Question 1

If the price elasticity of demand is calculated to be 0.75,then demand is:

Accepted Answer

A) price-inelastic. 
B) price-elastic. 
C) price unit-elastic. 
D) positively sloped. 
A) price-inelastic. 
B) price-elastic. 
C) price unit-elastic. 
D) positively sloped.

Question 2

Goods A and B have a positive cross-price elasticity of demand.This means that goods A and B are:

Accepted Answer

A) normal. 
B) substitutes. 
C) complements. 
D) inferior. 
A) normal. 
B) substitutes. 
C) complements. 
D) inferior.

Question 3

Use the following to answer question:  
-(Figure: Demand Curves)Use Figure: Demand Curves.Which graph shows a perfectly inelastic demand curve?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 4

Use the following to answer question:  
-(Table: Price Elasticity)Use Table: Price Elasticity.What is the price elasticity of demand (using the midpoint formula)between $1.50 and $1.25?

Accepted Answer

A) 1.00 
B) 1.22 
C) 1.50 
D) 1.75 
A) 1.00 
B) 1.22 
C) 1.50 
D) 1.75

Question 5

On a linear demand curve,the price elasticity of demand at very high prices will be:

Accepted Answer

A) price-inelastic. 
B) price-elastic. 
C) price unit-elastic. 
D) perfectly price-inelastic. 
A) price-inelastic. 
B) price-elastic. 
C) price unit-elastic. 
D) perfectly price-inelastic.

Question 6

If a good is a luxury item that looms large in the household budget,then demand will tend to:

Accepted Answer

A) be relatively price-elastic. 
B) be relatively price-inelastic. 
C) have price elasticity equal to 1. 
D) be the same as that of a necessity. 
A) be relatively price-elastic. 
B) be relatively price-inelastic. 
C) have price elasticity equal to 1. 
D) be the same as that of a necessity.

Question 7

Use the following to answer question:  
-(Figure: The Demand for e-Books)Use Figure: The Demand for e-Books.What is the price elasticity of demand (by the midpoint method)when the price decreases from $6 to $4?

Accepted Answer

A) 0.55 
B) 0.5 
C) 1 
D) 0.67 
A) 0.55 
B) 0.5 
C) 1 
D) 0.67

Question 8

If two goods are complements,their cross-price elasticity of demand is:

Accepted Answer

A) less than 0. 
B) equal to 0. 
C) greater than 0. 
D) impossible to determine without more information. 
A) less than 0. 
B) equal to 0. 
C) greater than 0. 
D) impossible to determine without more information.

Question 9

A rancher in Oklahoma decides to raise the price of her beef by 19% over the prevailing market price.If the demand for beef is perfectly elastic,this rancher's quantity demanded will:

Accepted Answer

A) fall to 0. 
B) not change. 
C) fall slightly. 
D) increase slightly. 
A) fall to 0. 
B) not change. 
C) fall slightly. 
D) increase slightly.

Question 10

The price of gasoline rises 5% and the quantity of gasoline purchased falls 1%.The price elasticity of demand is equal to _____,and demand is described as _____.

Accepted Answer

A) 0.2;inelastic 
B) 5;inelastic 
C) 0.2;elastic 
D) 5;elastic 
A) 0.2;inelastic 
B) 5;inelastic 
C) 0.2;elastic 
D) 5;elastic

Question 11

A perfectly inelastic demand curve for insulin would mean that the quantity demanded does NOT respond at all to changes in the price of insulin.

Accepted Answer

A) True 
 B)False

Question 12

When the price of chocolate-covered peanuts increases from $1.55 to $2.00,the quantity demanded decreases from 220 to 160.In this price range,the demand for chocolate-covered peanuts is _____,and total revenue will _____ when the price increases.

Accepted Answer

A) elastic;increase 
B) elastic;decrease 
C) inelastic;increase 
D) inelastic;decrease 
A) elastic;increase 
B) elastic;decrease 
C) inelastic;increase 
D) inelastic;decrease

Question 13

The income elasticity of demand of a normal good is always:

Accepted Answer

A) greater than 0. 
B) less than 0. 
C) equal to 0. 
D) impossible to determine without more information about the type of good in question. 
A) greater than 0. 
B) less than 0. 
C) equal to 0. 
D) impossible to determine without more information about the type of good in question.

Question 14

The price elasticity of demand for milk has been estimated to be somewhere between 0.49 and 0.63.If a new system of feeding and milking cows yields a 15% increase in the production of milk throughout the country,how will that affect total expenditures on milk,all other things equal?

Accepted Answer

A) Total expenditures will remain unchanged. 
B) Total expenditures will fall. 
C) Total expenditures will rise. 
D) The information is insufficient to answer the question. 
A) Total expenditures will remain unchanged. 
B) Total expenditures will fall. 
C) Total expenditures will rise. 
D) The information is insufficient to answer the question.

Question 15

The price elasticity of demand for cabbage has been estimated to be 0.25.If an insect infestation destroys 20% of the nation's cabbage crop (and thus reduces supply),how will that affect total expenditures on cabbage,all other things equal?

Accepted Answer

A) Total expenditures will rise. 
B) Total expenditures will fall. 
C) Total expenditures will remain unchanged. 
D) The information is insufficient to answer the question. 
A) Total expenditures will rise. 
B) Total expenditures will fall. 
C) Total expenditures will remain unchanged. 
D) The information is insufficient to answer the question.

