Question 1

Calculate the income elasticity if an 8 percent increase in income leads to a 4 percent 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 2

Suppose the demand for milk is relatively inelastic.What happens to sales revenue if the government imposes a price floor above the free market equilibrium price in the market for milk?

Accepted Answer

A)  Sales revenue falls. 
B)  Sales revenue rises. 
C)  Sales revenue remains unchanged. 
D)  It cannot be determined without information on prices. 
A)  Sales revenue falls. 
B)  Sales revenue rises. 
C)  Sales revenue remains unchanged. 
D)  It cannot be determined without information on prices.

Question 3

The price elasticity of supply of hot dog buns is estimated to be 1.5.Holding everything else constant,this means that a 10 percent decrease in the price of hot dog buns will cause the quantity of hot dog buns supplied to decrease by

Accepted Answer

A)  1.5 percent. 
B)  15 percent. 
C)  approximately 25 percent. 
D)  approximately 5 percent. 
A)  1.5 percent. 
B)  15 percent. 
C)  approximately 25 percent. 
D)  approximately 5 percent.

Question 4

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

percent ch

Question 5

Figure 6-12  
-Refer to Figure 6-12.Suppose the diagram shows the supply curves for a product in the short run and in the long run.Which supply curve represents supply in the short run and which curve represents supply in the long run?

Accepted Answer

A)  SB represents supply in the short run and SA represents supply in the long run. 
B)  Either SA or SB could represent supply in the short run; in the long run the supply curve must be a vertical line. 
C)  Either SA or SB could represent supply in the long run; in the short run the supply curve must be a horizontal line. 
D)  SA represents supply in the short run and SB represents supply in the long run. 
A)  SB represents supply in the short run and SA represents supply in the long run. 
B)  Either SA or SB could represent supply in the short run; in the long run the supply curve must be a vertical line. 
C)  Either SA or SB could represent supply in the long run; in the short run the supply curve must be a horizontal line. 
D)  SA represents supply in the short run and SB represents supply in the long run.

Question 6

Which of the following is not a determinant of a good's price elasticity of demand?

Accepted Answer

A)  the slope of the demand curve 
B)  the share of the good in the consumer's total budget 
C)  whether the good is a luxury or a necessity 
D)  the passage of time 
A)  the slope of the demand curve 
B)  the share of the good in the consumer's total budget 
C)  whether the good is a luxury or a necessity 
D)  the passage of time

Question 7

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

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 8

If the demand for iPods is price elastic,then

Accepted Answer

A)  the percentage change in quantity demanded is greater than the percentage change in price (in absolute value). 
B)  the percentage change in quantity demanded is less than the percentage change in price (in absolute value). 
C)  the percentage change in quantity demanded is equal to the percentage change in price. 
D)  quantity demanded is not responsive to changes in price. 
A)  the percentage change in quantity demanded is greater than the percentage change in price (in absolute value). 
B)  the percentage change in quantity demanded is less than the percentage change in price (in absolute value). 
C)  the percentage change in quantity demanded is equal to the percentage change in price. 
D)  quantity demanded is not responsive to changes in price.

Question 9

The price elasticity of supply is equal to

Accepted Answer

A)  the value of the slope of the supply curve. 
B)  the change in quantity supplied divided by the change in price. 
C)  the percentage change in price divided by the percentage change in quantity supplied. 
D)  the percentage change in quantity supplied divided by the percentage change in price. 
A)  the value of the slope of the supply curve. 
B)  the change in quantity supplied divided by the change in price. 
C)  the percentage change in price divided by the percentage change in quantity supplied. 
D)  the percentage change in quantity supplied divided by the percentage change in price.

Question 10

Assume that the price elasticity of demand for gasoline is -0.06.If the government tax causes the price of gasoline to increase by 50 percent,what will be the decrease in the quantity of gasoline demanded?

Accepted Answer

A)  0.5 percent 
B)  3.0 percent 
C)  8.33 percent 
D)  50 percent 
A)  0.5 percent 
B)  3.0 percent 
C)  8.33 percent 
D)  50 percent

Question 11

If a supply curve is a horizontal line,supply is said to be

Accepted Answer

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

Question 12

Jaycee Jeans sold 40 pairs of jeans at a price of $40.When it lowered its price to $20,the quantity sold increased to 60 pairs.Calculate the absolute value of the price elasticity of demand.Use the midpoint formula.

Accepted Answer

A)  1.67 
B)  1.0 
C)  0.6 
D)  0.53 
A)  1.67 
B)  1.0 
C)  0.6 
D)  0.53

Question 13

Suppose the cross-price elasticity of demand between grapefruit juice and orange juice is approximately 6.What does this mean?

Accepted Answer

A)  A 1 percent decrease in the price of grapefruit juice leads to a 6 percent increase in orange juice consumption. 
B)  A 6 percent increase in the price of grapefruit juice leads to a 1 percent 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 percent decrease in the price of grapefruit juice leads to a 6 percent increase in orange juice consumption. 
B)  A 6 percent increase in the price of grapefruit juice leads to a 1 percent 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 14

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.

Question 15

The demand for most farm products is relatively inelastic.All else constant,what is the effect on farm revenues as a result of the introduction of new and better farm equipment which increases in productivity?

