Question 1

Refer to the total revenue graph above. When the seller is earning maximum revenues from selling Product X, the demand is

Accepted Answer

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

Question 2

The price elasticity of demand is generally

Accepted Answer

A) negative, but the minus sign is ignored. 
B) positive, but the plus sign is ignored. 
C) positive for normal goods and negative for inferior goods. 
D) positive because price and quantity demanded are inversely related. 
A) negative, but the minus sign is ignored. 
B) positive, but the plus sign is ignored. 
C) positive for normal goods and negative for inferior goods. 
D) positive because price and quantity demanded are inversely related.

Question 3

Assume that pizza and hamburgers are the only food items available to consumers. If the price of pizza increases, other factors constant, then which of the following will definitely happen?

Accepted Answer

A) Total revenues received by pizza sellers will increase. 
B) Total revenues received by pizza sellers will decrease. 
C) Total revenues received by hamburger sellers will increase. 
D) Total revenues received by hamburger sellers will decrease. 
A) Total revenues received by pizza sellers will increase. 
B) Total revenues received by pizza sellers will decrease. 
C) Total revenues received by hamburger sellers will increase. 
D) Total revenues received by hamburger sellers will decrease.

Question 4

The price of old baseball cards rises rapidly with increases in demand because

Accepted Answer

A) the supply of old baseball cards is price inelastic. 
B) the supply of old baseball cards in price elastic. 
C) the demand for old baseball cards is price inelastic. 
D) the demand for old baseball cards is price elastic. 
A) the supply of old baseball cards is price inelastic. 
B) the supply of old baseball cards in price elastic. 
C) the demand for old baseball cards is price inelastic. 
D) the demand for old baseball cards is price elastic.

Question 5

Answer the question based on the following data.   What is the price elasticity of demand over the range of $8 to $10?

Accepted Answer

A) 0.11 
B) 0.47 
C) 1.93 
D) 1.43 
A) 0.11 
B) 0.47 
C) 1.93 
D) 1.43

Question 6

Suppose Aiyanna's Pizzeria currently faces a linear demand curve and is charging a very high price per pizza and doing very little business. Aiyanna now decides to lower pizza prices by 5 percent per week for an indefinite period of time. We can expect that each successive week,

Accepted Answer

A) demand will become more price elastic. 
B) price elasticity of demand will not change as price is lowered. 
C) demand will become less price elastic. 
D) the elasticity of supply will increase. 
A) demand will become more price elastic. 
B) price elasticity of demand will not change as price is lowered. 
C) demand will become less price elastic. 
D) the elasticity of supply will increase.

Question 7

If the price of hand calculators falls from $10 to $9 and, as a result, the quantity demanded increases from 100 to 125, then

Accepted Answer

A) demand is price elastic. 
B) demand is price inelastic. 
C) demand is unit elastic with respect to price. 
D) not enough information is given to make a statement about elasticity. 
A) demand is price elastic. 
B) demand is price inelastic. 
C) demand is unit elastic with respect to price. 
D) not enough information is given to make a statement about elasticity.

Question 8

You are the only seller of eggs in town, and the price-elasticity coefficient for eggs is known to be 0.5. If you want to increase your sales quantity by 6 percent through a price change, what should you do to the price?

Accepted Answer

A) reduce price by 12 percent 
B) increase price by 12 percent 
C) reduce price by 3 percent 
D) increase price by 3 percent 
A) reduce price by 12 percent 
B) increase price by 12 percent 
C) reduce price by 3 percent 
D) increase price by 3 percent

Question 9

The price elasticity of demand for a popular sporting event is 0.5. If the price of a ticket to this event increases by 12 percent, the quantity of tickets demanded will

Accepted Answer

A) decrease by 24 percent. 
B) decrease by 6 percent. 
C) increase by 6 percent. 
D) increase by 24 percent. 
A) decrease by 24 percent. 
B) decrease by 6 percent. 
C) increase by 6 percent. 
D) increase by 24 percent.

Question 10

Suppose that 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 6 units to 7 units. 
B) elastic for price declines that increase quantity demanded from 6 units to 7 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 8 units to 7 units. 
A) inelastic for price declines that increase quantity demanded from 6 units to 7 units. 
B) elastic for price declines that increase quantity demanded from 6 units to 7 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 8 units to 7 units.

Question 11

The price of gold is often volatile because

Accepted Answer

A) demand is relatively inelastic, so changes in supply have a large effect on price. 
B) supply is relatively elastic, so changes in demand have a large effect on price. 
C) demand is relatively elastic, so changes in supply have a large effect on price. 
D) supply is relatively inelastic, so changes in demand have a large effect on price. 
A) demand is relatively inelastic, so changes in supply have a large effect on price. 
B) supply is relatively elastic, so changes in demand have a large effect on price. 
C) demand is relatively elastic, so changes in supply have a large effect on price. 
D) supply is relatively inelastic, so changes in demand have a large effect on price.

Question 12

If a product has a short-run elasticity of supply equal to zero, then an increase in the demand for the product will

Accepted Answer

A) have no effect on price or quantity sold. 
B) increase price and leave quantity sold unchanged. 
C) increase price and reduce the quantity sold to zero. 
D) leave the price unchanged and reduce the quantity sold. 
A) have no effect on price or quantity sold. 
B) increase price and leave quantity sold unchanged. 
C) increase price and reduce the quantity sold to zero. 
D) leave the price unchanged and reduce the quantity sold.

Question 13

When the price of a product is increased 10 percent, the quantity demanded decreases 15 percent. The price-elasticity-of-demand coefficient for this product is

Accepted Answer

A) 1.5. 
B) 0.15. 
C) 0.67. 
D) 6.7. 
A) 1.5. 
B) 0.15. 
C) 0.67. 
D) 6.7.

