Question 1

If the price elasticity of demand for a good is 1.2, then a 3 percent decrease in price results in a

Accepted Answer

A)  0.4 percent increase in the quantity demanded. 
B)  2.5 percent increase in the quantity demanded. 
C)  3.6 percent increase in the quantity demanded. 
D)  6 percent increase in the quantity demanded. 
A)  0.4 percent increase in the quantity demanded. 
B)  2.5 percent increase in the quantity demanded. 
C)  3.6 percent increase in the quantity demanded. 
D)  6 percent increase in the quantity demanded.

Question 2

Scenario 5-2
Suppose the demand function for good X is given by:   where   is the quantity demanded of good X,   is the price of good X, and   is the price of good Y, which is related to good X.
-Refer to Scenario 5-2. Using the midpoint method, if the price of good X is constant at $10 and the price of good Y decreases from $10 to $8, the cross price elasticity of demand is about

Accepted Answer

A)  0.57, and X and Y are substitutes. 
B)  -0.22, and X and Y are complements. 
C)  -0.80, and X and Y are complements. 
D)  -2.57, and X and Y are complements. 
A)  0.57, and X and Y are substitutes. 
B)  -0.22, and X and Y are complements. 
C)  -0.80, and X and Y are complements. 
D)  -2.57, and X and Y are complements.

Question 3

Suppose goods A and B are substitutes for each other. We would expect the cross-price elasticity between these two goods to be

Accepted Answer

A)  positive. 
B)  negative. 
C)  either positive or negative. It depends whether A and B are normal goods or inferior goods. 
D)  either positive or negative. It depends whether the current price level is on the elastic or inelastic portion of the demand curve. 
A)  positive. 
B)  negative. 
C)  either positive or negative. It depends whether A and B are normal goods or inferior goods. 
D)  either positive or negative. It depends whether the current price level is on the elastic or inelastic portion of the demand curve.

Question 4

In the case of perfectly inelastic demand,

Accepted Answer

A)  the change in quantity demanded equals the change in price. 
B)  the percentage change in quantity demanded equals the percentage change in price. 
C)  infinitely-large changes in quantity demanded result from very small changes in the price. 
D)  quantity demanded stays the same whenever price changes. 
A)  the change in quantity demanded equals the change in price. 
B)  the percentage change in quantity demanded equals the percentage change in price. 
C)  infinitely-large changes in quantity demanded result from very small changes in the price. 
D)  quantity demanded stays the same whenever price changes.

Question 5

Suppose the price of natural gas, a typical fuel for heating homes, rises in January in Alaska. Would you expect the price elasticity of demand for natural gas to more inelastic immediately after the price increase or at some point in the future?

Accepted Answer

The price elasticity

Question 6

Suppose demand is given by the equation:   At what price will total revenue be maximized?

Accepted Answer

Total revenue will be maximize

Question 7

If the demand for textbooks is inelastic, then a decrease in the price of textbooks will

Accepted Answer

A)  increase total revenue of textbook sellers. 
B)  decrease total revenue of textbook sellers. 
C)  not change total revenue of textbook sellers. 
D)  There is not enough information to answer this question. 
A)  increase total revenue of textbook sellers. 
B)  decrease total revenue of textbook sellers. 
C)  not change total revenue of textbook sellers. 
D)  There is not enough information to answer this question.

Question 8

If demand is price inelastic, then

Accepted Answer

A)  buyers do not respond much to a change in price. 
B)  buyers respond substantially to a change in price, but the response is very slow. 
C)  buyers do not alter their quantities demanded much in response to advertising, fads, or general changes in tastes. 
D)  the demand curve is very flat. 
A)  buyers do not respond much to a change in price. 
B)  buyers respond substantially to a change in price, but the response is very slow. 
C)  buyers do not alter their quantities demanded much in response to advertising, fads, or general changes in tastes. 
D)  the demand curve is very flat.

Question 9

Scenario 5-4
The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%.
-Refer to Scenario 5-4. Total consumer spending on aged cheddar cheese will

Accepted Answer

A)  increase, and total consumer spending on bread will increase. 
B)  increase, and total consumer spending on bread will decrease. 
C)  decrease, and total consumer spending on bread will increase. 
D)  decrease, and total consumer spending on bread will decrease. 
A)  increase, and total consumer spending on bread will increase. 
B)  increase, and total consumer spending on bread will decrease. 
C)  decrease, and total consumer spending on bread will increase. 
D)  decrease, and total consumer spending on bread will decrease.

