Question 1

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 2

The greater the ease of shifting resources from product X to product Y in the production process,the greater is the elasticity of supply of product Y.

Accepted Answer

A) True 
 B)False

Question 3

The supply of product X is perfectly inelastic if the price of X rises by:

Accepted Answer

A)  5 percent and quantity supplied rises by 7 percent. 
B)  8 percent and quantity supplied rises by 8 percent. 
C)  10 percent and quantity supplied stays the same. 
D)  7 percent and quantity supplied rises by 5 percent. 
A)  5 percent and quantity supplied rises by 7 percent. 
B)  8 percent and quantity supplied rises by 8 percent. 
C)  10 percent and quantity supplied stays the same. 
D)  7 percent and quantity supplied rises by 5 percent.

Question 4

The basic formula for the price elasticity of demand coefficient is:

Accepted Answer

A)  absolute decline in quantity demanded/absolute increase in price. 
B)  percentage change in quantity demanded/percentage change in price. 
C)  absolute decline in price/absolute increase in quantity demanded. 
D)  percentage change in price/percentage change in quantity demanded. 
A)  absolute decline in quantity demanded/absolute increase in price. 
B)  percentage change in quantity demanded/percentage change in price. 
C)  absolute decline in price/absolute increase in quantity demanded. 
D)  percentage change in price/percentage change in quantity demanded.

Question 5

Answer the question on the basis of the following demand schedule: $\begin{array}{l}
\begin{array}{ccc}
&\text { Quantity }\
\underline{\text { Price} } &  \underline{\text { Demanded}} \
 \$6 & 1 \
5 &  2 \
4 &  3 \
3 &  4 \
2 &  5 \
1 &  6
\end{array}
\end{array}$ Refer to the data.The price elasticity of demand is relatively inelastic:

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 6

Suppose the price of a product rises and the total revenue of sellers increases.

Accepted Answer

A)  It can be concluded that the demand for the product is elastic. 
B)  It can be concluded that the supply of the product is elastic. 
C)  It can be concluded that the supply of the product is inelastic. 
D)  No conclusion can be reached with respect to the elasticity of supply. 
A)  It can be concluded that the demand for the product is elastic. 
B)  It can be concluded that the supply of the product is elastic. 
C)  It can be concluded that the supply of the product is inelastic. 
D)  No conclusion can be reached with respect to the elasticity of supply.

Question 7

Which type of goods is most adversely affected by recessions?

Accepted Answer

A)  Goods for which the income elasticity coefficient is relatively low or negative. 
B)  Goods for which the income elasticity coefficient is relatively high and positive. 
C)  Goods for which the cross elasticity coefficient is positive. 
D)  Goods for which the cross elasticity coefficient is negative. 
A)  Goods for which the income elasticity coefficient is relatively low or negative. 
B)  Goods for which the income elasticity coefficient is relatively high and positive. 
C)  Goods for which the cross elasticity coefficient is positive. 
D)  Goods for which the cross elasticity coefficient is negative.

Question 8

Which of the following goods (with their respective income elasticity coefficients in parentheses)will most likely suffer a decline in demand during a recession?

Accepted Answer

A)  Dinner at a nice restaurant (+1.8) 
B)  Chicken purchased at the grocery store for preparation at home (+0.25) 
C)  Facial tissue (+0.6) 
D)  Plasma screen and LCD TVs (+4.2) 
A)  Dinner at a nice restaurant (+1.8) 
B)  Chicken purchased at the grocery store for preparation at home (+0.25) 
C)  Facial tissue (+0.6) 
D)  Plasma screen and LCD TVs (+4.2)

Question 9

A manufacturer of frozen pizzas found that total revenue decreased when price was lowered from $5 to $4.It was also found that total revenue decreased when price was raised from $5 to $6.Thus,

Accepted Answer

A)  the demand for pizza is elastic above $5 and inelastic below $5. 
B)  the demand for pizza is elastic both above and below $5. 
C)  the demand for pizza is inelastic above $5 and elastic below $5. 
D)  $5 is not the equilibrium price of pizza. 
A)  the demand for pizza is elastic above $5 and inelastic below $5. 
B)  the demand for pizza is elastic both above and below $5. 
C)  the demand for pizza is inelastic above $5 and elastic below $5. 
D)  $5 is not the equilibrium price of pizza.

Question 10

Generally speaking,the smaller the percentage of one's total budget devoted to a particular product,the more price elastic will be the demand for that product.

Accepted Answer

A) True 
 B)False

Question 11

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 12

The Illinois Central Railroad once asked the Illinois Commerce Commission for permission to increase its commuter rates by 20 percent.The railroad argued that declining revenues made this rate increase essential.Opponents of the rate increase contended that the railroad's revenues would fall because of the rate hike.It can be concluded that:

Accepted Answer

A)  both groups felt that the demand was elastic but for different reasons. 
B)  both groups felt that the demand was inelastic but for different reasons. 
C)  the railroad felt that the demand for passenger service was inelastic and opponents of the rate increase felt it was elastic. 
D)  the railroad felt that the demand for passenger service was elastic and opponents of the rate increase felt it was inelastic. 
A)  both groups felt that the demand was elastic but for different reasons. 
B)  both groups felt that the demand was inelastic but for different reasons. 
C)  the railroad felt that the demand for passenger service was inelastic and opponents of the rate increase felt it was elastic. 
D)  the railroad felt that the demand for passenger service was elastic and opponents of the rate increase felt it was inelastic.

