Question 1

Which of the following explains why a firm would be interested in the knowing the price elasticity of demand for a good it sells?

Accepted Answer

A) The price elasticity of demand can be used to determine the impact of changes in income on quantity sold. 
B) Knowing the price elasticity of demand allows the firm to determine how the cost of producing additional units of the good will change. 
C) Knowing the price elasticity of demand allows the firm to calculate how changes in the price of the good will affect the firm's total profit. 
D) The price elasticity of demand allows the firm to calculate how changes in the price of the good will affect the firm's total revenue. 
A) The price elasticity of demand can be used to determine the impact of changes in income on quantity sold. 
B) Knowing the price elasticity of demand allows the firm to determine how the cost of producing additional units of the good will change. 
C) Knowing the price elasticity of demand allows the firm to calculate how changes in the price of the good will affect the firm's total profit. 
D) The price elasticity of demand allows the firm to calculate how changes in the price of the good will affect the firm's total revenue.

Question 2

If the demand for a steak is unit-elastic,then

Accepted Answer

A) the percentage change in quantity demanded is 1 percent 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 percent 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 percent 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 percent greater than the percentage change in price (in absolute value). 
D) quantity demanded does not respond to changes in price.

Question 3

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 4

Barbara,the consummate hostess,proudly announced as she served dessert,"A port is often the perfect end to a meal,sipped with a piece of my scrumptious chocolate cake." Evidently,Barbara views

Accepted Answer

A) port and chocolate cake as luxury items. 
B) port and chocolate cake as necessities. 
C) port and chocolate cake as complementary goods. 
D) port and chocolate cake as substitutes to other desserts. 
A) port and chocolate cake as luxury items. 
B) port and chocolate cake as necessities. 
C) port and chocolate cake as complementary goods. 
D) port and chocolate cake as substitutes to other desserts.

Question 5

Suppose when the price of jean-jackets increased by 10 percent,the quantity supplied increased by 16 percent.Based on this information the price elasticity of supply of jean-jackets is

Accepted Answer

A) 0.625. 
B) 6%. 
C) 1.6. 
D) 1.6%. 
A) 0.625. 
B) 6%. 
C) 1.6. 
D) 1.6%.

Question 6

If the cross-price elasticity of demand for goods A and B is zero,this means the two goods are unrelated.

Accepted Answer

A) True 
 B)False

Question 7

Table 6-4
  
-Refer to Table 6-4.
a.Using the information in the table,calculate the income elasticity of demand for good X and characterize the good.Use the midpoint formula.
b.Can you calculate the income elasticity of demand for good Y? If you can,show your calculation and characterize the good.If you cannot,explain why.

Accepted Answer

a.The income elasticity of demand for go

Question 8

A linear downward sloping demand curve has price elasticities (in absolute values)that

Accepted Answer

A) increase as price decreases. 
B) remain constant along the demand curve. 
C) decrease as price decreases. 
D) are greater than or equal to 1. 
A) increase as price decreases. 
B) remain constant along the demand curve. 
C) decrease as price decreases. 
D) are greater than or equal to 1.

Question 9

Which of the following statements is true?

Accepted Answer

A) If the price of a good is lowered and total revenue decreases,demand is elastic. 
B) If the price of a good is raised and total revenue does not change,demand is perfectly elastic. 
C) If the price of a good is raised and total revenue increases,demand is inelastic. 
D) If the price of a good is lowered and total revenue increases,demand is inelastic. 
A) If the price of a good is lowered and total revenue decreases,demand is elastic. 
B) If the price of a good is raised and total revenue does not change,demand is perfectly elastic. 
C) If the price of a good is raised and total revenue increases,demand is inelastic. 
D) If the price of a good is lowered and total revenue increases,demand is inelastic.

Question 10

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 11

In May 2011,the average price of gasoline in the United States was $3.76 per gallon,and consumers purchased nearly 5 percent less gasoline than they had during May 2010,when the average price of gasoline was $2.79 per gallon.Based on these figures,when the price of gasoline rose from $2.79 per gallon to $3.76 per gallon,total revenue

Accepted Answer

A) increased. 
B) decreased. 
C) did not change. 
D) There is not enough information to determine what happened to total revenue. 
A) increased. 
B) decreased. 
C) did not change. 
D) There is not enough information to determine what happened to total revenue.

Question 12

Table 6-5
   The town of Bloomfield is well known for its basketball team.The price of basketball game tickets is determined by market forces.Table 6-5 above shows the demand and supply schedules for basketball games tickets.
-Refer to Table 6-5.What is the numerical value of the price elasticity of supply?

Accepted Answer

A) 1 
B) greater than 0 but less than 1 
C) 0 
D) greater than 1 
A) 1 
B) greater than 0 but less than 1 
C) 0 
D) greater than 1

Question 13

Figure 6-4  
-Refer to Figure 6-4.The data in the diagram indicates that DVDs are

Accepted Answer

A) luxury goods. 
B) inelastic goods. 
C) necessities. 
D) both luxury goods and inelastic goods. 
E) both necessities and inelastic goods. 
A) luxury goods. 
B) inelastic goods. 
C) necessities. 
D) both luxury goods and inelastic goods. 
E) both necessities and inelastic goods.

Question 14

Total revenue is equal to

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 15

Explain the concepts of cross-price elasticity of demand and income elasticity of demand.What do positive and negative values indicate for each of these demand elasticities

Accepted Answer

Cross-price elasticity of demand measure

Question 16

If at a price of $10,a vendor sells 5 units of a product and at a price of $8,6 units are sold,then,using the midpoint formula,the demand for this good is inelastic.

