Question 1

The total revenue test says that if a price decrease leads to

Accepted Answer

A) an increase in total revenue, demand is income elastic. 
B) a decrease in total revenue, demand is income inelastic. 
C) a decrease in total revenue, demand is price inelastic. 
D) a decrease in total revenue, supply is price inelastic. 
E) a decrease in total revenue, supply is price elastic. 
A) an increase in total revenue, demand is income elastic. 
B) a decrease in total revenue, demand is income inelastic. 
C) a decrease in total revenue, demand is price inelastic. 
D) a decrease in total revenue, supply is price inelastic. 
E) a decrease in total revenue, supply is price elastic.

Question 2

Explain why the cross elasticity of demand for substitute goods is positive and the cross elasticity of demand for complements is negative.

Accepted Answer

The formula for the cross elasticity of

Question 3

KFC raises the price of its grilled chicken.The price elasticity of demand for KFC grilled chicken is 0.8.What happens to the KFC's total revenue?

Accepted Answer

A) nothing 
B) It increases. 
C) It decreases. 
D) It becomes negative. 
E) It might change, but more information is needed to determine if it increases, decreases, or does not change. 
A) nothing 
B) It increases. 
C) It decreases. 
D) It becomes negative. 
E) It might change, but more information is needed to determine if it increases, decreases, or does not change.

Question 4

If a good has many close substitutes, then its demand is most likely

Accepted Answer

A) elastic. 
B) inelastic. 
C) unit elastic. 
D) perfectly inelastic. 
E) elastic or inelastic depending on whether the price of the good is increasing or decreasing. 
A) elastic. 
B) inelastic. 
C) unit elastic. 
D) perfectly inelastic. 
E) elastic or inelastic depending on whether the price of the good is increasing or decreasing.

Question 5

Economists use elasticity to measure the responsiveness of quantity to a change in price rather than the slope of the demand curve because elasticity is

Accepted Answer

A) independent of the units of measurement. 
B) dependent on the units of measurement. 
C) easier to calculate. 
D) harder to calculate. 
E) always negative whereas the slope is always positive. 
A) independent of the units of measurement. 
B) dependent on the units of measurement. 
C) easier to calculate. 
D) harder to calculate. 
E) always negative whereas the slope is always positive.

Question 6

The elasticity of demand is used to

Accepted Answer

A) determine if consumers will or will not buy a product. 
B) measure how responsive consumers are to a change in price. 
C) determine in what direction the demand curve shifts if income changes. 
D) find the market equilibrium. 
E) determine if a change in price results in a shortage or a surplus. 
A) determine if consumers will or will not buy a product. 
B) measure how responsive consumers are to a change in price. 
C) determine in what direction the demand curve shifts if income changes. 
D) find the market equilibrium. 
E) determine if a change in price results in a shortage or a surplus.

Question 7

For which of the following would the supply likely be most inelastic?

Accepted Answer

A) aircraft carrier 
B) canned soup 
C) toy airplane 
D) t-shirt 
E) bottled water 
A) aircraft carrier 
B) canned soup 
C) toy airplane 
D) t-shirt 
E) bottled water

Question 8

A firm can sell 10 units if the price is $100 and can sell 8 units if the price is $125.Using the midpoint method, what is the price elasticity of demand?

Accepted Answer

A) 0.75 
B) 1.00 
C) 1.25 
D) 0.50 
E) 0.0 
A) 0.75 
B) 1.00 
C) 1.25 
D) 0.50 
E) 0.0

Question 9

When does a decrease in supply raise the price more: When demand is elastic or when demand is inelastic? When OPEC decreases the supply of oil, the price of gasoline skyrockets.Hence is the demand for gasoline elastic or inelastic?

Accepted Answer

A decrease in supply raises th

Question 10

Suppose the price of a tie rises from $45 to $55.Using the midpoint method, what is the percentage change in price?

Accepted Answer

A) 10 percent 
B) -10 percent 
C) 20 percent 
D) -20 percent 
E) 100 percent 
A) 10 percent 
B) -10 percent 
C) 20 percent 
D) -20 percent 
E) 100 percent

Question 11

-In the figure above, at which point (a, b, or c)along the linear demand curve illustrated would demand be
a∙most elastic?
b∙most inelastic?

Accepted Answer

a∙The demand would b

Question 12

What happens to the price elasticity of demand moving down along a downward-sloping, linear demand curve?

Accepted Answer

Moving down along a downward-sloping, li

Question 13

If the price elasticity of demand for moose hunting lessons is 4.23, then the demand for moose hunting lessons is

Accepted Answer

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

Question 14

If wheat can be produced at a constant opportunity cost, then the supply of wheat is

Accepted Answer

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

Question 15

If you know the cross elasticity between two goods is negative, then you know the goods are

Accepted Answer

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

Question 16

Total revenue increases if the price of the good

Accepted Answer

A) rises and demand is elastic. 
B) rises and demand is inelastic. 
C) rises and demand is unit elastic. 
D) falls and supply is inelastic. 
E) falls and demand is unit elastic. 
A) rises and demand is elastic. 
B) rises and demand is inelastic. 
C) rises and demand is unit elastic. 
D) falls and supply is inelastic. 
E) falls and demand is unit elastic.

