Question 1

Total revenue is equal to

Accepted Answer

A) The income from sales. 
B) Profit. 
C) Cost of production. 
D) Total revenue minus total cost. 
A) The income from sales. 
B) Profit. 
C) Cost of production. 
D) Total revenue minus total cost.

Question 2

To find the average percentage change in quantity demanded,

Accepted Answer

A) The change in price is divided by the percentage change in quantity demanded. 
B) The change in quantity demanded is divided by the change in price. 
C) The change in quantity demanded is divided by the average quantity. 
D) The change in price is divided by the average price. 
A) The change in price is divided by the percentage change in quantity demanded. 
B) The change in quantity demanded is divided by the change in price. 
C) The change in quantity demanded is divided by the average quantity. 
D) The change in price is divided by the average price.

Question 3

A good is normal if the sign on the income elasticity formula is

Accepted Answer

A) Positive. 
B) Greater than 1. 
C) Less than 1. 
D) Negative. 
A) Positive. 
B) Greater than 1. 
C) Less than 1. 
D) Negative.

Question 4

Supply is very inelastic if the quantity supplied cannot respond quickly to an increase in price.

Accepted Answer

A) True 
 B)False

Question 5

If the cross-price elasticity of demand for SUVs with respect to the price of gasoline is -0.10,and gasoline prices rise by 18 percent,then SUV sales should,ceteris paribus,

Accepted Answer

A) Fall by 1.8 percent. 
B) Fall by 18 percent. 
C) Rise by 1.8 percent. 
D) Rise by 18 percent. 
A) Fall by 1.8 percent. 
B) Fall by 18 percent. 
C) Rise by 1.8 percent. 
D) Rise by 18 percent.

Question 6

If a good is inferior,its

Accepted Answer

A) Cross-price elasticity is negative. 
B) Price elasticity of demand is negative. 
C) Income elasticity of demand is positive. 
D) Income elasticity of demand is negative. 
A) Cross-price elasticity is negative. 
B) Price elasticity of demand is negative. 
C) Income elasticity of demand is positive. 
D) Income elasticity of demand is negative.

Question 7

Income elasticity measures the

Accepted Answer

A) Responsiveness of quantity demanded for one good to a percentage change in price of another good. 
B) Responsiveness of quantity demanded to a percentage change in income. 
C) Way in which consumers switch from one product to another when price rises. 
D) Percentage change in quantity demanded given a percentage change in wealth. 
A) Responsiveness of quantity demanded for one good to a percentage change in price of another good. 
B) Responsiveness of quantity demanded to a percentage change in income. 
C) Way in which consumers switch from one product to another when price rises. 
D) Percentage change in quantity demanded given a percentage change in wealth.

Question 8

If the price elasticity of demand is 1.0,and a firm raises its price by 10 percent,the total revenue will

Accepted Answer

A) Rise by 10 percent. 
B) Fall by 10 percent. 
C) Not change. 
D) Rise by 100 percent. 
A) Rise by 10 percent. 
B) Fall by 10 percent. 
C) Not change. 
D) Rise by 100 percent.

Question 9

Refer to Figure 20.2.If the area 0P1AB is less than the area 0P2CD,we can conclude that the price elasticity of demand between point A and point C is

Accepted Answer

A) Elastic. 
B) Inelastic. 
C) Unitary elastic. 
D) Impossible to determine.It depends on whether the price has increased or decreased. 
A) Elastic. 
B) Inelastic. 
C) Unitary elastic. 
D) Impossible to determine.It depends on whether the price has increased or decreased.

Question 10

When the price of taking a ride in Uber increases,the demand for Lyft rides increases,ceteris paribus.Uber and Lyft are therefore

Accepted Answer

A) Elastic. 
B) Inelastic. 
C) Complements. 
D) Substitutes. 
A) Elastic. 
B) Inelastic. 
C) Complements. 
D) Substitutes.

Question 11

The formula for the elasticity of supply is

Accepted Answer

A) The percentage change in quantity supplied divided by the percentage change in price. 
B) The percentage change in price divided by the percentage change in quantity supplied. 
C) The percentage change in quantity supplied divided by the percentage change in income. 
D) The percentage change in price divided by the percentage change in quantity demanded. 
A) The percentage change in quantity supplied divided by the percentage change in price. 
B) The percentage change in price divided by the percentage change in quantity supplied. 
C) The percentage change in quantity supplied divided by the percentage change in income. 
D) The percentage change in price divided by the percentage change in quantity demanded.

Question 12

When demand is elastic,the absolute number for price elasticity will be

Accepted Answer

A) Greater than 0. 
B) Less than 1. 
C) Greater than 1. 
D) Equal to 1. 
A) Greater than 0. 
B) Less than 1. 
C) Greater than 1. 
D) Equal to 1.

