Question 1

If demand is ________, a price cut ________ the total revenue.

Accepted Answer

A) elastic; increases 
B) unit elastic; decreases 
C) inelastic; increases 
D) inelastic; does not change 
E) normal; decreases 
A) elastic; increases 
B) unit elastic; decreases 
C) inelastic; increases 
D) inelastic; does not change 
E) normal; decreases

Question 2

It is very difficult for Gourmet Chocolatier to find inexpensive and available inputs for the business.Because of this, we predict that Gourmet Chocolatier's supply to be

Accepted Answer

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

Question 3

When the price of Cosmopolitan magazine decreases from $5 to $3, the quantity demanded increases from 600,000 to 1,000,000 copies each month.Using the midpoint method, the price elasticity of demand equals

Accepted Answer

A) 1. 
B) 3. 
C) 2. 
D) 1/3. 
E) 1/2. 
A) 1. 
B) 3. 
C) 2. 
D) 1/3. 
E) 1/2.

Question 4

If the price increases by 20 percent and the quantity supplied increases by 40 percent, what does the elasticity of supply equal?

Accepted Answer

The price elasticity of supply

Question 5

If substitutes for a good are readily available, the demand for that good

Accepted Answer

A) does not change substantially if the price rises. 
B) does not change substantially if the price falls. 
C) is inelastic. 
D) is elastic. 
E) Both answers A and B are correct. 
A) does not change substantially if the price rises. 
B) does not change substantially if the price falls. 
C) is inelastic. 
D) is elastic. 
E) Both answers A and B are correct.

Question 6

Natural gas is difficult to store.What implication does this fact have for the elasticity of supply of natural gas?

Accepted Answer

Because natural gas is difficult to stor

Question 7

If the price of a good decreases from $9 to $6 and the quantity supplied decreases from 1,500 to 1,300, using the midpoint formula the elasticity of supply equals

Accepted Answer

A) 0.20. 
B) 2.80. 
C) 0.36. 
D) 0.40. 
E) 3.20. 
A) 0.20. 
B) 2.80. 
C) 0.36. 
D) 0.40. 
E) 3.20.

Question 8

If the income elasticity of demand for a good is 2, then when income rises 10 percent, the quantity demanded

Accepted Answer

A) increases 2 percent. 
B) increases 20 percent. 
C) decreases 2 percent. 
D) decreases 20 percent. 
E) increases 12 percent. 
A) increases 2 percent. 
B) increases 20 percent. 
C) decreases 2 percent. 
D) decreases 20 percent. 
E) increases 12 percent.

Question 9

The cross elasticity of demand

Accepted Answer

A) means that an increase in the demand for one good leads to a decrease in demand for another good. 
B) measures how a change in the price of one good impacts the demand for another good. 
C) measures how a change in supply impacts the demand for the good. 
D) means that an increase in the price of one good leads to an increase in the price of another good. 
E) measures how a change in income impacts the demand for the good. 
A) means that an increase in the demand for one good leads to a decrease in demand for another good. 
B) measures how a change in the price of one good impacts the demand for another good. 
C) measures how a change in supply impacts the demand for the good. 
D) means that an increase in the price of one good leads to an increase in the price of another good. 
E) measures how a change in income impacts the demand for the good.

Question 10

Suppose the price of a ticket to a Lenny Kravitz concert is $41 and at that price, the quantity of tickets demanded is 17,000 per concert.Using the midpoint method of calculating percentage changes, if Mr.Kravitz raises the price to $48 and the quantity demanded decreases to 16,000, the price elasticity of demand for his concert tickets is

Accepted Answer

A) 15.73. 
B) 6.06. 
C) 1.00. 
D) 0.39. 
E) 0.93. 
A) 15.73. 
B) 6.06. 
C) 1.00. 
D) 0.39. 
E) 0.93.

