Question 1

Cross-price elasticity of demand is calculated as the

Accepted Answer

A)  percentage change in quantity demanded divided by percentage change in price of a good. 
B)  percentage change in quantity demanded of one good divided by percentage change in price of a different good. 
C)  percentage change in quantity sold divided by percentage change in buyers' incomes. 
D)  percentage change in quantity supplied divided by percentage change in price of a good. 
A)  percentage change in quantity demanded divided by percentage change in price of a good. 
B)  percentage change in quantity demanded of one good divided by percentage change in price of a different good. 
C)  percentage change in quantity sold divided by percentage change in buyers' incomes. 
D)  percentage change in quantity supplied divided by percentage change in price of a good.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Which of the following would result in a higher absolute value of the price elasticity of demand for a product?

Accepted Answer

A)  A wide variety of substitutes are available for the good. 
B)  The time period under consideration is short. 
C)  The good is a necessity. 
D)  The expenditure on the good is small relative to one's budget. 
A)  A wide variety of substitutes are available for the good. 
B)  The time period under consideration is short. 
C)  The good is a necessity. 
D)  The expenditure on the good is small relative to one's budget.

Question 4

Which of the following items is likely to have the highest income elasticity of demand?

Accepted Answer

A)  a bus ride 
B)  a meal at Taco Bell 
C)  a vacation home in the Swiss Alps 
D)  a tank of gasoline 
A)  a bus ride 
B)  a meal at Taco Bell 
C)  a vacation home in the Swiss Alps 
D)  a tank of gasoline

Question 5

If the price elasticity of demand for canned soup is estimated at -1.62.What happens to sales revenue if the price of canned soup rises?

Accepted Answer

A)  It falls by 162 percent. 
B)  It rises by 1.62 percent. 
C)  It falls. 
D)  It rises. 
A)  It falls by 162 percent. 
B)  It rises by 1.62 percent. 
C)  It falls. 
D)  It rises.

Question 6

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 7

When is demand perfectly elastic? When is demand perfectly inelastic? What are the values of the price elasticity of demand when demand is perfectly elastic or perfectly inelastic? What do perfectly elastic and perfectly inelastic demand curves look like?

Accepted Answer

Demand is perfectly elastic when quantit

Question 8

Suppose a frost destroys the tomato crop in California but farmers see an increase in their revenues.Which of the following best explains this?

Accepted Answer

A)  The decrease in supply led to huge price increases. 
B)  Tomatoes are necessities. 
C)  The demand for tomatoes is price inelastic. 
D)  The cross-price elasticity between tomatoes and most other substitute vegetables is very low. 
A)  The decrease in supply led to huge price increases. 
B)  Tomatoes are necessities. 
C)  The demand for tomatoes is price inelastic. 
D)  The cross-price elasticity between tomatoes and most other substitute vegetables is very low.

Question 9

Figure 6-6  
-Refer to Figure 6-6.As price falls from PS1U1B1AS1U1B0 to PS1U1B1BS1U1B0,the quantity demanded increases most along DS1U1B11S1U1B0therefore,

Accepted Answer

A)  DS1U1B11S1U1B0is unit elastic. 
B)  DS1U1B11S1U1B0 is more inelastic than DS1U1B12S1U1B0or DS1U1B13S1U1B0. 
C)  DS1U1B11S1U1B0 is more elastic than DS1U1B12S1U1B0or DS1U1B13S1U1B0 
D)  DS1U1B11S1U1B0 is elastic at PS1U1B1AS1U1B0 but inelastic at PS1U1B1BS1U1B0. 
A)  DS1U1B11S1U1B0is unit elastic. 
B)  DS1U1B11S1U1B0 is more inelastic than DS1U1B12S1U1B0or DS1U1B13S1U1B0. 
C)  DS1U1B11S1U1B0 is more elastic than DS1U1B12S1U1B0or DS1U1B13S1U1B0 
D)  DS1U1B11S1U1B0 is elastic at PS1U1B1AS1U1B0 but inelastic at PS1U1B1BS1U1B0.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is one reason why the income of small family farms has decreased over time?

