Question 1

-In the above figure,along which range would total revenue rise by lowering prices?

Accepted Answer

A) Between point a and point b 
B) Between point c and point d 
C) Between point d and point e 
D) Below point e 
A) Between point a and point b 
B) Between point c and point d 
C) Between point d and point e 
D) Below point e

Question 2

Income elasticity of demand is defined as

Accepted Answer

A) the change in quantity demanded divided by the change in income. 
B) the change in quantity demanded divided by the change in market price. 
C) the percentage change in income divided by the percentage change in quantity demanded. 
D) the percentage change in demand divided by the percentage change in income. 
A) the change in quantity demanded divided by the change in income. 
B) the change in quantity demanded divided by the change in market price. 
C) the percentage change in income divided by the percentage change in quantity demanded. 
D) the percentage change in demand divided by the percentage change in income.

Question 3

When John earned $65,000 he purchased 10 DVDs a year.His income has just increased to $68,000 and he plans to purchase 15 DVDs this year.John's income elasticity of demand equals

Accepted Answer

A) 0 
B) 0.11 
C) 1.67 
D) 8.87 
A) 0 
B) 0.11 
C) 1.67 
D) 8.87

Question 4

A situation in which there is a reduction in quantity supplied to zero when there is the slightest decrease in price is

Accepted Answer

A) perfectly elastic supply. 
B) perfectly elastic demand. 
C) perfectly inelastic supply. 
D) perfectly inelastic demand. 
A) perfectly elastic supply. 
B) perfectly elastic demand. 
C) perfectly inelastic supply. 
D) perfectly inelastic demand.

Question 5

To say that demand is inelastic means that

Accepted Answer

A) people do not like the good very much. 
B) quantity demanded not very responsive to price changes. 
C) relatively small changes in price lead to relatively large changes in quantity demanded. 
D) relatively small changes in quantity demanded lead to relatively small changes in price. 
A) people do not like the good very much. 
B) quantity demanded not very responsive to price changes. 
C) relatively small changes in price lead to relatively large changes in quantity demanded. 
D) relatively small changes in quantity demanded lead to relatively small changes in price.

Question 6

Which of the following is NOT a determinant of the price elasticity of demand?

Accepted Answer

A) the availability of potential substitutes 
B) the share of the budget spent on the item 
C) the time the consumer has to adjust to the price change 
D) the cost to produce the product 
A) the availability of potential substitutes 
B) the share of the budget spent on the item 
C) the time the consumer has to adjust to the price change 
D) the cost to produce the product

Question 7

Other things being equal,demand is more elastic the

Accepted Answer

A) less expensive the good. 
B) shorter the time period for adjustment. 
C) larger the percentage of a total budget that a family spends on the good. 
D) more unique the good is. 
A) less expensive the good. 
B) shorter the time period for adjustment. 
C) larger the percentage of a total budget that a family spends on the good. 
D) more unique the good is.

Question 8

If the supply of a good is perfectly inelastic,the price elasticity of supply will equal

Accepted Answer

A) positive infinity. 
B) one. 
C) zero. 
D) none of the above. 
A) positive infinity. 
B) one. 
C) zero. 
D) none of the above.

Question 9

If the absolute price elasticity of demand for concert tickets is 0.75,an increase in ticket prices will

Accepted Answer

A) increase total revenue. 
B) decrease total revenue. 
C) not change the elasticity of demand. 
D) not change total revenue. 
A) increase total revenue. 
B) decrease total revenue. 
C) not change the elasticity of demand. 
D) not change total revenue.

Question 10

If the price of a cola increased by 12 % and consumers responded by purchasing 20 % less cola,the absolute value of price elasticity of demand for cola would be

Accepted Answer

A) 0.20. 
B) 0.80. 
C) 1.67. 
D) 1.80. 
A) 0.20. 
B) 0.80. 
C) 1.67. 
D) 1.80.

Question 11

$$\begin{array} { r r r r r r } 
\text { Px } & \text { Qx } & \text { Py } & \text { Qy } & \text { Pz } & \text { Qz } \
\hline 10 & 100 & \$ 20 & 50 & \$ 25 & 200 \
10 & 90 & 18 & 60 & 25 & 225 \
10 & 70 & 15 & 90 & 25 & 275 \
12 & 50 & 15 & 100 & 25 & 290 \
15 & 25 & 15 & 120 & 25 & 320\\hline
\end{array}$$
-Refer to the above table.Suppose the price of Y rises from $18 to $20.What is the cross price elasticity of demand between X and Y?

Accepted Answer

A) -2 
B) -1 
C) 0 
D) +1 
A) -2 
B) -1 
C) 0 
D) +1

Question 12

Which of the following goods is most likely to have the lowest price elasticity?

Accepted Answer

A) Movie tickets 
B) DVD rentals 
C) Gasoline 
D) Pasta 
A) Movie tickets 
B) DVD rentals 
C) Gasoline 
D) Pasta

Question 13

The price elasticity of supply is

Accepted Answer

A) negative. 
B) zero. 
C) positive. 
D) unknown,depending on other factors. 
A) negative. 
B) zero. 
C) positive. 
D) unknown,depending on other factors.

