Question 1

Suppose inter-city bus travel is a substitute for transportation by train. Which of the following could then be TRUE?

Accepted Answer

A)  The cross elasticity between bus and train travel could equal 0.65. 
B)  The cross elasticity between bus and train travel could equal 1.0. 
C)  The cross elasticity between bus and train travel could equal 1.25. 
D)  All of the above could be true. 
A)  The cross elasticity between bus and train travel could equal 0.65. 
B)  The cross elasticity between bus and train travel could equal 1.0. 
C)  The cross elasticity between bus and train travel could equal 1.25. 
D)  All of the above could be true. D

Question 2

If a rise in the price of good B increases the quantity demanded of good A

Accepted Answer

A)  A and B are substitutes. 
B)  A and B are complements. 
C)  A is a substitute for B, but B is a complement to A. 
D)  B is a substitute for A, but A is a complement to B. 
A)  A and B are substitutes. 
B)  A and B are complements. 
C)  A is a substitute for B, but B is a complement to A. 
D)  B is a substitute for A, but A is a complement to B. A

Question 3

Joe likes peanut butter and jelly sandwiches for lunch. We can conclude that for Joe the cross elasticity of demand for peanut butter with respect to jelly is

Accepted Answer

A)  positive because jelly and peanut butter are substitutes. 
B)  positive because jelly and peanut butter are complements. 
C)  negative because jelly and peanut butter are substitutes. 
D)  negative because jelly and peanut butter are complements. 
A)  positive because jelly and peanut butter are substitutes. 
B)  positive because jelly and peanut butter are complements. 
C)  negative because jelly and peanut butter are substitutes. 
D)  negative because jelly and peanut butter are complements. D

Question 4

If the demand curve for a good is a downward sloping straight line, the demand for the good will be more price elastic the higher is the

Accepted Answer

A)  price of the good. 
B)  price of complements. 
C)  income of consumers. 
D)  income elasticity of demand for that good. 
A)  price of the good. 
B)  price of complements. 
C)  income of consumers. 
D)  income elasticity of demand for that good.

Question 5

Business people often speak about price elasticity without actually using the term. Which statement describes a good with an elastic demand?

Accepted Answer

A)  "A price cut won't help me. It won't increase my sales, and I'll just get less money for each unit." 
B)  "I don't think a price cut will help my bottom line any. Sure, I'll sell a bit more, but I'll more than lose because the price will be lower." 
C)  "My customers are real shoppers. After I cut my prices just a few cents below those my competitors charge, customers have been flocking to my store and sales are booming." 
D)  "The economic expansion has done wonders for my sales. With more people back at work, my sales are taking off!" 
A)  "A price cut won't help me. It won't increase my sales, and I'll just get less money for each unit." 
B)  "I don't think a price cut will help my bottom line any. Sure, I'll sell a bit more, but I'll more than lose because the price will be lower." 
C)  "My customers are real shoppers. After I cut my prices just a few cents below those my competitors charge, customers have been flocking to my store and sales are booming." 
D)  "The economic expansion has done wonders for my sales. With more people back at work, my sales are taking off!"

Question 6

A university conducts a survey of students, which shows that a 10 percent tuition hike would lead to a 12 percent decrease in the enrollment. If the university wants to increase its total revenue, it should ________ tuition because the demand for education at this university is ________.

Accepted Answer

A)  raise; elastic 
B)  not raise; elastic 
C)  raise; inelastic 
D)  not raise; inelastic 
A)  raise; elastic 
B)  not raise; elastic 
C)  raise; inelastic 
D)  not raise; inelastic

Question 7

The elasticity of the momentary supply curve for any good always equals

Accepted Answer

A)  zero. 
B)  one. 
C)  positive infinity. 
D)  None of the above answers is correct. 
A)  zero. 
B)  one. 
C)  positive infinity. 
D)  None of the above answers is correct.

Question 8

A 10 percent decrease in the price of a Pepsi decreases the demand for a Coca-Cola by 50 percent. The cross elasticity of demand between a Pepsi and Coca-Cola is

Accepted Answer

A)  50. 
B)  10. 
C)  5. 
D)  0.20. 
A)  50. 
B)  10. 
C)  5. 
D)  0.20.

Question 9

If the price of a magazine increases from $5 to $7 and the quantity demanded of the magazines decreases from 10 million per month to 8 million per month, using the midpoint method, what is the price elasticity of demand? Show your work. Is the demand elastic, inelastic, or unit elastic?

Accepted Answer

The price elasticity of demand = (percen

Question 10

Which of the following items has the largest price elasticity of demand?

