Question 1

Which of the following statements is true?

Accepted Answer

A) Whenever a firm raises its price its total revenue will increase. 
B) When a firm lowers its price its total revenue may either increase or decrease. 
C) Whenever a firm increases its quantity sold its revenue will increase. 
D) Total revenue will equal zero when the demand for a product is unit elastic. 
A) Whenever a firm raises its price its total revenue will increase. 
B) When a firm lowers its price its total revenue may either increase or decrease. 
C) Whenever a firm increases its quantity sold its revenue will increase. 
D) Total revenue will equal zero when the demand for a product is unit elastic.

Question 2

Consider the following pairs of items:
A.shampoo and conditioner
B.iPhones and earbuds
C.a laptop computer and a desktop computer
D.beef and pork
E.air-travel and weed killer
Which of the pairs listed will have a negative cross-price elasticity?

Accepted Answer

A) a and b only 
B) c and d only 
C) e only 
D) a, b, and c only 
A) a and b only 
B) c and d only 
C) e only 
D) a, b, and c only

Question 3

If demand is perfectly inelastic, the absolute value of the price elasticity of demand is

Accepted Answer

A) zero. 
B) less than one. 
C) more than one. 
D) equal to the absolute value of the slope of the demand curve. 
A) zero. 
B) less than one. 
C) more than one. 
D) equal to the absolute value of the slope of the demand curve.

Question 4

Explain the economic concept of price elasticity of supply.How is price elasticity of supply calculated?

Accepted Answer

Price elasticity of supply refers to the

Question 5

Which of the following statements is true?

Accepted Answer

A) In general, if a product has few substitutes it will have an elastic demand. 
B) The more time that passes the more inelastic the demand for a product becomes. 
C) The demand curve for a necessity is more elastic than the demand curve for a luxury. 
D) The more narrowly we define a market, the more elastic the demand for a product will be. 
A) In general, if a product has few substitutes it will have an elastic demand. 
B) The more time that passes the more inelastic the demand for a product becomes. 
C) The demand curve for a necessity is more elastic than the demand curve for a luxury. 
D) The more narrowly we define a market, the more elastic the demand for a product will be.

Question 6

Shifts in the supply of oil have caused large changes in price since the 1970s because

Accepted Answer

A) the supply of oil is very inelastic while the demand for oil is very elastic over short periods of time. 
B) the supply of oil is very elastic while the demand for oil is inelastic over short periods of time. 
C) both the supply of oil and the demand for oil are inelastic over short periods of time. 
D) the supply of oil and the demand for oil are perfectly elastic over short periods of time. 
A) the supply of oil is very inelastic while the demand for oil is very elastic over short periods of time. 
B) the supply of oil is very elastic while the demand for oil is inelastic over short periods of time. 
C) both the supply of oil and the demand for oil are inelastic over short periods of time. 
D) the supply of oil and the demand for oil are perfectly elastic over short periods of time.

Question 7

Opera Estate Girls' School is considering increasing its tuition to raise revenue.If the school believes that raising tuition will increase revenue it is assuming that the demand for attending the school is

Accepted Answer

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

Question 8

If, for a given percentage increase in price, quantity demanded falls by a proportionately smaller percentage, then demand 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 9

If tolls on a toll road can be raised significantly before commuters will consider using a free alternative, then an increase in tolls will result in

Accepted Answer

A) a decrease in total revenue. 
B) a decrease in non-toll road usage. 
C) an increase in total revenue. 
D) an increase in toll road usage. 
A) a decrease in total revenue. 
B) a decrease in non-toll road usage. 
C) an increase in total revenue. 
D) an increase in toll road usage.

Question 10

Suppose the current price of oil is $50 a barrel and the quantity supplied is 800 million barrels per day.If the price elasticity of supply for oil in the short run is estimated at 0.5, use the midpoint formula to calculate the percentage change in quantity supplied when the price of oil rises to $58 a barrel.

Accepted Answer

The percentage change in quant

Question 11

For each pair of items below determine which product would have the higher price elasticity of demand (in absolute value).
a.Blood pressure medicine for someone who has high blood pressure or the purchase of Clairol hair coloring product.
b.A new Ford Fusion or a tank of gas for your current car.
c.A Seiko watch or watches in general.

Accepted Answer

a.The demand for the hair product is mor

Question 12

The price elasticity of supply of hot dog buns is estimated to be 1.5.Holding everything else constant, this means that a 10 percent decrease in the price of hot dog buns will cause the quantity of hot dog buns supplied to decrease by

Accepted Answer

A) 1.5 percent. 
B) 15 percent. 
C) approximately 25 percent. 
D) approximately 5 percent. 
A) 1.5 percent. 
B) 15 percent. 
C) approximately 25 percent. 
D) approximately 5 percent.

Question 13

Suppose the supply of bicycles is price elastic.This means that

Accepted Answer

A) consumers will respond significantly to an increase in the quantity of bicycles supplied. 
B) suppliers will increase the quantity of bicycles supplied, but not immediately. 
C) suppliers face many substitutes for bicycles. 
D) suppliers will respond significantly to changes in the price of bicycles. 
A) consumers will respond significantly to an increase in the quantity of bicycles supplied. 
B) suppliers will increase the quantity of bicycles supplied, but not immediately. 
C) suppliers face many substitutes for bicycles. 
D) suppliers will respond significantly to changes in the price of bicycles.

Question 14

Suppose that the price of a money clip increases from $0.75 to $0.90 and quantity supplied rises from 8,000 units to 10,000 units.Use the midpoint formula to calculate the price elasticity of supply.

Accepted Answer

A) 1.22 
B) 1.0 
C) 0.82 
D) 0.07 
A) 1.22 
B) 1.0 
C) 0.82 
D) 0.07

Question 15

The price elasticity of demand is equal to

Accepted Answer

A) the value of the slope of the demand curve. 
B) the change in quantity demanded divided by the change in price. 
C) the percentage change in price divided by the percentage change in quantity demanded. 
D) the percentage change in quantity demanded divided by the percentage change in price. 
A) the value of the slope of the demand curve. 
B) the change in quantity demanded divided by the change in price. 
C) the percentage change in price divided by the percentage change in quantity demanded. 
D) the percentage change in quantity demanded divided by the percentage change in price.

Question 16

If demand is perfectly elastic, the absolute value of the price elasticity coefficient is

Accepted Answer

A) infinity. 
B) zero. 
C) one. 
D) equal to the absolute value of the slope of the demand curve. 
A) infinity. 
B) zero. 
C) one. 
D) equal to the absolute value of the slope of the demand curve.

Question 17

Which of the following statements is true?

Accepted Answer

A) The supply of oil is very elastic over short time periods but becomes perfectly inelastic over time. A given shift in supply results in a greater increase in the price of oil when the supply of oil is perfectly inelastic. 
B) The supply of oil is very inelastic over short time periods but becomes more elastic over time. A given shift in supply results in a smaller increase in the price of oil when the supply is more elastic. 
C) The supply of oil is perfectly inelastic; therefore, as the demand for oil increases over time the price of oil increases significantly. 
D) Over short periods of time increases in the demand for oil are greater than increases in the supply of oil. Over the long run increases in the demand and the supply of oil are about equal. As a result, the price of oil increases greatly in the short run but is stable in the long run. 
A) The supply of oil is very elastic over short time periods but becomes perfectly inelastic over time. A given shift in supply results in a greater increase in the price of oil when the supply of oil is perfectly inelastic. 
B) The supply of oil is very inelastic over short time periods but becomes more elastic over time. A given shift in supply results in a smaller increase in the price of oil when the supply is more elastic. 
C) The supply of oil is perfectly inelastic; therefore, as the demand for oil increases over time the price of oil increases significantly. 
D) Over short periods of time increases in the demand for oil are greater than increases in the supply of oil. Over the long run increases in the demand and the supply of oil are about equal. As a result, the price of oil increases greatly in the short run but is stable in the long run.

Question 18

Which of the following explains why a firm would be interested in knowing the price elasticity of demand for a good it sells?

Accepted Answer

A) The price elasticity of demand can be used to determine the impact of changes in income on quantity sold. 
B) Knowing the price elasticity of demand allows the firm to determine how the cost of producing additional units of the good will change. 
C) Knowing the price elasticity of demand allows the firm to calculate how changes in the price of the good will affect the firm's total profit. 
D) The price elasticity of demand allows the firm to calculate how changes in the price of the good will affect the firm's total revenue. 
A) The price elasticity of demand can be used to determine the impact of changes in income on quantity sold. 
B) Knowing the price elasticity of demand allows the firm to determine how the cost of producing additional units of the good will change. 
C) Knowing the price elasticity of demand allows the firm to calculate how changes in the price of the good will affect the firm's total profit. 
D) The price elasticity of demand allows the firm to calculate how changes in the price of the good will affect the firm's total revenue.

Question 19

If, for a given percentage increase in price, quantity supplied increases by a proportionately larger percentage, then supply is

Accepted Answer

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

Question 20

Economists estimated that the price elasticity of beer is -0.30 and the income elasticity of beer is 0.09.This means that

Accepted Answer

A) an increase in the price of beer will increase the quantity demanded of beer and beer is a normal good. 
B) an increase in the price of beer will lead to an increase in revenue for beer sellers and beer is a normal good. 
C) a decrease in the price of beer will lead to an increase in revenue for beer sellers and beer is an inferior good. 
D) an increase in the price of beer will lead to a decrease in the quantity demanded of beer and beer is a luxury. 
A) an increase in the price of beer will increase the quantity demanded of beer and beer is a normal good. 
B) an increase in the price of beer will lead to an increase in revenue for beer sellers and beer is a normal good. 
C) a decrease in the price of beer will lead to an increase in revenue for beer sellers and beer is an inferior good. 
D) an increase in the price of beer will lead to a decrease in the quantity demanded of beer and beer is a luxury.

Which of the following statements is true?

Consider the following pairs of items: A.shampoo and conditioner B.iPhones and earbuds C.a laptop computer and a desktop computer D.beef and pork E.air-travel and weed killer Which of the pairs listed will have a negative cross-price elasticity?

If demand is perfectly inelastic, the absolute value of the price elasticity of demand is

Explain the economic concept of price elasticity of supply.How is price elasticity of supply calculated?

Which of the following statements is true?

Shifts in the supply of oil have caused large changes in price since the 1970s because

Opera Estate Girls' School is considering increasing its tuition to raise revenue.If the school believes that raising tuition will increase revenue it is assuming that the demand for attending the school is

If, for a given percentage increase in price, quantity demanded falls by a proportionately smaller percentage, then demand is

If tolls on a toll road can be raised significantly before commuters will consider using a free alternative, then an increase in tolls will result in

The price elasticity of supply of hot dog buns is estimated to be 1.5.Holding everything else constant, this means that a 10 percent decrease in the price of hot dog buns will cause the quantity of hot dog buns supplied to decrease by

Suppose the supply of bicycles is price elastic.This means that

Suppose that the price of a money clip increases from $0.75 to $0.90 and quantity supplied rises from 8,000 units to 10,000 units.Use the midpoint formula to calculate the price elasticity of supply.

The price elasticity of demand is equal to

If demand is perfectly elastic, the absolute value of the price elasticity coefficient is

Which of the following statements is true?

Which of the following explains why a firm would be interested in knowing the price elasticity of demand for a good it sells?

If, for a given percentage increase in price, quantity supplied increases by a proportionately larger percentage, then supply is

Economists estimated that the price elasticity of beer is -0.30 and the income elasticity of beer is 0.09.This means that

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

Which of the following statements is true?

Consider the following pairs of items: A.shampoo and conditioner B.iPhones and earbuds C.a laptop computer and a desktop computer D.beef and pork E.air-travel and weed killer Which of the pairs listed will have a negative cross-price elasticity?

If demand is perfectly inelastic, the absolute value of the price elasticity of demand is

Explain the economic concept of price elasticity of supply.How is price elasticity of supply calculated?

Which of the following statements is true?

Shifts in the supply of oil have caused large changes in price since the 1970s because

Opera Estate Girls' School is considering increasing its tuition to raise revenue.If the school believes that raising tuition will increase revenue it is assuming that the demand for attending the school is

If, for a given percentage increase in price, quantity demanded falls by a proportionately smaller percentage, then demand is

If tolls on a toll road can be raised significantly before commuters will consider using a free alternative, then an increase in tolls will result in

The price elasticity of supply of hot dog buns is estimated to be 1.5.Holding everything else constant, this means that a 10 percent decrease in the price of hot dog buns will cause the quantity of hot dog buns supplied to decrease by

Suppose the supply of bicycles is price elastic.This means that

Suppose that the price of a money clip increases from $0.75 to $0.90 and quantity supplied rises from 8,000 units to 10,000 units.Use the midpoint formula to calculate the price elasticity of supply.

The price elasticity of demand is equal to

If demand is perfectly elastic, the absolute value of the price elasticity coefficient is

Which of the following statements is true?

Which of the following explains why a firm would be interested in knowing the price elasticity of demand for a good it sells?

If, for a given percentage increase in price, quantity supplied increases by a proportionately larger percentage, then supply is

Economists estimated that the price elasticity of beer is -0.30 and the income elasticity of beer is 0.09.This means that

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