Question 1

The diagram shows two product demand curves. On the basis of this diagram, we can say that

Accepted Answer

A)  over range P₁P₂, price elasticity of demand is greater for D₁ than for D₂.
B)  over range P₁P₂, price elasticity of demand is greater for D₂ than for D₁.
C)  over range P₁P₂, price elasticity is the same for the two demand curves.
D)  not enough information is given to compare price elasticities.E) All of the above
F) B) and C)

Question 2

Generally speaking, the smaller the percentage of one's total budget devoted to a particular product, the more price elastic will be the demand for that product.

Accepted Answer

A) True 
 B)False

Question 3

If the demand for farm products is price inelastic, a bumper crop (an unusually good harvest) will cause farm revenues to

Accepted Answer

A)  increase.
B)  decrease.
C)  be unchanged.
D)  either increase or decrease, depending on what happens to supply.E) All of the above
F) B) and C)

Question 4

Suppose the price elasticity of demand for bread is 0.2. If the price of bread falls by 10 percent, the quantity demanded will increase by

Accepted Answer

A)  2 percent and total expenditures on bread will rise.
B)  2 percent and total expenditures on bread will fall.
C)  20 percent and total expenditures on bread will fall.
D)  20 percent and total expenditures on bread will rise.E) None of the above
F) All of the above

Question 5

When the price of candy bars decreased from $0.55 to $0.45, the quantity demanded changed from 19,000 per day to 21,000 per day. In this price range, the price-elasticity coefficient (based on the midpoint formula) for candy bars is

Accepted Answer

A)  1.
B)  2.
C)  0.2.
D)  0.5.E) B) and C)
F) B) and D)

Question 6

Consider the parallel demand curves in the figure above. Which curve is relatively more elastic at P₁?

Accepted Answer

A)  AA
B)  BB
C)  The answer cannot be determined.
D)  Both have the same slope; therefore both have the same elasticity.E) A) and B)
F) C) and D)

Question 7

Refer to the diagram. Between prices of $5.70 and $6.30,

Accepted Answer

A)  D₁ is more elastic than D₂.
B)  D₂ is an inferior good and D₁ is a normal good.
C)  D₁ and D₂ have identical elasticities.
D)  D₂ is more elastic than D₁.E) A) and B)
F) B) and D)

Question 8

The coefficient of price-elasticity of supply for a product is 1.2 if

Accepted Answer

A)  a 3 percent decrease in the price causes a 0.4 percent decrease in quantity supplied.
B)  a 3 percent decrease in price causes a 1.2 percent decrease in quantity supplied.
C)  a 3 percent decrease in price causes a 3.6 percent decrease in quantity supplied.
D)  a 1.2 percent decrease in price causes a 1.2 percent decrease in quantity supplied.E) B) and C)
F) A) and B)

Question 9

The main reason for the high price of antiques is that

Accepted Answer

A)  supply is relatively elastic and demand increases over time.
B)  supply is relatively inelastic and demand increases over time.
C)  demand is relatively elastic and supply increases over time.
D)  demand is relatively inelastic and supply increases over time.E) None of the above
F) All of the above

Question 10

Refer to the diagram and assume that price increases from $2 to $10. The coefficient of price elasticity of demand (midpoint formula) relating to this change in price is about

Accepted Answer

A)  0.25, and demand is inelastic.
B)  1.5, and demand is elastic.
C)  1, and demand is unit elastic.
D)  0.67, and demand is inelastic.E) C) and D)
F) B) and C)

Question 11

Answer the question on the basis of the following demand schedule.  The price elasticity of demand is relatively elastic

Accepted Answer

A)  in the $6-$4 price range.
B)  over the entire $6-$1 price range.
C)  in the $3-$1 price range.
D)  in the $6-$5 price range only.E) B) and C)
F) A) and D)

Question 12

If the demand for bacon is relatively elastic, a 10 percent decline in the price of bacon will

Accepted Answer

A)  decrease the amount demanded by more than 10 percent.
B)  increase the amount demanded by more than 10 percent.
C)  decrease the amount demanded by less than 10 percent.
D)  increase the amount demanded by less than 10 percent.E) None of the above
F) All of the above

Question 13

Refer to the diagram. In the P₁ to P₂ price range, we can say

Accepted Answer

A)  that consumer purchases are relatively insensitive to price changes.
B)  nothing concerning price elasticity of demand.
C)  that demand is inelastic with respect to price.
D)  that demand is elastic with respect to price.E) None of the above
F) A) and D)

