Question 1

If a 10 percent cut in price causes a 15 percent increase in sales, then:

Accepted Answer

A)  total revenue will decrease. 
B)  demand is price inelastic in this range. 
C)  demand is price elastic in this range. 
D)  demand is unit elastic in this range. 
E)  total revenue will remain the same. 
A)  total revenue will decrease. 
B)  demand is price inelastic in this range. 
C)  demand is price elastic in this range. 
D)  demand is unit elastic in this range. 
E)  total revenue will remain the same. C

Question 2

Which of the following describes a situation in which demand must be elastic?

Accepted Answer

A)  Total revenue increases by 15 percent when the price of corn dogs rises by 15 percent. 
B)  Total revenue increases by less than 15 percent when the price of corn dogs rises by 15 percent. 
C)  Total revenue decreases by more than 15 percent when the price of corn dogs rises by 15 percent. 
D)  Total revenue increases by $15 when the price of corn dogs rises by $15. 
E)  Total revenue increases by more than $15 when the price of corn dogs rises by $15. 
A)  Total revenue increases by 15 percent when the price of corn dogs rises by 15 percent. 
B)  Total revenue increases by less than 15 percent when the price of corn dogs rises by 15 percent. 
C)  Total revenue decreases by more than 15 percent when the price of corn dogs rises by 15 percent. 
D)  Total revenue increases by $15 when the price of corn dogs rises by $15. 
E)  Total revenue increases by more than $15 when the price of corn dogs rises by $15. C

Question 3

Exhibit 5-3  Demand curves for gallons of orange juice   Using Exhibit 5-3, whose "quantity demanded" experiences the largest percentage increase when the price falls from $2 to $1?

Accepted Answer

A)  Albert 
B)  Betty 
C)  Carl 
D)  Dana 
E)  Edward 
A)  Albert 
B)  Betty 
C)  Carl 
D)  Dana 
E)  Edward A

Question 4

The price elasticity of demand measures consumer responsiveness to a price change.

Accepted Answer

A) True 
 B)False

Question 5

Suppose that Starbucks reduces the price of its premium coffee from $2.20 to $1.80 per cup, and as a result, the quantity sold per day increased from 350 to 450. Over this price range, the price elasticity of demand for Starbucks coffee is:

Accepted Answer

A)  0.40. 
B)  0.80. 
C)  1.25. 
D)  2.50. 
A)  0.40. 
B)  0.80. 
C)  1.25. 
D)  2.50.

Question 6

Since it is always a negative number, economists use the convention of taking the absolute value of:

Accepted Answer

A)  income elasticity of demand. 
B)  cross price elasticity of demand. 
C)  price elasticity of supply. 
D)  price elasticity of demand. 
E)  any elasticity calculation. 
A)  income elasticity of demand. 
B)  cross price elasticity of demand. 
C)  price elasticity of supply. 
D)  price elasticity of demand. 
E)  any elasticity calculation.

Question 7

If the demand for a product is inelastic, then a price increase will result in a decrease in total revenue.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following factors is associated with products with a highly price elastic demand?

Accepted Answer

A)  Few close substitutes. 
B)  A very short time period for consumers to respond to price changes. 
C)  Many very close substitutes. 
D)  A per unit price that is only a very small portion of most peoples' budgets. 
A)  Few close substitutes. 
B)  A very short time period for consumers to respond to price changes. 
C)  Many very close substitutes. 
D)  A per unit price that is only a very small portion of most peoples' budgets.

Question 9

An increase in total revenue results occurs from which of the following?

Accepted Answer

A)  Price decreases when demand is inelastic. 
B)  Price increases when demand is elastic. 
C)  Price decreases when demand is elastic. 
D)  Price increases when demand is unitary elastic. 
A)  Price decreases when demand is inelastic. 
B)  Price increases when demand is elastic. 
C)  Price decreases when demand is elastic. 
D)  Price increases when demand is unitary elastic.

Question 10

One of the reasons that price elasticities of demand are always stated as positive numbers is because:

Accepted Answer

A)  the numerators and denominators of the formula are both negative. 
B)  the numerators and denominators of the formula are both positive. 
C)  price increases always lead to increases in quantity demanded. 
D)  price decreases always lead to decreases in quantity demanded. 
E)  price elasticities are always negative, so we ignore the sign. 
A)  the numerators and denominators of the formula are both negative. 
B)  the numerators and denominators of the formula are both positive. 
C)  price increases always lead to increases in quantity demanded. 
D)  price decreases always lead to decreases in quantity demanded. 
E)  price elasticities are always negative, so we ignore the sign.

Question 11

Goods with few available substitutes tend to have inelastic demand curves.

Accepted Answer

A) True 
 B)False

Question 12

As price decreases and we move down further along a linear demand curve, the price elasticity of demand will:

Accepted Answer

A)  decrease. 
B)  increase. 
C)  stay the same. 
D)  approach infinity. 
E)  increase or decrease. 
A)  decrease. 
B)  increase. 
C)  stay the same. 
D)  approach infinity. 
E)  increase or decrease.

Question 13

Which of the following describes a situation in which demand must be inelastic?

