Question 1

Provide a simple definition of the price elasticity of demand and explain why knowing the price elasticity for her product is useful to the firm's manager.

Accepted Answer

The price elasticity of demand is a meas

Question 2

Demand for a good will tend to be more price elastic if it exhibits which of the following characteristics?

Accepted Answer

A) It accounts for a small part of the consumer's total income. 
B) The good has many available substitutes. 
C) It is a non-durable (as opposed to a durable good). 
D) There is little time for the consumer to adjust to the price change. 
A) It accounts for a small part of the consumer's total income. 
B) The good has many available substitutes. 
C) It is a non-durable (as opposed to a durable good). 
D) There is little time for the consumer to adjust to the price change.

Question 3

A decrease in price will result in an increase in total revenue if:

Accepted Answer

A) the percentage change in quantity demanded is less than the percentage change in price. 
B) the percentage change in quantity demanded is greater than the percentage change in price. 
C) demand is inelastic. 
D) the consumer is operating along a linear demand curve at a point at which the price is very low and the quantity demanded is very high. 
A) the percentage change in quantity demanded is less than the percentage change in price. 
B) the percentage change in quantity demanded is greater than the percentage change in price. 
C) demand is inelastic. 
D) the consumer is operating along a linear demand curve at a point at which the price is very low and the quantity demanded is very high.

Question 4

Suppose the price of movies seen at a theater rises from $12 per couple to $20 per couple.The theater manager observes that the rise in price causes attendance at a given movie to fall from 300 persons to 200 persons.What is the arc price elasticity of demand for movies?

Accepted Answer

A) 0.5 
B) 0.8 
C) 1.0 
D) 1.2 
A) 0.5 
B) 0.8 
C) 1.0 
D) 1.2

Question 5

The available data strongly suggest that,as the "needs" argument would suggest,the demand for health care is virtually perfectly inelastic.

Accepted Answer

A) True 
 B)False

Question 6

If the percentage change in quantity demanded is greater than the percentage change in price,we would say that over this range,demand is:

Accepted Answer

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

Question 7

The income elasticity of demand for health care is generally less than 1,indicating consumers consider these services to be luxuries.

Accepted Answer

A) True 
 B)False

Question 8

When a demand curve is perfectly elastic:

Accepted Answer

A) marginal revenue = average revenue = price. 
B) marginal revenue > average revenue = price. 
C) marginal revenue  average revenue > price. 
A) marginal revenue = average revenue = price. 
B) marginal revenue > average revenue = price. 
C) marginal revenue  average revenue > price.

Question 9

Assuming the inverse demand function for good Z can be written as P = 90 - 3Q,when Q is equal to 5,average revenue and marginal revenue are equal to ________ and ________.

Accepted Answer

A) $75; $75. 
B) $85; $85. 
C) $75; $60. 
D) $⁶⁰; $⁶⁰. 
A) $75; $75. 
B) $85; $85. 
C) $75; $60. 
D) $⁶⁰; $⁶⁰.

Question 10

Information on the price elasticity of demand is particularly important to managerial decision making because:

Accepted Answer

A) the higher the price elasticity of demand for a product is, the more profitable it will be to produce more of it. 
B) depending on the elasticity coefficient, decision makers will immediately know if a price change will cause profits to increase or decrease. 
C) it allows one to predict how total revenue will respond, i.e., increase or decrease, to a change in price. 
D) as the price elasticity coefficient approaches one, profits will increase. 
A) the higher the price elasticity of demand for a product is, the more profitable it will be to produce more of it. 
B) depending on the elasticity coefficient, decision makers will immediately know if a price change will cause profits to increase or decrease. 
C) it allows one to predict how total revenue will respond, i.e., increase or decrease, to a change in price. 
D) as the price elasticity coefficient approaches one, profits will increase.

Question 11

Which of the following statements is correct?

Accepted Answer

A) In the case of a linear demand curve, the slope and the price elasticity of demand are equal at each point on the demand curve. 
B) The slope of the demand curve is some constant value, but the value of the price elasticity coefficient decreases as we move down the demand curve. 
C) The slope of the demand curve is some constant value, but the value of the price elasticity coefficient increases as we move down the demand curve. 
D) There is no connection between the slope of the demand curve and the value of the price elasticity coefficient. 
A) In the case of a linear demand curve, the slope and the price elasticity of demand are equal at each point on the demand curve. 
B) The slope of the demand curve is some constant value, but the value of the price elasticity coefficient decreases as we move down the demand curve. 
C) The slope of the demand curve is some constant value, but the value of the price elasticity coefficient increases as we move down the demand curve. 
D) There is no connection between the slope of the demand curve and the value of the price elasticity coefficient.

