Question 1

If the cross-price elasticity of demand for computers and software is negative, this means the two goods are

Accepted Answer

A) substitutes. 
B) complements. 
C) inferior. 
D) normal. 
A) substitutes. 
B) complements. 
C) inferior. 
D) normal.

Question 2

Demand for staples such as dairy products and bread is likely to be both income and price inelastic.

Accepted Answer

A) True 
 B)False

Question 3

Suppose a decrease in the supply of wheat results in an increase in revenue.This indicates that

Accepted Answer

A) the decrease in quantity sold is proportionately larger than the resulting change in price. 
B) the resulting increase in price is proportionately greater than decrease in quantity sold. 
C) the demand curve for wheat must be vertical. 
D) the supply curve for wheat must be vertical. 
A) the decrease in quantity sold is proportionately larger than the resulting change in price. 
B) the resulting increase in price is proportionately greater than decrease in quantity sold. 
C) the demand curve for wheat must be vertical. 
D) the supply curve for wheat must be vertical.

Question 4

Linesha, a college student working part-time receives a wage increase.An avid movie buff, she increased her purchases of Blu-ray discs and reduced her purchases of DVDs.Based on this information,

Accepted Answer

A) DVDs and Blu-ray discs are substitutes. 
B) Blu-ray discs are normal goods and DVDs are inferior goods. 
C) DVDs and Blu-ray discs are normal goods. 
D) the cross-price elasticity between DVDs and Blu-ray discs is negative. 
A) DVDs and Blu-ray discs are substitutes. 
B) Blu-ray discs are normal goods and DVDs are inferior goods. 
C) DVDs and Blu-ray discs are normal goods. 
D) the cross-price elasticity between DVDs and Blu-ray discs is negative.

Question 5

Price elasticity of demand measures

Accepted Answer

A) how responsive suppliers are to price changes. 
B) how responsive sales are to changes in the price of a related good. 
C) how responsive quantity demanded is to a change in price. 
D) how responsive sales are to a change in buyers' incomes. 
A) how responsive suppliers are to price changes. 
B) how responsive sales are to changes in the price of a related good. 
C) how responsive quantity demanded is to a change in price. 
D) how responsive sales are to a change in buyers' incomes.

Question 6

Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from $120 a ton to $180 a ton and quantity sold decreased from 800 tons to 240 tons.What is the absolute value of the price elasticity of demand?

Accepted Answer

A) 0.11 
B) 0.37 
C) 2.69 
D) 9.33 
A) 0.11 
B) 0.37 
C) 2.69 
D) 9.33

Question 7

The price elasticity of the supply of teenage labour services is approximately 1.36.Suppose the government of Prince Edward Island raises the minimum wage rises from $10.00 per hour to $10.25.Using the midpoint formula, calculate the approximate change in the quantity supplied of teenage labour.

Accepted Answer

A) 17.3 percent 
B) 24.4 percent 
C) 3)4 percent 
D) There is insufficient information to answer the question. 
A) 17.3 percent 
B) 24.4 percent 
C) 3)4 percent 
D) There is insufficient information to answer the question.

Question 8

Figure 6.1
  
-Refer to Figure 6.1.A perfectly elastic demand curve is shown in

Accepted Answer

A) Panel A. 
B) Panel B. 
C) Panel C. 
D) Panel D. 
A) Panel A. 
B) Panel B. 
C) Panel C. 
D) Panel D.

Question 9

Consider a demand curve that has a constant elasticity value of 0.What happens to quantity demanded and total revenue when price increases?

Accepted Answer

A) The quantity demanded and total revenue remain the same. 
B) The quantity demanded does not change but total revenue increases. 
C) The quantity demanded and total revenue fall to zero. 
D) The quantity demanded does not change but total revenue decreases. 
A) The quantity demanded and total revenue remain the same. 
B) The quantity demanded does not change but total revenue increases. 
C) The quantity demanded and total revenue fall to zero. 
D) The quantity demanded does not change but total revenue decreases.

Question 10

In September 2006, the Canadian Food Inspection Agency recommended that Canadians avoid eating imported raw spinach in the wake of an outbreak of E.coli bacteria in the United States.Following this recommendation, the food industry looked at alternatives and many turned to arugula.One U.S.distributor claimed, "The sale of the stuff has gone through the roof." Based on this information,

Accepted Answer

A) arugula is a normal good while raw spinach is an inferior good. 
B) the cross-price elasticity between arugula and spinach is negative. 
C) the cross-price elasticity between arugula and spinach is positive 
D) the price elasticity of arugula is positive while the price elasticity of spinach falls to zero. 
A) arugula is a normal good while raw spinach is an inferior good. 
B) the cross-price elasticity between arugula and spinach is negative. 
C) the cross-price elasticity between arugula and spinach is positive 
D) the price elasticity of arugula is positive while the price elasticity of spinach falls to zero.

