Question 1

The table below shows the quantities of automobiles, margarine, and coffee purchased by Ted at different levels of income.Table 6.2
 
-Suppose the price of a product is reduced from $10 to $6 and the quantity demanded increases from 40 to 60 units. From this we can conclude that the price elasticity of demand over this price range is equal to _____.

Accepted Answer

A) 1.2 
B) 1.25 
C) 0.80 
D) 0.20 
E) 0.5

Question 2

The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1
 
-A horizontal demand curve shows that demand for a good is _____.

Accepted Answer

A) ​perfectly inelastic 
B) ​moderately inelastic 
C) ​unit-elastic 
D) ​moderately elastic 
E) ​perfectly elastic

Question 3

Scenario 5.1
The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2PS1U1B1xS1U1B0. Assume that P = $8, I = 200, and PS1U1B1xS1U1B0 = $10.
-If price elasticity of supply is large and demand is price-inelastic, then the firm can earn positive profits by increasing the price.

Accepted Answer

A) True 
 B)False

Question 4

The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1
 
-When the cross-price elasticity of demand for two goods is a positive number, one can correctly conclude that:

Accepted Answer

A) the goods are normal goods. 
B) the goods are inferior goods. 
C) the goods are substitutes. 
D) the goods are complements. 
E) total revenue will increase when the price increases.

Question 5

The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1
 
-If = -1.50 for a good, and price of the good decreases by 20 percent, then:

Accepted Answer

A) quantity demanded will decrease by 30 percent. 
B) quantity demanded will increase by 30 percent. 
C) total revenue will remain unchanged. 
D) total revenue will decrease. 
E) quantity demanded will increase by 3 percent.

Question 6

The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1
 
-If the demand for beans tends to decline as incomes rise, everything else held constant, beans are _____.

Accepted Answer

A) luxury goods 
B) normal goods 
C) price sensitive 
D) not price sensitive 
E) inferior goods

Question 7

​Figure 5.3. The figure shows the wage rate and the quantity of labor supplied in an unskilled labor market. 
-Which of the following is explained by the price elasticity of demand for a product?

Accepted Answer

A) The effect of changes in price on the supply of the product 
B) The effect of changes in quantity on the supply of the product 
C) The effect of changes in quantity on the price of the product 
D) The effect of changes in price on the quantity demanded of the product 
E) The effect of changes in price on the quantity supplied of the product

Question 8

The table below shows the quantities of automobiles, margarine, and coffee purchased by Ted at different levels of income.Table 6.2
 
-Based on the information given in Table 6.2, margarine is:

Accepted Answer

A) an inferior good. 
B) a necessity. 
C) a normal good. 
D) a complementary good. 
E) a luxury good.

Question 9

​Figure 5.3. The figure shows the wage rate and the quantity of labor supplied in an unskilled labor market. 
-What would be the consequence of a 10 percent decrease in the price of a good for which price elasticity of demand is 5?

Accepted Answer

A) A 50 percent decrease in the quantity demanded 
B) A 5 percent increase in the quantity demanded 
C) A 50 percent increase in the quantity demanded 
D) A decrease in the quantity demanded by 0.2 units 
E) An increase in the quantity demanded by 0.2 units

Question 10

The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1
 
-If the demand for corn is elastic, then:

Accepted Answer

A) there are not many substitutes for the consumption of corn. 
B) the price elasticity of demand for corn is less than -1. 
C) a decrease in price will reduce total revenue for corn producers. 
D) an increase in price will increase total revenue for corn producers. 
E) consumers will continue buying the same quantity even if price increases.

Question 11

The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1
 
-An inferior good or service is any good or service for which:

Accepted Answer

A) an increase in price causes an increase in the quantity demanded. 
B) a decrease in price causes an increase in demand. 
C) an increase in price causes a decrease in the quantity demanded. 
D) an increase in the amount consumed causes a decrease in marginal utility. 
E) an increase in income causes a decrease in demand.

Question 12

Scenario 5.1
The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2PS1U1B1xS1U1B0. Assume that P = $8, I = 200, and PS1U1B1xS1U1B0 = $10.
-If supply is price-inelastic and demand is price-elastic, then the firm can earn positive profits by increasing the price.

Accepted Answer

A) True 
 B)False

Question 13

The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1
 
-An economic survey observed that a 20 percent cut in the price of a certain line of women's clothing, almost doubled the quantity demanded of the clothing. This led economists to conclude that the demand for this line of clothing is _____.

