Question 1

Which of the following is likely to have the highest price elasticity of demand?

Accepted Answer

A) shoes 
B) running shoes 
C) Nike running shoes 
D) The price elasticity of demand will be the same for all of the answers listed. 
A) shoes 
B) running shoes 
C) Nike running shoes 
D) The price elasticity of demand will be the same for all of the answers listed.

Question 2

The following graph depicts demand.   The price elasticity of demand at point A is:

Accepted Answer

A) 5/2. 
B) 5/8. 
C) 2/5. 
D) 8/5. 
A) 5/2. 
B) 5/8. 
C) 2/5. 
D) 8/5.

Question 3

Refer to the figure below. At a price of $2, the total expenditure on lattes each hour equals:

Accepted Answer

A) $30. 
B) $40. 
C) $60. 
D) $80. 
A) $30. 
B) $40. 
C) $60. 
D) $80.

Question 4

Suppose that a new drug has been approved to treat a life-threatening disease. The demand for that drug is shown on the graph below. Prior to approval of this drug, the only treatment for this condition was any one of several non-prescription, or over-the-counter, pain relievers. The demand for one brand of the several non-prescription pain relievers is also shown on the graph.   At a price of $15 (the price at which the two demand curves intersect), the price elasticity of demand for the new drug is ______ the price elasticity of demand for the over-the-counter pain reliever.

Accepted Answer

A) greater than 
B) less than 
C) the same as 
D) the reciprocal of 
A) greater than 
B) less than 
C) the same as 
D) the reciprocal of

Question 5

Suppose that the demand for electricity has been found to be price inelastic. The most likely explanation for this finding is that:

Accepted Answer

A) electricity is a luxury good. 
B) the fraction of income spent on electricity is large. 
C) few substitutes for electricity exist. 
D) electricity is sold in a monopoly market. 
A) electricity is a luxury good. 
B) the fraction of income spent on electricity is large. 
C) few substitutes for electricity exist. 
D) electricity is sold in a monopoly market.

Question 6

If the price elasticity of demand for a good is greater than one, then the demand for that good is:

Accepted Answer

A) elastic. 
B) inelastic. 
C) unit elastic. 
D) perfectly elastic. 
A) elastic. 
B) inelastic. 
C) unit elastic. 
D) perfectly elastic.

Question 7

Refer to the figure below. If the price rises from $10 to $14, what will happen to the price elasticity of supply?

Accepted Answer

A) It increases. 
B) It decreases. 
C) It stays the same. 
D) This cannot be determined from the information provided. 
A) It increases. 
B) It decreases. 
C) It stays the same. 
D) This cannot be determined from the information provided.

Question 8

Suppose that if the price of plane tickets increased, more people would choose to travel by train. If this happened, you would know that:

Accepted Answer

A) plane tickets are an inferior good. 
B) the cross-price elasticity between plane tickets and train tickets is positive. 
C) the cross-price elasticity between plane tickets and train tickets is negative. 
D) plane tickets and train tickets are complements. 
A) plane tickets are an inferior good. 
B) the cross-price elasticity between plane tickets and train tickets is positive. 
C) the cross-price elasticity between plane tickets and train tickets is negative. 
D) plane tickets and train tickets are complements.

Question 9

The following graph depicts demand.   The price elasticity of demand at point B is:

Accepted Answer

A) 3/4. 
B) 4/3. 
C) 3. 
D) 1/3. 
A) 3/4. 
B) 4/3. 
C) 3. 
D) 1/3.

Question 10

If the demand for electricity is inelastic, then if the local utility wants to increase its total revenue, it should _______ its price.

Accepted Answer

A) lower 
B) raise 
C) not change 
D) frequently change 
A) lower 
B) raise 
C) not change 
D) frequently change

Question 11

If the absolute value of the price elasticity of demand for cell phone service is 3, then if the price of cell phone service increases by 1%, quantity demanded would:

Accepted Answer

A) increase by 0.33%. 
B) decrease by 0.33%. 
C) increase by 3%. 
D) decrease by 3%. 
A) increase by 0.33%. 
B) decrease by 0.33%. 
C) increase by 3%. 
D) decrease by 3%.

Question 12

Suppose that Chris had been charging $1.00 per pound for potatoes. When Chris lowered the price to $0.90 per pound, his total revenue fell. When Chris raised the price to $1.10, total revenue also fell. Which of the following could explain this?

Accepted Answer

A) $1.00 is the equilibrium price for potatoes. 
B) At 90 cents, there is excess demand for potatoes. 
C) $1.10 is more than Chris's customers' reservation prices. 
D) The price elasticity of demand for potatoes is 1 at a price of $1.00 per pound. 
A) $1.00 is the equilibrium price for potatoes. 
B) At 90 cents, there is excess demand for potatoes. 
C) $1.10 is more than Chris's customers' reservation prices. 
D) The price elasticity of demand for potatoes is 1 at a price of $1.00 per pound.

