Question 1

If quantity demanded is completely unresponsive to price changes, demand is

Accepted Answer

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

Question 2

The larger the positive cross elasticity coefficient of demand between products X and Y, the

Accepted Answer

A)  stronger their complementariness. 
B)  greater their substitutability. 
C)  smaller the price elasticity of demand for both products. 
D)  less sensitive purchases of each are to increases in income. 
A)  stronger their complementariness. 
B)  greater their substitutability. 
C)  smaller the price elasticity of demand for both products. 
D)  less sensitive purchases of each are to increases in income.

Question 3

If 100 shirts are sold when the unit price is $10, while 75 shirts are sold when the unit price is $15, one can conclude that in this price range,

Accepted Answer

A)  demand for the shirts is elastic. 
B)  demand for the shirts is inelastic. 
C)  demand for the shirts has shifted to the right. 
D)  consumers are quite sensitive to changes in the price of the shirt. 
A)  demand for the shirts is elastic. 
B)  demand for the shirts is inelastic. 
C)  demand for the shirts has shifted to the right. 
D)  consumers are quite sensitive to changes in the price of the shirt.

Question 4

If the income elasticity of demand for store brand macaroni and cheese is −3.00, this means that

Accepted Answer

A)  store brand macaroni and cheese is a substitute for name brand macaroni and cheese. 
B)  store brand macaroni and cheese is a normal good. 
C)  store brand macaroni and cheese is an inferior good. 
D)  more store brand macaroni and cheese will be purchased when its price falls. 
A)  store brand macaroni and cheese is a substitute for name brand macaroni and cheese. 
B)  store brand macaroni and cheese is a normal good. 
C)  store brand macaroni and cheese is an inferior good. 
D)  more store brand macaroni and cheese will be purchased when its price falls.

Question 5

What is the most likely effect of the development of rental movies and online movie streaming on the movie theater (or cinema) industry?

Accepted Answer

A)  decreased costs of producing movies 
B)  increased demand for movie theater tickets 
C)  movie theater tickets become an inferior good 
D)  increased price elasticity of demand for movie theater tickets 
A)  decreased costs of producing movies 
B)  increased demand for movie theater tickets 
C)  movie theater tickets become an inferior good 
D)  increased price elasticity of demand for movie theater tickets

Question 6

Income elasticity measures the effect of a change in income on the purchases of some good or service.

Accepted Answer

A) True 
 B)False

Question 7

Suppose you are given the following data on demand for a product. The price elasticity of demand (based on the midpoint formula) when price decreases from $9 to $7 is

Accepted Answer

A)  0.63. 
B)  1.16. 
C)  1.60. 
D)  2.27. 
A)  0.63. 
B)  1.16. 
C)  1.60. 
D)  2.27.

Question 8

If the government tightens up on drug dealers and raises the costs of dealing illegal drugs, then the drug addicts' dollar expenditures to feed their addiction will tend to

Accepted Answer

A)  increase because their demand is price-elastic. 
B)  decrease because their demand is price-Inelastic. 
C)  decrease because their demand is price-elastic. 
D)  increase because their demand is price-Inelastic. 
A)  increase because their demand is price-elastic. 
B)  decrease because their demand is price-Inelastic. 
C)  decrease because their demand is price-elastic. 
D)  increase because their demand is price-Inelastic.

Question 9

A supply curve that is a vertical straight line indicates that

Accepted Answer

A)  production costs for this product cannot be calculated. 
B)  the relationship between price and quantity supplied is inverse. 
C)  a change in price will have no effect on the quantity supplied. 
D)  an unlimited amount of the product will be supplied at a constant price. 
A)  production costs for this product cannot be calculated. 
B)  the relationship between price and quantity supplied is inverse. 
C)  a change in price will have no effect on the quantity supplied. 
D)  an unlimited amount of the product will be supplied at a constant price.

Question 10

If the elasticity coefficient of supply is 0.7, supply is elastic.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not characteristic of the demand for a commodity that is elastic?

Accepted Answer

A)  The relative change in quantity demanded is greater than the relative change in price. 
B)  Buyers are relatively sensitive to price changes. 
C)  Total revenue increases if price is increased. 
D)  The elasticity coefficient is greater than one. 
A)  The relative change in quantity demanded is greater than the relative change in price. 
B)  Buyers are relatively sensitive to price changes. 
C)  Total revenue increases if price is increased. 
D)  The elasticity coefficient is greater than one.

Question 12

Which of the following is correct?

Accepted Answer

A)  If the demand for a product is inelastic, a change in price will cause total revenue to change in the opposite direction. 
B)  If the demand for a product is inelastic, a change in price will cause total revenue to change in the same direction. 
C)  If the demand for a product is inelastic, a change in price may cause total revenue to change in either the opposite or the same direction. 
D)  The price elasticity coefficient applies to demand, but not to supply. 
A)  If the demand for a product is inelastic, a change in price will cause total revenue to change in the opposite direction. 
B)  If the demand for a product is inelastic, a change in price will cause total revenue to change in the same direction. 
C)  If the demand for a product is inelastic, a change in price may cause total revenue to change in either the opposite or the same direction. 
D)  The price elasticity coefficient applies to demand, but not to supply.

