Question 1

If goods X and Y are complements, then the cross price elasticity of demand will be

Accepted Answer

A)  elastic. 
B)  greater than zero but less than 1. 
C)  negative. 
D)  positive. 
A)  elastic. 
B)  greater than zero but less than 1. 
C)  negative. 
D)  positive.

Question 2

Relative percentage changes are used in measuring price elasticity of demand, so that

Accepted Answer

A)  it does not matter whether price increases or decreases when calculating the elasticity. 
B)  it does not matter what units are used to measure prices or quantities. 
C)  we always obtain a positive number. 
D)  larger numbers indicate greater responsiveness. 
A)  it does not matter whether price increases or decreases when calculating the elasticity. 
B)  it does not matter what units are used to measure prices or quantities. 
C)  we always obtain a positive number. 
D)  larger numbers indicate greater responsiveness.

Question 3

-In the above figure, through which range would the demand for this good be most inelastic?

Accepted Answer

A)  A-B 
B)  B-E 
C)  E-F 
D)  G-H 
A)  A-B 
B)  B-E 
C)  E-F 
D)  G-H

Question 4

The more sensitive people are to a change in price, the

Accepted Answer

A)  greater a change in price must be to induce a certain change in quantity demanded. 
B)  greater is the price elasticity of demand. 
C)  smaller the price elasticity of demand. 
D)  closer the price elasticity of demand is to one. 
A)  greater a change in price must be to induce a certain change in quantity demanded. 
B)  greater is the price elasticity of demand. 
C)  smaller the price elasticity of demand. 
D)  closer the price elasticity of demand is to one.

Question 5

-Refer to the above table. For which prices is demand unit-elastic?

Accepted Answer

A)  In a range of prices below $6.50 
B)  In a range of prices above $6.50 
C)  In a range of prices between $5 and $10 
D)  In a range of prices between $6 and $6.50 
A)  In a range of prices below $6.50 
B)  In a range of prices above $6.50 
C)  In a range of prices between $5 and $10 
D)  In a range of prices between $6 and $6.50

Question 6

Which of the following goods is likely to have the highest income elasticity?

Accepted Answer

A)  A designer blouse 
B)  Tomato soup 
C)  Hamburger 
D)  Can of tuna 
A)  A designer blouse 
B)  Tomato soup 
C)  Hamburger 
D)  Can of tuna

Question 7

If the price of a good increases and the total revenue also increases, the good has a(n)

Accepted Answer

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

Question 8

A decrease in total revenue will result if

Accepted Answer

A)  demand is inelastic and price increases. 
B)  demand is elastic and price decreases. 
C)  demand is inelastic and price decreases. 
D)  demand is unitary elastic and price decreases. 
A)  demand is inelastic and price increases. 
B)  demand is elastic and price decreases. 
C)  demand is inelastic and price decreases. 
D)  demand is unitary elastic and price decreases.

Question 9

If the cross price elasticity of demand between Los Angeles Lakers professional basketball tickets and Los Angeles Dodgers professional baseball tickets is positive, then the two goods are

Accepted Answer

A)  substitutes. 
B)  unrelated. 
C)  complements. 
D)  not related. 
A)  substitutes. 
B)  unrelated. 
C)  complements. 
D)  not related.

Question 10

-Refer to the above table. What is the absolute price elasticity of demand if a price falls from $7.50 to $7?

Accepted Answer

A)  10 
B)  1.38 
C)  0.724 
D)  0.1 
A)  10 
B)  1.38 
C)  0.724 
D)  0.1

Question 11

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

Accepted Answer

A)  Existence of substitutes 
B)  Expenditures on the good as a share of a consumer's budget 
C)  The amount of time allowed for adjustment to changes in the price of the commodity 
D)  The price level in a country 
A)  Existence of substitutes 
B)  Expenditures on the good as a share of a consumer's budget 
C)  The amount of time allowed for adjustment to changes in the price of the commodity 
D)  The price level in a country

Question 12

-Refer to the above figure. The supply curve is

Accepted Answer

A)  elastic at high prices and inelastic at low prices. 
B)  unitary for all prices. 
C)  perfectly elastic. 
D)  perfectly inelastic. 
A)  elastic at high prices and inelastic at low prices. 
B)  unitary for all prices. 
C)  perfectly elastic. 
D)  perfectly inelastic.

