Question 1

If the quantity effect outweighs the price effect of a price increase,then demand is:

Accepted Answer

A)   elastic.
B)   inelastic.
C)   unit elastic.
D)   normal.E) C) and D)
F) A) and C)

Question 2

If total revenue increases when price increases:

Accepted Answer

A)   demand is elastic.
B)   demand is inelastic.
C)   demand is unit elastic.
D)   Any of these could be true.E) C) and D)
F) A) and C)

Question 3

The demand for spring break vacations is _________________ than is the demand for textbooks because ________________.

Accepted Answer

A)   less price elastic; vacations have more available substitutes.
B)   more price elastic; vacations have less available substitutes.
C)   less price elastic; vacations are more of a luxury.
D)   more price elastic; vacations are more of a luxury.E) A) and B)
F) A) and C)

Question 4

The cross-price elasticity of two goods is 2.This tells us the two goods are:

Accepted Answer

A)   substitutes.
B)   complements.
C)   unrelated.
D)   inelastic.E) A) and C)
F) All of the above

Question 5

If the price of a DVD decreases by 50 percent,the quantity demanded increases by 75 percent.The price elasticity of demand is:

Accepted Answer

A)   -1.5 and is inelastic.
B)   -1.5 and is elastic.
C)   -0.67 and is elastic.
D)   -0.67 and is inelastic.E) All of the above
F) B) and C) B

Question 6

The mid-point method of calculating elasticity is typically used because:

Accepted Answer

A)   it is easier to calculate.
B)   it is universally understood by all economists.
C)   the negative sign can then be ignored.
D)   it is a consistent way to estimate the elasticity of demand between two points on a demand curve, regardless of the direction of the movement.E) All of the above
F) A) and B) D

Question 7

If two goods are substitutes,then their cross-price elasticity of demand is

Accepted Answer

A)   positive.
B)   negative.
C)   zero.
D)   between zero and minus one.E) C) and D)
F) A) and B)

Question 8

Suppose when the price of shoe laces goes from $1 to $2 per pair,production increases from 95 million pairs to 105 million pairs per year.Using the mid-point method,the price elasticity of supply is:

Accepted Answer

A)   6.28
B)   66 percent
C)   10.5 percent
D)   0.15E) B) and C)
F) C) and D)

Question 9

A good with an income elasticity of 2.3 is:

Accepted Answer

A)   a luxury.
B)   inferior.
C)   a necessity.
D)   a complement.E) C) and D)
F) All of the above

Question 10

For many consumers,bacon and eggs are complements.Therefore,egg producers monitor the price of bacon because the cross elasticity between bacon and eggs is

Accepted Answer

A)   negative, and a decrease in the price of bacon will decrease the demand for eggs.
B)   positive, and a decrease in the price of bacon will increase the demand for eggs.
C)   negative, and a decrease in the price of bacon will increase the demand for eggs.
D)   positive, and an increase in the price of bacon will increase the demand for eggs.E) All of the above
F) A) and D)

Question 11

The demand for a specific brand of corn flakes cereal is likely to be:

Accepted Answer

A)   very price elastic, because there are many close substitutes available.
B)   less price elastic, because there are many close substitutes available.
C)   very price elastic, because that specific brand is a unique product.
D)   less price elastic, because the specific brand is a unique product.E) C) and D)
F) None of the above

Question 12

If a good has unitary price elasticity of demand,then the absolute value of the percentage change in

Accepted Answer

A)   quantity exactly equals one.
B)   price exactly equals one.
C)   the quantity demanded equals the absolute value of the corresponding percentage change in price.
D)   quantity demanded and the absolute value of the corresponding percentage change in price both equal one-half and total one.E) None of the above
F) B) and C)

Question 13

A good with a unit elastic demand has a:

Accepted Answer

A)   perfectly horizontal demand curve.
B)   perfectly vertical demand curve.
C)   price elasticity greater than 1.
D)   price elasticity equal to 1.E) B) and D)
F) B) and C) D

Question 14

If a manager multiplies the quantity sold by the price paid for each unit,the manager calculates:

Accepted Answer

A)   total profit.
B)   total revenue.
C)   total cost.
D)   total benefit.E) A) and B)
F) A) and C)

Question 15

If the cross-price elasticity of two goods is 0.25,then we know that these goods are:

Accepted Answer

A)   substitutes because their cross-price elasticity is greater than zero.
B)   complements because their cross-price elasticity is less than 1.
C)   substitutes because their cross-price elasticity is less than 1.
D)   complements because their cross-price elasticity is greater than zero.E) B) and C)
F) None of the above

Question 16

If the price of hairbrushes decreases by 20 percent,the quantity demanded increases by 2 percent.The price elasticity of demand is:

Accepted Answer

A)   0.1, and is elastic.
B)   10 and is elastic.
C)   0.1 and is inelastic.
D)   10 and is inelastic.E) A) and D)
F) B) and D)

Question 17

The demand for a pack of gum is ______________ than is the demand for a steak because _______________.

