Question 1

How does advertising influence the demand for goods and the shape of the demand curve?

Accepted Answer

Advertising can increase the demand for

Question 2

For the United States to become less dependent on foreign sources of oil,

Accepted Answer

A) The cross-price elasticity for alternative energy sources is negative. 
B) The price of alternative energy sources such as wind and solar has to rise. 
C) Incomes in the United States must increase. 
D) The price of oil and gasoline must increase to shift businesses and consumers over to alternative energy sources. 
A) The cross-price elasticity for alternative energy sources is negative. 
B) The price of alternative energy sources such as wind and solar has to rise. 
C) Incomes in the United States must increase. 
D) The price of oil and gasoline must increase to shift businesses and consumers over to alternative energy sources.

Question 3

In Figure 20.1, at what price is the elasticity of demand unitary?

Accepted Answer

A) $40. 
B) $100. 
C) $160. 
D) $200. 
A) $40. 
B) $100. 
C) $160. 
D) $200.

Question 4

In the article on SUV sales titled "SUV Sales Drop with Gasoline Price Rise" suggests that

Accepted Answer

A) SUV sales are very responsive to gasoline, which is a substitute good to SUVs. 
B) SUV sales did not respond all that much to a rise in gasoline prices, indicating that demand is inelastic for SUVs. 
C) Gasoline and SUVs are complementary goods, and when the price of gasoline rose, the demand for SUVs fell. 
D) The sign on the cross-price elasticity formula will be positive for SUVs and gasoline. 
A) SUV sales are very responsive to gasoline, which is a substitute good to SUVs. 
B) SUV sales did not respond all that much to a rise in gasoline prices, indicating that demand is inelastic for SUVs. 
C) Gasoline and SUVs are complementary goods, and when the price of gasoline rose, the demand for SUVs fell. 
D) The sign on the cross-price elasticity formula will be positive for SUVs and gasoline.

Question 5

The In The News article "Play Station 3 Sales More Than Double after Price Cut" indicated that

Accepted Answer

A) The percentage change in price was greater than the percentage change in quantity demanded. 
B) The percentage change in quantity demanded was greater than the percentage change in price. 
C) The demand for the Play Station 3 consoles was inelastic. 
D) The percentage change in price was the same magnitude as the percentage change in quantity demanded.There was a huge sales response to the price cut for the Play Station consoles, indicating that demand was elastic. 
A) The percentage change in price was greater than the percentage change in quantity demanded. 
B) The percentage change in quantity demanded was greater than the percentage change in price. 
C) The demand for the Play Station 3 consoles was inelastic. 
D) The percentage change in price was the same magnitude as the percentage change in quantity demanded.There was a huge sales response to the price cut for the Play Station consoles, indicating that demand was elastic.

Question 6

Income elasticity measures the

Accepted Answer

A) Responsiveness of quantity demanded for one good to a percentage change in price of another good. 
B) Responsiveness of quantity demanded to a percentage change in income. 
C) Way in which consumers switch from one product to another when price rises. 
D) Percentage change in quantity demanded given a percentage change in wealth. 
A) Responsiveness of quantity demanded for one good to a percentage change in price of another good. 
B) Responsiveness of quantity demanded to a percentage change in income. 
C) Way in which consumers switch from one product to another when price rises. 
D) Percentage change in quantity demanded given a percentage change in wealth.

Question 7

If demand is inelastic, a reduction in price will lead to a drop in total revenue.

Accepted Answer

A) True 
 B)False

Question 8

Explain under what conditions supply is very inelastic and elastic.

Accepted Answer

Elasticity of supply measures the change

Question 9

The price elasticity of supply will always be a negative number.

Accepted Answer

A) True 
 B)False

Question 10

If the elasticity of demand is 3, then a 10 percent increase in price will cause quantity demanded to fall by 3 percent.

Accepted Answer

A) True 
 B)False

Question 11

MP3 players and MP3 files are complementary goods.The cross-price elasticity of demand between MP3 players and MP3 files is expected to be

Accepted Answer

A) Positive. 
B) Negative. 
C) Equal to zero. 
D) Undefined. 
A) Positive. 
B) Negative. 
C) Equal to zero. 
D) Undefined.

