Question 1

What does price elasticity of demand measure? When is demand elastic? Inelastic? Unit elastic?

Accepted Answer

Price elasticity of demand measures the

Question 2

Figure 6-12
  
-Refer to Figure 6-12.Suppose the diagram shows the supply curves for a product in the short run and in the long run.Which supply curve represents supply in the short run and which curve represents supply in the long run?

Accepted Answer

A) SB represents supply in the short run and SA represents supply in the long run. 
B) Either SA or SB could represent supply in the short run; in the long run the supply curve must be a vertical line. 
C) Either SA or SB could represent supply in the long run; in the short run the supply curve must be a horizontal line. 
D) SA represents supply in the short run and SB represents supply in the long run. 
A) SB represents supply in the short run and SA represents supply in the long run. 
B) Either SA or SB could represent supply in the short run; in the long run the supply curve must be a vertical line. 
C) Either SA or SB could represent supply in the long run; in the short run the supply curve must be a horizontal line. 
D) SA represents supply in the short run and SB represents supply in the long run.

Question 3

A linear downward-sloping demand curve has price elasticities (in absolute values)that

Accepted Answer

A) increase as price decreases. 
B) remain constant along the demand curve. 
C) decrease as price decreases. 
D) are greater than or equal to 1. 
A) increase as price decreases. 
B) remain constant along the demand curve. 
C) decrease as price decreases. 
D) are greater than or equal to 1.

Question 4

For people who live near a bus route, a subway station, or a commuter rail line, public transportation provides a substitute to driving their own cars.So, for these people, the cross-price elasticity of demand between gasoline and public transportation is

Accepted Answer

A) positive. 
B) negative. 
C) zero. 
D) infinity. 
A) positive. 
B) negative. 
C) zero. 
D) infinity.

Question 5

Table 6-5
  
-Refer to Table 6-5.Katie Graham owns a kayak rental service in Santa Barbara.Table 6.5 shows her estimated demand schedule for kayak rentals per week.She would like to increase her sales revenue by changing the price she charges for rentals.At present she charges $75.Based on the information in the table, Katie

Accepted Answer

A) is not able to increase her revenue by changing her price because the demand for kayak rentals is unit elastic. 
B) should lower her price to $60 to increase her revenue because the demand for kayak rentals is price elastic. 
C) should raise her price to $80 to increase her revenue because the demand for kayak rentals is price inelastic. 
D) should raise her price to earn the most revenue. 
A) is not able to increase her revenue by changing her price because the demand for kayak rentals is unit elastic. 
B) should lower her price to $60 to increase her revenue because the demand for kayak rentals is price elastic. 
C) should raise her price to $80 to increase her revenue because the demand for kayak rentals is price inelastic. 
D) should raise her price to earn the most revenue.

Question 6

If a firm is in an antitrust court case being accused of monopolizing a product, the firm would hire an economist to show

Accepted Answer

A) the cross-price elasticity of demand between the firm's good and another is negative. 
B) the cross-price elasticity of demand between the firm's good and another is positive. 
C) the price elasticity of demand for the firm's good is highly inelastic. 
D) the income elasticity of the firm's good is inferior. 
A) the cross-price elasticity of demand between the firm's good and another is negative. 
B) the cross-price elasticity of demand between the firm's good and another is positive. 
C) the price elasticity of demand for the firm's good is highly inelastic. 
D) the income elasticity of the firm's good is inferior.

Question 7

If the cross-price elasticity of demand for computers and software is negative, this means the two goods are

Accepted Answer

A) substitutes. 
B) complements. 
C) inferior. 
D) normal. 
A) substitutes. 
B) complements. 
C) inferior. 
D) normal.

Question 8

Suppose you have surveyed a few industries and obtained information about the income elasticity of demand for their products.If you expect that the economy is headed for a long recession, you would advise people to look for jobs in an industry with

Accepted Answer

A) a high positive income elasticity coefficient such as 5. 
B) a low positive income elasticity coefficient such as 0.8. 
C) a "high" negative income elasticity coefficient such as -4. 
D) a "low" negative income elasticity coefficient such as -0.2. 
A) a high positive income elasticity coefficient such as 5. 
B) a low positive income elasticity coefficient such as 0.8. 
C) a "high" negative income elasticity coefficient such as -4. 
D) a "low" negative income elasticity coefficient such as -0.2.

Question 9

To calculate the price elasticity of demand we divide

Accepted Answer

A) the percentage change in quantity demanded by the percentage change in price. 
B) the percentage change in price by the percentage change in quantity demanded. 
C) rise by the run. 
D) the average price by the average quantity demanded. 
A) the percentage change in quantity demanded by the percentage change in price. 
B) the percentage change in price by the percentage change in quantity demanded. 
C) rise by the run. 
D) the average price by the average quantity demanded.

Question 10

In December 2014, the average price of gasoline in the United States was $2.50 per gallon and consumers bought 7 percent more gasoline than they had during April 2014, when the average price was $3.60 per gallon.Based on these figures, when the price of gasoline fell from $3.60 per gallon to $2.50 per gallon, total revenue

Accepted Answer

A) increased. 
B) decreased. 
C) did not change. 
D) There is not enough information to determine what happened to total revenue. 
A) increased. 
B) decreased. 
C) did not change. 
D) There is not enough information to determine what happened to total revenue.

