Question 1

When Johanna cut prices in her jewelry store by 20 percent, the dollar value of her sales fell by 20 percent. This indicates that

Accepted Answer

A) demand was elastic. 
B) demand was inelastic. 
C) demand was unit elastic. 
D) the demand curve was vertical. 
A) demand was elastic. 
B) demand was inelastic. 
C) demand was unit elastic. 
D) the demand curve was vertical.

Question 2

If demand is unit elastic, revenue

Accepted Answer

A) and price rise and fall together. 
B) rises as price falls. 
C) falls as price rises. 
D) remains constant as price rises or falls. 
A) and price rise and fall together. 
B) rises as price falls. 
C) falls as price rises. 
D) remains constant as price rises or falls.

Question 3

Figure 6-2
 
-Using Figure 6-2, calculate the price elasticity of demand (dropping all minus signs)between P = 10 and P = 12.

Accepted Answer

A) 2.20 
B) 0.45 
C) 0.80 
D) 1.25 
A) 2.20 
B) 0.45 
C) 0.80 
D) 1.25

Question 4

If a 10 percent rise in price leads to a reduction in quantity demanded of more than 10 percent,

Accepted Answer

A) demand is elastic. 
B) demand is inelastic. 
C) elasticity of demand is unitary. 
D) None of the above is correct. 
A) demand is elastic. 
B) demand is inelastic. 
C) elasticity of demand is unitary. 
D) None of the above is correct.

Question 5

John's Bait Shop was surprised to learn that when it raised prices by 10 percent, total revenue was unaffected. This is because the elasticity for bait is

Accepted Answer

A) unit elastic. 
B) inelastic. 
C) elastic. 
D) Not enough information is given. 
A) unit elastic. 
B) inelastic. 
C) elastic. 
D) Not enough information is given.

Question 6

The definition of cross elasticity of demand for two products X and Y is

Accepted Answer

A) percentage change in quantity of X demanded\percentage change in quantity of Y demanded. 
B) percentage change in price of Y\percentage change in quantity of X demanded. 
C) percentage change in price of Y\percentage change in price of X. 
D) percentage change in quantity of X demanded\percentage change in price of Y. 
A) percentage change in quantity of X demanded\percentage change in quantity of Y demanded. 
B) percentage change in price of Y\percentage change in quantity of X demanded. 
C) percentage change in price of Y\percentage change in price of X. 
D) percentage change in quantity of X demanded\percentage change in price of Y.

Question 7

A demand curve is described as perfectly elastic if

Accepted Answer

A) any quantity can be sold at a given price. 
B) the same quantity is sold regardless of price. 
C) neither price nor quantity demanded ever change. 
D) only price can change. 
A) any quantity can be sold at a given price. 
B) the same quantity is sold regardless of price. 
C) neither price nor quantity demanded ever change. 
D) only price can change.

Question 8

The elasticity of demand for gasoline is likely to be relatively low in the short term and higher as the period of time gets longer.

Accepted Answer

A) True 
 B)False

Question 9

The Sandy Deli operates near a college campus. It has been selling 325 sandwiches a day at $1.75 each and is considering a price cut. It estimates 450 sandwiches would sell per day at $1.50 each. Calculate the marginal revenue of such a price cut and the elasticity between the two points.

Accepted Answer

Revenue is currently 325 × $1.75 = $568.

Question 10

The elasticity of a demand curve at any point can be ascertained by its steepness.

Accepted Answer

A) True 
 B)False

Question 11

Whenever the elasticity value for a demand curve is greater than zero, then the demand is labeled as "elastic."

Accepted Answer

A) True 
 B)False

Question 12

In an attempt to raise sales, Hannah cut prices in her bookstore by 20 percent. If the dollar value of her sales remained constant, that indicates

Accepted Answer

A) old customers bought no more books. 
B) no new customers bought books. 
C) the quantity of books sold increased 20 percent. 
D) the demand curve is vertical. 
A) old customers bought no more books. 
B) no new customers bought books. 
C) the quantity of books sold increased 20 percent. 
D) the demand curve is vertical.