Question 11

A product's price elasticity of demand is likely to be greater

Accepted Answer

A) if it only has a few substitutes. 
B) if consumers spend a small proportion of income on the product. 
C) the less time consumers have to adjust to price changes. 
D) if the product is a luxury good rather than a necessity. 
E) Both answers C and D are correct. 
A) if it only has a few substitutes. 
B) if consumers spend a small proportion of income on the product. 
C) the less time consumers have to adjust to price changes. 
D) if the product is a luxury good rather than a necessity. 
E) Both answers C and D are correct.

Question 12

If we ignore the negative or positive sign, the midpoint method of calculating a percentage change in price between two points on a demand curve results in

Accepted Answer

A) a smaller percentage change if the price rises than if it falls. 
B) the same percentage, regardless of whether the price increases or decreases. 
C) the price elasticity of demand. 
D) the price elasticity of supply. 
E) a higher percentage change if the price rises than if it falls. 
A) a smaller percentage change if the price rises than if it falls. 
B) the same percentage, regardless of whether the price increases or decreases. 
C) the price elasticity of demand. 
D) the price elasticity of supply. 
E) a higher percentage change if the price rises than if it falls.

Question 13

Suppose the Chicago Bears football team raises ticket prices by 13 percent and as a result the quantity of tickets demanded decreases by 21 percent.This response means that the demand for Bears tickets is

Accepted Answer

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

Question 14

Consider two goods: peanut butter and jelly.If the price of jelly increases from $2 a jar to $3 per jar and the quantity demanded of peanut butter decreases from 50 jars to 45 jars, what is the cross elasticity of demand? Are the goods substitutes or complements?

Accepted Answer

The cross elasticity

Question 15

Jess owns a sandwich shop.The price of a sandwich recently increased from $5 to $7.Jess responded by increasing the quantity of sandwiches she supplied from 70 to 90 per day.Using the midpoint method, Jess's price elasticity of supply is equal to

Accepted Answer

A) 1.33. 
B) 0.75. 
C) 3.00. 
D) 4.00. 
E) 1.50. 
A) 1.33. 
B) 0.75. 
C) 3.00. 
D) 4.00. 
E) 1.50.

Question 16

If the price of a one good increases and the quantity demanded of a different good decreases, then these two goods are

Accepted Answer

A) substitutes. 
B) normal goods. 
C) inferior goods. 
D) inelastic goods. 
E) complements. 
A) substitutes. 
B) normal goods. 
C) inferior goods. 
D) inelastic goods. 
E) complements.

Question 17

You own a small store.Your cashier thinks you should raise prices to increase your total revenue and your customer thinks you should lower prices to increase your total revenue.The cashier thinks the price elasticity of demand is ________ and the customer believes the price elasticity of demand is ________.

Accepted Answer

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

Question 18

A firm lowers the price it charges.The firm's total revenue decreases.What can we conclude about the price elasticity of demand?

Accepted Answer

A) Demand is elastic. 
B) Demand is unit elastic. 
C) Demand is inelastic. 
D) Demand is perfectly elastic. 
E) Not enough information is given to conclude anything about price elasticity of demand. 
A) Demand is elastic. 
B) Demand is unit elastic. 
C) Demand is inelastic. 
D) Demand is perfectly elastic. 
E) Not enough information is given to conclude anything about price elasticity of demand.

Question 19

A product that has a negative income elasticity of demand is ________ good.

Accepted Answer

A) a complementary 
B) a substitute 
C) a normal 
D) an inferior 
E) a negative 
A) a complementary 
B) a substitute 
C) a normal 
D) an inferior 
E) a negative

Question 20

When two goods are related such that an increase in the price of one good decreases the quantity demanded of the other good, these goods are definitely

Accepted Answer

A) normal goods. 
B) luxury goods. 
C) complements. 
D) substitutes. 
E) inferior goods. 
A) normal goods. 
B) luxury goods. 
C) complements. 
D) substitutes. 
E) inferior goods.

If demand is , a price cut the total revenue.

It is very difficult for Gourmet Chocolatier to find inexpensive and available inputs for the business.Because of this, we predict that Gourmet Chocolatier's supply to be

When the price of Cosmopolitan magazine decreases from $5 to $3, the quantity demanded increases from 600,000 to 1,000,000 copies each month.Using the midpoint method, the price elasticity of demand equals

If the price increases by 20 percent and the quantity supplied increases by 40 percent, what does the elasticity of supply equal?