Question 11

The midpoint formula is used to measure the elasticity of demand between two points on a demand curve

Accepted Answer

A) when demand is elastic. 
B) in special cases when the percentage change in the quantity demanded is equal to the percentage change in price. 
C) to ensure that the elasticity has a negative value. 
D) to ensure that we have only one value of the price elasticity of demand between two points on a demand curve. 
A) when demand is elastic. 
B) in special cases when the percentage change in the quantity demanded is equal to the percentage change in price. 
C) to ensure that the elasticity has a negative value. 
D) to ensure that we have only one value of the price elasticity of demand between two points on a demand curve.

Question 12

A perfectly elastic demand curve is

Accepted Answer

A) vertical. 
B) horizontal. 
C) curvilinear. 
D) upward sloping. 
A) vertical. 
B) horizontal. 
C) curvilinear. 
D) upward sloping.

Question 13

If the price of steel increases drastically, the quantity of steel demanded by the building industry will fall significantly over the long run because

Accepted Answer

A) buyers of steel are more sensitive to a price change if they have more time to adjust to the price change. 
B) buyers of steel are less sensitive to a price change if they have more time to adjust to the price change. 
C) sales revenue in the building industry will fall sharply. 
D) profits will fall by a greater amount in the long run than in the short run. 
A) buyers of steel are more sensitive to a price change if they have more time to adjust to the price change. 
B) buyers of steel are less sensitive to a price change if they have more time to adjust to the price change. 
C) sales revenue in the building industry will fall sharply. 
D) profits will fall by a greater amount in the long run than in the short run.

Question 14

If the market for a product is broadly defined, then

Accepted Answer

A) the good has many complements. 
B) there are few substitutes for the product and the demand for the product is relatively inelastic. 
C) there are many substitutes for the product and the demand for the product is relatively elastic. 
D) the expenditure on the good is likely to make up a large share of one's budget. 
A) the good has many complements. 
B) there are few substitutes for the product and the demand for the product is relatively inelastic. 
C) there are many substitutes for the product and the demand for the product is relatively elastic. 
D) the expenditure on the good is likely to make up a large share of one's budget.

Question 15

During an economic expansion as consumer incomes rise, holding everything else constant,

Accepted Answer

A) the demand for most goods, except luxuries, will rise. 
B) the demand for luxuries will rise while the demand for inferior goods will fall. 
C) the demand for luxuries and inferior goods will rise. 
D) the prices of luxuries will fall while the prices of inferior goods will rise. 
A) the demand for most goods, except luxuries, will rise. 
B) the demand for luxuries will rise while the demand for inferior goods will fall. 
C) the demand for luxuries and inferior goods will rise. 
D) the prices of luxuries will fall while the prices of inferior goods will rise.

What does price elasticity of demand measure? When is demand elastic? Inelastic? Unit elastic?

Figure 6-12 -Refer to Figure 6-12.Suppose the diagram shows the supply curves for a product in the short run and in the long run.Which supply curve represents supply in the short run and which curve represents supply in the long run?

A linear downward-sloping demand curve has price elasticities (in absolute values)that

For people who live near a bus route, a subway station, or a commuter rail line, public transportation provides a substitute to driving their own cars.So, for these people, the cross-price elasticity of demand between gasoline and public transportation is

If a firm is in an antitrust court case being accused of monopolizing a product, the firm would hire an economist to show

If the cross-price elasticity of demand for computers and software is negative, this means the two goods are

Suppose you have surveyed a few industries and obtained information about the income elasticity of demand for their products.If you expect that the economy is headed for a long recession, you would advise people to look for jobs in an industry with

To calculate the price elasticity of demand we divide

The midpoint formula is used to measure the elasticity of demand between two points on a demand curve

A perfectly elastic demand curve is

If the price of steel increases drastically, the quantity of steel demanded by the building industry will fall significantly over the long run because

If the market for a product is broadly defined, then

During an economic expansion as consumer incomes rise, holding everything else constant,

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

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Exam 6: Elasticity: the Responsiveness of Demand and Supply

What does price elasticity of demand measure? When is demand elastic? Inelastic? Unit elastic?

Figure 6-12 -Refer to Figure 6-12.Suppose the diagram shows the supply curves for a product in the short run and in the long run.Which supply curve represents supply in the short run and which curve represents supply in the long run?

A linear downward-sloping demand curve has price elasticities (in absolute values)that

For people who live near a bus route, a subway station, or a commuter rail line, public transportation provides a substitute to driving their own cars.So, for these people, the cross-price elasticity of demand between gasoline and public transportation is

If a firm is in an antitrust court case being accused of monopolizing a product, the firm would hire an economist to show

If the cross-price elasticity of demand for computers and software is negative, this means the two goods are

Suppose you have surveyed a few industries and obtained information about the income elasticity of demand for their products.If you expect that the economy is headed for a long recession, you would advise people to look for jobs in an industry with

To calculate the price elasticity of demand we divide

The midpoint formula is used to measure the elasticity of demand between two points on a demand curve

A perfectly elastic demand curve is

If the price of steel increases drastically, the quantity of steel demanded by the building industry will fall significantly over the long run because

If the market for a product is broadly defined, then

During an economic expansion as consumer incomes rise, holding everything else constant,

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters