Question 1

As we move down a straight-line demand curve, the price elasticity becomes

Accepted Answer

A) larger. 
B) smaller. 
C) larger, then smaller. 
D) smaller, then larger. 
A) larger. 
B) smaller. 
C) larger, then smaller. 
D) smaller, then larger.

Question 2

In an attempt to raise sales, Hannah cut prices in her bookstore by 20 percent.If the dollar value of her sales remained constant, that indicates

Accepted Answer

A) old customers bought no more books. 
B) no new customers bought books. 
C) the quantity of books sold increased 20 percent. 
D) the demand curve is vertical. 
A) old customers bought no more books. 
B) no new customers bought books. 
C) the quantity of books sold increased 20 percent. 
D) the demand curve is vertical.

Question 3

If demand is unit elastic, then a 10 percent increase in the price will lead to a 10 percent increase in quantity demanded.

Accepted Answer

A) True 
 B)False

Question 4

What is an optimal decision?

Accepted Answer

An optimal decision is one that best ser

Question 5

The elasticity of a straight-line demand curve is the same as its slope.

Accepted Answer

A) True 
 B)False

Question 6

Along the inelastic portion of a demand curve, the

Accepted Answer

A) change in price will always be less than the change in quantity demanded. 
B) percentage change in price will be less than the percentage change in quantity demanded. 
C) change in price will always be more than the change in quantity demanded. 
D) percentage change in price will be more than the percentage change in quantity demanded. 
A) change in price will always be less than the change in quantity demanded. 
B) percentage change in price will be less than the percentage change in quantity demanded. 
C) change in price will always be more than the change in quantity demanded. 
D) percentage change in price will be more than the percentage change in quantity demanded.

Question 7

Perfectly elastic demand curves are vertical.

Accepted Answer

A) True 
 B)False

Question 8

A correct formula (dropping all minus signs) for the calculation of the elasticity of demand between point Q? , P?
And point Q?, P? is

Accepted Answer

A) [(P? ? P? )/(P? + P?)]/[(Q? ? Q?)/(Q? + Q?)] 
B) [(P? ? P? )/P?]/[(Q? ? Q?)/Q?] 
C) [(Q? ? Q? )/(Q? + Q?)]/[(P? ? P?)/(P? + P?)] 
D) [(Q? ? Q? )/Q?)]/[(P? ? P?)/P?]. 
A) [(P? ? P? )/(P? + P?)]/[(Q? ? Q?)/(Q? + Q?)] 
B) [(P? ? P? )/P?]/[(Q? ? Q?)/Q?] 
C) [(Q? ? Q? )/(Q? + Q?)]/[(P? ? P?)/(P? + P?)] 
D) [(Q? ? Q? )/Q?)]/[(P? ? P?)/P?].

Question 9

If a demand curve is unit elastic, then P times Q will remain constant when P changes.

Accepted Answer

A) True 
 B)False

Question 10

A unit-elastic demand curve never touches or crosses either of the axes.Why?

Accepted Answer

When demand is unit-elastic, total expen

Question 11

A negative cross elasticity indicates that two goods are complements.

Accepted Answer

A) True 
 B)False

Question 12

The unit-elastic demand curve bends in the middle toward the origin of the graph and at either end moves closer to the axes.

Accepted Answer

A) True 
 B)False

Question 13

When price falls, demand rises.

Accepted Answer

A) True 
 B)False

Question 14

Figure 6-3
  
-In Figure 6-3(a), at any price above $6, quantity demanded

Accepted Answer

A) falls to zero. 
B) becomes infinitely large. 
C) is equal to price. 
D) is equal to the elasticity of demand. 
A) falls to zero. 
B) becomes infinitely large. 
C) is equal to price. 
D) is equal to the elasticity of demand.

Question 15

The term "unit elasticity" is used to describe a situation in which a rise in price is accompanied by

Accepted Answer

A) a fall in total expenditure. 
B) a rise in total expenditure. 
C) constant total expenditure. 
D) a unit decrease in total expenditure. 
A) a fall in total expenditure. 
B) a rise in total expenditure. 
C) constant total expenditure. 
D) a unit decrease in total expenditure.

Question 16

Elasticity of demand is another way to measure slope.

Accepted Answer

A) True 
 B)False

Question 17

After a $5 million ad campaign, Coca-Cola measured its effectiveness by calculating the cross elasticity of demand between Coke and Pepsi.A successful campaign would be indicated if the cross elasticity went from

Accepted Answer

A) 0.9 to 0.5. 
B) 0.9 to 1.5. 
C) −0.5 to −0.2. 
D) −0.9 to −1.5. 
A) 0.9 to 0.5. 
B) 0.9 to 1.5. 
C) −0.5 to −0.2. 
D) −0.9 to −1.5.

Question 18

A unit-elastic demand curve will be concave toward the origin.

Accepted Answer

A) True 
 B)False

Question 19

The price of an airline ticket rises as the amount of time between purchase and flight departure gets smaller.The airlines base the policy on the assumption that

Accepted Answer

A) consumers are not aware of airline prices. 
B) consumer demand is unrelated to prices. 
C) consumer demand becomes more elastic as departure time approaches. 
D) consumer demand becomes less elastic as departure time approaches. 
A) consumers are not aware of airline prices. 
B) consumer demand is unrelated to prices. 
C) consumer demand becomes more elastic as departure time approaches. 
D) consumer demand becomes less elastic as departure time approaches.

Question 20

When Johanna cut prices in her jewelry store by 20 percent, the dollar value of her sales fell by 20 percent.This indicates that

Accepted Answer

A) demand was elastic. 
B) demand was inelastic. 
C) demand was unit elastic. 
D) the demand curve was vertical. 
A) demand was elastic. 
B) demand was inelastic. 
C) demand was unit elastic. 
D) the demand curve was vertical.

Exam 6: Demand and Elasticity

As we move down a straight-line demand curve, the price elasticity becomes

In an attempt to raise sales, Hannah cut prices in her bookstore by 20 percent.If the dollar value of her sales remained constant, that indicates

If demand is unit elastic, then a 10 percent increase in the price will lead to a 10 percent increase in quantity demanded.

What is an optimal decision?

The elasticity of a straight-line demand curve is the same as its slope.

Along the inelastic portion of a demand curve, the

Perfectly elastic demand curves are vertical.

A correct formula (dropping all minus signs) for the calculation of the elasticity of demand between point Q? , P? And point Q?, P? is

If a demand curve is unit elastic, then P times Q will remain constant when P changes.

A unit-elastic demand curve never touches or crosses either of the axes.Why?

A negative cross elasticity indicates that two goods are complements.

The unit-elastic demand curve bends in the middle toward the origin of the graph and at either end moves closer to the axes.

When price falls, demand rises.

Figure 6-3 -In Figure 6-3(a), at any price above $6, quantity demanded

The term "unit elasticity" is used to describe a situation in which a rise in price is accompanied by

Elasticity of demand is another way to measure slope.

After a $5 million ad campaign, Coca-Cola measured its effectiveness by calculating the cross elasticity of demand between Coke and Pepsi.A successful campaign would be indicated if the cross elasticity went from

A unit-elastic demand curve will be concave toward the origin.

The price of an airline ticket rises as the amount of time between purchase and flight departure gets smaller.The airlines base the policy on the assumption that

When Johanna cut prices in her jewelry store by 20 percent, the dollar value of her sales fell by 20 percent.This indicates that

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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