Question 1

Where is total revenue the greatest along a downward-sloping,linear demand curve?

Accepted Answer

A)  Where demand is normal 
B)  Where demand is the most inelastic 
C)  Where demand is the most elastic 
D)  Where demand is unit-elastic 
A)  Where demand is normal 
B)  Where demand is the most inelastic 
C)  Where demand is the most elastic 
D)  Where demand is unit-elastic

Question 2

Figure 4.1  
-Refer to Figure 4.1.What is the demand curve on which elasticity changes at every point given?

Accepted Answer

A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  None of the above graphs 
A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  None of the above graphs

Question 3

Consider the following pairs of items: 
A.shampoo and conditioner
B.iPhones and earbuds
C.a laptop computer and a desktop computer
D.beef and pork
E.air-travel and weed killer
Which of the pairs listed will have cross-price elasticity of zero?

Accepted Answer

A)  a and b only 
B)  c only, since most people cannot do without computers 
C)  e only 
D)  none of the pairs listed 
A)  a and b only 
B)  c only, since most people cannot do without computers 
C)  e only 
D)  none of the pairs listed

Question 4

The cross-price elasticity of demand measures the________.

Accepted Answer

A)  absolute change in the quantity demanded of one good divided by the absolute change in the price of another good 
B)  percentage change in the quantity demanded of one good divided by the percentage change in the price of another good 
C)  percentage change in the price of one good divided by the percentage change in the quantity demanded of another good 
D)  percentage change in the quantity demanded of one good in one location divided by the price of the same good in another location 
A)  absolute change in the quantity demanded of one good divided by the absolute change in the price of another good 
B)  percentage change in the quantity demanded of one good divided by the percentage change in the price of another good 
C)  percentage change in the price of one good divided by the percentage change in the quantity demanded of another good 
D)  percentage change in the quantity demanded of one good in one location divided by the price of the same good in another location

Question 5

The price elasticity of supply is calculated as the change in supply divided by the change in price.

Accepted Answer

A) True 
 B)False

Question 6

If a firm lowered the price of the product it sells and found that total revenue did not change,then what is true about the demand for its product?

Accepted Answer

A)  It is perfectly inelastic. 
B)  It is perfectly elastic. 
C)  It is unit-elastic. 
D)  It is relatively elastic. 
A)  It is perfectly inelastic. 
B)  It is perfectly elastic. 
C)  It is unit-elastic. 
D)  It is relatively elastic.

Question 7

Why should we never assume that an inelastic demand curve is a perfectly inelastic demand curve?

Accepted Answer

A)  Because there has never been evidence of a perfectly inelastic demand curve 
B)  Because an inelastic demand curve may be perfectly inelastic at some times but not others 
C)  Because perfectly inelastic demand curves are rare 
D)  Because an inelastic demand curve may be elastic at high prices 
A)  Because there has never been evidence of a perfectly inelastic demand curve 
B)  Because an inelastic demand curve may be perfectly inelastic at some times but not others 
C)  Because perfectly inelastic demand curves are rare 
D)  Because an inelastic demand curve may be elastic at high prices

Question 8

Suppose the supply of bicycles is price elastic.This means that________.

Accepted Answer

A)  consumers will respond significantly to an increase in the quantity supplied of bicycles 
B)  suppliers will increase the quantity supplied of bicycles, but not immediately 
C)  suppliers face many substitutes for bicycles 
D)  suppliers will respond significantly to changes in the price of bicycles 
A)  consumers will respond significantly to an increase in the quantity supplied of bicycles 
B)  suppliers will increase the quantity supplied of bicycles, but not immediately 
C)  suppliers face many substitutes for bicycles 
D)  suppliers will respond significantly to changes in the price of bicycles

Question 9

The demand for all carbonated beverages is likely to be ________ the demand for Pepsi.

Accepted Answer

A)  more elastic than 
B)  perfectly elastic compared to 
C)  less elastic than 
D)  perfectly inelastic compared to 
A)  more elastic than 
B)  perfectly elastic compared to 
C)  less elastic than 
D)  perfectly inelastic compared to

Question 10

To what is total revenue equal?

