Question 1

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. D

Question 2

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. A

Question 3

Jonah lives in a small town where there is only one Mexican restaurant.Which of the following is likely to be true about the price elasticity of demand for meals at the Mexican restaurant?

Accepted Answer

A) Demand is likely to be perfectly inelastic. 
B) Demand is likely to be perfectly elastic. 
C) Demand is likely to be relatively elastic. 
D) Demand is likely to be relatively inelastic. 
A) Demand is likely to be perfectly inelastic. 
B) Demand is likely to be perfectly elastic. 
C) Demand is likely to be relatively elastic. 
D) Demand is likely to be relatively inelastic. D

Question 4

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 5

Table 6-2
  
-Refer to Table 6-2.Assume that an economist has estimated the price elasticity of demand values in the table above.Use the data in the table to select the correct statement.

Accepted Answer

A) The demand for Coca-Cola is inelastic. 
B) The elasticity for "All soft drinks" is less than the elasticity for Coca-Cola because Coca-Cola is more of a luxury than a necessity; "All soft drinks" represent goods that are more necessity than luxury. 
C) The difference in elasticity values is explained by the fact that the more narrowly we define a market the more elastic the demand will be. 
D) There are fewer substitutes for "All carbonated soft drinks" than there are for "All soft drinks." 
A) The demand for Coca-Cola is inelastic. 
B) The elasticity for "All soft drinks" is less than the elasticity for Coca-Cola because Coca-Cola is more of a luxury than a necessity; "All soft drinks" represent goods that are more necessity than luxury. 
C) The difference in elasticity values is explained by the fact that the more narrowly we define a market the more elastic the demand will be. 
D) There are fewer substitutes for "All carbonated soft drinks" than there are for "All soft drinks."

Question 6

If the price of steel increases drastically, the quantity of steel demanded by the building industry will fall significantly over the long run because

Accepted Answer

A) buyers of steel are more sensitive to a price change if they have more time to adjust to the price change. 
B) buyers of steel are less sensitive to a price change if they have more time to adjust to the price change. 
C) sales revenue in the building industry will fall sharply. 
D) profits will fall by a greater amount in the long run than in the short run. 
A) buyers of steel are more sensitive to a price change if they have more time to adjust to the price change. 
B) buyers of steel are less sensitive to a price change if they have more time to adjust to the price change. 
C) sales revenue in the building industry will fall sharply. 
D) profits will fall by a greater amount in the long run than in the short run.

Question 7

If you expect the economy is going to experience a boom and average income in the economy will rise in the foreseeable future, the type of firm that would be able to increase its sales if your expectations are met is

Accepted Answer

A) one that sells an inferior good. 
B) one that sells a necessity good. 
C) one that sells a luxury good. 
D) one that sells a price-inelastic good. 
A) one that sells an inferior good. 
B) one that sells a necessity good. 
C) one that sells a luxury good. 
D) one that sells a price-inelastic good.

Question 8

When demand is unit elastic, a change in price causes total revenue to stay the same because

Accepted Answer

A) the percentage change in quantity demanded exactly offsets the percentage change in price. 
B) buyers are buying the same quantity. 
C) total revenue never changes with price changes. 
D) the change in profit is offset by the change in production cost. 
A) the percentage change in quantity demanded exactly offsets the percentage change in price. 
B) buyers are buying the same quantity. 
C) total revenue never changes with price changes. 
D) the change in profit is offset by the change in production cost.

Question 9

Suppose the absolute value of the price elasticity of demand for meals at Fortune Buffet House is ∞.What happens to sales revenue if the restaurant increases its price by 5 percent?

Accepted Answer

A) Sales revenue falls by less than 5 percent. 
B) Sales revenue remains unchanged. 
C) Sales revenue falls by 100 percent. 
D) It cannot be determined without information on prices. 
A) Sales revenue falls by less than 5 percent. 
B) Sales revenue remains unchanged. 
C) Sales revenue falls by 100 percent. 
D) It cannot be determined without information on prices.

