Question 1

Suppose when the price of calculators is $18, the quantity demanded is 90, and when the price is $22, the quantity demanded drops to 70. Using the mid-point method, the price elasticity of demand is:

Accepted Answer

A)   1.25
B)   25 percent
C)   20 percent
D)   25E) B) and D)
F) B) and C)

Question 2

An automobile manufacturing plant is likely to have a ______________ price elasticity of supply than a bread bakery due to _________________.

Accepted Answer

A)   more elastic; a more flexible production process
B)   more elastic; greater availability of inputs
C)   less elastic; a less flexible production process
D)   more elastic; lower availability of inputsE) B) and C)
F) None of the above

Question 3

If the price of butter increases 5 percent and the amount of margarine purchased increases 25 percent, then the cross-price elasticity of these goods is:

Accepted Answer

A)   5.
B)   5
C)   0.2.
D)   0.2E) None of the above
F) A) and D)

Question 4

The demand for novels is _____________ than is the demand for science textbooks because __________________.

Accepted Answer

A)   less price elastic; novels have more available substitutes.
B)   more price elastic; novels have less available substitutes.
C)   less price elastic; novels have less available substitutes.
D)   more price elastic; novels have more available substitutes.E) A) and C)
F) None of the above

Question 5

The demand for shoes is ___________________ than is the demand for sneakers because __________________.

Accepted Answer

A)   less price elastic; the scope of the market for shoes is less broadly defined
B)   more price elastic; the scope of the market for shoes is less broadly defined
C)   less price elastic; the scope of the market for shoes is more broadly defined
D)   more price elastic; the scope of the market for shoes is more broadly definedE) All of the above
F) B) and D)

Question 6

A perfectly inelastic demand is one in which the:

Accepted Answer

A)   demand curve is perfectly vertical.
B)   demand curve is perfectly horizontal.
C)   measured elasticity is exactly 1.
D)   response to a change in price is immediate.E) All of the above
F) None of the above

Question 7

The price elasticity of supply is __________ elastic over time because ___________.

Accepted Answer

A)   less; producers get accustomed to the price changes
B)   less; the ideal number of firms have time to move into or out of the industry
C)   more; producers have a longer time to adjust their production decisions
D)   more; producers get accustomed to the price changesE) B) and D)
F) B) and C)

Question 8

Knowing the price elasticity of demand is important in business because it allows a manager to determine whether:

Accepted Answer

A)   a price increase will cause total revenue to rise or fall.
B)   an increase in supply will cause total profit to rise or fall.
C)   a price increase will cause the quantity demanded to rise or fall.
D)   a price increase will cause the demand to rise or fall.E) A) and B)
F) A) and C)

Question 9

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) A) and B)
F) C) and D)

Question 10

Producers want to calculate the price elasticity of demand because they want to:

Accepted Answer

A)   know the goods and services for which consumers are most sensitive to price changes.
B)   be able to predict the future preferences of their customers.
C)   know that consumers will have the same response to a price change regardless of the good or service.
D)   understand what goods their customers dislike the most.E) C) and D)
F) All of the above

Question 11

Coke and Pepsi probably have a:

Accepted Answer

A)   less elastic cross-price elasticity of demand than do Coke and bananas.
B)   cross-price elasticity of demand that is smaller than do Coke and bananas.
C)   negative cross-price elasticity of demand.
D)   more elastic cross-price elasticity of demand than do Coke and bananas.E) A) and B)
F) C) and D)

Question 12

How much the demand for one good changes in response to a change in the price of a different good is measured by:

Accepted Answer

A)   price elasticity of supply.
B)   price elasticity of demand.
C)   income elasticity.
D)   cross-price elasticity.E) All of the above
F) A) and C)

Question 13

The price elasticity of demand for eggs is .27 and the price elasticity of demand for soft drinks is .70. Therefore, the demand for eggs

