Question 1

Price elasticity of demand is defined as

Accepted Answer

A) slope divided by price. 
B) percentage change in price divided by percentage change in quantity demanded. 
C) percentage change in quantity demanded divided by percentage change in price. 
D) the inverse of the price elasticity of supply. 
A) slope divided by price. 
B) percentage change in price divided by percentage change in quantity demanded. 
C) percentage change in quantity demanded divided by percentage change in price. 
D) the inverse of the price elasticity of supply.

Question 2

A recent study on enrollment at a liberal arts college concluded that demand elasticity is 0.91.The administration is considering a tuition increase to help balance the budget.The revenue-maximizing decision is to

Accepted Answer

A) decrease tuition, which should boost enrollment enough to balance the budget. 
B) decrease tuition, which would bring in more revenue. 
C) leave tuition as is-an increase would not help balance the budget. 
D) increase tuition, which would bring in more revenue. 
A) decrease tuition, which should boost enrollment enough to balance the budget. 
B) decrease tuition, which would bring in more revenue. 
C) leave tuition as is-an increase would not help balance the budget. 
D) increase tuition, which would bring in more revenue.

Question 3

If Polaroid wanted damages against Kodak for infringing on its instant development film process, and the courts found a high positive cross elasticity between purchases of Polaroid instant film and 35mm regular film, would that have strengthened or weakened Polaroid's claim against Kodak?

Accepted Answer

A large positive cross elasticity showed

Question 4

If demand is elastic, an increase in price will decrease total revenue.

Accepted Answer

A) True 
 B)False

Question 5

Elasticity provides a guide to both

Accepted Answer

A) market stability and change in revenue as price changes. 
B) responsiveness of quantity demanded to a change in price and market stability. 
C) responsiveness of quantity demanded to a change in price and change in revenue as price changes. 
D) technological change and change in revenue as price changes. 
A) market stability and change in revenue as price changes. 
B) responsiveness of quantity demanded to a change in price and market stability. 
C) responsiveness of quantity demanded to a change in price and change in revenue as price changes. 
D) technological change and change in revenue as price changes.

Question 6

Demand elasticity equals quantity times price.

Accepted Answer

A) True 
 B)False

Question 7

Scientific evidence suggests that consumption of foods rich in fiber lowers cholesterol.As a result, the demand for bran increases at every price by 5,000 bushels and the supply curve for bran is perfectly price elastic.The quantity of bran consumed will

Accepted Answer

A) not change. 
B) change unless the demand curve is perfectly inelastic. 
C) rise by exactly 5,000 bushels. 
D) not rise by exactly 5,000 bushels unless the demand curve is perfectly inelastic. 
A) not change. 
B) change unless the demand curve is perfectly inelastic. 
C) rise by exactly 5,000 bushels. 
D) not rise by exactly 5,000 bushels unless the demand curve is perfectly inelastic.

Question 8

Cross-elasticity of demand could be used to measure the responsiveness of the quantity demanded of swimming pools to a change in the price of picnic tables.

Accepted Answer

A) True 
 B)False

Question 9

Figure 6-4
  
-In Figure 6-4, total expenditure ____ as price falls from P = 12 to P = 10.

Accepted Answer

A) falls 
B) stays constant 
C) rises 
D) rises by more than $12 
A) falls 
B) stays constant 
C) rises 
D) rises by more than $12

Question 10

Total expenditure equals price times elasticity.

Accepted Answer

A) True 
 B)False

Question 11

As one moves down a straight-line demand curve, the elasticity decreases.

Accepted Answer

A) True 
 B)False

Question 12

A price increase will always cause a firm's revenue to fall, because they will sell less of the good.

Accepted Answer

A) True 
 B)False

Question 13

Suppose that elasticity has been reliably measured as 1.55 and the unit price decreases from $20 to $17.50.How much will quantity demanded increase?

Accepted Answer

The percentage change in price

Question 14

A demand curve with an elasticity of 1.0 is a unit-elastic demand curve.

