Question 1

A negative cross elasticity of demand indicates that two commodities are

Accepted Answer

A)  luxuries. 
B)  necessities. 
C)  unrelated. 
D)  substitutes. 
E)  complements. 
A)  luxuries. 
B)  necessities. 
C)  unrelated. 
D)  substitutes. 
E)  complements.

Question 2

The price elasticity of demand will increase with the length of the period to which the demand curve pertains because

Accepted Answer

A)  consumers will be better able to find substitutes. 
B)  consumers' incomes will increase. 
C)  advertising will have more time to take effect. 
D)  the demand curve will shift outward. 
E)  the arc elasticity of demand will decline. 
A)  consumers will be better able to find substitutes. 
B)  consumers' incomes will increase. 
C)  advertising will have more time to take effect. 
D)  the demand curve will shift outward. 
E)  the arc elasticity of demand will decline.

Question 3

A rightward shift in the demand curve for a commodity necessarily means that

Accepted Answer

A)  consumers' incomes have fallen. 
B)  supply conditions are more favorable. 
C)  equilibrium price decreases. 
D)  consumers are willing to buy more of the good at each price than previously. 
E)  the price of complementary goods increased. 
A)  consumers' incomes have fallen. 
B)  supply conditions are more favorable. 
C)  equilibrium price decreases. 
D)  consumers are willing to buy more of the good at each price than previously. 
E)  the price of complementary goods increased.

Question 4

When a price decrease produces a decline in the total amount spent on a commodity,demand is said to be

Accepted Answer

A)  of absolute elasticity. 
B)  income inelastic. 
C)  of unitary elasticity. 
D)  price inelastic. 
E)  price elastic. 
A)  of absolute elasticity. 
B)  income inelastic. 
C)  of unitary elasticity. 
D)  price inelastic. 
E)  price elastic.

Question 5

A demand-estimating procedure in which a firm changes the price of its product to see the effect on sales is the

Accepted Answer

A)  interview approach. 
B)  price extrapolation procedure. 
C)  direct market experiment. 
D)  derived demand method. 
E)  open market method. 
A)  interview approach. 
B)  price extrapolation procedure. 
C)  direct market experiment. 
D)  derived demand method. 
E)  open market method.

Question 6

When the total amount spent on a commodity remains unchanged as price is raised or lowered,demand is said to be

Accepted Answer

A)  of absolute elasticity. 
B)  income inelastic. 
C)  of unitary elasticity. 
D)  price inelastic. 
E)  price elastic. 
A)  of absolute elasticity. 
B)  income inelastic. 
C)  of unitary elasticity. 
D)  price inelastic. 
E)  price elastic.

Question 7

Which of the following values would most likely represent the cross elasticity of demand between butter and margarine?

Accepted Answer

A)  -5.0 
B)  -1.0 
C)  -0.1 
D)  0.0 
E)  0.8 
A)  -5.0 
B)  -1.0 
C)  -0.1 
D)  0.0 
E)  0.8

Question 8

A leftward shift in the demand curve for a commodity may

Accepted Answer

A)  mean consumers are willing to buy more of the good at each price than previously. 
B)  decrease the equilibrium price of the commodity. 
C)  mean that supply decreased. 
D)  mean that the price of a complement has fallen. 
E)  follow from a rise in the price of the product. 
A)  mean consumers are willing to buy more of the good at each price than previously. 
B)  decrease the equilibrium price of the commodity. 
C)  mean that supply decreased. 
D)  mean that the price of a complement has fallen. 
E)  follow from a rise in the price of the product.

Question 9

Low or negative income elasticities of demand indicate that the items are

Accepted Answer

A)  luxuries. 
B)  necessities. 
C)  unrelated. 
D)  substitutes. 
E)  complements. 
A)  luxuries. 
B)  necessities. 
C)  unrelated. 
D)  substitutes. 
E)  complements.

Question 10

Which of the following has been a major factor in keeping U.S.farm incomes low?

Accepted Answer

A)  depletion of resources resulting from the war effort 
B)  rapid advances in technology pushing the supply curve to the right 
C)  growth in per capita income pushing the demand curve to the right 
D)  shift from an agricultural to a service-oriented society 
E)  large imports of agricultural products from abroad 
A)  depletion of resources resulting from the war effort 
B)  rapid advances in technology pushing the supply curve to the right 
C)  growth in per capita income pushing the demand curve to the right 
D)  shift from an agricultural to a service-oriented society 
E)  large imports of agricultural products from abroad

Question 11

In this range,the demand for wheat is

Accepted Answer

A)  perfectly elastic. 
B)  of unit elasticity. 
C)  price inelastic. 
D)  arc elastic. 
E)  invariant. 
A)  perfectly elastic. 
B)  of unit elasticity. 
C)  price inelastic. 
D)  arc elastic. 
E)  invariant.

Question 12

The following question are based on the following information regarding the gross monthly receipts of a miniature golf course in a resort community at the shore.
  
-Between $2.50 and $3.00,demand is

Accepted Answer

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

Question 13

Price elasticity of demand is the

Accepted Answer

A)  change in quantity divided by the change in price. 
B)  ratio of quantity to price. 
C)  change in quantity divided by the change in price times the original price-quantity ratio. 
D)  change in price times the change in quantity divided by the original price-quantity ratio. 
E)  reciprocal of the original price-quantity ratio times the change in price. 
A)  change in quantity divided by the change in price. 
B)  ratio of quantity to price. 
C)  change in quantity divided by the change in price times the original price-quantity ratio. 
D)  change in price times the change in quantity divided by the original price-quantity ratio. 
E)  reciprocal of the original price-quantity ratio times the change in price.

