Question 1

A good will tend to be more price elastic if it

Accepted Answer

A) is a luxury good. 
B) has no close substitutes. 
C) is a small part of the household budget. 
D) is a necessity. 
A) is a luxury good. 
B) has no close substitutes. 
C) is a small part of the household budget. 
D) is a necessity.

Question 2

Why is it customary to report price elasticity of demand in absolute value terms,while cross elasticities and income elasticities are reported with their sign attached?

Accepted Answer

Price elasticity of demand is always neg

Question 3

The price of an airline ticket rises as the amount of time between purchase and flight departure gets smaller.The airlines base the policy on the assumption that

Accepted Answer

A) consumers are not aware of airline prices. 
B) consumer demand is unrelated to prices. 
C) consumer demand becomes more elastic as departure time approaches. 
D) consumer demand becomes less elastic as departure time approaches. 
A) consumers are not aware of airline prices. 
B) consumer demand is unrelated to prices. 
C) consumer demand becomes more elastic as departure time approaches. 
D) consumer demand becomes less elastic as departure time approaches.

Question 4

Figure 6-5
  
-In Figure 6-5,if price falls from point A to point B along the unit-elastic demand curve,

Accepted Answer

A) total expenditure remains unchanged. 
B) total expenditure increases. 
C) total expenditure decreases. 
D) total expenditure first increases and then declines. 
A) total expenditure remains unchanged. 
B) total expenditure increases. 
C) total expenditure decreases. 
D) total expenditure first increases and then declines.

Question 5

If the price elasticity of supply of doodads equals 0.50 and the price rises by 3 percent,then the quantity supplied of doodads will rise by ____.

Accepted Answer

A) 0.50 percent. 
B) 1.50 percent. 
C) 6.00 percent. 
D) 15 percent. 
A) 0.50 percent. 
B) 1.50 percent. 
C) 6.00 percent. 
D) 15 percent.

Question 6

When price falls,demand rises.

Accepted Answer

A) True 
 B)False

Question 7

To avoid an increase in the local property tax,Sullivan County,New York,proposed a 2 percent hotel tax,which presumably would be passed on to tourists.The hotel industry argued that the tax would hurt hotel business.They are really arguing that

Accepted Answer

A) tourist and convention demand is inelastic, so hotel bookings will decline. 
B) tourist and convention demand is very elastic, so hotel bookings will decline. 
C) they would prefer a property tax increase instead. 
D) it is unfair to tax people who do not live in the area. 
A) tourist and convention demand is inelastic, so hotel bookings will decline. 
B) tourist and convention demand is very elastic, so hotel bookings will decline. 
C) they would prefer a property tax increase instead. 
D) it is unfair to tax people who do not live in the area.

Question 8

As one moves down a straight-line demand curve,the elasticity decreases.

Accepted Answer

A) True 
 B)False

Question 9

Demand is said to be price elastic at a point on a demand curve if a

Accepted Answer

A) 1 percent rise in price reduces the quantity demanded by more than 1 percent. 
B) 1 percent rise in price reduces the quantity demanded by less than 1 percent. 
C) 1 percent rise in price reduces the quantity demanded by more than 10 percent. 
D) 10 percent rise in price reduces the quantity demanded by less than 10 percent. 
A) 1 percent rise in price reduces the quantity demanded by more than 1 percent. 
B) 1 percent rise in price reduces the quantity demanded by less than 1 percent. 
C) 1 percent rise in price reduces the quantity demanded by more than 10 percent. 
D) 10 percent rise in price reduces the quantity demanded by less than 10 percent.

Question 10

A recent study on enrollment at a liberal arts college concluded that demand elasticity is 0.91.The administration is considering a tuition increase to help balance the budget.The revenue-maximizing decision is to

Accepted Answer

A) decrease tuition, which should boost enrollment enough to balance the budget. 
B) decrease tuition, which would bring in more revenue. 
C) leave tuition as is-an increase would not help balance the budget. 
D) increase tuition, which would bring in more revenue. 
A) decrease tuition, which should boost enrollment enough to balance the budget. 
B) decrease tuition, which would bring in more revenue. 
C) leave tuition as is-an increase would not help balance the budget. 
D) increase tuition, which would bring in more revenue.

Question 11

If a product constitutes a large portion of a consumer's income,demand will be more inelastic.

Accepted Answer

A) True 
 B)False

Question 12

If the income of buyers increases and a company maintains the same price,what is the most likely impact on quantity sold? Explain.Draw a graphical display of the result.

