Question 1

Use the table below to answer the following question.
Table 4.1.3
  
-Refer to Table 4.1.3. The price elasticity of demand for Jolt is

Accepted Answer

A) 1. 
B) 2.5. 
C) 3.0. 
D) 0.33. 
E) cannot be calculated because income is not constant. 
A) 1. 
B) 2.5. 
C) 3.0. 
D) 0.33. 
E) cannot be calculated because income is not constant.

Question 2

Use the table below to answer the following question.
Table 4.2.1
  
-Consider the information in Table 4.2.1. Select the best statement.

Accepted Answer

A) The income elasticity of demand is -2.5. 
B) The income elasticity of demand is 2.5. 
C) The income elasticity of demand is -3.33. 
D) The income elasticity of demand is 3.33. 
E) We cannot calculate the income elasticity of demand because both income and price are changing at the same time. 
A) The income elasticity of demand is -2.5. 
B) The income elasticity of demand is 2.5. 
C) The income elasticity of demand is -3.33. 
D) The income elasticity of demand is 3.33. 
E) We cannot calculate the income elasticity of demand because both income and price are changing at the same time.

Question 3

A union leader who claims that "higher wages increase living standards without causing unemployment" believes that the demand for labour is

Accepted Answer

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

Question 4

Suppose a fall from $110 to $90 in the price of playing golf on a public golf course results in an increase in the quantity of golf balls demanded (at the current price of golf balls)from 9,950 units to 10,050 units. The cross elasticity of demand of playing golf with respect to the price of golf balls is

Accepted Answer

A) -0.05. 
B) -0.1. 
C) 0.01. 
D) 0.08. 
E) 0.05. 
A) -0.05. 
B) -0.1. 
C) 0.01. 
D) 0.08. 
E) 0.05.

Question 5

When the price of a bicycle falls from $220 to $180 and other things remain the same, I. the quantity of bicycles demanded increases from 150 to 250 an hour.
II. the quantity of skateboards demanded decreases from 125 to 75 an hour.
III. the quantity of bicycle helmets demanded increases from 170 to 230 an hour.
Bicycle helmets and bicycles are ________ because a fall in the price of a bicycle brings ________ in the quantity demanded of bicycle helmets. The cross elasticity of demand for bicycle helmets with respect to bicycles is ________.

Accepted Answer

A) complements; an increase; -1.5 
B) substitutes; a decrease; 1.5 
C) substitutes; an increase; -0.67 
D) complements; a decrease; 0.67 
E) complements; an increase; 1.5 
A) complements; an increase; -1.5 
B) substitutes; a decrease; 1.5 
C) substitutes; an increase; -0.67 
D) complements; a decrease; 0.67 
E) complements; an increase; 1.5

Question 6

Suppose a fall in the price of a good from $10 to $8 leads to an increase in quantity demanded from 20 to 24 units. The price elasticity of demand is

Accepted Answer

A) 1. 
B) 9/11. 
C) 11/9. 
D) 2.0. 
E) 4.5/11. 
A) 1. 
B) 9/11. 
C) 11/9. 
D) 2.0. 
E) 4.5/11.

Question 7

A unit elastic demand

Accepted Answer

A) means that the ratio of a change in quantity demanded to a change in price is equal to 1. 
B) means that the ratio of a percentage change in quantity demanded to a percentage change in price is equal to 1. 
C) means that the ratio of a change in price to a change in quantity demanded is equal to 1. 
D) is illustrated by a horizontal demand curve. 
E) is illustrated by a vertical demand curve. 
A) means that the ratio of a change in quantity demanded to a change in price is equal to 1. 
B) means that the ratio of a percentage change in quantity demanded to a percentage change in price is equal to 1. 
C) means that the ratio of a change in price to a change in quantity demanded is equal to 1. 
D) is illustrated by a horizontal demand curve. 
E) is illustrated by a vertical demand curve.

Question 8

If a rise in price results in a decrease in total revenue, then the price elasticity of demand is

Accepted Answer

A) negative. 
B) zero. 
C) greater than zero but less than 1. 
D) equal to 1. 
E) greater than 1. 
A) negative. 
B) zero. 
C) greater than zero but less than 1. 
D) equal to 1. 
E) greater than 1.

Question 9

If the supply curve passes through the origin, then the price elasticity of supply is

Accepted Answer

A) zero. 
B) 1. 
C) -1. 
D) greater than 1. 
E) less than 1 but greater than zero. 
A) zero. 
B) 1. 
C) -1. 
D) greater than 1. 
E) less than 1 but greater than zero.

