Question 1

The elasticity of a straight-line demand curve is the same as its slope.

Accepted Answer

A) True 
 B)False

Question 2

After a $5 million ad campaign,Coca-Cola measured its effectiveness by calculating the cross elasticity of demand between Coke and Pepsi.A successful campaign would be indicated if the cross elasticity went from

Accepted Answer

A) 0.9 to 0.5. 
B) 0.9 to 1.5. 
C) -0.5 to -0.2. 
D) -0.9 to -1.5. 
A) 0.9 to 0.5. 
B) 0.9 to 1.5. 
C) -0.5 to -0.2. 
D) -0.9 to -1.5.

Question 3

Figure 6-5
  
-If the demand curve in Figure 6-5 is unit elastic,then total expenditure at A is ____ total expenditure at B.

Accepted Answer

A) greater than 
B) less than 
C) equal to 
D) less elastic than 
A) greater than 
B) less than 
C) equal to 
D) less elastic than

Question 4

Explain what happens to the magnitude of price elasticity of demand as price increases along a straight-line demand curve.

Accepted Answer

Price elasticity is the ratio of percent

Question 5

Elasticity of demand is another way to measure slope.

Accepted Answer

A) True 
 B)False

Question 6

Income elasticity of demand describes how change in income affects the quantity demanded of a good.

Accepted Answer

A) True 
 B)False

Question 7

Figure 6-4
  
-In Figure 6-4,total expenditure ____ as price falls from P = 12 to P = 10.

Accepted Answer

A) falls 
B) stays constant 
C) rises 
D) rises by more than $12 
A) falls 
B) stays constant 
C) rises 
D) rises by more than $12

Question 8

The elasticity of a demand curve at any point can be ascertained by its steepness.

Accepted Answer

A) True 
 B)False

Question 9

Figure 6-8
  
-Libya sold more crude oil in 1985 than it sold five years earlier,but revenues were 17 percent less.Which graph in Figure 6-8 is consistent with this set of facts?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 10

Certain goods are related such that an increase in the price of one good decreases the quantity demanded of the other.These goods are

Accepted Answer

A) complements. 
B) substitutes. 
C) luxury goods. 
D) competing goods. 
A) complements. 
B) substitutes. 
C) luxury goods. 
D) competing goods.

Question 11

The emigration of some of Whoville's workers reduces the quantity of thingamabobs supplied at every price by 50.The new supply curve will ____ the old supply curve.

Accepted Answer

A) be steeper and less elastic at every price than 
B) have the same slope and the same elasticity at every price as 
C) have the same slope and be more elastic at every price than 
D) More information is needed to predict the relationship between the elasticities of the two supply curves. 
A) be steeper and less elastic at every price than 
B) have the same slope and the same elasticity at every price as 
C) have the same slope and be more elastic at every price than 
D) More information is needed to predict the relationship between the elasticities of the two supply curves.

Question 12

Why are time series data unlikely to give an accurate estimate of demand?

Accepted Answer

Demand may have shifted over time,so tha

Question 13

As we move down a straight-line demand curve,the price elasticity becomes

Accepted Answer

A) larger. 
B) smaller. 
C) larger, then smaller. 
D) smaller, then larger. 
A) larger. 
B) smaller. 
C) larger, then smaller. 
D) smaller, then larger.

Question 14

Total expenditure by a buyer is equal to the

Accepted Answer

A) slope at any point along the demand curve. 
B) price times quantity demanded at any point along the demand curve. 
C) elasticity times price at any point along the demand curve. 
D) elasticity times quantity demanded at any point along the demand curve. 
A) slope at any point along the demand curve. 
B) price times quantity demanded at any point along the demand curve. 
C) elasticity times price at any point along the demand curve. 
D) elasticity times quantity demanded at any point along the demand curve.

Question 15

Would a profit-maximizing firm sell where demand is inelastic?

Accepted Answer

A) No, this would not follow the rule of MC = MR. 
B) No, the firm could not profitably raise price. 
C) Yes, the firm could profitably lower price to attract sales. 
D) Yes, in this case there are few substitutes for the good. 
A) No, this would not follow the rule of MC = MR. 
B) No, the firm could not profitably raise price. 
C) Yes, the firm could profitably lower price to attract sales. 
D) Yes, in this case there are few substitutes for the good.

