Question 1

Which of the following pairs of goods would most likely exhibit a cross price elasticity of 2.2?

Accepted Answer

A)  ​hamburgers and fries
B)  ​peanut butter and jelly
C)  ​butter and margarine
D)  ​tennis balls and tennis racketsE) A) and B)
F) A) and C)

Question 2

A jeweler cut prices in his store by 20% and the dollar value of his sales fell by 20%. This is indicative of:

Accepted Answer

A)  ​elastic demand.
B)  ​inelastic demand.
C)  ​perfectly elastic demand.
D)  ​perfectly inelastic demand.E) B) and C)
F) None of the above

Question 3

For a given decrease in demand, the effect on price is smallest and the effect on quantity exchanged largest when:

Accepted Answer

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

Question 4

Price elasticity of supply is a measure of the relative responsiveness of the change in price to a change in quantity supplied.

Accepted Answer

A) True 
 B)False

Question 5

Fantastic Cuts Hair Salon knows that a 15% increase in the price of their haircuts will result in a 5% decrease in the number of haircuts sold. What is the elasticity of demand facing Fantastic Cuts?

Accepted Answer

A)  ​0.05
B)  ​0.10
C)  ​0.33
D)  ​3.0E) A) and B)
F) B) and C)

Question 6

Shaina and Mariah have a business that provides personal fitness training services. They know that after raising their prices from $50 to $75 per hour, the quantity of hours they spent delivering training services fell from 90 to 80 hours per week. The demand for their services is:

Accepted Answer

A)  ​inelastic, with a price elasticity coefficient greater than one.
B)  ​inelastic, with a price elasticity coefficient less than one.
C)  ​elastic, with a price elasticity coefficient greater than one.
D)  ​elastic, with a price elasticity coefficient less than one.E) B) and D)
F) A) and B)

Question 7

A 10% decrease in the price of energy bars leads to a 20% increase in the quantity of energy bars demanded. It appears that:

Accepted Answer

A)  ​demand is inelastic and total revenue will decrease.
B)  ​demand is inelastic and total revenue will increase.
C)  ​demand is elastic and total revenue will decrease.
D)  ​demand is elastic and total revenue will increase.E) A) and C)
F) All of the above

Question 8

The price elasticity of demand coefficient for gourmet coffee is estimated to be equal to 1.6. It is expected, therefore, that a 10% increase in price would lead to:

Accepted Answer

A)  ​a 16% decrease in the quantity of gourmet coffee demanded.
B)  ​a 16% increase in the quantity of gourmet coffee demanded.
C)  ​an 8% decrease in the quantity of gourmet coffee demanded.
D)  ​an 8% increase in the quantity of gourmet coffee demanded.E) B) and C)
F) All of the above

Question 9

If the demand is perfectly elastic, what would happen to the quantity demanded if there is a tiny increase in price?

Accepted Answer

A)  ​quantity demanded will increase proportionately
B)  ​quantity demanded will fall to zero
C)  ​quantity demanded will register a disproportionately high increase
D)  ​quantity demanded will decrease proportionatelyE) None of the above
F) B) and D)

Question 10

If the short run elasticity of demand for widgets is 0.4 and the long run elasticity of demand for widgets is 0.95, a decrease in price will ____ total revenue in the short run and ____ total revenue in the long run.

Accepted Answer

A)  ​Increase; increase.
B)  ​Increase; decrease.
C)  ​Decrease; increase.
D)  ​Decrease; decrease.E) B) and C)
F) None of the above

Question 11

Which of the following is false?

Accepted Answer

A)  ​The price elasticity of supply measures the sensitivity of the quantity supplied to the changes in the price of the good.
B)  ​The price elasticity of supply is defined at the percentage change in the quantity supplied divided by the percentage change in price.
C)  ​Goods with a supply elasticity that is greater than 1 are called relatively elastic in supply.
D)  ​When supply is inelastic, a 1 percent change in the price of a good will induce a more than 1 percent change in the quantity supplied.E) B) and D)
F) All of the above

Question 12

If the government wanted a tax to not burden consumers much, it would want to tax an industry with:

Accepted Answer

A)  ​elastic supply and demand curves.
B)  ​inelastic supply and demand curves.
C)  ​inelastic supply and elastic demand.
D)  ​elastic supply and inelastic demand.E) B) and C)
F) A) and D)

Question 13

Demand for a good is said to be inelastic if the quantity demanded increases substantially when the price falls by a small amount.

Accepted Answer

A) True 
 B)False

Question 14

Demand tends to be more elastic, the greater the number of good substitutes, the greater the fraction of one's income devoted to a product and the greater the time allowed to respond to a price change.

Accepted Answer

A) True 
 B)False

Question 15

If the short run elasticity of demand for widgets is 1.1 and the long run elasticity of demand for widgets is 3.6, a decrease in price will ____ total revenue in the short run and ____ total revenue in the long run.