Question 10

Fred's income increases from $800 per week to $1,200 per week. As a result, he decides to purchase 40 percent more bubble gum each week. The income elasticity of Fred's demand for bubble gum is

Accepted Answer

A) 0.40. 
B) 40. 
C) 1.0. 
D) 0.12. 
E) 10. 
A) 0.40. 
B) 40. 
C) 1.0. 
D) 0.12. 
E) 10.

Question 11

Use the table below to answer the following question.
Table 4.1.4
  
-Refer to Table 4.1.4. The table shows the demand schedule for computer chips. As the price rises from $200 a chip to $300 a chip, total revenue ________. So at a price of $250 a chip, demand is ________.

Accepted Answer

A) falls; inelastic 
B) rises; inelastic 
C) falls; rises 
D) rises; elastic 
E) rises; unit elastic 
A) falls; inelastic 
B) rises; inelastic 
C) falls; rises 
D) rises; elastic 
E) rises; unit elastic

Question 12

A decrease in tuition fees will decrease the university's total revenue if the price elasticity of demand for university education is

Accepted Answer

A) negative. 
B) greater than zero but less than 1. 
C) equal to 1. 
D) greater than 1. 
E) less than the elasticity of supply. 
A) negative. 
B) greater than zero but less than 1. 
C) equal to 1. 
D) greater than 1. 
E) less than the elasticity of supply.

Question 13

The price of plums falls by 7 percent and quantity of plums demanded increases by 6.75 percent. We conclude that the demand for plums is

Accepted Answer

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

Question 14

In the nation of Transporta, the income elasticity of demand for used cars is -2.66. If incomes in this nation increase by 10 percent,

Accepted Answer

A) the quantity of used cars demanded increase by 26.6 percent. 
B) used cars will be normal goods. 
C) the quantity of used cars demanded decrease by 26.6 percent. 
D) the demand curve for used cars shifts rightward. 
E) the supply curve of used cars shifts rightward. 
A) the quantity of used cars demanded increase by 26.6 percent. 
B) used cars will be normal goods. 
C) the quantity of used cars demanded decrease by 26.6 percent. 
D) the demand curve for used cars shifts rightward. 
E) the supply curve of used cars shifts rightward.

Question 15

Demand is perfectly inelastic when

Accepted Answer

A) a good has perfect substitutes. 
B) an increase in supply does not change total revenue. 
C) a decrease in supply decreases total revenue. 
D) the price elasticity of demand is negative. 
E) an increase in supply does not change the equilibrium quantity. 
A) a good has perfect substitutes. 
B) an increase in supply does not change total revenue. 
C) a decrease in supply decreases total revenue. 
D) the price elasticity of demand is negative. 
E) an increase in supply does not change the equilibrium quantity.

Question 16

A horizontal supply curve

Accepted Answer

A) is impossible except in the long run. 
B) implies an elasticity of supply equal to zero. 
C) implies an elasticity of supply equal to infinity. 
D) indicates that suppliers are unwilling to produce the good. 
E) indicates there is a fixed quantity of the good that can be supplied. 
A) is impossible except in the long run. 
B) implies an elasticity of supply equal to zero. 
C) implies an elasticity of supply equal to infinity. 
D) indicates that suppliers are unwilling to produce the good. 
E) indicates there is a fixed quantity of the good that can be supplied.

Question 17

Suppose there is an increase in the cost of resources used in the production of good A. Then

Accepted Answer

A) if the price of A rises, we know the demand for A is elastic. 
B) if the total revenue from sales of A rises, we know the demand for A is elastic. 
C) if the total revenue from sales of A falls, we know the demand for A is elastic. 
D) total revenue will increase because the price of A must rise. 
E) total revenue must fall because the quantity bought and sold of A must fall. 
A) if the price of A rises, we know the demand for A is elastic. 
B) if the total revenue from sales of A rises, we know the demand for A is elastic. 
C) if the total revenue from sales of A falls, we know the demand for A is elastic. 
D) total revenue will increase because the price of A must rise. 
E) total revenue must fall because the quantity bought and sold of A must fall.

