Question 1

An increase in demand will:

Accepted Answer

A) ​reduce total revenue. 
B) ​increase total revenue. 
C) ​increase total revenue only if supply is inelastic. 
D) ​increase total revenue only if supply is elastic. 
A) ​reduce total revenue. 
B) ​increase total revenue. 
C) ​increase total revenue only if supply is inelastic. 
D) ​increase total revenue only if supply is elastic.

Question 2

As you move down a demand curve, if a decrease in price from $11 to $9 increased total revenue, then further decreases below $9 would also increase total revenue.

Accepted Answer

A) True 
 B)False

Question 3

A decrease in price will cause a firm's total revenue to decrease if demand is price inelastic.

Accepted Answer

A) True 
 B)False

Question 4

If the supply curve for housing is perfectly inelastic, a reduction in demand will cause the equilibrium price to:

Accepted Answer

A) ​rise and the equilibrium quantity to fall. 
B) ​rise and the equilibrium quantity to stay the same. 
C) ​fall and the equilibrium quantity to fall. 
D) ​fall and the equilibrium quantity to stay the same. 
A) ​rise and the equilibrium quantity to fall. 
B) ​rise and the equilibrium quantity to stay the same. 
C) ​fall and the equilibrium quantity to fall. 
D) ​fall and the equilibrium quantity to stay the same.

Question 5

​Exhibit 6-4  
-Refer to Exhibit 6-4. Graph A represents a demand curve that is relatively ____in the range illustrated. Total revenue ____ as the price decreases from $10 to $5.

Accepted Answer

A) ​inelastic; decreases 
B) ​elastic; decreases 
C) ​elastic; increases 
D) ​inelastic; increases 
A) ​inelastic; decreases 
B) ​elastic; decreases 
C) ​elastic; increases 
D) ​inelastic; increases

Question 6

As the time to respond to a change in market conditions increases, the odds of supply being elastic:

Accepted Answer

A) ​Increase. 
B) ​Decrease. 
C) ​Stay the same. 
D) ​Cannot be determined. 
A) ​Increase. 
B) ​Decrease. 
C) ​Stay the same. 
D) ​Cannot be determined.

Question 7

​Exhibit 6-4  
-Refer to Exhibit 6-4. With reference to Graph A, at a price of $10, total revenue equals:

Accepted Answer

A) ​$200. 
B) ​$400. 
C) ​$500. 
D) ​$1,000. 
A) ​$200. 
B) ​$400. 
C) ​$500. 
D) ​$1,000.

Question 8

If a huge percentage change in price leads to a small percentage change in quantity demanded, then demand is said to be elastic.

Accepted Answer

A) True 
 B)False

Question 9

The nation's largest cable TV company tested the effect of a price reduction for premium movie channels. It increased prices from $20 to $30 per month and found virtually no change in the number of customers. This means:

Accepted Answer

A) ​the demand curve for the premium movie channels shifted to the right. 
B) ​the supply curve for premium movie channels shifted to the left. 
C) ​the demand for premium movie channels is very elastic in this price range. 
D) ​the demand for premium movie channels is very inelastic in this price range. 
A) ​the demand curve for the premium movie channels shifted to the right. 
B) ​the supply curve for premium movie channels shifted to the left. 
C) ​the demand for premium movie channels is very elastic in this price range. 
D) ​the demand for premium movie channels is very inelastic in this price range.

Question 10

If the demand for a good is perfectly inelastic, what will happen to the quantity demanded if there is a tiny increase in price?

Accepted Answer

A) ​quantity demanded will increase proportionately 
B) ​quantity demanded will fall to zero 
C) ​quantity demanded will decrease proportionately 
D) ​quantity demanded will remain the same 
A) ​quantity demanded will increase proportionately 
B) ​quantity demanded will fall to zero 
C) ​quantity demanded will decrease proportionately 
D) ​quantity demanded will remain the same

Question 11

If the cross price elasticity between Goods A and B equals -1.3, then a reduction in the price of Good B will:

Accepted Answer

A) ​increase the demand for Good A and increase Good A's price as a result. 
B) ​increase the demand for Good A and decrease Good A's price as a result. 
C) ​decrease the demand for Good A and increase Good A's price as a result. 
D) ​decrease the demand for Good A and decrease Good A's price as a result. 
A) ​increase the demand for Good A and increase Good A's price as a result. 
B) ​increase the demand for Good A and decrease Good A's price as a result. 
C) ​decrease the demand for Good A and increase Good A's price as a result. 
D) ​decrease the demand for Good A and decrease Good A's price as a result.

