Question 1

Cross-price elasticity refers to:

Accepted Answer

A) how much the demand for one good changes in response to a change in the price of a different good. 
B) how much the demand for one good changes in response to a change in its price. 
C) the magnitude of the shift in demand for a good in response to a change in its price. 
D) None of these is true. 
A) how much the demand for one good changes in response to a change in the price of a different good. 
B) how much the demand for one good changes in response to a change in its price. 
C) the magnitude of the shift in demand for a good in response to a change in its price. 
D) None of these is true.

Question 2

Coke and Pepsi would likely have a:

Accepted Answer

A) more elastic cross-price elasticity of demand than Coke and Sunkist. 
B) less elastic cross-price elasticity of demand than Coke and Sunkist. 
C) measured cross-price elasticity of demand that is smaller than Coke and Sunkist. 
D) None of these is true. 
A) more elastic cross-price elasticity of demand than Coke and Sunkist. 
B) less elastic cross-price elasticity of demand than Coke and Sunkist. 
C) measured cross-price elasticity of demand that is smaller than Coke and Sunkist. 
D) None of these is true.

Question 3

Price elasticity of supply:

Accepted Answer

A) is the size of the percentage change in the quantity supplied of a good or service when its price changes by one percent. 
B) measures producers' responsiveness to a change in price. 
C) is typically a positive number. 
D) All of these are true. 
A) is the size of the percentage change in the quantity supplied of a good or service when its price changes by one percent. 
B) measures producers' responsiveness to a change in price. 
C) is typically a positive number. 
D) All of these are true.

Question 4

Steak is _______________________ than food because _____________________.

Accepted Answer

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

Question 5

A perfectly inelastic demand is one in which:

Accepted Answer

A) the demand curve is perfectly vertical. 
B) the demand curve is perfectly horizontal. 
C) the measured elasticity is exactly 1. 
D) the response to a change in price is immediate. 
A) the demand curve is perfectly vertical. 
B) the demand curve is perfectly horizontal. 
C) the measured elasticity is exactly 1. 
D) the response to a change in price is immediate.

Question 6

The mid-point method of calculating elasticity is often used because:

Accepted Answer

A) it allows us to have a consistent way to estimate the elasticity of demand between two points,regardless of the direction of the movement. 
B) it is easier to calculate. 
C) it is universally understood by all economists. 
D) the negative sign can then be ignored. 
A) it allows us to have a consistent way to estimate the elasticity of demand between two points,regardless of the direction of the movement. 
B) it is easier to calculate. 
C) it is universally understood by all economists. 
D) the negative sign can then be ignored.

Question 7

If a manager were to multiply the quantity sold by the price paid for each unit,he would calculate:

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.

Question 8

A linear demand curve:

Accepted Answer

A) has a constant slope. 
B) has a constant elasticity. 
C) will be more elastic when price is low and more inelastic when price is high. 
D) must be either perfectly inelastic or perfectly elastic. 
A) has a constant slope. 
B) has a constant elasticity. 
C) will be more elastic when price is low and more inelastic when price is high. 
D) must be either perfectly inelastic or perfectly elastic.

Question 9

The price elasticity of supply is __________ elastic over time because ___________.

Accepted Answer

A) less;producers get accustomed to the price changes 
B) less;the ideal number of firms have time to move into or out of the industry 
C) more;producers have a longer time to adjust their production decisions 
D) more;producers get accustomed to the price changes 
A) less;producers get accustomed to the price changes 
B) less;the ideal number of firms have time to move into or out of the industry 
C) more;producers have a longer time to adjust their production decisions 
D) more;producers get accustomed to the price changes

Question 10

If the price of a good increases by 10 percent,its quantity demanded drops by 50 percent.The price elasticity of demand is:

Accepted Answer

A) 1. 
B) 0.2. 
C) 5. 
D) 2. 
A) 1. 
B) 0.2. 
C) 5. 
D) 2.

Question 11

Bob got laid off six months ago.He used to go to the movies once a month,but he's only been twice since losing his job.This type of behavior can be measured using:

Accepted Answer

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

Question 12

The concept of elasticity can be applied to:

Accepted Answer

A) changes in demand,but not supply. 
B) changes in supply,but not demand. 
C) changes in both supply and demand. 
D) neither supply nor demand. 
A) changes in demand,but not supply. 
B) changes in supply,but not demand. 
C) changes in both supply and demand. 
D) neither supply nor demand.