Question 18

If a turnip is a normal good then

Accepted Answer

A) a small decrease in income increases the quantity of turnips demanded at the current price by a large amount. 
B) a large decrease in income increases the quantity of turnips demanded at the current price by a small amount. 
C) an increase in income increases the quantity demanded at the current price. 
D) an increase in income decreases the quantity demanded at the current price. 
E) an increase in price decreases the quantity demanded. 
A) a small decrease in income increases the quantity of turnips demanded at the current price by a large amount. 
B) a large decrease in income increases the quantity of turnips demanded at the current price by a small amount. 
C) an increase in income increases the quantity demanded at the current price. 
D) an increase in income decreases the quantity demanded at the current price. 
E) an increase in price decreases the quantity demanded.

Question 19

Business people speak about cross elasticity of demand without using the actual term. Which one of the following statements reflects cross elasticity of demand?

Accepted Answer

A) "A price cut won't help me. It won't increase sales, and I'll just get less money for each unit." 
B) "I don't think a price cut will make any difference to my bottom line. What I may gain from selling more I would lose on the lower price." 
C) "My customers are real bargain hunters. Since I set my prices just a few cents below my competitors, customers have flocked to the store and sales are booming." 
D) "With the recent economic recovery, people have more income to spend and sales are booming, even at the previous prices." 
E) "Since the price of gasoline fell at the neighbouring station, my milk sales have been booming." 
A) "A price cut won't help me. It won't increase sales, and I'll just get less money for each unit." 
B) "I don't think a price cut will make any difference to my bottom line. What I may gain from selling more I would lose on the lower price." 
C) "My customers are real bargain hunters. Since I set my prices just a few cents below my competitors, customers have flocked to the store and sales are booming." 
D) "With the recent economic recovery, people have more income to spend and sales are booming, even at the previous prices." 
E) "Since the price of gasoline fell at the neighbouring station, my milk sales have been booming."

Question 20

Suppose the Nunavut government decides to repair Iqaluit roads. One way to generate sufficient funds for this plan is to increase taxes on gasoline. The government will be able to raise total revenue from gasoline sales only if the demand for gasoline is

Accepted Answer

A) perfectly elastic. 
B) equal to the supply of gasoline. 
C) unit elastic. 
D) inelastic. 
E) elastic. 
A) perfectly elastic. 
B) equal to the supply of gasoline. 
C) unit elastic. 
D) inelastic. 
E) elastic.

Exam 4: Elasticity

Use the table below to answer the following question. Table 4.1.3 -Refer to Table 4.1.3. The price elasticity of demand for Jolt is

Use the table below to answer the following question. Table 4.2.1 -Consider the information in Table 4.2.1. Select the best statement.

A union leader who claims that "higher wages increase living standards without causing unemployment" believes that the demand for labour is

Suppose a fall in the price of a good from $10 to $8 leads to an increase in quantity demanded from 20 to 24 units. The price elasticity of demand is

A unit elastic demand

If a rise in price results in a decrease in total revenue, then the price elasticity of demand is

If the supply curve passes through the origin, then the price elasticity of supply is

Fred's income increases from $800 per week to $1,200 per week. As a result, he decides to purchase 40 percent more bubble gum each week. The income elasticity of Fred's demand for bubble gum is

Use the table below to answer the following question. Table 4.1.4 -Refer to Table 4.1.4. The table shows the demand schedule for computer chips. As the price rises from $200 a chip to $300 a chip, total revenue ________. So at a price of $250 a chip, demand is ________.

A decrease in tuition fees will decrease the university's total revenue if the price elasticity of demand for university education is

The price of plums falls by 7 percent and quantity of plums demanded increases by 6.75 percent. We conclude that the demand for plums is

In the nation of Transporta, the income elasticity of demand for used cars is -2.66. If incomes in this nation increase by 10 percent,

Demand is perfectly inelastic when

A horizontal supply curve

Suppose there is an increase in the cost of resources used in the production of good A. Then

If a turnip is a normal good then

Business people speak about cross elasticity of demand without using the actual term. Which one of the following statements reflects cross elasticity of demand?

Suppose the Nunavut government decides to repair Iqaluit roads. One way to generate sufficient funds for this plan is to increase taxes on gasoline. The government will be able to raise total revenue from gasoline sales only if the demand for gasoline is

What Is Economics

The Economic Problem

Demand and Supply

Efficiency and Equity

Governments Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

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Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

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Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

Macro Only: International Trade Policy

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Use the table below to answer the following question. Table 4.1.4 -Refer to Table 4.1.4. The table shows the demand schedule for computer chips. As the price rises from $200 a chip to $300 a chip, total revenue . So at a price of $250 a chip, demand is .