Question 1

If the market for a product is broadly defined, then

Accepted Answer

A) the good has many complements. 
B) there are few substitutes for the product and the demand for the product is relatively inelastic. 
C) there are many substitutes for the product and the demand for the product is relatively elastic. 
D) the expenditure on the good is likely to make up a large share of one's budget. 
A) the good has many complements. 
B) there are few substitutes for the product and the demand for the product is relatively inelastic. 
C) there are many substitutes for the product and the demand for the product is relatively elastic. 
D) the expenditure on the good is likely to make up a large share of one's budget.

Question 2

An article in the Wall Street Journal noted the following: Instead of relying on a full-coach, round-trip unrestricted fare of about $2,000 between Cleveland and Los Angeles ...Continental [Airlines] since June has offered a $716 unrestricted fare in that market ....Through October, the test resulted in about the same revenue that Continental thinks it would have collected with its higher fare.
Source: Scott McCartney, "Airlines Try Cutting Business Fares, Find They Don't Lose Revenue," Wall Street Journal, November 22, 2002.
What is the absolute value of the price elasticity of demand on this airline route?

Accepted Answer

A) 0 
B) less than 1 
C) greater than 1 
D) approximately 1 
A) 0 
B) less than 1 
C) greater than 1 
D) approximately 1

Question 3

The demand for gasoline in the short run is

Accepted Answer

A) elastic because people can easily switch to public transportation. 
B) perfectly inelastic because people have no choice but to buy gasoline. 
C) unit-elastic because people tend to consume a stable amount of gasoline per period. 
D) inelastic because there are no good substitutes for gasoline. 
A) elastic because people can easily switch to public transportation. 
B) perfectly inelastic because people have no choice but to buy gasoline. 
C) unit-elastic because people tend to consume a stable amount of gasoline per period. 
D) inelastic because there are no good substitutes for gasoline.

Question 4

Figure 6.1
  
-Refer to Figure 6.1.A perfectly inelastic 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 5

If the demand for a life-saving drug was perfectly inelastic and the price doubled, the quantity demanded would

Accepted Answer

A) also double. 
B) decrease by 50%. 
C) be cut in half. 
D) remain constant. 
A) also double. 
B) decrease by 50%. 
C) be cut in half. 
D) remain constant.

Question 6

When is demand perfectly elastic? When is demand perfectly inelastic? What are the values of the price elasticity of demand when demand is perfectly elastic or perfectly inelastic? What do perfectly elastic and perfectly inelastic demand curves look like?

Accepted Answer

Demand is perfectly elastic when quantit

Question 7

Necessities tend to have more inelastic demands than luxuries.

Accepted Answer

A) True 
 B)False

Question 8

Figure 6.6
  
-Refer to Figure 6.6.A perfectly inelastic supply 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

Suppose the cross-price elasticity of demand between grapefruit juice and orange juice is approximately 6.What does this mean?

Accepted Answer

A) A 1 percent decrease in the price of grapefruit juice leads to a 6 percent increase in orange juice consumption. 
B) A 6 percent increase in the price of grapefruit juice leads to a 1 percent increase in orange juice consumption. 
C)  If the price of grapefruit juice rises by $1, 6 more cartons of orange juice will be purchased. 
D) The demand for orange juice is 6 times more than the demand for grapefruit juice. 
A) A 1 percent decrease in the price of grapefruit juice leads to a 6 percent increase in orange juice consumption. 
B) A 6 percent increase in the price of grapefruit juice leads to a 1 percent increase in orange juice consumption. 
C)  If the price of grapefruit juice rises by $1, 6 more cartons of orange juice will be purchased. 
D) The demand for orange juice is 6 times more than the demand for grapefruit juice.

If the market for a product is broadly defined, then

The demand for gasoline in the short run is

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

If the demand for a life-saving drug was perfectly inelastic and the price doubled, the quantity demanded would

When is demand perfectly elastic? When is demand perfectly inelastic? What are the values of the price elasticity of demand when demand is perfectly elastic or perfectly inelastic? What do perfectly elastic and perfectly inelastic demand curves look like?

Necessities tend to have more inelastic demands than luxuries.

Figure 6.6 -Refer to Figure 6.6.A perfectly inelastic supply curve is shown in

Suppose the cross-price elasticity of demand between grapefruit juice and orange juice is approximately 6.What does this mean?

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 market for a product is broadly defined, then

The demand for gasoline in the short run is

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

If the demand for a life-saving drug was perfectly inelastic and the price doubled, the quantity demanded would

When is demand perfectly elastic? When is demand perfectly inelastic? What are the values of the price elasticity of demand when demand is perfectly elastic or perfectly inelastic? What do perfectly elastic and perfectly inelastic demand curves look like?

Necessities tend to have more inelastic demands than luxuries.

Figure 6.6 -Refer to Figure 6.6.A perfectly inelastic supply curve is shown in

Suppose the cross-price elasticity of demand between grapefruit juice and orange juice is approximately 6.What does this mean?

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