Accepted Answer

A)  food 
B)  fruit 
C)  oranges 
D)  oranges from a Wal-Mart SuperCenter 
A)  food 
B)  fruit 
C)  oranges 
D)  oranges from a Wal-Mart SuperCenter

Question 11

About six months ago, Pat lost the job as vice president of a local bank. Since losing the job, Pat still has the Sunday newspaper delivered every week. For Pat, the Sunday newspaper is

Accepted Answer

A)  income inelastic. 
B)  price inelastic. 
C)  an inferior good. 
D)  a normal good because Pat still buys the paper even with a big loss of income. 
A)  income inelastic. 
B)  price inelastic. 
C)  an inferior good. 
D)  a normal good because Pat still buys the paper even with a big loss of income.

Question 12

At the midpoint of a downward sloping straight-line demand curve, the demand

Accepted Answer

A)  is elastic. 
B)  is unit elastic. 
C)  is inelastic. 
D)  has an elasticity exactly equal to zero. 
A)  is elastic. 
B)  is unit elastic. 
C)  is inelastic. 
D)  has an elasticity exactly equal to zero.

Question 13

If the income elasticity of demand for corn is 0.5, then as income increases

Accepted Answer

A)  the demand for corn will increase. 
B)  the demand for corn will decrease. 
C)  corn will prove to be an inferior good. 
D)  the supply curve of corn will shift leftward. 
A)  the demand for corn will increase. 
B)  the demand for corn will decrease. 
C)  corn will prove to be an inferior good. 
D)  the supply curve of corn will shift leftward.

Question 14

The price elasticity of demand is equal to the ________ in the ________ divided by the ________ in the ________.

Accepted Answer

A)  percentage change; price; percentage change; quantity demanded 
B)  change; price; change; quantity demanded 
C)  percentage change; quantity demanded; percentage change; price 
D)  change; quantity demanded; change; price 
A)  percentage change; price; percentage change; quantity demanded 
B)  change; price; change; quantity demanded 
C)  percentage change; quantity demanded; percentage change; price 
D)  change; quantity demanded; change; price

Question 15

The demand for corn increases. As a result, the price of corn will ________, and the less elastic the supply of corn, the ________ will be the effect on the price.

Accepted Answer

A)  fall; smaller 
B)  fall; greater 
C)  rise; smaller 
D)  rise; greater 
A)  fall; smaller 
B)  fall; greater 
C)  rise; smaller 
D)  rise; greater

Question 16

The marketing people for AT&T believe that if they lower the price of long-distance phone calls by 5 percent, their quantity demanded will increase by 15 percent. If they are correct in their belief, then

Accepted Answer

A)  the demand for long-distance phone calls is price inelastic. 
B)  the total revenue from long-distance phone calls will increase if they lower the price. 
C)  the demand for long-distance phone calls is income elastic. 
D)  the total revenue from long-distance phone calls will decrease if they lower the price. 
A)  the demand for long-distance phone calls is price inelastic. 
B)  the total revenue from long-distance phone calls will increase if they lower the price. 
C)  the demand for long-distance phone calls is income elastic. 
D)  the total revenue from long-distance phone calls will decrease if they lower the price.

Question 17

If OPEC, a group of oil producing nations, cuts oil production to increase the total revenue, OPEC presumes that the demand for oil is

Accepted Answer

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

Question 18

Demand is inelastic when a price ________ results in total revenue ________.

Accepted Answer

A)  rise; decreasing 
B)  fall; increasing 
C)  rise, increasing 
D)  fall, remaining the same 
A)  rise; decreasing 
B)  fall; increasing 
C)  rise, increasing 
D)  fall, remaining the same

Question 19

A negative value for the cross elasticity of demand between two goods indicates that

Accepted Answer

A)  the goods are complements. 
B)  the goods are substitutes. 
C)  one of the goods is normal and the other is inferior. 
D)  each good is price inelastic. 
A)  the goods are complements. 
B)  the goods are substitutes. 
C)  one of the goods is normal and the other is inferior. 
D)  each good is price inelastic.

Question 20

As time passes after a change in the price, the supply of a good or service

Accepted Answer

A)  becomes more elastic. 
B)  becomes less elastic. 
C)  initially becomes more elastic and then becomes less elastic. 
D)  initially becomes less elastic and then becomes more elastic. 
A)  becomes more elastic. 
B)  becomes less elastic. 
C)  initially becomes more elastic and then becomes less elastic. 
D)  initially becomes less elastic and then becomes more elastic.

Suppose inter-city bus travel is a substitute for transportation by train. Which of the following could then be TRUE?