Question 13

The absolute price elasticity of demand for a vertical demand curve

Accepted Answer

A)  is infinite. 
B)  is 1.0. 
C)  is 0. 
D)  depends on where one is on the demand curve. 
A)  is infinite. 
B)  is 1.0. 
C)  is 0. 
D)  depends on where one is on the demand curve.

Question 14

A perfectly horizontal demand curve has

Accepted Answer

A)  zero elasticity. 
B)  some positive finite elasticity. 
C)  negative elasticity. 
D)  perfect elasticity. 
A)  zero elasticity. 
B)  some positive finite elasticity. 
C)  negative elasticity. 
D)  perfect elasticity.

Question 15

If the absolute price elasticity of demand for concert tickets is 0.75, an increase in ticket prices will

Accepted Answer

A)  increase total revenue. 
B)  decrease total revenue. 
C)  not change the elasticity of demand. 
D)  not change total revenue. 
A)  increase total revenue. 
B)  decrease total revenue. 
C)  not change the elasticity of demand. 
D)  not change total revenue.

Question 16

-Refer to the above table. The price of Y decreases from $18 to $15. What is the cross price elasticity of demand between Y and X?

Accepted Answer

A)  -0.73 
B)  -1.0 
C)  +1.38 
D)  +1.83 
A)  -0.73 
B)  -1.0 
C)  +1.38 
D)  +1.83

Question 17

If an individual's income rises 40 percent and his clothing purchases increase 50 percent in response, the income elasticity for clothing by the individual is

Accepted Answer

A)  -0.8. 
B)  0.8. 
C)  1.25. 
D)  -1.25. 
A)  -0.8. 
B)  0.8. 
C)  1.25. 
D)  -1.25.

Question 18

When the price of a soft drink from the campus vending machine was $0.60 per can, 100 cans were sold each day. After the price increased to $0.75 per can, sales dropped to 85 cans per day. Over this range, the absolute price elasticity of demand for soft drinks was approximately equal to

Accepted Answer

A)  0.15. 
B)  0.60. 
C)  0.73. 
D)  1.67. 
A)  0.15. 
B)  0.60. 
C)  0.73. 
D)  1.67.

Question 19

-Use the above figure. When the price increases from $2 to $10, the absolute price elasticity of demand is

Accepted Answer

A)  0.67. 
B)  1.50. 
C)  0.25. 
D)  1.00. 
A)  0.67. 
B)  1.50. 
C)  0.25. 
D)  1.00.

Question 20

The value of the absolute price elasticity of demand for good X is 4. The absolute price elasticity for good Y is 1. Which good's quantity demanded is more responsive to a change in price?

Accepted Answer

A)  Good X. 
B)  Good Y. 
C)  They are equally responsive. 
D)  Not enough information is given. 
A)  Good X. 
B)  Good Y. 
C)  They are equally responsive. 
D)  Not enough information is given.

Exam 19: Demand and Supply Elasticity

If goods X and Y are complements, then the cross price elasticity of demand will be

Relative percentage changes are used in measuring price elasticity of demand, so that

-In the above figure, through which range would the demand for this good be most inelastic?

The more sensitive people are to a change in price, the

-Refer to the above table. For which prices is demand unit-elastic?

Which of the following goods is likely to have the highest income elasticity?

If the price of a good increases and the total revenue also increases, the good has a(n)

A decrease in total revenue will result if

If the cross price elasticity of demand between Los Angeles Lakers professional basketball tickets and Los Angeles Dodgers professional baseball tickets is positive, then the two goods are

-Refer to the above table. What is the absolute price elasticity of demand if a price falls from $7.50 to $7?

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

-Refer to the above figure. The supply curve is

The absolute price elasticity of demand for a vertical demand curve

A perfectly horizontal demand curve has

If the absolute price elasticity of demand for concert tickets is 0.75, an increase in ticket prices will

-Refer to the above table. The price of Y decreases from $18 to $15. What is the cross price elasticity of demand between Y and X?

If an individual's income rises 40 percent and his clothing purchases increase 50 percent in response, the income elasticity for clothing by the individual is

When the price of a soft drink from the campus vending machine was $0.60 per can, 100 cans were sold each day. After the price increased to $0.75 per can, sales dropped to 85 cans per day. Over this range, the absolute price elasticity of demand for soft drinks was approximately equal to

-Use the above figure. When the price increases from $2 to $10, the absolute price elasticity of demand is

The value of the absolute price elasticity of demand for good X is 4. The absolute price elasticity for good Y is 1. Which good's quantity demanded is more responsive to a change in price?

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