Accepted Answer

A)   is more elastic.
B)   is less elastic.
C)   cannot be compared to the demand for soft drinks because both are negative.
D)   cannot be compared to the demand for soft drinks because eggs cannot be substituted for soft drinks.E) A) and C)
F) All of the above

Question 14

A perfectly inelastic demand means:

Accepted Answer

A)   consumers will change the quantity they purchase when price changes.
B)   demand will drop to zero if the price increases by any amount.
C)   consumers will not change the quantity they purchase when price changes.
D)   the demand curve is perfectly horizontal.E) B) and D)
F) None of the above

Question 15

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) B) and C)
F) A) and B)

Question 16

The demand for markers is _______________________ than is the demand for Sharpies because ____________________.

Accepted Answer

A)   less price elastic; markers require a smaller portion of one's income
B)   more price elastic; markers require a smaller portion of one's income
C)   less price elastic; the scope of the market for markers is more broadly defined
D)   more price elastic; the scope of the market is for markers is more broadly definedE) All of the above
F) None of the above

Question 17

Income elasticity of demand describes:

Accepted Answer

A)   how much the quantity demanded changes in response to a change in consumers' incomes.
B)   which way the demand shifts in response to a change in price.
C)   how much the quantity demanded changes in response to a change in price.
D)   how quickly the market will change in response to a change in consumers' incomes.E) A) and C)
F) A) and B)

Question 18

A perfectly elastic demand is one in which the:

Accepted Answer

A)   demand curve is perfectly vertical.
B)   demand curve is perfectly horizontal.
C)   price elasticity is exactly 1.
D)   response to a change in price is immediate.E) All of the above
F) C) and D)

Question 19

Assuming price elasticity of demand is reported as an absolute value, a price elasticity of demand greater than one indicates demand:

Accepted Answer

A)   for the good is elastic.
B)   for the good is inelastic.
C)   for the good is unitary elastic.
D)   cannot be determined without more information.E) None of the above
F) A) and C)

Question 20

Assuming price elasticity of demand is reported as an absolute value, an elastic demand has an elasticity:

Accepted Answer

A)   greater than one.
B)   less than one.
C)   exactly one.
D)   greater than zero and less than one.E) C) and D)
F) A) and C)

Exam 4: Elasticity

If total revenue increases when price increases:

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A perfectly inelastic demand is one in which the:

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A perfectly elastic demand is one in which the:

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If the price of butter increases 5 percent and the amount of margarine purchased increases 25 percent, then the cross-price elasticity of these goods is:

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The demand for novels is _____________ than is the demand for science textbooks because __________________.

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Assuming price elasticity of demand is reported as an absolute value, a price elasticity of demand greater than one indicates demand:

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How much the demand for one good changes in response to a change in the price of a different good is measured by:

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The demand for shoes is ___________________ than is the demand for sneakers because __________________.

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An automobile manufacturing plant is likely to have a ______________ price elasticity of supply than a bread bakery due to _________________.

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Knowing the price elasticity of demand is important in business because it allows a manager to determine whether:

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A perfectly inelastic demand means:

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Suppose when the price of calculators is $18, the quantity demanded is 90, and when the price is $22, the quantity demanded drops to 70. Using the mid-point method, the price elasticity of demand is:

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The demand for markers is _______________________ than is the demand for Sharpies because ____________________.

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Income elasticity of demand describes:

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The price elasticity of supply is __________ elastic over time because ___________.

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

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Assuming price elasticity of demand is reported as an absolute value, an elastic demand has an elasticity:

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The price elasticity of demand for eggs is .27 and the price elasticity of demand for soft drinks is .70. Therefore, the demand for eggs

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Coke and Pepsi probably have a:

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Producers want to calculate the price elasticity of demand because they want to:

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The demand for novels is _ than is the demand for science textbooks because ______.

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The demand for shoes is _ than is the demand for sneakers because .

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An automobile manufacturing plant is likely to have a price elasticity of supply than a bread bakery due to ___.

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The demand for markers is ___ than is the demand for Sharpies because .

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The price elasticity of supply is elastic over time because _.

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