Question 1

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

Accepted Answer

A) jewelry 
B) Big Macs 
C) electricity 
D) pork chops 
A) jewelry 
B) Big Macs 
C) electricity 
D) pork chops

Question 2

Along a straight-line demand curve the

Accepted Answer

A) slope is constant. 
B) ratio P/Q constantly changes. 
C) elasticity grows much smaller toward the right-hand end. 
D) All of the above are correct. 
A) slope is constant. 
B) ratio P/Q constantly changes. 
C) elasticity grows much smaller toward the right-hand end. 
D) All of the above are correct.

Question 3

Figure 6-8
  
-Libya sold more crude oil in 1985 than it sold five years earlier, but revenues were 17 percent less.Which graph in Figure 6-8 is consistent with this set of facts?

Accepted Answer

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

Question 4

Along a straight-line demand curve (dropping all minus signs), the price elasticity of demand

Accepted Answer

A) gets larger as quantity demanded gets larger. 
B) gets smaller as quantity demanded gets larger. 
C) always equals one. 
D) is constant (though not necessarily equal to one). 
A) gets larger as quantity demanded gets larger. 
B) gets smaller as quantity demanded gets larger. 
C) always equals one. 
D) is constant (though not necessarily equal to one).

Question 5

Cross-elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good.

Accepted Answer

A) True 
 B)False

Question 6

Would a profit-maximizing firm sell at a price where demand is inelastic?
 Explain.

Accepted Answer

No.If demand is inelastic, the

Question 7

John's Bait Shop was surprised to learn that when it raised prices by 10 percent, total revenue was unaffected.This is because the elasticity for bait is

Accepted Answer

A) unit elastic. 
B) inelastic. 
C) elastic. 
D) Not enough information is given. 
A) unit elastic. 
B) inelastic. 
C) elastic. 
D) Not enough information is given.

Question 8

A horizontal demand curve is perfectly elastic because a change in price will induce an infinite change in quantity demanded.

Accepted Answer

A) True 
 B)False

Question 9

Necessities such as food and shelter have inelastic demand.

Accepted Answer

A) True 
 B)False

Question 10

Elasticity of demand is calculated using percentage changes in both price and quantity.

Accepted Answer

A) True 
 B)False

Question 11

If the demand for gasoline becomes more elastic over time,

Accepted Answer

A) the demand curve will shift out. 
B) the demand curve will become flatter. 
C) other things being equal, the equilibrium price of gasoline must fall. 
D) other things being equal, the equilibrium quantity of gasoline must fall. 
A) the demand curve will shift out. 
B) the demand curve will become flatter. 
C) other things being equal, the equilibrium price of gasoline must fall. 
D) other things being equal, the equilibrium quantity of gasoline must fall.

Question 12

Why is it customary to report price elasticity of demand in absolute value terms, while cross elasticities and income elasticities are reported with their sign attached?

Accepted Answer

Price elasticity of demand is always neg

Question 13

Julia knows the price elasticity of movie rentals is 3.She knows, therefore, that if she raises her price from $2 to $2.50, her rentals will drop by approximately

Accepted Answer

A) 150 percent. 
B) 100 percent. 
C) 75 percent. 
D) 33 percent. 
A) 150 percent. 
B) 100 percent. 
C) 75 percent. 
D) 33 percent.

Question 14

Figure 6-2
  
-From Figure 6-2, we can infer that demand is ____ between P = 12 and P = 10 and ____ between P = 6 and P = 4.

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 15

The local symphony recently raised its price for tickets to their summer concerts in the park.At the end of the summer season, the symphony was surprised to see that total revenue had actually decreased.The reason was that the elasticity of demand for tickets was

Accepted Answer

A) unit elastic. 
B) inelastic. 
C) elastic. 
D) Not enough information is given. 
A) unit elastic. 
B) inelastic. 
C) elastic. 
D) Not enough information is given.

Question 16

A straight-line demand curve has an elasticity that becomes smaller as we move from left to right along the schedule.

Accepted Answer

A) True 
 B)False

Question 17

The elasticity measure which has been employed by the courts to assess the degree of market competition is

Accepted Answer

A) price elasticity of demand. 
B) income elasticity of demand. 
C) cross elasticity of demand. 
D) inverse elasticity of demand. 
A) price elasticity of demand. 
B) income elasticity of demand. 
C) cross elasticity of demand. 
D) inverse elasticity of demand.

Question 18

For each pair of goods, explain which is more elastic: toothpicks vs.cars; electricity vs.yachts; IBM computers vs.Apple computers.

Accepted Answer

The more elastic are cars, yachts, and I

Question 19

How might a market research analyst use measures of elasticity-price, cross, and income-in her work?
 Explain.

Accepted Answer

A market researcher is interested in det

Question 20

When OPEC raises the price of petroleum, American expenditures on oil imports increase, suggesting that

Accepted Answer

A) the United States' elasticity of demand for imported oil is greater than one. 
B) the United States' elasticity of demand for imported oil is less than one. 
C) imported oil and domestically produced oil are complementary goods. 
D) the short-run elasticity of demand for oil is greater than the long-run elasticity. 
A) the United States' elasticity of demand for imported oil is greater than one. 
B) the United States' elasticity of demand for imported oil is less than one. 
C) imported oil and domestically produced oil are complementary goods. 
D) the short-run elasticity of demand for oil is greater than the long-run elasticity.

Exam 6: Demand and Elasticity

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

Along a straight-line demand curve the

Figure 6-8 -Libya sold more crude oil in 1985 than it sold five years earlier, but revenues were 17 percent less.Which graph in Figure 6-8 is consistent with this set of facts?

Along a straight-line demand curve (dropping all minus signs), the price elasticity of demand

Cross-elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good.

Would a profit-maximizing firm sell at a price where demand is inelastic? Explain.

John's Bait Shop was surprised to learn that when it raised prices by 10 percent, total revenue was unaffected.This is because the elasticity for bait is

A horizontal demand curve is perfectly elastic because a change in price will induce an infinite change in quantity demanded.

Necessities such as food and shelter have inelastic demand.

Elasticity of demand is calculated using percentage changes in both price and quantity.

If the demand for gasoline becomes more elastic over time,

Why is it customary to report price elasticity of demand in absolute value terms, while cross elasticities and income elasticities are reported with their sign attached?

Julia knows the price elasticity of movie rentals is 3.She knows, therefore, that if she raises her price from $2 to $2.50, her rentals will drop by approximately

Figure 6-2 -From Figure 6-2, we can infer that demand is ____ between P = 12 and P = 10 and ____ between P = 6 and P = 4.

The local symphony recently raised its price for tickets to their summer concerts in the park.At the end of the summer season, the symphony was surprised to see that total revenue had actually decreased.The reason was that the elasticity of demand for tickets was

A straight-line demand curve has an elasticity that becomes smaller as we move from left to right along the schedule.

The elasticity measure which has been employed by the courts to assess the degree of market competition is

For each pair of goods, explain which is more elastic: toothpicks vs.cars; electricity vs.yachts; IBM computers vs.Apple computers.

How might a market research analyst use measures of elasticity-price, cross, and income-in her work? Explain.

When OPEC raises the price of petroleum, American expenditures on oil imports increase, suggesting 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

Filters

Figure 6-2 -From Figure 6-2, we can infer that demand is between P = 12 and P = 10 and between P = 6 and P = 4.