Accepted Answer

A)  The amount of funds earned by a firm minus its costs of production 
B)  The total quantity sold of a product over a given period of time 
C)  The price of a product multiplied by the number of units of the product sold 
D)  The monetary value of the capital (for example, plant and equipment) a firm owns 
A)  The amount of funds earned by a firm minus its costs of production 
B)  The total quantity sold of a product over a given period of time 
C)  The price of a product multiplied by the number of units of the product sold 
D)  The monetary value of the capital (for example, plant and equipment) a firm owns

Question 11

The cross-price elasticity between Gillette razors and a related good is −3.4.What happens to the demand for the related good if the price of Gillette razors falls by 10 per cent?

Accepted Answer

A)  The quantity demanded of the related good rises by 3.4 per cent. 
B)  The quantity demanded of the related good falls by 34 per cent. 
C)  The quantity demanded of the related good rises by 34 per cent. 
D)  The quantity demanded of the related good falls by 3.4 per cent. 
A)  The quantity demanded of the related good rises by 3.4 per cent. 
B)  The quantity demanded of the related good falls by 34 per cent. 
C)  The quantity demanded of the related good rises by 34 per cent. 
D)  The quantity demanded of the related good falls by 3.4 per cent.

Question 12

When there are few close substitutes available for a good,demand tends to be ________.

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 13

Figure 4.1  
-Refer to Figure 4.1 A perfectly elastic demand curve is shown in ______.

Accepted Answer

A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D 
A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D

Question 14

Which of the following is a key determinant of the price elasticity of supply?

Accepted Answer

A)  The slope of the supply curve 
B)  The availability of substitutes in production 
C)  The available technology 
D)  The time it takes to change output in response to a change in price 
A)  The slope of the supply curve 
B)  The availability of substitutes in production 
C)  The available technology 
D)  The time it takes to change output in response to a change in price

Question 15

What is generally true about a 'big ticket item' such as a house or new car?

Accepted Answer

A)  It will tend to have a more elastic demand than a lower priced good. 
B)  It will tend to have an inelastic demand because spending on the item takes up a large share of the average consumer's budget. 
C)  It will tend to have an inelastic demand because it has many substitutes. 
D)  It will tend to have a more inelastic demand the more time that passes. 
A)  It will tend to have a more elastic demand than a lower priced good. 
B)  It will tend to have an inelastic demand because spending on the item takes up a large share of the average consumer's budget. 
C)  It will tend to have an inelastic demand because it has many substitutes. 
D)  It will tend to have a more inelastic demand the more time that passes.

Question 16

Suppose the supply curve for digital cameras shifts to the right.This will cause a relatively large decrease in the price of digital cameras if both demand and supply are inelastic.

Accepted Answer

A) True 
 B)False

Question 17

The larger the share of a good in a consumer's budget,holding everything else constant,the________.

Accepted Answer

A)  more price elastic is a consumer's demand. 
B)  more vertical is a consumer's demand curve. 
C)  more price inelastic is a consumer's demand. 
D)  more unit-elastic is a consumer's demand. 
A)  more price elastic is a consumer's demand. 
B)  more vertical is a consumer's demand curve. 
C)  more price inelastic is a consumer's demand. 
D)  more unit-elastic is a consumer's demand.

Question 18

If demand is perfectly inelastic,what is the absolute value of the price elasticity of demand?

Accepted Answer

A)  Zero 
B)  Less than one 
C)  More than one 
D)  Equal to the absolute value of the slope of the demand curve 
A)  Zero 
B)  Less than one 
C)  More than one 
D)  Equal to the absolute value of the slope of the demand curve

Question 19

If the demand for a life-saving drug was perfectly inelastic and the price doubled,what would happen to the quantity demanded?

Accepted Answer

A)  It would also double. 
B)  It would decrease by 50 per cent. 
C)  It would be cut in half. 
D)  It would remain constant. 
A)  It would also double. 
B)  It would decrease by 50 per cent. 
C)  It would be cut in half. 
D)  It would remain constant.

Question 20

For people who live near a bus route,a subway station,or a commuter rail line,public transportation provides a substitute to driving their own cars.So,for these people,the cross-price elasticity of demand between petrol and public transportation is ________.

