Question 1

-The above figure shows a linear (straight-line) demand curve. Starting at point A and then moving to point B and then point C, the price elasticity of demand

Accepted Answer

A)  increases. 
B)  decreases. 
C)  increases and then decreases. 
D)  decreases and then increases. 
A)  increases. 
B)  decreases. 
C)  increases and then decreases. 
D)  decreases and then increases.

Question 2

Suppose the price of burgers increases from $2 to $3 each. The degree to which quantity demanded responds to this price increase depends on the

Accepted Answer

A)  price elasticity of demand. 
B)  the price elasticity of supply. 
C)  income elasticity of demand. 
D)  cross elasticity of demand. 
A)  price elasticity of demand. 
B)  the price elasticity of supply. 
C)  income elasticity of demand. 
D)  cross elasticity of demand.

Question 3

The income elasticity of demand for food

Accepted Answer

A)  does not change when an individual's income changes. 
B)  increases as an individual's income increases. 
C)  decreases as an individual's income increases. 
D)  is negative. 
A)  does not change when an individual's income changes. 
B)  increases as an individual's income increases. 
C)  decreases as an individual's income increases. 
D)  is negative.

Question 4

The price of gasoline rises by 33 percent to $3.50 a gallon and stays at that price for the next two years. The quantity of gasoline demanded two years from now will be

Accepted Answer

A)  the same as one month after the price hike. 
B)  greater than one month after the price hike. 
C)  less than one month after the price hike. 
D)  the same as it would be if the price hike had never occurred. 
A)  the same as one month after the price hike. 
B)  greater than one month after the price hike. 
C)  less than one month after the price hike. 
D)  the same as it would be if the price hike had never occurred.

Question 5

The elasticity of supply equals ________ if the supply curve is vertical.

Accepted Answer

A)  0 
B)  1 
C)  infinity 
D)  -1 
A)  0 
B)  1 
C)  infinity 
D)  -1

Question 6

Perfectly elastic demand is represented by a demand curve that

Accepted Answer

A)  is vertical. 
B)  is horizontal. 
C)  has a 45° slope. 
D)  is a rectangular hyperbola. 
A)  is vertical. 
B)  is horizontal. 
C)  has a 45° slope. 
D)  is a rectangular hyperbola.

Question 7

Blue pens and black pens are close substitutes. The cross elasticity of demand for black pens with respect to the price of blue pens is ________.

Accepted Answer

A)  positive 
B)  negative 
C)  equal to 1 
D)  zero 
A)  positive 
B)  negative 
C)  equal to 1 
D)  zero

Question 8

Grape juice prices increased by 20 percent in 2007. Suppose in response grape growers did not increase or decrease their grape production. The elasticity of supply is best described as

Accepted Answer

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

Question 9

Along a perfectly vertical demand curve, the price elasticity of demand

Accepted Answer

A)  equals 0. 
B)  is greater than 0 but less than 1.0. 
C)  equals 1.0. 
D)  is negative. 
A)  equals 0. 
B)  is greater than 0 but less than 1.0. 
C)  equals 1.0. 
D)  is negative.

Question 10

According to one study, the price elasticity of demand for cigarettes is 0.25. To decrease the consumption of cigarettes by 8 percent, a tax on cigarettes must raise the price of cigarettes by

Accepted Answer

A)  32 percent. 
B)  25 percent. 
C)  2 percent. 
D)  3.1 percent. 
A)  32 percent. 
B)  25 percent. 
C)  2 percent. 
D)  3.1 percent.

Question 11

The income elasticity of demand for movies in the United States is 3.41. If people's incomes decrease by 1 percent, what is the decrease in the quantity of movies demanded?

Accepted Answer

The income elasticity of demand = (perce

Question 12

If the demand curve is a downward sloping straight line, the price elasticity of demand always

Accepted Answer

A)  increases as the demand curve shifts rightward. 
B)  increases as the demand curve shifts leftward. 
C)  increases with movements upward along the demand curve. 
D)  decreases with movements upward along the demand curve. 
A)  increases as the demand curve shifts rightward. 
B)  increases as the demand curve shifts leftward. 
C)  increases with movements upward along the demand curve. 
D)  decreases with movements upward along the demand curve.

