Question 1

We would expect the cross-elasticity of demand between popcorn and potato chips to be negative.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following statements is not correct?

Accepted Answer

A) If the relative change in price is greater than the relative change in the quantity demanded associated with it, demand is inelastic. 
B) In the range of prices in which demand is elastic, total revenue will diminish as price decreases. 
C) Total revenue will not change if price varies within a range where the elasticity coefficient is unity. 
D) Demand tends to be elastic at high prices and inelastic at low prices. 
A) If the relative change in price is greater than the relative change in the quantity demanded associated with it, demand is inelastic. 
B) In the range of prices in which demand is elastic, total revenue will diminish as price decreases. 
C) Total revenue will not change if price varies within a range where the elasticity coefficient is unity. 
D) Demand tends to be elastic at high prices and inelastic at low prices.

Question 3

Suppose you are given the following data on demand for a product. The price elasticity of demand (based on the midpoint formula)when price decreases from $9 to $7 is

Accepted Answer

A) 0.63. 
B) 1.16. 
C) 1.6. 
D) 2.27. 
A) 0.63. 
B) 1.16. 
C) 1.6. 
D) 2.27.

Question 4

Refer to the information. Over the $11-$9 price range, demand is

Accepted Answer

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

Question 5

Refer to the table. Over the $6-$4 price range, supply is

Accepted Answer

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

Question 6

The supply of cars will be more elastic the

Accepted Answer

A) greater the quantity demanded. 
B) longer the time interval considered. 
C) greater the decline in input prices. 
D) less able producers are to make other goods. 
A) greater the quantity demanded. 
B) longer the time interval considered. 
C) greater the decline in input prices. 
D) less able producers are to make other goods.

Question 7

If the price elasticity of demand for a product is unity, a decrease in price will

Accepted Answer

A) have no effect upon the amount purchased. 
B) increase the quantity demanded and increase total revenue. 
C) increase the quantity demanded but decrease total revenue. 
D) increase the quantity demanded, but total revenue will be unchanged. 
A) have no effect upon the amount purchased. 
B) increase the quantity demanded and increase total revenue. 
C) increase the quantity demanded but decrease total revenue. 
D) increase the quantity demanded, but total revenue will be unchanged.

Question 8

Answer the question based on the following table, which shows a demand schedule.   At a price of $2, the total revenues of sellers will be

Accepted Answer

A) $21. 
B) $17. 
C) $38. 
D) $9.5. 
A) $21. 
B) $17. 
C) $38. 
D) $9.5.

Question 9

Suppose that as the price of Y falls from $12 to $10, the quantity of Y demanded increases from 500 to 600. Then the absolute value of the price elasticity (using the midpoint formula)is approximately

Accepted Answer

A) 50. 
B) 1.2. 
C) 1. 
D) 0.83. 
A) 50. 
B) 1.2. 
C) 1. 
D) 0.83.

Question 10

Refer to the diagram. If price falls from P₁ to P₂, total revenue will become area(s)

Accepted Answer

A) B + D. 
B) C + D. 
C) A + C. 
D) C. 
A) B + D. 
B) C + D. 
C) A + C. 
D) C.

Question 11

A supply curve that is parallel to the horizontal axis suggests that

Accepted Answer

A) the industry is organized monopolistically. 
B) the relationship between price and quantity supplied is inverse. 
C) a change in demand will change price in the same direction. 
D) a change in demand will change the equilibrium quantity but not price. 
A) the industry is organized monopolistically. 
B) the relationship between price and quantity supplied is inverse. 
C) a change in demand will change price in the same direction. 
D) a change in demand will change the equilibrium quantity but not price.

Question 12

Blossom, Inc., sells 500 bottles of perfume a month when the price is $7. A huge increase in resource costs forces Blossom to raise the price to $9, and the firm only manages to sell 460 bottles of perfume. Using the midpoint formula, the price elasticity of demand coefficient is

Accepted Answer

A) 0.33 and elastic. 
B) 3 and elastic. 
C) 0.33 and inelastic. 
D) 3 and inelastic. 
A) 0.33 and elastic. 
B) 3 and elastic. 
C) 0.33 and inelastic. 
D) 3 and inelastic.

Question 13

It takes a considerable amount of time to increase the production of pork. This implies that

Accepted Answer

A) a change in the demand for pork will not affect its price in the short run. 
B) the short-run supply curve for pork is less elastic than the long-run supply curve for pork. 
C) an increase in the demand for pork will elicit a larger supply response in the short run than in the long run. 
D) the long-run supply curve for pork is less elastic than the short-run supply curve for pork. 
A) a change in the demand for pork will not affect its price in the short run. 
B) the short-run supply curve for pork is less elastic than the long-run supply curve for pork. 
C) an increase in the demand for pork will elicit a larger supply response in the short run than in the long run. 
D) the long-run supply curve for pork is less elastic than the short-run supply curve for pork.

Question 14

We use percentage changes in the formula for estimating the price elasticity of demand coefficient in order to

Accepted Answer

A) make the coefficient's value become independent of whether price goes up or down. 
B) take the midpoints of P and of Q in the computation. 
C) eliminate the negative sign of the coefficient. 
D) make it irrelevant how we measure price: be it in cents, in dollars, or in thousands of dollars. 
A) make the coefficient's value become independent of whether price goes up or down. 
B) take the midpoints of P and of Q in the computation. 
C) eliminate the negative sign of the coefficient. 
D) make it irrelevant how we measure price: be it in cents, in dollars, or in thousands of dollars.

Question 15

Refer to the above graphs. For which graph is the supply perfectly inelastic?

Accepted Answer

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

Question 16

The supply of tickets to a major sporting event held in an enclosed stadium with a fixed number of seats, such as the Super Bowl or a World Series game, is perfectly inelastic.

Accepted Answer

A) True 
 B)False

Question 17

Answer the question based on the following data.   Over which of the following price ranges is the demand elastic?

Accepted Answer

A) $12-$10 
B) $8-$6 
C) $10-$8 
D) $14-$12 
A) $12-$10 
B) $8-$6 
C) $10-$8 
D) $14-$12

Question 18

When the price of a product is increased 8 percent, the quantity demanded decreases 20 percent. The price-elasticity of demand coefficient for this product is

Accepted Answer

A) 2.5. 
B) 25. 
C) 0.4. 
D) 4. 
A) 2.5. 
B) 25. 
C) 0.4. 
D) 4.

Question 19

Chuck has a price elasticity of demand for beer of 1.2. Suppose that the price of beer is increased by 10 percent. What will happen to the total amount Chuck spends on beer?

Accepted Answer

A) It will not change. 
B) It will decrease. 
C) It will increase. 
D) It is impossible to tell. 
A) It will not change. 
B) It will decrease. 
C) It will increase. 
D) It is impossible to tell.

Question 20

Refer to the figure above. At the equilibrium point in this market, the sellers' total revenues are equal to

Accepted Answer

A) $300. 
B) $50. 
C) $360. 
D) $150. 
A) $300. 
B) $50. 
C) $360. 
D) $150.

Exam 6: Elasticity

We would expect the cross-elasticity of demand between popcorn and potato chips to be negative.

Which of the following statements is not correct?

Suppose you are given the following data on demand for a product. The price elasticity of demand (based on the midpoint formula)when price decreases from $9 to $7 is

Refer to the information. Over the $11-$9 price range, demand is

Refer to the table. Over the $6-$4 price range, supply is

The supply of cars will be more elastic the

If the price elasticity of demand for a product is unity, a decrease in price will

Answer the question based on the following table, which shows a demand schedule. At a price of $2, the total revenues of sellers will be

Suppose that as the price of Y falls from $12 to $10, the quantity of Y demanded increases from 500 to 600. Then the absolute value of the price elasticity (using the midpoint formula)is approximately

Refer to the diagram. If price falls from P₁ to P₂, total revenue will become area(s)

A supply curve that is parallel to the horizontal axis suggests that

Blossom, Inc., sells 500 bottles of perfume a month when the price is $7. A huge increase in resource costs forces Blossom to raise the price to $9, and the firm only manages to sell 460 bottles of perfume. Using the midpoint formula, the price elasticity of demand coefficient is

It takes a considerable amount of time to increase the production of pork. This implies that

We use percentage changes in the formula for estimating the price elasticity of demand coefficient in order to

Refer to the above graphs. For which graph is the supply perfectly inelastic?

The supply of tickets to a major sporting event held in an enclosed stadium with a fixed number of seats, such as the Super Bowl or a World Series game, is perfectly inelastic.

Answer the question based on the following data. Over which of the following price ranges is the demand elastic?

When the price of a product is increased 8 percent, the quantity demanded decreases 20 percent. The price-elasticity of demand coefficient for this product is

Chuck has a price elasticity of demand for beer of 1.2. Suppose that the price of beer is increased by 10 percent. What will happen to the total amount Chuck spends on beer?

Refer to the figure above. At the equilibrium point in this market, the sellers' total revenues are equal to

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