Question 1

The price of the good multiplied by the quantity sold is its

Accepted Answer

A)  total revenue. 
B)  total cost. 
C)  total spending. 
D)  total income. 
E)  total quantity.

Question 2

During last year the price of regular unleaded gasoline in Oakland,California increased 11.0 percent.If the price elasticity of demand for gasoline was 0.13,the price hike means that the quantity demanded decreased by

Accepted Answer

A)  1.43 percent. 
B)  8.46 percent. 
C)  0.16 percent. 
D)  4.31 percent. 
E)  6.46 percent.

Question 3

What happens to the price elasticity of demand moving down along a downward-sloping,linear demand curve?

Accepted Answer

The answer of What happens to the price elasticity of...

Question 4

If the price of a DVD falls from $20 to $12 and the quantity of DVDs supplied decreases from 118,000 per hour to 100,000 per hour,using the midpoint formula the elasticity of supply equals

Accepted Answer

A)  0.33. 
B)  2.94. 
C)  3.08. 
D)  0.23. 
E)  -3.08.

Question 5

The long-run price elasticity of demand for electricity is ________ the short-run price elasticity of demand for electricity.

Accepted Answer

A)  greater than 
B)  less than 
C)  equal to 
D)  not comparable to 
E)  unrelated to

Question 6

Suppose the price of a box of cereal rises from $4 to $6.Using the midpoint method,what is the percentage change in price?

Accepted Answer

A)  50 percent 
B)  40 percent 
C)  33 percent 
D)  67 percent 
E)  None of the above answers is correct.

Question 7

Supply is unit elastic when the

Accepted Answer

A)  supply curve is upward sloping. 
B)  price elasticity of supply is positive. 
C)  percentage change in the quantity supplied equals the percentage change in price. 
D)  supply curve is horizontal. 
E)  supply curve is vertical.

Question 8

If demand is price inelastic and the price is lowered,which of the following occurs?

Accepted Answer

A)  The quantity sold decreases. 
B)  The total expenditure increases and the total revenue decreases. 
C)  The total revenue of the firms selling the product is unchanged. 
D)  The total revenue of the firms selling the product decreases. 
E)  The total expenditure decreases and the total revenue increases.

Question 9

When income increases by 6 percent,the demand for potatoes decreases by 2 percent.The income elasticity of demand for potatoes equals

Accepted Answer

A)  -2.00. 
B)  3.00. 
C)  -3.00. 
D)  0.33. 
E)  -0.33.

Question 10

The price of one bedroom apartments in Cheyenne increased from $55,000 to $65,000 and the quantity of apartment for sale increased from 25 to 30.Using the midpoint method,the price elasticity of supply for apartments in Cheyenne is equal to

Accepted Answer

A)  0.916. 
B)  0.75. 
C)  1.09. 
D)  2.18. 
E)  0.08.

Question 11

The cross elasticity of demand

Accepted Answer

A)  means that an increase in the demand for one good leads to a decrease in demand for another good. 
B)  measures how a change in the price of one good impacts the demand for another good. 
C)  measures how a change in supply impacts the demand for the good. 
D)  means that an increase in the price of one good leads to an increase in the price of another good. 
E)  measures how a change in income impacts the demand for the good.

Question 12

Perfectly inelastic demand means that consumers

Accepted Answer

A)  are willing to buy any quantity of the good at a given price, but none at higher prices. 
B)  decrease their consumption as price rises. 
C)  increase their consumption as price rises. 
D)  will buy a certain quantity, regardless of price. 
E)  will buy a huge, almost infinite amount more, if the price falls just a little.

Question 13

If demand is inelastic and the price falls,the total revenue

Accepted Answer

A)  rises. 
B)  falls. 
C)  remains constant. 
D)  might rise, fall, or remain constant. 
E)  becomes negative.

Question 14

If the price of a one good increases and the quantity demanded of a different good decreases,then these two goods are

Accepted Answer

A)  substitutes. 
B)  normal goods. 
C)  inferior goods. 
D)  inelastic goods. 
E)  complements.

Question 15

What is the price elasticity of supply? List and briefly define three cases of the price elasticity of supply.

Accepted Answer

The answer of What is the price elasticity of supply?...

Question 16

Which of the following is true?
I.The supply of a good is inelastic if when its price changes,the percentage change in the quantity supplied exceeds the percentage change in price.
II.Price elasticity of supply equals the percentage change in the quantity supplied divided by the percentage change in price.
III.If demand is price elastic,a rise in price leads to a decrease in total revenue.

Accepted Answer

A)  Only I 
B)  Only II 
C)  Only III 
D)  I and II 
E)  II and III

Question 17

Explain the total revenue test.

Accepted Answer

The answer of Explain the total revenue test....

Question 18

If a good has only a few,poor substitutes,is its demand elastic or inelastic?

Accepted Answer

The answer of If a good has only a few,poor...

Question 19

If beef and pork are substitutes for consumers,the cross elasticity of demand between the two products must be

Accepted Answer

A)  negative. 
B)  positive. 
C)  indeterminate. 
D)  elastic. 
E)  greater than 1.

Question 20

Suppose a decrease in demand causes the price to decrease from $4 to $3 and the quantity to decrease from 1,000 to 700.Using the midpoint method,the elasticity of supply equals

Accepted Answer

A)  0.81. 
B)  1.24. 
C)  2.83. 
D)  0.18. 
E)  None of the above answers is correct.

Exam 5: Elasticities of Demand and Supply