Question 1

Most goods can be classified as normal goods rather than inferior goods.The definition of a normal good suggests that

Accepted Answer

A) the income elasticity of demand for the good is negative. 
B) the price elasticity of demand for the good is negative. 
C) the income elasticity for the good is greater than 0. 
D) the cross elasticity of demand for the good is positive. 
A) the income elasticity of demand for the good is negative. 
B) the price elasticity of demand for the good is negative. 
C) the income elasticity for the good is greater than 0. 
D) the cross elasticity of demand for the good is positive.

Question 2

If a firm finds that it can sell $13,000 worth of a product when its price is $5 per unit and $11,000 worth of it when its price is $6, then

Accepted Answer

A) the demand for the product is elastic in the $6-$5 price range. 
B) the demand for the product must have increased. 
C) elasticity of demand is 0.74. 
D) the demand for the product is inelastic in the $6-$5 price range. 
A) the demand for the product is elastic in the $6-$5 price range. 
B) the demand for the product must have increased. 
C) elasticity of demand is 0.74. 
D) the demand for the product is inelastic in the $6-$5 price range.

Question 3

The price elasticity of demand increases with the length of the period considered because

Accepted Answer

A) consumers' incomes will increase over time. 
B) the demand curve will shift outward as time passes. 
C) all prices will increase over time. 
D) consumers will be better able to find substitutes. 
A) consumers' incomes will increase over time. 
B) the demand curve will shift outward as time passes. 
C) all prices will increase over time. 
D) consumers will be better able to find substitutes.

Question 4

Gigantic State University raises tuition for the purpose of increasing its revenue so that more faculty can be hired.GSU is assuming that the demand for education at GSU is

Accepted Answer

A) decreasing. 
B) relatively elastic. 
C) perfectly elastic. 
D) relatively inelastic.Difficulty: 02 Medium 
A) decreasing. 
B) relatively elastic. 
C) perfectly elastic. 
D) relatively inelastic.Difficulty: 02 Medium

Question 5

When demand is price-elastic, an increase in price will lead to increased total consumer spending for the product.

Accepted Answer

A) True 
 B)False

Question 6

Elasticity of supply will increase when

Accepted Answer

A) the number of producers selling a product decreases. 
B) producers are given less time to respond to price changes. 
C) the number of consumers wanting to purchase a product increases. 
D) it becomes easier to substitute one factor of production for another in a manufacturing process. 
A) the number of producers selling a product decreases. 
B) producers are given less time to respond to price changes. 
C) the number of consumers wanting to purchase a product increases. 
D) it becomes easier to substitute one factor of production for another in a manufacturing process.

Question 7

For a linear demand curve,

Accepted Answer

A) elasticity is constant along the curve. 
B) elasticity is unity at every point on the curve. 
C) demand is elastic at relatively low prices. 
D) demand is elastic at relatively high prices. 
A) elasticity is constant along the curve. 
B) elasticity is unity at every point on the curve. 
C) demand is elastic at relatively low prices. 
D) demand is elastic at relatively high prices.

Question 8

The supply curve of a one-of-a-kind original painting is

Accepted Answer

A) relatively elastic. 
B) relatively inelastic. 
C) perfectly inelastic. 
D) perfectly elastic. 
A) relatively elastic. 
B) relatively inelastic. 
C) perfectly inelastic. 
D) perfectly elastic.

Question 9

The price of product X is reduced from $100 to $90 and, as a result, the quantity demanded increases from 50 to 60 units.Therefore, demand for X in this price range

Accepted Answer

A) has declined. 
B) is of unit elasticity. 
C) is inelastic. 
D) is elastic. 
A) has declined. 
B) is of unit elasticity. 
C) is inelastic. 
D) is elastic.

Question 10

The demand for a product is inelastic with respect to price if

Accepted Answer

A) consumers are largely unresponsive to a per unit price change. 
B) the elasticity coefficient is greater than 1. 
C) a drop in price is accompanied by a decrease in the quantity demanded. 
D) a drop in price is accompanied by an increase in the quantity demanded. 
A) consumers are largely unresponsive to a per unit price change. 
B) the elasticity coefficient is greater than 1. 
C) a drop in price is accompanied by a decrease in the quantity demanded. 
D) a drop in price is accompanied by an increase in the quantity demanded.

Question 11

The main determinant of elasticity of supply is the

Accepted Answer

A) number of close substitutes for the product available to consumers. 
B) amount of time the producer has to adjust inputs in response to a price change. 
C) urgency of consumer wants for the product. 
D) number of uses for the product. 
A) number of close substitutes for the product available to consumers. 
B) amount of time the producer has to adjust inputs in response to a price change. 
C) urgency of consumer wants for the product. 
D) number of uses for the product.

Question 12

The concept of price elasticity of demand measures

Accepted Answer

A) the slope of the demand curve. 
B) the number of buyers in a market. 
C) the extent to which the demand curve shifts as the result of a price decline. 
D) the sensitivity of consumer purchases to price changes. 
A) the slope of the demand curve. 
B) the number of buyers in a market. 
C) the extent to which the demand curve shifts as the result of a price decline. 
D) the sensitivity of consumer purchases to price changes.

Question 13

A state government seeking to increase its excise-tax revenues is more likely to increase the tax rate on items with elastic demand.

Accepted Answer

A) True 
 B)False

Question 14

The income elasticity of demand for food is roughly 1.A consumer's monthly income is $2,000, of which 20 percent is spent on food.If the income of this consumer doubles, the amount she'll spend on food will be

Accepted Answer

A) $400 per month. 
B) $500 per month. 
C) $800 per month. 
D) $1,000 per month. 
A) $400 per month. 
B) $500 per month. 
C) $800 per month. 
D) $1,000 per month.

Question 15

Movie theaters charge lower prices to see a movie in the afternoon than in the evening because there is an

Accepted Answer

A) inelastic supply of movies in the evening. 
B) elastic demand to see movies in the evening. 
C) elastic demand to see movies in the afternoon. 
D) inelastic demand to see movies in the afternoon. 
A) inelastic supply of movies in the evening. 
B) elastic demand to see movies in the evening. 
C) elastic demand to see movies in the afternoon. 
D) inelastic demand to see movies in the afternoon.

Question 16

We would expect the coefficient of cross elasticity of demand for DVD players and DVDs to be positive.Difficulty: 03 Hard
Learning Objective: 06-05 Apply cross elasticity of demand and income elasticity of demand.Topic: Cross Elasticity and Income Elasticity of Demand

Accepted Answer

A) True 
 B)False

Question 17

When universities announce a large tuition increase and follow it with an announcement that more financial aid will be available, they are assuming that students who pay full tuition

Accepted Answer

A) have elastic demand and students who use financial aid have inelastic demand. 
B) have inelastic demand and students who use financial aid have elastic demand. 
C) view a college education as an inferior good and students who use financial aid view it as a normal good. 
D) view a college education as a normal good and students who use financial aid view it as an inferior good. 
A) have elastic demand and students who use financial aid have inelastic demand. 
B) have inelastic demand and students who use financial aid have elastic demand. 
C) view a college education as an inferior good and students who use financial aid view it as a normal good. 
D) view a college education as a normal good and students who use financial aid view it as an inferior good.

Question 18

If price changes and total revenue changes in the opposite direction, demand is relatively elastic.

Accepted Answer

A) True 
 B)False

Question 19

An income elasticity coefficient of −1.8 means the product is a normal good.Difficulty: 03 Hard
Learning Objective: 06-05 Apply cross elasticity of demand and income elasticity of demand.Topic: Cross Elasticity and Income Elasticity of Demand

Accepted Answer

A) True 
 B)False

Question 20

The price elasticity of demand coefficient measures

Accepted Answer

A) buyer responsiveness to price changes. 
B) the extent to which a demand curve shifts as incomes change. 
C) the slope of the demand curve. 
D) how far business executives can stretch their fixed costs. 
A) buyer responsiveness to price changes. 
B) the extent to which a demand curve shifts as incomes change. 
C) the slope of the demand curve. 
D) how far business executives can stretch their fixed costs.

Exam 6: Elasticity

Most goods can be classified as normal goods rather than inferior goods.The definition of a normal good suggests that

If a firm finds that it can sell $13,000 worth of a product when its price is $5 per unit and $11,000 worth of it when its price is $6, then

The price elasticity of demand increases with the length of the period considered because

Gigantic State University raises tuition for the purpose of increasing its revenue so that more faculty can be hired.GSU is assuming that the demand for education at GSU is

When demand is price-elastic, an increase in price will lead to increased total consumer spending for the product.

Elasticity of supply will increase when

For a linear demand curve,

The supply curve of a one-of-a-kind original painting is

The price of product X is reduced from $100 to $90 and, as a result, the quantity demanded increases from 50 to 60 units.Therefore, demand for X in this price range

The demand for a product is inelastic with respect to price if

The main determinant of elasticity of supply is the

The concept of price elasticity of demand measures

A state government seeking to increase its excise-tax revenues is more likely to increase the tax rate on items with elastic demand.

The income elasticity of demand for food is roughly 1.A consumer's monthly income is $2,000, of which 20 percent is spent on food.If the income of this consumer doubles, the amount she'll spend on food will be

Movie theaters charge lower prices to see a movie in the afternoon than in the evening because there is an

We would expect the coefficient of cross elasticity of demand for DVD players and DVDs to be positive.Difficulty: 03 Hard Learning Objective: 06-05 Apply cross elasticity of demand and income elasticity of demand.Topic: Cross Elasticity and Income Elasticity of Demand

When universities announce a large tuition increase and follow it with an announcement that more financial aid will be available, they are assuming that students who pay full tuition

If price changes and total revenue changes in the opposite direction, demand is relatively elastic.

An income elasticity coefficient of −1.8 means the product is a normal good.Difficulty: 03 Hard Learning Objective: 06-05 Apply cross elasticity of demand and income elasticity of demand.Topic: Cross Elasticity and Income Elasticity of Demand

The price elasticity of demand coefficient measures

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Utility Maximization

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