Question 1

The cross-price elasticity of demand for peanut butter and jelly is likely:

Accepted Answer

A) a negative number. 
B) a positive number. 
C) a very high positive number. 
D) 1. 
A) a negative number. 
B) a positive number. 
C) a very high positive number. 
D) 1.

Question 2

It is most likely for which of the following to have an income elasticity greater than 1?

Accepted Answer

A) Deli meat 
B) Store brand cola 
C) Gold earrings 
D) Milk 
A) Deli meat 
B) Store brand cola 
C) Gold earrings 
D) Milk

Question 3

Which pair of goods is likely to have the largest positive cross-price elasticity?

Accepted Answer

A) Peanut butter and jelly 
B) Butter and margarine 
C) Ramen noodles and a Rolex watch 
D) Cross-price elasticity is always negative,and simply reported in absolute value. 
A) Peanut butter and jelly 
B) Butter and margarine 
C) Ramen noodles and a Rolex watch 
D) Cross-price elasticity is always negative,and simply reported in absolute value.

Question 4

Assuming elasticity is reported in absolute value,an elastic demand has a measured elasticity:

Accepted Answer

A) greater than one. 
B) less than one. 
C) of exactly one. 
D) greater than zero and less than one. 
A) greater than one. 
B) less than one. 
C) of exactly one. 
D) greater than zero and less than one.

Question 5

If a good has a less elastic demand curve:

Accepted Answer

A) then a small percentage change in price will cause a large change in quantity demanded. 
B) then any percentage change in price will take a long time to cause a response in quantity demanded. 
C) then a large percentage change in price will cause a small change in quantity demanded. 
D) then any percentage change in price will cause an almost immediate response in quantity demanded. 
A) then a small percentage change in price will cause a large change in quantity demanded. 
B) then any percentage change in price will take a long time to cause a response in quantity demanded. 
C) then a large percentage change in price will cause a small change in quantity demanded. 
D) then any percentage change in price will cause an almost immediate response in quantity demanded.

Question 6

In general,the more elastic a demand curve is:

Accepted Answer

A) the flatter it will be. 
B) the steeper it will be. 
C) the more bowed-in it will be. 
D) the faster it will shift when price changes. 
A) the flatter it will be. 
B) the steeper it will be. 
C) the more bowed-in it will be. 
D) the faster it will shift when price changes.

Question 7

The calculated price elasticity of demand:

Accepted Answer

A) is always a negative number,although many times is reported as an absolute value. 
B) is sometimes a negative number,depending on the magnitude of response. 
C) is always a positive number,because price and quantity are directly related in terms of demand. 
D) can be positive or negative,but is always reported as an absolute value. 
A) is always a negative number,although many times is reported as an absolute value. 
B) is sometimes a negative number,depending on the magnitude of response. 
C) is always a positive number,because price and quantity are directly related in terms of demand. 
D) can be positive or negative,but is always reported as an absolute value.

Question 8

If the quantity effect outweighs the price effect of a price decrease,then:

Accepted Answer

A) the good is price elastic. 
B) total revenue will rise. 
C) the measured elasticity must be more than 1. 
D) All of these are true. 
A) the good is price elastic. 
B) total revenue will rise. 
C) the measured elasticity must be more than 1. 
D) All of these are true.

Question 9

A good that has an income elasticity of 0.4 is:

Accepted Answer

A) a luxury good. 
B) a normal good. 
C) an inferior good. 
D) a substitute good. 
A) a luxury good. 
B) a normal good. 
C) an inferior good. 
D) a substitute good.

Question 10

A good that has a unit elastic demand:

Accepted Answer

A) has a perfectly horizontal demand curve. 
B) has a perfectly vertical demand curve. 
C) has a measured elasticity greater than 1. 
D) None of these is true. 
A) has a perfectly horizontal demand curve. 
B) has a perfectly vertical demand curve. 
C) has a measured elasticity greater than 1. 
D) None of these is true.

Question 11

A subway ride is ___________________ than a car because ___________________.

Accepted Answer

A) less price elastic;it is a smaller portion of one's income 
B) more price elastic;it is a smaller portion of one's income 
C) less price elastic;people will have a longer time to adjust to the change in its price 
D) more price elastic;people will have a longer time to adjust to the change in its price 
A) less price elastic;it is a smaller portion of one's income 
B) more price elastic;it is a smaller portion of one's income 
C) less price elastic;people will have a longer time to adjust to the change in its price 
D) more price elastic;people will have a longer time to adjust to the change in its price

Question 12

A good is inelastic if:

Accepted Answer

A) total revenue decreases as a result of a price increase. 
B) the quantity effect outweighs the price effect of a price increase. 
C) the measured elasticity is greater than 1. 
D) None of these is true. 
A) total revenue decreases as a result of a price increase. 
B) the quantity effect outweighs the price effect of a price increase. 
C) the measured elasticity is greater than 1. 
D) None of these is true.