Question 13

When the price of a product is increased 10 percent, the quantity demanded decreases 15 percent. The price-elasticity of demand coefficient for this product is

Accepted Answer

A)  1.5. 
B)  0.15. 
C)  0.67. 
D)  67. 
A)  1.5. 
B)  0.15. 
C)  0.67. 
D)  67.

Question 14

The price elasticity of demand coefficient measures

Accepted Answer

A)  buyer responsiveness to price changes. 
B)  the extent to which a demand curve shifts as incomes change. 
C)  the slope of the demand curve. 
D)  how far business executives can stretch their fixed costs. 
A)  buyer responsiveness to price changes. 
B)  the extent to which a demand curve shifts as incomes change. 
C)  the slope of the demand curve. 
D)  how far business executives can stretch their fixed costs.

Question 15

The demand for a luxury good whose purchase would exhaust a big portion of one's income is

Accepted Answer

A)  perfectly price inelastic. 
B)  perfectly price elastic. 
C)  relatively price inelastic. 
D)  relatively price elastic. 
A)  perfectly price inelastic. 
B)  perfectly price elastic. 
C)  relatively price inelastic. 
D)  relatively price elastic.

Question 16

Sony is considering a 10 percent price reduction on its HD TV sets. If the price-elasticity coefficient for the sets in this price range is 0.75, then the price cut will cause

Accepted Answer

A)  sales quantity to increase and revenues to also increase. 
B)  sales quantity to increase but revenues to decrease. 
C)  sales quantity to decrease and revenues to also decrease. 
D)  sales quantity to decrease but revenues to increase. 
A)  sales quantity to increase and revenues to also increase. 
B)  sales quantity to increase but revenues to decrease. 
C)  sales quantity to decrease and revenues to also decrease. 
D)  sales quantity to decrease but revenues to increase.

Question 17

A demand curve that is parallel to the horizontal axis is

Accepted Answer

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

Question 18

The price of season tickets to a performing arts theater decreases by 3 percent. As a result, the quantity demanded increases by 6 percent. The price elasticity of demand for season tickets is

Accepted Answer

A)  0.5. 
B)  9. 
C)  2. 
D)  18. 
A)  0.5. 
B)  9. 
C)  2. 
D)  18.

Question 19

An income elasticity coefficient of −1.8 means the product is a normal good.

Accepted Answer

A) True 
 B)False

Question 20

A supply curve that is parallel to the horizontal axis suggests that

Accepted Answer

A)  the industry is organized monopolistically. 
B)  the relationship between price and quantity supplied is inverse. 
C)  a change in demand will change price in the same direction. 
D)  a change in demand will change the equilibrium quantity but not price. 
A)  the industry is organized monopolistically. 
B)  the relationship between price and quantity supplied is inverse. 
C)  a change in demand will change price in the same direction. 
D)  a change in demand will change the equilibrium quantity but not price.

Exam 6: Elasticity

If quantity demanded is completely unresponsive to price changes, demand is

The larger the positive cross elasticity coefficient of demand between products X and Y, the

If 100 shirts are sold when the unit price is $10, while 75 shirts are sold when the unit price is $15, one can conclude that in this price range,

If the income elasticity of demand for store brand macaroni and cheese is −3.00, this means that

What is the most likely effect of the development of rental movies and online movie streaming on the movie theater (or cinema) industry?

Income elasticity measures the effect of a change in income on the purchases of some good or service.

Suppose you are given the following data on demand for a product. The price elasticity of demand (based on the midpoint formula) when price decreases from $9 to $7 is

If the government tightens up on drug dealers and raises the costs of dealing illegal drugs, then the drug addicts' dollar expenditures to feed their addiction will tend to

A supply curve that is a vertical straight line indicates that

If the elasticity coefficient of supply is 0.7, supply is elastic.

Which of the following is not characteristic of the demand for a commodity that is elastic?

Which of the following is correct?

When the price of a product is increased 10 percent, the quantity demanded decreases 15 percent. The price-elasticity of demand coefficient for this product is

The price elasticity of demand coefficient measures

The demand for a luxury good whose purchase would exhaust a big portion of one's income is

Sony is considering a 10 percent price reduction on its HD TV sets. If the price-elasticity coefficient for the sets in this price range is 0.75, then the price cut will cause

A demand curve that is parallel to the horizontal axis is

The price of season tickets to a performing arts theater decreases by 3 percent. As a result, the quantity demanded increases by 6 percent. The price elasticity of demand for season tickets is

An income elasticity coefficient of −1.8 means the product is a normal good.

A supply curve that is parallel to the horizontal axis suggests that

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