Question 1

Maximum total revenue occurs when

Accepted Answer

A) The absolute value of the price elasticity of demand is 1.0. 
B) Price multiplied by quantity is 1.0. 
C) The absolute value of the price elasticity of demand is 100. 
A) The absolute value of the price elasticity of demand is 1.0. 
B) Price multiplied by quantity is 1.0. 
C) The absolute value of the price elasticity of demand is 100.

Question 2

Elasticity of supply tells us

Accepted Answer

A) How much sellers will increase production in response to a change in price. 
B) How much sellers will change their price as their quantity supplied changes. 
C) How much producers will increase production with changes in consumers' income. 
D) How much supply responds to a change in quantity demanded. 
A) How much sellers will increase production in response to a change in price. 
B) How much sellers will change their price as their quantity supplied changes. 
C) How much producers will increase production with changes in consumers' income. 
D) How much supply responds to a change in quantity demanded.

Question 3

The article "Samsung Stung by Apple Moves" related to the price cuts for the iPhone indicates that

Accepted Answer

A) The cross-price elasticity for iPhones and other cell phones produced by Samsung was negative. 
B) Apple lowered the price for the iPhone because the cross-price elasticity between it and the other competitors was positive. 
C) The percentage change in the quantity demanded for the substitute cell phones was increasing less than the percentage change in the price. 
D) The demand for the iPhone was inelastic. 
A) The cross-price elasticity for iPhones and other cell phones produced by Samsung was negative. 
B) Apple lowered the price for the iPhone because the cross-price elasticity between it and the other competitors was positive. 
C) The percentage change in the quantity demanded for the substitute cell phones was increasing less than the percentage change in the price. 
D) The demand for the iPhone was inelastic.

Question 4

If two goods are substitute goods,

Accepted Answer

A) The percentage change in quantity demanded for good X will fall if there is a reduction in price of good Y. 
B) The percentage change in quantity demanded for good X will stay the same if there is an increase in the price of good Y. 
C) If the price of good X increases,the demand for good Y falls. 
D) The percentage change in quantity demanded for good X will rise if there is a reduction in the price of good Y. 
A) The percentage change in quantity demanded for good X will fall if there is a reduction in price of good Y. 
B) The percentage change in quantity demanded for good X will stay the same if there is an increase in the price of good Y. 
C) If the price of good X increases,the demand for good Y falls. 
D) The percentage change in quantity demanded for good X will rise if there is a reduction in the price of good Y.

Question 5

If the elasticity of demand for cigarettes is 0.4,a seller should

Accepted Answer

A) Increase price to increase total revenue. 
B) Decrease price to increase total revenue. 
C) Reduce price to maximize profits. 
D) Increase price because the percentage change in quantity demanded will be greater than the price effect. 
A) Increase price to increase total revenue. 
B) Decrease price to increase total revenue. 
C) Reduce price to maximize profits. 
D) Increase price because the percentage change in quantity demanded will be greater than the price effect.

Question 6

In Figure 20.1,total revenue is maximized at the unit price of

Accepted Answer

A) $50. 
B) $60. 
C) $80. 
D) $100. 
A) $50. 
B) $60. 
C) $80. 
D) $100.

Question 7

If the elasticity of demand is 3,and the price rises by 15 percent,then

Accepted Answer

A) The quantity demanded will increase by 5 percent. 
B) The quantity demanded will fall by 45 percent. 
C) The quantity demanded will rise by 4.5 percent. 
D) The percentage change in quantity demanded will fall as income rises. 
A) The quantity demanded will increase by 5 percent. 
B) The quantity demanded will fall by 45 percent. 
C) The quantity demanded will rise by 4.5 percent. 
D) The percentage change in quantity demanded will fall as income rises.

Question 8

A demand curve that is perfectly inelastic is

Accepted Answer

A) Horizontal. 
B) Vertical. 
C) Upward-sloping. 
D) Downward-sloping. 
A) Horizontal. 
B) Vertical. 
C) Upward-sloping. 
D) Downward-sloping.

Question 9

Ceteris paribus,if income increases and as a result,the demand for good X increases and the demand for good Y falls,

Accepted Answer

A) Good X is an inferior good and good Y is a normal good. 
B) Good X is a normal good and good Y is an inferior good. 
C) Goods X and Y are substitute goods. 
D) Goods X and Y are complementary goods. 
A) Good X is an inferior good and good Y is a normal good. 
B) Good X is a normal good and good Y is an inferior good. 
C) Goods X and Y are substitute goods. 
D) Goods X and Y are complementary goods.