Question 10

Figure 5-12  
-Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point X and point Y is

Accepted Answer

A)  0.4. 
B)  1. 
C)  2. 
D)  2.5. 
A)  0.4. 
B)  1. 
C)  2. 
D)  2.5.

Question 11

Suppose a market has the demand function Qd=20-0.5P. At what price will total revenue be maximized?

Accepted Answer

The answer of Suppose a market has the demand function...

Question 12

Suppose the cross-price elasticity of demand between hot dogs and mustard is -2.00. This implies that a 20 percent increase in the price of hot dogs will cause the quantity of mustard purchased to

Accepted Answer

A)  fall by 200 percent. 
B)  fall by 40 percent. 
C)  rise by 200 percent. 
D)  rise by 40 percent. 
A)  fall by 200 percent. 
B)  fall by 40 percent. 
C)  rise by 200 percent. 
D)  rise by 40 percent.

Question 13

Suppose that Jane enjoys Diet Coke so much that she consumes one can every day. Although she enjoys gourmet cheese, she consumes it sporadically. If the price of Diet Coke rises, Jane decreases her consumption by only a very small amount. But if the price of gourmet cheese rises, Jane decreases her consumption by a lot. These examples illustrate the importance of

Accepted Answer

A)  the availability of close substitutes in determining the price elasticity of demand. 
B)  a necessity versus a luxury in determining the price elasticity of demand. 
C)  the definition of a market in determining the price elasticity of demand. 
D)  the time horizon in determining the price elasticity of demand. 
A)  the availability of close substitutes in determining the price elasticity of demand. 
B)  a necessity versus a luxury in determining the price elasticity of demand. 
C)  the definition of a market in determining the price elasticity of demand. 
D)  the time horizon in determining the price elasticity of demand.

Question 14

In January the price of dark chocolate candy bars was $2.00, and Willy's Chocolate Factory produced 80 pounds. In February the price of dark chocolate candy bars was $2.50, and Willy's produced 110 pounds. In March the price of dark chocolate candy bars was $3.00, and Willy's produced 140 pounds. The price elasticity of supply of Willy's dark chocolate candy bars was about

Accepted Answer

A)  0.70 when the price increased from $2.00 to $2.50 and 0.76 when the price increased from $2.50 to $3.00. 
B)  0.88 when the price increased from $2.00 to $2.50 and 1.08 when the price increased from $2.50 to $3.00. 
C)  1.42 when the price increased from $2.00 to $2.50 and 1.32 when the price increased from $2.50 to $3.00. 
D)  1.50 when the price increased from $2.00 to $2.50 and 1.18 when the price increased from $2.50 to $3.00. 
A)  0.70 when the price increased from $2.00 to $2.50 and 0.76 when the price increased from $2.50 to $3.00. 
B)  0.88 when the price increased from $2.00 to $2.50 and 1.08 when the price increased from $2.50 to $3.00. 
C)  1.42 when the price increased from $2.00 to $2.50 and 1.32 when the price increased from $2.50 to $3.00. 
D)  1.50 when the price increased from $2.00 to $2.50 and 1.18 when the price increased from $2.50 to $3.00.

Question 15

If the cross-price elasticity of demand for two goods is negative, then the two goods are complements.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements about the consumers' responses to rising gasoline prices is correct?

Accepted Answer

A)  About 10 percent of the long-run reduction in quantity demanded arises because people drive less and about 90 percent arises because they switch to more fuel-efficient cars. 
B)  About 90 percent of the long-run reduction in quantity demanded arises because people drive less and about 10 percent arises because they switch to more fuel-efficient cars. 
C)  About half of the long-run reduction in quantity demanded arises because people drive less and about half arises because they switch to more fuel-efficient cars. 
D)  Because gasoline is a necessity, consumers do not decrease their quantity demanded in either the short run or the long run. 
A)  About 10 percent of the long-run reduction in quantity demanded arises because people drive less and about 90 percent arises because they switch to more fuel-efficient cars. 
B)  About 90 percent of the long-run reduction in quantity demanded arises because people drive less and about 10 percent arises because they switch to more fuel-efficient cars. 
C)  About half of the long-run reduction in quantity demanded arises because people drive less and about half arises because they switch to more fuel-efficient cars. 
D)  Because gasoline is a necessity, consumers do not decrease their quantity demanded in either the short run or the long run.

