Question 1

Suppose that when a particular firm decreases its price its total revenue decreases. What kind of demand does this particular firm face?

Accepted Answer

A)  Demand is price inelastic. 
B)  Demand is price elastic. 
C)  Demand is unit elastic. 
D)  Demand is perfectly price elastic. 
A)  Demand is price inelastic. 
B)  Demand is price elastic. 
C)  Demand is unit elastic. 
D)  Demand is perfectly price elastic.

Question 2

Recall the Application about the price of vanity license plates in Virginia to answer the following question(s).
-Recall the Application. Which of the following is a reason for the state of Virginia to increase its revenue while the price for vanity plates increases?

Accepted Answer

A)  The demand for vanity plates in Virginia is inelastic. 
B)  The demand for vanity plates in Virginia is elastic. 
C)  The demand for vanity plates in Virginia is equal to 1. 
D)  There is insufficient information to draw a conclusion. 
A)  The demand for vanity plates in Virginia is inelastic. 
B)  The demand for vanity plates in Virginia is elastic. 
C)  The demand for vanity plates in Virginia is equal to 1. 
D)  There is insufficient information to draw a conclusion.

Question 3

Suppose that the elasticity of demand for chocolate is 3.0 and price decreases by 20%. By what percentage will quantity demanded for chocolate increase?

Accepted Answer

A)  20% 
B)  30% 
C)  60% 
D)  200% 
A)  20% 
B)  30% 
C)  60% 
D)  200%

Question 4

Suppose that the price elasticity of supply is 1.25 and the quantity supplied increases by 10%. Other things being equal, the percentage change in the price should be

Accepted Answer

A)  a 0.8% increase in the price. 
B)  an 8% increase in the price. 
C)  a 1.25% increase in the price. 
D)  a 12.5% increase in the price. 
A)  a 0.8% increase in the price. 
B)  an 8% increase in the price. 
C)  a 1.25% increase in the price. 
D)  a 12.5% increase in the price.

Question 5

When the price of pens went from $1 to $1.50, the quantity demanded of pencils changed from 50 to 75 a day. The cross-price elasticity of demand for pens (using the initial value formula) is

Accepted Answer

A)  0.8. 
B)  0.4. 
C)  0.2. 
D)  It cannot be determined from the information provided. 
A)  0.8. 
B)  0.4. 
C)  0.2. 
D)  It cannot be determined from the information provided.

Question 6

Suppose that ABC Beer Brewer faces a linear demand curve and that the current price for its beer is set at a point where the price elasticity is 1.6. If ABC Beer Brewer increases the product price

Accepted Answer

A)  the demand becomes more elastic and total revenue increases. 
B)  the demand becomes less elastic and total revenue increases. 
C)  the demand becomes more elastic and total revenue decreases. 
D)  the demand becomes less elastic and total revenue decreases. 
A)  the demand becomes more elastic and total revenue increases. 
B)  the demand becomes less elastic and total revenue increases. 
C)  the demand becomes more elastic and total revenue decreases. 
D)  the demand becomes less elastic and total revenue decreases.

Question 7

If the number of highway deaths among young people is roughly proportional to their beer consumption and young peoples' elasticity of demand for beer is 1.5, then a tax increase that increases the price of beer by 20% would roughly reduced highway deaths of young people by

Accepted Answer

A)  1.5%. 
B)  13.33%. 
C)  20%. 
D)  30%. 
A)  1.5%. 
B)  13.33%. 
C)  20%. 
D)  30%.

Question 8

The percentage change in the quantity of peanut butter demanded divided by the percentage change in price of jelly measures

Accepted Answer

A)  the price elasticity of demand for peanut butter. 
B)  the price elasticity of demand for jelly. 
C)  the cross-price elasticity of demand for peanut butter with respect to the price of jelly. 
D)  the cross-price elasticity of demand for jelly with respect to the price of peanut butter. 
A)  the price elasticity of demand for peanut butter. 
B)  the price elasticity of demand for jelly. 
C)  the cross-price elasticity of demand for peanut butter with respect to the price of jelly. 
D)  the cross-price elasticity of demand for jelly with respect to the price of peanut butter.

Question 9

If the elasticity of demand for cigarettes by teenagers is 1.5, then the price and total revenue from teens buying cigarettes are

Accepted Answer

A)  zero. 
B)  unrelated. 
C)  inversely related. 
D)  directly related. 
A)  zero. 
B)  unrelated. 
C)  inversely related. 
D)  directly related.