Accepted Answer

The most likely result will be

Question 13

Two economists from Ohio University estimated that the demand curve for kerosene in Indonesia was such that a 10 percent increase in the price reduced the quantity demanded by 2.2 percent and that a 10 percent increase in the price of electricity increased the demand for kerosene by 1.6 percent.This indicates that (i)the demand for kerosene is price inelastic and (ii)kerosene and electricity are substitutes.Which of these two statements is correct?

Accepted Answer

A) i and ii 
B) i not ii 
C) ii not i 
D) neither i nor ii 
A) i and ii 
B) i not ii 
C) ii not i 
D) neither i nor ii

Question 14

As a price change persists over a long period of time,we should expect the demand elasticity to fall.

Accepted Answer

A) True 
 B)False

Question 15

The elasticity measure which has been employed by the courts to assess the degree of market competition is

Accepted Answer

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

Question 16

Figure 6-4
  
-If the price of apples decreases by 2 percent and causes apple consumption to increase by 4 percent,the price elasticity of demand is ____,indicating the demand is ____.

Accepted Answer

A) 2, elastic 
B) 2, inelastic 
C) 0.5, elastic 
D) 0.5, inelastic 
A) 2, elastic 
B) 2, inelastic 
C) 0.5, elastic 
D) 0.5, inelastic

Question 17

If goods X and Y are complements,the

Accepted Answer

A) quantities demanded of X and Y tend to move in opposite directions. 
B) quantities demanded of X and Y tend to move in the same direction. 
C) prices of X and Y tend to move in the same direction. 
D) supply curves for X and Y tend to move in the same direction. 
A) quantities demanded of X and Y tend to move in opposite directions. 
B) quantities demanded of X and Y tend to move in the same direction. 
C) prices of X and Y tend to move in the same direction. 
D) supply curves for X and Y tend to move in the same direction.

Question 18

A line that is perfectly elastic has an elasticity of demand of zero.

Accepted Answer

A) True 
 B)False

Question 19

Elasticity is a measure of the responsiveness of change in quantity demanded to a change in price.

Accepted Answer

A) True 
 B)False

Question 20

A negative cross elasticity indicates that two goods are complements.

Accepted Answer

A) True 
 B)False

Exam 6: Demand and Elasticity

A good will tend to be more price elastic if it

Why is it customary to report price elasticity of demand in absolute value terms,while cross elasticities and income elasticities are reported with their sign attached?

The price of an airline ticket rises as the amount of time between purchase and flight departure gets smaller.The airlines base the policy on the assumption that

Figure 6-5 -In Figure 6-5,if price falls from point A to point B along the unit-elastic demand curve,

If the price elasticity of supply of doodads equals 0.50 and the price rises by 3 percent,then the quantity supplied of doodads will rise by ____.

When price falls,demand rises.

To avoid an increase in the local property tax,Sullivan County,New York,proposed a 2 percent hotel tax,which presumably would be passed on to tourists.The hotel industry argued that the tax would hurt hotel business.They are really arguing that

As one moves down a straight-line demand curve,the elasticity decreases.

Demand is said to be price elastic at a point on a demand curve if a

A recent study on enrollment at a liberal arts college concluded that demand elasticity is 0.91.The administration is considering a tuition increase to help balance the budget.The revenue-maximizing decision is to

If a product constitutes a large portion of a consumer's income,demand will be more inelastic.

If the income of buyers increases and a company maintains the same price,what is the most likely impact on quantity sold? Explain.Draw a graphical display of the result.

As a price change persists over a long period of time,we should expect the demand elasticity to fall.

The elasticity measure which has been employed by the courts to assess the degree of market competition is

Figure 6-4 -If the price of apples decreases by 2 percent and causes apple consumption to increase by 4 percent,the price elasticity of demand is ____,indicating the demand is ____.

If goods X and Y are complements,the

A line that is perfectly elastic has an elasticity of demand of zero.

Elasticity is a measure of the responsiveness of change in quantity demanded to a change in price.

A negative cross elasticity indicates that two goods are complements.

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Production,Inputs,and Cost: Building Blocks for Supply Analysis

Output,Price,and Profit: The Importance of Marginal Analysis

Securities: Business Finance,and the Economy: The Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: the Price System

The Shortcomings of Free Markets

The Markets Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

International Trade and Comparative Advantage

Filters

Figure 6-4 -If the price of apples decreases by 2 percent and causes apple consumption to increase by 4 percent,the price elasticity of demand is ,indicating the demand is .