Question 13

If the elasticity number (E)is less than 1,a price increase will cause total revenue to fall.

Accepted Answer

A) True 
 B)False

Question 14

Suppose computer prices at an office supply store fall from $1,000 to $900 and as a result the quantity demanded of typewriters decreases from 40 to 20 per month.The cross-price elasticity of demand is closest to

Accepted Answer

A) 0.16. 
B) 0.2. 
C) 5.0. 
D) 6.3. 
A) 0.16. 
B) 0.2. 
C) 5.0. 
D) 6.3.

Question 15

If peanut butter and jelly are complementary goods,an increase in the price of peanut butter will,ceteris paribus,

Accepted Answer

A) Increase the quantity demanded of jelly. 
B) Increase the quantity demanded of peanut butter. 
C) Reduce the demand for jelly. 
D) increase the demand for jelly. 
A) Increase the quantity demanded of jelly. 
B) Increase the quantity demanded of peanut butter. 
C) Reduce the demand for jelly. 
D) increase the demand for jelly.

Question 16

If the price elasticity of demand is equal to 2,the good has ________ demand.

Accepted Answer

A) elastic 
B) inelastic 
C) unitary elastic 
D) restrictive 
A) elastic 
B) inelastic 
C) unitary elastic 
D) restrictive

Question 17

If the price of the iPhone X falls by 3 percent and the price elasticity of demand for iPhone X is 2.0,then quantity demanded will fall by what percentage?

Accepted Answer

A) 5 percent. 
B) 6 percent. 
C) 0.6 percent. 
D) 60 percent. 
A) 5 percent. 
B) 6 percent. 
C) 0.6 percent. 
D) 60 percent.

Question 18

Which of the following is the best measure of the effects of a recession?

Accepted Answer

A) Income elasticity of demand. 
B) Price elasticity of demand. 
C) Cross-price elasticity of demand. 
D) Utility-maximizing rule. 
A) Income elasticity of demand. 
B) Price elasticity of demand. 
C) Cross-price elasticity of demand. 
D) Utility-maximizing rule.

Question 19

Assume apples and oranges are substitutes.Suppose apple growers launch a successful advertising campaign that convinces consumers apples are a better product.As a result the cross-price elasticity of apples and oranges will become

Accepted Answer

A) Less negative (move closer to zero). 
B) More negative. 
C) Less positive (move closer to zero). 
D) More positive. 
A) Less negative (move closer to zero). 
B) More negative. 
C) Less positive (move closer to zero). 
D) More positive.

Question 20

The formula for the elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price.

Accepted Answer

A) True 
 B)False

Exam 20: Elasticity

Total revenue is equal to

To find the average percentage change in quantity demanded,

A good is normal if the sign on the income elasticity formula is

Supply is very inelastic if the quantity supplied cannot respond quickly to an increase in price.

If the cross-price elasticity of demand for SUVs with respect to the price of gasoline is -0.10,and gasoline prices rise by 18 percent,then SUV sales should,ceteris paribus,

If a good is inferior,its

Income elasticity measures the

If the price elasticity of demand is 1.0,and a firm raises its price by 10 percent,the total revenue will

Refer to Figure 20.2.If the area 0P1AB is less than the area 0P2CD,we can conclude that the price elasticity of demand between point A and point C is

When the price of taking a ride in Uber increases,the demand for Lyft rides increases,ceteris paribus.Uber and Lyft are therefore

The formula for the elasticity of supply is

When demand is elastic,the absolute number for price elasticity will be

If the elasticity number (E)is less than 1,a price increase will cause total revenue to fall.

Suppose computer prices at an office supply store fall from $1,000 to $900 and as a result the quantity demanded of typewriters decreases from 40 to 20 per month.The cross-price elasticity of demand is closest to

If peanut butter and jelly are complementary goods,an increase in the price of peanut butter will,ceteris paribus,

If the price elasticity of demand is equal to 2,the good has ________ demand.

If the price of the iPhone X falls by 3 percent and the price elasticity of demand for iPhone X is 2.0,then quantity demanded will fall by what percentage?

Which of the following is the best measure of the effects of a recession?

Assume apples and oranges are substitutes.Suppose apple growers launch a successful advertising campaign that convinces consumers apples are a better product.As a result the cross-price elasticity of apples and oranges will become

The formula for the elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price.

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

Fiscal Policy

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

The Labor Market

Labor Unions

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

International Finance

Global Poverty

Filters

Refer to Figure 20.2.If the area 0P₁AB is less than the area 0P₂CD,we can conclude that the price elasticity of demand between point A and point C is