Question 14

$$\begin{array} { c c } 
\hline \begin{array} { c } 
\text { Price } \
\text { Per Unit }
\end{array} & \begin{array} { c } 
\text { Quantity Demanded } \
\text { Per Week }
\end{array} \
\hline \$ 10.00 & 25 \
9.50 & 30 \
9.00 & 35 \
8.50 & 40 \
8.00 & 45 \
7.50 & 50 \
7.00 & 55 \
6.50 & 60 \
6.00 & 65 \
5.50 & 70 \
5.00 & 75\\hline
\end{array}$$
-Refer to the above table.For which prices is demand elastic?

Accepted Answer

A) In a range of prices below $6.50 
B) In a range of prices above $6.50 
C) In a range of prices between $5 and $10 
D) In a range of prices above $9.00 
A) In a range of prices below $6.50 
B) In a range of prices above $6.50 
C) In a range of prices between $5 and $10 
D) In a range of prices above $9.00

Question 15

If the bus fare of a city increases from $1.00 to $1.25 per ride and as a result total revenue increases,then we know that

Accepted Answer

A) percentage change in fare is less than percentage change in number of rides. 
B) percentage change in fare is greater than percentage change in number of rides. 
C) percentage change in fare is equal to the percentage change in number of rides. 
D) it is impossible to tell. 
A) percentage change in fare is less than percentage change in number of rides. 
B) percentage change in fare is greater than percentage change in number of rides. 
C) percentage change in fare is equal to the percentage change in number of rides. 
D) it is impossible to tell.

Question 16

Price elasticity of supply is always

Accepted Answer

A) positive because of the law of supply. 
B) negative because of the law of supply. 
C) positive because of diminishing marginal utility. 
D) negative because percentages can only be negative. 
A) positive because of the law of supply. 
B) negative because of the law of supply. 
C) positive because of diminishing marginal utility. 
D) negative because percentages can only be negative.

Question 17

The price elasticity of demand measures

Accepted Answer

A) the consumers' sensitivity to a price change. 
B) the producers' sensitivity to a price change. 
C) how much the market price changes in response to a change in demand. 
D) how much the demand changes in response to a change in income. 
A) the consumers' sensitivity to a price change. 
B) the producers' sensitivity to a price change. 
C) how much the market price changes in response to a change in demand. 
D) how much the demand changes in response to a change in income.

Question 18

Suppose that the number of units of good X consumed falls 12 percent when the price of good Y falls 8 percent.The cross price elasticity of demand between goods X and Y is

Accepted Answer

A) 0.66. 
B) 1.75. 
C) 2.0. 
D) 1.5. 
A) 0.66. 
B) 1.75. 
C) 2.0. 
D) 1.5.

Question 19

Which of the following is FALSE regarding inelastic demand?

Accepted Answer

A) Price elasticity of demand is less than 1 ( $$\mathrm { E } _ { \mathrm { p } }$$  1). 
D) If a firm lowers price,total revenues will fall. 
A) Price elasticity of demand is less than 1 ( $$\mathrm { E } _ { \mathrm { p } }$$  1). 
D) If a firm lowers price,total revenues will fall.

Question 20

If a seller lowers the price of a product when demand is price inelastic,the seller can expect revenues to

Accepted Answer

A) rise. 
B) fall. 
C) stay the same. 
D) either rise or fall,but it is impossible to determine which. 
A) rise. 
B) fall. 
C) stay the same. 
D) either rise or fall,but it is impossible to determine which.

Exam 6: Demand and Supply Elasticity

-In the above figure,along which range would total revenue rise by lowering prices?

Income elasticity of demand is defined as

When John earned $65,000 he purchased 10 DVDs a year.His income has just increased to $68,000 and he plans to purchase 15 DVDs this year.John's income elasticity of demand equals

A situation in which there is a reduction in quantity supplied to zero when there is the slightest decrease in price is

To say that demand is inelastic means that

Which of the following is NOT a determinant of the price elasticity of demand?

Other things being equal,demand is more elastic the

If the supply of a good is perfectly inelastic,the price elasticity of supply will equal

If the absolute price elasticity of demand for concert tickets is 0.75,an increase in ticket prices will

If the price of a cola increased by 12 % and consumers responded by purchasing 20 % less cola,the absolute value of price elasticity of demand for cola would be

Px Qx Py Qy Pz Qz 10 100 \ 20 50 \ 25 200 10 90 18 60 25 225 10 70 15 90 25 275 12 50 15 100 25 290 15 25 15 120 25 320 -Refer to the above table.Suppose the price of Y rises from $18 to $20.What is the cross price elasticity of demand between X and Y?

Which of the following goods is most likely to have the lowest price elasticity?

The price elasticity of supply is

Price Per Unit Quantity Demanded Per Week \ 10.00 25 9.50 30 9.00 35 8.50 40 8.00 45 7.50 50 7.00 55 6.50 60 6.00 65 5.50 70 5.00 75 -Refer to the above table.For which prices is demand elastic?

If the bus fare of a city increases from $1.00 to $1.25 per ride and as a result total revenue increases,then we know that

Price elasticity of supply is always

The price elasticity of demand measures

Suppose that the number of units of good X consumed falls 12 percent when the price of good Y falls 8 percent.The cross price elasticity of demand between goods X and Y is

Which of the following is FALSE regarding inelastic demand?

If a seller lowers the price of a product when demand is price inelastic,the seller can expect revenues to

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

Consumer Choice

Rents, profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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