Question 1

We use percentage changes in the formula for estimating the price elasticity of demand coefficient in order to

Accepted Answer

A)  make the coefficient's value become independent of whether price goes up or down. 
B)  take the midpoints of P and of Q in the computation. 
C)  eliminate the negative sign of the coefficient. 
D)  make it irrelevant how we measure price: be it in cents, in dollars, or in thousands of dollars. 
A)  make the coefficient's value become independent of whether price goes up or down. 
B)  take the midpoints of P and of Q in the computation. 
C)  eliminate the negative sign of the coefficient. 
D)  make it irrelevant how we measure price: be it in cents, in dollars, or in thousands of dollars.

Question 2

Chuck has a price elasticity of demand for beer of 1.2. Suppose that the price of beer is increased by 10 percent. What will happen to the total amount Chuck spends on beer?

Accepted Answer

A)  It will not change. 
B)  It will decrease. 
C)  It will increase. 
D)  It is impossible to tell. 
A)  It will not change. 
B)  It will decrease. 
C)  It will increase. 
D)  It is impossible to tell.

Question 3

If a product has a short-run elasticity of supply equal to zero, then an increase in the demand for the product will

Accepted Answer

A)  have no effect on price or quantity sold. 
B)  increase price and leave quantity sold unchanged. 
C)  increase price and reduce the quantity sold to zero. 
D)  leave the price unchanged and reduce the quantity sold. 
A)  have no effect on price or quantity sold. 
B)  increase price and leave quantity sold unchanged. 
C)  increase price and reduce the quantity sold to zero. 
D)  leave the price unchanged and reduce the quantity sold.

Question 4

Movie theaters charge lower prices to see a movie in the afternoon than in the evening because there is an

Accepted Answer

A)  inelastic supply of movies in the evening. 
B)  elastic demand to see movies in the evening. 
C)  elastic demand to see movies in the afternoon. 
D)  inelastic demand to see movies in the afternoon. 
A)  inelastic supply of movies in the evening. 
B)  elastic demand to see movies in the evening. 
C)  elastic demand to see movies in the afternoon. 
D)  inelastic demand to see movies in the afternoon.

Question 5

We would expect the coefficient of cross elasticity of demand for DVD players and DVDs to be positive.

Accepted Answer

A) True 
 B)False

Question 6

If the quantity demanded for good A increases from 40 to 60 when price decreases from $9 to $7, price elasticity of demand in this price range is 1.6.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A)  in the $6-$4 price range. 
B)  over the entire $6-$1 price range. 
C)  in the $3-$1 price range. 
D)  in the $6-$5 price range only. 
A)  in the $6-$4 price range. 
B)  over the entire $6-$1 price range. 
C)  in the $3-$1 price range. 
D)  in the $6-$5 price range only.

Question 8

The price elasticity of demand is a measure of the

Accepted Answer

A)  effect of changes in demand on the price. 
B)  relationship between price and profitability. 
C)  responsiveness of buyers of a good to changes in its price. 
D)  sensitivity of a good's price to changes in demand. 
A)  effect of changes in demand on the price. 
B)  relationship between price and profitability. 
C)  responsiveness of buyers of a good to changes in its price. 
D)  sensitivity of a good's price to changes in demand.

Question 9

A perfectly inelastic demand schedule

Accepted Answer

A)  rises upward and to the right but has a constant slope. 
B)  can be represented by a line parallel to the vertical axis. 
C)  cannot be shown on a two-dimensional graph. 
D)  can be represented by a line parallel to the horizontal axis. 
A)  rises upward and to the right but has a constant slope. 
B)  can be represented by a line parallel to the vertical axis. 
C)  cannot be shown on a two-dimensional graph. 
D)  can be represented by a line parallel to the horizontal axis.

Question 10

Supply curves tend to be

Accepted Answer

A)  perfectly elastic in the long run because consumer demand will have sufficient time to adjust fully to changes in supply. 
B)  more elastic in the long run because there is time for firms to enter or leave the industry. 
C)  perfectly inelastic in the long run because the law of scarcity imposes absolute limits on production. 
D)  less elastic in the long run because there is time for firms to enter or leave an industry. 
A)  perfectly elastic in the long run because consumer demand will have sufficient time to adjust fully to changes in supply. 
B)  more elastic in the long run because there is time for firms to enter or leave the industry. 
C)  perfectly inelastic in the long run because the law of scarcity imposes absolute limits on production. 
D)  less elastic in the long run because there is time for firms to enter or leave an industry.

Question 11

We would expect the cross-elasticity of demand between popcorn and potato chips to be negative.

