Question 1

If a price decrease results in an increase in total revenue, then demand is

Accepted Answer

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

Question 2

When the quantity of coal is measured in kilograms instead of pounds, the demand for coal becomes

Accepted Answer

A) more elastic. 
B) less elastic. 
C) neither more nor less elastic. 
D) perfectly elastic. 
E) perfectly inelastic. 
A) more elastic. 
B) less elastic. 
C) neither more nor less elastic. 
D) perfectly elastic. 
E) perfectly inelastic.

Question 3

Use the figure below to answer the following questions.
   
Figure 4.1.2
-Figure 4.1.2 illustrates a linear demand curve. If the price falls from $13 to $11,

Accepted Answer

A) total revenue increases. 
B) total revenue decreases. 
C) total revenue remains unchanged. 
D) total revenue initially increases then decreases. 
E) total revenue initially decreases then increases. 
A) total revenue increases. 
B) total revenue decreases. 
C) total revenue remains unchanged. 
D) total revenue initially increases then decreases. 
E) total revenue initially decreases then increases.

Question 4

Suppose that a 20 percent increase in income increases the quantity of good A demanded from 19,200 to 20,800 units. The income elasticity of demand for good A is

Accepted Answer

A) 0.05. 
B) 0.8. 
C) 0.4. 
D) 1.2. 
E) 2.0. 
A) 0.05. 
B) 0.8. 
C) 0.4. 
D) 1.2. 
E) 2.0.

Question 5

Suppose Swiss Chalet in Moncton knows that the demand for their half-chicken meals is elastic. If the manager wants to increase total revenue from half-chicken meal sales, he should

Accepted Answer

A) lower the price of a half-chicken meal. 
B) not change the price of a half-chicken meal. 
C) raise the price of a half-chicken meal. 
D) decrease the supply of half-chicken meals. 
E) hire fewer employees. 
A) lower the price of a half-chicken meal. 
B) not change the price of a half-chicken meal. 
C) raise the price of a half-chicken meal. 
D) decrease the supply of half-chicken meals. 
E) hire fewer employees.

Question 6

If the cross elasticity of demand between two goods is -0.56, then a fall in the price of one good leads to a ________ shift of the ________ curve of the other good.

Accepted Answer

A) rightward; demand 
B) rightward; supply 
C) leftward; demand 
D) leftward; supply 
E) rightward; demand curve and the supply 
A) rightward; demand 
B) rightward; supply 
C) leftward; demand 
D) leftward; supply 
E) rightward; demand curve and the supply

Question 7

The price of apples falls by 5 percent and quantity of apples demanded increases by 6 percent. We conclude that the demand for apples is

Accepted Answer

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

Question 8

Business people speak about price elasticity of demand without using the actual term. Which one of the following statements reflects elastic demand for a good?

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) "A very cold winter has increased my sales of skates and hockey sticks." 
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) "A very cold winter has increased my sales of skates and hockey sticks."

Question 9

An economic measure that indicates when the demands for two or more goods are related is

Accepted Answer

A) the income elasticity of demand. 
B) the price elasticity of demand. 
C) the substitute elasticity of demand. 
D) the cross elasticity of demand. 
E) the normal elasticity of demand. 
A) the income elasticity of demand. 
B) the price elasticity of demand. 
C) the substitute elasticity of demand. 
D) the cross elasticity of demand. 
E) the normal elasticity of demand.

Question 10

A fall in the price of a good from $10.50 to $9.50 results in an increase in the quantity demanded from 18,800 to 21,200 units. The price elasticity of demand is

Accepted Answer

A) 0.8. 
B) 1.25. 
C) 1.2. 
D) 8.0. 
E) 2.4. 
A) 0.8. 
B) 1.25. 
C) 1.2. 
D) 8.0. 
E) 2.4.

Question 11

If the income elasticity of demand for chocolate chip cookies is 1.84, then chocolate chip cookies are

Accepted Answer

A) a normal good and income elastic. 
B) a normal good and income inelastic. 
C) also price elastic. 
D) an inferior good and income elastic. 
E) an inferior good and income inelastic. 
A) a normal good and income elastic. 
B) a normal good and income inelastic. 
C) also price elastic. 
D) an inferior good and income elastic. 
E) an inferior good and income inelastic.

Question 12

If a rise in the price of good B increases the demand for good A, then

Accepted Answer

A) A and B are substitutes. 
B) A and B are complements. 
C) the cross elasticity of demand between A and B is negative. 
D) A is a resource used in the production of B. 
E) the demand for A is price elastic. 
A) A and B are substitutes. 
B) A and B are complements. 
C) the cross elasticity of demand between A and B is negative. 
D) A is a resource used in the production of B. 
E) the demand for A is price elastic.

Question 13

If the quantity of carrots demanded increases by a large percentage when income increases by a small amount, we know that the demand for carrots is

Accepted Answer

A) price elastic. 
B) price inelastic. 
C) income inferior. 
D) income inelastic. 
E) income elastic. 
A) price elastic. 
B) price inelastic. 
C) income inferior. 
D) income inelastic. 
E) income elastic.