Question 13

Suppose that a new drug has been approved to treat a life-threatening disease. The demand for that drug is shown on the graph below. Prior to approval of this drug, the only treatment for this condition was any one of several non-prescription, or over-the-counter, pain relievers. The demand for one brand of the several non-prescription pain relievers is also shown on the graph.   The manufacturer of the new drug would ______ total revenue by increasing the price from $15 to $16.

Accepted Answer

A) increase 
B) decrease 
C) experience no change in 
D) experience an uncertain change in 
A) increase 
B) decrease 
C) experience no change in 
D) experience an uncertain change in

Question 14

Suppose that each serving of Mac & Cheese costs $0.50 to make no matter how many servings are produced. This means that the price elasticity of supply for Mac & Cheese is ______ and the supply curve is ______.

Accepted Answer

A) one; perfectly inelastic 
B) zero; perfectly elastic 
C) infinite; perfectly inelastic 
D) infinite; perfectly elastic 
A) one; perfectly inelastic 
B) zero; perfectly elastic 
C) infinite; perfectly inelastic 
D) infinite; perfectly elastic

Question 15

Suppose the price P on a given demand curve results in a price elasticity of demand equal to 1. Any price higher than P will lie on the ______ part of the demand curve, and any price lower than P will lie on the ______ part of the demand curve.

Accepted Answer

A) elastic; inelastic 
B) unit elastic; inelastic 
C) inelastic; elastic 
D) elastic; unit elastic 
A) elastic; inelastic 
B) unit elastic; inelastic 
C) inelastic; elastic 
D) elastic; unit elastic

Question 16

Jeans in general have fewer close substitutes than a specific brand of jeans. Therefore, the demand for jeans in general will be _______ than the demand for a specific brand of jeans.

Accepted Answer

A) more elastic 
B) less elastic 
C) more unit elastic 
D) less inelastic 
A) more elastic 
B) less elastic 
C) more unit elastic 
D) less inelastic

Question 17

For Outback Steakhouse, seating capacity is limited in the short run. In the long run, they can add as many seats as they want. Therefore, the price elasticity of supply for meals at Outback would be ______ in the short run than in the long run.

Accepted Answer

A) higher 
B) lower 
C) the same 
D) more variable 
A) higher 
B) lower 
C) the same 
D) more variable

Question 18

Which of the following determines whether a firm will earn higher revenues when it raises its price?

Accepted Answer

A) The cost of the firm's inputs. 
B) Government regulation of the industry. 
C) The price elasticity of demand. 
D) None of the above, because companies always earn higher revenues when they increase price. 
A) The cost of the firm's inputs. 
B) Government regulation of the industry. 
C) The price elasticity of demand. 
D) None of the above, because companies always earn higher revenues when they increase price.

Question 19

Refer to the figure below. For demand curve D1, what is the price elasticity of demand when P = 12?\

Accepted Answer

A) 12 
B) 6 
C) 4 
D) 3 
A) 12 
B) 6 
C) 4 
D) 3

Question 20

If the San Diego Opera decreases the price of their opera tickets and their total revenue falls, then this suggests that, at the original price, the demand for tickets to the San Diego Opera was:

Accepted Answer

A) unit elastic. 
B) elastic. 
C) inelastic. 
D) either elastic or inelastic. 
A) unit elastic. 
B) elastic. 
C) inelastic. 
D) either elastic or inelastic.

Which of the following is likely to have the highest price elasticity of demand?

The following graph depicts demand. The price elasticity of demand at point A is:

Refer to the figure below. At a price of $2, the total expenditure on lattes each hour equals:

Suppose that the demand for electricity has been found to be price inelastic. The most likely explanation for this finding is that:

If the price elasticity of demand for a good is greater than one, then the demand for that good is:

Refer to the figure below. If the price rises from $10 to $14, what will happen to the price elasticity of supply?

Suppose that if the price of plane tickets increased, more people would choose to travel by train. If this happened, you would know that:

The following graph depicts demand. The price elasticity of demand at point B is:

If the demand for electricity is inelastic, then if the local utility wants to increase its total revenue, it should _______ its price.

If the absolute value of the price elasticity of demand for cell phone service is 3, then if the price of cell phone service increases by 1%, quantity demanded would:

Suppose that Chris had been charging $1.00 per pound for potatoes. When Chris lowered the price to $0.90 per pound, his total revenue fell. When Chris raised the price to $1.10, total revenue also fell. Which of the following could explain this?