Accepted Answer

A)  ​Increase; increase.
B)  ​Increase; decrease.
C)  ​Decrease; increase.
D)  ​Decrease; decrease.E) A) and D)
F) A) and C)

Question 16

When two goods have negative cross elasticities of demand and negative income elasticities, they are:

Accepted Answer

A)  ​Normal and substitutes.
B)  ​Normal and complements.
C)  ​Inferior and substitutes.
D)  ​Inferior and complements.E) All of the above
F) A) and B)

Question 17

If the short run elasticity of demand for a good was greater than 1, an increase in the price of the good would tend to:

Accepted Answer

A)  ​increase total revenue in both the short run and the long run.
B)  ​increase total revenue in the short run but not the long run.
C)  ​decrease total revenue in the short run and the long run, but by more in the short run.
D)  ​decrease total revenue in the short run and the long run, but by more in the long run.E) None of the above
F) B) and C)

Question 18

When two goods have positive cross elasticities of demand and negative income elasticities, they are:

Accepted Answer

A)  ​Normal and substitutes.
B)  ​Normal and complements.
C)  ​Inferior and substitutes.
D)  ​Inferior and complements.E) A) and B)
F) A) and C)

Question 19

​Exhibit 6-3
​ 
-Refer to Exhibit 6-3. The graph that best illustrates a perfectly inelastic demand curve is:

Accepted Answer

A)  ​Graph A.
B)  ​Graph B.
C)  ​Graph C.
D)  ​Graph D.E) All of the above
F) B) and C)

Question 20

The measure used to determine whether two products are substitutes or complements is called the:

Accepted Answer

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

Exam 6: Elasticities

A 10% decrease in the price of energy bars leads to a 20% increase in the quantity of energy bars demanded. It appears that:

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When two goods have negative cross elasticities of demand and negative income elasticities, they are:

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Demand for a good is said to be inelastic if the quantity demanded increases substantially when the price falls by a small amount.

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The price elasticity of demand coefficient for gourmet coffee is estimated to be equal to 1.6. It is expected, therefore, that a 10% increase in price would lead to:

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If the short run elasticity of demand for a good was greater than 1, an increase in the price of the good would tend to:

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The measure used to determine whether two products are substitutes or complements is called the:

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For a given decrease in demand, the effect on price is smallest and the effect on quantity exchanged largest when:

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When two goods have positive cross elasticities of demand and negative income elasticities, they are:

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If the government wanted a tax to not burden consumers much, it would want to tax an industry with:

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If the short run elasticity of demand for widgets is 0.4 and the long run elasticity of demand for widgets is 0.95, a decrease in price will ____ total revenue in the short run and ____ total revenue in the long run.

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If the short run elasticity of demand for widgets is 1.1 and the long run elasticity of demand for widgets is 3.6, a decrease in price will ____ total revenue in the short run and ____ total revenue in the long run.

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Price elasticity of supply is a measure of the relative responsiveness of the change in price to a change in quantity supplied.

Correct AnswerverifiedShow Answer

Shaina and Mariah have a business that provides personal fitness training services. They know that after raising their prices from $50 to $75 per hour, the quantity of hours they spent delivering training services fell from 90 to 80 hours per week. The demand for their services is:

Correct AnswerverifiedShow Answer

Which of the following pairs of goods would most likely exhibit a cross price elasticity of 2.2?

Correct AnswerverifiedShow Answer

A jeweler cut prices in his store by 20% and the dollar value of his sales fell by 20%. This is indicative of:

Correct AnswerverifiedShow Answer

Fantastic Cuts Hair Salon knows that a 15% increase in the price of their haircuts will result in a 5% decrease in the number of haircuts sold. What is the elasticity of demand facing Fantastic Cuts?

Correct AnswerverifiedShow Answer

Demand tends to be more elastic, the greater the number of good substitutes, the greater the fraction of one's income devoted to a product and the greater the time allowed to respond to a price change.

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​Exhibit 6-3 ​ -Refer to Exhibit 6-3. The graph that best illustrates a perfectly inelastic demand curve is:

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If the demand is perfectly elastic, what would happen to the quantity demanded if there is a tiny increase in price?

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Which of the following is false?

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If the short run elasticity of demand for widgets is 0.4 and the long run elasticity of demand for widgets is 0.95, a decrease in price will total revenue in the short run and total revenue in the long run.

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If the short run elasticity of demand for widgets is 1.1 and the long run elasticity of demand for widgets is 3.6, a decrease in price will total revenue in the short run and total revenue in the long run.

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Exhibit 6-3 -Refer to Exhibit 6-3. The graph that best illustrates a perfectly inelastic demand curve is:

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