Question 12

Illustrate graphically the effect the credit market crisis in the United States in 2008 had in the market for existing single-family homes.Assuming the demand for existing single-family homes is relatively inelastic,what is likely to happen to the total revenues of home sellers as a result of the credit market crisis?

Accepted Answer

The credit market crisis resulted in a l

Question 13

Studies strongly suggest that advertising strategies are generally much more effective than pricing strategies as a means to increase market share.

Accepted Answer

A) True 
 B)False

Question 14

As the amount of time a consumer has to adjust to a change in price increases,so does the price elasticity of demand for a good.

Accepted Answer

A) True 
 B)False

Question 15

In the long run,the price elasticity of demand is ________ than in the short run because ________.

Accepted Answer

A) less; consumers have more time in which to make adjustments to price changes 
B) less; the percentage change is measured over a larger amount of time 
C) greater; consumers have more time in which to make adjustments to price changes 
D) greater; firms have more time to shift the burden of the tax forward to consumers 
A) less; consumers have more time in which to make adjustments to price changes 
B) less; the percentage change is measured over a larger amount of time 
C) greater; consumers have more time in which to make adjustments to price changes 
D) greater; firms have more time to shift the burden of the tax forward to consumers

Question 16

Hot dogs and hot dog buns would be expected to have:

Accepted Answer

A) positive income elasticities of demand with respect to each other. 
B) negative income elasticities of demand with respect to each other. 
C) a positive cross-price elasticity of demand. 
D) a negative cross-price elasticity of demand. 
A) positive income elasticities of demand with respect to each other. 
B) negative income elasticities of demand with respect to each other. 
C) a positive cross-price elasticity of demand. 
D) a negative cross-price elasticity of demand.

Question 17

Which of the following is a plausible reason that restaurants offer "Senior Citizen Discounts"?

Accepted Answer

A) Senior citizens tend to have relatively more elastic demands for restaurant meals than other consumer groups. 
B) Senior citizens tend to have relatively more inelastic demands for restaurant meals. than other consumer groups. 
C) Senior citizens are not very sensitive to changes in prices. 
D) Senior citizens are easily fooled by "come-ons" and are therefore frequently victims of price discrimination. 
A) Senior citizens tend to have relatively more elastic demands for restaurant meals than other consumer groups. 
B) Senior citizens tend to have relatively more inelastic demands for restaurant meals. than other consumer groups. 
C) Senior citizens are not very sensitive to changes in prices. 
D) Senior citizens are easily fooled by "come-ons" and are therefore frequently victims of price discrimination.

Question 18

If a 10 percent increase in the price of a luxury hotel room causes the quantity demanded to decrease by 41.5 percent.,we can conclude that the price elasticity of demand for luxury hotel rooms is approximately -0.24.

Accepted Answer

A) True 
 B)False

Question 19

An increase in price will result in no change in total revenue if:

Accepted Answer

A) the percentage change in price is large enough to cause quantity demanded to fall to zero. 
B) the coefficient of elasticity is equal to zero. 
C) the percentage change in quantity demanded is equal to the percentage change in price (in absolute values). 
D) the demand function is perfectly elastic. 
A) the percentage change in price is large enough to cause quantity demanded to fall to zero. 
B) the coefficient of elasticity is equal to zero. 
C) the percentage change in quantity demanded is equal to the percentage change in price (in absolute values). 
D) the demand function is perfectly elastic.

Question 20

Consider the market for gasoline in a moderately large city.All else constant,it would be reasonable to conclude that the price elasticity demand for any individual gas station would be higher (more elastic)than the price elasticity of demand for gas in general.

Accepted Answer

A) True 
 B)False

Provide a simple definition of the price elasticity of demand and explain why knowing the price elasticity for her product is useful to the firm's manager.

Demand for a good will tend to be more price elastic if it exhibits which of the following characteristics?

A decrease in price will result in an increase in total revenue if:

Suppose the price of movies seen at a theater rises from $12 per couple to $20 per couple.The theater manager observes that the rise in price causes attendance at a given movie to fall from 300 persons to 200 persons.What is the arc price elasticity of demand for movies?

The available data strongly suggest that,as the "needs" argument would suggest,the demand for health care is virtually perfectly inelastic.

If the percentage change in quantity demanded is greater than the percentage change in price,we would say that over this range,demand is:

The income elasticity of demand for health care is generally less than 1,indicating consumers consider these services to be luxuries.

