Question 1

Which of the following is correct?

Accepted Answer

A)  If demand is elastic, an increase in price will increase total revenue. 
B)  If demand is elastic, a decrease in price will decrease total revenue. 
C)  If demand is elastic, a decrease in price will increase total revenue. 
D)  If demand is inelastic, an increase in price will decrease total revenue. 
A)  If demand is elastic, an increase in price will increase total revenue. 
B)  If demand is elastic, a decrease in price will decrease total revenue. 
C)  If demand is elastic, a decrease in price will increase total revenue. 
D)  If demand is inelastic, an increase in price will decrease total revenue.

Question 2

The supply of antiques is highly inelastic.Thus,increases in demand would have a small effect on price.

Accepted Answer

A) True 
 B)False

Question 3

A product that is successfully advertised and has loyal buyers would have a low price-elasticity coefficient.

Accepted Answer

A) True 
 B)False

Question 4

Price elasticity of demand is generally

Accepted Answer

A)  greater in the long run than in the short run. 
B)  greater in the short run than in the long run. 
C)  the same in both the short run and the long run. 
D)  greater for "necessities" than it is for "luxuries." 
A)  greater in the long run than in the short run. 
B)  greater in the short run than in the long run. 
C)  the same in both the short run and the long run. 
D)  greater for "necessities" than it is for "luxuries."

Question 5

We would expect the cross elasticity of demand for Pepsi to be greater in relation to other soft drinks than that for soft drinks in general because

Accepted Answer

A)  soft drinks are normal goods. 
B)  the income effect always exceeds the substitution effect. 
C)  there are fewer good substitutes for soft drinks as a whole than for Pepsi specifically. 
D)  there are more good substitutes for soft drinks as a whole than for Pepsi specifically. 
A)  soft drinks are normal goods. 
B)  the income effect always exceeds the substitution effect. 
C)  there are fewer good substitutes for soft drinks as a whole than for Pepsi specifically. 
D)  there are more good substitutes for soft drinks as a whole than for Pepsi specifically.

Question 6

Assume that a 6 percent increase in income in the economy produces a 3 percent increase in the quantity demanded of good X. The coefficient of income elasticity of demand is

Accepted Answer

A)  negative, and therefore X is an inferior good. 
B)  positive but less than one; therefore X is an inferior good. 
C)  positive, and therefore X is an inferior good. 
D)  positive, and therefore X is a normal good. 
A)  negative, and therefore X is an inferior good. 
B)  positive but less than one; therefore X is an inferior good. 
C)  positive, and therefore X is an inferior good. 
D)  positive, and therefore X is a normal good.

Question 7

The cross elasticity of demand between digital cameras and memory cards is likely to be

Accepted Answer

A)  zero. 
B)  a negative number. 
C)  a positive number greater than 1. 
D)  a positive number between zero and 1. 
A)  zero. 
B)  a negative number. 
C)  a positive number greater than 1. 
D)  a positive number between zero and 1.

Question 8

The larger the coefficient of price elasticity of demand for a product, the

Accepted Answer

A)  larger the resulting price change for an increase in supply. 
B)  more rapid the rate at which the marginal utility of that product diminishes. 
C)  less competitive will be the industry supplying that product. 
D)  smaller the resulting price change for an increase in supply. 
A)  larger the resulting price change for an increase in supply. 
B)  more rapid the rate at which the marginal utility of that product diminishes. 
C)  less competitive will be the industry supplying that product. 
D)  smaller the resulting price change for an increase in supply.

Question 9

For which product is the income elasticity of demand most likely to be negative?

Accepted Answer

A)  computer software 
B)  used clothing 
C)  apps for iPads 
D)  bread 
A)  computer software 
B)  used clothing 
C)  apps for iPads 
D)  bread

Question 10

Suppose the price of local cable TV service increased from $16.20 to $19.80 and as a result the number of cable subscribers decreased from 224,000 to 176,000. Along this portion of the demand curve, price elasticity of demand is

Accepted Answer

A)  0.8. 
B)  1.2. 
C)  1.6. 
D)  8.0. 
A)  0.8. 
B)  1.2. 
C)  1.6. 
D)  8.0.

Question 11

A cross elasticity of demand coefficient of +2.5 indicates that the two products are substitutes.

Accepted Answer

A) True 
 B)False

Question 12

The formula for cross elasticity of demand is percentage change in

Accepted Answer

A)  quantity demanded of X/percentage change in price of X. 
B)  quantity demanded of X/percentage change in income. 
C)  quantity demanded of X/percentage change in price of Y. 
D)  price of X/percentage change in quantity demanded of Y. 
A)  quantity demanded of X/percentage change in price of X. 
B)  quantity demanded of X/percentage change in income. 
C)  quantity demanded of X/percentage change in price of Y. 
D)  price of X/percentage change in quantity demanded of Y.