Question 13

An antidrug policy that reduces the supply of heroin might:

Accepted Answer

A)  increase street crime because the addict's demand for heroin is highly inelastic. 
B)  reduce street crime because the addict's demand for heroin is highly elastic. 
C)  reduce street crime because the addict's demand for heroin is highly inelastic. 
D)  increase street crime because the addict's demand for heroin is highly elastic. 
A)  increase street crime because the addict's demand for heroin is highly inelastic. 
B)  reduce street crime because the addict's demand for heroin is highly elastic. 
C)  reduce street crime because the addict's demand for heroin is highly inelastic. 
D)  increase street crime because the addict's demand for heroin is highly elastic.

Question 14

(Last Word)Suppose that a firm has "pricing power" and can segregate its market into two distinct groups based on differences in elasticities of demand.The firm might charge:

Accepted Answer

A)  a lower price to the group that has the less elastic demand. 
B)  a higher price to the group that has the less elastic demand. 
C)  the same price to both groups but include a "free" related product for the group that has an inelastic demand. 
D)  the same price to both groups but make it difficult for the group with the more elastic demand to gain access to the product. 
A)  a lower price to the group that has the less elastic demand. 
B)  a higher price to the group that has the less elastic demand. 
C)  the same price to both groups but include a "free" related product for the group that has an inelastic demand. 
D)  the same price to both groups but make it difficult for the group with the more elastic demand to gain access to the product.

Question 15

Assume that a 3 percent increase in income across the economy produces a 1 percent decline in the quantity demanded of good X.The coefficient of income elasticity of demand for good X 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 16

If the coefficient of cross elasticity of demand is positive,the two products are complementary goods.

Accepted Answer

A) True 
 B)False

Question 17

If the University Chamber Music Society decides to raise ticket prices to provide more funds to finance concerts,the Society is assuming that the demand for tickets is:

Accepted Answer

A)  parallel to the horizontal axis. 
B)  shifting to the left. 
C)  inelastic. 
D)  elastic. 
A)  parallel to the horizontal axis. 
B)  shifting to the left. 
C)  inelastic. 
D)  elastic.

Question 18

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 19

We would expect the cross elasticity of demand between dress shirts and ties to be:

Accepted Answer

A)  positive,indicating normal goods. 
B)  positive,indicating complementary goods. 
C)  negative,indicating substitute goods. 
D)  negative,indicating complementary goods. 
A)  positive,indicating normal goods. 
B)  positive,indicating complementary goods. 
C)  negative,indicating substitute goods. 
D)  negative,indicating complementary goods.

Question 20

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.

Which of the following is correct?

The greater the ease of shifting resources from product X to product Y in the production process,the greater is the elasticity of supply of product Y.

The supply of product X is perfectly inelastic if the price of X rises by:

The basic formula for the price elasticity of demand coefficient is:

Answer the question on the basis of the following demand schedule: Quantity \6 1 5 2 4 3 3 4 2 5 1 6 Refer to the data.The price elasticity of demand is relatively inelastic:

Suppose the price of a product rises and the total revenue of sellers increases.

Which type of goods is most adversely affected by recessions?

Which of the following goods (with their respective income elasticity coefficients in parentheses)will most likely suffer a decline in demand during a recession?

A manufacturer of frozen pizzas found that total revenue decreased when price was lowered from $5 to $4.It was also found that total revenue decreased when price was raised from $5 to $6.Thus,

Generally speaking,the smaller the percentage of one's total budget devoted to a particular product,the more price elastic will be the demand for that product.

The supply of known Monet paintings is:

An antidrug policy that reduces the supply of heroin might:

(Last Word)Suppose that a firm has "pricing power" and can segregate its market into two distinct groups based on differences in elasticities of demand.The firm might charge:

Assume that a 3 percent increase in income across the economy produces a 1 percent decline in the quantity demanded of good X.The coefficient of income elasticity of demand for good X is:

If the coefficient of cross elasticity of demand is positive,the two products are complementary goods.

If the University Chamber Music Society decides to raise ticket prices to provide more funds to finance concerts,the Society is assuming that the demand for tickets is:

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

We would expect the cross elasticity of demand between dress shirts and ties to be:

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

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 Cost of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition and Oligopoly

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

Filters

Exam 6: Elasticity

Which of the following is correct?

The greater the ease of shifting resources from product X to product Y in the production process,the greater is the elasticity of supply of product Y.

The supply of product X is perfectly inelastic if the price of X rises by:

The basic formula for the price elasticity of demand coefficient is:

Answer the question on the basis of the following demand schedule: Quantity \6 1 5 2 4 3 3 4 2 5 1 6 Refer to the data.The price elasticity of demand is relatively inelastic:

Suppose the price of a product rises and the total revenue of sellers increases.

Which type of goods is most adversely affected by recessions?

Which of the following goods (with their respective income elasticity coefficients in parentheses)will most likely suffer a decline in demand during a recession?

A manufacturer of frozen pizzas found that total revenue decreased when price was lowered from $5 to $4.It was also found that total revenue decreased when price was raised from $5 to $6.Thus,

Generally speaking,the smaller the percentage of one's total budget devoted to a particular product,the more price elastic will be the demand for that product.

The supply of known Monet paintings is:

An antidrug policy that reduces the supply of heroin might:

(Last Word)Suppose that a firm has "pricing power" and can segregate its market into two distinct groups based on differences in elasticities of demand.The firm might charge:

Assume that a 3 percent increase in income across the economy produces a 1 percent decline in the quantity demanded of good X.The coefficient of income elasticity of demand for good X is:

If the coefficient of cross elasticity of demand is positive,the two products are complementary goods.

If the University Chamber Music Society decides to raise ticket prices to provide more funds to finance concerts,the Society is assuming that the demand for tickets is:

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

We would expect the cross elasticity of demand between dress shirts and ties to be:

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

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 Cost of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition and Oligopoly

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

Filters