Question 1

If the cross price elasticity between Goods A and B equals 0.7,then a reduction in the price of Good B will:

Accepted Answer

A)  increase the demand for Good A and increase Good A's price as a result. 
B)  increase the demand for Good A and decrease Good A's price as a result. 
C)  decrease the demand for Good A and increase Good A's price as a result. 
D)  decrease the demand for Good A and decrease Good A's price as a result. 
A)  increase the demand for Good A and increase Good A's price as a result. 
B)  increase the demand for Good A and decrease Good A's price as a result. 
C)  decrease the demand for Good A and increase Good A's price as a result. 
D)  decrease the demand for Good A and decrease Good A's price as a result.

Question 2

The income elasticities of Products A and B and their cross price elasticities with respect to Product C are as follows:   From this information,one can conclude that:

Accepted Answer

A) Product A is normal,Product B is inferior,Product A is a complement to Product C,and Product B is a substitute for Product C. 
B) Product A is normal,Product B is inferior,Product A is a substitute for Product C,and Product B is a complement to Product C. 
C) Product A is inferior,Product B is normal,Product A is a substitute for Product C,and Product B is a complement to Product C. 
D) Product A is inferior,Product B is normal,Product A is a complement to Product C,and Product B is a substitute for Product C. 
A) Product A is normal,Product B is inferior,Product A is a complement to Product C,and Product B is a substitute for Product C. 
B) Product A is normal,Product B is inferior,Product A is a substitute for Product C,and Product B is a complement to Product C. 
C) Product A is inferior,Product B is normal,Product A is a substitute for Product C,and Product B is a complement to Product C. 
D) Product A is inferior,Product B is normal,Product A is a complement to Product C,and Product B is a substitute for Product C.

Question 3

The widespread availability of e-mail has likely increased the price elasticity of demand for the services of the U.S.Postal Service.

Accepted Answer

A) True 
 B)False

Question 4

Good A has an income elasticity equal to -0.8 and a cross price elasticity with respect to Good B of -0.75.Then:

Accepted Answer

A)  Good A is an inferior good and Goods A and B are substitutes. 
B)  Good A is an inferior good and Goods A and B are complements. 
C)  Good A is a normal good and Goods A and B are substitutes. 
D)  Good A is a normal good and Goods A and B are complements. 
A)  Good A is an inferior good and Goods A and B are substitutes. 
B)  Good A is an inferior good and Goods A and B are complements. 
C)  Good A is a normal good and Goods A and B are substitutes. 
D)  Good A is a normal good and Goods A and B are complements.

Question 5

Exhibit 6-4   Refer to Exhibit 6-4.Graph A represents a demand curve that is relatively ____.Total revenue ____ as the price decreases from $10 to $5.

Accepted Answer

A)  inelastic; decreases 
B)  elastic; decreases 
C)  elastic; increases 
D)  inelastic; increases 
A)  inelastic; decreases 
B)  elastic; decreases 
C)  elastic; increases 
D)  inelastic; increases

Question 6

A family friend is shopping for an exclusive Vera Wang wedding gown for $8,000 but feels that the price is excessive.She argues that the company should lower prices not only to benefit customers but also to increase the company's revenues and profits.What has she assumed about the price elasticity of demand for these gowns? Is her assumption likely to be correct or incorrect? Why?

Accepted Answer

In this case the friend has assumed that

If the cross price elasticity between Goods A and B equals 0.7,then a reduction in the price of Good B will:

The income elasticities of Products A and B and their cross price elasticities with respect to Product C are as follows: From this information,one can conclude that:

The widespread availability of e-mail has likely increased the price elasticity of demand for the services of the U.S.Postal Service.

Good A has an income elasticity equal to -0.8 and a cross price elasticity with respect to Good B of -0.75.Then:

Exhibit 6-4 Refer to Exhibit 6-4.Graph A represents a demand curve that is relatively .Total revenue as the price decreases from $10 to $5.

The Role and Method of Economics

Economics: Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Markets in Motion and Price Controls

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty, and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Aggregate Demand and Aggregate Supply

The Aggregate Expenditure Model

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Trade

International Finance

Filters

Exam 6: Elasticities

If the cross price elasticity between Goods A and B equals 0.7,then a reduction in the price of Good B will:

The income elasticities of Products A and B and their cross price elasticities with respect to Product C are as follows: From this information,one can conclude that:

The widespread availability of e-mail has likely increased the price elasticity of demand for the services of the U.S.Postal Service.

Good A has an income elasticity equal to -0.8 and a cross price elasticity with respect to Good B of -0.75.Then:

Exhibit 6-4 Refer to Exhibit 6-4.Graph A represents a demand curve that is relatively ____.Total revenue ____ as the price decreases from $10 to $5.

The Role and Method of Economics

Economics: Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Markets in Motion and Price Controls

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty, and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Aggregate Demand and Aggregate Supply

The Aggregate Expenditure Model

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Trade

International Finance

Filters

Exhibit 6-4 Refer to Exhibit 6-4.Graph A represents a demand curve that is relatively .Total revenue as the price decreases from $10 to $5.