Question 10

If demand is elastic,then

Accepted Answer

A) An increase in price will reduce total revenue. 
B) An increase in price will increase total revenue. 
C) A decrease in price will reduce total revenue. 
D) A decrease in price will have no effect on total revenue. 
A) An increase in price will reduce total revenue. 
B) An increase in price will increase total revenue. 
C) A decrease in price will reduce total revenue. 
D) A decrease in price will have no effect on total revenue.

Question 11

The formula for cross-price elasticity is

Accepted Answer

A) The percentage change in the quantity demanded for one good divided by the percentage change in income. 
B) The percentage change in the quantity demanded for one good divided by the percentage change in the price of another good. 
C) The percentage change in the price of one good divided by the percentage change in the quantity demanded of another good. 
D) The percentage change in the quantity demanded divided by the average change in price. 
A) The percentage change in the quantity demanded for one good divided by the percentage change in income. 
B) The percentage change in the quantity demanded for one good divided by the percentage change in the price of another good. 
C) The percentage change in the price of one good divided by the percentage change in the quantity demanded of another good. 
D) The percentage change in the quantity demanded divided by the average change in price.

Question 12

To reduce our dependence on foreign oil,policy makers must realize that the cross-price elasticity sign for gasoline and fossil fuel-burning cars is negative.

Accepted Answer

A) True 
 B)False

Question 13

Most goods are normal goods,and their demand shifts to the left when income rises.

Accepted Answer

A) True 
 B)False

Question 14

Discuss how the concepts of cross-price elasticity of demand and income elasticity of demand can help businesses plan production and pricing.

Accepted Answer

Cross-price elasticity measures how the

Question 15

If two goods are complementary goods,then

Accepted Answer

A) The cross-price elasticity sign will be negative. 
B) The cross-price elasticity sign is not important. 
C) The cross-price elasticity sign will be positive. 
D) The cross-price elasticity will be greater than 1. 
A) The cross-price elasticity sign will be negative. 
B) The cross-price elasticity sign is not important. 
C) The cross-price elasticity sign will be positive. 
D) The cross-price elasticity will be greater than 1.

Question 16

Explain why the concept of price elasticity of demand is important to government when deciding which goods to tax in order to raise government tax revenues

Accepted Answer

Policy makers will choose which products

Question 17

A price change will have no effect on total revenue if demand is

Accepted Answer

A) Elastic. 
B) Unitary elastic. 
C) Inelastic. 
D) Perfectly elastic. 
A) Elastic. 
B) Unitary elastic. 
C) Inelastic. 
D) Perfectly elastic.

Question 18

Which of the following products will have elastic demand?

Accepted Answer

A) Gasoline. 
B) Cigarettes. 
C) Travel souvenirs. 
D) Alcohol. 
A) Gasoline. 
B) Cigarettes. 
C) Travel souvenirs. 
D) Alcohol.

Question 19

Demand is elastic if the consumer has only a few substitutes to choose from.

Accepted Answer

A) True 
 B)False

Question 20

In the $160 to $180 price range in Figure 20.1,the absolute value of the price elasticity of demand is closest to

Accepted Answer

A) 9.0. 
B) 1.0. 
C) 5.7. 
D) 0.175. 
A) 9.0. 
B) 1.0. 
C) 5.7. 
D) 0.175.

Exam 20: Elasticity

Maximum total revenue occurs when

Elasticity of supply tells us

The article "Samsung Stung by Apple Moves" related to the price cuts for the iPhone indicates that

If two goods are substitute goods,

If the elasticity of demand for cigarettes is 0.4,a seller should

In Figure 20.1,total revenue is maximized at the unit price of

If the elasticity of demand is 3,and the price rises by 15 percent,then

A demand curve that is perfectly inelastic is

Ceteris paribus,if income increases and as a result,the demand for good X increases and the demand for good Y falls,

If demand is elastic,then

The formula for cross-price elasticity is

To reduce our dependence on foreign oil,policy makers must realize that the cross-price elasticity sign for gasoline and fossil fuel-burning cars is negative.

Most goods are normal goods,and their demand shifts to the left when income rises.

Discuss how the concepts of cross-price elasticity of demand and income elasticity of demand can help businesses plan production and pricing.

If two goods are complementary goods,then

Explain why the concept of price elasticity of demand is important to government when deciding which goods to tax in order to raise government tax revenues

A price change will have no effect on total revenue if demand is

Which of the following products will have elastic demand?

Demand is elastic if the consumer has only a few substitutes to choose from.

In the $160 to $180 price range in Figure 20.1,the absolute value of the price elasticity of demand is closest to

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Aggregate Demand

Self-Adjustment or Instability

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Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

The Costs of Production

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

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Labor Unions

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Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

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