Question 1

(Figure: Supply Curve for Olive Oil) Use Figure: Supply Curve for Olive Oil. The figure depicts a supply curve that is:

Accepted Answer

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

Question 2

(Figure: Demand for High End Cell Phones) Use Figure: The Demand for High End Cell Phones. The change in total revenue resulting from a change in price from P to T suggests that demand is:

Accepted Answer

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

Question 3

Income elasticity of demand measures how responsive the:

Accepted Answer

A)  quantity demanded of a good is to changes in income.
B)  quantity demanded of one good is to changes in demand for another good.
C)  price of good is to price changes of another good.
D)  quantity supplied of one good is to price changes of another good. A

Question 4

If demand is _____, a higher price yields _____ total revenue.

Accepted Answer

A)  inelastic; lower
B)  inelastic; no change in
C)  elastic; higher
D)  elastic; lower

Question 5

Suppose the percentage change in newspapers demanded for any price change is infinite. The absolute value of the elasticity of demand for newspapers is _____, and demand is _____.

Accepted Answer

A)  0; perfectly elastic
B)  0; perfectly inelastic
C)  infinity; perfectly elastic
D)  infinity; perfectly inelastic

Question 6

Price elasticity of demand measures how responsive _____ are to _____ changes.

Accepted Answer

A)  buyers; quantity
B)  buyers; price
C)  buyers; income
D)  sellers; quantity

Question 7

If a firm produces a product that has easily available variable inputs, its supply curve will be:

Accepted Answer

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

Question 8

The price of a dozen eggs rises from $3 to $4.70. In response to this price change, quantity supplied increases from 100,000 dozen eggs to 127,000 dozen eggs. What is the approximate price elasticity of supply for eggs?

Accepted Answer

A)  1.86
B)  3.52
C)  0.48
D)  2.5

Question 9

(Figure: Supply Curves) The figure shows four different supply curves for four products: A, B, C and D. Which of the products has an inelastic, but not perfectly inelastic supply curve?

Accepted Answer

A)  product A
B)  product B
C)  product C
D)  product D

Question 10

Suppose the price elasticity of demand for bacon double cheeseburgers is 3.67. This means that the demand for cheeseburgers is:

Accepted Answer

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

Question 11

Demand is more elastic when you are shopping in Walmart than when you shop at a small convenience store because:

Accepted Answer

A)  more competing products means greater elasticity.
B)  specific brands tend to have more elastic demand than categories of goods.
C)  necessities have less elastic demand.
D)  consumer search makes demand more elastic.

Question 12

If the cross elasticity of demand between cheese and yogurt is positive, then:

Accepted Answer

A)  the demand for cheese and the demand for yogurt are both price elastic.
B)  the demand for cheese and the demand for yogurt are both price inelastic.
C)  cheese and yogurt are complements.
D)  cheese and yogurt are substitutes.

Question 13

The price elasticity of demand along a linear demand curve:

Accepted Answer

A)  is equal to the rate of change of the slope.
B)  is greater than the absolute value of the slope.
C)  is less than the absolute value of the slope.
D)  increases in absolute value as the price rises.

Question 14

Butter producers know that the price elasticity of demand for butter is 0.2. If they want to increase sales by 4%, they will have to lower price by:

Accepted Answer

A)  0.1%.
B)  1%.
C)  4%.
D)  20%.

Question 15

Keanna and Joanna, who are roommates in Los Angeles, both received raises from their respective employers. Keanna now purchases more iTunes downloads than before, while Joanna purchases fewer. For Keanna, iTunes downloads are a _____ good; Joanna's income elasticity of demand for iTunes downloads is _____.

Accepted Answer

A)  normal; positive
B)  normal; negative
C)  inferior; positive
D)  inferior; negative

Question 16

Which statement is likely to be associated with an elastic supply?

Accepted Answer

A)  The time period under consideration is very short.
B)  The inputs necessary for production can readily be increased.
C)  The good is necessary for survival (e.g., a life-saving drug) .
D)  Consumers are willing to pay any price for the good.

Question 17

As Edwin's annual income increased from $40,000 to $50,000, his' purchases of tickets to see LA Kings hockey games increased from two to four per year. Calculated using the midpoint method, his income elasticity of demand for LA Kings hockey tickets is _____, and hockey tickets are a(n) _____ good.

Accepted Answer

A)  -0.33; inferior
B)  +0.67; normal
C)  -3; inferior
D)  +3; normal

Question 18

When the absolute value of the price elasticity of demand is greater than 1, demand is:

Accepted Answer

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

Question 19

Which of the following sellers will achieve their desired result for total revenue?

Accepted Answer

A)  A pharmacy raises the price of its store-brand pain medication in order to raise revenue from sales. The store-brand medication has many brand-name substitutes.
B)  A florist raises the price of roses before and on Valentine's Day and hopes to raise total revenue. The florist is the only flower shop in town.
C)  An airline maintains higher prices in the hopes of maintaining sales. However, a new low-cost competing airline has just entered the market.
D)  In a market with a relatively inelastic demand curve, a coffee shop lowers coffee prices in the hopes of raising total revenue.

Question 20

Uber cuts the price of a ride in New York City by 20%, and the quantity of rides demanded rises by 40%. The absolute value of the price elasticity of demand for Uber rides is _____, and the price elasticity of demand for Uber rides is _____.

Accepted Answer

A)  0.5; elastic
B)  0.5; inelastic
C)  2; elastic
D)  2; inelastic

Exam 5: Elasticity: Measuring Responsiveness