Question 1

Economist Jerry Hausman estimated the price elasticity of demand for breakfast cereal. He found that

Accepted Answer

A)  the price elasticity for a particular brand of raisin bran was the same as the elasticity of demand for all family cereals. 
B)  the price elasticity of demand for Post Raisin Bran is less than the price elasticity of demand for Kellogg's Raisin Bran. 
C)  the price elasticity of all family breakfast cereals is greater than the price elasticity of demand for Post Raisin Bran or Kellogg's Raisin Bran. 
D)  the price elasticity of demand for a particular brand of raisin bran was larger in absolute value than the elasticity for all family cereals. 
A)  the price elasticity for a particular brand of raisin bran was the same as the elasticity of demand for all family cereals. 
B)  the price elasticity of demand for Post Raisin Bran is less than the price elasticity of demand for Kellogg's Raisin Bran. 
C)  the price elasticity of all family breakfast cereals is greater than the price elasticity of demand for Post Raisin Bran or Kellogg's Raisin Bran. 
D)  the price elasticity of demand for a particular brand of raisin bran was larger in absolute value than the elasticity for all family cereals. D

Question 2

Assume that when the price of cantaloupes is $2.50, the demand for cantaloupes is unit-elastic and the demand curve for cantaloupes is linear and downward sloping. If firms lower the price of cantaloupes to $2.00, which of the following statements can be made regarding the price elasticity of demand for cantaloupes?

Accepted Answer

A)  The demand for cantaloupes at $2.00 must be inelastic. 
B)  We cannot determine whether the demand for cantaloupes is elastic or inelastic without knowing what the quantity demanded is at each price. 
C)  The demand for cantaloupes at $2.00 must be elastic. 
D)  The demand for cantaloupes at $2.00 must be unit-elastic. 
A)  The demand for cantaloupes at $2.00 must be inelastic. 
B)  We cannot determine whether the demand for cantaloupes is elastic or inelastic without knowing what the quantity demanded is at each price. 
C)  The demand for cantaloupes at $2.00 must be elastic. 
D)  The demand for cantaloupes at $2.00 must be unit-elastic. A

Question 3

If the price elasticity of demand for insulin is equal to zero, then the demand curve for insulin is

Accepted Answer

A)  horizontal. 
B)  downward sloping. 
C)  curvilinear. 
D)  vertical. 
A)  horizontal. 
B)  downward sloping. 
C)  curvilinear. 
D)  vertical. D

Question 4

Most food products have low income and price elasticities of demand.

Accepted Answer

A) True 
 B)False

Question 5

Figure 6-10  
-Refer to Figure 6-10. A perfectly elastic 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 6

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 7

Suppose at a price of $50, Yoshi's Jazz Bar sells 20 tickets to its nightly jazz performance and at a price of $40, it sells 25 tickets. Based on this information, the demand for Yoshi's jazz performance is elastic.

Accepted Answer

A) True 
 B)False

Question 8

Figure 6-8  
-Refer to Figure 6-8. Identify the two goods which are complements.

Accepted Answer

A)  Good X and Good Y 
B)  Good Y and Good Z 
C)  Good X and Good Z 
D)  It is not possible to distinguish any relationship among the goods. 
A)  Good X and Good Y 
B)  Good Y and Good Z 
C)  Good X and Good Z 
D)  It is not possible to distinguish any relationship among the goods.

Question 9

When the price of Starbucks coffee increased by 8 percent, the quantity demanded of Peets coffee increased by 10 percent. Calculate the cross price elasticity of demand between Starbucks coffee and Peets coffee. What is the relationship between the two products?

Accepted Answer

The cross price elas

Question 10

Figure 6-2  
-Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from $120 a ton to $180 a ton and quantity sold decreased from 800 tons to 240 tons. What is the absolute value of the price elasticity of demand?

Accepted Answer

A)  0.11 
B)  0.37 
C)  2.69 
D)  9.33 
A)  0.11 
B)  0.37 
C)  2.69 
D)  9.33

Question 11

In general, a "big ticket item" such as a house or new car will

Accepted Answer

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

Question 12

Figure 6-2  
-Refer to Figure 6-2. The absolute value of the price elasticity of demand at points a and b is 1. What is the value of Pb?

Accepted Answer

A)  $50 
B)  $40 
C)  $30 
D)  $20 
A)  $50 
B)  $40 
C)  $30 
D)  $20

Question 13

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)

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

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 16

Which of the following goods would have the most inelastic demand?

Accepted Answer

A)  ski vacations 
B)  bread 
C)  luxury cars 
D)  big screen TVs 
A)  ski vacations 
B)  bread 
C)  luxury cars 
D)  big screen TVs

Question 17

If the quantity supplied of walkie-talkies increases by 5 percent when prices increase by 12 percent, then

Accepted Answer

A)  the supply of walkie-talkies is inelastic. 
B)  the supply of walkie-talkies is elastic. 
C)  the walkie-talkie supply curve will shift to the right. 
D)  the walkie-talkie supply curve will shift to the left. 
A)  the supply of walkie-talkies is inelastic. 
B)  the supply of walkie-talkies is elastic. 
C)  the walkie-talkie supply curve will shift to the right. 
D)  the walkie-talkie supply curve will shift to the left.

Question 18

Figure 6-10  
-Refer to Figure 6-10. The supply curve on which price elasticity changes at every point 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 19

If the price of steel increases drastically, the quantity of steel demanded by the building industry will fall significantly over the long run because

Accepted Answer

A)  buyers of steel are more sensitive to a price change if they have more time to adjust to the price change. 
B)  buyers of steel are less sensitive to a price change if they have more time to adjust to the price change 
C)  sales revenue in the building industry will fall sharply. 
D)  profits will fall by a greater amount in the long run than in the short run. 
A)  buyers of steel are more sensitive to a price change if they have more time to adjust to the price change. 
B)  buyers of steel are less sensitive to a price change if they have more time to adjust to the price change 
C)  sales revenue in the building industry will fall sharply. 
D)  profits will fall by a greater amount in the long run than in the short run.

Question 20

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

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.

Exam 6: Elasticity: the Responsiveness of Demand and Supply

Economist Jerry Hausman estimated the price elasticity of demand for breakfast cereal. He found that

If the price elasticity of demand for insulin is equal to zero, then the demand curve for insulin is

Most food products have low income and price elasticities of demand.

Figure 6-10 -Refer to Figure 6-10. A perfectly elastic supply curve is shown in

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

Suppose at a price of $50, Yoshi's Jazz Bar sells 20 tickets to its nightly jazz performance and at a price of $40, it sells 25 tickets. Based on this information, the demand for Yoshi's jazz performance is elastic.

Figure 6-8 -Refer to Figure 6-8. Identify the two goods which are complements.

When the price of Starbucks coffee increased by 8 percent, the quantity demanded of Peets coffee increased by 10 percent. Calculate the cross price elasticity of demand between Starbucks coffee and Peets coffee. What is the relationship between the two products?

Figure 6-2 -Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from $120 a ton to $180 a ton and quantity sold decreased from 800 tons to 240 tons. What is the absolute value of the price elasticity of demand?

In general, a "big ticket item" such as a house or new car will

Figure 6-2 -Refer to Figure 6-2. The absolute value of the price elasticity of demand at points a and b is 1. What is the value of Pb?

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

Total revenue is equal to

Which of the following goods would have the most inelastic demand?

If the quantity supplied of walkie-talkies increases by 5 percent when prices increase by 12 percent, then

Figure 6-10 -Refer to Figure 6-10. The supply curve on which price elasticity changes at every point is shown in

If the price of steel increases drastically, the quantity of steel demanded by the building industry will fall significantly over the long run because

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

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

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

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