Accepted Answer

A)  positive 
B)  negative 
C)  zero 
D)  infinity 
A)  positive 
B)  negative 
C)  zero 
D)  infinity

Where is total revenue the greatest along a downward-sloping,linear demand curve?

Figure 4.1 -Refer to Figure 4.1.What is the demand curve on which elasticity changes at every point given?

Consider the following pairs of items: A.shampoo and conditioner B.iPhones and earbuds C.a laptop computer and a desktop computer D.beef and pork E.air-travel and weed killer Which of the pairs listed will have cross-price elasticity of zero?

The cross-price elasticity of demand measures the________.

The price elasticity of supply is calculated as the change in supply divided by the change in price.

If a firm lowered the price of the product it sells and found that total revenue did not change,then what is true about the demand for its product?

Why should we never assume that an inelastic demand curve is a perfectly inelastic demand curve?

Suppose the supply of bicycles is price elastic.This means that________.

The demand for all carbonated beverages is likely to be ________ the demand for Pepsi.

To what is total revenue equal?

The cross-price elasticity between Gillette razors and a related good is −3.4.What happens to the demand for the related good if the price of Gillette razors falls by 10 per cent?

When there are few close substitutes available for a good,demand tends to be ________.

Figure 4.1 -Refer to Figure 4.1 A perfectly elastic demand curve is shown in ______.

Which of the following is a key determinant of the price elasticity of supply?

What is generally true about a 'big ticket item' such as a house or new car?

Suppose the supply curve for digital cameras shifts to the right.This will cause a relatively large decrease in the price of digital cameras if both demand and supply are inelastic.

The larger the share of a good in a consumer's budget,holding everything else constant,the________.

If demand is perfectly inelastic,what is the absolute value of the price elasticity of demand?

If the demand for a life-saving drug was perfectly inelastic and the price doubled,what would happen to the quantity demanded?

For people who live near a bus route,a subway station,or a commuter rail line,public transportation provides a substitute to driving their own cars.So,for these people,the cross-price elasticity of demand between petrol and public transportation is ________.

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency,government Price Setting and Taxes

Technology,production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition and Oligopoly

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money,banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

Filters

Exam 4: Elasticity: The Responsiveness of Demand and Supply

Where is total revenue the greatest along a downward-sloping,linear demand curve?

Figure 4.1 -Refer to Figure 4.1.What is the demand curve on which elasticity changes at every point given?

Consider the following pairs of items: A.shampoo and conditioner B.iPhones and earbuds C.a laptop computer and a desktop computer D.beef and pork E.air-travel and weed killer Which of the pairs listed will have cross-price elasticity of zero?

The cross-price elasticity of demand measures the________.

The price elasticity of supply is calculated as the change in supply divided by the change in price.

If a firm lowered the price of the product it sells and found that total revenue did not change,then what is true about the demand for its product?

Why should we never assume that an inelastic demand curve is a perfectly inelastic demand curve?

Suppose the supply of bicycles is price elastic.This means that________.

The demand for all carbonated beverages is likely to be ________ the demand for Pepsi.

To what is total revenue equal?

The cross-price elasticity between Gillette razors and a related good is −3.4.What happens to the demand for the related good if the price of Gillette razors falls by 10 per cent?

When there are few close substitutes available for a good,demand tends to be ________.

Figure 4.1 -Refer to Figure 4.1 A perfectly elastic demand curve is shown in ______.

Which of the following is a key determinant of the price elasticity of supply?

What is generally true about a 'big ticket item' such as a house or new car?

Suppose the supply curve for digital cameras shifts to the right.This will cause a relatively large decrease in the price of digital cameras if both demand and supply are inelastic.

The larger the share of a good in a consumer's budget,holding everything else constant,the________.

If demand is perfectly inelastic,what is the absolute value of the price elasticity of demand?

If the demand for a life-saving drug was perfectly inelastic and the price doubled,what would happen to the quantity demanded?

For people who live near a bus route,a subway station,or a commuter rail line,public transportation provides a substitute to driving their own cars.So,for these people,the cross-price elasticity of demand between petrol and public transportation is ________.

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency,government Price Setting and Taxes

Technology,production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition and Oligopoly

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money,banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

Filters