Question 1

Which of the following is true?
i.The easier it is to find substitutes for a good,the more price elastic the demand for the good is.
ii.The demand for a good is more price elastic the smaller the proportion of income spent on it.
iii.If demand is price elastic,lowering the price leads to a decrease in total revenue.

Accepted Answer

A)  only i 
B)  only ii 
C)  only iii 
D)  i and ii 
E)  i and iii

Question 2

After long hair for men became popular,barbers found that their incomes fell.In an attempt to boost their incomes,many barbers raised the price of a haircut and yet their total revenue fell even more.What can explain this result?

Accepted Answer

A)  The demand for haircuts by barbers is elastic because of many substitutes. 
B)  The demand for haircuts by barbers became inelastic after the increase in price. 
C)  Haircuts are inferior products. 
D)  The demand for haircuts by barbers is inelastic because most people need haircuts. 
E)  None of the above can explain the phenomenon.

Question 3

People take fewer trips by airplane when their incomes fall because of a recession.Trips by airplane must be

Accepted Answer

A)  a normal good. 
B)  an inferior good. 
C)  a substitute for other goods. 
D)  a complement to other goods. 
E)  an inelastic good.

Question 4

Which of the following is true?
i.The supply of a good is inelastic if when its price changes,the percentage change in the quantity supplied exceeds the percentage change in price.
ii.Price elasticity of supply equals the percentage change in the quantity supplied divided by the percentage change in price.
iii.If demand is price elastic,a rise in price leads to a decrease in total revenue.

Accepted Answer

A)  only i 
B)  only ii 
C)  only iii 
D)  i and ii 
E)  ii and iii

Question 5

Does the fact that the price elasticity of demand for a good is inelastic violate the law of demand?

Accepted Answer

The answer of Does the fact that the price elasticity...

Question 6

The price elasticity of demand for an agricultural product is 0.4.This value means that,when the quantity decreases 1 percent,the price

Accepted Answer

A)  falls 4 percent. 
B)  rises 4 percent. 
C)  falls 2.5 percent. 
D)  rises 2.5 percent. 
E)  rises 0.25 percent.

Question 7

-June makes holiday wreaths and sells them during the holiday season.The figure above shows her supply curve of wreaths per week.Use the midpoint method in this problem.
a.Calculate the percentage change in quantity between points A and B.
b.Calculate the percentage change in price between points A and B.
c.Calculate the price elasticity of supply between points A and B.

Accepted Answer

The answer of 
-June makes holiday wreaths and sells them...

Question 8

If the price of a DVD falls from $20 to $12 and the quantity of DVDs supplied decreases from 118,000 per hour to 100,000 per hour,using the midpoint formula the elasticity of supply equals

Accepted Answer

A)  0.33. 
B)  2.94. 
C)  3.08. 
D)  0.23. 
E)  -3.08.

Question 9

A firm raises the price it charges.The firm's total revenue does not change.What can we conclude about the price elasticity of demand?

Accepted Answer

A)  Demand is elastic. 
B)  Demand is unit elastic. 
C)  Demand is inelastic. 
D)  Demand is perfectly elastic. 
E)  Not enough information is given to conclude anything about price elasticity of demand.

Question 10

-In the figure above,using the midpoint method,the price elasticity of demand when the price falls from $8 to $7 is equal to

Accepted Answer

A)  2.50. 
B)  1.63. 
C)  0.40. 
D)  0.62. 
E)  1.00.

Question 11

Suppose the San Francisco 49ers lower ticket prices by 15 percent and as a result the quantity of tickets demanded increases by 10 percent.This set of results shows that San Francisco 49ers tickets have

Accepted Answer

A)  an inelastic demand. 
B)  an elastic demand. 
C)  a unit elastic demand. 
D)  an inelastic supply. 
E)  an elastic supply.

Question 12

During last year the price of regular unleaded gasoline in Oakland,California increased 11.0 percent.If the price elasticity of demand for gasoline was 0.13,the price hike means that the quantity demanded decreased by

Accepted Answer

A)  1.43 percent. 
B)  8.46 percent. 
C)  0.16 percent. 
D)  4.31 percent. 
E)  6.46 percent.

Question 13

-The figure above shows the supply curve for a good with

Accepted Answer

A)  a perfectly elastic supply. 
B)  a perfectly inelastic supply. 
C)  an elastic supply. 
D)  an inelastic supply. 
E)  a unit elastic supply.

Question 14

The income elasticity of demand for skiing trips to Vermont is greater than one.Thus a trip to Vermont for skiing is ________ good.

Accepted Answer

A)  a normal 
B)  an inferior 
C)  a unit elastic 
D)  a price elastic 
E)  a price inelastic

Question 15

The total revenue test says that if a price decrease leads to

Accepted Answer

A)  an increase in total revenue, supply is elastic. 
B)  a decrease in total revenue, supply is unit elastic. 
C)  a decrease in total revenue, supply is inelastic. 
D)  an increase in total revenue, supply is inelastic. 
E)  None of the above answers is correct.

Question 16

The price of furnace filters increased by 5 percent and the quantity demanded did not change.The price elasticity of demand for furnace filters is

Accepted Answer

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

Question 17

The price elasticity of demand measures which of the following?

Accepted Answer

A)  the slope of the demand curve 
B)  the rate at which demand changes when price changes 
C)  how responsive the quantity demanded is to changes in price 
D)  the percentage-slope of the demand curve 
E)  None of these correctly defines what price elasticity of demand measures.

Question 18

Suppose the University of Oklahoma increases the price of student football tickets for the 2012 season by 30 percent.If the price elasticity of demand for student tickets is 1.22,the price increase leads to

Accepted Answer

A)  a 36.6 percent decrease in the quantity demanded. 
B)  a 30 percent decrease in the quantity demanded. 
C)  a 1.22 percent decrease in the quantity demanded. 
D)  28.78 percent decrease in the quantity demanded. 
E)  no change in the quantity demanded.

Question 19

If Pepsi goes on sale and decreases its price by 10 percent,and as a result,the quantity demanded of Coca Cola decreases by 5 percent,then Pepsi and Coke are ________ goods.

Accepted Answer

A)  inferior 
B)  normal 
C)  substitute 
D)  complementary 
E)  unrelated

Question 20

Suppose the price of a DVD rose from $15 to $17 and the quantity demanded decreased from 1,000 per month to 900 per month.Using the midpoint formula,the ________ percent change in price lead to a ________ percent change in the quantity demanded.

Accepted Answer

A)  12.5; 10.5 
B)  13.3; 10.0 
C)  11.8; 11.1 
D)  8.0; 9.5 
E)  None of the above answers is correct.

Exam 5: Elasticities of Demand and Supply