Question 1

A decrease in price:

Accepted Answer

A)   causes a decrease in total revenue due to the quantity effect.
B)   causes an increase in total revenue due to the price effect.
C)   does not cause a quantity effect when demand is perfectly inelastic.
D)   does not change quantity demanded if demand is elastic.E) C) and D)
F) A) and B)

Question 2

Different measurements of elasticity include:

Accepted Answer

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

Question 3

Suppose price decreases from $27.00 to $13.00. Using the mid-point formula, the percentage change in price is:

Accepted Answer

A)   0.35 = 35 percent.
B)   0.7 = 70 percent.
C)   0.7 = 70 percent
D)   14 percent.E) All of the above
F) C) and D)

Question 4

If the price of a good increases by 10 percent, its quantity demanded drops by 50 percent. The price elasticity of demand is:

Accepted Answer

A)   1.0
B)   0.2
C)   5.0
D)   2.0E) B) and D)
F) A) and C)

Question 5

If a good has unitary price elasticity of demand, then the absolute value of the percentage change in

Accepted Answer

A)   quantity exactly equals one.
B)   price exactly equals one.
C)   the quantity demanded equals the absolute value of the corresponding percentage change in price.
D)   quantity demanded and the absolute value of the corresponding percentage change in price both equal one-half and total one.E) All of the above
F) A) and B)

Question 6

Suppose price increases from $9.00 to $11.00. Using the mid-point formula, the percentage change in price is:

Accepted Answer

A)   20%
B)   25%
C)   20%.
D)   2%E) A) and B)
F) C) and D)

Question 7

Suppose when the price of pineapples goes from $5 to $3 per pineapple, production decreases from 3,500 pineapples to 2,000 pineapples per year. Using the mid-point method, the percentage change in price would be:

Accepted Answer

A)   0.50
B)   50 percent
C)   0.54
D)   54 percentE) B) and C)
F) A) and B)

Question 8

Demand tends to be more elastic when:

Accepted Answer

A)   price is high and more inelastic when price is low.
B)   price is low and more inelastic when price is high.
C)   demand is perfectly inelastic.
D)   the quantity demanded is larger.E) A) and D)
F) B) and D)

Question 9

If the price of cereal increases by 10 percent and the amount of milk demanded decreases by 2 percent, then the cross-price elasticity of these goods is:

Accepted Answer

A)   5.
B)   5
C)   0.2.
D)   0.2E) B) and C)
F) A) and D)

Question 10

If a good has an elastic demand, then:

Accepted Answer

A)   a small percentage change in price will cause a larger percentage change in quantity demanded.
B)   a small percentage change in price will cause virtually no change in quantity demanded.
C)   a large percentage change in price will cause a smaller change in quantity demanded.
D)   any percentage change in price will cause an almost immediate response in quantity demanded.E) None of the above
F) All of the above

Question 11

If consumers' buying decisions are not very sensitive to changes in price, then their demand is:

Accepted Answer

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

Question 12

A horizontal demand curve indicates:

Accepted Answer

A)   a perfectly inelastic demand.
B)   quantity demanded will drop to zero if the price increases by any amount.
C)   price elasticity is 1.
D)   price is not important in this market.E) A) and D)
F) C) and D)

Question 13

If a good has an income elasticity of 1.83, then it:

Accepted Answer

A)   is a normal good, and a necessity.
B)   is an inferior good, and a necessity.
C)   probably has a lot of close substitutes available.
D)   is a luxury.E) B) and C)
F) A) and B)

Question 14

Which pair of goods is most likely to have a negative cross-price elasticity?

Accepted Answer

A)   All cross-price elasticities are negative, but often reported in absolute value.
B)   Peanut butter and jelly.
C)   Butter and margarine.
D)   Milk and pencils.E) B) and C)
F) C) and D)

Question 15

Assuming price elasticity of demand is reported as an absolute value, a price elasticity of demand of 1.2 indicates an:

Accepted Answer

A)   elastic demand, meaning the percentage change in quantity demanded will be greater than the percentage change in price.
B)   inelastic demand, meaning the percentage change in quantity demanded will be greater than the percentage change in price.
C)   elastic demand, meaning the percentage change in quantity demanded will be less than the percentage change in price.
D)   inelastic demand, meaning the percentage change in quantity demanded will be less than the percentage change in price.E) A) and B)
F) All of the above

Question 16

The amount that a firm receives from the sale of goods and services is:

Accepted Answer

A)   total profit.
B)   total revenue.
C)   total cost.
D)   total benefit.E) None of the above
F) B) and C)

Question 17

If a good has an income elasticity of 0.18, then it is:

Accepted Answer

A)   a normal good, and a necessity.
B)   a normal good, and a luxury good.
C)   an inferior good, and a necessity.
D)   an inferior good, and a luxury.E) None of the above
F) B) and C)

Question 18

If supply and demand analysis is a measure of how, then elasticity is a measure of:

Accepted Answer

A)   how much.
B)   when.
C)   why.
D)   how quickly.E) All of the above
F) None of the above

Question 19

If the price of a DVD decreases by 50 percent, the quantity demanded increases by 75 percent. The price elasticity of demand is:

Accepted Answer

A)   -1.5 and is inelastic.
B)   -1.5 and is elastic.
C)   -0.67 and is elastic.
D)   -0.67 and is inelastic.E) A) and D)
F) All of the above

Question 20

A baker of chocolate chip cookies is likely to have a ______________ price elasticity of supply than does the seller of rare baseball cards due to ______________.

Accepted Answer

A)   more elastic; the availability of inputs
B)   less elastic; the availability of inputs
C)   less elastic; a shorter adjustment time
D)   less elastic; a more flexible production processE) None of the above
F) B) and D)

Exam 4: Elasticity

If a good has an elastic demand, then:

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Assuming price elasticity of demand is reported as an absolute value, a price elasticity of demand of 1.2 indicates an:

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If a good has an income elasticity of 0.18, then it is:

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A baker of chocolate chip cookies is likely to have a ______________ price elasticity of supply than does the seller of rare baseball cards due to ______________.

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If consumers' buying decisions are not very sensitive to changes in price, then their demand is:

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If the price of a DVD decreases by 50 percent, the quantity demanded increases by 75 percent. The price elasticity of demand is:

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Suppose when the price of pineapples goes from $5 to $3 per pineapple, production decreases from 3,500 pineapples to 2,000 pineapples per year. Using the mid-point method, the percentage change in price would be:

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If a good has unitary price elasticity of demand, then the absolute value of the percentage change in

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If a good has an income elasticity of 1.83, then it:

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Demand tends to be more elastic when:

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Different measurements of elasticity include:

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If supply and demand analysis is a measure of how, then elasticity is a measure of:

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A horizontal demand curve indicates:

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Which pair of goods is most likely to have a negative cross-price elasticity?

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If the price of cereal increases by 10 percent and the amount of milk demanded decreases by 2 percent, then the cross-price elasticity of these goods is:

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If the price of a good increases by 10 percent, its quantity demanded drops by 50 percent. The price elasticity of demand is:

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Suppose price decreases from $27.00 to $13.00. Using the mid-point formula, the percentage change in price is:

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Suppose price increases from $9.00 to $11.00. Using the mid-point formula, the percentage change in price is:

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The amount that a firm receives from the sale of goods and services is:

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A decrease in price:

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A baker of chocolate chip cookies is likely to have a price elasticity of supply than does the seller of rare baseball cards due to .

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