Question 1

How total revenue changes when a price changes can be predicted using price elasticity of demand.

Accepted Answer

A) True 
 B)False  True

Question 2

Price and total revenue move in inverse directions when demand is

Accepted Answer

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

Question 3

If the quantity of bagels demanded decreases by 8% when the price of croissants decreases by 16%, the cross-price elasticity of demand between bagels and croissants is

Accepted Answer

A)  2. 
B)  0.5. 
C)  -2. 
D)  -5. 
A)  2. 
B)  0.5. 
C)  -2. 
D)  -5. B

Question 4

If the cross-price elasticity of demand between fish and chicken is 2, then a 2% increase in the price of fish will result in a ________ in the quantity of chicken demanded.

Accepted Answer

A)  1% increase 
B)  4% increase 
C)  10% increase 
D)  20% decrease 
A)  1% increase 
B)  4% increase 
C)  10% increase 
D)  20% decrease

Question 5

When the price of coffee increases 5%, quantity demanded decreases 10%. The price elasticity of demand for coffee is ________ and total revenue from coffee sales will ________.

Accepted Answer

A)  inelastic; increase 
B)  inelastic; decrease 
C)  elastic; increase 
D)  elastic; decrease 
A)  inelastic; increase 
B)  inelastic; decrease 
C)  elastic; increase 
D)  elastic; decrease

Question 6

Cross-price elasticity of demand measures the response in the

Accepted Answer

A)  price of a good to a change in the quantity of another good demanded. 
B)  income of consumers to the change in the price of goods. 
C)  quantity of one good demanded when the quantity demanded of another good changes. 
D)  quantity of one good demanded to a change in the price of another good. 
A)  price of a good to a change in the quantity of another good demanded. 
B)  income of consumers to the change in the price of goods. 
C)  quantity of one good demanded when the quantity demanded of another good changes. 
D)  quantity of one good demanded to a change in the price of another good.

Question 7

Refer to the information provided in Figure 5.4 below to answer the questions that follow.   Figure 5.4
-Refer to Figure 5.4. Along the given demand curve, which of the following is true?

Accepted Answer

A)  Demand is less elastic along the segment AB than the segment EF. 
B)  Demand is less elastic along the segment EF than the segment AB. 
C)  Since the demand curve is linear, the price elasticity of demand between each of the points is the same. 
D)  All of the above are true. 
A)  Demand is less elastic along the segment AB than the segment EF. 
B)  Demand is less elastic along the segment EF than the segment AB. 
C)  Since the demand curve is linear, the price elasticity of demand between each of the points is the same. 
D)  All of the above are true.

Question 8

Related to the Economics in Practice on page 109: Frank runs a corner delicatessen and one day decides to raise his prices by 10 percent. Total revenue is likely to ________ at the end of the first month of the higher prices since demand is relatively elastic in the ________ term.

Accepted Answer

A)  rise; short 
B)  fall; short 
C)  rise; long 
D)  fall; long 
A)  rise; short 
B)  fall; short 
C)  rise; long 
D)  fall; long

Question 9

A positive cross-price elasticity between two goods implies that the two goods are substitutes.

Accepted Answer

A) True 
 B)False

Question 10

Refer to the information provided in Figure 5.5 below to answer the question that follows.   Figure 5.5
-Refer to Figure 5.5. As the price of good W increased, the demand for good Y shifted from D1 to D2. The cross-price elasticity of demand between W and Y is

Accepted Answer

A)  positive. 
B)  negative. 
C)  zero. 
D)  indeterminate from this information. 
A)  positive. 
B)  negative. 
C)  zero. 
D)  indeterminate from this information.

Question 11

When there are more substitutes for a product, the ________ for the product is ________.

Accepted Answer

A)  demand; less price elastic 
B)  demand; more price elastic 
C)  income elasticity; greater 
D)  income elasticity; smaller 
A)  demand; less price elastic 
B)  demand; more price elastic 
C)  income elasticity; greater 
D)  income elasticity; smaller

Question 12

Demand determines price entirely when

Accepted Answer

A)  demand is downward sloping. 
B)  demand is perfectly inelastic. 
C)  supply is perfectly inelastic. 
D)  supply is perfectly elastic. 
A)  demand is downward sloping. 
B)  demand is perfectly inelastic. 
C)  supply is perfectly inelastic. 
D)  supply is perfectly elastic.

Question 13

Perfectly inelastic demand is represented as a vertical line.

Accepted Answer

A) True 
 B)False

Question 14

When the price of radios decreases 5%, quantity demanded increases 5%. The price elasticity of demand for radios is ________ and total revenue from radio sales will ________.

Accepted Answer

A)  elastic; decrease 
B)  elastic; increase 
C)  inelastic; decrease 
D)  unit elastic; not change 
A)  elastic; decrease 
B)  elastic; increase 
C)  inelastic; decrease 
D)  unit elastic; not change

Question 15

Refer to the information provided in Figure 5.3 below to answer the questions that follow.   Figure 5.3
-Refer to Figure 5.3. Use the midpoint formula. If the price of a gardenburger is increased from $6 to $8, the price elasticity of demand equals ________ and demand is ________.

Accepted Answer

A)  -0.57; inelastic 
B)  -1.75; elastic 
C)  -1.9; inelastic 
D)  -2.0; elastic 
A)  -0.57; inelastic 
B)  -1.75; elastic 
C)  -1.9; inelastic 
D)  -2.0; elastic

Question 16

Total revenue increases if price ________ and demand is ________.

Accepted Answer

A)  falls; inelastic 
B)  falls; elastic 
C)  rises; elastic 
D)  rises; unit elastic 
A)  falls; inelastic 
B)  falls; elastic 
C)  rises; elastic 
D)  rises; unit elastic

Question 17

The ABC Computer Company spends a lot of money for advertising designed to convince you that their personal computers are superior to all other personal computers. If the ABC Company is successful, the demand for ABC personal computers

Accepted Answer

A)  and the demand for other firmsʹ personal computers will become less price elastic. 
B)  and the demand for other firmsʹ personal computers will become more price elastic. 
C)  will become more price elastic, but the demand for other firmsʹ personal computers will become less price elastic. 
D)  will become less price elastic, but the demand for other firmsʹ personal computers will become more price elastic. 
A)  and the demand for other firmsʹ personal computers will become less price elastic. 
B)  and the demand for other firmsʹ personal computers will become more price elastic. 
C)  will become more price elastic, but the demand for other firmsʹ personal computers will become less price elastic. 
D)  will become less price elastic, but the demand for other firmsʹ personal computers will become more price elastic.

Question 18

At a price of $20, a store can sell 24 picture frames a day. At a price of $18 the store can sell 33 picture frames a day. Since total revenue ________ by the price decrease, demand must be ________.

Accepted Answer

A)  is increased; elastic 
B)  is increased; inelastic 
C)  is increased; unit elastic 
D)  is decreased; elastic 
A)  is increased; elastic 
B)  is increased; inelastic 
C)  is increased; unit elastic 
D)  is decreased; elastic

Question 19

When demand is inelastic, an increase in price will result in an increase in total revenue.

Accepted Answer

A) True 
 B)False

Question 20

If the quantity of tea demanded increases by 2% when the price of coffee increases by 6%, the cross-price elasticity of demand between tea and coffee is

Accepted Answer

A)  -3. 
B)  0.33. 
C)  3. 
D)  12. 
A)  -3. 
B)  0.33. 
C)  3. 
D)  12.

Exam 5: Elasticity

How total revenue changes when a price changes can be predicted using price elasticity of demand.

Price and total revenue move in inverse directions when demand is

If the quantity of bagels demanded decreases by 8% when the price of croissants decreases by 16%, the cross-price elasticity of demand between bagels and croissants is

If the cross-price elasticity of demand between fish and chicken is 2, then a 2% increase in the price of fish will result in a ________ in the quantity of chicken demanded.

When the price of coffee increases 5%, quantity demanded decreases 10%. The price elasticity of demand for coffee is ________ and total revenue from coffee sales will ________.

Cross-price elasticity of demand measures the response in the

Refer to the information provided in Figure 5.4 below to answer the questions that follow. Figure 5.4 -Refer to Figure 5.4. Along the given demand curve, which of the following is true?

Related to the Economics in Practice on page 109: Frank runs a corner delicatessen and one day decides to raise his prices by 10 percent. Total revenue is likely to ________ at the end of the first month of the higher prices since demand is relatively elastic in the ________ term.

A positive cross-price elasticity between two goods implies that the two goods are substitutes.

Refer to the information provided in Figure 5.5 below to answer the question that follows. Figure 5.5 -Refer to Figure 5.5. As the price of good W increased, the demand for good Y shifted from D1 to D2. The cross-price elasticity of demand between W and Y is

When there are more substitutes for a product, the ________ for the product is ________.

Demand determines price entirely when

Perfectly inelastic demand is represented as a vertical line.

When the price of radios decreases 5%, quantity demanded increases 5%. The price elasticity of demand for radios is ________ and total revenue from radio sales will ________.

Refer to the information provided in Figure 5.3 below to answer the questions that follow. Figure 5.3 -Refer to Figure 5.3. Use the midpoint formula. If the price of a gardenburger is increased from $6 to $8, the price elasticity of demand equals ________ and demand is ________.

Total revenue increases if price ________ and demand is ________.

The ABC Computer Company spends a lot of money for advertising designed to convince you that their personal computers are superior to all other personal computers. If the ABC Company is successful, the demand for ABC personal computers

At a price of $20, a store can sell 24 picture frames a day. At a price of $18 the store can sell 33 picture frames a day. Since total revenue ________ by the price decrease, demand must be ________.

When demand is inelastic, an increase in price will result in an increase in total revenue.

If the quantity of tea demanded increases by 2% when the price of coffee increases by 6%, the cross-price elasticity of demand between tea and coffee is

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: the Labor and Land Markets

Input Demand: the Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Externalities, Public Goods, and Social Choice

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: The Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing and Transitional Economies

Filters

When the price of coffee increases 5%, quantity demanded decreases 10%. The price elasticity of demand for coffee is and total revenue from coffee sales will .

Related to the Economics in Practice on page 109: Frank runs a corner delicatessen and one day decides to raise his prices by 10 percent. Total revenue is likely to at the end of the first month of the higher prices since demand is relatively elastic in the term.

When there are more substitutes for a product, the for the product is .

When the price of radios decreases 5%, quantity demanded increases 5%. The price elasticity of demand for radios is and total revenue from radio sales will .

Refer to the information provided in Figure 5.3 below to answer the questions that follow. Figure 5.3 -Refer to Figure 5.3. Use the midpoint formula. If the price of a gardenburger is increased from $6 to $8, the price elasticity of demand equals and demand is .

Total revenue increases if price and demand is .

At a price of $20, a store can sell 24 picture frames a day. At a price of $18 the store can sell 33 picture frames a day. Since total revenue by the price decrease, demand must be .