Question 1

Assuming price elasticity of demand is reported as an absolute value,a good with unit elastic demand has an elasticity:

Accepted Answer

A)  between zero and one. 
B)  greater than one. 
C)  less than one, but greater than zero. 
D)  equal to one. 
A)  between zero and one. 
B)  greater than one. 
C)  less than one, but greater than zero. 
D)  equal to one.

Question 2

Ray just got a raise,and decided to splurge on a fancy dinner to celebrate.The change to Ray's demand for fancy dinners could be measured by the:

Accepted Answer

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

Question 3

A perfectly inelastic demand means:

Accepted Answer

A)  consumers will change the quantity they purchase when price changes. 
B)  demand will drop to zero if the price increases by any amount. 
C)  consumers will not change the quantity they purchase when price changes. 
D)  the demand curve is perfectly horizontal. 
A)  consumers will change the quantity they purchase when price changes. 
B)  demand will drop to zero if the price increases by any amount. 
C)  consumers will not change the quantity they purchase when price changes. 
D)  the demand curve is perfectly horizontal.

Question 4

Suppose when the price of mascara is $12,the quantity demanded is 450,and when the price is $8,the quantity demanded is 550.Using the mid-point method,the price elasticity of demand is:

Accepted Answer

A)  -0.5 
B)  -2.0 
C)  -55 
D)  -180 
A)  -0.5 
B)  -2.0 
C)  -55 
D)  -180

Question 5

The demand for shoes is ___________________ than is the demand for sneakers because __________________.

Accepted Answer

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

Question 6

Suppose a decrease in price increases quantity demanded from 8 to 12.Using the mid-point formula,the percentage change in quantity demanded is:

Accepted Answer

A)  0.1, and is elastic. 
B)  40 = 400 percent. 
C)  0.40 = 40 percent. 
D)  0.40 = 40 percent 
A)  0.1, and is elastic. 
B)  40 = 400 percent. 
C)  0.40 = 40 percent. 
D)  0.40 = 40 percent

Question 7

If the price of jelly increases 10 percent and the amount of peanut butter purchased decreases 20 percent,then the cross-price elasticity of these goods is:

Accepted Answer

A)  0.5. 
B)  2. 
C)  0.5 
D)  2 
A)  0.5. 
B)  2. 
C)  0.5 
D)  2

Question 8

Assuming price elasticity of demand is reported as an absolute value,a price elasticity of demand of 1.2 indicates an:

Accepted Answer

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

Question 9

If a large percentage change in price leads to a smaller percentage change in quantity demanded,the result is a:

Accepted Answer

A)  very elastic demand. 
B)  less elastic demand. 
C)  low magnitude of response. 
D)  high magnitude of response. 
A)  very elastic demand. 
B)  less elastic demand. 
C)  low magnitude of response. 
D)  high magnitude of response.

Question 10

The response in quantity demanded to a price increase in subway rides:

Accepted Answer

A)  will be more elastic in six weeks than in six months. 
B)  will be less elastic in six weeks than in six months. 
C)  will be the same over that time period. 
D)  is unpredictable without more information. 
A)  will be more elastic in six weeks than in six months. 
B)  will be less elastic in six weeks than in six months. 
C)  will be the same over that time period. 
D)  is unpredictable without more information.

Question 11

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 pencils. 
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 pencils.

Question 12

A decrease in price:

Accepted Answer

A)  causes a decrease in total revenue due to the quantity effect. 
B)  causes an increase in total revenue due to the price effect. 
C)  does not cause a quantity effect when demand is perfectly inelastic. 
D)  does not change quantity demanded if demand is elastic. 
A)  causes a decrease in total revenue due to the quantity effect. 
B)  causes an increase in total revenue due to the price effect. 
C)  does not cause a quantity effect when demand is perfectly inelastic. 
D)  does not change quantity demanded if demand is elastic.

Question 13

An increase in price causes:

Accepted Answer

A)  a decrease in total revenue due to the price effect. 
B)  an increase in total revenue due to the price effect. 
C)  an increase in total revenue due to the quantity effect. 
D)  an increase in quantity demanded. 
A)  a decrease in total revenue due to the price effect. 
B)  an increase in total revenue due to the price effect. 
C)  an increase in total revenue due to the quantity effect. 
D)  an increase in quantity demanded.

Question 14

Bob got laid off six months ago.He used to go to the movies once a month,but he's only been twice because he lost 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 15

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 16

Assuming price elasticity of demand is reported as an absolute value,an inelastic demand has a measured elasticity:

Accepted Answer

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

Question 17

Assuming price elasticity of demand is reported as an absolute value,a price elasticity of demand less than one indicates demand for the good is:

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  unitary elastic. 
D)  unrelated to price. 
A)  elastic. 
B)  inelastic. 
C)  unitary elastic. 
D)  unrelated to price.

Question 18

If a one percent change in the price of oil causes a 0.02 percent change in the quantity demanded of oil,then 0.02 is the

Accepted Answer

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

Question 19

Determinants of the price elasticity of supply are:

Accepted Answer

A)  adjustment time, whether the good is a luxury or a necessity. 
B)  availability of inputs, adjustment time. 
C)  flexibility of the production process, whether the good is a luxury or a necessity. 
D)  availability of inputs, whether the good is a luxury or a necessity. 
A)  adjustment time, whether the good is a luxury or a necessity. 
B)  availability of inputs, adjustment time. 
C)  flexibility of the production process, whether the good is a luxury or a necessity. 
D)  availability of inputs, whether the good is a luxury or a necessity.

Question 20

A linear demand curve:

Accepted Answer

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

Exam 4: Elasticity

Assuming price elasticity of demand is reported as an absolute value,a good with unit elastic demand has an elasticity:

Ray just got a raise,and decided to splurge on a fancy dinner to celebrate.The change to Ray's demand for fancy dinners could be measured by the:

A perfectly inelastic demand means:

Suppose when the price of mascara is $12,the quantity demanded is 450,and when the price is $8,the quantity demanded is 550.Using the mid-point method,the price elasticity of demand is:

The demand for shoes is ___________________ than is the demand for sneakers because __________________.

Suppose a decrease in price increases quantity demanded from 8 to 12.Using the mid-point formula,the percentage change in quantity demanded is:

If the price of jelly increases 10 percent and the amount of peanut butter purchased decreases 20 percent,then the cross-price elasticity of these goods is:

Assuming price elasticity of demand is reported as an absolute value,a price elasticity of demand of 1.2 indicates an:

If a large percentage change in price leads to a smaller percentage change in quantity demanded,the result is a:

The response in quantity demanded to a price increase in subway rides:

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

A decrease in price:

An increase in price causes:

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

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

Assuming price elasticity of demand is reported as an absolute value,an inelastic demand has a measured elasticity:

Assuming price elasticity of demand is reported as an absolute value,a price elasticity of demand less than one indicates demand for the good is:

If a one percent change in the price of oil causes a 0.02 percent change in the quantity demanded of oil,then 0.02 is the

Determinants of the price elasticity of supply are:

A linear demand curve:

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The demand for shoes is _ than is the demand for sneakers because .