Question 1

A tax on a good

Accepted Answer

A) ​raises the price that buyers effectively pay and raises the price that sellers effectively receive. 
B) ​raises the price that buyers effectively pay and lowers the price that sellers effectively receive. 
C) ​lowers the price that buyers effectively pay and raises the price that sellers effectively receive. 
D) ​lowers the price that buyers effectively pay and lowers the price that sellers effectively receive. 
A) ​raises the price that buyers effectively pay and raises the price that sellers effectively receive. 
B) ​raises the price that buyers effectively pay and lowers the price that sellers effectively receive. 
C) ​lowers the price that buyers effectively pay and raises the price that sellers effectively receive. 
D) ​lowers the price that buyers effectively pay and lowers the price that sellers effectively receive.

Question 2

A "war on drugs" is waged, and, as a result, a larger quantity of drugs flowing into the United States is seized and more drug traffickers are arrested. If demand for drugs is inelastic, one would expect the total expenditure on drugs to:

Accepted Answer

A) ​decrease. 
B) ​increase. 
C) ​stay constant. 
D) ​There is not enough information available to make a determination. 
A) ​decrease. 
B) ​increase. 
C) ​stay constant. 
D) ​There is not enough information available to make a determination.

Question 3

When demand is relatively inelastic, a 5% increase in price will:

Accepted Answer

A) ​increase total revenue by more than 5%. 
B) ​increase total revenue by less than 5%. 
C) ​decrease total revenue by more than 5%. 
D) ​decrease total revenue by less than 5%. 
A) ​increase total revenue by more than 5%. 
B) ​increase total revenue by less than 5%. 
C) ​decrease total revenue by more than 5%. 
D) ​decrease total revenue by less than 5%.

Question 4

Calculate the cross-price elasticity of demand between computers and printers, where a 10 percent decrease in the price of computers results in a 15 percent increase in the demand for printers.

Accepted Answer

In this case, the cross-price

Question 5

Which of the following is associated with a less elastic demand curve?

Accepted Answer

A) ​availability of many close substitutes 
B) ​a greater amount of time for consumers to respond to a price change 
C) ​a smaller percentage of income spent on the good in question 
D) ​all of the above 
A) ​availability of many close substitutes 
B) ​a greater amount of time for consumers to respond to a price change 
C) ​a smaller percentage of income spent on the good in question 
D) ​all of the above

Question 6

A given increase in demand will raise the equilibrium quantity exchanged:

Accepted Answer

A) ​unless supply is perfectly inelastic. 
B) ​more in the long run than in the short run. 
C) ​in the market for normal goods. 
D) ​all of the above 
A) ​unless supply is perfectly inelastic. 
B) ​more in the long run than in the short run. 
C) ​in the market for normal goods. 
D) ​all of the above

Question 7

A movie theatre raises its admission prices by 10%, which results in a 10% reduction in the quantity of tickets demanded. The demand curve facing this firm is:

Accepted Answer

A) ​elastic. 
B) ​inelastic. 
C) ​unit elastic. 
D) ​unit inelastic. 
A) ​elastic. 
B) ​inelastic. 
C) ​unit elastic. 
D) ​unit inelastic.

Question 8

A perfectly elastic supply curve is:

Accepted Answer

A) ​upward sloping to the right. 
B) ​downward sloping to the left. 
C) ​horizontal. 
D) ​vertical. 
A) ​upward sloping to the right. 
B) ​downward sloping to the left. 
C) ​horizontal. 
D) ​vertical.

Question 9

If 400 apple pies are sold at $4 per pie, but 500 apple pies are sold at $3 per pie, we know from the total revenue rule:

Accepted Answer

A) ​that the demand for pies is elastic over that price range. 
B) ​that the demand for pies is inelastic over that price range. 
C) ​that the demand for pies is unit elastic over that price range. 
D) ​nothing about the elasticity of demand. 
A) ​that the demand for pies is elastic over that price range. 
B) ​that the demand for pies is inelastic over that price range. 
C) ​that the demand for pies is unit elastic over that price range. 
D) ​nothing about the elasticity of demand.

Question 10

If the demand curve is perfectly elastic, then an increase in supply will:

Accepted Answer

A) ​increase both the price and the quantity exchanged. 
B) ​increase the price but result in no change in the quantity exchanged. 
C) ​increase the quantity exchanged but result in no change in the price. 
D) ​decrease the price but result in no change in the quantity exchanged. 
A) ​increase both the price and the quantity exchanged. 
B) ​increase the price but result in no change in the quantity exchanged. 
C) ​increase the quantity exchanged but result in no change in the price. 
D) ​decrease the price but result in no change in the quantity exchanged.

Question 11

Shari and Mary have a business that provides personal fitness training services. They know that after raising their prices from $40 to $60 per hour, the quantity of hours they spent delivering training services fell from 90 to 50 hours per week. The demand for their services is:

Accepted Answer

A) ​inelastic, with a price elasticity coefficient greater than one. 
B) ​inelastic, with a price elasticity coefficient less than one. 
C) ​elastic, with a price elasticity coefficient greater than one. 
D) ​elastic, with a price elasticity coefficient less than one. 
A) ​inelastic, with a price elasticity coefficient greater than one. 
B) ​inelastic, with a price elasticity coefficient less than one. 
C) ​elastic, with a price elasticity coefficient greater than one. 
D) ​elastic, with a price elasticity coefficient less than one.

Question 12

Which of the following pairs of goods would most likely exhibit a cross price elasticity of -1.8?

Accepted Answer

A) ​orange juice and grapefruit juice 
B) ​coffee and tea 
C) ​a bagel and cream cheese 
D) ​a van and a sport utility vehicle 
A) ​orange juice and grapefruit juice 
B) ​coffee and tea 
C) ​a bagel and cream cheese 
D) ​a van and a sport utility vehicle

Question 13

When a product's price increases from $9 to $11, the quantity demanded decreases from 1200 to 800. Based on this information, the price elasticity of demand (in absolute terms) is estimated to be equal to:

Accepted Answer

A) ​0.5. 
B) ​2.0. 
C) ​0.25. 
D) ​4.0. 
A) ​0.5. 
B) ​2.0. 
C) ​0.25. 
D) ​4.0.

Question 14

If one is interested in knowing whether or not a pair of products are substitutes, one would be interested in the value of the:

Accepted Answer

A) ​elasticity of supply. 
B) ​price elasticity of demand. 
C) ​income elasticity of demand. 
D) ​cross-price elasticity of demand. 
A) ​elasticity of supply. 
B) ​price elasticity of demand. 
C) ​income elasticity of demand. 
D) ​cross-price elasticity of demand.

Question 15

If Education R Us University thought that it faced an inelastic demand for the regular academic year but an elastic demand for summer school, and it wanted to increase its total tuition revenue, it would want to____ tuition in the regular academic year and ____ tuition for summer school

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 16

If the elasticity of demand coefficient for a good is 6 (in absolute terms), we know:

Accepted Answer

A) ​that for every 1% increase in quantity, there will be a 6% increase in price. 
B) ​that for every 1% increase in quantity, there will be a 6% decrease in price. 
C) ​that for every 6% increase in quantity, there will be a 1% increase in price. 
D) ​that for every 6% increase in quantity, there will be a 1% decrease in price. 
A) ​that for every 1% increase in quantity, there will be a 6% increase in price. 
B) ​that for every 1% increase in quantity, there will be a 6% decrease in price. 
C) ​that for every 6% increase in quantity, there will be a 1% increase in price. 
D) ​that for every 6% increase in quantity, there will be a 1% decrease in price.

Question 17

If the price of a product is lowered from $300 to $270, and as a result the quantity demanded increases from 25 to 30 units, we know that in that range:

Accepted Answer

A) ​demand has declined. 
B) ​demand is elastic. 
C) ​demand is unit elastic. 
D) ​demand is inelastic. 
E) ​demand is perfectly elastic. 
A) ​demand has declined. 
B) ​demand is elastic. 
C) ​demand is unit elastic. 
D) ​demand is inelastic. 
E) ​demand is perfectly elastic.