Question 12

A tax is imposed on wine. Sellers will bear no burden from this tax if the:

Accepted Answer

A) ​demand for wine is perfectly inelastic. 
B) ​demand for wine is perfectly elastic. 
C) ​demand for wine is unit elastic. 
D) ​supply curve for wine is perfectly inelastic. 
A) ​demand for wine is perfectly inelastic. 
B) ​demand for wine is perfectly elastic. 
C) ​demand for wine is unit elastic. 
D) ​supply curve for wine is perfectly inelastic.

Question 13

If the short run elasticity of demand for widgets is 0.7 and the long run elasticity of demand for widgets is 1.5, a decrease in price will ____ total revenue in the short run and ____ total revenue in the long run.

Accepted Answer

A) ​Increase; increase. 
B) ​Increase; decrease. 
C) ​Decrease; increase. 
D) ​Decrease; decrease. 
A) ​Increase; increase. 
B) ​Increase; decrease. 
C) ​Decrease; increase. 
D) ​Decrease; decrease.

Question 14

Which of the following is false?

Accepted Answer

A) ​The price elasticity of demand measures the responsiveness of quantity demanded to a change in price. 
B) ​The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price. 
C) ​If demand is elastic, it means the quantity demanded changes by a relatively larger amount than the price change. 
D) ​All of the above are true. 
A) ​The price elasticity of demand measures the responsiveness of quantity demanded to a change in price. 
B) ​The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price. 
C) ​If demand is elastic, it means the quantity demanded changes by a relatively larger amount than the price change. 
D) ​All of the above are true.

Question 15

Put the following products in order from the least to the most elastic demand: Domino's pizza, pizza, and pizza from Domino's on the corner of Main Street and 8th Avenue.

Accepted Answer

A) ​Domino's pizza; pizza; pizza from Domino's on the corner of Main Street and 8th Avenue 
B) ​pizza; pizza from Domino's on the corner of Main Street and 8th Avenue; Domino's pizza 
C) ​pizza; Domino's pizza; pizza from Domino's on the corner of Main Street and 8th Avenue 
D) ​pizza from Domino's on the corner of Main Street and 8th Avenue; Domino's pizza; pizza 
A) ​Domino's pizza; pizza; pizza from Domino's on the corner of Main Street and 8th Avenue 
B) ​pizza; pizza from Domino's on the corner of Main Street and 8th Avenue; Domino's pizza 
C) ​pizza; Domino's pizza; pizza from Domino's on the corner of Main Street and 8th Avenue 
D) ​pizza from Domino's on the corner of Main Street and 8th Avenue; Domino's pizza; pizza

Question 16

If a cut in prices increases total revenue in the short run, what will it do to total revenue in the long run?

Accepted Answer

A) ​It will decrease total revenue in the long run. 
B) ​It will increase total revenue in the long run. 
C) ​It will leave total revenue unchanged in the long run. 
D) ​Any of the above results are possible in the long run. 
A) ​It will decrease total revenue in the long run. 
B) ​It will increase total revenue in the long run. 
C) ​It will leave total revenue unchanged in the long run. 
D) ​Any of the above results are possible in the long run.

Question 17

​Exhibit 6-2
​  
-Refer to Exhibit 6-2. Elasticity varies along a linear demand curve. Graph B represents the section of the curve where:

Accepted Answer

A) ​the curve is elastic. 
B) ​Ed is > 1. 
C) ​starting at P1, an increase in price will lead to a decrease in total revenue. 
D) ​all of the above are correct. 
A) ​the curve is elastic. 
B) ​Ed is > 1. 
C) ​starting at P1, an increase in price will lead to a decrease in total revenue. 
D) ​all of the above are correct.