Question 14

The price elasticity of demand for widgets is 0.75. Assuming no change in the demand curve for widgets, a 9 percent decrease in sales implies a(n)

Accepted Answer

A)  3.25 percent increase in price.
B)  8 percent increase in price.
C)  12 percent increase in price.
D)  6.75 percent increase in price.E) C) and D)
F) None of the above

Question 15

Studies show that the demand for gasoline is

Accepted Answer

A)  price inelastic in the short run but elastic in the long run.
B)  price inelastic in both the short and long run.
C)  price elastic in the short run but inelastic in the long run.
D)  price elastic in both the short and long run.E) C) and D)
F) A) and C)

Question 16

Refer to the diagrams. In which case would the coefficient of cross elasticity of demand be positive?

Accepted Answer

A)  A
B)  B
C)  C
D)  DE) All of the above
F) None of the above

Question 17

Total revenue falls as the price of a good is raised, if the demand for the good is

Accepted Answer

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

Question 18

Suppose the price elasticity of demand for bread is 0.2. If the price of bread falls by 10 percent, the quantity demanded will increase by

Accepted Answer

A)  2 percent and total expenditures on bread will rise.
B)  2 percent and total expenditures on bread will fall.
C)  20 percent and total expenditures on bread will fall.
D)  20 percent and total expenditures on bread will rise.E) A) and B)
F) A) and C)

Question 19

Suppose the price elasticity of demand for beef is about 1.2. Other things equal, this means that a 15 percent increase in the price of beef will cause the quantity of beef demanded to

Accepted Answer

A)  increase by approximately 8 percent.
B)  decrease by approximately 18 percent.
C)  decrease by approximately 8 percent.
D)  decrease by approximately 12 percent.E) All of the above
F) None of the above

Question 20

The demand for cocaine among addicts is relatively elastic.

Accepted Answer

A) True 
 B)False

Exam 6: Elasticity

Refer to the diagram. Between prices of $5.70 and $6.30,

Correct AnswerverifiedShow Answer

The price elasticity of demand for widgets is 0.75. Assuming no change in the demand curve for widgets, a 9 percent decrease in sales implies a(n)

Correct AnswerverifiedShow Answer

If the demand for farm products is price inelastic, a bumper crop (an unusually good harvest) will cause farm revenues to

Correct AnswerverifiedShow Answer

The coefficient of price-elasticity of supply for a product is 1.2 if

Correct AnswerverifiedShow Answer

Total revenue falls as the price of a good is raised, if the demand for the good is

Correct AnswerverifiedShow Answer

Generally speaking, the smaller the percentage of one's total budget devoted to a particular product, the more price elastic will be the demand for that product.

Correct AnswerverifiedShow Answer

Suppose the price elasticity of demand for bread is 0.2. If the price of bread falls by 10 percent, the quantity demanded will increase by

Correct AnswerverifiedShow Answer

The demand for cocaine among addicts is relatively elastic.

Correct AnswerverifiedShow Answer

Studies show that the demand for gasoline is

Correct AnswerverifiedShow Answer

Consider the parallel demand curves in the figure above. Which curve is relatively more elastic at P₁?

Correct AnswerverifiedShow Answer

If the demand for bacon is relatively elastic, a 10 percent decline in the price of bacon will

Correct AnswerverifiedShow Answer

Refer to the diagram and assume that price increases from $2 to $10. The coefficient of price elasticity of demand (midpoint formula) relating to this change in price is about

Correct AnswerverifiedShow Answer

Suppose the price elasticity of demand for beef is about 1.2. Other things equal, this means that a 15 percent increase in the price of beef will cause the quantity of beef demanded to

Correct AnswerverifiedShow Answer

The main reason for the high price of antiques is that

Correct AnswerverifiedShow Answer

Refer to the diagrams. In which case would the coefficient of cross elasticity of demand be positive?

Correct AnswerverifiedShow Answer

Refer to the diagram. In the P₁ to P₂ price range, we can say

Correct AnswerverifiedShow Answer

Suppose the price elasticity of demand for bread is 0.2. If the price of bread falls by 10 percent, the quantity demanded will increase by

Correct AnswerverifiedShow Answer

The diagram shows two product demand curves. On the basis of this diagram, we can say that

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following demand schedule. The price elasticity of demand is relatively elastic

Correct AnswerverifiedShow Answer

When the price of candy bars decreased from $0.55 to $0.45, the quantity demanded changed from 19,000 per day to 21,000 per day. In this price range, the price-elasticity coefficient (based on the midpoint formula) for candy bars is

Correct AnswerverifiedShow Answer

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