Accepted Answer

A) highly elastic 
B) highly inelastic 
C) unit-elastic 
D) perfectly elastic 
E) perfectly inelastic

Question 14

The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1
 
-The value of price elasticity of demand is more likely to be above 1 if:

Accepted Answer

A) consumers have a long time to adjust to a price change. 
B) the product is a necessity. 
C) demand is inelastic. 
D) there are few close substitutes for the product. 
E) total revenue declines in response to a price reduction.

Question 15

​Figure 5.3. The figure shows the wage rate and the quantity of labor supplied in an unskilled labor market. 
-When the manager of a local movie theater raises the price of movie tickets from $7.50 to $8.50, his total revenue falls. This means that:

Accepted Answer

A) the demand for movie tickets is highly elastic. 
B) the supply of movie tickets is perfectly elastic. 
C) the supply of movie tickets is unit-elastic. 
D) the demand for movie tickets is inelastic. 
E) the supply of movie tickets is inelastic.

Question 16

Scenario 5.1
The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2PS1U1B1xS1U1B0. Assume that P = $8, I = 200, and PS1U1B1xS1U1B0 = $10.
-If a 10 percent increase in the price of tomatoes leads to a 20 percent decrease in quantity demanded, then the price elasticity of demand for tomatoes, , equals -2.

Accepted Answer

A) True 
 B)False

Question 17

​Figure 5.3. The figure shows the wage rate and the quantity of labor supplied in an unskilled labor market. 
-If a 50 percent increase in the price of pizza results in a 25 percent decrease in the quantity demanded of pizza, then the price elasticity of demand for pizza:

Accepted Answer

A) is equal to 0.5 and demand for pizza is inelastic. 
B) is equal to 0.5 and demand for pizza is elastic. 
C) is equal to 2 and demand for pizza is elastic. 
D) is equal to 2 and demand for pizza is inelastic. 
E) cannot be determined from the information provided.

Question 18

Scenario 5.1
The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2PS1U1B1xS1U1B0. Assume that P = $8, I = 200, and PS1U1B1xS1U1B0 = $10.
-Supply curves applicable to shorter periods of time tend to:

Accepted Answer

A) be represented by horizontal lines parallel to the quantity axis. 
B) be perfectly elastic. 
C) be more inelastic than supply curves that apply to longer periods of time. 
D) be more elastic than supply curves that apply to longer periods of time. 
E) have a price elasticity of supply that is approximately equal to 1.

Question 19

Scenario 5.1
The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2PS1U1B1xS1U1B0. Assume that P = $8, I = 200, and PS1U1B1xS1U1B0 = $10.
-Everything else held constant, the greater the number of close substitutes there are for a good, the smaller the price elasticity of demand for that good.

Accepted Answer

A) True 
 B)False

Question 20

The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1
 
-Which of the following items is likely to have the highest positive income elasticity of demand?

Accepted Answer

A) Bread 
B) Jewelry 
C) Soap 
D) A plumber's service 
E) Table salt

Exam 6: Elasticity: Demand and Supply

The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 -A horizontal demand curve shows that demand for a good is _____.

Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2P_x. Assume that P = $8, I = 200, and P_x = $10. -If price elasticity of supply is large and demand is price-inelastic, then the firm can earn positive profits by increasing the price.

The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 -When the cross-price elasticity of demand for two goods is a positive number, one can correctly conclude that:

The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 -If = -1.50 for a good, and price of the good decreases by 20 percent, then:

The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 -If the demand for beans tends to decline as incomes rise, everything else held constant, beans are _____.

Figure 5.3. The figure shows the wage rate and the quantity of labor supplied in an unskilled labor market. -Which of the following is explained by the price elasticity of demand for a product?

The table below shows the quantities of automobiles, margarine, and coffee purchased by Ted at different levels of income.Table 6.2 -Based on the information given in Table 6.2, margarine is:

Figure 5.3. The figure shows the wage rate and the quantity of labor supplied in an unskilled labor market. -What would be the consequence of a 10 percent decrease in the price of a good for which price elasticity of demand is 5?

The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 -If the demand for corn is elastic, then:

The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 -An inferior good or service is any good or service for which:

Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2P_x. Assume that P = $8, I = 200, and P_x = $10. -If supply is price-inelastic and demand is price-elastic, then the firm can earn positive profits by increasing the price.