Question 14

Demand is unit elastic when

Accepted Answer

A) an increase in supply does not change the price of the good. 
B) a decrease in supply raises the price of the good. 
C) a change in price does not change total revenue. 
D) the slope of the demand curve is -1. 
E) the slope of the demand curve is +1. 
A) an increase in supply does not change the price of the good. 
B) a decrease in supply raises the price of the good. 
C) a change in price does not change total revenue. 
D) the slope of the demand curve is -1. 
E) the slope of the demand curve is +1.

Question 15

Use the table below to answer the following questions.
Table 4.1.1
Demand schedule for good A.
  
-Refer to Table 4.1.1. The price elasticity of demand when the price rises from $6 a unit to $7 a unit is

Accepted Answer

A) 1.0. 
B) 2.0. 
C) 2.6. 
D) 0.5. 
E) 1.3. 
A) 1.0. 
B) 2.0. 
C) 2.6. 
D) 0.5. 
E) 1.3.

Question 16

The quantity of apples demanded decreases by 8 percent when the price rises by 8 percent. The demand for apples is

Accepted Answer

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

Question 17

If Mr. Brown's income increases by 12 percent and as a result his quantity demanded of music downloads increases by 4 percent, Mr. Brown's income elasticity of demand for music downloads is

Accepted Answer

A) 3.0. 
B) 0.33. 
C) -0.33. 
D) -3.0. 
E) 48.0. 
A) 3.0. 
B) 0.33. 
C) -0.33. 
D) -3.0. 
E) 48.0.

Question 18

A fall in the price of a good from $11.50 to $8.50 results in an increase in the quantity demanded from 19,200 to 20,800 units. The price elasticity of demand is

Accepted Answer

A) 0.27. 
B) 3.75. 
C) 0.08. 
D) 8.0. 
E) 30. 
A) 0.27. 
B) 3.75. 
C) 0.08. 
D) 8.0. 
E) 30.

Question 19

The income elasticity of demand equals the percentage change in ________, other things remaining the same.

Accepted Answer

A) price divided by the percentage change in income 
B) price divided by the percentage change in quantity demanded 
C) income divided by the percentage change in quantity demanded 
D) quantity demanded divided by the percentage change in price 
E) quantity demanded divided by the percentage change in income 
A) price divided by the percentage change in income 
B) price divided by the percentage change in quantity demanded 
C) income divided by the percentage change in quantity demanded 
D) quantity demanded divided by the percentage change in price 
E) quantity demanded divided by the percentage change in income

Question 20

Suppose a rise of 8 percent in the price of bison meat in Saskatchewan reduces the consumption of bison meat by 24 percent. Such a price rise will induce consumers to spend

Accepted Answer

A) more of their income on bison. 
B) the same amount of their income on bison as before. 
C) less of their income on bison. 
D) more on products that are complements of bison. 
E) zero dollars on bison meat. 
A) more of their income on bison. 
B) the same amount of their income on bison as before. 
C) less of their income on bison. 
D) more on products that are complements of bison. 
E) zero dollars on bison meat.

Exam 4: Elasticity

If a price decrease results in an increase in total revenue, then demand is

When the quantity of coal is measured in kilograms instead of pounds, the demand for coal becomes

Use the figure below to answer the following questions. Figure 4.1.2 -Figure 4.1.2 illustrates a linear demand curve. If the price falls from $13 to $11,

Suppose that a 20 percent increase in income increases the quantity of good A demanded from 19,200 to 20,800 units. The income elasticity of demand for good A is

Suppose Swiss Chalet in Moncton knows that the demand for their half-chicken meals is elastic. If the manager wants to increase total revenue from half-chicken meal sales, he should

If the cross elasticity of demand between two goods is -0.56, then a fall in the price of one good leads to a ________ shift of the ________ curve of the other good.

The price of apples falls by 5 percent and quantity of apples demanded increases by 6 percent. We conclude that the demand for apples is

Business people speak about price elasticity of demand without using the actual term. Which one of the following statements reflects elastic demand for a good?

An economic measure that indicates when the demands for two or more goods are related is

A fall in the price of a good from $10.50 to $9.50 results in an increase in the quantity demanded from 18,800 to 21,200 units. The price elasticity of demand is

If the income elasticity of demand for chocolate chip cookies is 1.84, then chocolate chip cookies are

If a rise in the price of good B increases the demand for good A, then

If the quantity of carrots demanded increases by a large percentage when income increases by a small amount, we know that the demand for carrots is

Demand is unit elastic when

Use the table below to answer the following questions. Table 4.1.1 Demand schedule for good A. -Refer to Table 4.1.1. The price elasticity of demand when the price rises from $6 a unit to $7 a unit is

The quantity of apples demanded decreases by 8 percent when the price rises by 8 percent. The demand for apples is

If Mr. Brown's income increases by 12 percent and as a result his quantity demanded of music downloads increases by 4 percent, Mr. Brown's income elasticity of demand for music downloads is

A fall in the price of a good from $11.50 to $8.50 results in an increase in the quantity demanded from 19,200 to 20,800 units. The price elasticity of demand is

The income elasticity of demand equals the percentage change in ________, other things remaining the same.

Suppose a rise of 8 percent in the price of bison meat in Saskatchewan reduces the consumption of bison meat by 24 percent. Such a price rise will induce consumers to spend

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If the cross elasticity of demand between two goods is -0.56, then a fall in the price of one good leads to a shift of the curve of the other good.