Question 1

What does price elasticity of demand measure? When is demand elastic? Inelastic? Unit elastic?

Accepted Answer

Price elasticity of demand measures the

Question 2

Which of the following pairs of goods is likely to have a negative cross-price elasticity of demand?

Accepted Answer

A) pancakes and syrup 
B) hot dogs and hamburgers 
C) orange juice and grapefruit juice 
D) peanuts and cat food 
A) pancakes and syrup 
B) hot dogs and hamburgers 
C) orange juice and grapefruit juice 
D) peanuts and cat food

Question 3

When Audrina raised the price of her homemade cookies, her total revenue increased.This suggests that the demand for Audrina's cookies is elastic.

Accepted Answer

A) True 
 B)False

Question 4

The price elasticity of supply for umbrellas is 2.Suppose you're told that following a price increase, quantity supplied increased by 30 percent.What was the percentage change in price that brought this about?

Accepted Answer

A) 60 percent 
B) 15 percent 
C) 6.7 percent 
D) impossible to determine without additional information 
A) 60 percent 
B) 15 percent 
C) 6.7 percent 
D) impossible to determine without additional information

Question 5

If at a price of $24, Octavia sells 36 home-grown orchids and at $30 she sells 24 home-grown orchids, the demand for her orchids is

Accepted Answer

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

Question 6

The slope of a demand curve is not used to measure the price elasticity of demand because

Accepted Answer

A) the slope of a linear demand curve is not constant. 
B) the slope of a line cannot have a negative value. 
C) the measurement of slope is sensitive to the units chosen for price and quantity. 
D) the slope of the demand curve does not tell us how much quantity changes as price changes. 
A) the slope of a linear demand curve is not constant. 
B) the slope of a line cannot have a negative value. 
C) the measurement of slope is sensitive to the units chosen for price and quantity. 
D) the slope of the demand curve does not tell us how much quantity changes as price changes.

Question 7

Which of the following statements about the price elasticity of demand is correct?

Accepted Answer

A) The elasticity of demand for a good in general is equal to the elasticity of demand for a specific brand of the good. 
B) The absolute value of the elasticity of demand ranges from zero to one. 
C) Demand is more elastic in the long run than it is in the short run. 
D) Demand is more elastic the smaller the percentage of the consumer's budget the item takes up. 
A) The elasticity of demand for a good in general is equal to the elasticity of demand for a specific brand of the good. 
B) The absolute value of the elasticity of demand ranges from zero to one. 
C) Demand is more elastic in the long run than it is in the short run. 
D) Demand is more elastic the smaller the percentage of the consumer's budget the item takes up.

Question 8

Figure 6-12
  
-Refer to Figure 6-12.Suppose the diagram shows the supply curves for a product in the short run and in the long run.Which supply curve represents supply in the short run and which curve represents supply in the long run?

Accepted Answer

A) SB represents supply in the short run and SA represents supply in the long run. 
B) Either SA or SB could represent supply in the short run; in the long run the supply curve must be a vertical line. 
C) Either SA or SB could represent supply in the long run; in the short run the supply curve must be a horizontal line. 
D) SA represents supply in the short run and SB represents supply in the long run. 
A) SB represents supply in the short run and SA represents supply in the long run. 
B) Either SA or SB could represent supply in the short run; in the long run the supply curve must be a vertical line. 
C) Either SA or SB could represent supply in the long run; in the short run the supply curve must be a horizontal line. 
D) SA represents supply in the short run and SB represents supply in the long run.

Question 9

The paradox of American farming is

Accepted Answer

A) the demand for imported luxury food products has risen as the demand for domestic food products has fallen. 
B) the demand for food has risen as the number of people who pursue farming as a career has fallen. 
C) food has become cheaper and more abundant as the number of farms has decreased. 
D) the amount of food produced has increased as the average farm size has fallen. 
A) the demand for imported luxury food products has risen as the demand for domestic food products has fallen. 
B) the demand for food has risen as the number of people who pursue farming as a career has fallen. 
C) food has become cheaper and more abundant as the number of farms has decreased. 
D) the amount of food produced has increased as the average farm size has fallen.

Question 10

Assume that you own a small boutique hotel.In an attempt to raise revenue, you reduce your rates by 20 percent.However, your revenue falls.What does this indicate about the demand for your boutique hotel rooms?

Accepted Answer

A) Boutique hotel rooms are inferior goods. 
B) Demand is inelastic. 
C) The demand curve for your hotel rooms is vertical. 
D) Demand is elastic. 
A) Boutique hotel rooms are inferior goods. 
B) Demand is inelastic. 
C) The demand curve for your hotel rooms is vertical. 
D) Demand is elastic.