Suppose that each serving of Mac & Cheese costs $0.50 to make no matter how many servings are produced. This means that the price elasticity of supply for Mac & Cheese is and the supply curve is .

Suppose the price P on a given demand curve results in a price elasticity of demand equal to 1. Any price higher than P will lie on the part of the demand curve, and any price lower than P will lie on the part of the demand curve.

Jeans in general have fewer close substitutes than a specific brand of jeans. Therefore, the demand for jeans in general will be _______ than the demand for a specific brand of jeans.

For Outback Steakhouse, seating capacity is limited in the short run. In the long run, they can add as many seats as they want. Therefore, the price elasticity of supply for meals at Outback would be ______ in the short run than in the long run.

Which of the following determines whether a firm will earn higher revenues when it raises its price?

Refer to the figure below. For demand curve D1, what is the price elasticity of demand when P = 12?\ $Refer to the figure below. For demand curve D1, what is the price elasticity of demand when P = 12?\$

If the San Diego Opera decreases the price of their opera tickets and their total revenue falls, then this suggests that, at the original price, the demand for tickets to the San Diego Opera was:

Thinking Like an Economist

Comparative Advantage

Supply and Demand

Demand

Perfectly Competitive Supply

Efficiency, Exchange, and the Invisible Hand in Action

Monopoly, Oligopoly, and Monopolistic Competition

Games and Strategic Behavior

Externalities and Property Rights

The Economics of Information

Labor Markets, Poverty, and Income Distribution

The Environment, Health, and Safety

Public Goods and Tax Policy

Filters

Exam 4: Elasticity

Which of the following is likely to have the highest price elasticity of demand?

The following graph depicts demand. The price elasticity of demand at point A is:

Refer to the figure below. At a price of $2, the total expenditure on lattes each hour equals:

Suppose that the demand for electricity has been found to be price inelastic. The most likely explanation for this finding is that:

If the price elasticity of demand for a good is greater than one, then the demand for that good is:

Refer to the figure below. If the price rises from $10 to $14, what will happen to the price elasticity of supply?

Suppose that if the price of plane tickets increased, more people would choose to travel by train. If this happened, you would know that:

The following graph depicts demand. The price elasticity of demand at point B is:

If the demand for electricity is inelastic, then if the local utility wants to increase its total revenue, it should _______ its price.

If the absolute value of the price elasticity of demand for cell phone service is 3, then if the price of cell phone service increases by 1%, quantity demanded would:

Suppose that Chris had been charging $1.00 per pound for potatoes. When Chris lowered the price to $0.90 per pound, his total revenue fell. When Chris raised the price to $1.10, total revenue also fell. Which of the following could explain this?

Suppose that each serving of Mac & Cheese costs $0.50 to make no matter how many servings are produced. This means that the price elasticity of supply for Mac & Cheese is ______ and the supply curve is ______.

Suppose the price P on a given demand curve results in a price elasticity of demand equal to 1. Any price higher than P will lie on the ______ part of the demand curve, and any price lower than P will lie on the ______ part of the demand curve.

Jeans in general have fewer close substitutes than a specific brand of jeans. Therefore, the demand for jeans in general will be _______ than the demand for a specific brand of jeans.

For Outback Steakhouse, seating capacity is limited in the short run. In the long run, they can add as many seats as they want. Therefore, the price elasticity of supply for meals at Outback would be ______ in the short run than in the long run.

Which of the following determines whether a firm will earn higher revenues when it raises its price?

Refer to the figure below. For demand curve D1, what is the price elasticity of demand when P = 12?\

If the San Diego Opera decreases the price of their opera tickets and their total revenue falls, then this suggests that, at the original price, the demand for tickets to the San Diego Opera was:

Thinking Like an Economist

Comparative Advantage

Supply and Demand

Demand

Perfectly Competitive Supply

Efficiency, Exchange, and the Invisible Hand in Action

Monopoly, Oligopoly, and Monopolistic Competition

Games and Strategic Behavior

Externalities and Property Rights

The Economics of Information

Labor Markets, Poverty, and Income Distribution

The Environment, Health, and Safety

Public Goods and Tax Policy

Filters

Suppose that each serving of Mac & Cheese costs $0.50 to make no matter how many servings are produced. This means that the price elasticity of supply for Mac & Cheese is and the supply curve is .

Suppose the price P on a given demand curve results in a price elasticity of demand equal to 1. Any price higher than P will lie on the part of the demand curve, and any price lower than P will lie on the part of the demand curve.

Refer to the figure below. For demand curve D1, what is the price elasticity of demand when P = 12?\ $Refer to the figure below. For demand curve D1, what is the price elasticity of demand when P = 12?\$