Accepted Answer

A)  Technology has increase farm productivity and market supply. 
B)  The demand for farm products is price elastic. 
C)  The demand for farm products is income inelastic. 
D)  The U.S. population has increased greatly since 1950. 
A)  Technology has increase farm productivity and market supply. 
B)  The demand for farm products is price elastic. 
C)  The demand for farm products is income inelastic. 
D)  The U.S. population has increased greatly since 1950.

Question 12

Table 6-5
  
-Refer to Table 6-5.Katie Graham owns a kayak rental service in Santa Barbara.Table 6.3 below shows her estimated demand schedule for kayak rentals per week.She would like to increase her sales revenue by changing the price she charges for rentals.At present she charges $75.Based on the information in the table,Katie

Accepted Answer

A)  is not able to increase her revenue by changing her price because the demand for kayak rentals is unit-elastic. 
B)  should lower her price to $60 to increase her revenue because the demand for kayak rentals is price elastic. 
C)  should raise her price to $80 to increase her revenue because the demand for kayak rentals is price inelastic. 
D)  should raise her price to earn the most revenue. 
A)  is not able to increase her revenue by changing her price because the demand for kayak rentals is unit-elastic. 
B)  should lower her price to $60 to increase her revenue because the demand for kayak rentals is price elastic. 
C)  should raise her price to $80 to increase her revenue because the demand for kayak rentals is price inelastic. 
D)  should raise her price to earn the most revenue.

Question 13

If you expect the economy is going to boom and average income in the economy will rise in the foreseeable future,the type of firm that would be able to increase its sales if your expectations are met is

Accepted Answer

A)  one that sells an inferior good. 
B)  one that sells a necessity good. 
C)  one that sells a luxury good. 
D)  one that sells a price inelastic good. 
A)  one that sells an inferior good. 
B)  one that sells a necessity good. 
C)  one that sells a luxury good. 
D)  one that sells a price inelastic good.

Question 14

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.

Question 15

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 16

Suppose the current price of copper is $3 per pound and the quantity supplied is 200 pounds per day.If the price of copper falls to $2.50 per pound,the quantity supplied drops to 180 pounds per day.Use the midpoint formula to calculate the price elasticity of supply for copper.

Accepted Answer

The price elasticity

Question 17

Which of the following statements is true?

Accepted Answer

A)  Whenever a firm raises its price its total revenue will increase. 
B)  When a firm lowers its price its total revenue may either increase or decrease. 
C)  Whenever a firm increases its quantity sold its revenue will increase. 
D)  Total revenue will equal zero when the demand for a product is unit-elastic. 
A)  Whenever a firm raises its price its total revenue will increase. 
B)  When a firm lowers its price its total revenue may either increase or decrease. 
C)  Whenever a firm increases its quantity sold its revenue will increase. 
D)  Total revenue will equal zero when the demand for a product is unit-elastic.

Question 18

Between 1950 and 2013 the number of acres devoted to wheat production in the United States ________ and the price of wheat ________.

Accepted Answer

A)  declined; decreased 
B)  more than doubled; increased by about 50 percent 
C)  declined; more than doubled 
D)  increased; more than doubled 
A)  declined; decreased 
B)  more than doubled; increased by about 50 percent 
C)  declined; more than doubled 
D)  increased; more than doubled

Question 19

Economists have estimated that the cross-price elasticity of demand between beer and spirits is -0.50,the income elasticity for spirits is 1.21 and the income elasticity for wine is 5.03.These elasticities mean that

Accepted Answer

A)  beer and spirits are complements, spirits and wine are luxuries. 
B)  beer and spirits are normal goods, spirits and wine are luxuries. 
C)  beer and spirits are complements, spirits are substitutes. 
D)  beer and spirits are substitutes, spirits and wine are luxuries. 
A)  beer and spirits are complements, spirits and wine are luxuries. 
B)  beer and spirits are normal goods, spirits and wine are luxuries. 
C)  beer and spirits are complements, spirits are substitutes. 
D)  beer and spirits are substitutes, spirits and wine are luxuries.

