Question 1

If a demand curve for a good is perfectly inelastic, then the seller could

Accepted Answer

A) increase price and not change the number of units purchased. 
B) ignore the effects of costs on its profits. 
C) rely on buyers to look for other products if it increases price. 
D) sell more units by advertising. 
A) increase price and not change the number of units purchased. 
B) ignore the effects of costs on its profits. 
C) rely on buyers to look for other products if it increases price. 
D) sell more units by advertising.

Question 2

The value of zero is used to distinguish between elastic and inelastic price elasticity of demand for a product; so, if the elasticity is greater than zero, it is elastic and if it is less than zero, then it is inelastic.

Accepted Answer

A) True 
 B)False

Question 3

Suppose that a 15 percent decrease in price leads to an increase in the quantity demanded of 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 4

A demand curve with unit elasticity can never touch either the vertical or horizontal axes.

Accepted Answer

A) True 
 B)False

Question 5

For each pair of goods, explain which is more elastic: toothpicks vs. cars; electricity vs. yachts; IBM computers vs. Apple computers.

Accepted Answer

The more elastic are cars, yachts, and I

Question 6

A craze for apples in Riverdale increases the quantity demanded at every price by five bushels. Between any two prices, the new demand curve will be ____ the old demand curve.

Accepted Answer

A) more elastic than 
B) less elastic than 
C) equal in elasticity to 
D) More information is needed to predict the relationship. 
A) more elastic than 
B) less elastic than 
C) equal in elasticity to 
D) More information is needed to predict the relationship.

Question 7

When the goods of competing companies are identical, consumers have no reason to prefer one product over the other, so the demand curve for each manufacturer will be perfectly elastic.

Accepted Answer

A) True 
 B)False

Question 8

A price increase will always cause a firm's revenue to fall because they will sell less of the good.

Accepted Answer

A) True 
 B)False

Question 9

To avoid an increase in the local property tax, Sullivan County, New York, proposed a 2 percent hotel tax, which presumably would be passed on to tourists. The hotel industry argued that the tax would hurt hotel business. They are really arguing that

Accepted Answer

A) tourist and convention demand is inelastic, so hotel bookings will decline. 
B) tourist and convention demand is very elastic, so hotel bookings will decline. 
C) they would prefer a property tax increase instead. 
D) it is unfair to tax people who do not live in the area. 
A) tourist and convention demand is inelastic, so hotel bookings will decline. 
B) tourist and convention demand is very elastic, so hotel bookings will decline. 
C) they would prefer a property tax increase instead. 
D) it is unfair to tax people who do not live in the area.

Question 10

Figure 6-4
 
-Based on Figure 6-4, it can be determined that total expenditure ____ as price falls from P = 6 to P = 4.

Accepted Answer

A) falls 
B) remains constant 
C) rises 
D) rises by more than $12 
A) falls 
B) remains constant 
C) rises 
D) rises by more than $12

Question 11

How would an increase in cigarette taxes succeed according to the following criteria: collecting a large amount of tax revenue; distorting demand as little as possible; discouraging consumption of harmful commodities?

Accepted Answer

Assuming demand for cigarettes is fairly

Question 12

Certain goods are related such that an increase in the price of one good decreases the quantity demanded of the other. These goods are

Accepted Answer

A) complements. 
B) substitutes. 
C) luxury goods. 
D) competing goods. 
A) complements. 
B) substitutes. 
C) luxury goods. 
D) competing goods.

Question 13

How can one tell from cross elasticity what kind of relationship exists between any two goods?

Accepted Answer

If the price of X increases and the quan

Question 14

If the elasticity of demand for cigarettes is 0.4, then an increase in the price of a pack of cigarettes from $5.00 to $6.00 would reduce quantities demanded by about

Accepted Answer

A) 7 percent. 
B) 40 percent. 
C) 42 percent. 
D) 220 percent. 
A) 7 percent. 
B) 40 percent. 
C) 42 percent. 
D) 220 percent.

