Question 1

The formula for price elasticity of demand that is used in practice

Accepted Answer

A) usually drops all minus signs. 
B) usually takes on different values at different points on the demand curve. 
C) may calculate the percentage change in price between P1 and P2 as "(P2 − P1)as a percentage of (P1 + P2)\2." 
D) All of the responses are correct. 
A) usually drops all minus signs. 
B) usually takes on different values at different points on the demand curve. 
C) may calculate the percentage change in price between P1 and P2 as "(P2 − P1)as a percentage of (P1 + P2)\2." 
D) All of the responses are correct. D

Question 2

If price goes up 20 percent and quantity demanded declines by 10 percent, total revenue will rise.

Accepted Answer

A) True 
 B)False  True

Question 3

The elasticity of a straight-line demand curve is the same as its slope.

Accepted Answer

A) True 
 B)False  False

Question 4

Since an individual spends a small share of the income on salt, the elasticity of demand is likely to be low.

Accepted Answer

A) True 
 B)False

Question 5

The price elasticity of demand measure is generally stated as an absolute value.

Accepted Answer

A) True 
 B)False

Question 6

If the price changes for a good for which the demand is perfectly inelastic, the response will be infinitely large.

Accepted Answer

A) True 
 B)False

Question 7

A demand curve is described as perfectly inelastic if

Accepted Answer

A) the same quantity is purchased regardless of price. 
B) the same price is charged regardless of quantity sold. 
C) neither price nor quantity demanded ever change. 
D) only quantity demanded can change. 
A) the same quantity is purchased regardless of price. 
B) the same price is charged regardless of quantity sold. 
C) neither price nor quantity demanded ever change. 
D) only quantity demanded can change.

Question 8

Perfectly elastic demand curves are vertical.

Accepted Answer

A) True 
 B)False

Question 9

What is the shape of a perfectly elastic demand curve? Explain its significance for a seller.

Accepted Answer

The perfectly elastic demand curve is ho

Question 10

The sales manager of a retail outlet suggests that the best way to increase customers is to have a sale. If a 10 percent price cut doesn't bring in enough customers, then he'll cut prices 20 percent. Increased cash flow should take care of profits. Do you agree? Explain.

Accepted Answer

A price cut will (usually)lead

Question 11

Which of the following is more likely to be the price elasticity of demand for the snake bite treatment antivenom?

Accepted Answer

A) Highly inelastic 
B) Unit elastic 
C) Elastic 
D) Perfectly elastic 
A) Highly inelastic 
B) Unit elastic 
C) Elastic 
D) Perfectly elastic

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

The price elasticity of new automobile purchases is about 1.2. This implies that an increase of $1,000 on a $10,000 automobile will

Accepted Answer

A) reduce the number of autos sold by approximately 1.2 percent. 
B) increase the consumer expenditures on autos by approximately 1.2 percent. 
C) reduce the number of autos sold by approximately 12 percent. 
D) increase consumer expenditures on autos by approximately 12 percent. 
A) reduce the number of autos sold by approximately 1.2 percent. 
B) increase the consumer expenditures on autos by approximately 1.2 percent. 
C) reduce the number of autos sold by approximately 12 percent. 
D) increase consumer expenditures on autos by approximately 12 percent.

Question 14

Historical data on prices and quantities sold do not provide the basis for drawing an accurate demand curve because

Accepted Answer

A) reporters who gather these data are often wrong. 
B) factors other than price may change over time. 
C) they do not include measures of price close to the quantity axis. 
D) they sometimes tend to be clustered around one point. 
A) reporters who gather these data are often wrong. 
B) factors other than price may change over time. 
C) they do not include measures of price close to the quantity axis. 
D) they sometimes tend to be clustered around one point.

Question 15

Price elasticity of demand is a numerical measure of how much quantity demanded rises as price falls or quantity demanded falls as price rises.

Accepted Answer

A) True 
 B)False

Question 16

Specifically, what might cause the quantity demanded of a particular good to double at a particular price?

Accepted Answer

This results from a rightward shift in t

Question 17

Historical demand curves are always suspect because their demand curves are likely to have shifted over time.

Accepted Answer

A) True 
 B)False

Question 18

Two goods with a low cross elasticity of demand are competing in the same market.

Accepted Answer

A) True 
 B)False

Question 19

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 20

Compared to the demand for coffee, the market demand for French Roast coffee is likely to be

Accepted Answer

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

Exam 6: Demand and Elasticity

The formula for price elasticity of demand that is used in practice

If price goes up 20 percent and quantity demanded declines by 10 percent, total revenue will rise.

The elasticity of a straight-line demand curve is the same as its slope.

Since an individual spends a small share of the income on salt, the elasticity of demand is likely to be low.

The price elasticity of demand measure is generally stated as an absolute value.

If the price changes for a good for which the demand is perfectly inelastic, the response will be infinitely large.

A demand curve is described as perfectly inelastic if

Perfectly elastic demand curves are vertical.

What is the shape of a perfectly elastic demand curve? Explain its significance for a seller.

The sales manager of a retail outlet suggests that the best way to increase customers is to have a sale. If a 10 percent price cut doesn't bring in enough customers, then he'll cut prices 20 percent. Increased cash flow should take care of profits. Do you agree? Explain.

Which of the following is more likely to be the price elasticity of demand for the snake bite treatment antivenom?

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

The price elasticity of new automobile purchases is about 1.2. This implies that an increase of $1,000 on a $10,000 automobile will

Historical data on prices and quantities sold do not provide the basis for drawing an accurate demand curve because

Price elasticity of demand is a numerical measure of how much quantity demanded rises as price falls or quantity demanded falls as price rises.

Specifically, what might cause the quantity demanded of a particular good to double at a particular price?

Historical demand curves are always suspect because their demand curves are likely to have shifted over time.

Two goods with a low cross elasticity of demand are competing in the same market.

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

Compared to the demand for coffee, the market demand for French Roast coffee is likely to be

What Is Economics

The Economy: 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

Externalities, Externaliteis, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

International Trade and Comparative Advantage

Contemporary Issues in the Us Economy

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