Question 1

Which of these pairs of concepts can be positively, as well as negatively, related?

Accepted Answer

A)  the income of consumers and the demand for a product
B)  the price of a product and the quantity of that product demanded
C)  the price of a product and the demand for a complementary product
D)  the cost of resources required to make a product and its supplyE) A) and B)
F) B) and D)

Question 2

Suppose that a 10 percent increase in the price of normal good Y causes a 20 percent increase in the quantity demanded of normal good X.The coefficient of cross elasticity of demand is

Accepted Answer

A)  negative, and therefore these goods are substitutes.
B)  negative, and therefore these goods are complements.
C)  positive, and therefore these goods are substitutes.
D)  positive, and therefore these goods are complements.E) A) and B)
F) All of the above

Question 3

In the immediate market period for a highly perishable crop like tomatoes, the individual farmer's supply curve tends to be

Accepted Answer

A)  perfectly inelastic.
B)  perfectly elastic.
C)  quite flat.
D)  downward-sloping.E) C) and D)
F) None of the above

Question 4

Suppose Aiyanna's Pizzeria currently faces a linear demand curve and is charging a very high price per pizza and doing very little business.Aiyanna now decides to lower pizza prices by 5 percent per week for an indefinite period of time.We can expect that each successive week,

Accepted Answer

A)  demand will become more price elastic.
B)  price elasticity of demand will not change as price is lowered.
C)  demand will become less price elastic.
D)  the elasticity of supply will increase.E) All of the above
F) None of the above

Question 5

Given that the demand for grains is price-inelastic, we would expect that if the harvest of grains increases significantly, other factors constant, then grain farmers' total revenues would increase.

Accepted Answer

A) True 
 B)False

Question 6

The Illinois Central Railroad once asked the Illinois Commerce Commission for permission to increase its commuter rates by 20 percent.The railroad argued that declining revenues made this rate increase essential.Opponents of the rate increase contended that the railroad's revenues would fall because of the rate hike.It can be concluded that

Accepted Answer

A)  both groups felt that the demand was elastic but for different reasons.
B)  both groups felt that the demand was inelastic but for different reasons.
C)  the railroad felt that the demand for passenger service was inelastic and opponents of the rate increase felt it was elastic.
D)  the railroad felt that the demand for passenger service was elastic and opponents of the rate increase felt it was inelastic.E) B) and C)
F) A) and D)

Question 7

The elasticity of demand for a product is likely to be greater,

Accepted Answer

A)  if the product is a necessity, rather than a luxury good.
B)  the greater the amount of time over which buyers adjust to a price change.
C)  the smaller the proportion of one's income spent on the product.
D)  the smaller the number of substitute products available.E) A) and B)
F) A) and C)

Question 8

The law of supply indicates that the price-elasticity of supply coefficient would have a negative sign.

Accepted Answer

A) True 
 B)False

Question 9

If a 10 percent increase in the price of good A results in an increase of 5 percent in the quantity demanded of good B, then it can be concluded that goods A and B are

Accepted Answer

A)  complementary goods.
B)  substitute goods.
C)  independent goods.
D)  normal goods.E) None of the above
F) C) and D)

Question 10

Assume that a 6 percent increase in income in the economy produces a 3 percent increase in the quantity demanded of good X.The coefficient of income elasticity of demand is

Accepted Answer

A)  negative, and therefore X is an inferior good.
B)  positive but less than one; therefore X is an inferior good.
C)  positive, and therefore X is an inferior good.
D)  positive, and therefore X is a normal good.E) A) and D)
F) A) and B)

Question 11

Blossom, Inc., sells 500 bottles of perfume a month when the price is $7.A huge increase in resource costs forces Blossom to raise the price to $9, and the firm only manages to sell 460 bottles of perfume.Using the midpoint formula, the price elasticity of demand coefficient is

Accepted Answer

A)  0.33 and elastic.
B)  3.0 and elastic.
C)  0.33 and inelastic.
D)  3.0 and inelastic.E) None of the above
F) A) and B)

Question 12

The price elasticity of demand for beef is about 0.60.Other things equal, this means that a 20 percent increase in the price of beef will cause the quantity of beef demanded to

Accepted Answer

A)  increase by approximately 12 percent.
B)  decrease by approximately 12 percent.
C)  decrease by approximately 32 percent.
D)  decrease by approximately 26 percent.E) A) and D)
F) A) and C)

Question 13

If price and total revenue are directly related, demand is inelastic.

Accepted Answer

A) True 
 B)False

Question 14

It is argued that, with a rising demand for college education, if the supply were to become more elastic, then college tuition costs would

Accepted Answer

A)  rise faster.
B)  decrease slowly.
C)  increase more slowly.
D)  decrease steeply.E) A) and B)
F) A) and C)

Question 15

If the demand for bacon is relatively elastic, a 10 percent decline in the price of bacon will

Accepted Answer

A)  decrease the amount demanded by more than 10 percent.
B)  increase the amount demanded by more than 10 percent.
C)  decrease the amount demanded by less than 10 percent.
D)  increase the amount demanded by less than 10 percent.E) A) and D)
F) A) and B)

Question 16

(Last Word)  Which of the following is not an example of pricing based on group differences in elasticity of demand?

Accepted Answer

A)  senior-citizen discounts at restaurants and motels
B)  cash rebates for purchases of automobiles
C)  child discounts for admission to theme parks
D)  discounted student prices for visits to museumsE) A) and B)
F) A) and C)

Question 17

In which of the following cases will total revenue increase?

Accepted Answer

A)  Price falls and demand is inelastic.
B)  Price falls and supply is elastic.
C)  Price rises and demand is inelastic.
D)  Price rises and demand is elastic.E) None of the above
F) C) and D)

Question 18

Which of the following statements is inconsistent with an elastic demand curve?

Accepted Answer

A)  The price-elasticity coefficient is greater than 1.
B)  Total revenue increases when price increases.
C)  Buyers are relatively sensitive to price changes.
D)  The relative change in quantity exceeds the relative change in price.E) B) and C)
F) A) and C)

Question 19

Suppose that as the price of Y falls from $2.00 to $1.90, the quantity of Y demanded increases from 110 to 118.Then the absolute value of the price elasticity (using the midpoint formula)  is

Accepted Answer

A)  4.00.
B)  2.09.
C)  1.37.
D)  3.94.E) A) and B)
F) B) and C)

Question 20

Price elasticity of demand is generally

Accepted Answer

A)  greater in the long run than in the short run.
B)  greater in the short run than in the long run.
C)  the same in both the short run and the long run.
D)  greater for "necessities" than it is for "luxuries."E) None of the above
F) A) and C)

Exam 6: Elasticity

Which of these pairs of concepts can be positively, as well as negatively, related?

Correct Answer
verified

Which of the following statements is inconsistent with an elastic demand curve?

Correct Answer
verified

Price elasticity of demand is generally

Correct Answer
verified

Suppose that a 10 percent increase in the price of normal good Y causes a 20 percent increase in the quantity demanded of normal good X.The coefficient of cross elasticity of demand is

Correct Answer
verified

The elasticity of demand for a product is likely to be greater,

Correct Answer
verified

Correct Answer
verified

In the immediate market period for a highly perishable crop like tomatoes, the individual farmer's supply curve tends to be

Correct Answer
verified

It is argued that, with a rising demand for college education, if the supply were to become more elastic, then college tuition costs would

Correct Answer
verified

If a 10 percent increase in the price of good A results in an increase of 5 percent in the quantity demanded of good B, then it can be concluded that goods A and B are

Correct Answer
verified

In which of the following cases will total revenue increase?

Correct Answer
verified

Given that the demand for grains is price-inelastic, we would expect that if the harvest of grains increases significantly, other factors constant, then grain farmers' total revenues would increase.

Correct Answer
verified

Assume that a 6 percent increase in income in the economy produces a 3 percent increase in the quantity demanded of good X.The coefficient of income elasticity of demand is

Correct Answer
verified

(Last Word) Which of the following is not an example of pricing based on group differences in elasticity of demand?

