Question 1

Elasticity is a measure of the responsiveness of change in quantity demanded to a change in price.

Accepted Answer

A) True 
 B)False

Question 2

The market demand curve shows how the quantity demanded of a product, during a specified time period, changes as the price of that product changes.

Accepted Answer

A) True 
 B)False

Question 3

If, as price increases by 10 percent, total revenue decreases by 10 percent demand is

Accepted Answer

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

Question 4

Would a profit-maximizing firm sell where demand is inelastic?

Accepted Answer

A) No, this would not follow the rule of MC = MR. 
B) No, the firm could not profitably raise price. 
C) Yes, the firm could profitably lower price to attract sales. 
D) Yes, in this case there are few substitutes for the good. 
A) No, this would not follow the rule of MC = MR. 
B) No, the firm could not profitably raise price. 
C) Yes, the firm could profitably lower price to attract sales. 
D) Yes, in this case there are few substitutes for the good.

Question 5

Along a straight-line demand curve, why does the price elasticity of demand grow steadily smaller as we move from left to right?

Accepted Answer

As we move from left to right, the quant

Question 6

The formula for price elasticity of demand that is used in practice

Accepted Answer

A) usually drops all minus signs. 
B) usually takes on different values at different points on the demand curve. 
C) may calculate the percentage change in price between P? and P? as "(P? ? P?) as a percentage of (P?+ P?)/2." 
D) All of the above are correct. 
A) usually drops all minus signs. 
B) usually takes on different values at different points on the demand curve. 
C) may calculate the percentage change in price between P? and P? as "(P? ? P?) as a percentage of (P?+ P?)/2." 
D) All of the above are correct.

Question 7

Historical demand curves are always suspect because their demand curves are likely to have shifted over time.

Accepted Answer

A) True 
 B)False

Question 8

If the demand curve is vertical, the elasticity is

Accepted Answer

A) 1.0. 
B) 0.0. 
C) 0.5. 
D) infinite. 
A) 1.0. 
B) 0.0. 
C) 0.5. 
D) infinite.

Question 9

The current price of concert t-shirts is $20 each, and the company has been selling 400 per week.If price elasticity is 2.5 and the price changes to $21, how many t-shirts will be sold per week?

Accepted Answer

The percentage change in price is 1/20.5

Question 10

The ratio of the percentage change in quantity demanded to the percentage change in income is known as the cross elasticity of demand.

Accepted Answer

A) True 
 B)False

Question 11

Certain goods are related such that an increase in the price of one good decreases the quantity demanded of the other.These goods are

Accepted Answer

A) complements. 
B) substitutes. 
C) luxury goods. 
D) competing goods. 
A) complements. 
B) substitutes. 
C) luxury goods. 
D) competing goods.

Question 12

If the price elasticity of demand for radios is 2.5 (dropping the minus sign), then a 50 percent reduction in the price of radios will lead to

Accepted Answer

A) the sale of 200 additional radios. 
B) the sale of 125 percent more radios than before. 
C) the sale of 150 percent more radios than before. 
D) the sale of 25 percent more radios than before. 
A) the sale of 200 additional radios. 
B) the sale of 125 percent more radios than before. 
C) the sale of 150 percent more radios than before. 
D) the sale of 25 percent more radios than before.

Question 13

A good will tend to be more price elastic if it

Accepted Answer

A) is a luxury good. 
B) has no close substitutes. 
C) is a small part of the household budget. 
D) is a necessity. 
A) is a luxury good. 
B) has no close substitutes. 
C) is a small part of the household budget. 
D) is a necessity.

Question 14

If price goes up 20 percent and quantity demanded declines by 10 percent, total revenue will rise.

Accepted Answer

A) True 
 B)False

Question 15

The elasticity of supply is calculated by

Accepted Answer

A) determining the slope of the supply curve. 
B) dividing the absolute change in quantity supplied by the absolute change in price. 
C) dividing the percentage change in quantity supplied by the percentage change in price. 
D) dividing the percentage change in price by the percentage change in quantity demanded. 
A) determining the slope of the supply curve. 
B) dividing the absolute change in quantity supplied by the absolute change in price. 
C) dividing the percentage change in quantity supplied by the percentage change in price. 
D) dividing the percentage change in price by the percentage change in quantity demanded.

Question 16

Total expenditure equals price times quantity.

Accepted Answer

A) True 
 B)False

Question 17

Chicken and fish are substitutes.Therefore, the cross elasticity of demand between chicken and fish is

Accepted Answer

A) negative. 
B) positive. 
C) zero. 
D) Any of the above is possible. 
A) negative. 
B) positive. 
C) zero. 
D) Any of the above is possible.

Question 18

Figure 6-3
  
-In Figure 6-3(b), as price falls from $15 to $6, total expenditure

Accepted Answer

A) falls. 
B) increases. 
C) remains constant. 
D) first falls and then increases. 
A) falls. 
B) increases. 
C) remains constant. 
D) first falls and then increases.

Question 19

Total expenditure by a buyer is equal to the

Accepted Answer

A) slope at any point along the demand curve. 
B) price times quantity demanded at any point along the demand curve. 
C) elasticity times price at any point along the demand curve. 
D) elasticity times quantity demanded at any point along the demand curve. 
A) slope at any point along the demand curve. 
B) price times quantity demanded at any point along the demand curve. 
C) elasticity times price at any point along the demand curve. 
D) elasticity times quantity demanded at any point along the demand curve.

Question 20

Income elasticity of demand describes how change in income affects the quantity demanded of a good.

Accepted Answer

A) True 
 B)False

Exam 6: Demand and Elasticity

Elasticity is a measure of the responsiveness of change in quantity demanded to a change in price.

The market demand curve shows how the quantity demanded of a product, during a specified time period, changes as the price of that product changes.

If, as price increases by 10 percent, total revenue decreases by 10 percent demand is

Would a profit-maximizing firm sell where demand is inelastic?

Along a straight-line demand curve, why does the price elasticity of demand grow steadily smaller as we move from left to right?

The formula for price elasticity of demand that is used in practice

Historical demand curves are always suspect because their demand curves are likely to have shifted over time.

If the demand curve is vertical, the elasticity is

The current price of concert t-shirts is $20 each, and the company has been selling 400 per week.If price elasticity is 2.5 and the price changes to $21, how many t-shirts will be sold per week?

The ratio of the percentage change in quantity demanded to the percentage change in income is known as the cross elasticity of demand.

Certain goods are related such that an increase in the price of one good decreases the quantity demanded of the other.These goods are

If the price elasticity of demand for radios is 2.5 (dropping the minus sign), then a 50 percent reduction in the price of radios will lead to

A good will tend to be more price elastic if it

If price goes up 20 percent and quantity demanded declines by 10 percent, total revenue will rise.

The elasticity of supply is calculated by

Total expenditure equals price times quantity.

Chicken and fish are substitutes.Therefore, the cross elasticity of demand between chicken and fish is

Figure 6-3 -In Figure 6-3(b), as price falls from $15 to $6, total expenditure

Total expenditure by a buyer is equal to the

Income elasticity of demand describes how change in income affects the quantity demanded of a good.

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