Question 14

The coefficient of price-elasticity of supply for a product is 2 if

Accepted Answer

A) a 1 percent decrease in the price causes a 0.2 percent decrease in quantity supplied. 
B) a 2 percent decrease in price causes a 1 percent decrease in quantity supplied. 
C) a 1 percent decrease in price causes a 2 percent decrease in quantity supplied. 
D) a 2 percent decrease in price causes a 2 percent decrease in quantity supplied. 
A) a 1 percent decrease in the price causes a 0.2 percent decrease in quantity supplied. 
B) a 2 percent decrease in price causes a 1 percent decrease in quantity supplied. 
C) a 1 percent decrease in price causes a 2 percent decrease in quantity supplied. 
D) a 2 percent decrease in price causes a 2 percent decrease in quantity supplied.

Question 15

If demand for farm crops is inelastic, a good harvest will cause farm revenues to

Accepted Answer

A) increase because of the increase in the quantity that farmers can sell. 
B) increase because of a downward movement along the supply curve, encouraging an increase in demand. 
C) decrease because of a percentage fall in price that is greater than the percentage increase in quantity sold. 
D) remain unchanged, because the increase in quantity that can be sold will be matched by an equal decrease in price. 
A) increase because of the increase in the quantity that farmers can sell. 
B) increase because of a downward movement along the supply curve, encouraging an increase in demand. 
C) decrease because of a percentage fall in price that is greater than the percentage increase in quantity sold. 
D) remain unchanged, because the increase in quantity that can be sold will be matched by an equal decrease in price.

Question 16

The supply of product X is elastic if the price of X rises by

Accepted Answer

A) 1 percent and quantity supplied rises by 5 percent. 
B) 4 percent and quantity supplied rises by 4 percent. 
C) 8 percent and quantity supplied remains the same. 
D) 10 percent and quantity supplied rises by 2 percent. 
A) 1 percent and quantity supplied rises by 5 percent. 
B) 4 percent and quantity supplied rises by 4 percent. 
C) 8 percent and quantity supplied remains the same. 
D) 10 percent and quantity supplied rises by 2 percent.

Question 17

Which product is most likely to be the most price elastic?

Accepted Answer

A) milk 
B) housing 
C) clothing 
D) automobiles 
A) milk 
B) housing 
C) clothing 
D) automobiles

Question 18

Cross elasticity of demand measures how sensitive purchases of a specific product are to changes in

Accepted Answer

A) the price of some other product. 
B) the price of that same product. 
C) income. 
D) the general price level. 
A) the price of some other product. 
B) the price of that same product. 
C) income. 
D) the general price level.

Question 19

The diagram concerns supply adjustments to an increase in demand (D₁ to D₂)in the immediate market period, the short run, and the long run. In the immediate market period, the increase in demand will

Accepted Answer

A) have no effect on either equilibrium price or quantity. 
B) increase equilibrium price but not equilibrium quantity. 
C) increase equilibrium quantity but not equilibrium price. 
D) increase both equilibrium price and quantity. 
A) have no effect on either equilibrium price or quantity. 
B) increase equilibrium price but not equilibrium quantity. 
C) increase equilibrium quantity but not equilibrium price. 
D) increase both equilibrium price and quantity.

Question 20

If the supply of product X is perfectly elastic, an increase in the demand for it will increase

Accepted Answer

A) equilibrium quantity but reduce equilibrium price. 
B) equilibrium quantity, but equilibrium price will be unchanged. 
C) equilibrium price but reduce equilibrium quantity. 
D) equilibrium price, but equilibrium quantity will be unchanged. 
A) equilibrium quantity but reduce equilibrium price. 
B) equilibrium quantity, but equilibrium price will be unchanged. 
C) equilibrium price but reduce equilibrium quantity. 
D) equilibrium price, but equilibrium quantity will be unchanged.

Exam 6: Elasticity

Refer to the total revenue graph above. When the seller is earning maximum revenues from selling Product X, the demand is

The price elasticity of demand is generally

Assume that pizza and hamburgers are the only food items available to consumers. If the price of pizza increases, other factors constant, then which of the following will definitely happen?

The price of old baseball cards rises rapidly with increases in demand because

Answer the question based on the following data. What is the price elasticity of demand over the range of $8 to $10?

Suppose Aiyanna's Pizzeria currently faces a linear demand curve and is charging a very high price per pizza and doing very little business. Aiyanna now decides to lower pizza prices by 5 percent per week for an indefinite period of time. We can expect that each successive week,

If the price of hand calculators falls from $10 to $9 and, as a result, the quantity demanded increases from 100 to 125, then

You are the only seller of eggs in town, and the price-elasticity coefficient for eggs is known to be 0.5. If you want to increase your sales quantity by 6 percent through a price change, what should you do to the price?

The price elasticity of demand for a popular sporting event is 0.5. If the price of a ticket to this event increases by 12 percent, the quantity of tickets demanded will

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

The price of gold is often volatile because

If a product has a short-run elasticity of supply equal to zero, then an increase in the demand for the product will

When the price of a product is increased 10 percent, the quantity demanded decreases 15 percent. The price-elasticity-of-demand coefficient for this product is

The coefficient of price-elasticity of supply for a product is 2 if

If demand for farm crops is inelastic, a good harvest will cause farm revenues to

The supply of product X is elastic if the price of X rises by

Which product is most likely to be the most price elastic?

Cross elasticity of demand measures how sensitive purchases of a specific product are to changes in

The diagram concerns supply adjustments to an increase in demand (D₁ to D₂)in the immediate market period, the short run, and the long run. In the immediate market period, the increase in demand will

If the supply of product X is perfectly elastic, an increase in the demand for it will increase

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