Accepted Answer

A) True 
 B)False

Question 12

Assume that a 4 percent increase in income across the economy produces an 8 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)  negative, and therefore X is a normal 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)  negative, and therefore X is a normal good. 
C)  positive, and therefore X is an inferior good. 
D)  positive, and therefore X is a normal good.

Question 13

Answer the question based on the following table, which shows a demand schedule.   At a price of $3, the total revenues of sellers will be

Accepted Answer

A)  $18. 
B)  $12. 
C)  $45. 
D)  $5. 
A)  $18. 
B)  $12. 
C)  $45. 
D)  $5.

Question 14

If the price elasticity of demand for a product is unity, a decrease in price will

Accepted Answer

A)  have no effect upon the amount purchased. 
B)  increase the quantity demanded and increase total revenue. 
C)  increase the quantity demanded but decrease total revenue. 
D)  increase the quantity demanded, but total revenue will be unchanged. 
A)  have no effect upon the amount purchased. 
B)  increase the quantity demanded and increase total revenue. 
C)  increase the quantity demanded but decrease total revenue. 
D)  increase the quantity demanded, but total revenue will be unchanged.

Question 15

An increase in demand will increase equilibrium price to a greater extent

Accepted Answer

A)  if the product is a normal good. 
B)  if the product is an inferior good. 
C)  the less elastic the supply curve. 
D)  the more elastic the supply curve. 
A)  if the product is a normal good. 
B)  if the product is an inferior good. 
C)  the less elastic the supply curve. 
D)  the more elastic the supply curve.

Question 16

In which of the following cases will total revenue increase?

Accepted Answer

A)  Price falls and demand is inelastic. 
B)  Price falls and supply is elastic. 
C)  Price rises and demand is inelastic. 
D)  Price rises and demand is elastic. 
A)  Price falls and demand is inelastic. 
B)  Price falls and supply is elastic. 
C)  Price rises and demand is inelastic. 
D)  Price rises and demand is elastic.

Question 17

The supply of known Monet paintings is

Accepted Answer

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

Question 18

Compared to coffee, we would expect the cross elasticity of demand for

Accepted Answer

A)  tea to be negative, but positive for cream. 
B)  tea to be positive, but negative for cream. 
C)  both tea and cream to be negative. 
D)  both tea and cream to be positive. 
A)  tea to be negative, but positive for cream. 
B)  tea to be positive, but negative for cream. 
C)  both tea and cream to be negative. 
D)  both tea and cream to be positive.

Question 19

A state government seeking to increase its excise-tax revenues is more likely to increase the tax rate on items with elastic demand.

Accepted Answer

A) True 
 B)False

Question 20

A consumer's weekly income is $300, and the consumer buys 5 bars of chocolate per week. When income increases to $330, the consumer buys 6 bars per week. The income elasticity of demand for chocolate by this consumer is about

Accepted Answer

A)  0. 
B)  0.5. 
C)  1. 
D)  2. 
A)  0. 
B)  0.5. 
C)  1. 
D)  2.

Exam 6: Elasticity

We use percentage changes in the formula for estimating the price elasticity of demand coefficient in order to

Chuck has a price elasticity of demand for beer of 1.2. Suppose that the price of beer is increased by 10 percent. What will happen to the total amount Chuck spends on beer?

If a product has a short-run elasticity of supply equal to zero, then an increase in the demand for the product will

Movie theaters charge lower prices to see a movie in the afternoon than in the evening because there is an

We would expect the coefficient of cross elasticity of demand for DVD players and DVDs to be positive.

If the quantity demanded for good A increases from 40 to 60 when price decreases from $9 to $7, price elasticity of demand in this price range is 1.6.

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

The price elasticity of demand is a measure of the

A perfectly inelastic demand schedule

Supply curves tend to be

We would expect the cross-elasticity of demand between popcorn and potato chips to be negative.

Assume that a 4 percent increase in income across the economy produces an 8 percent increase in the quantity demanded of good X. The coefficient of income elasticity of demand is

Answer the question based on the following table, which shows a demand schedule. At a price of $3, the total revenues of sellers will be

If the price elasticity of demand for a product is unity, a decrease in price will

An increase in demand will increase equilibrium price to a greater extent

In which of the following cases will total revenue increase?

The supply of known Monet paintings is

Compared to coffee, we would expect the cross elasticity of demand for

A state government seeking to increase its excise-tax revenues is more likely to increase the tax rate on items with elastic demand.

A consumer's weekly income is $300, and the consumer buys 5 bars of chocolate per week. When income increases to $330, the consumer buys 6 bars per week. The income elasticity of demand for chocolate by this consumer is about

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