Question 18

If the cross price elasticity of demand for fries with respect to hamburgers equals -1.2, then:

Accepted Answer

A) ​a 1% increase in the quantity of hamburgers purchased will lead to a 1.2% increase in the price of fries. 
B) ​a 10% increase in the price of a hamburger will lead to a 12% increase in the quantity of fries demanded at a given price. 
C) ​a 1% decrease in the price of a hamburger will lead to a 1.2% increase in the quantity of fries demanded at a given price. 
D) ​a 10% increase in the quantity of hamburgers purchased will lead to a 12% increase in the price of fries. 
A) ​a 1% increase in the quantity of hamburgers purchased will lead to a 1.2% increase in the price of fries. 
B) ​a 10% increase in the price of a hamburger will lead to a 12% increase in the quantity of fries demanded at a given price. 
C) ​a 1% decrease in the price of a hamburger will lead to a 1.2% increase in the quantity of fries demanded at a given price. 
D) ​a 10% increase in the quantity of hamburgers purchased will lead to a 12% increase in the price of fries.

Question 19

A positive income elasticity of demand for a good

Accepted Answer

A) ​means it is a substitute. 
B) ​means it is a complement. 
C) ​it is a normal good. 
D) ​it is an inferior good. 
A) ​means it is a substitute. 
B) ​means it is a complement. 
C) ​it is a normal good. 
D) ​it is an inferior good.

Question 20

​Exhibit 6-2
​  
-Refer to Exhibit 6-2. Elasticity varies along a linear demand curve. Graph A represents the section of the curve where:

Accepted Answer

A) ​the curve is inelastic. 
B) ​Ed is 2, a decrease in price will lead to a decrease in total revenue. 
D) ​all of the above are correct. 
A) ​the curve is inelastic. 
B) ​Ed is 2, a decrease in price will lead to a decrease in total revenue. 
D) ​all of the above are correct.

Exam 6: Elasticities

An increase in demand will:

As you move down a demand curve, if a decrease in price from $11 to $9 increased total revenue, then further decreases below $9 would also increase total revenue.

A decrease in price will cause a firm's total revenue to decrease if demand is price inelastic.

If the supply curve for housing is perfectly inelastic, a reduction in demand will cause the equilibrium price to:

​Exhibit 6-4 -Refer to Exhibit 6-4. Graph A represents a demand curve that is relatively ____in the range illustrated. Total revenue ____ as the price decreases from $10 to $5.

As the time to respond to a change in market conditions increases, the odds of supply being elastic:

​Exhibit 6-4 -Refer to Exhibit 6-4. With reference to Graph A, at a price of $10, total revenue equals:

If a huge percentage change in price leads to a small percentage change in quantity demanded, then demand is said to be elastic.

The nation's largest cable TV company tested the effect of a price reduction for premium movie channels. It increased prices from $20 to $30 per month and found virtually no change in the number of customers. This means:

If the demand for a good is perfectly inelastic, what will happen to the quantity demanded if there is a tiny increase in price?

If the cross price elasticity between Goods A and B equals -1.3, then a reduction in the price of Good B will:

A tax is imposed on wine. Sellers will bear no burden from this tax if the:

If the short run elasticity of demand for widgets is 0.7 and the long run elasticity of demand for widgets is 1.5, a decrease in price will ____ total revenue in the short run and ____ total revenue in the long run.

Which of the following is false?

Put the following products in order from the least to the most elastic demand: Domino's pizza, pizza, and pizza from Domino's on the corner of Main Street and 8th Avenue.

If a cut in prices increases total revenue in the short run, what will it do to total revenue in the long run?

​Exhibit 6-2 ​ -Refer to Exhibit 6-2. Elasticity varies along a linear demand curve. Graph B represents the section of the curve where:

If the cross price elasticity of demand for fries with respect to hamburgers equals -1.2, then:

A positive income elasticity of demand for a good

​Exhibit 6-2 ​ -Refer to Exhibit 6-2. Elasticity varies along a linear demand curve. Graph A represents the section of the curve where:

The Role and Method of Economics

Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Market in Motion and Price Controls

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Filters

Exhibit 6-4 -Refer to Exhibit 6-4. Graph A represents a demand curve that is relatively in the range illustrated. Total revenue as the price decreases from $10 to $5.

Exhibit 6-4 -Refer to Exhibit 6-4. With reference to Graph A, at a price of $10, total revenue equals:

If the short run elasticity of demand for widgets is 0.7 and the long run elasticity of demand for widgets is 1.5, a decrease in price will total revenue in the short run and total revenue in the long run.

Exhibit 6-2 -Refer to Exhibit 6-2. Elasticity varies along a linear demand curve. Graph B represents the section of the curve where:

Exhibit 6-2 -Refer to Exhibit 6-2. Elasticity varies along a linear demand curve. Graph A represents the section of the curve where: