Deck 6: Simple Pricing

Question 1

When MR

A)Demand is flat
B)Demand is upright
C)Demand is elastic
D)Demand is inelastic

Answer 1

D

Question 2

For complements,cross price elasticity of demand is:

A)Negative
B)Positive
C)between zero and one only
D)zero.

Answer 2

A

Question 3

A demand for a product is more elastic

A)When it has few substitutes
B)In the long-run
C)When the expenditure on the product represent a small portion of the budget
D)When the product is broadly defined

Answer 3

B

Question 4

A demand for a product is more inelastic

A)When it has many close substitutes
B)In the long-run
C)When it has many complements
D)None of the above

Question 5

If your income goes up by 2% and,in response,the quantity demanded of good x rises by 3%,good x can be considered

A)An inferior good
B)A normal good
C)A public good
D)A private good

Question 6

The government decided to reduce taxes on fast-food to increase revenue.The government assumes that fast-food products have

A)An inelastic demand
B)An elastic demand
C)A demand curve that is upward sloping
D)Unitary elastic demand curve

Question 7

A price elasticity of demand of 0.67 implies

A)Demand is inelastic
B)Demand is elastic
C)Demand is unitary elastic
D)Demand is perfectly elastic

Question 8

In general,the larger the price elasticity:

A)the smaller the responsiveness of price to changes in quantity.
B)the smaller the responsiveness of quantity to changes in price.
C)the larger the responsiveness of price to changes in quantity.
D)the larger the responsiveness of quantity to changes in price.

Question 9

If your income goes down by10% and,in response,the quantity demanded of good x falls by 20%,the income elasticity of demand would be:

A)2
B)4
C))5
D))20

Question 10

If your income goes up by 2% and,in response,the quantity demanded of good x rises by 3%,the income elasticity of demand would be:

A)1)5
B)6
C)3
D))20

Question 11

For substitutes,cross price elasticity of demand is:

A)Negative
B)Positive
C)between zero and one only
D)zero.

Question 12

Jim has estimated elasticity of demand for gasoline to be 0.7 in the short-run and 1.8 in the long run.A decrease in taxes on gasoline would:

A)lower tax revenue in both the short and long run.
B)raise tax revenue in both the short and long run.
C)raise tax revenue in the short run but lower tax revenue in the long run.
D)lower tax revenue in the short run but raise tax revenue in the long run.

Question 13

A perfectly inelastic demand curve

A)Is a horizontal curve parallel to the horizontal axis
B)Has an elasticity of demand between 0 and 1
C)Represents the demand curve of a product with no close substitutes
D)None of the above

Question 14

In general,the smaller the price elasticity:

A)the smaller the responsiveness of price to changes in quantity.
B)the smaller the responsiveness of quantity to changes in price.
C)the larger the responsiveness of price to changes in quantity.
D)the larger the responsiveness of quantity to changes in price.

Question 15

A price elasticity of demand of 2.3% implies

A)Demand is inelastic
B)Demand is elastic
C)Demand is unitary elastic
D)Demand is perfectly elastic

Question 16

As the price of video games is raised from $40 to $45,their quantity demanded fell from 1.5 million copies to 1.2 million copies.The elasticity of demand of video games is:

A)0)25
B)1)89
C)1)66
D)2)08

Question 17

In 2011,Netflix raised prices on its DVDs and internet streaming plan.The Reed Hastings,CEO of Netflix,believes

A)Netflix is an industry leader thereby making the demand curve inelastic
B)Netflix is an industry leader thereby making the demand curve elastic
C)People are willing to pay more for the good
D)There are many substitutes to Netflix's products

Question 18

As the price of dvds is raised from $3 to $5,their quantity demanded fell from 200,000 to 180,000.The elasticity of demand of dvds is:

A)0)21
B)1)28
C)3)52
D))65

Question 19

If your income goes up by 2% and,in response,the quantity demanded of good x falls by 3%,the good x can be considered

A)An inferior good
B)A normal good
C)A public good
D)A private good

Question 20

Based on the information above,video games have

A)A unit elastic demand curve
B)A inelastic demand curve
C)A elastic demand curve
D)A perfectly elastic demand curve

Question 21

Which of the following goods have a negative income elasticity of demand?

A)Cars
B)Items from Dollar stores
C)Shoes
D)Bread

Question 22

If televisions are normal goods,a fall in income will

A)Increase the demand for cars
B)Decrease the demand for cars
C)Have no effect on the demand for cars
D)None of the above

Question 23

Jim saw a decrease in the quantity demanded for his firm's product from 8000 to 6000 units a week when he raised the price of the product from $200 to $250.Based on this information,the demand for Jim's product is

A)Elastic
B)Unitary elastic
C)Inelastic
D)Hard to determine

Question 24

If potatoes are inferior goods,which of the following will increase the demand for these goods?

A)Increase in the price of a complement
B)Decrease in income
C)Decrease in the price of a substitute
D)Increase in income

Question 25

As the number of substitutes for a good increases,its own-price elasticity becomes more

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

Question 26

Jim saw a decrease in the quantity demanded for his firm's product from 8000 to 6000 units a week when he raised the price of the product from $200 to $250.What is Jim's own price elasticity of demand?

A)1)29
B)1
C)0)25
D)0)78

Question 27

Given the information above,the demand is

A)unitary.
B)indeterminate.
C)elastic.
D)inelastic.

Question 28

An owner of local salon realized that by decreasing the prices for haircuts,his revenue increased.This implies that

A)The demand for haircuts is elastic
B)The demand for haircuts is inelastic
C)The demand for haircuts is unitary elastic
D)The demand for haircuts is perfectly elastic

Question 29

Which one of the following is true?

A)Nike has a more inelastic demand curve than shoes
B)The demand curve for gas is more elastic in the short-run than in the long-run
C)Cigarettes have a more elastic demands than televisions
D)Salt has a more inelastic demand than meat

Question 30

Jim recently graduated from college.His income increased tremendously from earning $5000 a year to $60,000 a year.Jim decided that instead of renting he will buy a house.This implies that

A)Houses are normal goods for Jim
B)Houses are inferior goods for Jim
C)Renting and Owning are complementary for Jim
D)Need information on the price of houses

Question 31

A research firm finding concluded that the price elasticity of demand for movie tickets is elastic in the afternoon but inelastic in the evenings.Given this information,to increase overall revenue the theatre owners should

A)Reduce the ticket prices for the afternoon shows and reduce the ticket prices for the evening shows
B)Increase the ticket prices for the afternoon shows and reduce the ticket prices for the evening shows
C)Reduce the ticket prices for the afternoon shows and increase the ticket prices for the evening shows
D)Increase the ticket prices for the afternoon shows and increase the ticket prices for the evening shows

Question 32

The price elasticity of demand for a printer is estimated to be 1 no matter what the price or quantity demanded.An increase in price by 10% will

A)Increase quantity demanded by 10%
B)Decrease quantity demanded by 10%
C)Increase demand by 10%
D)Decrease demand by 10%

Question 33

The demand for Nike shoes will be _________________ than the demand for shoes in general.

A)More elastic
B)More inelastic
C)Less elastic
D)Less inelastic

Question 34

Assume Coke and Pepsi are substitutes.Holding other things constant,if the price of Coke increases

A)Demand for Pepsi falls
B)Demand for Pepsi increases
C)Quantity demanded for Pepsi falls
D)Quantity demanded for Pepsi increases

Question 35

The demand for insulin will be _________________ than the demand for a Caribbean cruise in general.

A)More elastic
B)More inelastic
C)Less elastic
D)Less inelastic

Question 36

An economist estimated the cross-price elasticity for peanut butter and jelly to be +1.5.Based on this information,we know the goods are

A)inferior goods.
B)complements.
C)inelastic.
D)substitutes.

Question 37

Given that the own-price elasticity of demand for shoes is -2.6,if the price of shoes rises by 8%,what will happen to the quantity of shoes demanded?

A)It will decrease by 20.8%
B)It will increase by 20.8%
C)It will decrease by 2.6%
D)It will decrease by 2.6%

Question 38

The demand for Dell laptops is more price elastic than the demand for laptops as whole.This is best explained by

A)There are fewer substitutes for Dell laptops than for laptops as whole
B)There are more substitutes for Dell laptops than for laptops as whole
C)Dell laptops are luxurious goods
D)Dell laptops are a necessity

Question 39

If quantity demanded for rice falls by 2% when price increases 8%,we know that the absolute value of the own-price elasticity of rice is:

A)2)5.
B)0)25.
C)4)
D)0)40.

Question 40

If the income elasticity of demand of houses is exactly 1.40.Due to a recession,you expect incomes to drop by 25% next year.How will consumers adjust their purchase for houses?

A)Buy 35% more houses
B)Buy 35% less houses
C)Buy 25% more houses
D)Buy 25% less houses

Question 41

Use the following information to answer the next two questions:
Cigarettes - Price Elasticity of demand = -0.67
Alcohol - Price elasticity of demand=-1.00
Sodas - Price elasticity of demand=-1.28
If the government could raise taxes on one good,which product should the government increase tax rates in order to raise tax revenue?

A)Cigarettes
B)Alcohol
C)Sodas
D)None of the above

Question 42

Assume mortgages and houses are complements in consumption;if the price of mortgages decreases (decreases in interest rates),we would expect to see

A)An increase in demand for houses
B)An decrease in demand for houses
C)An increase in the quantity of houses demanded
D)An decrease in the quantity of houses demanded

Question 43

Which of the following is false?

A)Products with close substitutes have elastic demand
B)Demand for individual brand is less elastic than industry aggregate demand
C)Products with many complements have less elastic demand
D)In the long run,demand curves become more elastic

Question 44

Assume Dell and Toshiba computers are substitutes in consumption;if the price of dell computers increases we would expect to see

A)An increase in demand for Toshiba computers
B)An decrease in demand for Toshiba computers
C)An increase in the quantity of Toshiba computers demanded
D)An decrease in the quantity of Toshiba computers demanded

Question 45

Which of the following statement is true?

A)The demand for Cheerios is less elastic than the demand for cereal
B)The demand for gas is more elastic in the short-run than in the long-run
C)The demand for puma shoes is more elastic than the demand for shoes
D)Products with many complements have a more elastic demand

Question 46

A product can be classified to be an inferior good if an increase in the income of buyers causes

A)A decrease in quantity demanded
B)A decrease in demand
C)An increase in demand
D)An increase in quantity demanded.

Question 47

What is the most likely effect of the development of cell phones (many use this for time also)on the watch industry?

A)Increased price elasticity of demand for the watch industry because cell phones are complements
B)decreased price elasticity of demand for the watch industry because cell phones are complements
C)Increased price elasticity of demand for the watch industry because cell phones are substitutes
D)decreased price elasticity of demand for the watch industry because cell phones are substitutes

Question 48

Use the following information to answer the next two questions:
Cigarettes - Price Elasticity of demand = -0.67
Alcohol - Price elasticity of demand=-1.00
Sodas - Price elasticity of demand=-1.28
Out of the three products,which product has a unitary elastic demand curve?

A)Cigarettes
B)Alcohol
C)Sodas
D)None of the above

Question 49

Total revenue falls as the price of a good decreases if the price elasticity of demand is

A)Elastic
B)Inelastic
C)Unitary elastic
D)Perfectly inelastic

Question 50

What is the most likely effect of the development of XBOX with DVD capabilities on the DVD player industry?

A)Increased price elasticity of demand for the DVD player industry because XBOX are complements
B)decreased price elasticity of demand for the DVD player industry because XBOX are complements
C)Increased price elasticity of demand for the DVD player industry because XBOX are substitutes
D)decreased price elasticity of demand for the DVD player industry because XBOX are substitutes