When a demand curve is perfectly elastic:

Assuming the inverse demand function for good Z can be written as P = 90 - 3Q,when Q is equal to 5,average revenue and marginal revenue are equal to and .

Information on the price elasticity of demand is particularly important to managerial decision making because:

Which of the following statements is correct?

Studies strongly suggest that advertising strategies are generally much more effective than pricing strategies as a means to increase market share.

As the amount of time a consumer has to adjust to a change in price increases,so does the price elasticity of demand for a good.

In the long run,the price elasticity of demand is than in the short run because .

Hot dogs and hot dog buns would be expected to have:

Which of the following is a plausible reason that restaurants offer "Senior Citizen Discounts"?

If a 10 percent increase in the price of a luxury hotel room causes the quantity demanded to decrease by 41.5 percent.,we can conclude that the price elasticity of demand for luxury hotel rooms is approximately -0.24.

An increase in price will result in no change in total revenue if:

Consider the market for gasoline in a moderately large city.All else constant,it would be reasonable to conclude that the price elasticity demand for any individual gas station would be higher (more elastic)than the price elasticity of demand for gas in general.

Managers and Economics

Demand, supply, and Equilibrium Prices

Techniques for Understanding Consumer Demand and Behavior

Production and Cost Analysis in the Short Run

Production and Cost Analysis in the Long Run

Market Structure: Perfect Competition

Market Structure: Monopoly and Monopolistic Competition

Market Structure: Oligopoly

Pricing Strategies for the Firm

Measuring Macroeconomic Activity

Spending by Individuals, firms, and Governments on Real Goods and Services

The Role of Money in the Macro Economy

The Aggregate Model of the Macro Economy

International and Balance of Payments Issues in the Macro Economy

Combining Micro and Macro Analysis for Managerial Decision Making

Filters

Exam 3: Demand Elasticities

Provide a simple definition of the price elasticity of demand and explain why knowing the price elasticity for her product is useful to the firm's manager.

Demand for a good will tend to be more price elastic if it exhibits which of the following characteristics?

A decrease in price will result in an increase in total revenue if:

Suppose the price of movies seen at a theater rises from $12 per couple to $20 per couple.The theater manager observes that the rise in price causes attendance at a given movie to fall from 300 persons to 200 persons.What is the arc price elasticity of demand for movies?

The available data strongly suggest that,as the "needs" argument would suggest,the demand for health care is virtually perfectly inelastic.

If the percentage change in quantity demanded is greater than the percentage change in price,we would say that over this range,demand is:

The income elasticity of demand for health care is generally less than 1,indicating consumers consider these services to be luxuries.

When a demand curve is perfectly elastic:

Assuming the inverse demand function for good Z can be written as P = 90 - 3Q,when Q is equal to 5,average revenue and marginal revenue are equal to ________ and ________.

Information on the price elasticity of demand is particularly important to managerial decision making because:

Which of the following statements is correct?

Studies strongly suggest that advertising strategies are generally much more effective than pricing strategies as a means to increase market share.

As the amount of time a consumer has to adjust to a change in price increases,so does the price elasticity of demand for a good.

In the long run,the price elasticity of demand is ________ than in the short run because ________.

Hot dogs and hot dog buns would be expected to have:

Which of the following is a plausible reason that restaurants offer "Senior Citizen Discounts"?

If a 10 percent increase in the price of a luxury hotel room causes the quantity demanded to decrease by 41.5 percent.,we can conclude that the price elasticity of demand for luxury hotel rooms is approximately -0.24.

An increase in price will result in no change in total revenue if:

Consider the market for gasoline in a moderately large city.All else constant,it would be reasonable to conclude that the price elasticity demand for any individual gas station would be higher (more elastic)than the price elasticity of demand for gas in general.

Managers and Economics

Demand, supply, and Equilibrium Prices

Techniques for Understanding Consumer Demand and Behavior

Production and Cost Analysis in the Short Run

Production and Cost Analysis in the Long Run

Market Structure: Perfect Competition

Market Structure: Monopoly and Monopolistic Competition

Market Structure: Oligopoly

Pricing Strategies for the Firm

Measuring Macroeconomic Activity

Spending by Individuals, firms, and Governments on Real Goods and Services

The Role of Money in the Macro Economy

The Aggregate Model of the Macro Economy

International and Balance of Payments Issues in the Macro Economy

Combining Micro and Macro Analysis for Managerial Decision Making

Filters

Assuming the inverse demand function for good Z can be written as P = 90 - 3Q,when Q is equal to 5,average revenue and marginal revenue are equal to and .

In the long run,the price elasticity of demand is than in the short run because .