Question 20

The cross-price elasticity of demand measures the

Accepted Answer

A)  absolute change in the quantity demanded of one good divided by the absolute change in the price of another good. 
B)  percentage change in the quantity demanded of one good divided by the percentage change in the price of another good. 
C)  percentage change in the price of one good divided by the percentage change in the quantity demanded of another good. 
D)  percentage change in the quantity demanded of one good in one location divided by the price of the same good in another location. 
A)  absolute change in the quantity demanded of one good divided by the absolute change in the price of another good. 
B)  percentage change in the quantity demanded of one good divided by the percentage change in the price of another good. 
C)  percentage change in the price of one good divided by the percentage change in the quantity demanded of another good. 
D)  percentage change in the quantity demanded of one good in one location divided by the price of the same good in another location.

Cross-price elasticity of demand is calculated as the

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

Which of the following would result in a higher absolute value of the price elasticity of demand for a product?

Which of the following items is likely to have the highest income elasticity of demand?

If the price elasticity of demand for canned soup is estimated at -1.62.What happens to sales revenue if the price of canned soup rises?

When is demand perfectly elastic? When is demand perfectly inelastic? What are the values of the price elasticity of demand when demand is perfectly elastic or perfectly inelastic? What do perfectly elastic and perfectly inelastic demand curves look like?

Suppose a frost destroys the tomato crop in California but farmers see an increase in their revenues.Which of the following best explains this?

Figure 6-6 -Refer to Figure 6-6.As price falls from P_A to P_B,the quantity demanded increases most along D₁therefore,

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

Which of the following is one reason why the income of small family farms has decreased over time?

If you expect the economy is going to boom and average income in the economy will rise in the foreseeable future,the type of firm that would be able to increase its sales if your expectations are met is

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

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

Suppose the current price of copper is $3 per pound and the quantity supplied is 200 pounds per day.If the price of copper falls to $2.50 per pound,the quantity supplied drops to 180 pounds per day.Use the midpoint formula to calculate the price elasticity of supply for copper.

Which of the following statements is true?

Between 1950 and 2013 the number of acres devoted to wheat production in the United States and the price of wheat .

Economists have estimated that the cross-price elasticity of demand between beer and spirits is -0.50,the income elasticity for spirits is 1.21 and the income elasticity for wine is 5.03.These elasticities mean that

The cross-price elasticity of demand measures the

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

Cross-price elasticity of demand is calculated as the

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

Which of the following would result in a higher absolute value of the price elasticity of demand for a product?

Which of the following items is likely to have the highest income elasticity of demand?

If the price elasticity of demand for canned soup is estimated at -1.62.What happens to sales revenue if the price of canned soup rises?

When is demand perfectly elastic? When is demand perfectly inelastic? What are the values of the price elasticity of demand when demand is perfectly elastic or perfectly inelastic? What do perfectly elastic and perfectly inelastic demand curves look like?

Suppose a frost destroys the tomato crop in California but farmers see an increase in their revenues.Which of the following best explains this?

Figure 6-6 -Refer to Figure 6-6.As price falls from PA to PB,the quantity demanded increases most along D1therefore,

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

Which of the following is one reason why the income of small family farms has decreased over time?

If you expect the economy is going to boom and average income in the economy will rise in the foreseeable future,the type of firm that would be able to increase its sales if your expectations are met is

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

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

Suppose the current price of copper is $3 per pound and the quantity supplied is 200 pounds per day.If the price of copper falls to $2.50 per pound,the quantity supplied drops to 180 pounds per day.Use the midpoint formula to calculate the price elasticity of supply for copper.

Which of the following statements is true?

Between 1950 and 2013 the number of acres devoted to wheat production in the United States ________ and the price of wheat ________.

Economists have estimated that the cross-price elasticity of demand between beer and spirits is -0.50,the income elasticity for spirits is 1.21 and the income elasticity for wine is 5.03.These elasticities mean that

The cross-price elasticity of demand measures the

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

Figure 6-6 -Refer to Figure 6-6.As price falls from P_A to P_B,the quantity demanded increases most along D₁therefore,

Between 1950 and 2013 the number of acres devoted to wheat production in the United States and the price of wheat .