Question 10

If the absolute value of the price elasticity of demand for DVD movies is 0.8 then the elasticity of demand of the DVD for the movie The Hangover should be

Accepted Answer

A) less than 0.8 in absolute value. 
B) greater than 0.8 in absolute value. 
C) equal to 1 in absolute value. 
D) equal to zero because the DVD of this movie has been out for several years. 
A) less than 0.8 in absolute value. 
B) greater than 0.8 in absolute value. 
C) equal to 1 in absolute value. 
D) equal to zero because the DVD of this movie has been out for several years.

Question 11

At a price of $100, Beachside Canoe Rentals rented 11 canoes.When it increased its rental price to $125, 9 canoes were rented.Calculate the absolute value of the price elasticity of demand for canoe rentals using the midpoint formula.

Accepted Answer

A) 2 
B) 1.25 
C) 0.9 
D) 0.75 
A) 2 
B) 1.25 
C) 0.9 
D) 0.75

Question 12

The price elasticity of demand for Kellogg's Raisin Bran is larger in absolute value than the price elasticity of demand for all breakfast cereals.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is one reason why the income of small family farms has decreased over time?

Accepted Answer

A) Technology has increased farm productivity and market supply. 
B) The demand for farm products is inelastic. 
C) The demand for farm products is income inelastic. 
D) The U.S. population has increased greatly since 1950. 
A) Technology has increased farm productivity and market supply. 
B) The demand for farm products is inelastic. 
C) The demand for farm products is income inelastic. 
D) The U.S. population has increased greatly since 1950.

Question 14

The value of the price elasticity of supply depends primarily on how quickly firms can acquire inputs to increase quantity supplied when price increases.

Accepted Answer

A) True 
 B)False

Question 15

If, when price changes by 35 percent, the quantity demanded changes by 7 percent, then the absolute value of the price elasticity of demand is 5.

Accepted Answer

A) True 
 B)False

Question 16

The demand for most farm products is relatively inelastic.All else constant, what is the effect on farm revenues as a result of the introduction of new and better farm equipment which increases productivity?

Accepted Answer

A) Farm revenues increase. 
B) Farm revenues decrease. 
C) Farm revenues remain constant because consumers will not increase their consumption of farm products by much. 
D) Farm revenues could increase or decrease depending on the cost of this new equipment. 
A) Farm revenues increase. 
B) Farm revenues decrease. 
C) Farm revenues remain constant because consumers will not increase their consumption of farm products by much. 
D) Farm revenues could increase or decrease depending on the cost of this new equipment.

Question 17

Price elasticity of supply is used to gauge

Accepted Answer

A) how responsive suppliers are to price changes. 
B) how responsive suppliers are to changes in future prices. 
C) how responsive suppliers are to a change in demand. 
D) how responsive sales are to a change in input prices. 
A) how responsive suppliers are to price changes. 
B) how responsive suppliers are to changes in future prices. 
C) how responsive suppliers are to a change in demand. 
D) how responsive sales are to a change in input prices.

Question 18

If the quantity demanded for a good rises as income rises then the income elasticity of demand for this good is ________ than 0, and the good is ________ good.

Accepted Answer

A) greater; an inferior 
B) less; a normal 
C) less; an inferior 
D) greater; a normal 
A) greater; an inferior 
B) less; a normal 
C) less; an inferior 
D) greater; a normal

Question 19

If a firm's goal is to maximize revenue, it will price its product to correspond to the unit-elastic segment of its demand curve.

Accepted Answer

A) True 
 B)False

Question 20

If the demand for a product is elastic, the quantity demanded changes by a smaller percentage than the percentage change in price.

Accepted Answer

A) True 
 B)False

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

Figure 6-1 -Refer to Figure 6-1.A perfectly inelastic demand curve is shown in

Jonah lives in a small town where there is only one Mexican restaurant.Which of the following is likely to be true about the price elasticity of demand for meals at the Mexican restaurant?

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

Table 6-2 -Refer to Table 6-2.Assume that an economist has estimated the price elasticity of demand values in the table above.Use the data in the table to select the correct statement.

