Question 1

For inferior goods, when incomes rise the demand for these goods falls.

Accepted Answer

A) True 
 B)False  True

Question 2

When the prices of postage stamps rise, the demand for Internet service increases, ceteris paribus.Postage stamps and Internet service are therefore

Accepted Answer

A) Elastic. 
B) Inelastic. 
C) Complements. 
D) Substitutes. 
A) Elastic. 
B) Inelastic. 
C) Complements. 
D) Substitutes. D

Question 3

Assume the price elasticity of demand for U.S.Frisbee Co.Frisbees is 0.5.If the company increases the price of each Frisbee from $12 to $16, the number of Frisbees demanded will

Accepted Answer

A) Decrease by 14.3 percent. 
B) Decrease by 33.3 percent. 
C) Increase by 20.0 percent. 
D) Increase by 7.0 percent. 
A) Decrease by 14.3 percent. 
B) Decrease by 33.3 percent. 
C) Increase by 20.0 percent. 
D) Increase by 7.0 percent. A

Question 4

If DVD players and DVDs are complementary goods, an increase in the price of DVDs will, ceteris paribus,

Accepted Answer

A) Increase the quantity demanded of DVDs. 
B) Increase the quantity demanded of DVD players. 
C) Reduce the demand for DVD players. 
D) Reduce the demand for DVDs. 
A) Increase the quantity demanded of DVDs. 
B) Increase the quantity demanded of DVD players. 
C) Reduce the demand for DVD players. 
D) Reduce the demand for DVDs.

Question 5

The sign on the income elasticity formula will be positive for inferior goods and negative for normal goods.

Accepted Answer

A) True 
 B)False

Question 6

Assume that store brand cereal is an inferior good.If income rises, then the price of store brand cereal will ________ and the quantity sold of store brand cereal will _______.

Accepted Answer

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

Question 7

If the price is reduced from $100 to $80 in Figure 20.1, ceteris paribus,

Accepted Answer

A) Total revenue will decrease. 
B) Demand will increase. 
C) Quantity demanded will decrease. 
D) Total revenue will increase. 
A) Total revenue will decrease. 
B) Demand will increase. 
C) Quantity demanded will decrease. 
D) Total revenue will increase.

Question 8

If two goods are complementary goods, then

Accepted Answer

A) The cross-price elasticity sign will be negative. 
B) The cross-price elasticity sign is not important. 
C) The cross-price elasticity sign will be positive. 
D) The cross-price elasticity will be greater than 1. 
A) The cross-price elasticity sign will be negative. 
B) The cross-price elasticity sign is not important. 
C) The cross-price elasticity sign will be positive. 
D) The cross-price elasticity will be greater than 1.

Question 9

Demand is more inelastic for luxury goods.

Accepted Answer

A) True 
 B)False

Question 10

The article "SUV Sales Drop with Gasoline Price Rise" states

Accepted Answer

A) That gasoline and SUV sales have a cross-price elasticity that is negative. 
B) That gasoline and SUVs are substitute goods. 
C) That the cross-price elasticity for SUVs and gasoline is positive. 
D) That a drop in the price of gasoline will have little impact on SUV sales. 
A) That gasoline and SUV sales have a cross-price elasticity that is negative. 
B) That gasoline and SUVs are substitute goods. 
C) That the cross-price elasticity for SUVs and gasoline is positive. 
D) That a drop in the price of gasoline will have little impact on SUV sales.

Question 11

Total revenue is equal to

Accepted Answer

A) The income from sales. 
B) Profit. 
C) Cost of production. 
D) Total revenue minus total cost. 
A) The income from sales. 
B) Profit. 
C) Cost of production. 
D) Total revenue minus total cost.

Question 12

If demand is perfectly elastic,

Accepted Answer

A) The demand curve is vertical. 
B) The demand curve is very steep. 
C) The demand curve is horizontal. 
D) The demand curve has a zero slope. 
A) The demand curve is vertical. 
B) The demand curve is very steep. 
C) The demand curve is horizontal. 
D) The demand curve has a zero slope.

Question 13

In the $80 to $40 price range in Figure 20.1, demand is

Accepted Answer

A) Perfectly price-elastic. 
B) Price-inelastic. 
C) Unitary elastic. 
D) Price-elastic. 
A) Perfectly price-elastic. 
B) Price-inelastic. 
C) Unitary elastic. 
D) Price-elastic.

Question 14

Explain why the concept of price elasticity of demand is important to government when deciding which goods to tax in order to raise government tax revenues

Accepted Answer

Policy makers will choose which products

Question 15

In the article "After iPhone Price Cut, Sales Are Up by 200 Percent,"

Accepted Answer

A) The demand for iPhones is inelastic. 
B) The survey of quantity demanded after a price change for the iPhones showed that iPhones are an inferior good. 
C) The demand for iPhones is highly elastic. 
D) There was no way to calculate the price elasticity of demand. 
A) The demand for iPhones is inelastic. 
B) The survey of quantity demanded after a price change for the iPhones showed that iPhones are an inferior good. 
C) The demand for iPhones is highly elastic. 
D) There was no way to calculate the price elasticity of demand.