Correct Answer
verified

Blossom, Inc., sells 500 bottles of perfume a month when the price is $7.A huge increase in resource costs forces Blossom to raise the price to $9, and the firm only manages to sell 460 bottles of perfume.Using the midpoint formula, the price elasticity of demand coefficient is

Correct Answer
verified

Suppose Aiyanna's Pizzeria currently faces a linear demand curve and is charging a very high price per pizza and doing very little business.Aiyanna now decides to lower pizza prices by 5 percent per week for an indefinite period of time.We can expect that each successive week,

Correct Answer
verified

Suppose that as the price of Y falls from $2.00 to $1.90, the quantity of Y demanded increases from 110 to 118.Then the absolute value of the price elasticity (using the midpoint formula) is

Correct Answer
verified

If price and total revenue are directly related, demand is inelastic.

Correct Answer
verified

If the demand for bacon is relatively elastic, a 10 percent decline in the price of bacon will

Correct Answer
verified

The price elasticity of demand for beef is about 0.60.Other things equal, this means that a 20 percent increase in the price of beef will cause the quantity of beef demanded to

Correct Answer
verified

The law of supply indicates that the price-elasticity of supply coefficient would have a negative sign.

Correct Answer
verified

Exam 6: Elasticity

Which of these pairs of concepts can be positively, as well as negatively, related?

Correct AnswerverifiedShow Answer

Which of the following statements is inconsistent with an elastic demand curve?

Correct AnswerverifiedShow Answer

Price elasticity of demand is generally

Correct AnswerverifiedShow Answer

Suppose that a 10 percent increase in the price of normal good Y causes a 20 percent increase in the quantity demanded of normal good X.The coefficient of cross elasticity of demand is

Correct AnswerverifiedShow Answer

The elasticity of demand for a product is likely to be greater,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In the immediate market period for a highly perishable crop like tomatoes, the individual farmer's supply curve tends to be

Correct AnswerverifiedShow Answer

It is argued that, with a rising demand for college education, if the supply were to become more elastic, then college tuition costs would

Correct AnswerverifiedShow Answer

If a 10 percent increase in the price of good A results in an increase of 5 percent in the quantity demanded of good B, then it can be concluded that goods A and B are

Correct AnswerverifiedShow Answer

In which of the following cases will total revenue increase?

Correct AnswerverifiedShow Answer

Given that the demand for grains is price-inelastic, we would expect that if the harvest of grains increases significantly, other factors constant, then grain farmers' total revenues would increase.

Correct AnswerverifiedShow Answer

Assume that a 6 percent increase in income in the economy produces a 3 percent increase in the quantity demanded of good X.The coefficient of income elasticity of demand is

Correct AnswerverifiedShow Answer

(Last Word) Which of the following is not an example of pricing based on group differences in elasticity of demand?

Correct AnswerverifiedShow Answer

Blossom, Inc., sells 500 bottles of perfume a month when the price is $7.A huge increase in resource costs forces Blossom to raise the price to $9, and the firm only manages to sell 460 bottles of perfume.Using the midpoint formula, the price elasticity of demand coefficient is

Correct AnswerverifiedShow Answer

Suppose Aiyanna's Pizzeria currently faces a linear demand curve and is charging a very high price per pizza and doing very little business.Aiyanna now decides to lower pizza prices by 5 percent per week for an indefinite period of time.We can expect that each successive week,

Correct AnswerverifiedShow Answer

Suppose that as the price of Y falls from $2.00 to $1.90, the quantity of Y demanded increases from 110 to 118.Then the absolute value of the price elasticity (using the midpoint formula) is

Correct AnswerverifiedShow Answer

If price and total revenue are directly related, demand is inelastic.

Correct AnswerverifiedShow Answer

If the demand for bacon is relatively elastic, a 10 percent decline in the price of bacon will

Correct AnswerverifiedShow Answer

The price elasticity of demand for beef is about 0.60.Other things equal, this means that a 20 percent increase in the price of beef will cause the quantity of beef demanded to

Correct AnswerverifiedShow Answer

The law of supply indicates that the price-elasticity of supply coefficient would have a negative sign.

Correct AnswerverifiedShow Answer

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