Question 13

Some of the determinants of the price elasticity are:

Accepted Answer

A) availability of substitutes,cost relative to benefit,and scope of market. 
B) degree of necessity,cost relative to income,scope of market,and adjustment time. 
C) availability of complements,cost relative to income,and scope of market. 
D) cost relative to income,scope of demand,and adjustment time. 
A) availability of substitutes,cost relative to benefit,and scope of market. 
B) degree of necessity,cost relative to income,scope of market,and adjustment time. 
C) availability of complements,cost relative to income,and scope of market. 
D) cost relative to income,scope of demand,and adjustment time.

Question 14

Suppose when the price of mascara is $12,the quantity demanded is 400,and when the price is $8,the quantity demanded is 500.Using the mid-point method,the price elasticity of demand is:

Accepted Answer

A) 0.56. 
B) 1.8. 
C) 56. 
D) 180. 
A) 0.56. 
B) 1.8. 
C) 56. 
D) 180.

Question 15

When consumers' buying decisions are less sensitive to changes in price,we say that their demand curve is:

Accepted Answer

A) highly elastic. 
B) less elastic. 
C) very sensitive to changes in the price. 
D) unit elastic. 
A) highly elastic. 
B) less elastic. 
C) very sensitive to changes in the price. 
D) unit elastic.

Question 16

The demand for insulin is:

Accepted Answer

A) likely to be perfectly inelastic over some range of prices. 
B) perfectly elastic. 
C) a large portion of someone's income. 
D) low relative to the supply. 
A) likely to be perfectly inelastic over some range of prices. 
B) perfectly elastic. 
C) a large portion of someone's income. 
D) low relative to the supply.

Question 17

A perfectly elastic demand:

Accepted Answer

A) means people are extremely sensitive to a change in price. 
B) means demand will drop to zero if the price changes by any amount. 
C) is demonstrated by a horizontal demand curve. 
D) All of these are true. 
A) means people are extremely sensitive to a change in price. 
B) means demand will drop to zero if the price changes by any amount. 
C) is demonstrated by a horizontal demand curve. 
D) All of these are true.

Question 18

Suppose that when the price of shoe laces goes from $1 to $2 per pair,production increases from 90 million pairs per year to 100 million pairs.Using the mid-point method,the price elasticity of supply would be:

Accepted Answer

A) 6.28. 
B) 66 percent. 
C) 10.5 percent. 
D) 0.16. 
A) 6.28. 
B) 66 percent. 
C) 10.5 percent. 
D) 0.16.

Question 19

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

Accepted Answer

A) an increase in the price of one will cause a decrease in the quantity demanded of the other. 
B) an increase in the price of one will cause an increase in the quantity demanded of the other. 
C) a decrease in the price of one will cause a decrease in the quantity demanded of the other. 
D) None of these is true. 
A) an increase in the price of one will cause a decrease in the quantity demanded of the other. 
B) an increase in the price of one will cause an increase in the quantity demanded of the other. 
C) a decrease in the price of one will cause a decrease in the quantity demanded of the other. 
D) None of these is true.

Question 20

A horizontal demand curve implies:

Accepted Answer

A) a perfectly inelastic demand. 
B) demand will drop to zero if the price changes by any amount. 
C) price elasticity is equal to one. 
D) people will not respond to any change in price. 
A) a perfectly inelastic demand. 
B) demand will drop to zero if the price changes by any amount. 
C) price elasticity is equal to one. 
D) people will not respond to any change in price.

Exam 4: Elasticity

Cross-price elasticity refers to:

Coke and Pepsi would likely have a:

Price elasticity of supply:

Steak is _______________________ than food because _____________________.

A perfectly inelastic demand is one in which:

The mid-point method of calculating elasticity is often used because:

If a manager were to multiply the quantity sold by the price paid for each unit,he would calculate:

A linear demand curve:

The price elasticity of supply is __________ elastic over time because ___________.

If the price of a good increases by 10 percent,its quantity demanded drops by 50 percent.The price elasticity of demand is:

Bob got laid off six months ago.He used to go to the movies once a month,but he's only been twice since losing his job.This type of behavior can be measured using:

The concept of elasticity can be applied to:

Some of the determinants of the price elasticity are:

Suppose when the price of mascara is $12,the quantity demanded is 400,and when the price is $8,the quantity demanded is 500.Using the mid-point method,the price elasticity of demand is:

When consumers' buying decisions are less sensitive to changes in price,we say that their demand curve is:

The demand for insulin is:

A perfectly elastic demand:

Suppose that when the price of shoe laces goes from $1 to $2 per pair,production increases from 90 million pairs per year to 100 million pairs.Using the mid-point method,the price elasticity of supply would be:

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

A horizontal demand curve implies:

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