Question 11

Figure 6-10
  
-Refer to Figure 6-10.A unit-elastic 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 12

Studies show that the income elasticity of demand for wine is 5.03 and the income elasticity of demand for spirits is 1.21.This indicates that

Accepted Answer

A) wine and spirits are luxury goods. 
B) wine is a luxury good and spirits are inferior goods. 
C) wine and spirits are highly price elastic. 
D) wine is a luxury good and spirits are necessities. 
A) wine and spirits are luxury goods. 
B) wine is a luxury good and spirits are inferior goods. 
C) wine and spirits are highly price elastic. 
D) wine is a luxury good and spirits are necessities.

Question 13

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 14

Rank these three items in terms of the elasticity of the demand for them at any given price, from most elastic to least elastic: hot beverages, coffee and Peet's Coffee.

Accepted Answer

A) hot beverages, coffee, Peet's Coffee 
B) Peet's Coffee, coffee, hot beverages 
C) coffee, Peet's Coffee, hot beverages 
D) coffee, hot beverages, Peet's Coffee 
A) hot beverages, coffee, Peet's Coffee 
B) Peet's Coffee, coffee, hot beverages 
C) coffee, Peet's Coffee, hot beverages 
D) coffee, hot beverages, Peet's Coffee

Question 15

The cross-price elasticity of demand between an unlimited texting option and an unlimited call minutes option offered from a cell phone provider would be

Accepted Answer

A) positive if subscribers consider the services substitutes for each other. 
B) positive if subscribers consider the services complements to each other. 
C) negative if subscribers consider the services substitutes for each other. 
D) negative no matter if subscribers consider the services substitutes or complements for each other. 
A) positive if subscribers consider the services substitutes for each other. 
B) positive if subscribers consider the services complements to each other. 
C) negative if subscribers consider the services substitutes for each other. 
D) negative no matter if subscribers consider the services substitutes or complements for each other.

Question 16

If the demand for iPods is price elastic, then

Accepted Answer

A) the percentage change in quantity demanded is greater than the percentage change in price (in absolute value). 
B) the percentage change in quantity demanded is less than the percentage change in price (in absolute value). 
C) the percentage change in quantity demanded is equal to the percentage change in price. 
D) quantity demanded is not responsive to changes in price. 
A) the percentage change in quantity demanded is greater than the percentage change in price (in absolute value). 
B) the percentage change in quantity demanded is less than the percentage change in price (in absolute value). 
C) the percentage change in quantity demanded is equal to the percentage change in price. 
D) quantity demanded is not responsive to changes in price.

Question 17

Most people buy salt infrequently and in small quantities.Even a doubling of the price of salt is likely to result in a small decline in the quantity of salt demanded.Therefore

Accepted Answer

A) the demand for salt will be perfectly inelastic. 
B) salt is a normal good. 
C) the demand for salt is relatively inelastic. 
D) the price elasticity of demand for salt is greater than 1 (in absolute value). 
A) the demand for salt will be perfectly inelastic. 
B) salt is a normal good. 
C) the demand for salt is relatively inelastic. 
D) the price elasticity of demand for salt is greater than 1 (in absolute value).

Question 18

If the demand for a steak is unit elastic, then

Accepted Answer

A) the percentage change in quantity demanded is 1 percent greater than the percentage change in price. 
B) the percentage change in quantity demanded is equal to the percentage change in price. 
C) the percentage change in quantity demanded is 100 percent greater than the percentage change in price (in absolute value). 
D) quantity demanded does not respond to changes in price. 
A) the percentage change in quantity demanded is 1 percent greater than the percentage change in price. 
B) the percentage change in quantity demanded is equal to the percentage change in price. 
C) the percentage change in quantity demanded is 100 percent greater than the percentage change in price (in absolute value). 
D) quantity demanded does not respond to changes in price.

Question 19

An increase in the demand for green tea raises the price of green tea from $16 a pound to $20 a pound.As a result, quantity supplied increases by 30 percent.Using the midpoint formula, what is the value of the price elasticity of supply?

Accepted Answer

A) 1.35 
B) 1.875 
C) 2.22 
D) 7.5 
A) 1.35 
B) 1.875 
C) 2.22 
D) 7.5

Question 20

Which of the following statements about price elasticity of demand is false?