Question 11

If a 35 percent increase in price of golf balls led to an 42 percent decrease in quantity demanded, then the demand for golf balls is

Accepted Answer

A) unit-elastic. 
B) perfectly elastic. 
C) relatively inelastic. 
D) relatively elastic. 
A) unit-elastic. 
B) perfectly elastic. 
C) relatively inelastic. 
D) relatively elastic.

Question 12

If 50 units are sold at a price of $20 and 80 units are sold at a price of $15, what is the absolute value of the price elasticity of demand? Use the midpoint formula.

Accepted Answer

A) 0.17 
B) 0.62 
C) 1.62 
D) 5 
A) 0.17 
B) 0.62 
C) 1.62 
D) 5

Question 13

Suppose the price of gasoline is $1.25 per litre, the quantity of gasoline demanded is 40 billion litres per year, the price elasticity of demand for gasoline is -0.06, and the federal government decides to increase the excise tax on gasoline by $0.75 per litre, which increases the price of gasoline by $0.50 per litre.What is the new equilibrium quantity of gasoline demanded after the tax is imposed?

Accepted Answer

A) 37.67 billion gallons per year 
B) 38.91 billion gallons per year 
C) 39.21 billion gallons per year 
D) 40.52 billion gallons per year 
A) 37.67 billion gallons per year 
B) 38.91 billion gallons per year 
C) 39.21 billion gallons per year 
D) 40.52 billion gallons per year

Question 14

Which of the following would result in a higher absolute value of the price elasticity of demand for a product?

Accepted Answer

A) A wide variety of substitutes are available for the good. 
B) The time period under consideration is short. 
C) The good is a necessity. 
D) The expenditure on the good is small relative to one's budget. 
A) A wide variety of substitutes are available for the good. 
B) The time period under consideration is short. 
C) The good is a necessity. 
D) The expenditure on the good is small relative to one's budget.

Question 15

Apple introduced the iPhone to the market in June 2007.Within two months, it had become clear that the price elasticity of demand for iPhones was

Accepted Answer

A) significantly higher than had been expected. 
B) very close to original estimates. 
C) significantly lower than had been expected. 
D) essentially unit elastic. 
A) significantly higher than had been expected. 
B) very close to original estimates. 
C) significantly lower than had been expected. 
D) essentially unit elastic.

Question 16

Over longer periods of time, increases in oil prices provide firms with incentives to explore and recover oil.What does this indicate about the long run price elasticity of supply for oil?

Accepted Answer

A) The elasticity coefficient is likely to be higher in the long run than in the short run. 
B) The elasticity coefficient is likely to be lower in the long run than in the short run. 
C) The elasticity coefficient approaches 0 in the long run as supplies are depleted. 
D) The elasticity coefficient is unstable in the long run because oil supplies may be depleted. 
A) The elasticity coefficient is likely to be higher in the long run than in the short run. 
B) The elasticity coefficient is likely to be lower in the long run than in the short run. 
C) The elasticity coefficient approaches 0 in the long run as supplies are depleted. 
D) The elasticity coefficient is unstable in the long run because oil supplies may be depleted.

Question 17

For consumers who opt to pay a $10 monthly fee to have unlimited texting on their cell phones, but choose not to pay a $5 monthly fee to have unlimited call minutes, the unlimited texting option has a ________ than the unlimited minutes option.

Accepted Answer

A) higher price elasticity of demand 
B) higher cross-price elasticity of demand 
C) lower price elasticity of demand 
D) lower cross-price elasticity of demand 
A) higher price elasticity of demand 
B) higher cross-price elasticity of demand 
C) lower price elasticity of demand 
D) lower cross-price elasticity of demand

Question 18

The demand for most farm products is relatively inelastic.A drought that reduces the supply of farm products will also cause farm revenues to fall.

Accepted Answer

A) True 
 B)False

Question 19

Figure 6.5
  
-Refer to Figure 6.5.Identify the two goods which are complements.

Accepted Answer

A) Good X and Good Y 
B) Good Y and Good Z 
C) Good X and Good Z 
D) It is not possible to distinguish any relationship among the goods. 
A) Good X and Good Y 
B) Good Y and Good Z 
C) Good X and Good Z 
D) It is not possible to distinguish any relationship among the goods.