Question 13

-The cab fare in Horseville is regulated. Recently, the government decided to raise it from $2.00 to $2.50 per ride. After this rise in fare, cab ridership decreased by 10 percent.
a) What is the price elasticity of demand for cab rides in Horseville? (Use the midpoint formula to calculate the percentage change in the price.) Is the demand for rides elastic or inelastic?
b) According to your estimate, what happened to the cab drivers' revenue after the fare rose? Explain.
c) Why might your estimate of elasticity be inaccurate?

Accepted Answer

a) The percentage change in the price is

Question 14

-The elasticity of demand along the demand curve shown in the above figure is constant and equal to 1. Thus

Accepted Answer

A)  area 0BCF equals area 0AGF. 
B)  area 0BCF equals area FGDE. 
C)  area 0BCF equals area 0ADE. 
D)  area ABCG equals area 0AGF. 
A)  area 0BCF equals area 0AGF. 
B)  area 0BCF equals area FGDE. 
C)  area 0BCF equals area 0ADE. 
D)  area ABCG equals area 0AGF.

Question 15

-The figure illustrates the demand for hamburgers. When the price is $1.00 a hamburger, the elasticity of demand is ________ and a 1 percent increase in the price will ________ the quantity of hamburgers demanded by ________ percent.

Accepted Answer

A)  1.00; decrease; 0.40 
B)  0.40; decrease; 0.40 
C)  2.50; increase; 2.50 
D)  5.00; decrease; 5.00 
A)  1.00; decrease; 0.40 
B)  0.40; decrease; 0.40 
C)  2.50; increase; 2.50 
D)  5.00; decrease; 5.00

Question 16

To maximize its revenue

Accepted Answer

A)  a firm facing inelastic demand should always raise its price. 
B)  a firm facing elastic demand should always raise its price. 
C)  a firm should always charge the highest price possible regardless of the elasticity of demand. 
D)  None of the above answers is correct. 
A)  a firm facing inelastic demand should always raise its price. 
B)  a firm facing elastic demand should always raise its price. 
C)  a firm should always charge the highest price possible regardless of the elasticity of demand. 
D)  None of the above answers is correct.

Question 17

The demand for Honda Accords is probably

Accepted Answer

A)  inelastic but more elastic than the demand for automobiles. 
B)  elastic and more elastic than the demand for automobiles. 
C)  inelastic and less elastic than the demand for automobiles. 
D)  elastic but less elastic than the demand for automobiles. 
A)  inelastic but more elastic than the demand for automobiles. 
B)  elastic and more elastic than the demand for automobiles. 
C)  inelastic and less elastic than the demand for automobiles. 
D)  elastic but less elastic than the demand for automobiles.

Question 18

The price of a good rises by 12 percent and the price elasticity of demand for the good is 0.85. Which of the following is a CORRECT interpretation of these facts?

Accepted Answer

A)  When the price rises by 12 percent, the quantity demanded decreased by 0.85 percent. 
B)  For each 1 percent that the price rose, the quantity demanded decreased by 10.2 percent. 
C)  For each 0.85 percent that the price rose, the quantity demanded decreased by 1 percent. 
D)  For each 1 percent that the price rose, the quantity demanded decreased by 0.85 percent. 
A)  When the price rises by 12 percent, the quantity demanded decreased by 0.85 percent. 
B)  For each 1 percent that the price rose, the quantity demanded decreased by 10.2 percent. 
C)  For each 0.85 percent that the price rose, the quantity demanded decreased by 1 percent. 
D)  For each 1 percent that the price rose, the quantity demanded decreased by 0.85 percent.

Question 19

Aglets are the metal or plastic tips on shoelaces that make it easier to lace your shoes. The demand for aglets is probably

Accepted Answer

A)  inelastic. 
B)  unit elastic. 
C)  elastic but not perfectly elastic. 
D)  perfectly elastic. 
A)  inelastic. 
B)  unit elastic. 
C)  elastic but not perfectly elastic. 
D)  perfectly elastic.

