Question 1

If demand is unit-elastic throughout the demand curve, then total revenues are

Accepted Answer

A)  greater the higher the price. 
B)  lower the higher the price. 
C)  maximized at the midpoint of the demand curve. 
D)  the same for any price the firm charges. 
A)  greater the higher the price. 
B)  lower the higher the price. 
C)  maximized at the midpoint of the demand curve. 
D)  the same for any price the firm charges.

Question 2

-In the above table, the cross price elasticity of demand for good Y with good X when PX rises from $10 to $12 is

Accepted Answer

A)  +0.29. 
B)  +1.83. 
C)  +0.58. 
D)  -0.58. 
A)  +0.29. 
B)  +1.83. 
C)  +0.58. 
D)  -0.58.

Question 3

If the quantity supplied of candy increases by 10% when the price of candy increases by 20%, which of the following is true?

Accepted Answer

A)  Supply for candy is elastic, and price elasticity of supply = 2.0. 
B)  Supply for candy is inelastic, and price elasticity of supply = 2.0. 
C)  Supply for candy is elastic, and price elasticity of supply = 0.5. 
D)  Supply for candy is inelastic, and price elasticity of supply = 0.5. 
A)  Supply for candy is elastic, and price elasticity of supply = 2.0. 
B)  Supply for candy is inelastic, and price elasticity of supply = 2.0. 
C)  Supply for candy is elastic, and price elasticity of supply = 0.5. 
D)  Supply for candy is inelastic, and price elasticity of supply = 0.5.

Question 4

-Use the above table. Based on the information in the table, jam is a(n)

Accepted Answer

A)  normal good. 
B)  necessary good. 
C)  inferior good. 
D)  negative good. 
A)  normal good. 
B)  necessary good. 
C)  inferior good. 
D)  negative good.

Question 5

If the demand curve for a product is vertical, then

Accepted Answer

A)  the demand for the good is perfectly elastic. 
B)  consumers are highly responsive to price changes. 
C)  its price elasticity of demand is equal to zero. 
D)  consumers may purchase all they want to at the established market price. 
A)  the demand for the good is perfectly elastic. 
B)  consumers are highly responsive to price changes. 
C)  its price elasticity of demand is equal to zero. 
D)  consumers may purchase all they want to at the established market price.

Question 6

What is the price elasticity of demand? How is the price elasticity of demand calculated?

Accepted Answer

The price elasticity of demand is the re

Question 7

If price decreases by 10 percent and quantity demanded increases by 30 percent, the price elasticity of demand will be

Accepted Answer

A)  0.333. 
B)  3. 
C)  30. 
D)  300. 
A)  0.333. 
B)  3. 
C)  30. 
D)  300.

Question 8

Suppose the absolute price elasticity of demand for newsletter subscriptions is 1.3. In order to increase the total revenues from subscriptions, the publishers should

Accepted Answer

A)  increase the price of the newsletters. 
B)  reduce the price of the newsletters. 
C)  sell the newsletters on the inelastic portion of its demand curve. 
D)  keep the price the same. 
A)  increase the price of the newsletters. 
B)  reduce the price of the newsletters. 
C)  sell the newsletters on the inelastic portion of its demand curve. 
D)  keep the price the same.

Question 9

When Fred's income was $100 per week, 10 units of good X were demanded. Now his income is $150 per week and 12 units of good X are demanded. Using the percentage change formula, the income elasticity of demand for good X equals ________.

Accepted Answer

A)  0.45 
B)  0.40 
C)  2.20 
D)  2.50 
A)  0.45 
B)  0.40 
C)  2.20 
D)  2.50

Question 10

A movie theatre raises ticket prices from $8 to $10 in order to raise revenues. The theatre's management is assuming the absolute value of the price elasticity of demand for tickets is

Accepted Answer

A)  less than 1. 
B)  greater than 1. 
C)  equal to 1. 
D)  infinity. 
A)  less than 1. 
B)  greater than 1. 
C)  equal to 1. 
D)  infinity.

Question 11

If the cross price elasticity of demand between two commodities is positive, then these commodities are

Accepted Answer

A)  are superior. 
B)  are complements. 
C)  are substitutes. 
D)  are inferior. 
A)  are superior. 
B)  are complements. 
C)  are substitutes. 
D)  are inferior.

Question 12

If the price of gasoline increases from $2.50 per gallon to $3.00 per gallon and the quantity demanded goes down from 120 million gallons per week to 115 million gallons per week, the absolute value of price elasticity of demand in that price range is approximately

Accepted Answer

A)  0.23. 
B)  4.35. 
C)  0.93. 
D)  2.34. 
A)  0.23. 
B)  4.35. 
C)  0.93. 
D)  2.34.

Question 13

-Refer to the above table. Demand is unit elastic between the prices of

Accepted Answer

A)  $5.00 & $10.00. 
B)  $6.00 & $7.00. 
C)  $6.00 & $6.50. 
D)  $7.00 & $7.50 
A)  $5.00 & $10.00. 
B)  $6.00 & $7.00. 
C)  $6.00 & $6.50. 
D)  $7.00 & $7.50

Question 14

Which of the following is NOT a determinant of the price elasticity of demand?

Accepted Answer

A)  the number of producers of the good 
B)  the number of substitutes available to buyers 
C)  the time consumers have to adjust to a price change 
D)  expenditures on the item as a percentage of a consumer's total budget 
A)  the number of producers of the good 
B)  the number of substitutes available to buyers 
C)  the time consumers have to adjust to a price change 
D)  expenditures on the item as a percentage of a consumer's total budget

Question 15

If the absolute price elasticity of demand for a product is less than 1, then

Accepted Answer

A)  consumers are relatively insensitive to price changes. 
B)  consumers are relatively sensitive to price changes. 
C)  there is a positive relationship between price changes and total revenue. 
D)  producers are relatively insensitive to price changes. 
A)  consumers are relatively insensitive to price changes. 
B)  consumers are relatively sensitive to price changes. 
C)  there is a positive relationship between price changes and total revenue. 
D)  producers are relatively insensitive to price changes.

Question 16

The demand curve for petroleum should be

Accepted Answer

A)  more elastic in the long run than in the short run. 
B)  less elastic in the long run than in the short run. 
C)  as elastic in the long run as it is in the short run. 
D)  more or less elastic in the long run versus the short run depending upon supply conditions. 
A)  more elastic in the long run than in the short run. 
B)  less elastic in the long run than in the short run. 
C)  as elastic in the long run as it is in the short run. 
D)  more or less elastic in the long run versus the short run depending upon supply conditions.

Question 17

A 2 percent rise in the price of a good leads to a 2 percent decrease in quantity demanded. The absolute price elasticity of demand is

Accepted Answer

A)  5. 
B)  10. 
C)  0.1. 
D)  1.0. 
A)  5. 
B)  10. 
C)  0.1. 
D)  1.0.

Question 18

All of the following are true regarding the relationship between price elasticity of demand and total revenues EXCEPT

Accepted Answer

A)  when market demand is elastic, if the market price declines, then total revenues will rise. 
B)  when market demand is unit elastic, if the market price rises, then total revenues will not change. 
C)  when market demand is inelastic, if the market price falls, then total revenues will decrease. 
D)  when market demand is inelastic, if the market price rises, then total revenues will decrease. 
A)  when market demand is elastic, if the market price declines, then total revenues will rise. 
B)  when market demand is unit elastic, if the market price rises, then total revenues will not change. 
C)  when market demand is inelastic, if the market price falls, then total revenues will decrease. 
D)  when market demand is inelastic, if the market price rises, then total revenues will decrease.

Question 19

The price elasticity of demand is

Accepted Answer

A)  always negative. 
B)  sometimes positive. 
C)  always positive. 
D)  constant along the demand curve. 
A)  always negative. 
B)  sometimes positive. 
C)  always positive. 
D)  constant along the demand curve.

Question 20

If your income rises by 15 percent and, as a result, you buy more steak, then steak is a(n)

Accepted Answer

A)  substitute. 
B)  normal good. 
C)  complement. 
D)  inferior good. 
A)  substitute. 
B)  normal good. 
C)  complement. 
D)  inferior good.

Exam 19: Demand and Supply Elasticity

If demand is unit-elastic throughout the demand curve, then total revenues are

-In the above table, the cross price elasticity of demand for good Y with good X when PX rises from $10 to $12 is

If the quantity supplied of candy increases by 10% when the price of candy increases by 20%, which of the following is true?

-Use the above table. Based on the information in the table, jam is a(n)

If the demand curve for a product is vertical, then

What is the price elasticity of demand? How is the price elasticity of demand calculated?

If price decreases by 10 percent and quantity demanded increases by 30 percent, the price elasticity of demand will be

Suppose the absolute price elasticity of demand for newsletter subscriptions is 1.3. In order to increase the total revenues from subscriptions, the publishers should

When Fred's income was $100 per week, 10 units of good X were demanded. Now his income is $150 per week and 12 units of good X are demanded. Using the percentage change formula, the income elasticity of demand for good X equals ________.

A movie theatre raises ticket prices from $8 to $10 in order to raise revenues. The theatre's management is assuming the absolute value of the price elasticity of demand for tickets is

If the cross price elasticity of demand between two commodities is positive, then these commodities are

If the price of gasoline increases from $2.50 per gallon to $3.00 per gallon and the quantity demanded goes down from 120 million gallons per week to 115 million gallons per week, the absolute value of price elasticity of demand in that price range is approximately

-Refer to the above table. Demand is unit elastic between the prices of

Which of the following is NOT a determinant of the price elasticity of demand?

If the absolute price elasticity of demand for a product is less than 1, then

The demand curve for petroleum should be

A 2 percent rise in the price of a good leads to a 2 percent decrease in quantity demanded. The absolute price elasticity of demand is

All of the following are true regarding the relationship between price elasticity of demand and total revenues EXCEPT

The price elasticity of demand is

If your income rises by 15 percent and, as a result, you buy more steak, then steak is a(n)

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

-In the above table, the cross price elasticity of demand for good Y with good X when P_X rises from $10 to $12 is