Accepted Answer

A)  Farm revenues increase. 
B)  Farm revenues decrease. 
C)  Farm revenues remain constant because consumers will not increase their consumption of farm products by much. 
D)  Farm revenues could increase or decrease depending on the cost of this new equipment. 
A)  Farm revenues increase. 
B)  Farm revenues decrease. 
C)  Farm revenues remain constant because consumers will not increase their consumption of farm products by much. 
D)  Farm revenues could increase or decrease depending on the cost of this new equipment.

Question 16

Figure 6-9  
-Refer to Figure 6-9.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 17

Suppose a decrease in the supply of wheat results in an increase in revenue.This indicates that

Accepted Answer

A)  the decrease in quantity sold is proportionately larger than the resulting change in price. 
B)  the resulting increase in price is proportionately greater than decrease in quantity sold. 
C)  the demand curve for wheat must be vertical. 
D)  the supply curve for wheat must be vertical. 
A)  the decrease in quantity sold is proportionately larger than the resulting change in price. 
B)  the resulting increase in price is proportionately greater than decrease in quantity sold. 
C)  the demand curve for wheat must be vertical. 
D)  the supply curve for wheat must be vertical.

Question 18

In September 2012,the average price of gasoline in the United States was $3.91 per gallon and consumers bought 5 percent less gasoline than they had during September 2011,when the average price was $3.66 per gallon.Based on these numbers,what was the price elasticity of demand for gasoline from September 2011 to September 2012?

Accepted Answer

A)  -0.33 
B)  -0.76 
C)  -2.96 
D)  -6.75 
A)  -0.33 
B)  -0.76 
C)  -2.96 
D)  -6.75

Question 19

Figure 6-1  
-Refer to Figure 6-1.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 20

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.

Calculate the income elasticity if an 8 percent increase in income leads to a 4 percent increase in quantity demanded for organic produce.

Suppose the demand for milk is relatively inelastic.What happens to sales revenue if the government imposes a price floor above the free market equilibrium price in the market for milk?

The price elasticity of supply of hot dog buns is estimated to be 1.5.Holding everything else constant,this means that a 10 percent decrease in the price of hot dog buns will cause the quantity of hot dog buns supplied to decrease by

Figure 6-12 -Refer to Figure 6-12.Suppose the diagram shows the supply curves for a product in the short run and in the long run.Which supply curve represents supply in the short run and which curve represents supply in the long run?

Which of the following is not a determinant of a good's price elasticity of demand?

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

If the demand for iPods is price elastic,then

The price elasticity of supply is equal to

Assume that the price elasticity of demand for gasoline is -0.06.If the government tax causes the price of gasoline to increase by 50 percent,what will be the decrease in the quantity of gasoline demanded?

If a supply curve is a horizontal line,supply is said to be

Jaycee Jeans sold 40 pairs of jeans at a price of $40.When it lowered its price to $20,the quantity sold increased to 60 pairs.Calculate the absolute value of the price elasticity of demand.Use the midpoint formula.

Suppose the cross-price elasticity of demand between grapefruit juice and orange juice is approximately 6.What does this mean?

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

The demand for most farm products is relatively inelastic.All else constant,what is the effect on farm revenues as a result of the introduction of new and better farm equipment which increases in productivity?

Figure 6-9 -Refer to Figure 6-9.The data in the diagram indicates that DVDs are

Suppose a decrease in the supply of wheat results in an increase in revenue.This indicates that

Figure 6-1 -Refer to Figure 6-1.A perfectly elastic demand curve is shown in

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

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

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Exam 6: Elasticity: The Responsiveness of Demand and Supply

Calculate the income elasticity if an 8 percent increase in income leads to a 4 percent increase in quantity demanded for organic produce.

Suppose the demand for milk is relatively inelastic.What happens to sales revenue if the government imposes a price floor above the free market equilibrium price in the market for milk?

The price elasticity of supply of hot dog buns is estimated to be 1.5.Holding everything else constant,this means that a 10 percent decrease in the price of hot dog buns will cause the quantity of hot dog buns supplied to decrease by

Figure 6-12 -Refer to Figure 6-12.Suppose the diagram shows the supply curves for a product in the short run and in the long run.Which supply curve represents supply in the short run and which curve represents supply in the long run?

Which of the following is not a determinant of a good's price elasticity of demand?

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

If the demand for iPods is price elastic,then

The price elasticity of supply is equal to

Assume that the price elasticity of demand for gasoline is -0.06.If the government tax causes the price of gasoline to increase by 50 percent,what will be the decrease in the quantity of gasoline demanded?

If a supply curve is a horizontal line,supply is said to be

Jaycee Jeans sold 40 pairs of jeans at a price of $40.When it lowered its price to $20,the quantity sold increased to 60 pairs.Calculate the absolute value of the price elasticity of demand.Use the midpoint formula.

Suppose the cross-price elasticity of demand between grapefruit juice and orange juice is approximately 6.What does this mean?

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

The demand for most farm products is relatively inelastic.All else constant,what is the effect on farm revenues as a result of the introduction of new and better farm equipment which increases in productivity?

Figure 6-9 -Refer to Figure 6-9.The data in the diagram indicates that DVDs are

Suppose a decrease in the supply of wheat results in an increase in revenue.This indicates that

Figure 6-1 -Refer to Figure 6-1.A perfectly elastic demand curve is shown in

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

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