Question 1

Figure 6-3  
-Refer to Figure 6-3.Using the midpoint formula,calculate the absolute value of the price elasticity of demand between e and f.

Accepted Answer

A) 0.32 
B) 0.4 
C) 2.5 
D) 3.125 
A) 0.32 
B) 0.4 
C) 2.5 
D) 3.125

Question 2

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 inelastic?

Accepted Answer

A) over the entire range of prices 
B) between $12 and $16 
C) between $8 and $16 
D) between $2 and $8 
A) over the entire range of prices 
B) between $12 and $16 
C) between $8 and $16 
D) between $2 and $8

Question 3

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 demand for books is

Accepted Answer

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

Question 4

The price elasticity of demand for beef is estimated to be 0.60 (in absolute value).This means that a 20 percent increase in the price of beef,holding every thing else constant,will cause the quantity of beef demanded to

Accepted Answer

A) decrease by 12 percent. 
B) decrease by 26 percent. 
C) decrease by 32 percent. 
D) decrease by 60 percent. 
A) decrease by 12 percent. 
B) decrease by 26 percent. 
C) decrease by 32 percent. 
D) decrease by 60 percent.

Question 5

If the demand for iPods is price elastic,then

Accepted Answer

A) the percentage change in quantity demanded is greater than the percentage change in price (in absolute value). 
B) the percentage change in quantity demanded is less than the percentage change in price (in absolute value). 
C) the percentage change in quantity demanded is equal to the percentage change in price. 
D) quantity demanded is not responsive to changes in price. 
A) the percentage change in quantity demanded is greater than the percentage change in price (in absolute value). 
B) the percentage change in quantity demanded is less than the percentage change in price (in absolute value). 
C) the percentage change in quantity demanded is equal to the percentage change in price. 
D) quantity demanded is not responsive to changes in price.

Question 6

Suppose the price of gasoline is $3.50 per gallon,the quantity of gasoline demanded is 150 billion gallons per year,the price elasticity of demand for gasoline is -0.06,and the federal government decides to increase the excise tax on gasoline by $1.00 per gallon,which increases the price of gasoline by $0.75 per gallon.How much revenue does the federal government receive from the tax?

Accepted Answer

A) $95.44 billion 
B) $111.20 billion 
C) $148.27 billion 
D) $161.61 billion 
A) $95.44 billion 
B) $111.20 billion 
C) $148.27 billion 
D) $161.61 billion

Question 7

If the cross-price elasticity of demand for computers and software is negative,this means the two goods are

Accepted Answer

A) substitutes. 
B) complements. 
C) inferior. 
D) normal. 
A) substitutes. 
B) complements. 
C) inferior. 
D) normal.

Question 8

Most people buy salt infrequently and in small quantities.Even a doubling of the price of salt is likely to result in a small decline in the quantity of salt demanded.Therefore

Accepted Answer

A) the demand for salt will be perfectly inelastic. 
B) salt is a normal good. 
C) the demand for salt is relatively inelastic. 
D) the price elasticity of demand for salt is greater than 1 (in absolute value). 
A) the demand for salt will be perfectly inelastic. 
B) salt is a normal good. 
C) the demand for salt is relatively inelastic. 
D) the price elasticity of demand for salt is greater than 1 (in absolute value).

Question 9

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,when the price of gasoline fell from $3.60 per gallon to $2.50 per gallon,total revenue

Accepted Answer

A) increased. 
B) decreased. 
C) did not change. 
D) There is not enough information to determine what happened to total revenue. 
A) increased. 
B) decreased. 
C) did not change. 
D) There is not enough information to determine what happened to total revenue.

Question 10

If firms do not increase their quantity supplied when price changes,then supply is

Accepted Answer

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

Question 11

Explain the concepts of cross-price elasticity of demand and income elasticity of demand.What do positive and negative values indicate for each of these demand elasticities?

Accepted Answer

Cross-price elasticity of demand measure

Question 12

If demand is inelastic,the absolute value of the price elasticity coefficient is greater than one.

Accepted Answer

A) True 
 B)False

Question 13

If you expect the economy is going to boom and average income in the economy will rise in the foreseeable future,the type of firm that would be able to increase its sales if your expectations are met is

Accepted Answer

A) one that sells an inferior good. 
B) one that sells a necessity good. 
C) one that sells a luxury good. 
D) one that sells a price-inelastic good. 
A) one that sells an inferior good. 
B) one that sells a necessity good. 
C) one that sells a luxury good. 
D) one that sells a price-inelastic good.

Question 14

Assume that when the price of cantaloupes is $2.50 the demand for cantaloupes is unit-elastic,and that the demand curve for cantaloupes is linear and downward sloping.If firms lower the price of cantaloupes to $2.00 which of the following statements can be made regarding the price elasticity of demand for cantaloupes?

Accepted Answer

A) The demand for cantaloupes at $2.00 must be inelastic. 
B) We cannot determine whether the demand for cantaloupes is elastic or inelastic without knowing what the quantity demanded is at each price. 
C) The demand for cantaloupes at $2.00 must be elastic. 
D) The demand for cantaloupes at $2.00 must be unit elastic. 
A) The demand for cantaloupes at $2.00 must be inelastic. 
B) We cannot determine whether the demand for cantaloupes is elastic or inelastic without knowing what the quantity demanded is at each price. 
C) The demand for cantaloupes at $2.00 must be elastic. 
D) The demand for cantaloupes at $2.00 must be unit elastic.

Question 15

When there are few substitutes available for a good,demand tends to be relatively inelastic.

Accepted Answer

A) True 
 B)False

Question 16

Opera Estate Girls' School is considering increasing its tuition to raise revenue.If the school believes that raising tuition will increase revenue it is assuming that the demand for attending the school is

Accepted Answer

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

Question 17

Jenna runs a small boutique in Capitola.She tells one of her suppliers that she is willing to pay $6 for a pair of wool hand warmers and not a dime more.On the basis of this information,what can you conclude about her price elasticity of demand for wool hand warmers?

Accepted Answer

A) It is elastic. 
B) It is perfectly elastic. 
C) It is perfectly inelastic. 
D) The price elasticity coefficient is 0. 
A) It is elastic. 
B) It is perfectly elastic. 
C) It is perfectly inelastic. 
D) The price elasticity coefficient is 0.

Question 18

Suppose when Nablom's Bakery raised the price of its breads by 10 percent,the quantity demanded fell by 15 percent.What was the effect on sales revenue?

Accepted Answer

A) Sales revenue increased. 
B) Sales revenue remained unchanged. 
C) Sales revenue decreased. 
D) It cannot be determined without information on prices. 
A) Sales revenue increased. 
B) Sales revenue remained unchanged. 
C) Sales revenue decreased. 
D) It cannot be determined without information on prices.

Question 19

The slope of a demand curve is not used to measure the price elasticity of demand because

Accepted Answer

A) the slope of a linear demand curve is not constant. 
B) the slope of a line cannot have a negative value. 
C) the measurement of slope is sensitive to the units chosen for price and quantity. 
D) the slope of the demand curve does not tell us how much quantity changes as price changes. 
A) the slope of a linear demand curve is not constant. 
B) the slope of a line cannot have a negative value. 
C) the measurement of slope is sensitive to the units chosen for price and quantity. 
D) the slope of the demand curve does not tell us how much quantity changes as price changes.

Question 20

If the price elasticity of demand for insulin is equal to zero then the demand curve for insulin is

Accepted Answer

A) horizontal. 
B) downward sloping. 
C) curvilinear. 
D) vertical. 
A) horizontal. 
B) downward sloping. 
C) curvilinear. 
D) vertical.

Exam 6: Elasticity: the Responsiveness of Demand and Supply

Figure 6-3 -Refer to Figure 6-3.Using the midpoint formula,calculate the absolute value of the price elasticity of demand between e and f.

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 inelastic?

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 demand for books is

The price elasticity of demand for beef is estimated to be 0.60 (in absolute value).This means that a 20 percent increase in the price of beef,holding every thing else constant,will cause the quantity of beef demanded to

If the demand for iPods is price elastic,then

If the cross-price elasticity of demand for computers and software is negative,this means the two goods are

Most people buy salt infrequently and in small quantities.Even a doubling of the price of salt is likely to result in a small decline in the quantity of salt demanded.Therefore

If firms do not increase their quantity supplied when price changes,then supply is

Explain the concepts of cross-price elasticity of demand and income elasticity of demand.What do positive and negative values indicate for each of these demand elasticities?

If demand is inelastic,the absolute value of the price elasticity coefficient is greater than one.

If you expect the economy is going to boom and average income in the economy will rise in the foreseeable future,the type of firm that would be able to increase its sales if your expectations are met is

When there are few substitutes available for a good,demand tends to be relatively inelastic.

Opera Estate Girls' School is considering increasing its tuition to raise revenue.If the school believes that raising tuition will increase revenue it is assuming that the demand for attending the school is

Jenna runs a small boutique in Capitola.She tells one of her suppliers that she is willing to pay $6 for a pair of wool hand warmers and not a dime more.On the basis of this information,what can you conclude about her price elasticity of demand for wool hand warmers?

Suppose when Nablom's Bakery raised the price of its breads by 10 percent,the quantity demanded fell by 15 percent.What was the effect on sales revenue?

The slope of a demand curve is not used to measure the price elasticity of demand because

If the price elasticity of demand for insulin is equal to zero then the demand curve for insulin is

Economics: Foundations and Models

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