Question 1

Demand is more inelastic in the long run.

Accepted Answer

A) True 
 B)False

Question 2

The In The News article "Recession Eats into Gator Market" states that

Accepted Answer

A) The demand for alligator skins was inelastic. 
B) The quantity demanded for alligator skins fell when income dropped, indicating that the skins were an inferior good. 
C) The demand for alligator skins fell when income dropped, indicating that the skins were a normal good. 
D) The demand fell for alligator skins because the price was too high. 
A) The demand for alligator skins was inelastic. 
B) The quantity demanded for alligator skins fell when income dropped, indicating that the skins were an inferior good. 
C) The demand for alligator skins fell when income dropped, indicating that the skins were a normal good. 
D) The demand fell for alligator skins because the price was too high.

Question 3

Price elasticity of demand shows how

Accepted Answer

A) To compute the slope of the demand curve. 
B) Responsive the quantity demanded is to a change in price. 
C) Responsive the quantity demanded is to a change in the price of related goods. 
D) Responsive the price is to a change in demand. 
A) To compute the slope of the demand curve. 
B) Responsive the quantity demanded is to a change in price. 
C) Responsive the quantity demanded is to a change in the price of related goods. 
D) Responsive the price is to a change in demand.

Question 4

If the price of Good X falls and total revenue rises, then

Accepted Answer

A) Demand for Good X is inelastic. 
B) Demand for Good X is unitary elastic. 
C) Demand for Good X is elastic. 
D) The price elasticity of demand for Good X is equal to 1. 
A) Demand for Good X is inelastic. 
B) Demand for Good X is unitary elastic. 
C) Demand for Good X is elastic. 
D) The price elasticity of demand for Good X is equal to 1.

Question 5

Suppose computer prices at an office supply store fall from $1,000 to $900 and as a result the quantity demanded of typewriters decreases from 40 to 20 per month.The cross-price elasticity of demand is closest to

Accepted Answer

A) 0.16. 
B) 0.2. 
C) 5.0. 
D) 6.3. 
A) 0.16. 
B) 0.2. 
C) 5.0. 
D) 6.3.

Question 6

A good is normal if the sign on the income elasticity formula is

Accepted Answer

A) Positive. 
B) Greater than 1. 
C) Less than 1. 
D) Negative. 
A) Positive. 
B) Greater than 1. 
C) Less than 1. 
D) Negative.

Question 7

Elasticity of supply looks at

Accepted Answer

A) How responsive producers are to a change in quantity demanded. 
B) How much quantity demanded changes with a change in price. 
C) The responsiveness of sellers to a change in consumer's incomes. 
D) How responsive sellers are to a change in price. 
A) How responsive producers are to a change in quantity demanded. 
B) How much quantity demanded changes with a change in price. 
C) The responsiveness of sellers to a change in consumer's incomes. 
D) How responsive sellers are to a change in price.

Question 8

A grocery store put salt on sale but found that total revenues fell.This can be explained by which of the following?

Accepted Answer

A) The demand for salt is very elastic. 
B) The demand curve for salt is vertical. 
C) The demand for salt is inelastic. 
D) The demand for salt is unitary elastic. 
A) The demand for salt is very elastic. 
B) The demand curve for salt is vertical. 
C) The demand for salt is inelastic. 
D) The demand for salt is unitary elastic.

Question 9

If the elasticity number (E) is less than 1, a price increase will cause total revenue to fall.

Accepted Answer

A) True 
 B)False

Question 10

Suppose the quantity demanded of ski boats falls from 4.0 million to 3.0 million as a result of an average price increase from $20,000 to $25,000 per boat.The absolute value of the price elasticity of demand is closest to

Accepted Answer

A) 0.20. 
B) 1.29. 
C) 0.78. 
D) 0.29. 
A) 0.20. 
B) 1.29. 
C) 0.78. 
D) 0.29.

Question 11

When the percentage change in quantity demanded is less than the percentage change in price, ceteris paribus,

Accepted Answer

A) Demand is elastic. 
B) Demand is inelastic. 
C) Demand is unitary elastic. 
D) Elasticity is impossible to calculate. 
A) Demand is elastic. 
B) Demand is inelastic. 
C) Demand is unitary elastic. 
D) Elasticity is impossible to calculate.

Question 12

When demand is price-inelastic, ceteris paribus, an increase in

Accepted Answer

A) Price leads to lower total revenue. 
B) Total revenue means quantity rises. 
C) Total revenue indicates a reduction in price. 
D) Price leads to greater total revenue. 
A) Price leads to lower total revenue. 
B) Total revenue means quantity rises. 
C) Total revenue indicates a reduction in price. 
D) Price leads to greater total revenue.

Question 13

Carter has budgeted $40 per month for candy bars.No matter how the price of candy bars changes, he spends exactly $40 per month.Carter's price elasticity of demand for candy bars must

Accepted Answer

A) Equal zero. 
B) Be unitary. 
C) Be very inelastic since the amount he spends is not responsive to a price change. 
D) Be very elastic since the quantity he demands will change significantly if the price changes. 
A) Equal zero. 
B) Be unitary. 
C) Be very inelastic since the amount he spends is not responsive to a price change. 
D) Be very elastic since the quantity he demands will change significantly if the price changes.