Question 18

The Book Nook reduces prices by 20%. If the dollar value of The Book Nook's sales remain constant, it indicates that:

Accepted Answer

A) ​the quantity of books sold remains constant. 
B) ​the demand curve is horizontal. 
C) ​the demand curve is vertical. 
D) ​the quantity of books sold increases by 20%. 
A) ​the quantity of books sold remains constant. 
B) ​the demand curve is horizontal. 
C) ​the demand curve is vertical. 
D) ​the quantity of books sold increases by 20%.

Question 19

Which of the following would most likely feature elastic demand?

Accepted Answer

A) ​heart surgery 
B) ​a required textbook 
C) ​fresh green beans 
D) ​all of the above 
A) ​heart surgery 
B) ​a required textbook 
C) ​fresh green beans 
D) ​all of the above

Question 20

Good A has an income elasticity equal to 0.4 and a cross price elasticity with respect to Good B of 1.2. Then:

Accepted Answer

A) ​Good A is an inferior good and Goods A and B are substitutes. 
B) ​Good A is an inferior good and Goods A and B are complements. 
C) ​Good A is a normal good and Goods A and B are substitutes. 
D) ​Good A is a normal good and Goods A and B are complements. 
A) ​Good A is an inferior good and Goods A and B are substitutes. 
B) ​Good A is an inferior good and Goods A and B are complements. 
C) ​Good A is a normal good and Goods A and B are substitutes. 
D) ​Good A is a normal good and Goods A and B are complements.

Exam 6: Elasticities

A tax on a good

A "war on drugs" is waged, and, as a result, a larger quantity of drugs flowing into the United States is seized and more drug traffickers are arrested. If demand for drugs is inelastic, one would expect the total expenditure on drugs to:

When demand is relatively inelastic, a 5% increase in price will:

Calculate the cross-price elasticity of demand between computers and printers, where a 10 percent decrease in the price of computers results in a 15 percent increase in the demand for printers.

Which of the following is associated with a less elastic demand curve?

A given increase in demand will raise the equilibrium quantity exchanged:

A movie theatre raises its admission prices by 10%, which results in a 10% reduction in the quantity of tickets demanded. The demand curve facing this firm is:

A perfectly elastic supply curve is:

If 400 apple pies are sold at $4 per pie, but 500 apple pies are sold at $3 per pie, we know from the total revenue rule:

If the demand curve is perfectly elastic, then an increase in supply will:

Shari and Mary have a business that provides personal fitness training services. They know that after raising their prices from $40 to $60 per hour, the quantity of hours they spent delivering training services fell from 90 to 50 hours per week. The demand for their services is:

Which of the following pairs of goods would most likely exhibit a cross price elasticity of -1.8?

When a product's price increases from $9 to $11, the quantity demanded decreases from 1200 to 800. Based on this information, the price elasticity of demand (in absolute terms) is estimated to be equal to:

If one is interested in knowing whether or not a pair of products are substitutes, one would be interested in the value of the:

If Education R Us University thought that it faced an inelastic demand for the regular academic year but an elastic demand for summer school, and it wanted to increase its total tuition revenue, it would want to____ tuition in the regular academic year and ____ tuition for summer school

If the elasticity of demand coefficient for a good is 6 (in absolute terms), we know:

If the price of a product is lowered from $300 to $270, and as a result the quantity demanded increases from 25 to 30 units, we know that in that range:

The Book Nook reduces prices by 20%. If the dollar value of The Book Nook's sales remain constant, it indicates that:

Which of the following would most likely feature elastic demand?

Good A has an income elasticity equal to 0.4 and a cross price elasticity with respect to Good B of 1.2. Then:

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

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If Education R Us University thought that it faced an inelastic demand for the regular academic year but an elastic demand for summer school, and it wanted to increase its total tuition revenue, it would want to tuition in the regular academic year and tuition for summer school