Question 1

If,for a given percentage increase in price,quantity supplied increases by a proportionately larger percentage,then supply is

Accepted Answer

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

Question 2

Figure 6-3  
-Refer to Figure 6-3.Using the midpoint formula,calculate the absolute value of the price elasticity of demand between e and f.

Accepted Answer

A)  0.32 
B)  0.4 
C)  2.5 
D)  3.125 
A)  0.32 
B)  0.4 
C)  2.5 
D)  3.125

Question 3

If the cross-price elasticity of demand for computers and software is negative,this means the two goods are

Accepted Answer

A)  substitutes. 
B)  complements. 
C)  inferior. 
D)  normal. 
A)  substitutes. 
B)  complements. 
C)  inferior. 
D)  normal.

Question 4

If the demand for a product is elastic,the quantity demanded changes by a larger percentage than the percentage change in price.

Accepted Answer

A) True 
 B)False

Question 5

Necessities tend to have more inelastic demands than luxuries.

Accepted Answer

A) True 
 B)False

Question 6

When demand is unit-elastic,a change in price causes total revenue to stay the same because

Accepted Answer

A)  the percentage change in quantity demanded exactly offsets the percentage change in price. 
B)  buyers are buying the same quantity. 
C)  total revenue never changes with price changes. 
D)  the change in profit is offset by the change in production cost. 
A)  the percentage change in quantity demanded exactly offsets the percentage change in price. 
B)  buyers are buying the same quantity. 
C)  total revenue never changes with price changes. 
D)  the change in profit is offset by the change in production cost.

Question 7

If at a price of $50,Ghani sells 20 hand-made leather cell-phone covers but at a price of $60,zero units are sold.Based on this information,the demand for his cell-phone covers is

Accepted Answer

A)  elastic or perfectly inelastic 
B)  elastic or perfectly elastic. 
C)  unit-elastic. 
D)  perfectly inelastic. 
A)  elastic or perfectly inelastic 
B)  elastic or perfectly elastic. 
C)  unit-elastic. 
D)  perfectly inelastic.

Question 8

Linesha,a college student working part-time receives a wage increase.An avid movie buff,she increased her purchases of Blu-ray discs and reduced her purchases of DVDs.Based on this information,

Accepted Answer

A)  DVDs and Blu-ray discs are substitutes. 
B)  Blu-ray discs are normal goods and DVDs are inferior goods. 
C)  DVDs and Blu-ray discs are normal goods. 
D)  the cross-price elasticity between DVDs and Blu-ray discs is negative. 
A)  DVDs and Blu-ray discs are substitutes. 
B)  Blu-ray discs are normal goods and DVDs are inferior goods. 
C)  DVDs and Blu-ray discs are normal goods. 
D)  the cross-price elasticity between DVDs and Blu-ray discs is negative.

Question 9

A demand curve which is ________ represents perfectly inelastic demand,and a demand curve which is ________ represents inelastic demand.

Accepted Answer

A)  downward sloping; vertical 
B)  horizontal; downward sloping 
C)  vertical; downward sloping 
D)  upward sloping; horizontal 
A)  downward sloping; vertical 
B)  horizontal; downward sloping 
C)  vertical; downward sloping 
D)  upward sloping; horizontal

Question 10

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 11

If a 35 percent increase in price of golf balls led to an 42 percent decrease in quantity demanded,then the demand for golf balls 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.

Question 12

Figure 6-6  
-Refer to Figure 6-6.A unit-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 13

Jenna runs a small boutique in Capitola.She tells one of her suppliers that she is willing to pay $6 for a pair of wool hand warmers and not a dime more.On the basis of this information,what can you conclude about her price elasticity of demand for wool hand warmers?

Accepted Answer

A)  It is elastic. 
B)  It is perfectly elastic. 
C)  It is perfectly inelastic. 
D)  The price elasticity coefficient is 0. 
A)  It is elastic. 
B)  It is perfectly elastic. 
C)  It is perfectly inelastic. 
D)  The price elasticity coefficient is 0.

Question 14

Suppose the value of the price elasticity of demand is -3.What does this mean?

Accepted Answer

A)  A 1 percent increase in the price of the good causes quantity demanded to increase by 3 percent. 
B)  A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent. 
C)  A 3 percent increase in the price of the good causes quantity demanded to decrease by 1 percent. 
D)  A $1 increase in price causes quantity demanded to fall by 3 units. 
A)  A 1 percent increase in the price of the good causes quantity demanded to increase by 3 percent. 
B)  A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent. 
C)  A 3 percent increase in the price of the good causes quantity demanded to decrease by 1 percent. 
D)  A $1 increase in price causes quantity demanded to fall by 3 units.

Question 15

The price elasticity of the supply of teenage labor services is approximately 1.36.Suppose the minimum wage rises from $7.25 per hour to $8.75.Using the midpoint formula,calculate the approximately change in the quantity supplied of teenage labor.

