Question 1

Blossom, Inc., sells 500 bottles of perfume a month when the price is $7. A huge increase in resource costs forces Blossom to raise the price to $9, and the firm only manages to sell 460 bottles of perfume. Using the midpoint formula, the price elasticity of demand coefficient is

Accepted Answer

A)   0.33 and elastic.
B)   3.0 and elastic.
C)   0.33 and inelastic.
D)   3.0 and inelastic.E) All of the above
F) A) and C)

Question 2

The coefficient of price-elasticity of supply for a product is 2 if

Accepted Answer

A)   a 1 percent decrease in the price causes a 0.2 percent decrease in quantity supplied.
B)   a 2 percent decrease in price causes a 1 percent decrease in quantity supplied.
C)   a 1 percent decrease in price causes a 2 percent decrease in quantity supplied.
D)   a 2 percent decrease in price causes a 2 percent decrease in quantity supplied.E) C) and D)
F) B) and C)

Question 3

A perfectly inelastic demand curve

Accepted Answer

A)   has a price elasticity coefficient greater than unity.
B)   has a price elasticity coefficient of unity throughout.
C)   graphs as a line parallel to the vertical axis.
D)   graphs as a line parallel to the horizontal axis.E) B) and C)
F) C) and D)

Question 4

If the price elasticity of demand for a product is equal to 0.5, then a 10 percent decrease in price will increase quantity demanded by

Accepted Answer

A)   20 percent.
B)   0.5 percent.
C)   5 percent.
D)   0.05 percent.E) A) and B)
F) None of the above

Question 5

The income elasticity of demand for jewelry is +2. Other things equal, a 10 percent increase in consumer income will

Accepted Answer

A)   decrease the quantity of jewelry purchased by 20 percent.
B)   increase the quantity of jewelry purchased by 5 percent.
C)   decrease the quantity of jewelry purchased by 5 percent.
D)   increase the quantity of jewelry purchased by 20 percent.E) B) and C)
F) C) and D)

Question 6

A price increase from $43 to $49 results in an increase in quantity supplied from 220 units to 240 units. The price elasticity of supply in this price range is

Accepted Answer

A)   .3
B)   .67
C)   1.50
D)   3.33E) All of the above
F) C) and D)

Question 7

Suppose that the price of product X rises by 20 percent and the quantity supplied of X increases by 15 percent. The coefficient of price elasticity of supply for good X is

Accepted Answer

A)   negative, and therefore X is an inferior good.
B)   positive, and therefore X is a normal good.
C)   less than 1, and therefore supply is inelastic.
D)   more than 1, and therefore supply is elastic.E) A) and B)
F) A) and C)

Question 8

The cross elasticity of demand between Quaker State motor oil and Texaco motor oil is likely to be

Accepted Answer

A)   zero.
B)   a positive number.
C)   a small negative number.
D)   a large negative number.E) B) and D)
F) All of the above

Question 9

If a college admits only a fixed number of applicants every year, then the school's supply curve for admissions is

Accepted Answer

A)   perfectly elastic.
B)   perfectly inelastic.
C)   quite flat.
D)   downward-sloping.E) B) and C)
F) A) and C)

Question 10

The price elasticity of supply determines how much price would change as a result of a change in demand.

Accepted Answer

A) True 
 B)False

Question 11

Price elasticity of demand tends to be low for goods with few close substitutes.

Accepted Answer

A) True 
 B)False

Question 12

Suppose that a 20 percent increase in the price of normal good Y causes a 10 percent decline in the quantity demanded of normal good X. The coefficient of cross elasticity of demand is

Accepted Answer

A)   negative, and therefore these goods are substitutes.
B)   negative, and therefore these goods are complements.
C)   positive, and therefore these goods are substitutes.
D)   positive, and therefore these goods are complements.E) C) and D)
F) None of the above

Question 13

Elasticity of supply will increase when

Accepted Answer

A)   the number of producers selling a product decreases.
B)   producers are given less time to respond to price changes.
C)   the number of consumers wanting to purchase a product increases.
D)   it becomes easier to substitute one factor of production for another in a manufacturing process.E) A) and D)
F) None of the above

Question 14

If the government imposes an excise tax on a good, it will collect the most tax revenues from it if the demand for the good is

Accepted Answer

A)   elastic.
B)   inelastic.
C)   unit elastic.
D)   perfectly elastic.E) B) and C)
F) All of the above

Question 15

Which of the following statements is not correct?

