Question 1

A good is inelastic if:

Accepted Answer

A) total revenue increases 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 increases 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 2

An increase in price:

Accepted Answer

A) causes a decrease in revenue due to the price effect. 
B) causes an increase in revenue due to the price effect. 
C) causes an increase in revenue due to the quantity effect. 
D) None of these is true. 
A) causes a decrease in revenue due to the price effect. 
B) causes an increase in revenue due to the price effect. 
C) causes an increase in revenue due to the quantity effect. 
D) None of these is true.

Question 3

Suppose when the price of calculators is $10,the quantity demanded is 100,and when the price is $12,the quantity demanded drops to 80.Using the mid-point method,the price elasticity of demand is:

Accepted Answer

A) 1.5. 
B) 0.81. 
C) 150 percent. 
D) 81 percent. 
A) 1.5. 
B) 0.81. 
C) 150 percent. 
D) 81 percent.

Question 4

Assuming elasticity is reported in absolute value,a measured elasticity of less than one implies:

Accepted Answer

A) the good is elastic. 
B) the good is inelastic. 
C) the good is unitary elastic. 
D) Cannot be determined without more information. 
A) the good is elastic. 
B) the good is inelastic. 
C) the good is unitary elastic. 
D) Cannot be determined without more information.

Question 5

When a good has a lot of close substitutes available,it is likely to be:

Accepted Answer

A) more price elastic than goods without close substitutes available. 
B) less price elastic than goods without close substitutes available. 
C) more price elastic than those with a lot of complement goods available. 
D) less price elastic than those with a lot of complement goods available. 
A) more price elastic than goods without close substitutes available. 
B) less price elastic than goods without close substitutes available. 
C) more price elastic than those with a lot of complement goods available. 
D) less price elastic than those with a lot of complement goods available.

Question 6

Suppose that when the price of coffee beans goes from $1 to $1.20 per pound,production increases from 90 million pounds of coffee beans per year to 100 million pounds.
Using the mid-point method,the percentage change in quantity supplied would be:

Accepted Answer

A) 11 percent. 
B) 18 percent 
C) 0.6. 
D) 6. 
A) 11 percent. 
B) 18 percent 
C) 0.6. 
D) 6.

Question 7

The longer people have to adjust to a price change:

Accepted Answer

A) the more elastic their demand will be. 
B) the less elastic their demand will be. 
C) will not affect the elasticity of their response unless it is a luxury good. 
D) will not affect the elasticity of their response unless the good is a necessity. 
A) the more elastic their demand will be. 
B) the less elastic their demand will be. 
C) will not affect the elasticity of their response unless it is a luxury good. 
D) will not affect the elasticity of their response unless the good is a necessity.

Question 8

A baker of chocolate chip cookies is likely to have a ______________ price elasticity of supply than the seller of rare baseball cards due to ______________.

Accepted Answer

A) more elastic;the availability of inputs 
B) less elastic;the availability of inputs 
C) less elastic;a shorter adjustment time 
D) less elastic;a more flexible production process 
A) more elastic;the availability of inputs 
B) less elastic;the availability of inputs 
C) less elastic;a shorter adjustment time 
D) less elastic;a more flexible production process

Question 9

Which elasticity measures producers' responsiveness to a change in price?

Accepted Answer

A) Price elasticity of supply 
B) Price elasticity of demand 
C) Cross-price elasticity 
D) Income elasticity of supply 
A) Price elasticity of supply 
B) Price elasticity of demand 
C) Cross-price elasticity 
D) Income elasticity of supply

Question 10

If the price of cereal changes by 10 percent,we observe a 2 percent change in the quantity of milk demanded.The cross-price elasticity of these goods is:

Accepted Answer

A) 5. 
B) -5. 
C) 0.2. 
D) -0.2. 
A) 5. 
B) -5. 
C) 0.2. 
D) -0.2.

Question 11

A microchip manufacturing plant is likely to have a ______________ price elasticity of supply than a bread bakery due to _________________.

Accepted Answer

A) more elastic;a more flexible production process 
B) more elastic;greater availability of inputs 
C) less elastic;a less flexible production process 
D) more elastic;less availability of inputs 
A) more elastic;a more flexible production process 
B) more elastic;greater availability of inputs 
C) less elastic;a less flexible production process 
D) more elastic;less availability of inputs

Question 12

Classical music is _______________ than Beethoven's music 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;the scope of the market is more broadly defined 
D) more price elastic;the scope of the market is more broadly defined 
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;the scope of the market is more broadly defined 
D) more price elastic;the scope of the market is more broadly defined

Question 13

The cross-price elasticity of two goods is -2.This tells us that:

Accepted Answer

A) the two goods are substitutes. 
B) the two goods are complements. 
C) the two goods are unrelated. 
D) the two goods are inelastic. 
A) the two goods are substitutes. 
B) the two goods are complements. 
C) the two goods are unrelated. 
D) the two goods are inelastic.

