Question 1

If the consumers cannot switch to a close substitute when the price of a good increases,the demand for that good is likely to be:

Accepted Answer

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

Question 2

You read online that,at current rates of production,the yearly world supply of food is sufficient to feed the projected 2010 population of the earth,and that after 2010 there will be massive starvation.One assumption behind this prediction is that:

Accepted Answer

A) food supply is infinitely elastic. 
B) the long run elasticity of supply of food is inelastic. 
C) prices will allocate food supplies to only wealthy countries. 
D) short run supply elasticity is greater than long run supply elasticity.

Question 3

If consumers respond to a 10% price reduction by buying twice as much of a particular good,we would conclude that:

Accepted Answer

A) there was excess demand at the original price. 
B) there was excess supply at the original price. 
C) the absolute value of price elasticity at the original price was greater than one. 
D) the absolute value of price elasticity at the original price was less than one.

Question 4

When the price of insulin was $10,consumers demanded 100 units;when the price was $15,consumers demanded 100 units;and when the price was $20,consumers demanded 100 units.Based on this information,insulin must have a(n)_______ demand curve.

Accepted Answer

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

Question 5

If the elasticity of demand for the latest American Idol CD is 1.4,this means:

Accepted Answer

A) few substitutes exist. 
B) a 1% increase in the price leads to a 14% reduction in quantity demanded. 
C) a 10% decrease in the price leads to a 140% increase in quantity demanded. 
D) a 5% increase in the price leads to a 7% decrease in quantity demanded.

Question 6

If the local electricity utility wants to raise revenues,it should _______ its price because demand for electricity is likely to be ________.

Accepted Answer

A) lower;inelastic 
B) raise;elastic 
C) lower;elastic 
D) raise;inelastic

Question 7

Pepsi One is a close substitute for Diet Coke.When Pepsi introduced Pepsi One,the price elasticity of demand for Diet Coke _______ and Coke's ability to raise revenues through price increases _________.

Accepted Answer

A) increased;was reduced 
B) increased;increased 
C) decreased;was reduced 
D) had no effect;was reduced

Question 8

The following graph depicts demand. 
Refer to the figure above.At point D,demand is:

Accepted Answer

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

Question 9

The championship game will be held next weekend in your college's 40,000-seat stadium.The supply of tickets:

Accepted Answer

A) will increase because the price charged will be higher. 
B) is price elastic. 
C) is perfectly inelastic. 
D) depends on which teams make it to the championship game.

Question 10

The demand for a good is inelastic with respect to price,if the price elasticity of demand is:

Accepted Answer

A) equals one. 
B) is greater than one. 
C) is less than one. 
D) equals negative one.

Question 11

If the demand curve for a good is the line defined by Q = 1,then a decrease in the price of that good will:

Accepted Answer

A) decrease the quantity demanded. 
B) increase the quantity demanded. 
C) result in a quantity of zero being demanded. 
D) not change the quantity demanded.

Question 12

If a demand curve is the line defined by P = $5,the absolute value of the price elasticity of demand is:

Accepted Answer

A) 5. 
B) 0.2. 
C) 0. 
D) infinity.

Question 13

Antony's Pizza uses the same dough,sauce,and cheese for pizza and calzones.When the price of pizza is low Antony produces more calzones.For Antony,with respect to price,supply of pizza is ________ compared to supply at a pizza restaurant that does not serve calzones.

Accepted Answer

A) more inelastic 
B) more elastic 
C) unitary elastic 
D) more unpredictable

Question 14

Which determines whether a company will earn higher revenues when it raises its price?

Accepted Answer

A) The cost of the inputs. 
B) Government regulation of the industry. 
C) Consumer demand. 
D) Companies always earn higher revenues when they increase price.

Question 15

Firms that produce goods with few or no substitutes will find that:

Accepted Answer

A) lowering price increases total revenues. 
B) raising price decreases total revenues. 
C) raising price increases total revenues. 
D) raising price leaves total revenues unchanged.

Question 16

If the price elasticity of demand for cell phone service is 3,if the price increases by 1%,quantity demanded decreases by:

Accepted Answer

A) 0.33%. 
B) 0.67%. 
C) 1.33%. 
D) 3%.

Question 17

Firms that produce goods with many substitutes will find that:

Accepted Answer

A) lowering price increases total revenues. 
B) lowering price decreases total revenues. 
C) raising price increases total revenues. 
D) lowering price leaves total revenues unchanged.

Question 18

For any horizontal demand curve,the calculated price elasticity of demand is:

Accepted Answer

A) 0. 
B) 1. 
C) infinity. 
D) equal to the price of the good.

Question 19

If the price elasticity of demand for a good equals one,then the demand for that good with respect to price,is:

Accepted Answer