Accepted Answer

A)   less price elastic; a pack of gum requires a smaller portion of one's income.
B)   more price elastic; a pack of gum requires a smaller portion of one's income.
C)   less price elastic; a pack of gum is more of a luxury.
D)   more price elastic; a pack of gum is more of a luxury.E) None of the above
F) B) and C)

Question 18

The price elasticity of demand for eggs is 0.27.Therefore,an increase in the price of eggs will cause:

Accepted Answer

A)   a decrease in egg suppliers' total revenue.
B)   an increase in the demand for eggs.
C)   an increase in egg suppliers' total revenue.
D)   an increase in the quantity demand of eggs.E) A) and C)
F) A) and D)

Question 19

A perfectly elastic demand:

Accepted Answer

A)   means consumers are extremely sensitive to a change in price.
B)   means quantity demanded is unchanged if the price changes by any amount.
C)   is demonstrated by a vertical demand curve.
D)   has a price elasticity of 1.E) A) and B)
F) None of the above

Question 20

Total revenue is the amount:

Accepted Answer

A)   a firm receives from the sale of goods and services.
B)   a firm keeps after all expenses are paid.
C)   of sales that get reinvested in the firm.
D)   a firm receives from dividends.E) A) and B)
F) All of the above

Exam 4: Elasticity

If the quantity effect outweighs the price effect of a price increase,then demand is:

Correct AnswerverifiedShow Answer

If total revenue increases when price increases:

Correct AnswerverifiedShow Answer

The demand for spring break vacations is _________________ than is the demand for textbooks because ________________.

Correct AnswerverifiedShow Answer

The cross-price elasticity of two goods is 2.This tells us the two goods are:

Correct AnswerverifiedShow Answer

If the price of a DVD decreases by 50 percent,the quantity demanded increases by 75 percent.The price elasticity of demand is:

Correct AnswerverifiedB

The mid-point method of calculating elasticity is typically used because:

Correct AnswerverifiedD

If two goods are substitutes,then their cross-price elasticity of demand is

Correct AnswerverifiedShow Answer

Suppose when the price of shoe laces goes from $1 to $2 per pair,production increases from 95 million pairs to 105 million pairs per year.Using the mid-point method,the price elasticity of supply is:

Correct AnswerverifiedShow Answer

A good with an income elasticity of 2.3 is:

Correct AnswerverifiedShow Answer

For many consumers,bacon and eggs are complements.Therefore,egg producers monitor the price of bacon because the cross elasticity between bacon and eggs is

Correct AnswerverifiedShow Answer

The demand for a specific brand of corn flakes cereal is likely to be:

Correct AnswerverifiedShow Answer

If a good has unitary price elasticity of demand,then the absolute value of the percentage change in

Correct AnswerverifiedShow Answer

A good with a unit elastic demand has a:

Correct AnswerverifiedD

If a manager multiplies the quantity sold by the price paid for each unit,the manager calculates:

Correct AnswerverifiedShow Answer

If the cross-price elasticity of two goods is 0.25,then we know that these goods are:

Correct AnswerverifiedShow Answer

If the price of hairbrushes decreases by 20 percent,the quantity demanded increases by 2 percent.The price elasticity of demand is:

Correct AnswerverifiedShow Answer

The demand for a pack of gum is ______________ than is the demand for a steak because _______________.

Correct AnswerverifiedShow Answer

The price elasticity of demand for eggs is 0.27.Therefore,an increase in the price of eggs will cause:

Correct AnswerverifiedShow Answer

A perfectly elastic demand:

Correct AnswerverifiedShow Answer

Total revenue is the amount:

Correct AnswerverifiedShow Answer

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The demand for spring break vacations is _ than is the demand for textbooks because .

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B

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D

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D

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The demand for a pack of gum is than is the demand for a steak because _.

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