Question 1

The elasticity of supply of product X is unitary 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 2

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 3

If the price of hand calculators falls from $10 to $9 and,as a result,the quantity demanded increases from 100 to 125,then:

Accepted Answer

A)  demand is elastic. 
B)  demand is inelastic. 
C)  demand is of unit elasticity. 
D)  not enough information is given to make a statement about elasticity. 
A)  demand is elastic. 
B)  demand is inelastic. 
C)  demand is of unit elasticity. 
D)  not enough information is given to make a statement about elasticity.

Question 4

Cross elasticity of demand measures how sensitive purchases of a specific product are to changes in:

Accepted Answer

A)  the price of some other product. 
B)  the price of that same product. 
C)  income. 
D)  the general price level. 
A)  the price of some other product. 
B)  the price of that same product. 
C)  income. 
D)  the general price level.

Question 5

When the percentage change in price is greater than the resulting percentage change in quantity demanded:

Accepted Answer

A)  a decrease in price will increase total revenue. 
B)  demand may be either elastic or inelastic. 
C)  an increase in price will increase total revenue. 
D)  demand is elastic. 
A)  a decrease in price will increase total revenue. 
B)  demand may be either elastic or inelastic. 
C)  an increase in price will increase total revenue. 
D)  demand is elastic.

Question 6

Answer the question on the basis of the following demand and supply data: $ \begin{array}{cccc}\text {Quantity Demanded}&&
\text {Quantity Supplied}\\underline{\text { Per Month }} &\underline{\text { Price }} &\underline{ \text { Per Month} } \ 30& \$ 8 & 44 \ 36 & 7 & 38 \ 42 & 6 & 30 \ 50 & 5 &  20\end{array} $ Refer to the data.The supply of this product is inelastic in the $6-$5 price range.

Accepted Answer

A) True 
 B)False

Question 7

Suppose that a 20 percent increase in the price of normal good Y causes a 10 percent decline in the quantity demanded of normal good X.The coefficient of cross elasticity of demand is:

Accepted Answer

A)  negative and therefore these goods are substitutes. 
B)  negative and therefore these goods are complements. 
C)  positive and therefore these goods are substitutes. 
D)  positive and therefore these goods are complements. 
A)  negative and therefore these goods are substitutes. 
B)  negative and therefore these goods are complements. 
C)  positive and therefore these goods are substitutes. 
D)  positive and therefore these goods are complements.

Question 8

The supply of product X is elastic 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 remains 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 remains the same. 
D)  7 percent and quantity supplied rises by 5 percent.

Question 9

The price of old baseball cards rises rapidly with increases in demand because:

Accepted Answer

A)  the supply of old baseball cards is price inelastic. 
B)  the supply of old baseball cards in price elastic. 
C)  the demand for old baseball cards is price inelastic. 
D)  the demand for old baseball cards is price elastic. 
A)  the supply of old baseball cards is price inelastic. 
B)  the supply of old baseball cards in price elastic. 
C)  the demand for old baseball cards is price inelastic. 
D)  the demand for old baseball cards is price elastic.

Question 10

Suppose the price elasticity of demand for bread is 0.20.If the price of bread falls by 10 percent,the quantity demanded will increase by:

Accepted Answer

A)  2 percent and total expenditures on bread will rise. 
B)  2 percent and total expenditures on bread will fall. 
C)  20 percent and total expenditures on bread will fall. 
D)  20 percent and total expenditures on bread will rise. 
A)  2 percent and total expenditures on bread will rise. 
B)  2 percent and total expenditures on bread will fall. 
C)  20 percent and total expenditures on bread will fall. 
D)  20 percent and total expenditures on bread will rise.

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 declines if price is increased. 
D)  The elasticity coefficient is less 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 declines if price is increased. 
D)  The elasticity coefficient is less than one.

Question 12

Other things the same,if a price change causes total revenue to change in the opposite direction,demand is:

Accepted Answer

A)  perfectly inelastic. 
B)  relatively elastic. 
C)  relatively inelastic. 
D)  of unit elasticity. 
A)  perfectly inelastic. 
B)  relatively elastic. 
C)  relatively inelastic. 
D)  of unit elasticity.

Question 13

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 14

(Consider This)The supply of higher education in the United States is:

Accepted Answer

A)  highly price elastic. 
B)  highly price inelastic. 
C)  unitary elastic with respect to price. 
D)  perfectly price elastic. 
A)  highly price elastic. 
B)  highly price inelastic. 
C)  unitary elastic with respect to price. 
D)  perfectly price elastic.

Question 15

For a linear demand curve:

Accepted Answer

A)  elasticity is constant along the curve. 
B)  elasticity is unity at every point on the curve. 
C)  demand is elastic at low prices. 
D)  demand is elastic at high prices. 
A)  elasticity is constant along the curve. 
B)  elasticity is unity at every point on the curve. 
C)  demand is elastic at low prices. 
D)  demand is elastic at high prices.

Question 16

We would expect the cross elasticity of demand between Pepsi and Coke to be:

Accepted Answer

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

Question 17

If a firm finds that it can sell $13,000 worth of a product when its price is $5 per unit and $11,000 worth of it when its price is $6,then:

Accepted Answer

A)  the demand for the product is elastic in the $6-$5 price range. 
B)  the demand for the product must have increased. 
C)  elasticity of demand is 0.74. 
D)  the demand for the product is inelastic in the $6-$5 price range. 
A)  the demand for the product is elastic in the $6-$5 price range. 
B)  the demand for the product must have increased. 
C)  elasticity of demand is 0.74. 
D)  the demand for the product is inelastic in the $6-$5 price range.

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

The price elasticity of demand is generally:

Accepted Answer

A)  negative,but the minus sign is ignored. 
B)  positive,but the plus sign is ignored. 
C)  positive for normal goods and negative for inferior goods. 
D)  positive because price and quantity demanded are inversely related. 
A)  negative,but the minus sign is ignored. 
B)  positive,but the plus sign is ignored. 
C)  positive for normal goods and negative for inferior goods. 
D)  positive because price and quantity demanded are inversely related.

Question 20

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 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.

Exam 6: Elasticity

The elasticity of supply of product X is unitary if the price of X rises by:

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:

If the price of hand calculators falls from $10 to $9 and,as a result,the quantity demanded increases from 100 to 125,then:

Cross elasticity of demand measures how sensitive purchases of a specific product are to changes in:

When the percentage change in price is greater than the resulting percentage change in quantity demanded:

Answer the question on the basis of the following demand and supply data: Quantity Demanded Quantity Supplied 30 \ 8 44 36 7 38 42 6 30 50 5 20 Refer to the data.The supply of this product is inelastic in the $6-$5 price range.

Suppose that a 20 percent increase in the price of normal good Y causes a 10 percent decline in the quantity demanded of normal good X.The coefficient of cross elasticity of demand is:

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

The price of old baseball cards rises rapidly with increases in demand because:

Suppose the price elasticity of demand for bread is 0.20.If the price of bread falls by 10 percent,the quantity demanded will increase by:

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

Other things the same,if a price change causes total revenue to change in the opposite direction,demand is:

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

(Consider This)The supply of higher education in the United States is:

For a linear demand curve:

We would expect the cross elasticity of demand between Pepsi and Coke to be:

If a firm finds that it can sell $13,000 worth of a product when its price is $5 per unit and $11,000 worth of it when its price is $6,then:

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

The price elasticity of demand is generally:

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 unity:

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