Question 16

If the demand for gasoline becomes more elastic over time,

Accepted Answer

A) the demand curve will shift out. 
B) the demand curve will become flatter. 
C) other things being equal, the equilibrium price of gasoline must fall. 
D) other things being equal, the equilibrium quantity of gasoline must fall. 
A) the demand curve will shift out. 
B) the demand curve will become flatter. 
C) other things being equal, the equilibrium price of gasoline must fall. 
D) other things being equal, the equilibrium quantity of gasoline must fall.

Question 17

The elasticity of any demand curve is the same as its slope.

Accepted Answer

A) True 
 B)False

Question 18

A study of New York City (NYC)tax rates concluded that taxes on the nonmanufacturing sector should be higher since that sector has fewer alternatives.Manufacturers are more mobile and may move to avoid higher taxes.This means that

Accepted Answer

A) nonmanufacturing firms have a more elastic demand for NYC locations. 
B) manufacturing firms have an inelastic demand for the NYC locations. 
C) nonmanufacturing firms have relatively inelastic demand for the NYC locations. 
D) nonmanufacturing demand for NYC locations is perfectly elastic. 
A) nonmanufacturing firms have a more elastic demand for NYC locations. 
B) manufacturing firms have an inelastic demand for the NYC locations. 
C) nonmanufacturing firms have relatively inelastic demand for the NYC locations. 
D) nonmanufacturing demand for NYC locations is perfectly elastic.

Question 19

Define the following terms and explain their importance to the study of economics.
a.price elasticity
b.complements
c.substitutes
d.cross elasticity
e.supply elasticity

Accepted Answer

a.Price elasticity is the ratio of the p

Question 20

Hot dogs and hot dog buns are found to be related by the cross elasticity of demand.If they are complementary goods,the cross elasticity will be

Accepted Answer

A) positive. 
B) equal to zero. 
C) negative. 
D) unknown. 
A) positive. 
B) equal to zero. 
C) negative. 
D) unknown.

Exam 6: Demand and Elasticity

The elasticity of a straight-line demand curve is the same as its slope.

After a $5 million ad campaign,Coca-Cola measured its effectiveness by calculating the cross elasticity of demand between Coke and Pepsi.A successful campaign would be indicated if the cross elasticity went from

Figure 6-5 -If the demand curve in Figure 6-5 is unit elastic,then total expenditure at A is ____ total expenditure at B.

Explain what happens to the magnitude of price elasticity of demand as price increases along a straight-line demand curve.

Elasticity of demand is another way to measure slope.

Income elasticity of demand describes how change in income affects the quantity demanded of a good.

Figure 6-4 -In Figure 6-4,total expenditure ____ as price falls from P = 12 to P = 10.

The elasticity of a demand curve at any point can be ascertained by its steepness.

Figure 6-8 -Libya sold more crude oil in 1985 than it sold five years earlier,but revenues were 17 percent less.Which graph in Figure 6-8 is consistent with this set of facts?

Certain goods are related such that an increase in the price of one good decreases the quantity demanded of the other.These goods are

The emigration of some of Whoville's workers reduces the quantity of thingamabobs supplied at every price by 50.The new supply curve will ____ the old supply curve.

Why are time series data unlikely to give an accurate estimate of demand?

As we move down a straight-line demand curve,the price elasticity becomes

Total expenditure by a buyer is equal to the

Would a profit-maximizing firm sell where demand is inelastic?

If the demand for gasoline becomes more elastic over time,

The elasticity of any demand curve is the same as its slope.

A study of New York City (NYC)tax rates concluded that taxes on the nonmanufacturing sector should be higher since that sector has fewer alternatives.Manufacturers are more mobile and may move to avoid higher taxes.This means that

Define the following terms and explain their importance to the study of economics. a.price elasticity b.complements c.substitutes d.cross elasticity e.supply elasticity

Hot dogs and hot dog buns are found to be related by the cross elasticity of demand.If they are complementary goods,the cross elasticity will be

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

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