Question 1

The price of product X is reduced from $100 to $90 and, as a result, the quantity demanded increases from 50 to 60 units.Therefore, demand for X in this price range

Accepted Answer

A)  has declined.
B)  is of unit elasticity.
C)  is inelastic.
D)  is elastic.E) B) and D)
F) C) and D)

Question 2

The price elasticity of demand increases with the length of the period considered because

Accepted Answer

A)  consumers' incomes will increase over time.
B)  the demand curve will shift outward as time passes.
C)  all prices will increase over time.
D)  consumers will be better able to find substitutes.E) None of the above
F) A) and D)

Question 3

The demand for a product is inelastic with respect to price if

Accepted Answer

A)  consumers are largely unresponsive to a per unit price change.
B)  the elasticity coefficient is greater than 1.
C)  a drop in price is accompanied by a decrease in the quantity demanded.
D)  a drop in price is accompanied by an increase in the quantity demanded.E) C) and D)
F) All of the above

Question 4

For a linear demand curve,

Accepted Answer

A)  elasticity is constant along the curve.
B)  elasticity is unity at every point on the curve.
C)  demand is elastic at relatively low prices.
D)  demand is elastic at relatively high prices.E) All of the above
F) C) and D)

Question 5

Elasticity of supply will increase when

Accepted Answer

A)  the number of producers selling a product decreases.
B)  producers are given less time to respond to price changes.
C)  the number of consumers wanting to purchase a product increases.
D)  it becomes easier to substitute one factor of production for another in a manufacturing process.E) A) and B)
F) A) and C)

Question 6

A state government seeking to increase its excise-tax revenues is more likely to increase the tax rate on items with elastic demand.

Accepted Answer

A) True 
 B)False

Question 7

If price changes and total revenue changes in the opposite direction, demand is relatively elastic.

Accepted Answer

A) True 
 B)False

Question 8

The main determinant of elasticity of supply is the

Accepted Answer

A)  number of close substitutes for the product available to consumers.
B)  amount of time the producer has to adjust inputs in response to a price change.
C)  urgency of consumer wants for the product.
D)  number of uses for the product.E) A) and C)
F) C) and D)

Question 9

The concept of price elasticity of demand measures

Accepted Answer

A)  the slope of the demand curve.
B)  the number of buyers in a market.
C)  the extent to which the demand curve shifts as the result of a price decline.
D)  the sensitivity of consumer purchases to price changes.E) A) and B)
F) A) and C)

Question 10

The income elasticity of demand for food is roughly 1.A consumer's monthly income is $2,000, of which 20 percent is spent on food.If the income of this consumer doubles, the amount she'll spend on food will be

Accepted Answer

A)  $400 per month.
B)  $500 per month.
C)  $800 per month.
D)  $1,000 per month.E) A) and D)
F) C) and D)

Question 11

Most goods can be classified as normal goods rather than inferior goods.The definition of a normal good suggests that

Accepted Answer

A)  the income elasticity of demand for the good is negative.
B)  the price elasticity of demand for the good is negative.
C)  the income elasticity for the good is greater than 0.
D)  the cross elasticity of demand for the good is positive.E) A) and B)
F) B) and D)

Question 12

The supply curve of a one-of-a-kind original painting is

Accepted Answer

A)  relatively elastic.
B)  relatively inelastic.
C)  perfectly inelastic.
D)  perfectly elastic.E) None of the above
F) All of the above

Question 13

When universities announce a large tuition increase and follow it with an announcement that more financial aid will be available, they are assuming that students who pay full tuition

Accepted Answer

A)  have elastic demand and students who use financial aid have inelastic demand.
B)  have inelastic demand and students who use financial aid have elastic demand.
C)  view a college education as an inferior good and students who use financial aid view it as a normal good.
D)  view a college education as a normal good and students who use financial aid view it as an inferior good.E) A) and C)
F) A) and B)

Question 14

We would expect the coefficient of cross elasticity of demand for DVD players and DVDs to be positive.Difficulty: 03 Hard
Learning Objective: 06-05 Apply cross elasticity of demand and income elasticity of demand.Topic: Cross Elasticity and Income Elasticity of Demand

Accepted Answer

A) True 
 B)False

Question 15

When demand is price-elastic, an increase in price will lead to increased total consumer spending for the product.

Accepted Answer

A) True 
 B)False

Question 16

An income elasticity coefficient of −1.8 means the product is a normal good.Difficulty: 03 Hard
Learning Objective: 06-05 Apply cross elasticity of demand and income elasticity of demand.Topic: Cross Elasticity and Income Elasticity of Demand

Accepted Answer

A) True 
 B)False

Question 17

The price elasticity of demand coefficient measures

Accepted Answer

A)  buyer responsiveness to price changes.
B)  the extent to which a demand curve shifts as incomes change.
C)  the slope of the demand curve.
D)  how far business executives can stretch their fixed costs.E) A) and B)
F) A) and C)

Question 18

Gigantic State University raises tuition for the purpose of increasing its revenue so that more faculty can be hired.GSU is assuming that the demand for education at GSU is

Accepted Answer

A)  decreasing.
B)  relatively elastic.
C)  perfectly elastic.
D)  relatively inelastic.Difficulty: 02 MediumE) None of the above
F) A) and D)

Question 19

If a firm finds that it can sell $13,000 worth of a product when its price is $5 per unit and $11,000 worth of it when its price is $6, then

Accepted Answer

A)  the demand for the product is elastic in the $6-$5 price range.
B)  the demand for the product must have increased.
C)  elasticity of demand is 0.74.
D)  the demand for the product is inelastic in the $6-$5 price range.E) A) and B)
F) B) and D)

Question 20

Movie theaters charge lower prices to see a movie in the afternoon than in the evening because there is an

Accepted Answer

A)  inelastic supply of movies in the evening.
B)  elastic demand to see movies in the evening.
C)  elastic demand to see movies in the afternoon.
D)  inelastic demand to see movies in the afternoon.E) A) and B)
F) C) and D)

Exam 6: Elasticity

When universities announce a large tuition increase and follow it with an announcement that more financial aid will be available, they are assuming that students who pay full tuition

Correct AnswerverifiedShow Answer

When demand is price-elastic, an increase in price will lead to increased total consumer spending for the product.

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The price elasticity of demand coefficient measures

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We would expect the coefficient of cross elasticity of demand for DVD players and DVDs to be positive.Difficulty: 03 Hard Learning Objective: 06-05 Apply cross elasticity of demand and income elasticity of demand.Topic: Cross Elasticity and Income Elasticity of Demand

Correct AnswerverifiedShow Answer

The price elasticity of demand increases with the length of the period considered because

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Elasticity of supply will increase when

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For a linear demand curve,

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Movie theaters charge lower prices to see a movie in the afternoon than in the evening because there is an

Correct AnswerverifiedShow Answer

If price changes and total revenue changes in the opposite direction, demand is relatively elastic.

Correct AnswerverifiedShow Answer

The demand for a product is inelastic with respect to price if

Correct AnswerverifiedShow Answer

Most goods can be classified as normal goods rather than inferior goods.The definition of a normal good suggests that

Correct AnswerverifiedShow Answer

The income elasticity of demand for food is roughly 1.A consumer's monthly income is $2,000, of which 20 percent is spent on food.If the income of this consumer doubles, the amount she'll spend on food will be

Correct AnswerverifiedShow Answer

Gigantic State University raises tuition for the purpose of increasing its revenue so that more faculty can be hired.GSU is assuming that the demand for education at GSU is

Correct AnswerverifiedShow Answer

The price of product X is reduced from $100 to $90 and, as a result, the quantity demanded increases from 50 to 60 units.Therefore, demand for X in this price range

Correct AnswerverifiedShow Answer

If a firm finds that it can sell $13,000 worth of a product when its price is $5 per unit and $11,000 worth of it when its price is $6, then

Correct AnswerverifiedShow Answer

A state government seeking to increase its excise-tax revenues is more likely to increase the tax rate on items with elastic demand.

Correct AnswerverifiedShow Answer

An income elasticity coefficient of −1.8 means the product is a normal good.Difficulty: 03 Hard Learning Objective: 06-05 Apply cross elasticity of demand and income elasticity of demand.Topic: Cross Elasticity and Income Elasticity of Demand

Correct AnswerverifiedShow Answer

The concept of price elasticity of demand measures

Correct AnswerverifiedShow Answer

The supply curve of a one-of-a-kind original painting is

Correct AnswerverifiedShow Answer

The main determinant of elasticity of supply is the

Correct AnswerverifiedShow Answer

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