Question 1

Assume that pizza and hamburgers are the only food items available to consumers.If the price of pizza increases, other factors constant, then which of the following will definitely happen?

Accepted Answer

A) Total revenues received by pizza sellers will increase. 
B) Total revenues received by pizza sellers will decrease. 
C) Total revenues received by hamburger sellers will increase. 
D) Total revenues received by hamburger sellers will decrease.

Question 2

If the supply of product X is perfectly elastic, an increase in the demand for it will increase

Accepted Answer

A) equilibrium quantity but reduce equilibrium price. 
B) equilibrium quantity, but equilibrium price will be unchanged. 
C) equilibrium price but reduce equilibrium quantity. 
D) equilibrium price, but equilibrium quantity will be unchanged.

Question 3

Other things the same, if a price change causes total revenue to change in the opposite direction, demand is

Accepted Answer

A) perfectly inelastic. 
B) relatively elastic. 
C) relatively inelastic. 
D) of unit elasticity.

Question 4

What is the most likely effect of the development of rental movies and online movie streaming on the movie theater (or cinema) industry?

Accepted Answer

A) decreased costs of producing movies 
B) increased demand for movie theater tickets 
C) movie theater tickets become an inferior good 
D) increased price elasticity of demand for movie theater tickets

Question 5

The price of old baseball cards rises rapidly with increases in demand because

Accepted Answer

A) the supply of old baseball cards is price inelastic. 
B) the supply of old baseball cards in price elastic. 
C) the demand for old baseball cards is price inelastic. 
D) the demand for old baseball cards is price elastic.

Question 6

The law of supply suggests that the price-elasticity of supply is

Accepted Answer

A) positive. 
B) negative. 
C) always greater than 1. 
D) always less than 1.

Question 7

Suppose the price elasticity of supply for crude oil is 2.5.How much would price have to rise to increase production by 20 percent?

Accepted Answer

A) 8 percent 
B) 12.5 percent 
C) 20 percent 
D) 45 percent

Question 8

An auto rental company lowers the price of its rentals to increase its market share.The price cut increases quantity demanded, but total revenue decreases.This result suggests that over this price range, the demand for the auto rentals is

Accepted Answer

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

Question 9

If the demand for a product is elastic, then

Accepted Answer

A) a higher tax on the product will generate more tax revenue. 
B) a higher tax on the product will generate less tax revenue. 
C) total revenue will decrease as price decreases. 
D) total revenue will remain constant as price increases.

Question 10

Economists distinguish among the immediate market period, the short run, and the long run by noting that

Accepted Answer

A) supply is most elastic in the short run and least elastic in the immediate market period. 
B) demand is most elastic in the short run, and least elastic in the long run. 
C) supply is most elastic in the long run and least elastic in the immediate market period. 
D) supply is most elastic in the short run and least elastic in the long run.

Question 11

In which of the following instances will total revenue decline?

Accepted Answer

A) Price rises and supply is elastic. 
B) Price falls and demand is elastic. 
C) Price rises and demand is inelastic. 
D) Price rises and demand is elastic.

Question 12

The more time consumers have to adjust to a change in price,

Accepted Answer

A) the smaller will be the price elasticity of demand. 
B) the greater will be the price elasticity of demand. 
C) the more likely the product is a normal good. 
D) the more likely the product is an inferior good.

Question 13

If the price elasticity of demand for a product is 2.5, then a price cut from $2.00 to $1.80 will

Accepted Answer

A) increase the quantity demanded by about 2.5 percent. 
B) decrease the quantity demanded by about 2.5 percent. 
C) increase the quantity demanded by about 25 percent. 
D) increase the quantity demanded by about 250 percent.

Question 14

The supply curve of antique reproductions is

Accepted Answer

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

Question 15

Which of the following goods (with their respective income elasticity coefficients in parentheses) will most likely suffer a decline in demand during a recession?

Accepted Answer

A) dinner at a nice restaurant (+1.8) 
B) chicken purchased at the grocery store for preparation at home (+0.25) 
C) second-hand clothing (-0.6) 
D) plasma screen and LCD TVs (+4.2)

Question 16

In some markets consumers may buy many different brands of a product.Which of the statements below best represents a situation where demand for a particular brand would be very elastic?

Accepted Answer

A) "The different brands are almost identical.I always buy the cheapest." 
B) "I use so little of that product that when I do buy it, I don't pay much attention to the price." 
C) "The brand I buy is so superior to other available brands that I hardly consider the others." 
D) "I pinch pennies in buying other products, but like most people, I feel I owe it to myself to get the best brand of this product."

Question 17

Whenever a product is put on special sale at a discounted price, total revenue from the product increases.This indicates that the coefficient of elasticity for the product is greater than 1.

Accepted Answer

A) True 
 B)False

Question 18

A normal good would have a positive price-elasticity of demand.

Accepted Answer

A) True 
 B)False

Question 19

The Bear Corporation finds that its total spending on machine parts increases after the price of machine parts falls, other things being equal.Which of the following is true about the Bear Corporation's demand for machine parts with the price change?

Accepted Answer

A) It is unit elastic. 
B) It is price elastic. 
C) It is price inelastic. 
D) It is perfectly inelastic.

Question 20

A positive cross-elasticity of demand between two goods indicates that the two goods are both normal goods.

Accepted Answer

A) True 
 B)False

Exam 6: Elasticity

Assume that pizza and hamburgers are the only food items available to consumers.If the price of pizza increases, other factors constant, then which of the following will definitely happen?

If the supply of product X is perfectly elastic, an increase in the demand for it will increase

Other things the same, if a price change causes total revenue to change in the opposite direction, demand is

What is the most likely effect of the development of rental movies and online movie streaming on the movie theater (or cinema) industry?

The price of old baseball cards rises rapidly with increases in demand because

The law of supply suggests that the price-elasticity of supply is

Suppose the price elasticity of supply for crude oil is 2.5.How much would price have to rise to increase production by 20 percent?

An auto rental company lowers the price of its rentals to increase its market share.The price cut increases quantity demanded, but total revenue decreases.This result suggests that over this price range, the demand for the auto rentals is

If the demand for a product is elastic, then

Economists distinguish among the immediate market period, the short run, and the long run by noting that

In which of the following instances will total revenue decline?

The more time consumers have to adjust to a change in price,

If the price elasticity of demand for a product is 2.5, then a price cut from $2.00 to $1.80 will

The supply curve of antique reproductions is

Which of the following goods (with their respective income elasticity coefficients in parentheses) will most likely suffer a decline in demand during a recession?

In some markets consumers may buy many different brands of a product.Which of the statements below best represents a situation where demand for a particular brand would be very elastic?

Whenever a product is put on special sale at a discounted price, total revenue from the product increases.This indicates that the coefficient of elasticity for the product is greater than 1.

A normal good would have a positive price-elasticity of demand.

The Bear Corporation finds that its total spending on machine parts increases after the price of machine parts falls, other things being equal.Which of the following is true about the Bear Corporation's demand for machine parts with the price change?

A positive cross-elasticity of demand between two goods indicates that the two goods are both normal goods.