Question 13

A decrease in price:

Accepted Answer

A) causes a decrease in revenue due to the quantity effect. 
B) causes an increase in revenue due to the price effect. 
C) does not necessarily have to experience a quantity effect when the demand curve is downward sloping. 
D) None of these is true. 
A) causes a decrease in revenue due to the quantity effect. 
B) causes an increase in revenue due to the price effect. 
C) does not necessarily have to experience a quantity effect when the demand curve is downward sloping. 
D) None of these is true.

Question 14

Considering the concept of cross-price elasticity,when two goods are substitutes:

Accepted Answer

A) an increase in the price of one will cause an increase in the quantity demanded of the other. 
B) an increase in the price of one will cause a decrease in the quantity demanded of the other. 
C) a decrease in the price of one will cause an increase in the quantity demanded of the other. 
D) Any of these may be true. 
A) an increase in the price of one will cause an increase in the quantity demanded of the other. 
B) an increase in the price of one will cause a decrease in the quantity demanded of the other. 
C) a decrease in the price of one will cause an increase in the quantity demanded of the other. 
D) Any of these may be true.

Question 15

Which pair of goods is most likely to have a negative cross-price elasticity?

Accepted Answer

A) All cross-price elasticities are negative,but often reported in absolute value. 
B) Peanut butter and jelly. 
C) Butter and margarine. 
D) Milk and filet mignon. 
A) All cross-price elasticities are negative,but often reported in absolute value. 
B) Peanut butter and jelly. 
C) Butter and margarine. 
D) Milk and filet mignon.

Question 16

If the price of a DVD decreases by 50 percent,the quantity demanded increases by 75 percent.The price elasticity of demand is:

Accepted Answer

A) 1.5 and is elastic. 
B) 1.5 and is inelastic. 
C) 0.67 and is elastic. 
D) 0.67 and is inelastic. 
A) 1.5 and is elastic. 
B) 1.5 and is inelastic. 
C) 0.67 and is elastic. 
D) 0.67 and is inelastic.

Question 17

If a good has a highly elastic demand curve,then:

Accepted Answer

A) a small percentage change in price will cause a large change in quantity demanded. 
B) a small percentage change in price will cause virtually no change in quantity demanded. 
C) a large percentage change in price will cause a small change in quantity demanded. 
D) any percentage change in price will cause an almost immediate response in quantity demanded. 
A) a small percentage change in price will cause a large change in quantity demanded. 
B) a small percentage change in price will cause virtually no change in quantity demanded. 
C) a large percentage change in price will cause a small change in quantity demanded. 
D) any percentage change in price will cause an almost immediate response in quantity demanded.

Question 18

Suppose when the price of movie tickets is $5,the quantity demanded is 500,and when the price is $7,the quantity demanded is 300.Using the mid-point method,the price elasticity of demand is:

Accepted Answer

A) 1.51. 
B) 0.66. 
C) 151 percent. 
D) 66 percent. 
A) 1.51. 
B) 0.66. 
C) 151 percent. 
D) 66 percent.

Question 19

Ben & Jerry's ice cream is _________________ than all ice cream because _______________.

Accepted Answer

A) less price elastic;the scope of the market is less broadly defined 
B) more price elastic;the scope of the market is less broadly defined 
C) less price elastic;it has less available substitutes 
D) more price elastic;it has less available substitutes 
A) less price elastic;the scope of the market is less broadly defined 
B) more price elastic;the scope of the market is less broadly defined 
C) less price elastic;it has less available substitutes 
D) more price elastic;it has less available substitutes

Question 20

The amount that a firm receives from the sale of goods and services is:

Accepted Answer

A) total profit. 
B) total revenue. 
C) total cost. 
D) total benefit. 
A) total profit. 
B) total revenue. 
C) total cost. 
D) total benefit.

Exam 4: Elasticity

The cross-price elasticity of demand for peanut butter and jelly is likely:

It is most likely for which of the following to have an income elasticity greater than 1?

Which pair of goods is likely to have the largest positive cross-price elasticity?

Assuming elasticity is reported in absolute value,an elastic demand has a measured elasticity:

If a good has a less elastic demand curve:

In general,the more elastic a demand curve is:

The calculated price elasticity of demand:

If the quantity effect outweighs the price effect of a price decrease,then:

A good that has an income elasticity of 0.4 is:

A good that has a unit elastic demand:

A subway ride is ___________________ than a car because ___________________.

A good is inelastic if:

A decrease in price:

Considering the concept of cross-price elasticity,when two goods are substitutes:

Which pair of goods is most likely to have a negative cross-price elasticity?

If the price of a DVD decreases by 50 percent,the quantity demanded increases by 75 percent.The price elasticity of demand is:

If a good has a highly elastic demand curve,then:

Suppose when the price of movie tickets is $5,the quantity demanded is 500,and when the price is $7,the quantity demanded is 300.Using the mid-point method,the price elasticity of demand is:

Ben & Jerry's ice cream is _________________ than all ice cream because _______________.

The amount that a firm receives from the sale of goods and services is:

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A subway ride is _ than a car because _.

Ben & Jerry's ice cream is ___ than all ice cream because _.