Question 1

If the quantity demanded of a good is Q when the price for the good is P, the price elasticity of demand for that good at that point is:

Accepted Answer

A) (P/Q)× (1/slope) 
B) (Q/P)× (1/slope) 
C) (P/Q)× (slope) 
D) Q × P × (1/slope) 
A) (P/Q)× (1/slope) 
B) (Q/P)× (1/slope) 
C) (P/Q)× (slope) 
D) Q × P × (1/slope)

Question 2

The championship game will be held next weekend in your college's 40,000-seat stadium. The supply of tickets to the game:

Accepted Answer

A) will increase because the price charged will be higher. 
B) is elastic. 
C) is perfectly inelastic. 
D) depends on which teams make it to the championship game. 
A) will increase because the price charged will be higher. 
B) is elastic. 
C) is perfectly inelastic. 
D) depends on which teams make it to the championship game.

Question 3

Refer to the accompanying figure. If the price of a latte increases from $2.00 to $2.50:

Accepted Answer

A) total expenditure would increase. 
B) total expenditure would stay the same. 
C) total expenditure would decrease. 
D) the change in total expenditure, if any, would depend on the supply curve. 
A) total expenditure would increase. 
B) total expenditure would stay the same. 
C) total expenditure would decrease. 
D) the change in total expenditure, if any, would depend on the supply curve.

Question 4

To increase total revenue, firms with ________ demand should lower price, and firms with ________ demand should increase price.

Accepted Answer

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

Question 5

If the demand curve for open-heart surgery is vertical for people with serious heart conditions, then the demand for open-heart surgery is ________ with respect to price.

Accepted Answer

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

Question 6

Refer to the accompanying figure. For demand curve D1, what is the price elasticity of demand when P = 12?

Accepted Answer

A) 12 
B) 6 
C) 4 
D) 3 
A) 12 
B) 6 
C) 4 
D) 3

Question 7

If cross-price elasticity of demand between two goods is positive, the two goods are:

Accepted Answer

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

Question 8

Suppose that a new drug has been approved to treat a life-threatening disease. The demand for that drug is shown on the accompanying graph. Prior to approval of this drug, the only treatment for this condition was any one of several non-prescription, or over-the-counter, pain relievers. The demand for one brand of the several non-prescription pain relievers is also shown on the graph.   A likely reason for the difference in the slopes of the demand curves is that:

Accepted Answer

A) the over-the-counter pain reliever has many substitutes, but the new drug does not. 
B) one drug is new on the market, but the other has been available for a long time. 
C) one drug is heavily regulated by the Food and Drug Administration and the other is not. 
D) one market is in equilibrium and the other is not. 
A) the over-the-counter pain reliever has many substitutes, but the new drug does not. 
B) one drug is new on the market, but the other has been available for a long time. 
C) one drug is heavily regulated by the Food and Drug Administration and the other is not. 
D) one market is in equilibrium and the other is not.

Question 9

If the demand for salad dressing increases when the price of lettuce decreases, the cross-price elasticity of demand between salad dressing and lettuce will be ________ because these two goods are ________.

Accepted Answer

A) equal to 1; inelastic 
B) zero; inferior 
C) negative; substitutes 
D) negative; complements 
A) equal to 1; inelastic 
B) zero; inferior 
C) negative; substitutes 
D) negative; complements

Question 10

The accompanying graph depicts demand.  
  The slope of the demand curve (ignoring the negative sign)is:

Accepted Answer

A) 2. 
B) 1.5. 
C) 1. 
D) 0.5. 
A) 2. 
B) 1.5. 
C) 1. 
D) 0.5.

Question 11

If a one percent increase in the price of oranges leads to a five percent increase in the quantity supplied, the price elasticity of supply for oranges is ________.

Accepted Answer

A) 1/5 
B) 1/2 
C) 5 
D) 2 
A) 1/5 
B) 1/2 
C) 5 
D) 2

Question 12

When calculating price elasticity of demand, if the percentage change in price is negative, then the percentage change in quantity demanded is typically:

Accepted Answer

A) greater than one. 
B) positive. 
C) less than one. 
D) negative. 
A) greater than one. 
B) positive. 
C) less than one. 
D) negative.

Question 13

At the midpoint of a straight-line demand curve, the price elasticity of demand is:

Accepted Answer

A) greater than one. 
B) less than one. 
C) equal to one. 
D) zero. 
A) greater than one. 
B) less than one. 
C) equal to one. 
D) zero.

Question 14

The price elasticity of supply at a point is the:

Accepted Answer

A) percentage change in quantity supplied divided by the percentage change in price. 
B) percentage change in price divided by the percentage change in quantity supplied. 
C) change in quantity supplied divided by the change in price. 
D) change in price divided by the change in quantity supplied. 
A) percentage change in quantity supplied divided by the percentage change in price. 
B) percentage change in price divided by the percentage change in quantity supplied. 
C) change in quantity supplied divided by the change in price. 
D) change in price divided by the change in quantity supplied.

Exam 4: Elasticity

If the quantity demanded of a good is Q when the price for the good is P, the price elasticity of demand for that good at that point is:

The championship game will be held next weekend in your college's 40,000-seat stadium. The supply of tickets to the game:

Refer to the accompanying figure. If the price of a latte increases from $2.00 to $2.50:

To increase total revenue, firms with ________ demand should lower price, and firms with ________ demand should increase price.

If the demand curve for open-heart surgery is vertical for people with serious heart conditions, then the demand for open-heart surgery is ________ with respect to price.

Refer to the accompanying figure. For demand curve D1, what is the price elasticity of demand when P = 12?

If cross-price elasticity of demand between two goods is positive, the two goods are:

If the demand for salad dressing increases when the price of lettuce decreases, the cross-price elasticity of demand between salad dressing and lettuce will be ________ because these two goods are ________.

The accompanying graph depicts demand. The slope of the demand curve (ignoring the negative sign)is:

If a one percent increase in the price of oranges leads to a five percent increase in the quantity supplied, the price elasticity of supply for oranges is ________.

When calculating price elasticity of demand, if the percentage change in price is negative, then the percentage change in quantity demanded is typically:

At the midpoint of a straight-line demand curve, the price elasticity of demand is:

The price elasticity of supply at a point is the:

Thinking Like an Economist

Comparative Advantage

Supply and Demand

Demand

Perfectly Competitive Supply

Efficiency, Exchange, and the Invisible Hand in Action

Monopoly, Oligopoly, and Monopolistic Competition

Games and Strategic Behavior

An Introduction to Behavioral Economics

Externalities, Property Rights, and the Environment

The Economics of Information

Labor Markets, Poverty, and Income Distribution

Public Goods and Tax Policy

International Trade and Trade Policy

Macroeconomics: The Birds Eye View of the Economy

Measuring Economic Activity: GDP and Unemployment

Measuring the Price Level and Inflation

Economic Growth, Productivity, and Living Standards

The Labor Market: Workers, Wages, and Unemployment

Saving and Capital Formation

Money Prices and the Federal Reserve

Financial Markets and International Capital Flows

Short-Term Economic Fluctuations: An Introduction

Spending and Output in the Short Run

Stabilizing the Economy: The Role of the Fed

Aggregate Demand, Aggregate Supply, and Inflation

Exchange Rates and the Open Economy

Filters

To increase total revenue, firms with demand should lower price, and firms with demand should increase price.

If the demand for salad dressing increases when the price of lettuce decreases, the cross-price elasticity of demand between salad dressing and lettuce will be because these two goods are .