Question 1

Exhibit 5-7 Demand curve for concert tickets
  
-In Exhibit 5-7,If promoters charge a price of $10 per ticket,then their total revenue is:

Accepted Answer

A)  $240,000. 
B)  $300,000. 
C)  $333,333. 
D)  $800,000. 
A)  $240,000. 
B)  $300,000. 
C)  $333,333. 
D)  $800,000.

Question 2

Suppose the Good Food supermarket increases the price of a pound of bananas from $.75 to $1.25 and finds that the quantity of bananas it sells per month drops from 1,500 to 1,000.The price elasticity of demand coefficient for bananas in this price range is:

Accepted Answer

A)  0.80. 
B)  3.00. 
C)  2.00. 
D)  0.50. 
A)  0.80. 
B)  3.00. 
C)  2.00. 
D)  0.50.

Question 3

A lower price elasticity of demand coefficient occurs when:

Accepted Answer

A)  many substitutes exist. 
B)  the quantity demanded is more responsive. 
C)  few substitutes exist. 
D)  the market is broadly defined. 
A)  many substitutes exist. 
B)  the quantity demanded is more responsive. 
C)  few substitutes exist. 
D)  the market is broadly defined.

Question 4

If Sam,the Pizza Man,lowers the price of his pizzas from $6 to $5 and finds that sales increase from 400 to 600 pizzas per week,then the demand for Sam's pizzas 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.

Question 5

The demand for a product is likely to be more elastic:

Accepted Answer

A)  the smaller the share of the total budget spent on the product. 
B)  when more complementary products are available. 
C)  in the short run than in the long run. 
D)  when more good substitutes for the product are available. 
A)  the smaller the share of the total budget spent on the product. 
B)  when more complementary products are available. 
C)  in the short run than in the long run. 
D)  when more good substitutes for the product are available.

Question 6

Exhibit 5-1 Demand curves
  
-In Exhibit 5-1,between points a and b,the price elasticity of demand measures:

Accepted Answer

A)  0.67. 
B)  1.5. 
C)  2.0. 
D)  1.56. 
E)  1.0. 
A)  0.67. 
B)  1.5. 
C)  2.0. 
D)  1.56. 
E)  1.0.

Question 7

Larissa is a famous attorney with a great reputation in court.She charges her clients $300 for each hour she spends working on their cases.If she earned $450,000 in hourly wages last year,and by raising her rates to $350 per hour her income increased to $490,000 what can we say about the elasticity of demand for Larissa's legal services?

Accepted Answer

A)  It is approximately equal to 2.3. 
B)  It is approximately equal to 1.6. 
C)  It is approximately equal to 1.0. 
D)  It is approximately equal to 0.45. 
E)  It is approximately equal to 0.1. 
A)  It is approximately equal to 2.3. 
B)  It is approximately equal to 1.6. 
C)  It is approximately equal to 1.0. 
D)  It is approximately equal to 0.45. 
E)  It is approximately equal to 0.1.

Question 8

Which of the following statements is true?

Accepted Answer

A)  If the income elasticity of demand is less than zero, the good is an inferior good. 
B)  Only if the demand curve is vertical will sellers raise the price by the full amount of a tax. 
C)  Two goods are substitutes if the cross-elasticity of demand coefficient is positive. 
D)  A price elasticity of supply coefficient equal to 1.5 means the product exhibits an elastic supply and a 10 percent increase in the price will increase the quantity supplied by 15 percent. 
E)  All of the above. 
A)  If the income elasticity of demand is less than zero, the good is an inferior good. 
B)  Only if the demand curve is vertical will sellers raise the price by the full amount of a tax. 
C)  Two goods are substitutes if the cross-elasticity of demand coefficient is positive. 
D)  A price elasticity of supply coefficient equal to 1.5 means the product exhibits an elastic supply and a 10 percent increase in the price will increase the quantity supplied by 15 percent. 
E)  All of the above.

Question 9

Exhibit 5-3 Demand curves for gallons of orange juice
  
-Using Exhibit 5-3,in general,whose demand for orange juice is the most elastic?

Accepted Answer

A)  Albert 
B)  Betty 
C)  Carl 
D)  Dana 
E)  Edward 
A)  Albert 
B)  Betty 
C)  Carl 
D)  Dana 
E)  Edward

Question 10

If the price elasticity of demand for a product measures .45,

Accepted Answer

A)  this good has many available substitutes. 
B)  this good must be a nonessential good. 
C)  this good is a high-priced good. 
D)  a decrease in price will increase total revenue. 
E)  this good is demand price inelastic. 
A)  this good has many available substitutes. 
B)  this good must be a nonessential good. 
C)  this good is a high-priced good. 
D)  a decrease in price will increase total revenue. 
E)  this good is demand price inelastic.