If a rise in the price of good B increases the quantity demanded of good A

Joe likes peanut butter and jelly sandwiches for lunch. We can conclude that for Joe the cross elasticity of demand for peanut butter with respect to jelly is

If the demand curve for a good is a downward sloping straight line, the demand for the good will be more price elastic the higher is the

Business people often speak about price elasticity without actually using the term. Which statement describes a good with an elastic demand?

A university conducts a survey of students, which shows that a 10 percent tuition hike would lead to a 12 percent decrease in the enrollment. If the university wants to increase its total revenue, it should tuition because the demand for education at this university is .

The elasticity of the momentary supply curve for any good always equals

A 10 percent decrease in the price of a Pepsi decreases the demand for a Coca-Cola by 50 percent. The cross elasticity of demand between a Pepsi and Coca-Cola is

If the price of a magazine increases from $5 to $7 and the quantity demanded of the magazines decreases from 10 million per month to 8 million per month, using the midpoint method, what is the price elasticity of demand? Show your work. Is the demand elastic, inelastic, or unit elastic?

Which of the following items has the largest price elasticity of demand?

About six months ago, Pat lost the job as vice president of a local bank. Since losing the job, Pat still has the Sunday newspaper delivered every week. For Pat, the Sunday newspaper is

At the midpoint of a downward sloping straight-line demand curve, the demand

If the income elasticity of demand for corn is 0.5, then as income increases

The price elasticity of demand is equal to the in the divided by the in the .

The demand for corn increases. As a result, the price of corn will , and the less elastic the supply of corn, the will be the effect on the price.

The marketing people for AT&T believe that if they lower the price of long-distance phone calls by 5 percent, their quantity demanded will increase by 15 percent. If they are correct in their belief, then

If OPEC, a group of oil producing nations, cuts oil production to increase the total revenue, OPEC presumes that the demand for oil is

Demand is inelastic when a price results in total revenue .

A negative value for the cross elasticity of demand between two goods indicates that

As time passes after a change in the price, the supply of a good or service

What Is Economics

The Economic Problem

Demand and Supply

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

Exam 4: Elasticity

Suppose inter-city bus travel is a substitute for transportation by train. Which of the following could then be TRUE?

If a rise in the price of good B increases the quantity demanded of good A

Joe likes peanut butter and jelly sandwiches for lunch. We can conclude that for Joe the cross elasticity of demand for peanut butter with respect to jelly is

If the demand curve for a good is a downward sloping straight line, the demand for the good will be more price elastic the higher is the

Business people often speak about price elasticity without actually using the term. Which statement describes a good with an elastic demand?

A university conducts a survey of students, which shows that a 10 percent tuition hike would lead to a 12 percent decrease in the enrollment. If the university wants to increase its total revenue, it should ________ tuition because the demand for education at this university is ________.

The elasticity of the momentary supply curve for any good always equals

A 10 percent decrease in the price of a Pepsi decreases the demand for a Coca-Cola by 50 percent. The cross elasticity of demand between a Pepsi and Coca-Cola is

If the price of a magazine increases from $5 to $7 and the quantity demanded of the magazines decreases from 10 million per month to 8 million per month, using the midpoint method, what is the price elasticity of demand? Show your work. Is the demand elastic, inelastic, or unit elastic?

Which of the following items has the largest price elasticity of demand?

About six months ago, Pat lost the job as vice president of a local bank. Since losing the job, Pat still has the Sunday newspaper delivered every week. For Pat, the Sunday newspaper is

At the midpoint of a downward sloping straight-line demand curve, the demand

If the income elasticity of demand for corn is 0.5, then as income increases

The price elasticity of demand is equal to the ________ in the ________ divided by the ________ in the ________.

The demand for corn increases. As a result, the price of corn will ________, and the less elastic the supply of corn, the ________ will be the effect on the price.

The marketing people for AT&T believe that if they lower the price of long-distance phone calls by 5 percent, their quantity demanded will increase by 15 percent. If they are correct in their belief, then

If OPEC, a group of oil producing nations, cuts oil production to increase the total revenue, OPEC presumes that the demand for oil is

Demand is inelastic when a price ________ results in total revenue ________.

A negative value for the cross elasticity of demand between two goods indicates that

As time passes after a change in the price, the supply of a good or service

What Is Economics

The Economic Problem

Demand and Supply

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

A university conducts a survey of students, which shows that a 10 percent tuition hike would lead to a 12 percent decrease in the enrollment. If the university wants to increase its total revenue, it should tuition because the demand for education at this university is .

The price elasticity of demand is equal to the in the divided by the in the .

The demand for corn increases. As a result, the price of corn will , and the less elastic the supply of corn, the will be the effect on the price.

Demand is inelastic when a price results in total revenue .