Question 1

If the cross-price elasticity of demand between two goods is 0.25, then we know that these goods are _____ because the cross-price elasticity of demand is _____.

Accepted Answer

A)  substitutes; greater than zero
B)  complements; less than one
C)  substitutes; less than one
D)  complements; greater than zeroE) None of the above
F) A) and C)

Question 2

The mid-point method of calculating price elasticity of demand measures the _____ changes in quantity demanded and price relative to a point midway between _____.

Accepted Answer

A)  percentage; two points on a demand curve
B)  absolute; two points on a demand curve
C)  percentage; the demand and supply curves
D)  absolute; the demand and supply curvesE) B) and D)
F) None of the above

Question 3

The concept of price elasticity can be applied to:

Accepted Answer

A)  demand, but not supply.
B)  supply, but not demand.
C)  both supply and demand.
D)  neither supply nor demand.E) A) and C)
F) A) and D)

Question 4

Mathematically, price elasticity of demand is the percentage change in the _____ of a good divided by the percentage change in the _____ of that good.

Accepted Answer

A)  quantity demanded; price
B)  price; quantity
C)  quantity; price
D)  price; quantity.E) C) and D)
F) A) and D)

Question 5

How much the demand for one good changes in response to a change in the price of a different good is measured by:

Accepted Answer

A)  price elasticity of supply.
B)  price elasticity of demand.
C)  income elasticity of demand.
D)  cross-price elasticity of demand.E) None of the above
F) B) and C)

Question 6

Assuming price elasticity of demand is reported as an absolute value, the measured elasticity for an inelastic demand would be:

Accepted Answer

A)  greater than zero.
B)  greater than one.
C)  less than one.
D)  exactly one.E) A) and D)
F) B) and C)

Question 7

Consider the market in the graph shown. Using the mid-point method, what is the price elasticity of supply when the price increases from $40 to $60?

Accepted Answer

A)  1.67
B)  0.4
C)  0.67
D)  0.60E) None of the above
F) All of the above

Question 8

Suppose the price of a can of tuna is $1.30 and the quantity demanded is 9. When the price increases to $1.50, the quantity demanded drops to 7. Using the mid-point method, what is the price elasticity of demand?

Accepted Answer

A)  −1.75
B)  −0.57
C)  0.57
D)  1.75E) B) and D)
F) A) and D)

Question 9

Suppose the cross-price elasticity of demand between two goods is −2. This tells us the two goods are:

Accepted Answer

A)  substitutes.
B)  complements.
C)  unrelated.
D)  inelastic.E) A) and D)
F) B) and D)

Question 10

If increasing the admission charge for national parks increases the National Park Service's total revenue, then the demand for national park visits is:

Accepted Answer

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

Question 11

If the price of a Domino's pizza decreases while the price of a Pizza Hut pizza is unchanged, we expect the demand for Pizza Hut pizza to:

Accepted Answer

A)  increase as some consumers switch from Pizza Hut pizza to Domino's pizza.
B)  decrease as some consumers switch from Pizza Hut pizza to Domino's pizza.
C)  remain unchanged.
D)  change depending on what happens to the supply of Pizza Hut pizza.E) A) and B)
F) A) and C)

Question 12

Perfectly elastic demand occurs when:

Accepted Answer

A)  consumers are extremely sensitive to a change in price.
B)  the quantity demanded is unchanged when price changes by any amount.
C)  consumers are slow to alter their demand when the price changes.
D)  only large changes in price affect the quantity demanded.E) C) and D)
F) A) and D)

Question 13

If the price of a cup of coffee increases by 50 percent and the quantity of cups demanded decreases by 50 percent, the price elasticity of demand is:

Accepted Answer

A)  elastic.
B)  inelastic.
C)  unit elastic.
D)  zero.E) C) and D)
F) A) and C)

Question 14

The percentage change in the quantity supplied of a good or service when its price changes by one percent is:

Accepted Answer

A)  price elasticity of supply.
B)  price elasticity of demand.
C)  cross-price elasticity.
D)  income elasticity of supply.E) A) and C)
F) B) and D)

Question 15

If a good has an income elasticity of −0.85, then it:

Accepted Answer

A)  is a normal good, and a necessity.
B)  is an inferior good.
C)  is a necessity, but may be normal or inferior.
D)  is a luxury.E) A) and B)
F) A) and C)

Question 16

A rare coin dealer is likely to have a _____ price elasticity of supply than a coffee shop due to _____.

