Question 1

Tacos and pizza are substitutes.If a 2 percent change in the price of a taco leads to a 4 percent change in the demand for pizza,the cross elasticity of demand equals

Accepted Answer

A)  -1/2.
B)  1/2.
C)  2.
D)  -2.
E)  4.F) B) and E)
G) C) and E)

Question 2

Suppose a good can be produced using commonly available resources.The elasticity of supply is

Accepted Answer

A)  negative.
B)  greater than zero but less than 1.
C)  greater than 1.
D)  zero.
E)  More information is needed to make a determination about the size of the elasticity of supply.F) B) and C)
G) A) and B)

Question 3

"The price elasticity of demand is a measure of how sensitive demanders are to changes in the price of a product." Is this statement true or false?

Accepted Answer

The assertion is true.All elasticities m...

Question 4

The price of furnace filters increased by 5 percent and the quantity demanded did not change.The price elasticity of demand for furnace filters is

Accepted Answer

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

Question 5

A product's price elasticity of demand is likely to be greater

Accepted Answer

A)  if it only has a few substitutes.
B)  if consumers spend a small proportion of income on the product.
C)  the less time consumers have to adjust to price changes.
D)  if the product is a luxury good rather than a necessity.
E)  Both answers C and D are correct.F) A) and B)
G) D) and E)

Question 6

People take fewer trips by airplane when their incomes fall because of a recession.Trips by airplane must be

Accepted Answer

A)  a normal good.
B)  an inferior good.
C)  a substitute for other goods.
D)  a complement to other goods.
E)  an inelastic good.F) All of the above
G) A) and E)

Question 7

If substitutes for a good are readily available,the demand for that good

Accepted Answer

A)  does not change substantially if the price rises.
B)  does not change substantially if the price falls.
C)  is inelastic.
D)  is elastic.
E)  Both answers A and B are correct.F) A) and B)
G) C) and D)

Question 8

-In the figure above,when the price falls from $8 to $7,total revenue

Accepted Answer

A)  increases from $120 to $210 so demand is elastic.
B)  decreases from $210 to $120 so demand is inelastic.
C)  increases from $120 to $210 so demand is inelastic.
D)  decreases from $210 to $120 so demand is elastic.
E)  increases from $120 to $210,but more information is needed to determine whether demand is elastic,inelastic,or unit elastic.F) B) and D)
G) All of the above

Question 9

Total revenue increases if the price of the good

Accepted Answer

A)  rises and demand is elastic.
B)  rises and demand is inelastic.
C)  rises and demand is unit elastic.
D)  falls and supply is inelastic.
E)  falls and demand is unit elastic.F) A) and E)
G) A) and C)

Question 10

When the price of a cup of coffee falls from $3.00 to $2.50,the quantity demanded increases from 1,000 per month to 1,150 per month.Using the midpoint method,the price elasticity of demand is

Accepted Answer

A)  0.77.
B)  1.30.
C)  0.07.
D)  3.00.
E)  2.50.F) All of the above
G) A) and B)

Question 11

In a study session,your friend says,"Demand is elastic if the percentage change in the price exceeds the percentage change in quantity demanded." Is your friend correct?

Accepted Answer

No,your friend is incorrect.De...

Question 12

We calculate the price elasticity of demand as the

Accepted Answer

A)  ratio of the percentage change in the quantity demanded to the percentage change in price.
B)  change in quantity divided by the change in price.
C)  ratio of the percentage change in the price to the percentage change in quantity.
D)  percentage change in the quantity demanded divided by the percentage change in income.
E)  equilibrium quantity divided by the equilibrium price.F) C) and D)
G) B) and E)

Question 13

If the price elasticity of demand for razors is 0.32,the demand for razors is

Accepted Answer

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

Question 14

Suppose a local photographer increases his prices by 8 percent and quantity demanded decreases by the same percentage.This set of facts indicates that the demand for his services is

Accepted Answer

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

Question 15

When does a decrease in supply raise the price more: When demand is elastic or when demand is inelastic? When OPEC decreases the supply of oil,the price of gasoline skyrockets.Hence is the demand for gasoline elastic or inelastic?

Accepted Answer

A decrease in supply raises th...

Question 16

When the price of bananas rises 2 percent,the quantity demanded of peanut butter falls 4 percent.
a.What is the cross elasticity of demand between these two goods?
b.How are these goods related?
c.If the price of bananas rises,how will that affect the demand curve for peanut butter?

Accepted Answer

a.The cross elasticity of demand equals ...

Question 17

What effect does a price hike have on the total revenue of the producers?

Accepted Answer

The effect of a price hike on total reve...

Question 18

-Based on the data in the table above,ice cream and cake are ________ goods.

Accepted Answer

A)  inferior
B)  normal
C)  substitute
D)  complementary
E)  Both answers B and D are correct.F) B) and E)
G) B) and D)

Question 19

-Using the table above,what is the elasticity of demand between the prices of $6 and $4?

Accepted Answer

A)  1
B)  3/2
C)  2/3
D)  2
E)  4F) B) and E)
G) A) and D)

Question 20

If a good has many close substitutes,then its demand is most likely

Accepted Answer

A)  elastic.
B)  inelastic.
C)  unit elastic.
D)  perfectly inelastic.
E)  elastic or inelastic depending on whether the price of the good is increasing or decreasing.F) A) and E)
G) C) and D)

Exam 5: Elasticities of Demand and Supply

Suppose a good can be produced using commonly available resources.The elasticity of supply is

Correct AnswerverifiedShow Answer

-Using the table above,what is the elasticity of demand between the prices of $6 and $4?

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A product's price elasticity of demand is likely to be greater

Correct AnswerverifiedShow Answer

People take fewer trips by airplane when their incomes fall because of a recession.Trips by airplane must be

Correct AnswerverifiedShow Answer

-In the figure above,when the price falls from $8 to $7,total revenue

Correct AnswerverifiedShow Answer

What effect does a price hike have on the total revenue of the producers?

Correct AnswerverifiedThe effect of a price hike on total reve...View AnswerShow Answer

When does a decrease in supply raise the price more: When demand is elastic or when demand is inelastic? When OPEC decreases the supply of oil,the price of gasoline skyrockets.Hence is the demand for gasoline elastic or inelastic?

Correct AnswerverifiedA decrease in supply raises th...View AnswerShow Answer

Tacos and pizza are substitutes.If a 2 percent change in the price of a taco leads to a 4 percent change in the demand for pizza,the cross elasticity of demand equals

Correct AnswerverifiedShow Answer

When the price of bananas rises 2 percent,the quantity demanded of peanut butter falls 4 percent. a.What is the cross elasticity of demand between these two goods? b.How are these goods related? c.If the price of bananas rises,how will that affect the demand curve for peanut butter?

Correct Answerverifieda.The cross elasticity of demand equals ...View AnswerShow Answer

We calculate the price elasticity of demand as the

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Total revenue increases if the price of the good

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If the price elasticity of demand for razors is 0.32,the demand for razors is

Correct AnswerverifiedShow Answer

If substitutes for a good are readily available,the demand for that good

Correct AnswerverifiedShow Answer

When the price of a cup of coffee falls from $3.00 to $2.50,the quantity demanded increases from 1,000 per month to 1,150 per month.Using the midpoint method,the price elasticity of demand is

Correct AnswerverifiedShow Answer

"The price elasticity of demand is a measure of how sensitive demanders are to changes in the price of a product." Is this statement true or false?

Correct AnswerverifiedThe assertion is true.All elasticities m...View AnswerShow Answer

-Based on the data in the table above,ice cream and cake are ________ goods.

Correct AnswerverifiedShow Answer

Suppose a local photographer increases his prices by 8 percent and quantity demanded decreases by the same percentage.This set of facts indicates that the demand for his services is

Correct AnswerverifiedShow Answer

If a good has many close substitutes,then its demand is most likely

Correct AnswerverifiedShow Answer

The price of furnace filters increased by 5 percent and the quantity demanded did not change.The price elasticity of demand for furnace filters is

Correct AnswerverifiedShow Answer

In a study session,your friend says,"Demand is elastic if the percentage change in the price exceeds the percentage change in quantity demanded." Is your friend correct?

Correct AnswerverifiedNo,your friend is incorrect.De...View AnswerShow Answer

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The effect of a price hike on total reve...
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A decrease in supply raises th...
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a.The cross elasticity of demand equals ...
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The assertion is true.All elasticities m...
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No,your friend is incorrect.De...
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