Question 20

When there few close substitutes available for a good, demand tends to be

Accepted Answer

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

If the cross-price elasticity of demand for computers and software is negative, this means the two goods are

Demand for staples such as dairy products and bread is likely to be both income and price inelastic.

Suppose a decrease in the supply of wheat results in an increase in revenue.This indicates that

Linesha, a college student working part-time receives a wage increase.An avid movie buff, she increased her purchases of Blu-ray discs and reduced her purchases of DVDs.Based on this information,

Price elasticity of demand measures

Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from $120 a ton to $180 a ton and quantity sold decreased from 800 tons to 240 tons.What is the absolute value of the price elasticity of demand?

The price elasticity of the supply of teenage labour services is approximately 1.36.Suppose the government of Prince Edward Island raises the minimum wage rises from $10.00 per hour to $10.25.Using the midpoint formula, calculate the approximate change in the quantity supplied of teenage labour.

Figure 6.1 -Refer to Figure 6.1.A perfectly elastic demand curve is shown in

Consider a demand curve that has a constant elasticity value of 0.What happens to quantity demanded and total revenue when price increases?

If a 35 percent increase in price of golf balls led to an 42 percent decrease in quantity demanded, then the demand for golf balls is

If 50 units are sold at a price of $20 and 80 units are sold at a price of $15, what is the absolute value of the price elasticity of demand? Use the midpoint formula.

Which of the following would result in a higher absolute value of the price elasticity of demand for a product?

Apple introduced the iPhone to the market in June 2007.Within two months, it had become clear that the price elasticity of demand for iPhones was

Over longer periods of time, increases in oil prices provide firms with incentives to explore and recover oil.What does this indicate about the long run price elasticity of supply for oil?

For consumers who opt to pay a $10 monthly fee to have unlimited texting on their cell phones, but choose not to pay a $5 monthly fee to have unlimited call minutes, the unlimited texting option has a ________ than the unlimited minutes option.

The demand for most farm products is relatively inelastic.A drought that reduces the supply of farm products will also cause farm revenues to fall.

Figure 6.5 -Refer to Figure 6.5.Identify the two goods which are complements.

When there few close substitutes available for a good, demand tends to be

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

The Markets for Labour and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Pricing Strategy

Firms, the Stock Market, and Corporate Governance

Filters

Exam 6: Elasticity: the Responsiveness of Demand and Supply

If the cross-price elasticity of demand for computers and software is negative, this means the two goods are

Demand for staples such as dairy products and bread is likely to be both income and price inelastic.

Suppose a decrease in the supply of wheat results in an increase in revenue.This indicates that

Linesha, a college student working part-time receives a wage increase.An avid movie buff, she increased her purchases of Blu-ray discs and reduced her purchases of DVDs.Based on this information,

Price elasticity of demand measures

Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from $120 a ton to $180 a ton and quantity sold decreased from 800 tons to 240 tons.What is the absolute value of the price elasticity of demand?

The price elasticity of the supply of teenage labour services is approximately 1.36.Suppose the government of Prince Edward Island raises the minimum wage rises from $10.00 per hour to $10.25.Using the midpoint formula, calculate the approximate change in the quantity supplied of teenage labour.

Figure 6.1 -Refer to Figure 6.1.A perfectly elastic demand curve is shown in

Consider a demand curve that has a constant elasticity value of 0.What happens to quantity demanded and total revenue when price increases?

If a 35 percent increase in price of golf balls led to an 42 percent decrease in quantity demanded, then the demand for golf balls is

If 50 units are sold at a price of $20 and 80 units are sold at a price of $15, what is the absolute value of the price elasticity of demand? Use the midpoint formula.

Which of the following would result in a higher absolute value of the price elasticity of demand for a product?

Apple introduced the iPhone to the market in June 2007.Within two months, it had become clear that the price elasticity of demand for iPhones was

Over longer periods of time, increases in oil prices provide firms with incentives to explore and recover oil.What does this indicate about the long run price elasticity of supply for oil?

For consumers who opt to pay a $10 monthly fee to have unlimited texting on their cell phones, but choose not to pay a $5 monthly fee to have unlimited call minutes, the unlimited texting option has a ________ than the unlimited minutes option.

The demand for most farm products is relatively inelastic.A drought that reduces the supply of farm products will also cause farm revenues to fall.

Figure 6.5 -Refer to Figure 6.5.Identify the two goods which are complements.

When there few close substitutes available for a good, demand tends to be

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

The Markets for Labour and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Pricing Strategy

Firms, the Stock Market, and Corporate Governance

Filters