Accepted Answer

A)  more elastic; the availability of inputs
B)  less elastic; the availability of inputs
C)  more elastic; a longer adjustment time
D)  more elastic; a shorter adjustment timeE) A) and D)
F) C) and D)

Question 17

Suppose when the price of novels goes from $15 to $20 per book, production increases from 760 million books to 840 million books per year. Using the mid-point method, what is the price elasticity of supply?

Accepted Answer

A)  0.77
B)  2.85
C)  2.0
D)  0.35E) A) and B)
F) B) and D)

Question 18

The demand for steak is _____ price elastic than the demand for meat because the scope of the market for steak is _____ broadly defined.

Accepted Answer

A)  less; more
B)  more; more
C)  less; less
D)  more; lessE) A) and D)
F) C) and D)

Question 19

When the quantity effect outweighs the price effect, a price _____ will cause a(n) _____ in total revenue.

Accepted Answer

A)  increase; decrease
B)  increase; increase
C)  decrease; decrease
D)  All of these could occur.E) None of the above
F) C) and D)

Question 20

The price elasticity of supply becomes ________ elastic over time because _________.

Accepted Answer

A)  less; producers grow accustomed to the price changes
B)  less; firms have time to move into or out of the industry
C)  more; producers have more time to adjust their production decisions
D)  more; producers grow accustomed to the price changesE) None of the above
F) All of the above

Exam 4: Elasticity

If a good has an income elasticity of −0.85, then it:

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Consider the market in the graph shown. Using the mid-point method, what is the price elasticity of supply when the price increases from $40 to $60?

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The percentage change in the quantity supplied of a good or service when its price changes by one percent is:

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If increasing the admission charge for national parks increases the National Park Service's total revenue, then the demand for national park visits is:

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The price elasticity of supply becomes ________ elastic over time because _________.

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The concept of price elasticity can be applied to:

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A rare coin dealer is likely to have a _____ price elasticity of supply than a coffee shop due to _____.

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The demand for steak is _____ price elastic than the demand for meat because the scope of the market for steak is _____ broadly defined.

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Suppose the price of a can of tuna is $1.30 and the quantity demanded is 9. When the price increases to $1.50, the quantity demanded drops to 7. Using the mid-point method, what is the price elasticity of demand?

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When the quantity effect outweighs the price effect, a price _____ will cause a(n) _____ in total revenue.

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How much the demand for one good changes in response to a change in the price of a different good is measured by:

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Assuming price elasticity of demand is reported as an absolute value, the measured elasticity for an inelastic demand would be:

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Suppose the cross-price elasticity of demand between two goods is −2. This tells us the two goods are:

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The mid-point method of calculating price elasticity of demand measures the _____ changes in quantity demanded and price relative to a point midway between _____.

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Mathematically, price elasticity of demand is the percentage change in the _____ of a good divided by the percentage change in the _____ of that good.

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If the price of a Domino's pizza decreases while the price of a Pizza Hut pizza is unchanged, we expect the demand for Pizza Hut pizza to:

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Perfectly elastic demand occurs when:

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If the cross-price elasticity of demand between two goods is 0.25, then we know that these goods are _____ because the cross-price elasticity of demand is _____.

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Suppose when the price of novels goes from $15 to $20 per book, production increases from 760 million books to 840 million books per year. Using the mid-point method, what is the price elasticity of supply?

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If the price of a cup of coffee increases by 50 percent and the quantity of cups demanded decreases by 50 percent, the price elasticity of demand is:

Correct AnswerverifiedShow Answer

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The price elasticity of supply becomes elastic over time because _.

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A rare coin dealer is likely to have a _ price elasticity of supply than a coffee shop due to _.

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The demand for steak is _ price elastic than the demand for meat because the scope of the market for steak is _ broadly defined.

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When the quantity effect outweighs the price effect, a price _ will cause a(n) _ in total revenue.

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The mid-point method of calculating price elasticity of demand measures the _ changes in quantity demanded and price relative to a point midway between _.

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Mathematically, price elasticity of demand is the percentage change in the _ of a good divided by the percentage change in the _ of that good.

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If the cross-price elasticity of demand between two goods is 0.25, then we know that these goods are _ because the cross-price elasticity of demand is _.

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