Question 1

Suppose the demand curve for hybrid cars shifts to the right.This will cause a relatively small increase in the price of hybrid cars if

Accepted Answer

A) demand is elastic and supply is inelastic. 
B) demand is inelastic and supply is perfectly inelastic. 
C) both demand and supply are inelastic. 
D) both demand and supply are elastic. 
A) demand is elastic and supply is inelastic. 
B) demand is inelastic and supply is perfectly inelastic. 
C) both demand and supply are inelastic. 
D) both demand and supply are elastic.

Question 2

Suppose the demand curve for a product is represented by a typical downward-sloping curve.Now suppose the demand for this product decreases.Which of the following statements accurately predicts the resulting decrease in price?

Accepted Answer

A) The more elastic the supply curve, the greater the price increase. 
B) The more elastic the supply curve, the smaller the price decrease. 
C) The increase in price is not affected by the elasticity of the supply curve. 
D) The decrease in price will always be proportional to the magnitude of the demand shift. 
A) The more elastic the supply curve, the greater the price increase. 
B) The more elastic the supply curve, the smaller the price decrease. 
C) The increase in price is not affected by the elasticity of the supply curve. 
D) The decrease in price will always be proportional to the magnitude of the demand shift.

Question 3

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

Accepted Answer

A) the demand for paper is inelastic. 
B) the demand for paper is elastic. 
C) the supply of paper is inelastic. 
D) the supply of paper is elastic. 
A) the demand for paper is inelastic. 
B) the demand for paper is elastic. 
C) the supply of paper is inelastic. 
D) the supply of paper is elastic.

Question 4

Table 6-1
  
-Refer to Table 6-1.Suppose you own a bookstore.You believe that you can sell 40 copies per day of the latest John Grisham novel when the price is $35.You consider lowering the price to $25 and believe this will increase the quantity sold to 50 books per day.Compute the price elasticity of demand using the midpoint formula and these data.Select the correct implication from your work.

Accepted Answer

A) The demand for the John Grisham book is inelastic. Revenue will fall if the price is lowered. 
B) The demand for the John Grisham book is elastic. Revenue will rise if the price is lowered. 
C) The demand for the John Grisham book is inelastic. Revenue will rise if the price is lowered. 
D) The demand for the John Grisham book is elastic. Revenue will fall if the price is lowered. 
A) The demand for the John Grisham book is inelastic. Revenue will fall if the price is lowered. 
B) The demand for the John Grisham book is elastic. Revenue will rise if the price is lowered. 
C) The demand for the John Grisham book is inelastic. Revenue will rise if the price is lowered. 
D) The demand for the John Grisham book is elastic. Revenue will fall if the price is lowered.

Question 5

Table 6-3
  
-Refer to Table 6-3.Over what range of prices is the demand inelastic?

Accepted Answer

A) over the entire range of prices 
B) between $12 and $16 
C) between $8 and $16 
D) between $2 and $8 
A) over the entire range of prices 
B) between $12 and $16 
C) between $8 and $16 
D) between $2 and $8

Question 6

Suppose the absolute value of the price elasticity of demand for basketball game tickets on your campus is greater than 1.Increasing ticket prices will increase the total revenue from ticket sales.

Accepted Answer

A) True 
 B)False

Question 7

According to a study of the U.S.demand for alcoholic beverages, the price elasticity of demand for beer is -0.30.Which of the following could explain why the price elasticity of demand for beer is low?

Accepted Answer

A) Beer is an inferior alcoholic beverage. 
B) More and more people are switching to wine and cocktails rather than beer. 
C) The price of beer is relatively low and for many people it is a habit forming product. 
D) There are only a few major suppliers of beer. 
A) Beer is an inferior alcoholic beverage. 
B) More and more people are switching to wine and cocktails rather than beer. 
C) The price of beer is relatively low and for many people it is a habit forming product. 
D) There are only a few major suppliers of beer.

Question 8

Figure 6-6
  
-Refer to Figure 6-6.As price falls from PA to PB, the quantity demanded increases the most along D₁; therefore

Accepted Answer

A) D₁ is unit elastic. 
B) D₁ is more inelastic than D₂ or D₃. 
C) D₁ is more elastic than D₂ or D₃ 
D) D₁ is elastic at PA but inelastic at PB. 
A) D₁ is unit elastic. 
B) D₁ is more inelastic than D₂ or D₃. 
C) D₁ is more elastic than D₂ or D₃ 
D) D₁ is elastic at PA but inelastic at PB.

Question 9

Suppose the price of gasoline in July 2017 averaged $2.35 a gallon and 15 million gallons a day were sold.In October 2017, the price averaged $3.05 a gallon and 14 million gallons were sold.If the demand for gasoline did not shift between these two months, use the midpoint formula to calculate the price elasticity of demand.Indicate whether demand was elastic or inelastic.

Accepted Answer

Price elasticity of demand = [(14 - 15)/

Question 10

A soda tax is more effective at reducing soda consumption when demand is price ________ and is more effective at raising tax revenue when demand is price ________.

Accepted Answer

A) elastic; elastic 
B) elastic; inelastic 
C) inelastic; elastic 
D) inelastic; inelastic 
A) elastic; elastic 
B) elastic; inelastic 
C) inelastic; elastic 
D) inelastic; inelastic

Question 11

If a 6 percent increase in income leads to a 4 percent increase in quantity demanded for audio books, the income elasticity of demand is

Accepted Answer

A) -0.67. 
B) 0.67. 
C) 1.5. 
D) 2. 
A) -0.67. 
B) 0.67. 
C) 1.5. 
D) 2.

Question 12

Table 6-3
  
-Refer to Table 6-3.Over what range of prices is the demand elastic?