Question 16

If the price elasticity of demand for tobacco is 0.5 and the income elasticity of demand for tobacco is 0.4:

Accepted Answer

A) an increase in the price of tobacco will decrease total revenue from sales of tobacco. 
B) a 20% increase in the price of tobacco will decrease the quantity demanded of tobacco by 8%. 
C) tobacco is an inferior good. 
D) a 50% increase in income will increase the quantity demanded of tobacco by 20%. 
A) an increase in the price of tobacco will decrease total revenue from sales of tobacco. 
B) a 20% increase in the price of tobacco will decrease the quantity demanded of tobacco by 8%. 
C) tobacco is an inferior good. 
D) a 50% increase in income will increase the quantity demanded of tobacco by 20%.

Question 17

If the price of chocolate-covered peanuts increases and the demand for strawberry-flavored soft drinks decreases,this indicates that these two goods are _____ goods.

Accepted Answer

A) unrelated 
B) complementary 
C) inferior 
D) substitute 
A) unrelated 
B) complementary 
C) inferior 
D) substitute

Question 18

Use the following to answer question:  
-(Figure: Demand for Notebook Computers)Use Figure: The Demand for Notebook Computers.Total revenue at point S equals the:

Accepted Answer

A) distance 0P. 
B) distance MS. 
C) area 0TUM. 
D) area 0PSM. 
A) distance 0P. 
B) distance MS. 
C) area 0TUM. 
D) area 0PSM.

Question 19

The cross-price elasticity of demand for Coke with respect to the price of Pepsi has been estimated to be 0.61.If the price of Pepsi falls by 10%,all other things unchanged,the quantity demanded of Coke will:

Accepted Answer

A) decrease by less than 6.1%. 
B) decrease by 6.1%. 
C) not change because many people prefer Coke to Pepsi. 
D) increase. 
A) decrease by less than 6.1%. 
B) decrease by 6.1%. 
C) not change because many people prefer Coke to Pepsi. 
D) increase.

Question 20

The demand for agricultural output is price inelastic.This means that if farmers,taken collectively,have a bumper crop,they will have _____ prices,_____ quantities sold,and _____ incomes.

Accepted Answer

A) lower;greater;lower 
B) lower;greater;higher 
C) lower;lower;lower 
D) higher;higher;higher 
A) lower;greater;lower 
B) lower;greater;higher 
C) lower;lower;lower 
D) higher;higher;higher

Exam 6: Elasticity

If the price elasticity of demand is calculated to be 0.75,then demand is:

Goods A and B have a positive cross-price elasticity of demand.This means that goods A and B are:

Use the following to answer question: -(Figure: Demand Curves)Use Figure: Demand Curves.Which graph shows a perfectly inelastic demand curve?

Use the following to answer question: -(Table: Price Elasticity)Use Table: Price Elasticity.What is the price elasticity of demand (using the midpoint formula)between $1.50 and $1.25?

On a linear demand curve,the price elasticity of demand at very high prices will be:

If a good is a luxury item that looms large in the household budget,then demand will tend to:

Use the following to answer question: -(Figure: The Demand for e-Books)Use Figure: The Demand for e-Books.What is the price elasticity of demand (by the midpoint method)when the price decreases from $6 to $4?

If two goods are complements,their cross-price elasticity of demand is:

A rancher in Oklahoma decides to raise the price of her beef by 19% over the prevailing market price.If the demand for beef is perfectly elastic,this rancher's quantity demanded will:

The price of gasoline rises 5% and the quantity of gasoline purchased falls 1%.The price elasticity of demand is equal to _____,and demand is described as _____.

A perfectly inelastic demand curve for insulin would mean that the quantity demanded does NOT respond at all to changes in the price of insulin.

When the price of chocolate-covered peanuts increases from $1.55 to $2.00,the quantity demanded decreases from 220 to 160.In this price range,the demand for chocolate-covered peanuts is _____,and total revenue will _____ when the price increases.

The income elasticity of demand of a normal good is always:

The price elasticity of demand for milk has been estimated to be somewhere between 0.49 and 0.63.If a new system of feeding and milking cows yields a 15% increase in the production of milk throughout the country,how will that affect total expenditures on milk,all other things equal?

The price elasticity of demand for cabbage has been estimated to be 0.25.If an insect infestation destroys 20% of the nation's cabbage crop (and thus reduces supply),how will that affect total expenditures on cabbage,all other things equal?

If the price elasticity of demand for tobacco is 0.5 and the income elasticity of demand for tobacco is 0.4:

If the price of chocolate-covered peanuts increases and the demand for strawberry-flavored soft drinks decreases,this indicates that these two goods are _____ goods.

Use the following to answer question: -(Figure: Demand for Notebook Computers)Use Figure: The Demand for Notebook Computers.Total revenue at point S equals the:

The cross-price elasticity of demand for Coke with respect to the price of Pepsi has been estimated to be 0.61.If the price of Pepsi falls by 10%,all other things unchanged,the quantity demanded of Coke will:

The demand for agricultural output is price inelastic.This means that if farmers,taken collectively,have a bumper crop,they will have _____ prices,_____ quantities sold,and _____ incomes.

First Principles

Economic Models: Trade-Offs and Trade

Consumer and Producer Surplus

Supply and Demand

Price Controls and Quotas: Meddling With Markets

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Graphs in Economics

Consumer Preferences and Consumer Choice

Filters

The price of gasoline rises 5% and the quantity of gasoline purchased falls 1%.The price elasticity of demand is equal to _,and demand is described as _.

When the price of chocolate-covered peanuts increases from $1.55 to $2.00,the quantity demanded decreases from 220 to 160.In this price range,the demand for chocolate-covered peanuts is _,and total revenue will _ when the price increases.

The demand for agricultural output is price inelastic.This means that if farmers,taken collectively,have a bumper crop,they will have ___ prices,_ quantities sold,and ___ incomes.