Question 13

A rightward shift in the demand curve for a product will ordinarily result from

Accepted Answer

A) a decrease in the advertising budget. 
B) a decrease in the price of a competing product. 
C) an increase in consumer income. 
D) an increase in the price of a complementary good. 
A) a decrease in the advertising budget. 
B) a decrease in the price of a competing product. 
C) an increase in consumer income. 
D) an increase in the price of a complementary good.

Question 14

If the price elasticity of demand for radios is 2.5 (dropping the minus sign), then a 50 percent reduction in the price of radios will lead to

Accepted Answer

A) the sale of 200 additional radios. 
B) the sale of 125 percent more radios than before. 
C) the sale of 150 percent more radios than before. 
D) the sale of 25 percent more radios than before. 
A) the sale of 200 additional radios. 
B) the sale of 125 percent more radios than before. 
C) the sale of 150 percent more radios than before. 
D) the sale of 25 percent more radios than before.

Question 15

As one moves down a straight-line demand curve, the elasticity decreases.

Accepted Answer

A) True 
 B)False

Question 16

The demand for a product is inelastic whenever

Accepted Answer

A) the percentage change in quantity demanded is less than the percentage change in price. 
B) the percentage change in quantity demanded is higher than the percentage changes in price. 
C) the percentage change in quantity demanded is equal to the percentage changes in price. 
D) the quantity demanded changes by zero when price changes. 
A) the percentage change in quantity demanded is less than the percentage change in price. 
B) the percentage change in quantity demanded is higher than the percentage changes in price. 
C) the percentage change in quantity demanded is equal to the percentage changes in price. 
D) the quantity demanded changes by zero when price changes.

Question 17

Buyers' expenditures and sellers' revenues are always identical.

Accepted Answer

A) True 
 B)False

Question 18

The price elasticity of a vertical demand curve is always

Accepted Answer

A) infinitely large. 
B) zero. 
C) one. 
D) increasing as price increases. 
A) infinitely large. 
B) zero. 
C) one. 
D) increasing as price increases.

Question 19

The elasticity of demand is determined partly by whether the good is a necessity or a luxury.

Accepted Answer

A) True 
 B)False

Question 20

An accurate demand curve can be derived by examining the quantities of a good that are sold over time as the price varies.

Accepted Answer

A) True 
 B)False

Exam 6: Demand and Elasticity

When Johanna cut prices in her jewelry store by 20 percent, the dollar value of her sales fell by 20 percent. This indicates that

If demand is unit elastic, revenue

Figure 6-2 -Using Figure 6-2, calculate the price elasticity of demand (dropping all minus signs)between P = 10 and P = 12.

If a 10 percent rise in price leads to a reduction in quantity demanded of more than 10 percent,

John's Bait Shop was surprised to learn that when it raised prices by 10 percent, total revenue was unaffected. This is because the elasticity for bait is

The definition of cross elasticity of demand for two products X and Y is

A demand curve is described as perfectly elastic if

The elasticity of demand for gasoline is likely to be relatively low in the short term and higher as the period of time gets longer.

The Sandy Deli operates near a college campus. It has been selling 325 sandwiches a day at $1.75 each and is considering a price cut. It estimates 450 sandwiches would sell per day at $1.50 each. Calculate the marginal revenue of such a price cut and the elasticity between the two points.

The elasticity of a demand curve at any point can be ascertained by its steepness.

Whenever the elasticity value for a demand curve is greater than zero, then the demand is labeled as "elastic."

In an attempt to raise sales, Hannah cut prices in her bookstore by 20 percent. If the dollar value of her sales remained constant, that indicates

A rightward shift in the demand curve for a product will ordinarily result from

If the price elasticity of demand for radios is 2.5 (dropping the minus sign), then a 50 percent reduction in the price of radios will lead to

As one moves down a straight-line demand curve, the elasticity decreases.

The demand for a product is inelastic whenever

Buyers' expenditures and sellers' revenues are always identical.

The price elasticity of a vertical demand curve is always

The elasticity of demand is determined partly by whether the good is a necessity or a luxury.

An accurate demand curve can be derived by examining the quantities of a good that are sold over time as the price varies.

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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