Accepted Answer

A) over the entire range of prices 
B) between $14 and $16 
C) between $8 and $16 
D) between $2 and $8 
A) over the entire range of prices 
B) between $14 and $16 
C) between $8 and $16 
D) between $2 and $8

Question 13

Demand for staples such as dairy products and bread is likely to be both income and price inelastic.

Accepted Answer

A) True 
 B)False

Question 14

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 15

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 16

List the five key determinants of price elasticity of demand and explain how each determinant indicates if demand tends to be elastic or inelastic.

Accepted Answer

1.Availability of close substitutes: If

Question 17

Carrie Bradshaw claims that when it comes to buying shoes, "price is no object." If this is true, then her demand for shoes is

Accepted Answer

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

Question 18

If a firm wanted to know whether the demand for its product was elastic, unit elastic, or inelastic, then the firm could

Accepted Answer

A) survey competitors and ask them what they think demand elasticity is for the product. 
B) talk to its customers. 
C) change price a little bit and observe what happens to total revenue. 
D) not do anything as there is no way to find an elasticity value. 
A) survey competitors and ask them what they think demand elasticity is for the product. 
B) talk to its customers. 
C) change price a little bit and observe what happens to total revenue. 
D) not do anything as there is no way to find an elasticity value.

Question 19

Which of the following is a key determinant of the price elasticity of supply?

Accepted Answer

A) the slope of the supply curve 
B) the availability of substitutes in production 
C) the available technology 
D) the time it takes to change output in response to a change in price 
A) the slope of the supply curve 
B) the availability of substitutes in production 
C) the available technology 
D) the time it takes to change output in response to a change in price

Question 20

If the price elasticity of demand for insulin is equal to zero then the demand curve for insulin is

Accepted Answer

A) horizontal. 
B) downward sloping. 
C) curvilinear. 
D) vertical. 
A) horizontal. 
B) downward sloping. 
C) curvilinear. 
D) vertical.

Suppose the demand curve for hybrid cars shifts to the right.This will cause a relatively small increase in the price of hybrid cars if

Suppose the demand curve for a product is represented by a typical downward-sloping curve.Now suppose the demand for this product decreases.Which of the following statements accurately predicts the resulting decrease in price?

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

Table 6-3 -Refer to Table 6-3.Over what range of prices is the demand inelastic?

Suppose the absolute value of the price elasticity of demand for basketball game tickets on your campus is greater than 1.Increasing ticket prices will increase the total revenue from ticket sales.

According to a study of the U.S.demand for alcoholic beverages, the price elasticity of demand for beer is -0.30.Which of the following could explain why the price elasticity of demand for beer is low?

Figure 6-6 -Refer to Figure 6-6.As price falls from P_A to P_B, the quantity demanded increases the most along D₁; therefore

A soda tax is more effective at reducing soda consumption when demand is price and is more effective at raising tax revenue when demand is price .

If a 6 percent increase in income leads to a 4 percent increase in quantity demanded for audio books, the income elasticity of demand is

Table 6-3 -Refer to Table 6-3.Over what range of prices is the demand elastic?

Demand for staples such as dairy products and bread is likely to be both income and price inelastic.

If the market for a product is broadly defined, then

List the five key determinants of price elasticity of demand and explain how each determinant indicates if demand tends to be elastic or inelastic.

Carrie Bradshaw claims that when it comes to buying shoes, "price is no object." If this is true, then her demand for shoes is

If a firm wanted to know whether the demand for its product was elastic, unit elastic, or inelastic, then the firm could

Which of the following is a key determinant of the price elasticity of supply?

If the price elasticity of demand for insulin is equal to zero then the demand curve for insulin is

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

Suppose the demand curve for hybrid cars shifts to the right.This will cause a relatively small increase in the price of hybrid cars if

Suppose the demand curve for a product is represented by a typical downward-sloping curve.Now suppose the demand for this product decreases.Which of the following statements accurately predicts the resulting decrease in price?

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

Table 6-3 -Refer to Table 6-3.Over what range of prices is the demand inelastic?

Suppose the absolute value of the price elasticity of demand for basketball game tickets on your campus is greater than 1.Increasing ticket prices will increase the total revenue from ticket sales.

According to a study of the U.S.demand for alcoholic beverages, the price elasticity of demand for beer is -0.30.Which of the following could explain why the price elasticity of demand for beer is low?

Figure 6-6 -Refer to Figure 6-6.As price falls from PA to PB, the quantity demanded increases the most along D₁; therefore

A soda tax is more effective at reducing soda consumption when demand is price ________ and is more effective at raising tax revenue when demand is price ________.

If a 6 percent increase in income leads to a 4 percent increase in quantity demanded for audio books, the income elasticity of demand is

Table 6-3 -Refer to Table 6-3.Over what range of prices is the demand elastic?

Demand for staples such as dairy products and bread is likely to be both income and price inelastic.

If the market for a product is broadly defined, then

List the five key determinants of price elasticity of demand and explain how each determinant indicates if demand tends to be elastic or inelastic.

Carrie Bradshaw claims that when it comes to buying shoes, "price is no object." If this is true, then her demand for shoes is

If a firm wanted to know whether the demand for its product was elastic, unit elastic, or inelastic, then the firm could

Which of the following is a key determinant of the price elasticity of supply?

If the price elasticity of demand for insulin is equal to zero then the demand curve for insulin is

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

Figure 6-6 -Refer to Figure 6-6.As price falls from P_A to P_B, the quantity demanded increases the most along D₁; therefore

A soda tax is more effective at reducing soda consumption when demand is price and is more effective at raising tax revenue when demand is price .