Question 1

-In the figure above,what is the total revenue at point A?

Accepted Answer

A) $20 
B) $150 
C) $170 
D) $3,000 
E) 150 quantity units

Question 2

If Pepsi goes on sale and decreases its price by 10 percent,and as a result,the quantity demanded of Coca Cola decreases by 5 percent,then Pepsi and Coke are ________ goods.

Accepted Answer

A) inferior 
B) normal 
C) substitute 
D) complementary 
E) unrelated

Question 3

A 10 percent increase in price leads to a 20 percent decrease in the quantity demanded.The price elasticity of demand is equal to

Accepted Answer

A) 0.5. 
B) 1.0. 
C) 2.0. 
D) 20.0. 
E) 10.0.

Question 4

Moving downward along a linear (straight-line)downward-sloping demand curve,the

Accepted Answer

A) price elasticity of demand does not change. 
B) quantity demanded decreases. 
C) demand becomes more elastic. 
D) demand becomes less elastic. 
E) total revenue never changes.

Question 5

If the cross elasticity of demand is negative,that means the goods

Accepted Answer

A) have elastic demands. 
B) have inelastic demands. 
C) are complements. 
D) are substitutes. 
E) are inferior.

Question 6

Patrick lives near two gas stations,Exxon and Shell.If Exxon decreases the price of gas,we predict that the quantity of gasoline demanded at Shell will

Accepted Answer

A) decrease because Exxon and Shell gas are complements. 
B) decrease because Exxon and Shell gas are substitutes. 
C) increase because Exxon and Shell gas are substitutes. 
D) increase because Exxon and Shell gas are complements. 
E) not change Exxon and Shell are different brands of gasoline.

Question 7

Goods that can be produced at a constant or very gently rising opportunity cost have

Accepted Answer

A) an elastic demand. 
B) an inelastic demand. 
C) an inelastic supply. 
D) an elastic supply. 
E) a unit elastic demand.

Question 8

The price elasticity of demand for an agricultural product is 0.4.This value means that,when the quantity decreases 1 percent,the price

Accepted Answer

A) falls 4 percent. 
B) rises 4 percent. 
C) falls 2.5 percent. 
D) rises 2.5 percent. 
E) rises 0.25 percent.

Question 9

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 10

If the price of a magazine increases from $5 to $7 and the quantity demanded of the magazines decreases from 10 million per month to 8 million per month,using the midpoint method,what is the price elasticity of demand? Show your work.Is the demand elastic,inelastic,or unit elastic?

Accepted Answer

The answer of If the price of a magazine increases...

Question 11

As more time passes,the price elasticity of gasoline

Accepted Answer

A) increases. 
B) decreases. 
C) stays the same. 
D) becomes perfectly inelastic. 
E) becomes perfectly elastic.

Question 12

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 13

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 14

Goods are ________ when the income elasticity of demand is positive.

Accepted Answer

A) complements 
B) elastic 
C) inferior 
D) substitutes 
E) normal

Question 15

If the price of a movie rises 3 percent and,as a result,the quantity demanded of video rentals increases 6 percent,then the cross elasticity of demand is

Accepted Answer

A) 2. 
B) 1/2. 
C) -1/2. 
D) -2. 
E) 9.

Question 16

When the price of a product increases from $35 to $45,the quantity supplied increases from 30 units to 40 units per week.Using the midpoint method,the price elasticity of supply is

Accepted Answer

A) 0.00. 
B) -1.1. 
C) 1.14. 
D) 1.35. 
E) 0.88.

Question 17

What is measured by the price elasticity of supply?

Accepted Answer

A) The price elasticity of supply measures how responsive producers are to changes in the price of other goods. 
B) The price elasticity of supply measures how responsive producers are to changes in income. 
C) The price elasticity of supply measures how responsive producers are to changes in the price of a product. 
D) The price elasticity of supply is a measure of the slope of the supply curve. 
E) The price elasticity of supply measures how responsive producers are to changes in the cost of producing a product.

Question 18

If the cross elasticity of demand for DVD players and DVDs equals -2,then the products are

Accepted Answer

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

Question 19

If wheat can be produced at a constant opportunity cost,then the supply of wheat is

Accepted Answer

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

Question 20

Assume that it is predicted that for the years after you graduate from college,the entire economy will experience a long period of recession during which people's incomes decrease.What type of industry would be the best for you to find employment if this prediction is correct? An industry that produces a product that

Accepted Answer

A) is income elastic. 
B) is income inelastic. 
C) is inferior. 
D) is a complement. 
E) none of these industries

Exam 5: Elasticities of Demand and Supply