Accepted Answer

A)  7.3 percent 
B)  14.4 percent 
C)  25.5 percent 
D)  There is insufficient information to answer the question. 
A)  7.3 percent 
B)  14.4 percent 
C)  25.5 percent 
D)  There is insufficient information to answer the question.

Question 16

The Mass Rapid Transit (MRT)System in Hong Kong has been running significant losses.Transport Ministry officials have argued over whether to raise fares to combat the losses.One argument against a fare increase is that it will aggravate traffic congestion on the streets during peak commuter hours.Suppose that the current fare is $4 and the government is considering raising it to $6.Officials estimate that this reduces the number of rides purchased from 10,000 to 8,000 per day.
a.What is the estimated elasticity of demand for MRT rides?
b.What does this elasticity of demand suggest to you about what will happen to total revenue earned by the transit system?
c.Last year,the MRT system incurred a loss of $50,000 per day.Do you think the fare increase will resolve the deficit problem as well as Ministry officials anticipate? Explain.

Accepted Answer

a.Price elasticity = -0.56.
b.

Question 17

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 18

If a firm is in an antitrust court case being accused of monopolizing a product,the firm would hire an economist to show

Accepted Answer

A)  the cross-price elasticity of demand between the firm's good and another is negative. 
B)  the cross-price elasticity of demand between the firm's good and another is positive. 
C)  the price elasticity of demand for the firm's good is highly inelastic. 
D)  the income elasticity of the firm's good is inferior. 
A)  the cross-price elasticity of demand between the firm's good and another is negative. 
B)  the cross-price elasticity of demand between the firm's good and another is positive. 
C)  the price elasticity of demand for the firm's good is highly inelastic. 
D)  the income elasticity of the firm's good is inferior.

Question 19

Studies show that the income elasticity of demand for wine is approximately five.What does this mean?

Accepted Answer

A)  A one percent decrease in the price of wine leads to a five percent increase in wine consumption. 
B)  A one percent increase in income leads to a five percent increase in wine consumption. 
C)  A five percent increase in income leads to a one percent increase in wine consumption. 
D)  Wine is a relatively elastic good. 
A)  A one percent decrease in the price of wine leads to a five percent increase in wine consumption. 
B)  A one percent increase in income leads to a five percent increase in wine consumption. 
C)  A five percent increase in income leads to a one percent increase in wine consumption. 
D)  Wine is a relatively elastic good.

Question 20

Which of the following statements about the price elasticity of demand is correct?

Accepted Answer

A)  The elasticity of demand for a good in general is equal to the elasticity of demand for a specific brand of the good. 
B)  The absolute value of the elasticity of demand ranges from zero to one. 
C)  Demand is more elastic in the long run than it is in the short run. 
D)  Demand is more elastic the smaller the percentage of the consumer's budget the item takes up. 
A)  The elasticity of demand for a good in general is equal to the elasticity of demand for a specific brand of the good. 
B)  The absolute value of the elasticity of demand ranges from zero to one. 
C)  Demand is more elastic in the long run than it is in the short run. 
D)  Demand is more elastic the smaller the percentage of the consumer's budget the item takes up.

Exam 6: Elasticity: The Responsiveness of Demand and Supply

If,for a given percentage increase in price,quantity supplied increases by a proportionately larger percentage,then supply is

Figure 6-3 -Refer to Figure 6-3.Using the midpoint formula,calculate the absolute value of the price elasticity of demand between e and f.

If the cross-price elasticity of demand for computers and software is negative,this means the two goods are

If the demand for a product is elastic,the quantity demanded changes by a larger percentage than the percentage change in price.

Necessities tend to have more inelastic demands than luxuries.

When demand is unit-elastic,a change in price causes total revenue to stay the same because

If at a price of $50,Ghani sells 20 hand-made leather cell-phone covers but at a price of $60,zero units are sold.Based on this information,the demand for his cell-phone covers is

Linesha,a college student working part-time receives a wage increase.An avid movie buff,she increased her purchases of Blu-ray discs and reduced her purchases of DVDs.Based on this information,

A demand curve which is ________ represents perfectly inelastic demand,and a demand curve which is ________ represents inelastic demand.

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.

If a 35 percent increase in price of golf balls led to an 42 percent decrease in quantity demanded,then the demand for golf balls is

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

Jenna runs a small boutique in Capitola.She tells one of her suppliers that she is willing to pay $6 for a pair of wool hand warmers and not a dime more.On the basis of this information,what can you conclude about her price elasticity of demand for wool hand warmers?

Suppose the value of the price elasticity of demand is -3.What does this mean?

The price elasticity of the supply of teenage labor services is approximately 1.36.Suppose the minimum wage rises from $7.25 per hour to $8.75.Using the midpoint formula,calculate the approximately change in the quantity supplied of teenage labor.

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

If a firm is in an antitrust court case being accused of monopolizing a product,the firm would hire an economist to show

Studies show that the income elasticity of demand for wine is approximately five.What does this mean?

Which of the following statements about the price elasticity of demand is correct?

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

A demand curve which is represents perfectly inelastic demand,and a demand curve which is represents inelastic demand.