If the price of steel increases drastically, the quantity of steel demanded by the building industry will fall significantly over the long run because

If you expect the economy is going to experience a boom and average income in the economy will rise in the foreseeable future, the type of firm that would be able to increase its sales if your expectations are met is

When demand is unit elastic, a change in price causes total revenue to stay the same because

Suppose the absolute value of the price elasticity of demand for meals at Fortune Buffet House is ∞.What happens to sales revenue if the restaurant increases its price by 5 percent?

If the absolute value of the price elasticity of demand for DVD movies is 0.8 then the elasticity of demand of the DVD for the movie The Hangover should be

At a price of $100, Beachside Canoe Rentals rented 11 canoes.When it increased its rental price to $125, 9 canoes were rented.Calculate the absolute value of the price elasticity of demand for canoe rentals using the midpoint formula.

The price elasticity of demand for Kellogg's Raisin Bran is larger in absolute value than the price elasticity of demand for all breakfast cereals.

Which of the following is one reason why the income of small family farms has decreased over time?

The value of the price elasticity of supply depends primarily on how quickly firms can acquire inputs to increase quantity supplied when price increases.

If, when price changes by 35 percent, the quantity demanded changes by 7 percent, then the absolute value of the price elasticity of demand is 5.

The demand for most farm products is relatively inelastic.All else constant, what is the effect on farm revenues as a result of the introduction of new and better farm equipment which increases productivity?

Price elasticity of supply is used to gauge

If the quantity demanded for a good rises as income rises then the income elasticity of demand for this good is than 0, and the good is good.

If a firm's goal is to maximize revenue, it will price its product to correspond to the unit-elastic segment of its demand curve.

If the demand for a product is elastic, the quantity demanded changes by a smaller percentage than the percentage change in price.

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

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters

Exam 6: Elasticity: the Responsiveness of Demand and Supply

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

Figure 6-1 -Refer to Figure 6-1.A perfectly inelastic demand curve is shown in

Jonah lives in a small town where there is only one Mexican restaurant.Which of the following is likely to be true about the price elasticity of demand for meals at the Mexican restaurant?

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

Table 6-2 -Refer to Table 6-2.Assume that an economist has estimated the price elasticity of demand values in the table above.Use the data in the table to select the correct statement.

If the price of steel increases drastically, the quantity of steel demanded by the building industry will fall significantly over the long run because

If you expect the economy is going to experience a boom and average income in the economy will rise in the foreseeable future, the type of firm that would be able to increase its sales if your expectations are met is

When demand is unit elastic, a change in price causes total revenue to stay the same because

Suppose the absolute value of the price elasticity of demand for meals at Fortune Buffet House is ∞.What happens to sales revenue if the restaurant increases its price by 5 percent?

If the absolute value of the price elasticity of demand for DVD movies is 0.8 then the elasticity of demand of the DVD for the movie The Hangover should be

At a price of $100, Beachside Canoe Rentals rented 11 canoes.When it increased its rental price to $125, 9 canoes were rented.Calculate the absolute value of the price elasticity of demand for canoe rentals using the midpoint formula.

The price elasticity of demand for Kellogg's Raisin Bran is larger in absolute value than the price elasticity of demand for all breakfast cereals.

Which of the following is one reason why the income of small family farms has decreased over time?

The value of the price elasticity of supply depends primarily on how quickly firms can acquire inputs to increase quantity supplied when price increases.

If, when price changes by 35 percent, the quantity demanded changes by 7 percent, then the absolute value of the price elasticity of demand is 5.

The demand for most farm products is relatively inelastic.All else constant, what is the effect on farm revenues as a result of the introduction of new and better farm equipment which increases productivity?

Price elasticity of supply is used to gauge

If the quantity demanded for a good rises as income rises then the income elasticity of demand for this good is ________ than 0, and the good is ________ good.

If a firm's goal is to maximize revenue, it will price its product to correspond to the unit-elastic segment of its demand curve.

If the demand for a product is elastic, the quantity demanded changes by a smaller percentage than the percentage change in price.

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

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters

If the quantity demanded for a good rises as income rises then the income elasticity of demand for this good is than 0, and the good is good.