Question 1

If goods are complements, then their

Accepted Answer

A)  cross elasticities are positive. 
B)  income elasticities are positive. 
C)  income elasticities are negative. 
D)  cross elasticities are negative.

Question 2

If a consumer is relatively insensitive to changes in the price of a good, then the consumer's demand for the good is

Accepted Answer

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

Question 3

"The Department of Agriculture came out today with its prediction for food price next year-4 to 5 percent increases on top of this year's already steep gains… Eggs, dairy products and cereals are up 10 percent... But the USDA says another big part of the American diet has seen only moderate price increases. Beef, poultry and pork will be up only 3 percent this year." If Raul's demand for dairy products is unit elastic, his expenditure on dairy will

Accepted Answer

A)  not change. 
B)  increase less than 10 percent. 
C)  decrease by 10 percent. 
D)  increase by 10 percent.

Question 4

The cross-elasticity of demand between Homer's Holesome Doughnuts and Krusty's Krispy Crullers is 5.0, which indicates that Homer's doughnuts and Krusty's crullers are

Accepted Answer

A)  complements and the relationship between the two goods is strong (that is, the quantity demanded of doughnuts is very responsive to changes in the price of crullers). 
B)  complements and the relationship between the two goods is weak (that is, the quantity demanded of doughnuts is not very responsive to changes in the price of crullers). 
C)  substitutes and the relationship between the two goods is strong (that is, the quantity demanded of doughnuts is very responsive to changes in the price of crullers). 
D)  substitutes and the relationship between the two goods is weak (that is, the quantity demanded of doughnuts is not very responsive to changes in the price of crullers).

Question 5

Of the following, demand is likely to be the most elastic for

Accepted Answer

A)  food. 
B)  cars. 
C)  Sony Blu-ray players. 
D)  personal computers.

Question 6

A report shows that sales at Target stores increased in 2016 compared to the previous year. Incomes grew between 2015 and 2016. Using that fact and the sales data given above means that Target definitely is selling goods and services that

Accepted Answer

A)  are normal. 
B)  are inferior. 
C)  have an income elasticity of zero. 
D)  have an income elasticity of 1.

Question 7

If the demand for a good is perfectly elastic, the price elasticity of demand is ________ and the demand curve is ________.

Accepted Answer

A)  infinite; vertical 
B)  zero; vertical 
C)  zero; horizontal 
D)  infinite; horizontal

Question 8

Netflix is the largest online streaming service. Currently, there are approximately 110 million subscribers. Suppose Netflix increases its price by 10 percent and observes that its total revenue increases. Based on this information, the

Accepted Answer

A)  price elasticity of demand for Netflix subscription is inelastic. 
B)  price elasticity of demand for Netflix subscription is elastic. 
C)  price elasticity of demand for Netflix subscription is unit elastic. 
D)  income elasticity of demand for Netflix subscription is elastic.

Question 9

The supply of lettuce in the short run will be ________ than the supply in the long run and ________ than the supply today.

Accepted Answer

A)  more elastic; less elastic 
B)  more elastic; more elastic 
C)  less elastic; more elastic 
D)  less elastic; less elastic

Question 10

Which goods have more elastic demands?

Accepted Answer

A)  goods with many substitutes 
B)  goods which are necessities 
C)  goods with few substitutes 
D)  goods whose purchase represents a small percentage of income

Question 11

-The table gives some data on the supply of roses in a small town. When the price rises from $15 a dozen to $25 a dozen, the elasticity of supply is

Accepted Answer

A)  1.25. 
B)  5.00. 
C)  0.20. 
D)  0.80.

Question 12

Which of the following goods would have the smallest elasticity of demand?

Accepted Answer

A)  Exxon brand premium unleaded gasoline 
B)  insulin sold to diabetics 
C)  an education at Harvard Law School sold to recent college graduates 
D)  a bottle of Bayer Aspirin sold to someone without a headache

Question 13

If a 20 percent increase in the price of a used car results in a 10 percent decrease in the quantity of used cars demanded, then the demand for used cars is

Accepted Answer

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

Question 14

Is there any set of relationships between price elasticity of supply and total revenue similar to the relationships between price elasticity of demand and total revenue?

Accepted Answer

The answer of Is there any set of relationships between...

Question 15

If the demand for a good is perfectly elastic, then the demand curve is horizontal.

Accepted Answer

A) True 
 B)False

Question 16

If an increase in price results in no change in total revenue, then demand must be

Accepted Answer

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

Question 17

Explain why the cross elasticity of demand for substitute goods is positive and the cross elasticity of demand for complements is negative.

Accepted Answer

The answer of Explain why the cross elasticity of demand...

Question 18

-The increase in the demand for widgets, shown in the figure above, is the result of an increase in the price of McBoover devices from $9 to $11. Therefore, the cross-price elasticity for these two products is

Accepted Answer

A)  -2.0. 
B)  -0.5. 
C)  0.5. 
D)  2.0.

Question 19

Demand is unit elastic when

Accepted Answer

A)  the slope of the demand curve is -1. 
B)  a shift of the supply curve leads to no change in price. 
C)  a shift of the supply curve leads to an equal shift of the demand curve. 
D)  a change in the price of the product leads to no change in the total revenue.

Question 20

When demand is ________, a decrease in price ________ total revenue.

Accepted Answer

A)  elastic; decreases 
B)  inelastic; decreases 
C)  unit elastic; increases 
D)  elastic; does not change

Exam 4: Elasticity