Question 14

The expression "the farmer is a price taker,not a price maker," refers to the fact that

Accepted Answer

A)  the market demand curve for food is perfectly elastic. 
B)  demand for agricultural products has declined steadily throughout the twentieth century. 
C)  prices of farm goods are generally set by government. 
D)  in perfect competition, no one producer can control prices. 
E)  shifts in the demand and supply for farm products have little impact on farm prices. 
A)  the market demand curve for food is perfectly elastic. 
B)  demand for agricultural products has declined steadily throughout the twentieth century. 
C)  prices of farm goods are generally set by government. 
D)  in perfect competition, no one producer can control prices. 
E)  shifts in the demand and supply for farm products have little impact on farm prices.

Question 15

If the demand for cigarettes is price inelastic

Accepted Answer

A)  people will pay any price to smoke. 
B)  an increase in the price of cigarettes would have no effect on the quantity demanded of cigarettes. 
C)  a fall in cigarette prices would reduce people's expenditures for cigarettes. 
D)  a decrease in the price of cigarettes would decrease the demand for cigarettes. 
E)  as the price is reduced, the percentage increase in quantity demanded must be greater than the percentage decrease in price. 
A)  people will pay any price to smoke. 
B)  an increase in the price of cigarettes would have no effect on the quantity demanded of cigarettes. 
C)  a fall in cigarette prices would reduce people's expenditures for cigarettes. 
D)  a decrease in the price of cigarettes would decrease the demand for cigarettes. 
E)  as the price is reduced, the percentage increase in quantity demanded must be greater than the percentage decrease in price.

Question 16

In addition to the United States,the politics of agriculture is also important in

Accepted Answer

A)  Africa. 
B)  Europe. 
C)  China. 
D)  New Zealand. 
E)  South America. 
A)  Africa. 
B)  Europe. 
C)  China. 
D)  New Zealand. 
E)  South America.

Question 17

If the demand for digital cameras is price elastic

Accepted Answer

A)  they will have a high price. 
B)  they are probably in demand. 
C)  an increase in price will not measurably reduce sales. 
D)  a decrease in price increases the total amount spent on them. 
E)  the elasticity coefficient equals 1. 
A)  they will have a high price. 
B)  they are probably in demand. 
C)  an increase in price will not measurably reduce sales. 
D)  a decrease in price increases the total amount spent on them. 
E)  the elasticity coefficient equals 1.

Question 18

When a demand curve is price inelastic

Accepted Answer

A)  a reduction in price increases the amount spent on the good. 
B)  the quantity demanded will increase even if price remains constant. 
C)  a 1 percent increase in price will result in a less than 1 percent decrease in the quantity demanded. 
D)  the change in quantity will always be greater than the change in price. 
E)  demand must be falling. 
A)  a reduction in price increases the amount spent on the good. 
B)  the quantity demanded will increase even if price remains constant. 
C)  a 1 percent increase in price will result in a less than 1 percent decrease in the quantity demanded. 
D)  the change in quantity will always be greater than the change in price. 
E)  demand must be falling.

Question 19

A recent sale at a department store advertised 50 percent price reductions on clothing.The store's clothing sales increased by 200 percent.The price elasticity of demand was

Accepted Answer

A)  0.25. 
B)  0.5. 
C)  1.0. 
D)  2.5. 
E)  4.0. 
A)  0.25. 
B)  0.5. 
C)  1.0. 
D)  2.5. 
E)  4.0.

Question 20

Which of the following is an important determinant of the price elasticity of demand for a commodity?

Accepted Answer

A)  the method of calculating the coefficient of elasticity 
B)  the importance of the commodity in consumers' budgets 
C)  the number of buyers of the commodity 
D)  the number of sellers of the commodity 
E)  the cost of producing the commodity 
A)  the method of calculating the coefficient of elasticity 
B)  the importance of the commodity in consumers' budgets 
C)  the number of buyers of the commodity 
D)  the number of sellers of the commodity 
E)  the cost of producing the commodity

Exam 5: Market Demand and Price Elasticity

A negative cross elasticity of demand indicates that two commodities are

The price elasticity of demand will increase with the length of the period to which the demand curve pertains because

A rightward shift in the demand curve for a commodity necessarily means that

When a price decrease produces a decline in the total amount spent on a commodity,demand is said to be

A demand-estimating procedure in which a firm changes the price of its product to see the effect on sales is the

When the total amount spent on a commodity remains unchanged as price is raised or lowered,demand is said to be

Which of the following values would most likely represent the cross elasticity of demand between butter and margarine?

A leftward shift in the demand curve for a commodity may

Low or negative income elasticities of demand indicate that the items are

Which of the following has been a major factor in keeping U.S.farm incomes low?

In this range,the demand for wheat is

The following question are based on the following information regarding the gross monthly receipts of a miniature golf course in a resort community at the shore. -Between $2.50 and $3.00,demand is

Price elasticity of demand is the

The expression "the farmer is a price taker,not a price maker," refers to the fact that

If the demand for cigarettes is price inelastic

In addition to the United States,the politics of agriculture is also important in

If the demand for digital cameras is price elastic

When a demand curve is price inelastic

A recent sale at a department store advertised 50 percent price reductions on clothing.The store's clothing sales increased by 200 percent.The price elasticity of demand was

Which of the following is an important determinant of the price elasticity of demand for a commodity?

What is Economics

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The Business Firm: Organization,motivation,and Optimal Input Decisions

Getting Behind the Demand and Supply Curves

Economic Efficiency,market Supply,and Perfect Competition

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The Determination of National Output and the Keynesian Multiplier

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