Question 1

Suppose a decrease in the supply of bottled water results in a decrease in revenue.What does this indicate?

Accepted Answer

A)  That the demand for bottled water is inelastic in the price range considered 
B)  That the demand for bottled water is elastic in the price range considered 
C)  That the supply of bottled water is inelastic in the price range considered 
D)  That the supply of bottled water is elastic in the price range considered 
A)  That the demand for bottled water is inelastic in the price range considered 
B)  That the demand for bottled water is elastic in the price range considered 
C)  That the supply of bottled water is inelastic in the price range considered 
D)  That the supply of bottled water is elastic in the price range considered

Question 2

Suppose the cross-price elasticity of demand between grapefruit juice and orange juice is approximately 6.This means that________.

Accepted Answer

A)  a 1 per cent decrease in the price of grapefruit juice leads to a 6 per cent increase in orange juice consumption 
B)  a 6 per cent increase in the price of grapefruit juice leads to a 1 per cent increase in orange juice consumption 
C)  if the price of grapefruit juice rises by $1, 6 more cartons of orange juice will be purchased. 
D)  the demand for orange juice is 6 times more than the demand for grapefruit juice. 
A)  a 1 per cent decrease in the price of grapefruit juice leads to a 6 per cent increase in orange juice consumption 
B)  a 6 per cent increase in the price of grapefruit juice leads to a 1 per cent increase in orange juice consumption 
C)  if the price of grapefruit juice rises by $1, 6 more cartons of orange juice will be purchased. 
D)  the demand for orange juice is 6 times more than the demand for grapefruit juice.

Question 3

Suppose the current price of oil is $90 a barrel and the quantity supplied is 800 million barrels per day.If the price elasticity of supply for oil in the short run is estimated at 0.5,use the midpoint formula to calculate the percentage change in quantity supplied when the price of oil rises to $98 a barrel.
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

The percentage change in quant

Question 4

What factors would make you more sensitive or less sensitive to price when purchasing petrol?
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

A number of factors are likely to affect

Question 5

If the demand for a steak is unit-elastic,then________.

Accepted Answer

A)  the percentage change in quantity demanded is 1 per cent greater than the percentage change in price 
B)  the percentage change in quantity demanded is equal to the percentage change in price 
C)  the percentage change in quantity demanded is 100 per cent greater than the percentage change in price (in absolute value) 
D)  quantity demanded does not respond to changes in price 
A)  the percentage change in quantity demanded is 1 per cent greater than the percentage change in price 
B)  the percentage change in quantity demanded is equal to the percentage change in price 
C)  the percentage change in quantity demanded is 100 per cent greater than the percentage change in price (in absolute value) 
D)  quantity demanded does not respond to changes in price

Question 6

Figure 4.7  
-Refer to Figure 4.7.A perfectly inelastic supply 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 7

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

Accepted Answer

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

Question 8

What is the demand for petrol in the short run?

Accepted Answer

A)  Elastic because people can easily switch to public transportation 
B)  Perfectly inelastic because people have no choice but to buy petrol 
C)  Unit-elastic because people tend to consume a stable amount of petrol per period 
D)  Inelastic because there are no good substitutes for petrol 
A)  Elastic because people can easily switch to public transportation 
B)  Perfectly inelastic because people have no choice but to buy petrol 
C)  Unit-elastic because people tend to consume a stable amount of petrol per period 
D)  Inelastic because there are no good substitutes for petrol

Question 9

If the price elasticity of demand is unit-elastic,a 10 per cent increase in price will result in a 10 per cent increase in revenue.

Accepted Answer

A) True 
 B)False

Question 10

A study of the effects of the minimum wage on employment of low-skilled workers estimated the price elasticity of demand for low-skilled workers is −0.75.Suppose that the government is considering raising the minimum wage from $7.25 per hour to $7.75 per hour.Based on this information,calculate the percentage change in the employment of low-skilled workers.Use the midpoint formula.
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

Per cent change in q

Question 11

Which of the following correctly comments on the following statement? 'The only way to increase the revenue from selling a product is to increase the product's price.'

Accepted Answer

A)  It is not true. Revenue will increase as the price of the product increases only if demand is elastic. 
B)  This statement is not true. Revenue will increase as the price of the product increases only if demand is inelastic. 
C)  The statement is true. 
D)  This statement is not true. Revenue will decrease as the price of the product increases because quantity demanded will fall. 
A)  It is not true. Revenue will increase as the price of the product increases only if demand is elastic. 
B)  This statement is not true. Revenue will increase as the price of the product increases only if demand is inelastic. 
C)  The statement is true. 
D)  This statement is not true. Revenue will decrease as the price of the product increases because quantity demanded will fall.

Question 12

If tolls on a toll road can be raised significantly before commuters will consider using a free alternative,then an increase in tolls will result in _________.

Accepted Answer

A)  a decrease in total revenue 
B)  a decrease in non-toll road usage 
C)  an increase in total revenue 
D)  an increase in toll road usage 
A)  a decrease in total revenue 
B)  a decrease in non-toll road usage 
C)  an increase in total revenue 
D)  an increase in toll road usage

Question 13

What could a firm do if it wanted to know whether the demand for its product was elastic,unit-elastic,or inelastic?

Accepted Answer

A)  Survey competitors and ask them what they think demand elasticity is for the product. 
B)  Talk to its customers. 
C)  Change price a little bit and observe what happens to total revenue. 
D)  Don't do anything as there is no way to find an elasticity value. 
A)  Survey competitors and ask them what they think demand elasticity is for the product. 
B)  Talk to its customers. 
C)  Change price a little bit and observe what happens to total revenue. 
D)  Don't do anything as there is no way to find an elasticity value.

Question 14

Which of the following statements is true about the price elasticity of demand along a downward-sloping linear demand curve?

Accepted Answer

A)  It is inelastic at high prices and elastic at low prices. 
B)  It is unit-elastic throughout the demand curve. 
C)  It is elastic at high prices and inelastic at low prices. 
D)  It is perfectly elastic at very high prices and perfectly inelastic at very low prices. 
A)  It is inelastic at high prices and elastic at low prices. 
B)  It is unit-elastic throughout the demand curve. 
C)  It is elastic at high prices and inelastic at low prices. 
D)  It is perfectly elastic at very high prices and perfectly inelastic at very low prices.

Question 15

Holding everything else constant,the absolute value of the price elasticity of demand for Saucony tennis shoes is ________ the price elasticity of demand for tennis shoes.

Accepted Answer

A)  less than 
B)  equal to 
C)  twice as great as 
D)  greater than 
A)  less than 
B)  equal to 
C)  twice as great as 
D)  greater than

Question 16

If the cross-price elasticity of demand between beer and wine is 0.31,then beer and wine are ______.

Accepted Answer

A)  complements 
B)  price inelastic goods 
C)  substitutes 
D)  necessities 
A)  complements 
B)  price inelastic goods 
C)  substitutes 
D)  necessities

Question 17

Jill Borts believes that the price elasticity of demand for her economics textbook is relatively inelastic.She argues 'I was told I had to purchase a book written by Hubbard and O'Brien that is required by my instructor.If I wanted to buy a mystery novel I would have many authors to choose from.Therefore,the demand for mystery novels is more elastic than the demand for my textbook.' Is Jill correct?

Accepted Answer

A)  The demand for the textbook is more inelastic, but Jill's reasoning is incorrect. The reason the textbook has an inelastic demand is that it is more expensive than any novel. 
B)  She is correct. 
C)  She is confused. She should have concluded that the textbook has a more elastic demand than a novel. 
D)  She is correct that the textbook has a more inelastic demand, but that is because most students pay for their textbooks with credit or debit cards. Most people pay for novels and other books with cash or by check. 
A)  The demand for the textbook is more inelastic, but Jill's reasoning is incorrect. The reason the textbook has an inelastic demand is that it is more expensive than any novel. 
B)  She is correct. 
C)  She is confused. She should have concluded that the textbook has a more elastic demand than a novel. 
D)  She is correct that the textbook has a more inelastic demand, but that is because most students pay for their textbooks with credit or debit cards. Most people pay for novels and other books with cash or by check.

Question 18

Figure 4.4  
-Refer to Figure 4.4.Which of the following statements is true about the price elasticity of demand?

Accepted Answer

A)  The elasticity coefficient is constant along the demand curve. 
B)  The elastic portion of a straight-line downward-sloping demand curve corresponds to the segment above the midpoint. 
C)  The inelastic portion of the demand curve corresponds to the segment above the midpoint. 
D)  At the midpoint of the demand curve, the elasticity coefficient is zero. 
A)  The elasticity coefficient is constant along the demand curve. 
B)  The elastic portion of a straight-line downward-sloping demand curve corresponds to the segment above the midpoint. 
C)  The inelastic portion of the demand curve corresponds to the segment above the midpoint. 
D)  At the midpoint of the demand curve, the elasticity coefficient is zero.

Question 19

What is income elasticity if an 8 per cent increase in income leads to a 4 per cent increase in quantity demanded for organic produce?

Accepted Answer

A)  −0.66 
B)  0.5 
C)  1.5 
D)  2 
A)  −0.66 
B)  0.5 
C)  1.5 
D)  2

Question 20

If,for a given percentage increase in price,quantity demanded falls by a proportionately smaller percentage,then demand is _________.

Accepted Answer

A)  unit-elastic 
B)  perfectly elastic 
C)  relatively inelastic 
D)  relatively elastic 
A)  unit-elastic 
B)  perfectly elastic 
C)  relatively inelastic 
D)  relatively elastic

Suppose a decrease in the supply of bottled water results in a decrease in revenue.What does this indicate?

Suppose the cross-price elasticity of demand between grapefruit juice and orange juice is approximately 6.This means that________.

What factors would make you more sensitive or less sensitive to price when purchasing petrol? __________________________________________________________________________________________________________________________________________________________________________________________

If the demand for a steak is unit-elastic,then________.

Figure 4.7 -Refer to Figure 4.7.A perfectly inelastic supply curve is shown in ________.

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

What is the demand for petrol in the short run?

If the price elasticity of demand is unit-elastic,a 10 per cent increase in price will result in a 10 per cent increase in revenue.

Which of the following correctly comments on the following statement? 'The only way to increase the revenue from selling a product is to increase the product's price.'

If tolls on a toll road can be raised significantly before commuters will consider using a free alternative,then an increase in tolls will result in _________.

What could a firm do if it wanted to know whether the demand for its product was elastic,unit-elastic,or inelastic?

Which of the following statements is true about the price elasticity of demand along a downward-sloping linear demand curve?

Holding everything else constant,the absolute value of the price elasticity of demand for Saucony tennis shoes is ________ the price elasticity of demand for tennis shoes.

If the cross-price elasticity of demand between beer and wine is 0.31,then beer and wine are ______.

Figure 4.4 -Refer to Figure 4.4.Which of the following statements is true about the price elasticity of demand?

What is income elasticity if an 8 per cent increase in income leads to a 4 per cent increase in quantity demanded for organic produce?

If,for a given percentage increase in price,quantity demanded falls by a proportionately smaller percentage,then demand 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

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Exam 4: Elasticity: The Responsiveness of Demand and Supply

Suppose a decrease in the supply of bottled water results in a decrease in revenue.What does this indicate?

Suppose the cross-price elasticity of demand between grapefruit juice and orange juice is approximately 6.This means that________.

What factors would make you more sensitive or less sensitive to price when purchasing petrol? __________________________________________________________________________________________________________________________________________________________________________________________

If the demand for a steak is unit-elastic,then________.

Figure 4.7 -Refer to Figure 4.7.A perfectly inelastic supply curve is shown in ________.

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

What is the demand for petrol in the short run?

If the price elasticity of demand is unit-elastic,a 10 per cent increase in price will result in a 10 per cent increase in revenue.

Which of the following correctly comments on the following statement? 'The only way to increase the revenue from selling a product is to increase the product's price.'

If tolls on a toll road can be raised significantly before commuters will consider using a free alternative,then an increase in tolls will result in _________.

What could a firm do if it wanted to know whether the demand for its product was elastic,unit-elastic,or inelastic?

Which of the following statements is true about the price elasticity of demand along a downward-sloping linear demand curve?

Holding everything else constant,the absolute value of the price elasticity of demand for Saucony tennis shoes is ________ the price elasticity of demand for tennis shoes.

If the cross-price elasticity of demand between beer and wine is 0.31,then beer and wine are ______.

Figure 4.4 -Refer to Figure 4.4.Which of the following statements is true about the price elasticity of demand?

What is income elasticity if an 8 per cent increase in income leads to a 4 per cent increase in quantity demanded for organic produce?

If,for a given percentage increase in price,quantity demanded falls by a proportionately smaller percentage,then demand 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