Accepted Answer

A)   If the relative change in price is greater than the relative change in the quantity demanded associated with it, demand is inelastic.
B)   In the range of prices in which demand is elastic, total revenue will diminish as price decreases.
C)   Total revenue will not change if price varies within a range where the elasticity coefficient is unity.
D)   Demand tends to be elastic at high prices and inelastic at low prices.E) A) and B)
F) A) and C)

Exam 6: Elasticity

If a college admits only a fixed number of applicants every year, then the school's supply curve for admissions is

Correct Answer
verified

The income elasticity of demand for jewelry is +2. Other things equal, a 10 percent increase in consumer income will

Correct Answer
verified

If the government imposes an excise tax on a good, it will collect the most tax revenues from it if the demand for the good is

Correct Answer
verified

Elasticity of supply will increase when

Correct Answer
verified

A price increase from $43 to $49 results in an increase in quantity supplied from 220 units to 240 units. The price elasticity of supply in this price range is

Correct Answer
verified

Suppose that a 20 percent increase in the price of normal good Y causes a 10 percent decline in the quantity demanded of normal good X. The coefficient of cross elasticity of demand is

Correct Answer
verified

Price elasticity of demand tends to be low for goods with few close substitutes.

Correct Answer
verified

The coefficient of price-elasticity of supply for a product is 2 if

Correct Answer
verified

Blossom, Inc., sells 500 bottles of perfume a month when the price is $7. A huge increase in resource costs forces Blossom to raise the price to $9, and the firm only manages to sell 460 bottles of perfume. Using the midpoint formula, the price elasticity of demand coefficient is

Correct Answer
verified

A perfectly inelastic demand curve

Correct Answer
verified

If the price elasticity of demand for a product is equal to 0.5, then a 10 percent decrease in price will increase quantity demanded by

Correct Answer
verified

Which of the following statements is not correct?

Correct Answer
verified

The price elasticity of supply determines how much price would change as a result of a change in demand.

Correct Answer
verified

Suppose that the price of product X rises by 20 percent and the quantity supplied of X increases by 15 percent. The coefficient of price elasticity of supply for good X is

Correct Answer
verified

The cross elasticity of demand between Quaker State motor oil and Texaco motor oil is likely to be

Correct Answer
verified

Exam 6: Elasticity

If a college admits only a fixed number of applicants every year, then the school's supply curve for admissions is

Correct AnswerverifiedShow Answer

The income elasticity of demand for jewelry is +2. Other things equal, a 10 percent increase in consumer income will

Correct AnswerverifiedShow Answer

If the government imposes an excise tax on a good, it will collect the most tax revenues from it if the demand for the good is

Correct AnswerverifiedShow Answer

Elasticity of supply will increase when

Correct AnswerverifiedShow Answer

A price increase from $43 to $49 results in an increase in quantity supplied from 220 units to 240 units. The price elasticity of supply in this price range is

Correct AnswerverifiedShow Answer

Suppose that a 20 percent increase in the price of normal good Y causes a 10 percent decline in the quantity demanded of normal good X. The coefficient of cross elasticity of demand is

Correct AnswerverifiedShow Answer

Price elasticity of demand tends to be low for goods with few close substitutes.

Correct AnswerverifiedShow Answer

The coefficient of price-elasticity of supply for a product is 2 if

Correct AnswerverifiedShow Answer

Blossom, Inc., sells 500 bottles of perfume a month when the price is $7. A huge increase in resource costs forces Blossom to raise the price to $9, and the firm only manages to sell 460 bottles of perfume. Using the midpoint formula, the price elasticity of demand coefficient is

Correct AnswerverifiedShow Answer

A perfectly inelastic demand curve

Correct AnswerverifiedShow Answer

If the price elasticity of demand for a product is equal to 0.5, then a 10 percent decrease in price will increase quantity demanded by

Correct AnswerverifiedShow Answer

Which of the following statements is not correct?

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The price elasticity of supply determines how much price would change as a result of a change in demand.

Correct AnswerverifiedShow Answer

Suppose that the price of product X rises by 20 percent and the quantity supplied of X increases by 15 percent. The coefficient of price elasticity of supply for good X is

Correct AnswerverifiedShow Answer

The cross elasticity of demand between Quaker State motor oil and Texaco motor oil is likely to be

Correct AnswerverifiedShow Answer

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