Question 17

The fact that there is a very limited amount of land in Hong Kong means the supply of new apartments in Hong Kong is

Accepted Answer

A) inelastic. 
B) elastic. 
C) unit elastic. 
D) perfectly elastic. 
E) limited by the demand. 
A) inelastic. 
B) elastic. 
C) unit elastic. 
D) perfectly elastic. 
E) limited by the demand.

Question 18

The income elasticity of demand for store brands of soda (that is, non-name brands)is negative.What does this fact indicate about consumers' perceptions about the store brands?

Accepted Answer

The negative income elasticity indicates

Question 19

The price elasticity of demand is always positive, as is the price elasticity of supply.Is the cross elasticity of demand always positive? Explain your answer.

Accepted Answer

No, the cross elasticity of demand is no

Question 20

The opportunity cost of producing a good rises only slightly as the quantity produced increases.This good has

Accepted Answer

A) an inelastic demand. 
B) an elastic demand. 
C) an elastic supply. 
D) an inelastic supply. 
E) a perfectly elastic supply. 
A) an inelastic demand. 
B) an elastic demand. 
C) an elastic supply. 
D) an inelastic supply. 
E) a perfectly elastic supply.

The total revenue test says that if a price decrease leads to

Explain why the cross elasticity of demand for substitute goods is positive and the cross elasticity of demand for complements is negative.

KFC raises the price of its grilled chicken.The price elasticity of demand for KFC grilled chicken is 0.8.What happens to the KFC's total revenue?

If a good has many close substitutes, then its demand is most likely

Economists use elasticity to measure the responsiveness of quantity to a change in price rather than the slope of the demand curve because elasticity is

The elasticity of demand is used to

For which of the following would the supply likely be most inelastic?

A firm can sell 10 units if the price is $100 and can sell 8 units if the price is $125.Using the midpoint method, what is the price elasticity of demand?

When does a decrease in supply raise the price more: When demand is elastic or when demand is inelastic? When OPEC decreases the supply of oil, the price of gasoline skyrockets.Hence is the demand for gasoline elastic or inelastic?

Suppose the price of a tie rises from $45 to $55.Using the midpoint method, what is the percentage change in price?

-In the figure above, at which point (a, b, or c)along the linear demand curve illustrated would demand be a∙most elastic? b∙most inelastic?

What happens to the price elasticity of demand moving down along a downward-sloping, linear demand curve?

If the price elasticity of demand for moose hunting lessons is 4.23, then the demand for moose hunting lessons is

If wheat can be produced at a constant opportunity cost, then the supply of wheat is

If you know the cross elasticity between two goods is negative, then you know the goods are

Total revenue increases if the price of the good

The fact that there is a very limited amount of land in Hong Kong means the supply of new apartments in Hong Kong is

The income elasticity of demand for store brands of soda (that is, non-name brands)is negative.What does this fact indicate about consumers' perceptions about the store brands?

The price elasticity of demand is always positive, as is the price elasticity of supply.Is the cross elasticity of demand always positive? Explain your answer.

The opportunity cost of producing a good rises only slightly as the quantity produced increases.This good has

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

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Exam 5: Elasticities of Demand and Supply

The total revenue test says that if a price decrease leads to

Explain why the cross elasticity of demand for substitute goods is positive and the cross elasticity of demand for complements is negative.

KFC raises the price of its grilled chicken.The price elasticity of demand for KFC grilled chicken is 0.8.What happens to the KFC's total revenue?

If a good has many close substitutes, then its demand is most likely

Economists use elasticity to measure the responsiveness of quantity to a change in price rather than the slope of the demand curve because elasticity is

The elasticity of demand is used to

For which of the following would the supply likely be most inelastic?

A firm can sell 10 units if the price is $100 and can sell 8 units if the price is $125.Using the midpoint method, what is the price elasticity of demand?

When does a decrease in supply raise the price more: When demand is elastic or when demand is inelastic? When OPEC decreases the supply of oil, the price of gasoline skyrockets.Hence is the demand for gasoline elastic or inelastic?

Suppose the price of a tie rises from $45 to $55.Using the midpoint method, what is the percentage change in price?

-In the figure above, at which point (a, b, or c)along the linear demand curve illustrated would demand be a∙most elastic? b∙most inelastic?

What happens to the price elasticity of demand moving down along a downward-sloping, linear demand curve?

If the price elasticity of demand for moose hunting lessons is 4.23, then the demand for moose hunting lessons is

If wheat can be produced at a constant opportunity cost, then the supply of wheat is

If you know the cross elasticity between two goods is negative, then you know the goods are

Total revenue increases if the price of the good

The fact that there is a very limited amount of land in Hong Kong means the supply of new apartments in Hong Kong is

The income elasticity of demand for store brands of soda (that is, non-name brands)is negative.What does this fact indicate about consumers' perceptions about the store brands?

The price elasticity of demand is always positive, as is the price elasticity of supply.Is the cross elasticity of demand always positive? Explain your answer.

The opportunity cost of producing a good rises only slightly as the quantity produced increases.This good has

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