The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 -The value of price elasticity of demand is more likely to be above 1 if:

Figure 5.3. The figure shows the wage rate and the quantity of labor supplied in an unskilled labor market. -When the manager of a local movie theater raises the price of movie tickets from $7.50 to $8.50, his total revenue falls. This means that:

Figure 5.3. The figure shows the wage rate and the quantity of labor supplied in an unskilled labor market. -If a 50 percent increase in the price of pizza results in a 25 percent decrease in the quantity demanded of pizza, then the price elasticity of demand for pizza:

Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2P_x. Assume that P = $8, I = 200, and P_x = $10. -Supply curves applicable to shorter periods of time tend to:

Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2P_x. Assume that P = $8, I = 200, and P_x = $10. -Everything else held constant, the greater the number of close substitutes there are for a good, the smaller the price elasticity of demand for that good.

The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 -Which of the following items is likely to have the highest positive income elasticity of demand?

Exam 6: Elasticity: Demand and Supply

The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 -A horizontal demand curve shows that demand for a good is _____.

Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2Px. Assume that P = $8, I = 200, and Px = $10. -If price elasticity of supply is large and demand is price-inelastic, then the firm can earn positive profits by increasing the price.

The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 -When the cross-price elasticity of demand for two goods is a positive number, one can correctly conclude that:

The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 -If = -1.50 for a good, and price of the good decreases by 20 percent, then:

The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 -If the demand for beans tends to decline as incomes rise, everything else held constant, beans are _____.

​Figure 5.3. The figure shows the wage rate and the quantity of labor supplied in an unskilled labor market. -Which of the following is explained by the price elasticity of demand for a product?

The table below shows the quantities of automobiles, margarine, and coffee purchased by Ted at different levels of income.Table 6.2 -Based on the information given in Table 6.2, margarine is:

​Figure 5.3. The figure shows the wage rate and the quantity of labor supplied in an unskilled labor market. -What would be the consequence of a 10 percent decrease in the price of a good for which price elasticity of demand is 5?

The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 -If the demand for corn is elastic, then:

The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 -An inferior good or service is any good or service for which:

Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2Px. Assume that P = $8, I = 200, and Px = $10. -If supply is price-inelastic and demand is price-elastic, then the firm can earn positive profits by increasing the price.

The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 -The value of price elasticity of demand is more likely to be above 1 if:

​Figure 5.3. The figure shows the wage rate and the quantity of labor supplied in an unskilled labor market. -When the manager of a local movie theater raises the price of movie tickets from $7.50 to $8.50, his total revenue falls. This means that:

​Figure 5.3. The figure shows the wage rate and the quantity of labor supplied in an unskilled labor market. -If a 50 percent increase in the price of pizza results in a 25 percent decrease in the quantity demanded of pizza, then the price elasticity of demand for pizza:

Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2Px. Assume that P = $8, I = 200, and Px = $10. -Supply curves applicable to shorter periods of time tend to:

Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2Px. Assume that P = $8, I = 200, and Px = $10. -Everything else held constant, the greater the number of close substitutes there are for a good, the smaller the price elasticity of demand for that good.

The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 -Which of the following items is likely to have the highest positive income elasticity of demand?

Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2P_x. Assume that P = $8, I = 200, and P_x = $10. -If price elasticity of supply is large and demand is price-inelastic, then the firm can earn positive profits by increasing the price.

Figure 5.3. The figure shows the wage rate and the quantity of labor supplied in an unskilled labor market. -Which of the following is explained by the price elasticity of demand for a product?

Figure 5.3. The figure shows the wage rate and the quantity of labor supplied in an unskilled labor market. -What would be the consequence of a 10 percent decrease in the price of a good for which price elasticity of demand is 5?

Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2P_x. Assume that P = $8, I = 200, and P_x = $10. -If supply is price-inelastic and demand is price-elastic, then the firm can earn positive profits by increasing the price.

Figure 5.3. The figure shows the wage rate and the quantity of labor supplied in an unskilled labor market. -When the manager of a local movie theater raises the price of movie tickets from $7.50 to $8.50, his total revenue falls. This means that:

Figure 5.3. The figure shows the wage rate and the quantity of labor supplied in an unskilled labor market. -If a 50 percent increase in the price of pizza results in a 25 percent decrease in the quantity demanded of pizza, then the price elasticity of demand for pizza:

Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2P_x. Assume that P = $8, I = 200, and P_x = $10. -Supply curves applicable to shorter periods of time tend to:

Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2P_x. Assume that P = $8, I = 200, and P_x = $10. -Everything else held constant, the greater the number of close substitutes there are for a good, the smaller the price elasticity of demand for that good.