Question 17

Figure 5-12  
-Refer to Figure 5-12. If the price decreased from $36 to $12, total revenue would

Accepted Answer

A)  increase by $4,800, and demand is elastic between points X and Z. 
B)  increase by $7,200, and demand is elastic between points X and Z. 
C)  decrease by $4,800, and demand is inelastic between points X and Z. 
D)  decrease by $7,200, and demand is inelastic between points X and Z. 
A)  increase by $4,800, and demand is elastic between points X and Z. 
B)  increase by $7,200, and demand is elastic between points X and Z. 
C)  decrease by $4,800, and demand is inelastic between points X and Z. 
D)  decrease by $7,200, and demand is inelastic between points X and Z.

Question 18

If the price elasticity of demand for a good is 2.0, then a 10 percent increase in price results in a

Accepted Answer

A)  0.2 percent decrease in the quantity demanded. 
B)  5 percent decrease in the quantity demanded. 
C)  20 percent decrease in the quantity demanded. 
D)  40 percent decrease in the quantity demanded. 
A)  0.2 percent decrease in the quantity demanded. 
B)  5 percent decrease in the quantity demanded. 
C)  20 percent decrease in the quantity demanded. 
D)  40 percent decrease in the quantity demanded.

If the price elasticity of demand for a good is 1.2, then a 3 percent decrease in price results in a

Suppose goods A and B are substitutes for each other. We would expect the cross-price elasticity between these two goods to be

In the case of perfectly inelastic demand,

Suppose the price of natural gas, a typical fuel for heating homes, rises in January in Alaska. Would you expect the price elasticity of demand for natural gas to more inelastic immediately after the price increase or at some point in the future?

Suppose demand is given by the equation: At what price will total revenue be maximized?

If the demand for textbooks is inelastic, then a decrease in the price of textbooks will

If demand is price inelastic, then

Figure 5-12 -Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point X and point Y is

Suppose a market has the demand function Qd=20-0.5P. At what price will total revenue be maximized?

Suppose the cross-price elasticity of demand between hot dogs and mustard is -2.00. This implies that a 20 percent increase in the price of hot dogs will cause the quantity of mustard purchased to

If the cross-price elasticity of demand for two goods is negative, then the two goods are complements.

Which of the following statements about the consumers' responses to rising gasoline prices is correct?

Figure 5-12 -Refer to Figure 5-12. If the price decreased from $36 to $12, total revenue would

If the price elasticity of demand for a good is 2.0, then a 10 percent increase in price results in a

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Costs of Production

Firms in Competitive Markets

Monopoly

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

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Exam 5: Elasticity and Its Application

If the price elasticity of demand for a good is 1.2, then a 3 percent decrease in price results in a

Suppose goods A and B are substitutes for each other. We would expect the cross-price elasticity between these two goods to be

In the case of perfectly inelastic demand,

Suppose the price of natural gas, a typical fuel for heating homes, rises in January in Alaska. Would you expect the price elasticity of demand for natural gas to more inelastic immediately after the price increase or at some point in the future?

Suppose demand is given by the equation: At what price will total revenue be maximized?

If the demand for textbooks is inelastic, then a decrease in the price of textbooks will

If demand is price inelastic, then

Figure 5-12 -Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point X and point Y is

Suppose a market has the demand function Qd=20-0.5P. At what price will total revenue be maximized?

Suppose the cross-price elasticity of demand between hot dogs and mustard is -2.00. This implies that a 20 percent increase in the price of hot dogs will cause the quantity of mustard purchased to

If the cross-price elasticity of demand for two goods is negative, then the two goods are complements.

Which of the following statements about the consumers' responses to rising gasoline prices is correct?

Figure 5-12 -Refer to Figure 5-12. If the price decreased from $36 to $12, total revenue would

If the price elasticity of demand for a good is 2.0, then a 10 percent increase in price results in a

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Costs of Production

Firms in Competitive Markets

Monopoly

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

Filters