Question 1

-Steve sells hotdogs from a vending cart downtown.The table above shows his daily total revenues at four different prices.Between which two prices is the demand for hotdogs
a∙elastic?
b∙unit elastic?
c∙inelastic?

Accepted Answer

The answer of 
-Steve sells hotdogs from a vending cart...

Question 2

The income elasticity of demand for movies in the United States is 3.41.If people's incomes decrease by 1 percent, what is the decrease in the quantity of movies demanded?

Accepted Answer

The answer of The income elasticity of demand for movies...

Question 3

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 4

Suppose Starbucks currently charges $2.50 per cup for its latte.If Starbucks raises the price to $3.00 per cup, based on the demand curve in the figure above its total revenue will ________ because the demand for Starbucks latte is ________ over this price range.

Accepted Answer

A) increase; elastic 
B) decrease; elastic 
C) increase; inelastic 
D) increase; unit elastic 
E) not change; unit elastic

Question 5

The price of the good multiplied by the quantity sold is its

Accepted Answer

A) total revenue. 
B) total cost. 
C) total spending. 
D) total income. 
E) total quantity.

Question 6

Patrick lives near two gas stations, Exxon and Shell.If Exxon decreases the price of gas, we predict that the quantity of gasoline demanded at Shell will

Accepted Answer

A) decrease because Exxon and Shell gas are complements. 
B) decrease because Exxon and Shell gas are substitutes. 
C) increase because Exxon and Shell gas are substitutes. 
D) increase because Exxon and Shell gas are complements. 
E) not change Exxon and Shell are different brands of gasoline.

Question 7

The income elasticity of demand is ________ if the good is ________ good.

Accepted Answer

A) positive; a normal 
B) positive; an inferior 
C) negative; a normal 
D) less than one; an inferior 
E) positive; a substitute

Question 8

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 9

The price elasticity of demand measures the ________ that results from a ________.

Accepted Answer

A) change in quantity demanded; change in price 
B) change in price; change in the quantity demanded 
C) percentage change in price; percentage change in the quantity demanded 
D) percentage change in the quantity demanded; percentage change in price 
E) percentage change in the quantity demanded; change in price

Question 10

-In the figure above, at the point where the price is $60 per bunch, the price elasticity of supply is

Accepted Answer

A) 1.8. 
B) 0.56. 
C) 1. 
D) 1.5. 
E) 0.

Question 11

If a product is an inferior good, then its income elasticity of demand is

Accepted Answer

A) zero. 
B) positive. 
C) negative. 
D) indeterminate. 
E) undefined.

Question 12

If a small percentage change in the price brings a very large percentage change in the quantity supplied, then the supply is almost perfectly ________ and the supply curve is almost ________.

Accepted Answer

A) elastic; vertical 
B) elastic; horizontal 
C) inelastic; horizontal 
D) inelastic ; vertical 
E) elastic; 45 degrees

Question 13

Suppose bad weather decreases the quantity of wheat by 12 percent.If the price elasticity of demand for wheat is 0.6, how would the crop failure affect the price of wheat? Would the crop decrease benefit or harm wheat farmers?

Accepted Answer

The answer of Suppose bad weather decreases the quantity of...

Question 14

If a decrease in price increases total revenue, what can you determine about the elasticity of demand for the good?

Accepted Answer

The answer of If a decrease in price increases total...

Question 15

If the cross elasticity of demand between car insurance and new cars is -0.41, then car insurance and new cars are

Accepted Answer

A) complements. 
B) substitutes. 
C) normal goods. 
D) inferior goods. 
E) unrelated goods.

Question 16

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 17

The price elasticity of supply is a measure of the extent to which the quantity supplied of a good changes when the

Accepted Answer

A) cost of producing the product increases. 
B) quantity of the good demanded increases. 
C) supply increases. 
D) price changes. 
E) number of firms supplying the good changes.

Question 18

Which of the following statements is correct? The

Accepted Answer

A) income elasticity of demand for inferior goods is positive. 
B) cross elasticity of demand for substitutes is negative. 
C) income elasticity of demand for normal goods is positive. 
D) cross elasticity of demand for complements is positive. 
E) income elasticity of demand for inferior goods is zero.

Question 19

For a good such as a large screen HD television set, the income elasticity would likely be

Accepted Answer

A) negative. 
B) equal to zero. 
C) positive and less than one. 
D) positive and greater than one. 
E) undefined because large screen, HD TVs are bought by many consumers.

Question 20

People eat at restaurants less often when their incomes fall because of a recession.Eating at restaurants must be

Accepted Answer

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

Exam 5: Elasticities of Demand and Supply

-Steve sells hotdogs from a vending cart downtown.The table above shows his daily total revenues at four different prices.Between which two prices is the demand for hotdogs a∙elastic? b∙unit elastic? c∙inelastic?