Question 1

If a decrease in the price of theater tickets increases the total revenue earned by the theater,this is evidence that demand is:

Accepted Answer

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

Question 2

Suppose the quantity demanded of steak is 200 million pounds per year when the price is $6 per pound and 400 million pounds per year when the price is $2 per pound.The price elasticity of demand for steak over this range is:

Accepted Answer

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

Question 3

If Herbert,the hair stylist,raises the price of his cuts from $13 to $15 and finds the number of cuts falls from 300 to 260,then the demand for Herbert's cuts in this range is:

Accepted Answer

A)  price inelastic. 
B)  price elastic. 
C)  unit elastic. 
D)  cross elastic. 
E)  income inelastic. 
A)  price inelastic. 
B)  price elastic. 
C)  unit elastic. 
D)  cross elastic. 
E)  income inelastic. C

Question 4

If a straight-line demand curve slopes down,price elasticity will:

Accepted Answer

A)  remain the same at all points on the demand curve. 
B)  change between any two points along the demand curve. 
C)  always be greater than one. 
D)  always equal one. 
E)  always be less than one. 
A)  remain the same at all points on the demand curve. 
B)  change between any two points along the demand curve. 
C)  always be greater than one. 
D)  always equal one. 
E)  always be less than one.

Question 5

Suppose the president of a textbook publisher argues that a 10 percent increase in the price of textbooks will raise total revenue for the publisher.It can be concluded that the company president thinks that demand for textbooks is:

Accepted Answer

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

Question 6

What happens to total revenue given a price increase and demand is inelastic? Why?

Accepted Answer

Total revenue will rise if the price ris

Question 7

Which of the following goods is likely to have the most elastic demand curve?

Accepted Answer

A)  Tobacco products. 
B)  Gasoline. 
C)  Medical care. 
D)  Honda automobiles. 
A)  Tobacco products. 
B)  Gasoline. 
C)  Medical care. 
D)  Honda automobiles.

Question 8

Other factors held constant,if there are few close substitutes for a good,demand is more elastic for it.

Accepted Answer

A) True 
 B)False

Question 9

If the value of the price elasticity of demand is 0.2,this means that:

Accepted Answer

A)  a 20 percent decrease in price causes a 1 percent increase in quantity demanded. 
B)  a 0.2 percent decrease in price causes a 1 percent increase in quantity demanded. 
C)  a 5 percent decrease in price causes a 1 percent increase in quantity demanded. 
D)  a 0.2 percent decrease in price causes a 0.2 percent increase in quantity demanded. 
E)  a 100 percent decrease in price causes a 200 percent increase in quantity demanded. 
A)  a 20 percent decrease in price causes a 1 percent increase in quantity demanded. 
B)  a 0.2 percent decrease in price causes a 1 percent increase in quantity demanded. 
C)  a 5 percent decrease in price causes a 1 percent increase in quantity demanded. 
D)  a 0.2 percent decrease in price causes a 0.2 percent increase in quantity demanded. 
E)  a 100 percent decrease in price causes a 200 percent increase in quantity demanded.

Question 10

If the demand curve over a certain range is "price elastic," this implies that the:

Accepted Answer

A)  percentage change in the quantity demanded exceeds one. 
B)  percentage change in the quantity demanded exceeds the percentage change in product price. 
C)  percentage change in price exceeds the percentage change in quantity demanded. 
D)  product is non-reactive. 
E)  product has no good substitute. 
A)  percentage change in the quantity demanded exceeds one. 
B)  percentage change in the quantity demanded exceeds the percentage change in product price. 
C)  percentage change in price exceeds the percentage change in quantity demanded. 
D)  product is non-reactive. 
E)  product has no good substitute.

Question 11

As price decreases and we move down further along a linear demand curve,the price elasticity of demand will:

Accepted Answer

A)  decrease. 
B)  increase. 
C)  stay the same. 
D)  approach infinity. 
E)  increase or decrease. 
A)  decrease. 
B)  increase. 
C)  stay the same. 
D)  approach infinity. 
E)  increase or decrease.

Question 12

Which of the following describes a situation in which demand must be inelastic?

Accepted Answer

A)  Total revenue decreases by 10 percent when the price of spats rises by 10 percent. 
B)  Total revenue decreases by less than 10 percent when the price of spats rises by 10 percent. 
C)  Total revenue increases by more than 10 percent when the price of spats rises by 10 percent. 
D)  Total revenue decreases by $10 when the price of spats rises by $10. 
E)  Total revenue decreases by more than $10 when the price of spats rises by $10. 
A)  Total revenue decreases by 10 percent when the price of spats rises by 10 percent. 
B)  Total revenue decreases by less than 10 percent when the price of spats rises by 10 percent. 
C)  Total revenue increases by more than 10 percent when the price of spats rises by 10 percent. 
D)  Total revenue decreases by $10 when the price of spats rises by $10. 
E)  Total revenue decreases by more than $10 when the price of spats rises by $10.

Question 13

A perfectly elastic demand curve has an elasticity coefficient of:

Accepted Answer

A)  0. 
B)  1. 
C)  less than 1. 
D)  infinity. 
A)  0. 
B)  1. 
C)  less than 1. 
D)  infinity.

Question 14

Any change in price along a perfectly inelastic demand curve produces:

Accepted Answer

A)  greater change in the quantity demanded. 
B)  less change in the quantity demanded. 
C)  no change in the quantity demanded. 
D)  infinite change in the quantity demanded. 
A)  greater change in the quantity demanded. 
B)  less change in the quantity demanded. 
C)  no change in the quantity demanded. 
D)  infinite change in the quantity demanded.

Question 15

Within different price ranges along a linear demand curve,elasticities are:

Accepted Answer

A)  constant. 
B)  different. 
C)  equal. 
D)  the same as slope. 
E)  negative 1. 
A)  constant. 
B)  different. 
C)  equal. 
D)  the same as slope. 
E)  negative 1.

Question 16

The short-run price elasticity of demand for airline travel is .05,while the long-run elasticity is 2.36.This means that a significant increase in airline ticket prices will cause airline companies to:

Accepted Answer

A)  collect less revenue from short-notice travelers. 
B)  collect more revenue from travelers who book well in advance. 
C)  lose money on short-notice travelers. 
D)  collect less revenue from travelers who book well in advance. 
E)  lose many of its short-notice travelers. 
A)  collect less revenue from short-notice travelers. 
B)  collect more revenue from travelers who book well in advance. 
C)  lose money on short-notice travelers. 
D)  collect less revenue from travelers who book well in advance. 
E)  lose many of its short-notice travelers.

Question 17

If demand price elasticity measures 2,this implies that consumers would:

Accepted Answer

A)  buy twice as much of the product if the price drops 10 percent. 
B)  require a 2 percent drop in price to increase their purchases by 1 percent. 
C)  buy 2 percent more of the product in response to a 1 percent drop in price. 
D)  require at least a $2 increase in price before showing any response to the price increase. 
E)  buy twice as much of the product if the price drops 1 percent. 
A)  buy twice as much of the product if the price drops 10 percent. 
B)  require a 2 percent drop in price to increase their purchases by 1 percent. 
C)  buy 2 percent more of the product in response to a 1 percent drop in price. 
D)  require at least a $2 increase in price before showing any response to the price increase. 
E)  buy twice as much of the product if the price drops 1 percent.

Question 18

Exhibit 5-5 Demand curve for computers
  
-In Exhibit 5-5,the change in total revenue resulting from a change in price from A to D indicates that the demand curve is:

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  unitary elastic. 
D)  nonelastic. 
A)  elastic. 
B)  inelastic. 
C)  unitary elastic. 
D)  nonelastic.

Question 19

The price elasticity of demand for gasoline measures the:

Accepted Answer

A)  responsiveness of gasoline producers to changes in the quality of gasoline. 
B)  responsiveness of customers to changes in the price of gasoline. 
C)  responsiveness of consumer preferences to changes in the quality of gasoline. 
D)  both a and c above. 
A)  responsiveness of gasoline producers to changes in the quality of gasoline. 
B)  responsiveness of customers to changes in the price of gasoline. 
C)  responsiveness of consumer preferences to changes in the quality of gasoline. 
D)  both a and c above.

Question 20

Necessities have a much smaller price elasticity of demand,ceteris paribus,than goods that have many close substitutes.

Accepted Answer

A) True 
 B)False

Exam 5: Price Elasticity of Demand

If a decrease in the price of theater tickets increases the total revenue earned by the theater,this is evidence that demand is:

Suppose the quantity demanded of steak is 200 million pounds per year when the price is $6 per pound and 400 million pounds per year when the price is $2 per pound.The price elasticity of demand for steak over this range is:

If Herbert,the hair stylist,raises the price of his cuts from $13 to $15 and finds the number of cuts falls from 300 to 260,then the demand for Herbert's cuts in this range is:

If a straight-line demand curve slopes down,price elasticity will:

Suppose the president of a textbook publisher argues that a 10 percent increase in the price of textbooks will raise total revenue for the publisher.It can be concluded that the company president thinks that demand for textbooks is:

What happens to total revenue given a price increase and demand is inelastic? Why?

Which of the following goods is likely to have the most elastic demand curve?

Other factors held constant,if there are few close substitutes for a good,demand is more elastic for it.

If the value of the price elasticity of demand is 0.2,this means that:

If the demand curve over a certain range is "price elastic," this implies that the:

As price decreases and we move down further along a linear demand curve,the price elasticity of demand will:

Which of the following describes a situation in which demand must be inelastic?

A perfectly elastic demand curve has an elasticity coefficient of:

Any change in price along a perfectly inelastic demand curve produces:

Within different price ranges along a linear demand curve,elasticities are:

The short-run price elasticity of demand for airline travel is .05,while the long-run elasticity is 2.36.This means that a significant increase in airline ticket prices will cause airline companies to:

If demand price elasticity measures 2,this implies that consumers would:

Exhibit 5-5 Demand curve for computers -In Exhibit 5-5,the change in total revenue resulting from a change in price from A to D indicates that the demand curve is:

The price elasticity of demand for gasoline measures the:

Necessities have a much smaller price elasticity of demand,ceteris paribus,than goods that have many close substitutes.

Introducing the Economic Way of Thinking

A: Appendix: Applying Graphs to Economics

Production Possibilities,Opportunity Cost,and Economic Growth

Part 1: Market Demand and Supply

Part 2: Market Demand and Supply

Markets in Action

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

A: Appendix: The Self-Correcting Aggregate Demand and Supply Model

Fiscal Policy

The Public Sector

Federal Deficits,Surpluses,and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

A: Appendix: Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Filters