Question 10

One of the business revolutions of the 1980s is "just in time" inventory, a system where businesses estimate their requirements for raw materials and keep no more on hand than is necessary to complete that period's production. What affect did the change to "just in time" inventory have on short-term supply elasticities?

Accepted Answer

"Just in time" inventory made

Question 11

A bumper crop of wheat could be bad news to farmers if the price elasticity of demand for wheat is greater than one.

Accepted Answer

A) True 
 B)False

Question 12

If an increase in the price of accordions does not change total revenue from accordion sales, we can infer that demand for accordions is inelastic.

Accepted Answer

A) True 
 B)False

Question 13

If the demand for illegal drugs is inelastic, then a government policy that causes illegal drug price to rise would cause those who support their drug habit by property theft to

Accepted Answer

A)  increase their theft to pay for their drugs. 
B)  increase their drug dependency. 
C)  reduce their theft to pay for their drugs. 
D)  end their drug dependency. 
A)  increase their theft to pay for their drugs. 
B)  increase their drug dependency. 
C)  reduce their theft to pay for their drugs. 
D)  end their drug dependency.

Question 14

Under which of the following conditions will an increase in demand cause a relatively small increase in price?

Accepted Answer

A)  If the shift of the demand curve is relatively small, the gap between the new demand and the old supply will be relatively small. 
B)  If there is highly elastic demand, consumers are very responsive to changes in price. 
C)  If there is highly elastic supply, producers are very responsive to changes in price. 
D)  All of the above. 
A)  If the shift of the demand curve is relatively small, the gap between the new demand and the old supply will be relatively small. 
B)  If there is highly elastic demand, consumers are very responsive to changes in price. 
C)  If there is highly elastic supply, producers are very responsive to changes in price. 
D)  All of the above.

Question 15

If the price elasticity of supply is inelastic, which of the following could be a possible value of the elasticity?

Accepted Answer

A)  3 
B)  1 
C)  0.3 
D)  -0.3 
A)  3 
B)  1 
C)  0.3 
D)  -0.3

Question 16

A firm facing a linear demand curve maximizes its total revenue where demand is

Accepted Answer

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

Question 17

Suppose that the elasticity of demand for a product is 0.5 and quantity demanded increases by 20%. What must the percentage decrease in price have been?

Accepted Answer

A)  0.5% 
B)  5% 
C)  10% 
D)  40% 
A)  0.5% 
B)  5% 
C)  10% 
D)  40%

Question 18

If the quantity demanded is infinitely responsive to any change in price, the demand curve is

Accepted Answer

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

Question 19

If the demand curve facing a firm had a price elasticity of demand equal to zero and the firm raised its price, its total revenue would

Accepted Answer

A)  decrease slightly. 
B)  fall to zero. 
C)  not change. 
D)  increase. 
A)  decrease slightly. 
B)  fall to zero. 
C)  not change. 
D)  increase.

Question 20

In the case of perfectly inelastic demand, the demand curve is

Accepted Answer

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

Suppose that when a particular firm decreases its price its total revenue decreases. What kind of demand does this particular firm face?

Recall the Application about the price of vanity license plates in Virginia to answer the following question(s). -Recall the Application. Which of the following is a reason for the state of Virginia to increase its revenue while the price for vanity plates increases?

Suppose that the elasticity of demand for chocolate is 3.0 and price decreases by 20%. By what percentage will quantity demanded for chocolate increase?

Suppose that the price elasticity of supply is 1.25 and the quantity supplied increases by 10%. Other things being equal, the percentage change in the price should be

When the price of pens went from $1 to $1.50, the quantity demanded of pencils changed from 50 to 75 a day. The cross-price elasticity of demand for pens (using the initial value formula) is

Suppose that ABC Beer Brewer faces a linear demand curve and that the current price for its beer is set at a point where the price elasticity is 1.6. If ABC Beer Brewer increases the product price

If the number of highway deaths among young people is roughly proportional to their beer consumption and young peoples' elasticity of demand for beer is 1.5, then a tax increase that increases the price of beer by 20% would roughly reduced highway deaths of young people by

The percentage change in the quantity of peanut butter demanded divided by the percentage change in price of jelly measures

If the elasticity of demand for cigarettes by teenagers is 1.5, then the price and total revenue from teens buying cigarettes are

A bumper crop of wheat could be bad news to farmers if the price elasticity of demand for wheat is greater than one.