If substitutes for a good are readily available, the demand for that good

Natural gas is difficult to store.What implication does this fact have for the elasticity of supply of natural gas?

If the price of a good decreases from $9 to $6 and the quantity supplied decreases from 1,500 to 1,300, using the midpoint formula the elasticity of supply equals

If the income elasticity of demand for a good is 2, then when income rises 10 percent, the quantity demanded

The cross elasticity of demand

A product's price elasticity of demand is likely to be greater

If we ignore the negative or positive sign, the midpoint method of calculating a percentage change in price between two points on a demand curve results in

Suppose the Chicago Bears football team raises ticket prices by 13 percent and as a result the quantity of tickets demanded decreases by 21 percent.This response means that the demand for Bears tickets is

Consider two goods: peanut butter and jelly.If the price of jelly increases from $2 a jar to $3 per jar and the quantity demanded of peanut butter decreases from 50 jars to 45 jars, what is the cross elasticity of demand? Are the goods substitutes or complements?

Jess owns a sandwich shop.The price of a sandwich recently increased from $5 to $7.Jess responded by increasing the quantity of sandwiches she supplied from 70 to 90 per day.Using the midpoint method, Jess's price elasticity of supply is equal to

If the price of a one good increases and the quantity demanded of a different good decreases, then these two goods are

You own a small store.Your cashier thinks you should raise prices to increase your total revenue and your customer thinks you should lower prices to increase your total revenue.The cashier thinks the price elasticity of demand is and the customer believes the price elasticity of demand is .

A firm lowers the price it charges.The firm's total revenue decreases.What can we conclude about the price elasticity of demand?

A product that has a negative income elasticity of demand is ________ good.

When two goods are related such that an increase in the price of one good decreases the quantity demanded of the other good, these goods are definitely

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 5: Elasticities of Demand and Supply

If demand is ________, a price cut ________ the total revenue.

It is very difficult for Gourmet Chocolatier to find inexpensive and available inputs for the business.Because of this, we predict that Gourmet Chocolatier's supply to be

When the price of Cosmopolitan magazine decreases from $5 to $3, the quantity demanded increases from 600,000 to 1,000,000 copies each month.Using the midpoint method, the price elasticity of demand equals

If the price increases by 20 percent and the quantity supplied increases by 40 percent, what does the elasticity of supply equal?

If substitutes for a good are readily available, the demand for that good

Natural gas is difficult to store.What implication does this fact have for the elasticity of supply of natural gas?

If the price of a good decreases from $9 to $6 and the quantity supplied decreases from 1,500 to 1,300, using the midpoint formula the elasticity of supply equals

If the income elasticity of demand for a good is 2, then when income rises 10 percent, the quantity demanded

The cross elasticity of demand

A product's price elasticity of demand is likely to be greater

If we ignore the negative or positive sign, the midpoint method of calculating a percentage change in price between two points on a demand curve results in

Suppose the Chicago Bears football team raises ticket prices by 13 percent and as a result the quantity of tickets demanded decreases by 21 percent.This response means that the demand for Bears tickets is

Consider two goods: peanut butter and jelly.If the price of jelly increases from $2 a jar to $3 per jar and the quantity demanded of peanut butter decreases from 50 jars to 45 jars, what is the cross elasticity of demand? Are the goods substitutes or complements?

Jess owns a sandwich shop.The price of a sandwich recently increased from $5 to $7.Jess responded by increasing the quantity of sandwiches she supplied from 70 to 90 per day.Using the midpoint method, Jess's price elasticity of supply is equal to

If the price of a one good increases and the quantity demanded of a different good decreases, then these two goods are

A firm lowers the price it charges.The firm's total revenue decreases.What can we conclude about the price elasticity of demand?

A product that has a negative income elasticity of demand is ________ good.

When two goods are related such that an increase in the price of one good decreases the quantity demanded of the other good, these goods are definitely

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

If demand is , a price cut the total revenue.