Question 1

A 10 percent increase in the cost of restaurant meals, which are a luxury, will most likely

Accepted Answer

A) increase the purchase of meals by 10 percent. 
B) increase the purchase of meals by less than 10 percent. 
C) decrease the purchase of meals by more than 10 percent. 
D) decrease the purchase of meals by less than 10 percent. 
A) increase the purchase of meals by 10 percent. 
B) increase the purchase of meals by less than 10 percent. 
C) decrease the purchase of meals by more than 10 percent. 
D) decrease the purchase of meals by less than 10 percent. C

Question 2

Which of the following goods will have the most elastic demand at any time?

Accepted Answer

A) coffee 
B) gasoline 
C) restaurant meals 
D) insulin 
A) coffee 
B) gasoline 
C) restaurant meals 
D) insulin C

Question 3

Price elasticity of demand can be written as percentage change in Q divided by percentage change in P.

Accepted Answer

A) True 
 B)False  True

Question 4

The price of coffee rose 50 percent and coffee sales fell 25 percent.Doughnut sales also fell 25 percent.From this information we can conclude that

Accepted Answer

A) demand for coffee is inelastic. 
B) coffee and doughnuts are complements. 
C) the cross elasticity of demand is minus 0.5 percent. 
D) All of the above are correct. 
A) demand for coffee is inelastic. 
B) coffee and doughnuts are complements. 
C) the cross elasticity of demand is minus 0.5 percent. 
D) All of the above are correct.

Question 5

The elasticity of any demand curve is the same as its slope.

Accepted Answer

A) True 
 B)False

Question 6

Perfectly inelastic demand curves are vertical.

Accepted Answer

A) True 
 B)False

Question 7

The demand for potatoes at current prices is likely to be

Accepted Answer

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

Question 8

Historical data on prices and quantities sold do not provide the basis for drawing an accurate demand curve because

Accepted Answer

A) reporters who gather these data are often wrong. 
B) factors other than price may change over time. 
C) they do not include measures of price close to the quantity axis. 
D) they sometimes tend to be clustered around one point. 
A) reporters who gather these data are often wrong. 
B) factors other than price may change over time. 
C) they do not include measures of price close to the quantity axis. 
D) they sometimes tend to be clustered around one point.

Question 9

The relationships between elasticity and total revenue hold because:

Accepted Answer

A) ​total revenue equals price divided by quantity demanded 
B) ​total revenue equals price times quantity demanded 
C) ​a drop in price has two opposing effects on the two components of the formula 
D) ​both b and c 
A) ​total revenue equals price divided by quantity demanded 
B) ​total revenue equals price times quantity demanded 
C) ​a drop in price has two opposing effects on the two components of the formula 
D) ​both b and c

Question 10

Along a perfectly elastic demand curve,

Accepted Answer

A) the slope is always zero. 
B) the price elasticity of demand is 1. 
C) consumer purchases will not respond at all to a change in price. 
D) All of the above are true. 
A) the slope is always zero. 
B) the price elasticity of demand is 1. 
C) consumer purchases will not respond at all to a change in price. 
D) All of the above are true.

Question 11

As a price change persists over a long period of time, we should expect the demand elasticity to fall.

Accepted Answer

A) True 
 B)False

Question 12

Why do economists measure responsiveness of demand to price in percentage changes rather than in absolute changes?

Accepted Answer

Different units of measurement will give

Question 13

A perfectly elastic demand curve for a firm

Accepted Answer

A) is represented by a vertical line. 
B) means that with every unit price increase there will be a unit decrease in demand. 
C) is formulated by P × Q = a constant, for all prices and quantities. 
D) indicates that any increase in price will eliminate all purchases of its product. 
A) is represented by a vertical line. 
B) means that with every unit price increase there will be a unit decrease in demand. 
C) is formulated by P × Q = a constant, for all prices and quantities. 
D) indicates that any increase in price will eliminate all purchases of its product.

Question 14

A price cut will decrease the revenue a firm receives if the demand for its product is

Accepted Answer

A) elastic. 
B) inelastic. 
C) of unit elasticity. 
D) straight elastic. 
A) elastic. 
B) inelastic. 
C) of unit elasticity. 
D) straight elastic.