Accepted Answer

A)  Total revenue decreases by 10 percent when the price of spats rises by 10 percent. 
B)  Total revenue decreases by less than 10 percent when the price of spats rises by 10 percent. 
C)  Total revenue increases by more than 10 percent when the price of spats rises by 10 percent. 
D)  Total revenue decreases by $10 when the price of spats rises by $10. 
E)  Total revenue decreases by more than $10 when the price of spats rises by $10. 
A)  Total revenue decreases by 10 percent when the price of spats rises by 10 percent. 
B)  Total revenue decreases by less than 10 percent when the price of spats rises by 10 percent. 
C)  Total revenue increases by more than 10 percent when the price of spats rises by 10 percent. 
D)  Total revenue decreases by $10 when the price of spats rises by $10. 
E)  Total revenue decreases by more than $10 when the price of spats rises by $10.

Question 14

If the price of Pepsi-Cola increases from 40 cents to 50 cents per bottle and the quantity demanded decreases from 100 bottles to 50 bottles, then according to the averaging equation, the value of price elasticity of demand for Pepsi-Cola is:

Accepted Answer

A)  0.5. 
B)  0.25. 
C)  1. 
D)  3. 
E)  2. 
A)  0.5. 
B)  0.25. 
C)  1. 
D)  3. 
E)  2.

Question 15

Firms would like to know the price elasticity of demand for their products because it helps determine the effect of price changes on the firms':

Accepted Answer

A)  property taxes. 
B)  competitors' profits. 
C)  quantity supplied. 
D)  revenues. 
E)  total costs. 
A)  property taxes. 
B)  competitors' profits. 
C)  quantity supplied. 
D)  revenues. 
E)  total costs.

Question 16

If Sam, the Pizza Man, lowers the price of his pizzas from $6 to $5 and finds that sales increase from 400 to 600 pizzas per week, then the demand for Sam's pizzas in this range is:

Accepted Answer

A)  price inelastic. 
B)  price elastic. 
C)  unit elastic. 
D)  cross elastic. 
E)  income inelastic. 
A)  price inelastic. 
B)  price elastic. 
C)  unit elastic. 
D)  cross elastic. 
E)  income inelastic.

Question 17

Exhibit 5-9  Supply and demand curves for good X   As shown in Exhibit 5-9, the price elasticity of demand for good X between points E and B is:

Accepted Answer

A)  3/7 = 0.43. 
B)  7/3 = 2.33. 
C)  1/2 = 0.50. 
D)  1. 
A)  3/7 = 0.43. 
B)  7/3 = 2.33. 
C)  1/2 = 0.50. 
D)  1.

Question 18

If a demand curve for a good were completely vertical, it would be considered:

Accepted Answer

A)  perfectly elastic. 
B)  perfectly inelastic. 
C)  of unitary elasticity. 
D)  relatively inelastic. 
A)  perfectly elastic. 
B)  perfectly inelastic. 
C)  of unitary elasticity. 
D)  relatively inelastic.

Question 19

Exhibit 5-6  Demand curve for concert tickets   In Exhibit 5-6, if promoters lower their ticket price form $30 to $20, then:

Accepted Answer

A)  they will receive less money from their ticket sales. 
B)  people will continue to buy the same number of tickets. 
C)  customers will spend less total money on concert tickets. 
D)  both ticket sales and total revenue will rise. 
A)  they will receive less money from their ticket sales. 
B)  people will continue to buy the same number of tickets. 
C)  customers will spend less total money on concert tickets. 
D)  both ticket sales and total revenue will rise.

Question 20

If the price elasticity of demand for a good is elastic, then consumers are relatively unresponsive with respect to the quantity purchased when the price changes.

Accepted Answer

A) True 
 B)False

Exam 5: Price Elasticity of Demand

If a 10 percent cut in price causes a 15 percent increase in sales, then:

Which of the following describes a situation in which demand must be elastic?

Exhibit 5-3 Demand curves for gallons of orange juice Using Exhibit 5-3, whose "quantity demanded" experiences the largest percentage increase when the price falls from $2 to $1?

The price elasticity of demand measures consumer responsiveness to a price change.

Suppose that Starbucks reduces the price of its premium coffee from $2.20 to $1.80 per cup, and as a result, the quantity sold per day increased from 350 to 450. Over this price range, the price elasticity of demand for Starbucks coffee is:

Since it is always a negative number, economists use the convention of taking the absolute value of:

If the demand for a product is inelastic, then a price increase will result in a decrease in total revenue.

Which of the following factors is associated with products with a highly price elastic demand?

An increase in total revenue results occurs from which of the following?

One of the reasons that price elasticities of demand are always stated as positive numbers is because:

Goods with few available substitutes tend to have inelastic demand curves.

As price decreases and we move down further along a linear demand curve, the price elasticity of demand will:

Which of the following describes a situation in which demand must be inelastic?

If the price of Pepsi-Cola increases from 40 cents to 50 cents per bottle and the quantity demanded decreases from 100 bottles to 50 bottles, then according to the averaging equation, the value of price elasticity of demand for Pepsi-Cola is:

Firms would like to know the price elasticity of demand for their products because it helps determine the effect of price changes on the firms':

If Sam, the Pizza Man, lowers the price of his pizzas from $6 to $5 and finds that sales increase from 400 to 600 pizzas per week, then the demand for Sam's pizzas in this range is:

Exhibit 5-9 Supply and demand curves for good X As shown in Exhibit 5-9, the price elasticity of demand for good X between points E and B is:

If a demand curve for a good were completely vertical, it would be considered:

Exhibit 5-6 Demand curve for concert tickets In Exhibit 5-6, if promoters lower their ticket price form $30 to $20, then:

If the price elasticity of demand for a good is elastic, then consumers are relatively unresponsive with respect to the quantity purchased when the price changes.

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

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