Question 12

Suppose a university raises its tuition by 6 percent and as a result the enrollment of students decreases by 3 percent.The absolute value of the price elasticity of demand is

Accepted Answer

A) 0.5. 
B) 2.0. 
C) 8.0. 
D) 6.0. 
A) 0.5. 
B) 2.0. 
C) 8.0. 
D) 6.0.

Question 13

Which of the following would most likely have a price elasticity coefficient greater than 1?

Accepted Answer

A) Cigarettes. 
B) Gasoline in the short run. 
C) Electricity. 
D) Airline travel in the long run. 
A) Cigarettes. 
B) Gasoline in the short run. 
C) Electricity. 
D) Airline travel in the long run.

Question 14

Which of the following causes demand to be more elastic with respect to price?

Accepted Answer

A) Shorter periods of time to adjust to a change in price. 
B) A steeper demand curve for a given price and quantity. 
C) Fewer substitutes. 
D) A high ratio of price to income. 
A) Shorter periods of time to adjust to a change in price. 
B) A steeper demand curve for a given price and quantity. 
C) Fewer substitutes. 
D) A high ratio of price to income.

Question 15

Which of the following would most likely have a price elasticity coefficient less than 1?

Accepted Answer

A) Coffee. 
B) Televisions. 
C) Fresh fish. 
D) New cars. 
A) Coffee. 
B) Televisions. 
C) Fresh fish. 
D) New cars.

Question 16

Suppose income falls 5 percent in a year, and as a result, housing construction falls from 10 million to 5 million units annually.Based on this information, housing starts are

Accepted Answer

A) An inferior good. 
B) A normal good. 
C) Price-elastic. 
D) Price-inelastic. 
A) An inferior good. 
B) A normal good. 
C) Price-elastic. 
D) Price-inelastic.

Question 17

If demand is elastic, a price reduction will lead to an increase in total revenue.

Accepted Answer

A) True 
 B)False

Question 18

The basic formula for price elasticity is

Accepted Answer

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

Question 19

Total revenue is

Accepted Answer

A) Price times income. 
B) Quantity sold times price. 
C) Equal to total profit. 
D) Equal to costs of production. 
A) Price times income. 
B) Quantity sold times price. 
C) Equal to total profit. 
D) Equal to costs of production.

Question 20

If two goods are complementary, it means that when the price of one good increases, the demand for the other rises.

Accepted Answer

A) True 
 B)False

Exam 6: Elasticity

How does advertising influence the demand for goods and the shape of the demand curve?

For the United States to become less dependent on foreign sources of oil,

In Figure 20.1, at what price is the elasticity of demand unitary?

In the article on SUV sales titled "SUV Sales Drop with Gasoline Price Rise" suggests that

The In The News article "Play Station 3 Sales More Than Double after Price Cut" indicated that

Income elasticity measures the

If demand is inelastic, a reduction in price will lead to a drop in total revenue.

Explain under what conditions supply is very inelastic and elastic.

The price elasticity of supply will always be a negative number.

If the elasticity of demand is 3, then a 10 percent increase in price will cause quantity demanded to fall by 3 percent.

MP3 players and MP3 files are complementary goods.The cross-price elasticity of demand between MP3 players and MP3 files is expected to be

Suppose a university raises its tuition by 6 percent and as a result the enrollment of students decreases by 3 percent.The absolute value of the price elasticity of demand is

Which of the following would most likely have a price elasticity coefficient greater than 1?

Which of the following causes demand to be more elastic with respect to price?

Which of the following would most likely have a price elasticity coefficient less than 1?

Suppose income falls 5 percent in a year, and as a result, housing construction falls from 10 million to 5 million units annually.Based on this information, housing starts are

If demand is elastic, a price reduction will lead to an increase in total revenue.

The basic formula for price elasticity is

Total revenue is

If two goods are complementary, it means that when the price of one good increases, the demand for the other rises.

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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