Question 14

Assuming elasticity is reported in absolute value,a measured price elasticity of demand of 1.2 would indicate:

Accepted Answer

A) an elastic demand,meaning the percentage change in quantity demanded will be greater than the percentage change in price. 
B) an inelastic demand,meaning the percentage change in quantity demanded will be greater than the percentage change in price. 
C) an elastic demand,meaning the percentage change in quantity demanded will be less than the percentage change in price. 
D) an inelastic demand,meaning the percentage change in quantity demanded will be less than the percentage change in price. 
A) an elastic demand,meaning the percentage change in quantity demanded will be greater than the percentage change in price. 
B) an inelastic demand,meaning the percentage change in quantity demanded will be greater than the percentage change in price. 
C) an elastic demand,meaning the percentage change in quantity demanded will be less than the percentage change in price. 
D) an inelastic demand,meaning the percentage change in quantity demanded will be less than the percentage change in price.

Question 15

Suppose when the price of a cookie is $2.50,the quantity demanded is 50,and when the price is $1,the quantity demanded is 200.Using the midpoint method,the price elasticity of demand is:

Accepted Answer

A) 1.4. 
B) 0.72. 
C) 140. 
D) 72. 
A) 1.4. 
B) 0.72. 
C) 140. 
D) 72.

Question 16

A box of corn flakes cereal is likely to be:

Accepted Answer

A) very price elastic,since there are many close substitutes available. 
B) less price elastic,since there are many close substitutes available. 
C) very price elastic,since the cereal is a unique product. 
D) less price elastic,since the cereal is a unique product. 
A) very price elastic,since there are many close substitutes available. 
B) less price elastic,since there are many close substitutes available. 
C) very price elastic,since the cereal is a unique product. 
D) less price elastic,since the cereal is a unique product.

Question 17

A price increase will cause an increase in revenue:

Accepted Answer

A) when the price effect outweighs the quantity effect. 
B) when the quantity effect outweighs the price effect. 
C) when demand is perfectly elastic. 
D) when demand is unit elastic. 
A) when the price effect outweighs the quantity effect. 
B) when the quantity effect outweighs the price effect. 
C) when demand is perfectly elastic. 
D) when demand is unit elastic.

Question 18

We need to calculate the price elasticity of demand because:

Accepted Answer

A) producers need to know that consumers are more sensitive to price changes for some goods and services than for others. 
B) producers need to be able to predict the future preferences of their customers. 
C) producers need to know that consumers will have the same response to a price change regardless of the good or service. 
D) producers need to understand what it is their customers demand the most. 
A) producers need to know that consumers are more sensitive to price changes for some goods and services than for others. 
B) producers need to be able to predict the future preferences of their customers. 
C) producers need to know that consumers will have the same response to a price change regardless of the good or service. 
D) producers need to understand what it is their customers demand the most.

Question 19

Suppose that when the price of pineapples goes from $5 to $3 per pineapple,production decreases from 3,500 pineapples per year to 2,000 pineapples.Using the mid-point method,the percentage change in price would be:

Accepted Answer

A) 0.50. 
B) 50 percent. 
C) 0.54. 
D) 54 percent. 
A) 0.50. 
B) 50 percent. 
C) 0.54. 
D) 54 percent.

Exam 4: Elasticity

A good is inelastic if:

An increase in price:

Suppose when the price of calculators is $10,the quantity demanded is 100,and when the price is $12,the quantity demanded drops to 80.Using the mid-point method,the price elasticity of demand is:

Assuming elasticity is reported in absolute value,a measured elasticity of less than one implies:

When a good has a lot of close substitutes available,it is likely to be:

Suppose that when the price of coffee beans goes from $1 to $1.20 per pound,production increases from 90 million pounds of coffee beans per year to 100 million pounds. Using the mid-point method,the percentage change in quantity supplied would be:

The longer people have to adjust to a price change:

A baker of chocolate chip cookies is likely to have a ______________ price elasticity of supply than the seller of rare baseball cards due to ______________.

Which elasticity measures producers' responsiveness to a change in price?

If the price of cereal changes by 10 percent,we observe a 2 percent change in the quantity of milk demanded.The cross-price elasticity of these goods is:

A microchip manufacturing plant is likely to have a ______________ price elasticity of supply than a bread bakery due to _________________.

Classical music is _______________ than Beethoven's music because _______________.

The cross-price elasticity of two goods is -2.This tells us that:

Assuming elasticity is reported in absolute value,a measured price elasticity of demand of 1.2 would indicate:

Suppose when the price of a cookie is $2.50,the quantity demanded is 50,and when the price is $1,the quantity demanded is 200.Using the midpoint method,the price elasticity of demand is:

A box of corn flakes cereal is likely to be:

A price increase will cause an increase in revenue:

We need to calculate the price elasticity of demand because:

Suppose that when the price of pineapples goes from $5 to $3 per pineapple,production decreases from 3,500 pineapples per year to 2,000 pineapples.Using the mid-point method,the percentage change in price would be:

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A baker of chocolate chip cookies is likely to have a price elasticity of supply than the seller of rare baseball cards due to .

A microchip manufacturing plant is likely to have a price elasticity of supply than a bread bakery due to ___.

Classical music is _ than Beethoven's music because _.