Question 11

Goods with few available substitutes tend to have inelastic demand curves.

Accepted Answer

A) True 
 B)False

Question 12

Suppose there is no change in total revenue when the price changes.The demand curve for this good is:

Accepted Answer

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

Question 13

What are the characteristics of the product that has an inelastic demand?

Accepted Answer

A product that has an inelasti

Question 14

If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units,then demand is:

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  of unitary elasticity. 
D)  0. 
E)  inferior. 
A)  elastic. 
B)  inelastic. 
C)  of unitary elasticity. 
D)  0. 
E)  inferior.

Question 15

If demand is price elastic,then when price decreases,total revenue:

Accepted Answer

A)  decreases. 
B)  increases. 
C)  does not change. 
D)  is less than one. 
E)  is negative. 
A)  decreases. 
B)  increases. 
C)  does not change. 
D)  is less than one. 
E)  is negative.

Question 16

If demand for a good is price elastic,then the price elasticity will be:

Accepted Answer

A)  equal to one. 
B)  equal to zero. 
C)  greater than one. 
D)  less than one. 
E)  less than zero. 
A)  equal to one. 
B)  equal to zero. 
C)  greater than one. 
D)  less than one. 
E)  less than zero.

Question 17

If the quantity demanded increases by 20 percent in response to a 10 percent decrease in price,demand is classified as:

Accepted Answer

A)  unstable. 
B)  relatively inelastic. 
C)  relatively elastic. 
D)  of unitary elasticity. 
A)  unstable. 
B)  relatively inelastic. 
C)  relatively elastic. 
D)  of unitary elasticity.

Question 18

If the quantity of tickets to the fair sold decreases by 10 percent when the price increases by 5 percent,the price elasticity of demand over this range of the demand curve is:

Accepted Answer

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

Question 19

A horizontal demand curve is perfectly elastic.

Accepted Answer

A) True 
 B)False

Question 20

If a supplier faces a perfectly horizontal demand curve and sets his price slightly higher than the demand curve itself,he can expect:

Accepted Answer

A)  no change in his total revenues. 
B)  everyone to begin buying his product. 
C)  a complete loss of revenues. 
D)  a new demand curve. 
E)  a relative increase in income. 
A)  no change in his total revenues. 
B)  everyone to begin buying his product. 
C)  a complete loss of revenues. 
D)  a new demand curve. 
E)  a relative increase in income.

Exam 5: Price Elasticity of Demand

Exhibit 5-7 Demand curve for concert tickets -In Exhibit 5-7,If promoters charge a price of $10 per ticket,then their total revenue is:

Suppose the Good Food supermarket increases the price of a pound of bananas from $.75 to $1.25 and finds that the quantity of bananas it sells per month drops from 1,500 to 1,000.The price elasticity of demand coefficient for bananas in this price range is:

A lower price elasticity of demand coefficient occurs when:

If Sam,the Pizza Man,lowers the price of his pizzas from $6 to $5 and finds that sales increase from 400 to 600 pizzas per week,then the demand for Sam's pizzas in this range is:

The demand for a product is likely to be more elastic:

Exhibit 5-1 Demand curves -In Exhibit 5-1,between points a and b,the price elasticity of demand measures:

Which of the following statements is true?

Exhibit 5-3 Demand curves for gallons of orange juice -Using Exhibit 5-3,in general,whose demand for orange juice is the most elastic?

If the price elasticity of demand for a product measures .45,

Goods with few available substitutes tend to have inelastic demand curves.

Suppose there is no change in total revenue when the price changes.The demand curve for this good is:

What are the characteristics of the product that has an inelastic demand?

If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units,then demand is:

If demand is price elastic,then when price decreases,total revenue:

If demand for a good is price elastic,then the price elasticity will be:

If the quantity demanded increases by 20 percent in response to a 10 percent decrease in price,demand is classified as:

If the quantity of tickets to the fair sold decreases by 10 percent when the price increases by 5 percent,the price elasticity of demand over this range of the demand curve is:

A horizontal demand curve is perfectly elastic.

If a supplier faces a perfectly horizontal demand curve and sets his price slightly higher than the demand curve itself,he can expect:

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

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