Accepted Answer

A) The value of the price elasticity of demand is the reciprocal of the value of the demand curve's slope. 
B) If quantity demanded changes by a larger percentage than the percentage change in price, demand is elastic. 
C) The value of the price elasticity of demand along a downward-sloping demand curve is always negative. 
D) A linear downward-sloping demand curve has a varying price elasticity coefficient. 
A) The value of the price elasticity of demand is the reciprocal of the value of the demand curve's slope. 
B) If quantity demanded changes by a larger percentage than the percentage change in price, demand is elastic. 
C) The value of the price elasticity of demand along a downward-sloping demand curve is always negative. 
D) A linear downward-sloping demand curve has a varying price elasticity coefficient.

What does price elasticity of demand measure? When is demand elastic? Inelastic? Unit elastic?

Which of the following pairs of goods is likely to have a negative cross-price elasticity of demand?

When Audrina raised the price of her homemade cookies, her total revenue increased.This suggests that the demand for Audrina's cookies is elastic.

The price elasticity of supply for umbrellas is 2.Suppose you're told that following a price increase, quantity supplied increased by 30 percent.What was the percentage change in price that brought this about?

If at a price of $24, Octavia sells 36 home-grown orchids and at $30 she sells 24 home-grown orchids, the demand for her orchids is

The slope of a demand curve is not used to measure the price elasticity of demand because

Which of the following statements about the price elasticity of demand is correct?

Figure 6-12 -Refer to Figure 6-12.Suppose the diagram shows the supply curves for a product in the short run and in the long run.Which supply curve represents supply in the short run and which curve represents supply in the long run?

The paradox of American farming is

Assume that you own a small boutique hotel.In an attempt to raise revenue, you reduce your rates by 20 percent.However, your revenue falls.What does this indicate about the demand for your boutique hotel rooms?

Figure 6-10 -Refer to Figure 6-10.A unit-elastic supply curve is shown in

Studies show that the income elasticity of demand for wine is 5.03 and the income elasticity of demand for spirits is 1.21.This indicates that

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

Rank these three items in terms of the elasticity of the demand for them at any given price, from most elastic to least elastic: hot beverages, coffee and Peet's Coffee.

The cross-price elasticity of demand between an unlimited texting option and an unlimited call minutes option offered from a cell phone provider would be

If the demand for iPods is price elastic, then

Most people buy salt infrequently and in small quantities.Even a doubling of the price of salt is likely to result in a small decline in the quantity of salt demanded.Therefore

If the demand for a steak is unit elastic, then

An increase in the demand for green tea raises the price of green tea from $16 a pound to $20 a pound.As a result, quantity supplied increases by 30 percent.Using the midpoint formula, what is the value of the price elasticity of supply?

Which of the following statements about price elasticity of demand is false?

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

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Exam 6: Elasticity: the Responsiveness of Demand and Supply

What does price elasticity of demand measure? When is demand elastic? Inelastic? Unit elastic?

Which of the following pairs of goods is likely to have a negative cross-price elasticity of demand?

When Audrina raised the price of her homemade cookies, her total revenue increased.This suggests that the demand for Audrina's cookies is elastic.

The price elasticity of supply for umbrellas is 2.Suppose you're told that following a price increase, quantity supplied increased by 30 percent.What was the percentage change in price that brought this about?

If at a price of $24, Octavia sells 36 home-grown orchids and at $30 she sells 24 home-grown orchids, the demand for her orchids is

The slope of a demand curve is not used to measure the price elasticity of demand because

Which of the following statements about the price elasticity of demand is correct?

Figure 6-12 -Refer to Figure 6-12.Suppose the diagram shows the supply curves for a product in the short run and in the long run.Which supply curve represents supply in the short run and which curve represents supply in the long run?

The paradox of American farming is

Assume that you own a small boutique hotel.In an attempt to raise revenue, you reduce your rates by 20 percent.However, your revenue falls.What does this indicate about the demand for your boutique hotel rooms?

Figure 6-10 -Refer to Figure 6-10.A unit-elastic supply curve is shown in

Studies show that the income elasticity of demand for wine is 5.03 and the income elasticity of demand for spirits is 1.21.This indicates that

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

Rank these three items in terms of the elasticity of the demand for them at any given price, from most elastic to least elastic: hot beverages, coffee and Peet's Coffee.

The cross-price elasticity of demand between an unlimited texting option and an unlimited call minutes option offered from a cell phone provider would be

If the demand for iPods is price elastic, then

Most people buy salt infrequently and in small quantities.Even a doubling of the price of salt is likely to result in a small decline in the quantity of salt demanded.Therefore

If the demand for a steak is unit elastic, then

An increase in the demand for green tea raises the price of green tea from $16 a pound to $20 a pound.As a result, quantity supplied increases by 30 percent.Using the midpoint formula, what is the value of the price elasticity of supply?

Which of the following statements about price elasticity of demand is false?

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