Question 13

If the price-elasticity coefficient for a product is 0.68 and the seller wants to raise revenues by changing its price, then the seller should cut the price of the product.

Accepted Answer

A) True 
 B)False

Question 14

If a 10 percent increase in the price of good A results in an increase of 5 percent in the quantity demanded of good B, then it can be concluded that goods A and B are

Accepted Answer

A)  complementary goods. 
B)  substitute goods. 
C)  independent goods. 
D)  normal goods. 
A)  complementary goods. 
B)  substitute goods. 
C)  independent goods. 
D)  normal goods.

Question 15

For an increase in demand, the price effect is smallest and the quantity effect is largest

Accepted Answer

A)  when supply is least elastic. 
B)  in the long run. 
C)  in the short run. 
D)  in the immediate market period. 
A)  when supply is least elastic. 
B)  in the long run. 
C)  in the short run. 
D)  in the immediate market period.

Question 16

When the price of movie tickets in a certain town was reduced, the movietheaters' revenues did not change. This suggests that the demand for movie tickets in that town has a price- elasticity coefficient of

Accepted Answer

A)  1.0. 
B)  greater than 1. 
C)  0.5. 
D)  zero. 
A)  1.0. 
B)  greater than 1. 
C)  0.5. 
D)  zero.

Question 17

The smaller the number of good substitutes for a product, the greater will be the price elasticity of demand for it.

Accepted Answer

A) True 
 B)False

Question 18

Answer the question on the basis of the following demand schedule.   The price elasticity of demand is unity

Accepted Answer

A)  throughout the entire price range, because the slope of the demand curve is constant. 
B)  in the $4-$3 price range only. 
C)  over the entire $3-$1 price range. 
D)  over the entire $6-$4 price range. 
A)  throughout the entire price range, because the slope of the demand curve is constant. 
B)  in the $4-$3 price range only. 
C)  over the entire $3-$1 price range. 
D)  over the entire $6-$4 price range.

Question 19

The price elasticity of demand for a popular sporting event is 1.2. If the price of a ticket to this event increases by 10 percent, the quantity of tickets demanded will

Accepted Answer

A)  decrease by 8.3 percent. 
B)  decrease by 12 percent. 
C)  increase by 12 percent. 
D)  increase by 8.3 percent. 
A)  decrease by 8.3 percent. 
B)  decrease by 12 percent. 
C)  increase by 12 percent. 
D)  increase by 8.3 percent.

Question 20

Which of the following goods will least likely suffer a decline in demand during a recession?

Accepted Answer

A)  dinner at a nice restaurant 
B)  iPods 
C)  toothpaste 
D)  plasma screen and LCD TVs 
A)  dinner at a nice restaurant 
B)  iPods 
C)  toothpaste 
D)  plasma screen and LCD TVs

Exam 6: Elasticity

Which of the following is correct?

The supply of antiques is highly inelastic.Thus,increases in demand would have a small effect on price.

A product that is successfully advertised and has loyal buyers would have a low price-elasticity coefficient.

Price elasticity of demand is generally

We would expect the cross elasticity of demand for Pepsi to be greater in relation to other soft drinks than that for soft drinks in general because

Assume that a 6 percent increase in income in the economy produces a 3 percent increase in the quantity demanded of good X. The coefficient of income elasticity of demand is

The cross elasticity of demand between digital cameras and memory cards is likely to be

The larger the coefficient of price elasticity of demand for a product, the

For which product is the income elasticity of demand most likely to be negative?

Suppose the price of local cable TV service increased from $16.20 to $19.80 and as a result the number of cable subscribers decreased from 224,000 to 176,000. Along this portion of the demand curve, price elasticity of demand is

A cross elasticity of demand coefficient of +2.5 indicates that the two products are substitutes.

The formula for cross elasticity of demand is percentage change in

If the price-elasticity coefficient for a product is 0.68 and the seller wants to raise revenues by changing its price, then the seller should cut the price of the product.

If a 10 percent increase in the price of good A results in an increase of 5 percent in the quantity demanded of good B, then it can be concluded that goods A and B are

For an increase in demand, the price effect is smallest and the quantity effect is largest

When the price of movie tickets in a certain town was reduced, the movietheaters' revenues did not change. This suggests that the demand for movie tickets in that town has a price- elasticity coefficient of

The smaller the number of good substitutes for a product, the greater will be the price elasticity of demand for it.

Answer the question on the basis of the following demand schedule. The price elasticity of demand is unity

The price elasticity of demand for a popular sporting event is 1.2. If the price of a ticket to this event increases by 10 percent, the quantity of tickets demanded will

Which of the following goods will least likely suffer a decline in demand during a recession?

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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