Question 15

If both matches and automobile prices increase by 10 percent, consumers will likely buy

Accepted Answer

A) fewer matches and approximately the same quantity of automobiles. 
B) approximately the same quantity of matches and fewer automobiles. 
C) fewer matches and fewer automobiles. 
D) approximately the same quantity of both matches and automobiles. 
A) fewer matches and approximately the same quantity of automobiles. 
B) approximately the same quantity of matches and fewer automobiles. 
C) fewer matches and fewer automobiles. 
D) approximately the same quantity of both matches and automobiles.

Question 16

Big Alice Ice Cream Parlor reduced its price of an ice cream cone from $1 to 90 cents.Sales consequently increased from 1,000 cones per week to 1,050.The approximate price elasticity is

Accepted Answer

A) 0.20. 
B) 0.46. 
C) 2.16. 
D) 5.00. 
A) 0.20. 
B) 0.46. 
C) 2.16. 
D) 5.00.

Question 17

If the marginal cost of producing vanity license plates is virtually zero (by prison inmates with little else to do), then states would maximize their profits on plate sales at the point on a linear demand curve where

Accepted Answer

A) demand is inelastic. 
B) demand is elastic. 
C) demand is unit elastic. 
D) the demand curve crosses the horizontal axis. 
A) demand is inelastic. 
B) demand is elastic. 
C) demand is unit elastic. 
D) the demand curve crosses the horizontal axis.

Question 18

Figure 6-6
  
-An article in the Wall Street Journal reports that "most cable TV operators are aware that cable is price sensitive, and there comes a point where people won't pay the price." Which demand curve in Figure 6-6 best illustrates this situation?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 19

A straight-line demand curve has the same elasticity throughout its length.

Accepted Answer

A) True 
 B)False

Question 20

Elasticity

Accepted Answer

A) deals with percentage changes in price and quantity demanded. 
B) employs percentage changes calculated in terms of average values of the prices and quantities at issue. 
C) is generally stated in absolute value. 
D) All of the above are correct. 
A) deals with percentage changes in price and quantity demanded. 
B) employs percentage changes calculated in terms of average values of the prices and quantities at issue. 
C) is generally stated in absolute value. 
D) All of the above are correct.

Exam 6: Demand and Elasticity

A 10 percent increase in the cost of restaurant meals, which are a luxury, will most likely

Which of the following goods will have the most elastic demand at any time?

Price elasticity of demand can be written as percentage change in Q divided by percentage change in P.

The price of coffee rose 50 percent and coffee sales fell 25 percent.Doughnut sales also fell 25 percent.From this information we can conclude that

The elasticity of any demand curve is the same as its slope.

Perfectly inelastic demand curves are vertical.

The demand for potatoes at current prices is likely to be

Historical data on prices and quantities sold do not provide the basis for drawing an accurate demand curve because

The relationships between elasticity and total revenue hold because:

Along a perfectly elastic demand curve,

As a price change persists over a long period of time, we should expect the demand elasticity to fall.

Why do economists measure responsiveness of demand to price in percentage changes rather than in absolute changes?

A perfectly elastic demand curve for a firm

A price cut will decrease the revenue a firm receives if the demand for its product is

If both matches and automobile prices increase by 10 percent, consumers will likely buy

Big Alice Ice Cream Parlor reduced its price of an ice cream cone from $1 to 90 cents.Sales consequently increased from 1,000 cones per week to 1,050.The approximate price elasticity is

If the marginal cost of producing vanity license plates is virtually zero (by prison inmates with little else to do), then states would maximize their profits on plate sales at the point on a linear demand curve where

Figure 6-6 -An article in the Wall Street Journal reports that "most cable TV operators are aware that cable is price sensitive, and there comes a point where people won't pay the price." Which demand curve in Figure 6-6 best illustrates this situation?

A straight-line demand curve has the same elasticity throughout its length.

Elasticity

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

Securities: Business Finance and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

He Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

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