Question 15

The following table contains information regarding price and output for a firm. For each point except the first, calculate the elasticity between it and the point above.

Accepted Answer

The answer of The following table contains information regarding price...

Question 16

Elasticity of demand is likely to be higher for less-expensive goods, other things being equal.

Accepted Answer

A) True 
 B)False

Question 17

As one moves down a straight-line demand curve away from the vertical axis, demand becomes less elastic and then inelastic.

Accepted Answer

A) True 
 B)False

Question 18

A unit-elastic demand curve never touches or crosses either of the axes. Why?

Accepted Answer

When demand is unit elastic, total expen

Question 19

If the demand curve for a good is unit elastic, then total expenditure will _____ as the price of the good decreases.

Accepted Answer

A) remain constant 
B) fall 
C) rise 
D) go to zero 
A) remain constant 
B) fall 
C) rise 
D) go to zero

Question 20

Figure 6-2
 
-From Figure 6-2, we can determine that demand is ____ between P = 12 and P = 10 and ____ between P = 6 and P = 4.

Accepted Answer

A) elastic; elastic 
B) elastic; inelastic 
C) inelastic; elastic 
D) inelastic; inelastic 
A) elastic; elastic 
B) elastic; inelastic 
C) inelastic; elastic 
D) inelastic; inelastic

Exam 6: Demand and Elasticity

If a demand curve for a good is perfectly inelastic, then the seller could

The value of zero is used to distinguish between elastic and inelastic price elasticity of demand for a product; so, if the elasticity is greater than zero, it is elastic and if it is less than zero, then it is inelastic.

Suppose that a 15 percent decrease in price leads to an increase in the quantity demanded of 10 percent,

A demand curve with unit elasticity can never touch either the vertical or horizontal axes.

For each pair of goods, explain which is more elastic: toothpicks vs. cars; electricity vs. yachts; IBM computers vs. Apple computers.

A craze for apples in Riverdale increases the quantity demanded at every price by five bushels. Between any two prices, the new demand curve will be ____ the old demand curve.

When the goods of competing companies are identical, consumers have no reason to prefer one product over the other, so the demand curve for each manufacturer will be perfectly elastic.

A price increase will always cause a firm's revenue to fall because they will sell less of the good.

To avoid an increase in the local property tax, Sullivan County, New York, proposed a 2 percent hotel tax, which presumably would be passed on to tourists. The hotel industry argued that the tax would hurt hotel business. They are really arguing that

Figure 6-4 -Based on Figure 6-4, it can be determined that total expenditure ____ as price falls from P = 6 to P = 4.

How would an increase in cigarette taxes succeed according to the following criteria: collecting a large amount of tax revenue; distorting demand as little as possible; discouraging consumption of harmful commodities?

Certain goods are related such that an increase in the price of one good decreases the quantity demanded of the other. These goods are

How can one tell from cross elasticity what kind of relationship exists between any two goods?

If the elasticity of demand for cigarettes is 0.4, then an increase in the price of a pack of cigarettes from $5.00 to $6.00 would reduce quantities demanded by about

The following table contains information regarding price and output for a firm. For each point except the first, calculate the elasticity between it and the point above.

Elasticity of demand is likely to be higher for less-expensive goods, other things being equal.

As one moves down a straight-line demand curve away from the vertical axis, demand becomes less elastic and then inelastic.

A unit-elastic demand curve never touches or crosses either of the axes. Why?

If the demand curve for a good is unit elastic, then total expenditure will _____ as the price of the good decreases.

Figure 6-2 -From Figure 6-2, we can determine that demand is ____ between P = 12 and P = 10 and ____ between P = 6 and P = 4.

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

Filters

Figure 6-2 -From Figure 6-2, we can determine that demand is between P = 12 and P = 10 and between P = 6 and P = 4.