Question 1

If the quantity of bread demanded rises 2 percent when the price of bread declines 10 percent, then the price elasticity of demand is:

Accepted Answer

A)  0.2. 
B)  2. 
C)  5. 
D)  10.

Question 2

If the short-run price elasticity of demand for hospital care is .27, then the long-run price elasticity is expected to be:

Accepted Answer

A)  greater than .27. 
B)  perfectly inelastic. 
C)  less than .27. 
D)  equal to .27.

Question 3

What happens to total revenue if price increases and demand is inelastic? Why?

Accepted Answer

The answer of What happens to total revenue if price...

Question 4

Which statement about price elasticity of demand along a linear demand curve is true ?

Accepted Answer

A)  As the quantity demanded increases, so does the buyer's sensitivity to price. 
B)  When price elasticity of demand is equal to 1, consumers are indifferent to subtle price changes. 
C)  The ratio of current price to quantity demanded is a good estimate of the elasticity of demand. 
D)  As the prices of goods increase, the elasticity of demand increases.

Question 5

Suppose a good has a downward-sloping, straight-line demand curve. If the price elasticity of demand is 2.5 when the price is $10 per unit, then the price elasticity of demand when the price is $7 per unit could be

Accepted Answer

A)  approaching infinity. 
B)  2.7. 
C)  2.5. 
D)  1.7.

Question 6

Suppose that Starbucks reduces the price of its premium coffee from $2.20 to $1.80 per cup, and as a result, the quantity sold per day increased from 350 to 450. Over this price range, the price elasticity of demand for Starbucks coffee is:

Accepted Answer

A)  0.40. 
B)  0.80. 
C)  1.25. 
D)  2.50.

Question 7

The cross elasticity between two goods, X and Y, is positive. From this, we can conclude that goods X and Y are:

Accepted Answer

A)  substitute goods. 
B)  complementary goods. 
C)  unrelated goods. 
D)  inferior goods.

Question 8

A local doughnut shop reduced the price of its doughnuts from $4 per dozen to $3.50 per dozen, and as a result, the daily sales increased from 300 to 400 dozen. This indicates that the price elasticity of demand for the doughnuts was:

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  unitary elastic. 
D)  indeterminate; more information is needed to determine the price elasticity of demand.

Question 9

If the quantity of bananas sold increases by 5 percent when the price decreases by 10 percent, the price change occurs in the

Accepted Answer

A)  bottom half of the downward-sloping straight-line demand curve and total revenue decreases from this price change. 
B)  bottom half of the downward-sloping straight-line demand curve and total revenue increases from this price change. 
C)  top half of the downward-sloping straight-line demand curve and total revenue decreases from this price change. 
D)  top half of the downward-sloping straight-line demand curve and total revenue increases from this price change.

Question 10

Which of the following pairs is most likely to represent complementary goods?

Accepted Answer

A)  Hotels and campgrounds. 
B)  Butter and margarine. 
C)  Bacon and eggs. 
D)  Miniature golf and bowling.

Question 11

A 10 percent rise in the price of housing reduces the quantity demanded of housing by 3 percent. We can conclude that the demand for housing is:

Accepted Answer

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

Question 12

Using the midpoints formula, what would be price elasticity of demand for a gallbladder operation if the number of operations fell from 6,000 to 4,000 per week after its price increased from $6,000 to $10,000?

Accepted Answer

A)  0.25. 
B)  0.50. 
C)  0.80. 
D)  1.25

Question 13

An increase in total revenue results occurs from which of the following?

Accepted Answer

A)  Price decreases when demand is inelastic. 
B)  Price increases when demand is elastic. 
C)  Price decreases when demand is elastic. 
D)  Price increases when demand is unitary elastic.

Question 14

When a 2 percent increase in price generates a greater than 2 percent decrease in quantity demanded, then:

Accepted Answer

A)  demand is inelastic. 
B)  total revenue increases as a result of the price increase 
C)  total revenue decreases as a result of the price increase. 
D)  demand is unit elastic.

Question 15

Exhibit 5-7 Demand curve for concert tickets
​

According to Exhibit 5-7, the demand for concert tickets between the prices of $10 and $40 is:

Accepted Answer

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

Question 16

The short-run price elasticity of demand for airline travel is 0.05, while the long-run elasticity is 2.36. This means that a significant increase in airline ticket prices will cause airline companies to:

Accepted Answer

A)  collect less revenue from short-notice travelers. 
B)  collect more revenue from travelers who book well in advance. 
C)  lose money on short-notice travelers. 
D)  collect less revenue from travelers who book well in advance.

Question 17

Assume 300 billion pounds of Ostrich meat is produced per year when the price is 50 cents per pound, and 500 billion pounds when the price is 60 cents per pound. The supply of Ostrich meat, other factors held constant, is:

Accepted Answer

A)  price elastic. 
B)  price inelastic. 
C)  income elastic. 
D)  income inelastic.

Question 18

The demand for a product is likely to be more elastic:

Accepted Answer

A)  the smaller the share of the total budget spent on the product. 
B)  when more complementary products are available. 
C)  in the short run than in the long run. 
D)  when more good substitutes for the product are available.

Question 19

There are three goods you are interested in purchasing, X, Y and Z. You notice that the price of Z has fallen. Given that the cross price elasticity between Z and Y is − 1.5; the cross price elasticity between Y and X is 3.0, and the cross price elasticity between Z and X is 0.50. It would make sense that:

Accepted Answer

A)  Z and X are complements; Y and X are substitutes. 
B)  Y and X are substitutes; Y is complementary to Z. 
C)  X and Z are unrelated; Y is complementary to X. 
D)  X and Z are complements; Y and Z are substitutes.

Question 20

If the government wants to raise tax revenue and shift most of the tax burden to the consumers, it would impose a tax on a good with a:

Accepted Answer

A)  flat (elastic) demand curve and a steep (inelastic) supply curve. 
B)  steep (inelastic) demand curve and a flat (elastic) supply curve. 
C)  steep (inelastic) demand curve and steep (inelastic) demand curve. 
D)  flat (elastic) demand curve and a flat (elastic) supply curve.

Exam 5: Price Elasticity of Demand and Supply

If the quantity of bread demanded rises 2 percent when the price of bread declines 10 percent, then the price elasticity of demand is:

If the short-run price elasticity of demand for hospital care is .27, then the long-run price elasticity is expected to be:

What happens to total revenue if price increases and demand is inelastic? Why?

Which statement about price elasticity of demand along a linear demand curve is true ?

Suppose a good has a downward-sloping, straight-line demand curve. If the price elasticity of demand is 2.5 when the price is $10 per unit, then the price elasticity of demand when the price is $7 per unit could be

Suppose that Starbucks reduces the price of its premium coffee from $2.20 to $1.80 per cup, and as a result, the quantity sold per day increased from 350 to 450. Over this price range, the price elasticity of demand for Starbucks coffee is:

The cross elasticity between two goods, X and Y, is positive. From this, we can conclude that goods X and Y are:

A local doughnut shop reduced the price of its doughnuts from $4 per dozen to $3.50 per dozen, and as a result, the daily sales increased from 300 to 400 dozen. This indicates that the price elasticity of demand for the doughnuts was:

If the quantity of bananas sold increases by 5 percent when the price decreases by 10 percent, the price change occurs in the

Which of the following pairs is most likely to represent complementary goods?

A 10 percent rise in the price of housing reduces the quantity demanded of housing by 3 percent. We can conclude that the demand for housing is:

Using the midpoints formula, what would be price elasticity of demand for a gallbladder operation if the number of operations fell from 6,000 to 4,000 per week after its price increased from $6,000 to $10,000?

An increase in total revenue results occurs from which of the following?

When a 2 percent increase in price generates a greater than 2 percent decrease in quantity demanded, then:

Exhibit 5-7 Demand curve for concert tickets According to Exhibit 5-7, the demand for concert tickets between the prices of $10 and $40 is:

The short-run price elasticity of demand for airline travel is 0.05, while the long-run elasticity is 2.36. This means that a significant increase in airline ticket prices will cause airline companies to:

Assume 300 billion pounds of Ostrich meat is produced per year when the price is 50 cents per pound, and 500 billion pounds when the price is 60 cents per pound. The supply of Ostrich meat, other factors held constant, is:

The demand for a product is likely to be more elastic:

If the government wants to raise tax revenue and shift most of the tax burden to the consumers, it would impose a tax on a good with a:

Exam 5: Price Elasticity of Demand and Supply

If the quantity of bread demanded rises 2 percent when the price of bread declines 10 percent, then the price elasticity of demand is:

If the short-run price elasticity of demand for hospital care is .27, then the long-run price elasticity is expected to be:

What happens to total revenue if price increases and demand is inelastic? Why?

Which statement about price elasticity of demand along a linear demand curve is true ?

Suppose a good has a downward-sloping, straight-line demand curve. If the price elasticity of demand is 2.5 when the price is $10 per unit, then the price elasticity of demand when the price is $7 per unit could be

Suppose that Starbucks reduces the price of its premium coffee from $2.20 to $1.80 per cup, and as a result, the quantity sold per day increased from 350 to 450. Over this price range, the price elasticity of demand for Starbucks coffee is:

The cross elasticity between two goods, X and Y, is positive. From this, we can conclude that goods X and Y are:

A local doughnut shop reduced the price of its doughnuts from $4 per dozen to $3.50 per dozen, and as a result, the daily sales increased from 300 to 400 dozen. This indicates that the price elasticity of demand for the doughnuts was:

If the quantity of bananas sold increases by 5 percent when the price decreases by 10 percent, the price change occurs in the

Which of the following pairs is most likely to represent complementary goods?

A 10 percent rise in the price of housing reduces the quantity demanded of housing by 3 percent. We can conclude that the demand for housing is:

Using the midpoints formula, what would be price elasticity of demand for a gallbladder operation if the number of operations fell from 6,000 to 4,000 per week after its price increased from $6,000 to $10,000?

An increase in total revenue results occurs from which of the following?

When a 2 percent increase in price generates a greater than 2 percent decrease in quantity demanded, then:

Exhibit 5-7 Demand curve for concert tickets ​ According to Exhibit 5-7, the demand for concert tickets between the prices of $10 and $40 is:

The short-run price elasticity of demand for airline travel is 0.05, while the long-run elasticity is 2.36. This means that a significant increase in airline ticket prices will cause airline companies to:

Assume 300 billion pounds of Ostrich meat is produced per year when the price is 50 cents per pound, and 500 billion pounds when the price is 60 cents per pound. The supply of Ostrich meat, other factors held constant, is:

The demand for a product is likely to be more elastic:

If the government wants to raise tax revenue and shift most of the tax burden to the consumers, it would impose a tax on a good with a:

Exhibit 5-7 Demand curve for concert tickets According to Exhibit 5-7, the demand for concert tickets between the prices of $10 and $40 is: