Question 1

Exhibit 5-3  Demand curves for gallons of orange juice   Using Exhibit 5-3, in general, whose demand for orange juice is the most inelastic?

Accepted Answer

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

Question 2

Elasticity is a measure of:

Accepted Answer

A)  the slope of a linear demand curve. 
B)  the slope of a supply curve. 
C)  relative responsiveness. 
D)  economic welfare. 
E)  consumer tastes. 
A)  the slope of a linear demand curve. 
B)  the slope of a supply curve. 
C)  relative responsiveness. 
D)  economic welfare. 
E)  consumer tastes.

Question 3

Using the midpoints formula, what would be price elasticity of demand for a gallbladder operation if the number of operations fell from 6,000 to 4,000 per week after its price increased from $6,000 to $10,000?

Accepted Answer

A)  0.25. 
B)  0.50. 
C)  0.80. 
D)  1.25 
A)  0.25. 
B)  0.50. 
C)  0.80. 
D)  1.25

Question 4

Which of the following statements is true ?

Accepted Answer

A)  If the income elasticity of demand is less than zero, the good is an inferior good. 
B)  Only if the demand curve is vertical will sellers raise the price by the full amount of a tax. 
C)  Two goods are substitutes if the cross-elasticity of demand coefficient is positive. 
D)  A price elasticity of supply coefficient equal to 1.5 means the product exhibits an elastic supply and a 10 percent increase in the price will increase the quantity supplied by 15 percent. 
E)  All of the above. 
A)  If the income elasticity of demand is less than zero, the good is an inferior good. 
B)  Only if the demand curve is vertical will sellers raise the price by the full amount of a tax. 
C)  Two goods are substitutes if the cross-elasticity of demand coefficient is positive. 
D)  A price elasticity of supply coefficient equal to 1.5 means the product exhibits an elastic supply and a 10 percent increase in the price will increase the quantity supplied by 15 percent. 
E)  All of the above.

Question 5

Suppose the quantity demanded is 1,000 million bushels of peaches per year when the price is $3 per bushel and 1,500 million bushels when the price is $1 per bushel. The price elasticity of demand in this range of the demand curve is:

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  unitary elastic. 
D)  infinitely elastic. 
A)  elastic. 
B)  inelastic. 
C)  unitary elastic. 
D)  infinitely elastic.

Question 6

Necessities have a much smaller price elasticity of demand, ceteris paribus, than goods that have many close substitutes.

Accepted Answer

A) True 
 B)False

Question 7

The demand for a product is likely to be more elastic:

Accepted Answer

A)  the smaller the share of the total budget spent on the product. 
B)  when more complementary products are available. 
C)  in the short run than in the long run. 
D)  when more good substitutes for the product are available. 
A)  the smaller the share of the total budget spent on the product. 
B)  when more complementary products are available. 
C)  in the short run than in the long run. 
D)  when more good substitutes for the product are available.

Question 8

Which of the following statements is not true?

Accepted Answer

A)  Price elasticity of demand for basic foods is low. 
B)  When price elasticity of demand is very high, we say there is brand loyalty. 
C)  The availability and price of substitutes affect the elasticity of demand for a good or service. 
D)  When goods have very low prices, the elasticity of demand is usually quite low. 
E)  Elasticities increase as the price of the good increases. 
A)  Price elasticity of demand for basic foods is low. 
B)  When price elasticity of demand is very high, we say there is brand loyalty. 
C)  The availability and price of substitutes affect the elasticity of demand for a good or service. 
D)  When goods have very low prices, the elasticity of demand is usually quite low. 
E)  Elasticities increase as the price of the good increases.

Question 9

If a decrease in the price of theater tickets increases the total revenue earned by the theater, this is evidence that demand is:

Accepted Answer

A)  price elastic. 
B)  price inelastic. 
C)  unitary elastic. 
D)  perfectly inelastic. 
A)  price elastic. 
B)  price inelastic. 
C)  unitary elastic. 
D)  perfectly inelastic.

Question 10

When a 2 percent increase in price generates a greater than 2 percent decrease in quantity demanded, then:

Accepted Answer

A)  demand is price inelastic. 
B)  total revenue increases. 
C)  demand is positively sloped. 
D)  demand is unit elastic. 
E)  total revenue 
A)  demand is price inelastic. 
B)  total revenue increases. 
C)  demand is positively sloped. 
D)  demand is unit elastic. 
E)  total revenue

Question 11

Exhibit 5-7  Demand curve for concert tickets   According to Exhibit 5-7, the demand for concert tickets is:

Accepted Answer

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

Question 12

Which of the statements below does not describe a demand curve that is unit elastic?

Accepted Answer

A)  The percentage change in the quantity demanded = percentage change in product price. 
B)  An increase in product price will not change total revenue. 
C)  The price elasticity of demand equals one. 
D)  A change in price does not change quantity demanded. 
E)  A decrease in product price will not change total revenue. 
A)  The percentage change in the quantity demanded = percentage change in product price. 
B)  An increase in product price will not change total revenue. 
C)  The price elasticity of demand equals one. 
D)  A change in price does not change quantity demanded. 
E)  A decrease in product price will not change total revenue.

Question 13

In the short run, consumers typically ____ to price changes (when compared to the long run).

Accepted Answer

A)  are very responsive 
B)  are more demand sensitive 
C)  are less demand sensitive 
D)  do not respond at all 
E)  overreact 
A)  are very responsive 
B)  are more demand sensitive 
C)  are less demand sensitive 
D)  do not respond at all 
E)  overreact

Question 14

Larissa is a famous attorney with a great reputation in court. She charges her clients $300 for each hour she spends working on their cases. If she earned $450,000 in hourly wages last year, and by raising her rates to $350 per hour her income increased to $490,000 what can we say about the elasticity of demand for Larissa's legal services?

Accepted Answer

A)  It is approximately equal to 2.3. 
B)  It is approximately equal to 1.6. 
C)  It is approximately equal to 1.0. 
D)  It is approximately equal to 0.45. 
E)  It is approximately equal to 0.1. 
A)  It is approximately equal to 2.3. 
B)  It is approximately equal to 1.6. 
C)  It is approximately equal to 1.0. 
D)  It is approximately equal to 0.45. 
E)  It is approximately equal to 0.1.

Question 15

Suppose an economist found that total revenues increase for the bus system when fares were raised, the conclusion is that the price elasticity demand for subway services over the range of fare increase is inelastic.

Accepted Answer

A) True 
 B)False

Question 16

If a 10 percent price increase causes the quantity demanded for a good to decrease by 20 percent, demand is elastic.

Accepted Answer

A) True 
 B)False

Question 17

There is no change in total revenue when the demand curve for a good is:

Accepted Answer

A)  unitary elastic. 
B)  perfectly inelastic. 
C)  elastic. 
D)  inelastic. 
E)  perfectly elastic. 
A)  unitary elastic. 
B)  perfectly inelastic. 
C)  elastic. 
D)  inelastic. 
E)  perfectly elastic.

Question 18

Suppose an oil company wants to make its total revenue as large as possible. It should charge a price at which the demand for oil is:

Accepted Answer

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

Question 19

Governments can use price elasticity of demand to estimate how changes in excise tax rates will affect:

Accepted Answer

A)  income. 
B)  prices. 
C)  tax revenues. 
D)  government spending. 
E)  profits. 
A)  income. 
B)  prices. 
C)  tax revenues. 
D)  government spending. 
E)  profits.

Question 20

What are the characteristics of the product that has an inelastic demand?

Accepted Answer

A product that has an inelasti

Exam 5: Price Elasticity of Demand

Exhibit 5-3 Demand curves for gallons of orange juice Using Exhibit 5-3, in general, whose demand for orange juice is the most inelastic?

Elasticity is a measure of:

Using the midpoints formula, what would be price elasticity of demand for a gallbladder operation if the number of operations fell from 6,000 to 4,000 per week after its price increased from $6,000 to $10,000?

Which of the following statements is true ?

Suppose the quantity demanded is 1,000 million bushels of peaches per year when the price is $3 per bushel and 1,500 million bushels when the price is $1 per bushel. The price elasticity of demand in this range of the demand curve is:

Necessities have a much smaller price elasticity of demand, ceteris paribus, than goods that have many close substitutes.

The demand for a product is likely to be more elastic:

Which of the following statements is not true?

If a decrease in the price of theater tickets increases the total revenue earned by the theater, this is evidence that demand is:

When a 2 percent increase in price generates a greater than 2 percent decrease in quantity demanded, then:

Exhibit 5-7 Demand curve for concert tickets According to Exhibit 5-7, the demand for concert tickets is:

Which of the statements below does not describe a demand curve that is unit elastic?

In the short run, consumers typically ____ to price changes (when compared to the long run).

Suppose an economist found that total revenues increase for the bus system when fares were raised, the conclusion is that the price elasticity demand for subway services over the range of fare increase is inelastic.

If a 10 percent price increase causes the quantity demanded for a good to decrease by 20 percent, demand is elastic.

There is no change in total revenue when the demand curve for a good is:

Suppose an oil company wants to make its total revenue as large as possible. It should charge a price at which the demand for oil is:

Governments can use price elasticity of demand to estimate how changes in excise tax rates will affect:

What are the characteristics of the product that has an inelastic demand?

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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