Question 1

Which of the following items is likely to have the highest income elasticity of demand?

Accepted Answer

A) a luxury cruise to several European countries 
B) water 
C) breakfast cereal 
D) a hamburger 
A) a luxury cruise to several European countries 
B) water 
C) breakfast cereal 
D) a hamburger

Question 2

Consider the following types of demand curves: a.a vertical demand curve
B.a horizontal demand curve
C.a linear downward-sloping demand curve
Which of the demand curves listed exhibits a price elasticity of demand coefficient that remains constant along the demand curve?

Accepted Answer

A) a only 
B) b only 
C) a and b only 
D) a,b,and c 
A) a only 
B) b only 
C) a and b only 
D) a,b,and c

Question 3

Figure 6-4  
-Refer to Figure 6-4.The inelastic segment of the demand curve

Accepted Answer

A) is coincident with the horizontal axis. 
B) is coincident with the vertical axis. 
C) lies below the midpoint of the curve. 
D) lies above the midpoint of the curve. 
A) is coincident with the horizontal axis. 
B) is coincident with the vertical axis. 
C) lies below the midpoint of the curve. 
D) lies above the midpoint of the curve.

Question 4

An article in the Wall Street Journal noted the following: Instead of relying on a full-coach,round-trip unrestricted fare of about $2,000 between Cleveland and Los Angeles ...Continental [Airlines] since June has offered a $716 unrestricted fare in that market ....Through October,the test resulted in about the same revenue that Continental thinks it would have collected with its higher fare. Source: Scott McCartney,"Airlines Try Cutting Business Fares,Find They Don't Lose Revenue," Wall Street Journal,November 22,2002.
What is the absolute value of the price elasticity of demand on this airline route?

Accepted Answer

A) 0 
B) less than 1 
C) greater than 1 
D) approximately 1 
A) 0 
B) less than 1 
C) greater than 1 
D) approximately 1

Question 5

Table 6-3
 $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Price per Pound } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Quantity af Cheese } \
\text { Demanded (pounds) }
\end{array} \
\hline \$ 16 & 3 \
\hline 14 & 4 \
\hline 12 & 5 \
\hline 10 & 6 \
\hline 8 & 7 \
\hline 6 & 8 \
\hline 4 & 9 \
\hline 2 & 10 \
\hline
\end{array}$$
-Refer to Table 6-3.Over what range of prices is the demand elastic?

Accepted Answer

A) over the entire range of prices 
B) between $14 and $16 
C) between $8 and $16 
D) between $2 and $8 
A) over the entire range of prices 
B) between $14 and $16 
C) between $8 and $16 
D) between $2 and $8

Question 6

In December 2014,the average price of gasoline in the United States was $2.50 per gallon and consumers bought 7 percent more gasoline than they had during April 2014,when the average price was $3.60 per gallon.Based on these figures,from April 2014 to December 2014,the demand for gasoline was

Accepted Answer

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

Question 7

Table 6-6
 $$\begin{array} { | l | l | l | } 
\hline\begin{array} { l } 
\text { Price of } \ 
\text { Book }
\end{array} & \begin{array} { l } 
\text { Copies Sold at } \
\text { That Price }
\end{array} & \begin{array} { l } 
\text { Total Revenue at } \
\text { That Price }
\end{array} \
\hline \$ 14.99 & 100,000 & \$ 1,499,000 \
\hline 9.99 & 174,000 & 1,738,000 \
\hline
\end{array}$$
-Refer to Table 6-6.Based on the data in the table,between a price of $9.99 and $14.99,the price elasticity of demand for books is

Accepted Answer

A) -0.74. 
B) -1.16. 
C) -1.35. 
D) -14.8. 
A) -0.74. 
B) -1.16. 
C) -1.35. 
D) -14.8.

Question 8

Figure 6-5  
-Refer to Figure 6-5.The section of the demand curve labeled "A" represents

Accepted Answer

A) the inelastic section of the demand curve. 
B) the unit-elastic section of the demand curve. 
C) the elastic section of the demand curve. 
D) the perfectly elastic section of the demand curve. 
A) the inelastic section of the demand curve. 
B) the unit-elastic section of the demand curve. 
C) the elastic section of the demand curve. 
D) the perfectly elastic section of the demand curve.

Question 9

Which of the following is a key determinant of the price elasticity of supply?

Accepted Answer

A) the slope of the supply curve 
B) the availability of substitutes in production 
C) the available technology 
D) the time it takes to change output in response to a change in price 
A) the slope of the supply curve 
B) the availability of substitutes in production 
C) the available technology 
D) the time it takes to change output in response to a change in price

Question 10

Explain the relationship between price elasticity of demand and total revenue.

Accepted Answer

If demand is elastic,an increase in pric

Question 11

When the price of pistachio nuts is $7.50 per lb.the quantity demanded is 48 lbs.When the price of pistachio nuts is $9.00 per lb.the quantity demanded is 40 lbs.When the midpoint formula is used to measure the price elasticity of demand we can say that the demand for pistachio nuts is

Accepted Answer

A) relatively,but not perfectly,elastic. 
B) unit elastic. 
C) completely inelastic. 
D) relatively,but not perfectly,inelastic. 
A) relatively,but not perfectly,elastic. 
B) unit elastic. 
C) completely inelastic. 
D) relatively,but not perfectly,inelastic.

Question 12

Figure 6-8  
-Refer to Figure 6-8.Identify the two goods which are substitutes.

Accepted Answer

A) Good X and Good Y 
B) Good Y and Good Z 
C) Good X and Good Z 
D) It is not possible to distinguish any relationship among the goods. 
A) Good X and Good Y 
B) Good Y and Good Z 
C) Good X and Good Z 
D) It is not possible to distinguish any relationship among the goods.

Question 13

Holding everything else constant,the demand for a good tends to be more elastic

Accepted Answer

A) the more substitutes there are for the good. 
B) the shorter the time period involved. 
C) the more consumers perceive the good to be a necessity. 
D) the less important the product is in consumers' budgets. 
A) the more substitutes there are for the good. 
B) the shorter the time period involved. 
C) the more consumers perceive the good to be a necessity. 
D) the less important the product is in consumers' budgets.

Question 14

Which of the following would result in a higher absolute value of the price elasticity of demand for a product?

Accepted Answer

A) A wide variety of substitutes are available for the good. 
B) The time period under consideration is short. 
C) The good is a necessity. 
D) The expenditure on the good is small relative to one's budget. 
A) A wide variety of substitutes are available for the good. 
B) The time period under consideration is short. 
C) The good is a necessity. 
D) The expenditure on the good is small relative to one's budget.

Exam 6: Elasticity: the Responsiveness of Demand and Supply

Which of the following items is likely to have the highest income elasticity of demand?

Consider the following types of demand curves: a.a vertical demand curve B.a horizontal demand curve C.a linear downward-sloping demand curve Which of the demand curves listed exhibits a price elasticity of demand coefficient that remains constant along the demand curve?

Figure 6-4 -Refer to Figure 6-4.The inelastic segment of the demand curve

Table 6-3 Price per Pound (dollars) Quantity af Cheese Demanded (pounds) \ 16 3 14 4 12 5 10 6 8 7 6 8 4 9 2 10 -Refer to Table 6-3.Over what range of prices is the demand elastic?

In December 2014,the average price of gasoline in the United States was $2.50 per gallon and consumers bought 7 percent more gasoline than they had during April 2014,when the average price was $3.60 per gallon.Based on these figures,from April 2014 to December 2014,the demand for gasoline was

Table 6-6 Price of Book Copies Sold at That Price Total Revenue at That Price \ 14.99 100,000 \ 1,499,000 9.99 174,000 1,738,000 -Refer to Table 6-6.Based on the data in the table,between a price of $9.99 and $14.99,the price elasticity of demand for books is

Figure 6-5 -Refer to Figure 6-5.The section of the demand curve labeled "A" represents

Which of the following is a key determinant of the price elasticity of supply?

Explain the relationship between price elasticity of demand and total revenue.

When the price of pistachio nuts is $7.50 per lb.the quantity demanded is 48 lbs.When the price of pistachio nuts is $9.00 per lb.the quantity demanded is 40 lbs.When the midpoint formula is used to measure the price elasticity of demand we can say that the demand for pistachio nuts is

Figure 6-8 -Refer to Figure 6-8.Identify the two goods which are substitutes.

Holding everything else constant,the demand for a good tends to be more elastic

Which of the following would result in a higher absolute value of the price elasticity of demand for a product?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology,production,and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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