Question 1

When the price elasticity of demand for a good equals

Accepted Answer

A)  0, the demand curve is vertical. 
B)  0, the demand curve is horizontal. 
C)  1, the demand curve is vertical. 
D)  1, the demand curve is horizontal.

Question 2

The worst drought in over 50 years has decimated crops of soy beans and corn in the United States. (Source: New York Times, August 10, 2012). Because the production of corn has decreased, prices are expected to increase by 25 percent. These data are insufficient for calculating the elasticity of demand because we also need to know the

Accepted Answer

A)  percentage increase in income. 
B)  percentage increase in quantity. 
C)  percentage decrease in quantity. 
D)  increase in bushels per acre.

Question 3

Suppose the price of flour increases from $0.80 to $1.00 a pound and the quantity demanded decreases from 100 pounds to 95 pounds. Using the midpoint method, what is the price elasticity of demand for flour? Is the demand for flour elastic or inelastic?

Accepted Answer

The answer of Suppose the price of flour increases from...

Question 4

If the quantity demanded of hamburgers increases by 20 percent when the price decreases by 5 percent, then the price elasticity of demand is

Accepted Answer

A)  0.25. 
B)  4.0. 
C)  20.0. 
D)  5.0.

Question 5

The supply of lettuce in the short run will be ________ than the supply in the long run and ________ than the supply today.

Accepted Answer

A)  more elastic; less elastic 
B)  more elastic; more elastic 
C)  less elastic; more elastic 
D)  less elastic; less elastic

Question 6

The income elasticity of demand for restaurant meals is 1.61. So

Accepted Answer

A)  if income increases by 16.1 percent, the quantity demanded of restaurant meals will increase by 10 percent. 
B)  if income increases by 10 percent, the quantity demanded of restaurant meals will increase by 16.1 percent. 
C)  restaurant meals are an income elastic normal good. 
D)  Both answers B and C are correct.

Question 7

Most corn produced in the United States is used for animal feed. The demand for corn is inelastic. These facts mean that

Accepted Answer

A)  there are many substitutes for corn in feeding animals. 
B)  there are few substitutes for corn in feeding animals. 
C)  there are no substitutes for corn in feeding animals. 
D)  animals are not buying the corn themselves, so we cannot learn anything from these facts.

Question 8

-The table above gives the demand schedule for peas. Between point A and point B, the price elasticity of demand equals

Accepted Answer

A)  0.11. 
B)  0.50. 
C)  0.22. 
D)  9.09.

Question 9

If the price of one good increases by 3 percent and the quantity demanded of another good increases by 2 percent, the cross elasticity is ________ and the two goods are ________.

Accepted Answer

A)  2/3, substitutes 
B)  2/3, complements 
C)  3/2, complements 
D)  3/2, substitutes

Question 10

-The figure above illustrates a linear demand curve. If the price falls from $6 to $4

Accepted Answer

A)  total revenue increases. 
B)  total revenue decreases. 
C)  total revenue remains unchanged. 
D)  quantity demanded increases by more than 100 percent.

Question 11

When the price of bananas rises 2 percent, the quantity demanded of peanut butter falls 4 percent.
a) What is the cross elasticity of demand between these two goods?
b) How are these goods related?
c) If the price of bananas rises, how will that affect the demand curve for peanut butter?

Accepted Answer

The answer of When the price of bananas rises 2...

Question 12

A decrease in the price of eggs from $1.50 to $1.30 per dozen resulted in an increase in egg purchases in two cities. In Philadelphia, daily egg purchases increased from 6000 to 8000 dozens; in nearby Dover, Delaware, daily egg purchases increased from 300 to 400 dozens. The price elasticity of demand is therefore

Accepted Answer

A)  lower in the smaller city as would be expected. 
B)  greater in the smaller city as would be expected. 
C)  certainly affected by population differences in different markets. 
D)  the same in Philadelphia as in Dover.

Question 13

If an increase in price results in no change in total revenue, then demand must be

Accepted Answer

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

Question 14

Producers' total revenue will decrease if

Accepted Answer

A)  income increases and the good is a normal good. 
B)  the price rises and demand is elastic. 
C)  the price rises and demand is inelastic. 
D)  income falls and the good is an inferior good.

Question 15

-The above table gives the demand schedule for Billy Bob's BBQ ribs. An increase in the price of a pound of ribs will lead to a decrease in total revenue when

Accepted Answer

A)  demand is inelastic. 
B)  the demand curve is vertical. 
C)  the price increase occurs over the price range of 0 to $5. 
D)  the price increase occurs over the price range of $5 to $10.

Question 16

Suppose Sandy's Candies wants to increase its total revenues. If Sandy increases the price of her candy, she must be assuming that the demand for candy is

Accepted Answer

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

Question 17

"Last October, due to an early frost, the price of a pumpkin increased by 10 percent compared to the price in the previous Halloween season. As a result, the quantity demanded county-wide decreased from 2 million to 1.5 million." Based on this statement, it is certain that the

Accepted Answer

A)  demand curve for Halloween costumes shifted leftward. 
B)  price elasticity of demand for pumpkins decreased from its value in previous years. 
C)  demand curve for pumpkins shifted leftward. 
D)  total revenue from the sale of pumpkins decreased.

Question 18

Along a straight-line demand curve, as the price falls the

Accepted Answer

A)  demand becomes more elastic. 
B)  demand becomes less elastic. 
C)  elasticity of demand is constant. 
D)  demand is always unitary elastic.

Question 19

The concept of elasticity of supply measures the responsiveness of the

Accepted Answer

A)  quantity supplied to a change in the price. 
B)  price to a change in the quantity supplied. 
C)  quantity supplied to a change in the quantity demanded. 
D)  quantity demanded to a change in the quantity supplied.

Question 20

Bus rides and canned soup are inferior goods, so the ________ elasticity of demand is ________.

Accepted Answer

A)  cross; positive 
B)  income; positive 
C)  income; negative 
D)  cross; negative

Exam 4: Elasticity