Question 14

In Figure 20.1, total revenue is maximized at the unit price of

Accepted Answer

A) $50. 
B) $60. 
C) $80. 
D) $100. 
A) $50. 
B) $60. 
C) $80. 
D) $100.

Question 15

If income rises by 10 percent and the quantity sold of a particular vehicle falls by 7 percent, then this particular type of vehicle is

Accepted Answer

A) A normal good. 
B) An inferior good. 
C) An irregular good. 
D) A substandard good. 
A) A normal good. 
B) An inferior good. 
C) An irregular good. 
D) A substandard good.

Question 16

Refer to Figure 20.2.Suppose the areas 0P1AB and 0P2CD are equal.We can conclude that the price elasticity of demand between point A and point C is

Accepted Answer

A) Elastic. 
B) Inelastic. 
C) Unitary elastic. 
D) Impossible to determine.It depends on whether the price has increased or decreased. 
A) Elastic. 
B) Inelastic. 
C) Unitary elastic. 
D) Impossible to determine.It depends on whether the price has increased or decreased.

Question 17

The local baseball team owner hires you to help maximize the team's profits.You are told that costs are constant because enough help is always hired for a full stadium, so assume your task is to maximize revenues from ticket sales.Your advice to the owner should be to

Accepted Answer

A) Set the ticket price in the inelastic region of the demand curve in order to increase revenues. 
B) Raise the price as high as possible until the number of tickets sold begins to fall. 
C) Set the price as low as possible to make sure the stadium is always full. 
D) Set the price of tickets at the unitary elasticity price. 
A) Set the ticket price in the inelastic region of the demand curve in order to increase revenues. 
B) Raise the price as high as possible until the number of tickets sold begins to fall. 
C) Set the price as low as possible to make sure the stadium is always full. 
D) Set the price of tickets at the unitary elasticity price.

Question 18

The cross-price elasticity sign for substitute goods is negative.

Accepted Answer

A) True 
 B)False

Question 19

When demand is inelastic

Accepted Answer

A) The percentage change in price is greater than the percentage change in quantity demanded. 
B) Buyers are very sensitive to changes in price. 
C) The product in demand has many substitute goods. 
D) The percentage change in quantity demanded is greater than the percentage change in price. 
A) The percentage change in price is greater than the percentage change in quantity demanded. 
B) Buyers are very sensitive to changes in price. 
C) The product in demand has many substitute goods. 
D) The percentage change in quantity demanded is greater than the percentage change in price.

Question 20

If Carmen's Coffee Company wants to increase total revenue and the price elasticity of demand is 0.43, the company should

Accepted Answer

A) Increase the price of its coffee. 
B) Decrease the price of its coffee. 
C) Keep the price constant since a price increase or decrease will cause total revenue to fall. 
D) Advertise since this is the only option that will increase total revenue. 
A) Increase the price of its coffee. 
B) Decrease the price of its coffee. 
C) Keep the price constant since a price increase or decrease will cause total revenue to fall. 
D) Advertise since this is the only option that will increase total revenue.

Exam 6: Elasticity

Demand is more inelastic in the long run.

The In The News article "Recession Eats into Gator Market" states that

Price elasticity of demand shows how

If the price of Good X falls and total revenue rises, then

Suppose computer prices at an office supply store fall from $1,000 to $900 and as a result the quantity demanded of typewriters decreases from 40 to 20 per month.The cross-price elasticity of demand is closest to

A good is normal if the sign on the income elasticity formula is

Elasticity of supply looks at

A grocery store put salt on sale but found that total revenues fell.This can be explained by which of the following?

If the elasticity number (E) is less than 1, a price increase will cause total revenue to fall.

Suppose the quantity demanded of ski boats falls from 4.0 million to 3.0 million as a result of an average price increase from $20,000 to $25,000 per boat.The absolute value of the price elasticity of demand is closest to

When the percentage change in quantity demanded is less than the percentage change in price, ceteris paribus,

When demand is price-inelastic, ceteris paribus, an increase in

Carter has budgeted $40 per month for candy bars.No matter how the price of candy bars changes, he spends exactly $40 per month.Carter's price elasticity of demand for candy bars must

In Figure 20.1, total revenue is maximized at the unit price of

If income rises by 10 percent and the quantity sold of a particular vehicle falls by 7 percent, then this particular type of vehicle is

Refer to Figure 20.2.Suppose the areas 0P1AB and 0P2CD are equal.We can conclude that the price elasticity of demand between point A and point C is

The local baseball team owner hires you to help maximize the team's profits.You are told that costs are constant because enough help is always hired for a full stadium, so assume your task is to maximize revenues from ticket sales.Your advice to the owner should be to

The cross-price elasticity sign for substitute goods is negative.

When demand is inelastic

If Carmen's Coffee Company wants to increase total revenue and the price elasticity of demand is 0.43, the company should

Economics: the Core Issues

The Useconomy: a Global View

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The Role of Government

Consumer Choice

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Refer to Figure 20.2.Suppose the areas 0P₁AB and 0P₂CD are equal.We can conclude that the price elasticity of demand between point A and point C is