Accepted Answer

A) True 
 B)False

Question 15

If goods X and Y are complements, the

Accepted Answer

A) quantities demanded of X and Y tend to move in opposite directions. 
B) quantities demanded of X and Y tend to move in the same direction. 
C) prices of X and Y tend to move in the same direction. 
D) supply curves for X and Y tend to move in the same direction. 
A) quantities demanded of X and Y tend to move in opposite directions. 
B) quantities demanded of X and Y tend to move in the same direction. 
C) prices of X and Y tend to move in the same direction. 
D) supply curves for X and Y tend to move in the same direction.

Question 16

All of the following observations concerning the elasticity formula are true except

Accepted Answer

A) the changes with which it deals is measured as a percentage change. 
B) each of the percentage changes is calculated in terms of the average values. 
C) the calculation considers both positive and negative signs. 
D) each percentage change is taken as an "absolute value." 
A) the changes with which it deals is measured as a percentage change. 
B) each of the percentage changes is calculated in terms of the average values. 
C) the calculation considers both positive and negative signs. 
D) each percentage change is taken as an "absolute value."

Question 17

The Sandy Deli operates near a college campus.It has been selling 325 sandwiches a day at $1.75 each and is considering a price cut.It estimates 450 sandwiches would sell per day at $1.50 each.Calculate the marginal revenue of such a price cut and the elasticity between the two points.

Accepted Answer

Revenue is currently 325 × $1.75 = $568.

Question 18

​If the price of potatoes is reduced, consumers likely:

Accepted Answer

A) significantly more potatoes 
B) significantly fewer potatoes 
C) roughly the same quantity of potatoes 
D) ​an unknown quantity of potatoes; in this situation, consumers' actions cannot be predicted 
A) significantly more potatoes 
B) significantly fewer potatoes 
C) roughly the same quantity of potatoes 
D) ​an unknown quantity of potatoes; in this situation, consumers' actions cannot be predicted

Question 19

A craze for apples in Riverdale increases the quantity demanded at every price by five bushels.Between any two prices, the new demand curve will be ____ the old demand curve.

Accepted Answer

A) more elastic than 
B) less elastic than 
C) equal in elasticity to 
D) More information is needed to predict the relationship. 
A) more elastic than 
B) less elastic than 
C) equal in elasticity to 
D) More information is needed to predict the relationship.

Question 20

How might a court use cross elasticity in an antitrust case?

Accepted Answer

One major issue a court must settle is t

Exam 6: Demand and Elasticity

Price elasticity of demand is defined as

A recent study on enrollment at a liberal arts college concluded that demand elasticity is 0.91.The administration is considering a tuition increase to help balance the budget.The revenue-maximizing decision is to

If Polaroid wanted damages against Kodak for infringing on its instant development film process, and the courts found a high positive cross elasticity between purchases of Polaroid instant film and 35mm regular film, would that have strengthened or weakened Polaroid's claim against Kodak?

If demand is elastic, an increase in price will decrease total revenue.

Elasticity provides a guide to both

Demand elasticity equals quantity times price.

Scientific evidence suggests that consumption of foods rich in fiber lowers cholesterol.As a result, the demand for bran increases at every price by 5,000 bushels and the supply curve for bran is perfectly price elastic.The quantity of bran consumed will

Cross-elasticity of demand could be used to measure the responsiveness of the quantity demanded of swimming pools to a change in the price of picnic tables.

Figure 6-4 -In Figure 6-4, total expenditure ____ as price falls from P = 12 to P = 10.

Total expenditure equals price times elasticity.

As one moves down a straight-line demand curve, the elasticity decreases.

A price increase will always cause a firm's revenue to fall, because they will sell less of the good.

Suppose that elasticity has been reliably measured as 1.55 and the unit price decreases from $20 to $17.50.How much will quantity demanded increase?

A demand curve with an elasticity of 1.0 is a unit-elastic demand curve.

If goods X and Y are complements, the

All of the following observations concerning the elasticity formula are true except

The Sandy Deli operates near a college campus.It has been selling 325 sandwiches a day at $1.75 each and is considering a price cut.It estimates 450 sandwiches would sell per day at $1.50 each.Calculate the marginal revenue of such a price cut and the elasticity between the two points.

​If the price of potatoes is reduced, consumers likely:

A craze for apples in Riverdale increases the quantity demanded at every price by five bushels.Between any two prices, the new demand curve will be ____ the old demand curve.

How might a court use cross elasticity in an antitrust case?

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

Filters

If the price of potatoes is reduced, consumers likely: