Question 1

When Scuba, Inc., lowered the price of a tank of compressed air by 20 percent, it sold 10 percent more tankfuls.The price elasticity for compressed air is

Accepted Answer

A) 2. 
B) 1/2. 
C) 1. 
D) 20.

Question 2

The price elasticity of demand measure is generally stated as an absolute value.

Accepted Answer

A) True 
 B)False

Question 3

In 1975, New York City increased regulated taxi fares by 17.5 percent and expected taxi revenue to increase a like amount.The taxi commission believed taxi demand was

Accepted Answer

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

Question 4

Sun City's public bus line has been operating at a deficit.The city decides to raise the fare from 50 cents to 75 cents, anticipating enough additional revenue to cover the deficit.What assumption is the city making about price elasticity?

Accepted Answer

The answer of Sun City's public bus line has been...

Question 5

A relatively large increase in the cost of electricity would likely

Accepted Answer

A) result in a large increase in the use of gas for home use immediately. 
B) cause an immediate large decline in the use of electricity. 
C) increase the use of gas and decrease the use of electricity after a time lapse. 
D) cause an equal reduction in the use of electricity immediately.

Question 6

The elasticity of demand is determined partly by whether the good is a necessity or a luxury.

Accepted Answer

A) True 
 B)False

Question 7

A price cut will increase the revenue a firm receives if the demand for its product is

Accepted Answer

A) elastic. 
B) inelastic. 
C) of unit elasticity. 
D) straight elastic.

Question 8

Two goods are substitutes if a decrease in the price of one raises the quantity demanded of the other.

Accepted Answer

A) True 
 B)False

Question 9

Figure 6-5
 
-In Figure 6-5, if price falls from point A to point B along the unit-elastic demand curve,

Accepted Answer

A) total expenditure remains unchanged. 
B) total expenditure increases. 
C) total expenditure decreases. 
D) total expenditure first increases and then declines.

Question 10

If a product constitutes a large portion of a consumer's income, demand will be more inelastic.

Accepted Answer

A) True 
 B)False

Question 11

The following table contains information regarding price and output for a firm.For each point except the first, calculate the elasticity between it and the point above.

Accepted Answer

The answer of The following table contains information regarding price...

Question 12

Figure 6-1
 
-In Figure 6-1,

Accepted Answer

A) D₁ is more elastic than D₂ below P₂ and less elastic above P₂. 
B) D₁ is less elastic than D₂ at all prices. 
C) D₂ is less elastic than D₁ at all prices. 
D) D₂ is more elastic than D₂ above P₂ but less elastic below P₂.

Question 13

A fall in the price of a competing product will produce an outward shift in the demand curve for most products.

Accepted Answer

A) True 
 B)False

Question 14

If the price elasticity of supply of doodads equals 0.50 and the price rises by 3 percent, then the quantity supplied of doodads will rise by ____.

Accepted Answer

A) 0.50 percent. 
B) 1.50 percent. 
C) 6.00 percent. 
D) 15 percent.

Exam 6: Demand and Elasticity

When Scuba, Inc., lowered the price of a tank of compressed air by 20 percent, it sold 10 percent more tankfuls.The price elasticity for compressed air is

The price elasticity of demand measure is generally stated as an absolute value.

In 1975, New York City increased regulated taxi fares by 17.5 percent and expected taxi revenue to increase a like amount.The taxi commission believed taxi demand was

Sun City's public bus line has been operating at a deficit.The city decides to raise the fare from 50 cents to 75 cents, anticipating enough additional revenue to cover the deficit.What assumption is the city making about price elasticity?

A relatively large increase in the cost of electricity would likely

The elasticity of demand is determined partly by whether the good is a necessity or a luxury.

A price cut will increase the revenue a firm receives if the demand for its product is

Two goods are substitutes if a decrease in the price of one raises the quantity demanded of the other.

Figure 6-5 -In Figure 6-5, if price falls from point A to point B along the unit-elastic demand curve,

If a product constitutes a large portion of a consumer's income, demand will be more inelastic.

The following table contains information regarding price and output for a firm.For each point except the first, calculate the elasticity between it and the point above.

Figure 6-1 -In Figure 6-1,

A fall in the price of a competing product will produce an outward shift in the demand curve for most products.

If the price elasticity of supply of doodads equals 0.50 and the price rises by 3 percent, then the quantity supplied of doodads will rise by ____.