Question 16

If the demand for cigarettes is inelastic,

Accepted Answer

A) Total revenue will rise if the price of cigarettes rises. 
B) No matter how high the price goes, the quantity demanded will not fall. 
C) Total revenue will fall if the price of cigarettes rises. 
D) A price reduction will actually cause the quantity demanded to fall. 
A) Total revenue will rise if the price of cigarettes rises. 
B) No matter how high the price goes, the quantity demanded will not fall. 
C) Total revenue will fall if the price of cigarettes rises. 
D) A price reduction will actually cause the quantity demanded to fall.

Question 17

The World View "High Gold Price Swells Ranks of Illegal Miners"related to gold prices and gold mining suggests

Accepted Answer

A) As the price of gold rises, the quantity supplied falls. 
B) As the price of gold increases, there is an increase in quantity supplied, indicating that supply is elastic. 
C) Miners around the world have had difficulty finding additional sources of gold, indicating that the elasticity of supply is inelastic. 
D) Miners have found new supplies of gold, indicating that the demand for gold is inelastic. 
A) As the price of gold rises, the quantity supplied falls. 
B) As the price of gold increases, there is an increase in quantity supplied, indicating that supply is elastic. 
C) Miners around the world have had difficulty finding additional sources of gold, indicating that the elasticity of supply is inelastic. 
D) Miners have found new supplies of gold, indicating that the demand for gold is inelastic.

Question 18

The demand for normal goods

Accepted Answer

A) Rises when incomes fall. 
B) Rises when incomes rise. 
C) Falls when incomes rise. 
D) Shifts to the right when incomes fall. 
A) Rises when incomes fall. 
B) Rises when incomes rise. 
C) Falls when incomes rise. 
D) Shifts to the right when incomes fall.

Question 19

Over the price range from $180 to $120 in Figure 20.1, ceteris paribus,

Accepted Answer

A) Demand is elastic. 
B) Total revenue is maximized. 
C) Demand is increasing. 
D) Utility is maximized. 
A) Demand is elastic. 
B) Total revenue is maximized. 
C) Demand is increasing. 
D) Utility is maximized.

Question 20

Ceteris paribus, if income increases and as a result, the demand for good X increases and the demand for good Y falls,

Accepted Answer

A) Good X is an inferior good and good Y is a normal good. 
B) Good X is a normal good and good Y is an inferior good. 
C) Goods X and Y are substitute goods. 
D) Goods X and Y are complementary goods. 
A) Good X is an inferior good and good Y is a normal good. 
B) Good X is a normal good and good Y is an inferior good. 
C) Goods X and Y are substitute goods. 
D) Goods X and Y are complementary goods.

Exam 6: Elasticity

For inferior goods, when incomes rise the demand for these goods falls.

When the prices of postage stamps rise, the demand for Internet service increases, ceteris paribus.Postage stamps and Internet service are therefore

Assume the price elasticity of demand for U.S.Frisbee Co.Frisbees is 0.5.If the company increases the price of each Frisbee from $12 to $16, the number of Frisbees demanded will

If DVD players and DVDs are complementary goods, an increase in the price of DVDs will, ceteris paribus,

The sign on the income elasticity formula will be positive for inferior goods and negative for normal goods.

Assume that store brand cereal is an inferior good.If income rises, then the price of store brand cereal will ________ and the quantity sold of store brand cereal will _______.

If the price is reduced from $100 to $80 in Figure 20.1, ceteris paribus,

If two goods are complementary goods, then

Demand is more inelastic for luxury goods.

The article "SUV Sales Drop with Gasoline Price Rise" states

Total revenue is equal to

If demand is perfectly elastic,

In the $80 to $40 price range in Figure 20.1, demand is

Explain why the concept of price elasticity of demand is important to government when deciding which goods to tax in order to raise government tax revenues

In the article "After iPhone Price Cut, Sales Are Up by 200 Percent,"

If the demand for cigarettes is inelastic,

The World View "High Gold Price Swells Ranks of Illegal Miners"related to gold prices and gold mining suggests

The demand for normal goods

Over the price range from $180 to $120 in Figure 20.1, ceteris paribus,

Ceteris paribus, if income increases and as a result, the demand for good X increases and the demand for good Y falls,

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

The Role of Government

Consumer Choice

The Costs of Production

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

International Finance

Global Poverty

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Assume that store brand cereal is an inferior good.If income rises, then the price of store brand cereal will __ and the quantity sold of store brand cereal will _.