Question 1

If the absolute value of the price elasticity of demand for aspirin equals 0.8 then

Accepted Answer

A)  aspirin is a normal good. 
B)  the demand for aspirin is inelastic. 
C)  aspirin has few substitutes. 
D)  the demand for aspirin is elastic.

Question 2

Figure 4-2 
-Refer to Figure 4-2.Using the midpoint formula,calculate the absolute value of the price elasticity of demand between e and f.

Accepted Answer

A)  0.32 
B)  0.4 
C)  2.5 
D)  3.125

Question 3

If a firm's goal is to maximise revenue,it will price its product to correspond to the unit-elastic segment of its demand curve.

Accepted Answer

A) True 
 B)False

Question 4

Assume that the demand curve for sunblock is linear and downward sloping.Which of the following statements about the slope of the demand curve for sunblock and the price elasticity of demand for sunblock is true?

Accepted Answer

A)  The slope and the price elasticity of demand are constant at all points along the demand curve for sunblock. 
B)  The slope is constant, but the price elasticity of demand is not constant at all points along the demand curve for sunblock. 
C)  The slope is not constant, but the price elasticity of demand is constant at all points along the demand curve for sunblock. 
D)  The slope of the demand curve for sunblock is constant and equal to zero; demand is perfectly inelastic.

Question 5

Most food products have low income and price elasticities of demand.

Accepted Answer

A) True 
 B)False

Question 6

Figure 4-8 
-Refer to Figure 4-8.Suppose the diagram shows the supply curves for a product in the short run and in the long run.Which supply curve represents supply in the short run and which curve represents supply in the long run?

Accepted Answer

A)  SB represents supply in the short run, and SA represents supply in the long run. 
B)  Either SA or SB could represent supply in the short run; in the long run, the supply curve must be a vertical line. 
C)  Either SA or SB could represent supply in the long run; in the short run, the supply curve must be a horizontal line. 
D)  SA represents supply in the short run, and SB represents supply in the long run.

Question 7

The cross-price elasticity of demand between an unlimited texting option and an unlimited call minutes option offered from a mobile phone provider would be

Accepted Answer

A)  positive if subscribers consider the services substitutes for each other. 
B)  positive if subscribers consider the services complements to each other. 
C)  negative if subscribers consider the services substitutes for each other. 
D)  negative no matter whether subscribers consider the services substitutes or complements for each other.

Question 8

Suppose when the price of jean-jackets increased by 10 per cent,the quantity supplied increased by 16 percent.Based on this information the price elasticity of supply of jean-jackets is

Accepted Answer

A)  0.625. 
B)  6%. 
C)  1.6. 
D)  1.6%.

Question 9

If demand is inelastic,the absolute value of the price elasticity coefficient is greater than one.

Accepted Answer

A) True 
 B)False

Question 10

The price elasticity of supply of hot dog buns is estimated to be 1.5.Holding everything else constant,this means that a 10 per cent decrease in the price of hot dog buns will cause the quantity of hot dog buns supplied to decrease by

Accepted Answer

A)  1.5 per cent. 
B)  15 per cent. 
C)  approximately 25 per cent. 
D)  approximately 5 per cent.

Question 11

Carrie Bradshaw claims that when it comes to buying shoes,'price is no object.' If this is true,then her demand for shoes is

Accepted Answer

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

Question 12

Explain the concepts of cross-price elasticity of demand and income elasticity of demand.What do positive and negative values indicate for each of these demand elasticities?

Accepted Answer

The answer of Explain the concepts of cross-price elasticity of...

Question 13

Suppose the absolute value of the price elasticity of demand for basketball game tickets on your campus is greater than 1.Increasing ticket prices will increase the total revenue from ticket sales.

Accepted Answer

A) True 
 B)False

Question 14

The price elasticity of supply for umbrellas is 2.Suppose you're told that,following a price increase,quantity supplied increased by 30 per cent.What was the percentage change in price that brought this about?

Accepted Answer

A)  60 per cent 
B)  15 per cent 
C)  6.7 per cent 
D)  Impossible to determine without additional information

Question 15

The price elasticity of supply measures

Accepted Answer

A)  the responsiveness of quantity supplied to changes in input prices. 
B)  the responsiveness of quantity supplied to changes in technology. 
C)  the responsiveness of quantity supplied to changes in price. 
D)  a supplier's ability to produce a good in the face of scarcity.

Question 16

If demand is perfectly inelastic,the absolute value of the price elasticity coefficient is

Accepted Answer

A)  infinity. 
B)  zero. 
C)  more than one. 
D)  equal to the absolute value of the slope of the demand curve.

Question 17

Suppose that when the price per ream of recycled printer paper rises from $4 to $4.50,the quantity demanded falls from 800 to 600 reams per day.Using the midpoint formula,what is the price elasticity of demand (in absolute value)over this range?

Accepted Answer

A)  0.003 
B)  0.41 
C)  2.43 
D)  4

Question 18

Suppose the price elasticity of demand for methamphetamine is -0.35.If decriminalisation caused the price of methamphetamine to fall by 75 per cent,what will be the percentage increase in the quantity of methamphetamine demanded? If the price elasticity is -3.5,what will be the percentage increase in quantity demanded?

Accepted Answer

The answer of Suppose the price elasticity of demand for...

Question 19

Studies show that the income elasticity of demand for wine is 5.03 and the income elasticity of demand for spirits is 1.21.This indicates that

Accepted Answer

A)  wine and spirits are luxury goods. 
B)  wine is a luxury good and spirits are inferior goods. 
C)  wine and spirits are highly price elastic. 
D)  wine is a luxury good and spirits are necessities.

Question 20

Suppose the demand curve for a product is represented by a typical downward-sloping curve.Now suppose the demand for this product increases.Which of the following statements accurately predicts the resulting increase in price?

Accepted Answer

A)  The more elastic the supply curve, the greater the price increase. 
B)  The more elastic the supply curve, the smaller the price increase. 
C)  The increase in price is not affected by the elasticity of the supply curve. 
D)  There will be no increase in price if the supply curve is perfectly inelastic.

Exam 4: Market Efficiency and Market Failure

If the absolute value of the price elasticity of demand for aspirin equals 0.8 then

Figure 4-2 -Refer to Figure 4-2.Using the midpoint formula,calculate the absolute value of the price elasticity of demand between e and f.

If a firm's goal is to maximise revenue,it will price its product to correspond to the unit-elastic segment of its demand curve.

Assume that the demand curve for sunblock is linear and downward sloping.Which of the following statements about the slope of the demand curve for sunblock and the price elasticity of demand for sunblock is true?

Most food products have low income and price elasticities of demand.

Figure 4-8 -Refer to Figure 4-8.Suppose the diagram shows the supply curves for a product in the short run and in the long run.Which supply curve represents supply in the short run and which curve represents supply in the long run?

The cross-price elasticity of demand between an unlimited texting option and an unlimited call minutes option offered from a mobile phone provider would be

Suppose when the price of jean-jackets increased by 10 per cent,the quantity supplied increased by 16 percent.Based on this information the price elasticity of supply of jean-jackets is

If demand is inelastic,the absolute value of the price elasticity coefficient is greater than one.

The price elasticity of supply of hot dog buns is estimated to be 1.5.Holding everything else constant,this means that a 10 per cent decrease in the price of hot dog buns will cause the quantity of hot dog buns supplied to decrease by

Carrie Bradshaw claims that when it comes to buying shoes,'price is no object.' If this is true,then her demand for shoes is

Explain the concepts of cross-price elasticity of demand and income elasticity of demand.What do positive and negative values indicate for each of these demand elasticities?

Suppose the absolute value of the price elasticity of demand for basketball game tickets on your campus is greater than 1.Increasing ticket prices will increase the total revenue from ticket sales.

The price elasticity of supply for umbrellas is 2.Suppose you're told that,following a price increase,quantity supplied increased by 30 per cent.What was the percentage change in price that brought this about?

The price elasticity of supply measures

If demand is perfectly inelastic,the absolute value of the price elasticity coefficient is

Suppose that when the price per ream of recycled printer paper rises from $4 to $4.50,the quantity demanded falls from 800 to 600 reams per day.Using the midpoint formula,what is the price elasticity of demand (in absolute value) over this range?

Studies show that the income elasticity of demand for wine is 5.03 and the income elasticity of demand for spirits is 1.21.This indicates that

Suppose the demand curve for a product is represented by a typical downward-sloping curve.Now suppose the demand for this product increases.Which of the following statements accurately predicts the resulting increase in price?