Question 1

If demand is price-elastic, then

Accepted Answer

A) The elasticity number E is greater than 1. 
B) The elasticity number E is less than 1. 
C) The elasticity number E is equal to 1. 
D) The elasticity number E is 0.

Question 2

If the price of a good rises by 10 percent and quantity demanded falls by 20 percent, we can predict that

Accepted Answer

A) The company's total revenue will increase. 
B) The company's total profit will rise. 
C) The company's total revenue will decrease. 
D) The company's total revenue will remain the same.

Question 3

Which of the following is not a determinant of the price elasticity of demand?

Accepted Answer

A) The number of substitute goods available. 
B) The share of a consumer's budget. 
C) The amount of income the consumer has. 
D) The time frame-whether it is in the short run or long run.

Question 4

Technically the elasticity number is negative because

Accepted Answer

A) When price falls quantity demanded will rise, but for simplicity economists take the absolute value of the elasticity number. 
B) When price falls quantity demanded will fall, but for simplicity economists take the absolute value of the elasticity number. 
C) When price rises quantity demanded will rise, but for simplicity economists take the absolute value of the elasticity number. 
D) The demand curve is upward-sloping.

Question 5

Supply is very inelastic if the quantity supplied cannot respond quickly to an increase in price.

Accepted Answer

A) True 
 B)False

Question 6

A demand curve that is completely elastic is

Accepted Answer

A) Horizontal. 
B) Vertical. 
C) Upward-sloping. 
D) Downward-sloping.

Question 7

The article "Samsung Stung by Apple Moves" related to the price cuts for the iPhone indicates that

Accepted Answer

A) The cross-price elasticity for iPhones and other cell phones produced by Samsung was negative. 
B) Apple lowered the price for the iPhone because the cross-price elasticity between it and the other
Competitors was positive. 
C) The percentage change in the quantity demanded for the substitute cell phones was increasing less than the percentage change in the price. 
D) The demand for the iPhone was inelastic.

Question 8

Oil and alternative sources of energy such as wind and solar are

Accepted Answer

A) Complementary goods. 
B) Substitute goods. 
C) Inferior goods. 
D) Income-elastic goods.

Question 9

Price elasticity looks at

Accepted Answer

A) The law of demand. 
B) How much quantity demanded changes after a change in price. 
C) The degree to which price changes with a change in quantity demanded. 
D) Why the law of demand is untrue.

Question 10

When demand is elastic, the absolute number for price elasticity will be

Accepted Answer

A) Greater than 0. 
B) Less than 1. 
C) Greater than 1. 
D) Equal to 1.

Question 11

For product XYZ, the price elasticity of demand has an absolute value of 3.5.This means that quantity demanded will increase by

Accepted Answer

A) 1 percent for each 3.5 percent decrease in price, ceteris paribus. 
B) 1 unit for each $3.50 decrease in price, ceteris paribus. 
C) 3.5 percent for each 1 percent decrease in price, ceteris paribus. 
D) 3.5 units for each $1 decrease in price, ceteris paribus.

Question 12

A price decrease will cause total revenue to fall if

Accepted Answer

A) Demand is elastic. 
B) Demand is inelastic. 
C) Demand is unitary elastic. 
D) The price elasticity of demand is less than zero.

Question 13

Demand is elastic if the consumer has only a few substitutes to choose from.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following products will have elastic demand?

Accepted Answer

A) Gasoline. 
B) Cigarettes. 
C) European travel. 
D) Alcohol.

Question 15

Supply is very inelastic when

Accepted Answer

A) The quantity supplied changes little when the price increases. 
B) The quantity supplied changes a lot when price increases. 
C) The quantity supplied does not change at all when price increases. 
D) The quantity supplied changes only when demand changes.

Question 16

A price change will have no effect on total revenue if demand is

Accepted Answer

A) Elastic. 
B) Unitary. 
C) Inelastic. 
D) Perfectly elastic.

Question 17

Higher prices will increase total revenue if

Accepted Answer

A) Demand is elastic. 
B) Demand is unitary elastic. 
C) Demand is inelastic. 
D) The price elasticity of demand is zero.

Question 18

To find the average percentage change in price,

Accepted Answer

A) The change in price is divided by the average price. 
B) The change in quantity is divided by the average quantity. 
C) The change in quantity is divided by the change in price. 
D) The percentage change in quantity demanded is divided by the percentage change in price.

Question 19

When income falls, the demand for an inferior goods

Accepted Answer

A) Increases. 
B) Decreases. 
C) Has a smaller change than the income change. 
D) Stays the same.

Question 20

Which of the following is the best measure of the effects of a recession?

Accepted Answer

A) Income elasticity of demand. 
B) Price elasticity of demand. 
C) Cross-price elasticity of demand. 
D) Utility-maximizing rule.

Exam 6: Elasticity