Accepted Answer

A) True 
 B)False

Question 17

Economist Jerry Hausman estimated the price elasticity of demand for "Post Raisin Bran" and "All types of breakfast cereals." He found that the price elasticity of demand for Post Raisin Bran was -2.5 and the price elasticity of demand for "All types of breakfast cereals" was -0.9.Which of the following can be implied from Hausman's estimates?

Accepted Answer

A) The demand for "All types of breakfast cereals" is elastic. 
B) A 1 percent increase in the price of Post Raisin Bran will lead to a 25 percent decrease in the quantity demanded of Post Raisin Bran. 
C) The demand for Post Raisin Bran is more elastic than the demand for "All types of breakfast cereals." 
D) A 1 percent decrease in the price of breakfast cereals will lead to a 2.5 percent increase in the quantity demanded of Post Raisin Bran. 
A) The demand for "All types of breakfast cereals" is elastic. 
B) A 1 percent increase in the price of Post Raisin Bran will lead to a 25 percent decrease in the quantity demanded of Post Raisin Bran. 
C) The demand for Post Raisin Bran is more elastic than the demand for "All types of breakfast cereals." 
D) A 1 percent decrease in the price of breakfast cereals will lead to a 2.5 percent increase in the quantity demanded of Post Raisin Bran.

Question 18

If the percentage change in the quantity of teapots demanded is greater than the percentage change in the price of teapots,then

Accepted Answer

A) the price elasticity of demand for teapots is greater than 1 in absolute value. 
B) the demand for teapots is unit-elastic. 
C) the price elasticity of demand for teapots is equal to zero. 
D) the price elasticity of demand for teapots is less than 1 in absolute value. 
A) the price elasticity of demand for teapots is greater than 1 in absolute value. 
B) the demand for teapots is unit-elastic. 
C) the price elasticity of demand for teapots is equal to zero. 
D) the price elasticity of demand for teapots is less than 1 in absolute value.

Question 19

To calculate the price elasticity of supply we divide

Accepted Answer

A) the percentage change in price by the percentage change in quantity supplied. 
B) the percentage change in quantity supplied by the percentage change in price. 
C) rise by the run. 
D) the average price by the average quantity supplied. 
A) the percentage change in price by the percentage change in quantity supplied. 
B) the percentage change in quantity supplied by the percentage change in price. 
C) rise by the run. 
D) the average price by the average quantity supplied.

Question 20

In order to prove that Motrin and Ibuprofen are substitutes,one should measure the ________ and get a ________.

Accepted Answer

A) cross-price elasticity; positive number 
B) cross-price elasticity; negative number 
C) price elasticity of demand; number greater than 1 (in absolute value) 
D) price elasticity of demand; number less than 1 (in absolute value) 
A) cross-price elasticity; positive number 
B) cross-price elasticity; negative number 
C) price elasticity of demand; number greater than 1 (in absolute value) 
D) price elasticity of demand; number less than 1 (in absolute value)

Which of the following explains why a firm would be interested in the knowing the price elasticity of demand for a good it sells?

If the demand for a steak is unit-elastic,then

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

Barbara,the consummate hostess,proudly announced as she served dessert,"A port is often the perfect end to a meal,sipped with a piece of my scrumptious chocolate cake." Evidently,Barbara views

Suppose when the price of jean-jackets increased by 10 percent,the quantity supplied increased by 16 percent.Based on this information the price elasticity of supply of jean-jackets is

If the cross-price elasticity of demand for goods A and B is zero,this means the two goods are unrelated.

A linear downward sloping demand curve has price elasticities (in absolute values)that

Which of the following statements is true?

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."

Figure 6-4 -Refer to Figure 6-4.The data in the diagram indicates that DVDs are

Total revenue is equal to

Explain the concepts of cross-price elasticity of demand and income elasticity of demand.What do positive and negative values indicate for each of these demand elasticities

If at a price of $10,a vendor sells 5 units of a product and at a price of $8,6 units are sold,then,using the midpoint formula,the demand for this good is inelastic.

If the percentage change in the quantity of teapots demanded is greater than the percentage change in the price of teapots,then

To calculate the price elasticity of supply we divide

In order to prove that Motrin and Ibuprofen are substitutes,one should measure the and get a .

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

Filters

Exam 6: Elasticity: the Responsiveness of Demand and Supply

Which of the following explains why a firm would be interested in the knowing the price elasticity of demand for a good it sells?

If the demand for a steak is unit-elastic,then

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

Barbara,the consummate hostess,proudly announced as she served dessert,"A port is often the perfect end to a meal,sipped with a piece of my scrumptious chocolate cake." Evidently,Barbara views

Suppose when the price of jean-jackets increased by 10 percent,the quantity supplied increased by 16 percent.Based on this information the price elasticity of supply of jean-jackets is

If the cross-price elasticity of demand for goods A and B is zero,this means the two goods are unrelated.

A linear downward sloping demand curve has price elasticities (in absolute values)that

Which of the following statements is true?

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."

Figure 6-4 -Refer to Figure 6-4.The data in the diagram indicates that DVDs are

Total revenue is equal to

Explain the concepts of cross-price elasticity of demand and income elasticity of demand.What do positive and negative values indicate for each of these demand elasticities

If at a price of $10,a vendor sells 5 units of a product and at a price of $8,6 units are sold,then,using the midpoint formula,the demand for this good is inelastic.

If the percentage change in the quantity of teapots demanded is greater than the percentage change in the price of teapots,then

To calculate the price elasticity of supply we divide

In order to prove that Motrin and Ibuprofen are substitutes,one should measure the ________ and get a ________.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

Filters

In order to prove that Motrin and Ibuprofen are substitutes,one should measure the and get a .