Question 20

If peanut butter and jelly are complements, then their cross elasticity of demand must be

Accepted Answer

A)  infinitely high. 
B)  a positive number that might be greater than 1. 
C)  a number between zero and one. 
D)  a negative number. 
A)  infinitely high. 
B)  a positive number that might be greater than 1. 
C)  a number between zero and one. 
D)  a negative number.

-The above figure shows a linear (straight-line) demand curve. Starting at point A and then moving to point B and then point C, the price elasticity of demand

Suppose the price of burgers increases from $2 to $3 each. The degree to which quantity demanded responds to this price increase depends on the

The income elasticity of demand for food

The price of gasoline rises by 33 percent to $3.50 a gallon and stays at that price for the next two years. The quantity of gasoline demanded two years from now will be

The elasticity of supply equals ________ if the supply curve is vertical.

Perfectly elastic demand is represented by a demand curve that

Blue pens and black pens are close substitutes. The cross elasticity of demand for black pens with respect to the price of blue pens is ________.

Grape juice prices increased by 20 percent in 2007. Suppose in response grape growers did not increase or decrease their grape production. The elasticity of supply is best described as

Along a perfectly vertical demand curve, the price elasticity of demand

According to one study, the price elasticity of demand for cigarettes is 0.25. To decrease the consumption of cigarettes by 8 percent, a tax on cigarettes must raise the price of cigarettes by

The income elasticity of demand for movies in the United States is 3.41. If people's incomes decrease by 1 percent, what is the decrease in the quantity of movies demanded?

If the demand curve is a downward sloping straight line, the price elasticity of demand always

-The elasticity of demand along the demand curve shown in the above figure is constant and equal to 1. Thus

-The figure illustrates the demand for hamburgers. When the price is $1.00 a hamburger, the elasticity of demand is and a 1 percent increase in the price will the quantity of hamburgers demanded by percent.

To maximize its revenue

The demand for Honda Accords is probably

The price of a good rises by 12 percent and the price elasticity of demand for the good is 0.85. Which of the following is a CORRECT interpretation of these facts?

Aglets are the metal or plastic tips on shoelaces that make it easier to lace your shoes. The demand for aglets is probably

If peanut butter and jelly are complements, then their cross elasticity of demand must be

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

-The above figure shows a linear (straight-line) demand curve. Starting at point A and then moving to point B and then point C, the price elasticity of demand

Suppose the price of burgers increases from $2 to $3 each. The degree to which quantity demanded responds to this price increase depends on the

The income elasticity of demand for food

The price of gasoline rises by 33 percent to $3.50 a gallon and stays at that price for the next two years. The quantity of gasoline demanded two years from now will be

The elasticity of supply equals ________ if the supply curve is vertical.

Perfectly elastic demand is represented by a demand curve that

Blue pens and black pens are close substitutes. The cross elasticity of demand for black pens with respect to the price of blue pens is ________.

Grape juice prices increased by 20 percent in 2007. Suppose in response grape growers did not increase or decrease their grape production. The elasticity of supply is best described as

Along a perfectly vertical demand curve, the price elasticity of demand

According to one study, the price elasticity of demand for cigarettes is 0.25. To decrease the consumption of cigarettes by 8 percent, a tax on cigarettes must raise the price of cigarettes by

The income elasticity of demand for movies in the United States is 3.41. If people's incomes decrease by 1 percent, what is the decrease in the quantity of movies demanded?

If the demand curve is a downward sloping straight line, the price elasticity of demand always

-The elasticity of demand along the demand curve shown in the above figure is constant and equal to 1. Thus

-The figure illustrates the demand for hamburgers. When the price is $1.00 a hamburger, the elasticity of demand is ________ and a 1 percent increase in the price will ________ the quantity of hamburgers demanded by ________ percent.

To maximize its revenue

The demand for Honda Accords is probably

The price of a good rises by 12 percent and the price elasticity of demand for the good is 0.85. Which of the following is a CORRECT interpretation of these facts?

Aglets are the metal or plastic tips on shoelaces that make it easier to lace your shoes. The demand for aglets is probably

If peanut butter and jelly are complements, then their cross elasticity of demand must be

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

-The figure illustrates the demand for hamburgers. When the price is $1.00 a hamburger, the elasticity of demand is and a 1 percent increase in the price will the quantity of hamburgers demanded by percent.