If an increase in the price of accordions does not change total revenue from accordion sales, we can infer that demand for accordions is inelastic.

If the demand for illegal drugs is inelastic, then a government policy that causes illegal drug price to rise would cause those who support their drug habit by property theft to

Under which of the following conditions will an increase in demand cause a relatively small increase in price?

If the price elasticity of supply is inelastic, which of the following could be a possible value of the elasticity?

A firm facing a linear demand curve maximizes its total revenue where demand is

Suppose that the elasticity of demand for a product is 0.5 and quantity demanded increases by 20%. What must the percentage decrease in price have been?

If the quantity demanded is infinitely responsive to any change in price, the demand curve is

If the demand curve facing a firm had a price elasticity of demand equal to zero and the firm raised its price, its total revenue would

In the case of perfectly inelastic demand, the demand curve is

Introduction: What Is Economics

The Key Principles of Economics

Demand, Supply, and Market Equilibrium

Production Technology and Cost

Perfect Competition

Monopoly and Price Discrimination

Market Entry, Monopolistic Competition, and Oligopoly

Imperfect Information, External Benefits, and External Costs

The Labor Market and the Distribution of Income

Measuring a Nations Production and Income

Unemployment and Inflation

Why Do Economies Grow

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money and the Banking System

Monetary Policy and Inflation

International Trade and Finance

Filters

Exam 4: Elasticity: A Measure of Responsiveness

Suppose that when a particular firm decreases its price its total revenue decreases. What kind of demand does this particular firm face?

Recall the Application about the price of vanity license plates in Virginia to answer the following question(s). -Recall the Application. Which of the following is a reason for the state of Virginia to increase its revenue while the price for vanity plates increases?

Suppose that the elasticity of demand for chocolate is 3.0 and price decreases by 20%. By what percentage will quantity demanded for chocolate increase?

Suppose that the price elasticity of supply is 1.25 and the quantity supplied increases by 10%. Other things being equal, the percentage change in the price should be

When the price of pens went from $1 to $1.50, the quantity demanded of pencils changed from 50 to 75 a day. The cross-price elasticity of demand for pens (using the initial value formula) is

Suppose that ABC Beer Brewer faces a linear demand curve and that the current price for its beer is set at a point where the price elasticity is 1.6. If ABC Beer Brewer increases the product price

If the number of highway deaths among young people is roughly proportional to their beer consumption and young peoples' elasticity of demand for beer is 1.5, then a tax increase that increases the price of beer by 20% would roughly reduced highway deaths of young people by

The percentage change in the quantity of peanut butter demanded divided by the percentage change in price of jelly measures

If the elasticity of demand for cigarettes by teenagers is 1.5, then the price and total revenue from teens buying cigarettes are

A bumper crop of wheat could be bad news to farmers if the price elasticity of demand for wheat is greater than one.

If an increase in the price of accordions does not change total revenue from accordion sales, we can infer that demand for accordions is inelastic.

If the demand for illegal drugs is inelastic, then a government policy that causes illegal drug price to rise would cause those who support their drug habit by property theft to

Under which of the following conditions will an increase in demand cause a relatively small increase in price?

If the price elasticity of supply is inelastic, which of the following could be a possible value of the elasticity?

A firm facing a linear demand curve maximizes its total revenue where demand is

Suppose that the elasticity of demand for a product is 0.5 and quantity demanded increases by 20%. What must the percentage decrease in price have been?

If the quantity demanded is infinitely responsive to any change in price, the demand curve is

If the demand curve facing a firm had a price elasticity of demand equal to zero and the firm raised its price, its total revenue would

In the case of perfectly inelastic demand, the demand curve is

Introduction: What Is Economics

The Key Principles of Economics

Demand, Supply, and Market Equilibrium

Production Technology and Cost

Perfect Competition

Monopoly and Price Discrimination

Market Entry, Monopolistic Competition, and Oligopoly

Imperfect Information, External Benefits, and External Costs

The Labor Market and the Distribution of Income

Measuring a Nations Production and Income

Unemployment and Inflation

Why Do Economies Grow

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money and the Banking System

Monetary Policy and Inflation

International Trade and Finance

Filters