂ is an inferior good and D₁ is a normal good. 
C) D₁ and D₂ have identical elasticities. 
D) D₂ is more elastic than D₁.

Question 12

Studies show that the demand for gasoline is

Accepted Answer

A) price inelastic in the short run but elastic in the long run. 
B) price inelastic in both the short and long run. 
C) price elastic in the short run but inelastic in the long run. 
D) price elastic in both the short and long run. 
A) price inelastic in the short run but elastic in the long run. 
B) price inelastic in both the short and long run. 
C) price elastic in the short run but inelastic in the long run. 
D) price elastic in both the short and long run.

Question 13

The price elasticity of demand for widgets is 0.75. Assuming no change in the demand curve for widgets, a 9 percent decrease in sales implies a(n)

Accepted Answer

A) 3.25 percent increase in price. 
B) 8 percent increase in price. 
C) 12 percent increase in price. 
D) 6.75 percent increase in price. 
A) 3.25 percent increase in price. 
B) 8 percent increase in price. 
C) 12 percent increase in price. 
D) 6.75 percent increase in price.

Question 14

Refer to the diagram and assume that price increases from $2 to $10. The coefficient of price elasticity of demand (midpoint formula)relating to this change in price is about

Accepted Answer

A) 0.25, and demand is inelastic. 
B) 1.5, and demand is elastic. 
C) 1, and demand is unit elastic. 
D) 0.67, and demand is inelastic. 
A) 0.25, and demand is inelastic. 
B) 1.5, and demand is elastic. 
C) 1, and demand is unit elastic. 
D) 0.67, and demand is inelastic.

Question 15

Suppose the price elasticity of demand for beef is about 1.2. Other things equal, this means that a 15 percent increase in the price of beef will cause the quantity of beef demanded to

Accepted Answer

A) increase by approximately 8 percent. 
B) decrease by approximately 18 percent. 
C) decrease by approximately 8 percent. 
D) decrease by approximately 12 percent. 
A) increase by approximately 8 percent. 
B) decrease by approximately 18 percent. 
C) decrease by approximately 8 percent. 
D) decrease by approximately 12 percent.

Question 16

The demand for cocaine among addicts is relatively elastic.

Accepted Answer

A) True 
 B)False

Question 17

Refer to the diagrams. In which case would the coefficient of cross elasticity of demand be positive?

Accepted Answer

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

Question 18

If the demand for farm products is price inelastic, a bumper crop (an unusually good harvest)will cause farm revenues to

Accepted Answer

A) increase. 
B) decrease. 
C) be unchanged. 
D) either increase or decrease, depending on what happens to supply. 
A) increase. 
B) decrease. 
C) be unchanged. 
D) either increase or decrease, depending on what happens to supply.

Question 19

Generally speaking, the smaller the percentage of one's total budget devoted to a particular product, the more price elastic will be the demand for that product.

Accepted Answer

A) True 
 B)False

Question 20

Refer to the diagram. In the P₁ to P₂ price range, we can say

Accepted Answer

A) that consumer purchases are relatively insensitive to price changes. 
B) nothing concerning price elasticity of demand. 
C) that demand is inelastic with respect to price. 
D) that demand is elastic with respect to price. 
A) that consumer purchases are relatively insensitive to price changes. 
B) nothing concerning price elasticity of demand. 
C) that demand is inelastic with respect to price. 
D) that demand is elastic with respect to price.

Exam 6: Elasticity

Consider the parallel demand curves in the figure above. Which curve is relatively more elastic at P₁?

Suppose the price elasticity of demand for bread is 0.2. If the price of bread falls by 10 percent, the quantity demanded will increase by

When the price of candy bars decreased from $0.55 to $0.45, the quantity demanded changed from 19,000 per day to 21,000 per day. In this price range, the price-elasticity coefficient (based on the midpoint formula)for candy bars is

The main reason for the high price of antiques is that

Answer the question on the basis of the following demand schedule. The price elasticity of demand is relatively elastic

The coefficient of price-elasticity of supply for a product is 1.2 if

Suppose the price elasticity of demand for bread is 0.2. If the price of bread falls by 10 percent, the quantity demanded will increase by

Total revenue falls as the price of a good is raised, if the demand for the good is

If the demand for bacon is relatively elastic, a 10 percent decline in the price of bacon will

The diagram shows two product demand curves. On the basis of this diagram, we can say that

Refer to the diagram. Between prices of $5.70 and $6.30,

Studies show that the demand for gasoline is

The price elasticity of demand for widgets is 0.75. Assuming no change in the demand curve for widgets, a 9 percent decrease in sales implies a(n)

Refer to the diagram and assume that price increases from $2 to $10. The coefficient of price elasticity of demand (midpoint formula)relating to this change in price is about

Suppose the price elasticity of demand for beef is about 1.2. Other things equal, this means that a 15 percent increase in the price of beef will cause the quantity of beef demanded to

The demand for cocaine among addicts is relatively elastic.

Refer to the diagrams. In which case would the coefficient of cross elasticity of demand be positive?

If the demand for farm products is price inelastic, a bumper crop (an unusually good harvest)will cause farm revenues to

Generally speaking, the smaller the percentage of one's total budget devoted to a particular product, the more price elastic will be the demand for that product.

Refer to the diagram. In the P₁ to P₂ price range, we can say

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