Question 1

Refer to the table.Over the $8-$6 price range, supply is

Accepted Answer

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

Question 2

If the University Chamber Music Society decides to raise ticket prices to provide more funds to finance concerts, the Society is assuming that the demand for tickets is

Accepted Answer

A)  parallel to the horizontal axis.
B)  shifting to the left.
C)  inelastic.
D)  elastic.E) C) and D)
F) A) and B)

Question 3

A cross elasticity of demand coefficient of +2.5 indicates that the two products are substitutes.Difficulty: 03 Hard
Learning Objective: 06-05 Apply cross elasticity of demand and income elasticity of demand.Topic: Cross Elasticity and Income Elasticity of Demand

Accepted Answer

A) True 
 B)False

Question 4

(Consider This)  Elastic demand is analogous to a , and inelastic demand to a .

Accepted Answer

A)  normal wrench; socket wrench
B)  tight rubber band; loose rubber band
C)  Ace bandage; firm rubber tie-down
D)  one-foot ruler; tape measureE) A) and D)
F) A) and C)

Question 5

When the percentage change in price is greater than the resulting percentage change in quantity demanded,

Accepted Answer

A)  a decrease in price will increase total revenue.
B)  demand may be either elastic or inelastic.
C)  an increase in price will increase total revenue.
D)  demand is elastic.E) A) and B)
F) A) and C)

Question 6

Which of the following is not characteristic of a product with relatively inelastic demand?

Accepted Answer

A)  The good is regarded by consumers as a necessity.
B)  There are a large number of good substitutes for the good.
C)  Buyers spend a small percentage of their total income on the product.
D)  Consumers have had only a short time period to adjust to changes in price.E) A) and D)
F) A) and C)

Question 7

Which of the following is correct?

Accepted Answer

A)  If demand is elastic, an increase in price will increase total revenue.
B)  If demand is elastic, a decrease in price will decrease total revenue.
C)  If demand is elastic, a decrease in price will increase total revenue.
D)  If demand is inelastic, an increase in price will decrease total revenue.E) B) and C)
F) A) and D)

Question 8

The formula for cross elasticity of demand is percentage change in

Accepted Answer

A)  quantity demanded of X/percentage change in price of X.
B)  quantity demanded of X/percentage change in income.
C)  quantity demanded of X/percentage change in price of Y.
D)  price of X/percentage change in quantity demanded of Y.E) A) and B)
F) B) and C)

Question 9

If the demand for wheat is highly price inelastic, an extraordinarily large crop may reduce farm incomes.

Accepted Answer

A) True 
 B)False

Question 10

If the demand for farm products is price inelastic, a 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) A) and C)
F) None of the above

Question 11

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 12

If the income elasticity of demand for store brand macaroni and cheese is −3.00, this means that

Accepted Answer

A)  store brand macaroni and cheese is a substitute for name brand macaroni and cheese.
B)  store brand macaroni and cheese is a normal good.
C)  store brand macaroni and cheese is an inferior good.
D)  more store brand macaroni and cheese will be purchased when its price falls.E) A) and C)
F) C) and D)

Question 13

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) B) and C)

Question 14

If the elasticity coefficient of supply is 0.7, supply is elastic.

Accepted Answer

A) True 
 B)False

Question 15

A linear demand curve has a constant elasticity over the full range of the curve.

Accepted Answer

A) True 
 B)False

Question 16

The supply of antiques is highly inelastic.Thus,increases in demand would have a small effect on price.

Accepted Answer

A) True 
 B)False

Question 17

If the quantity demanded for good A increases from 40 to 60 when price decreases from $9 to $7, price elasticity of demand in this price range is 1.6.

Accepted Answer

A) True 
 B)False

Question 18

The total revenue received by sellers of a good is the same amount as the

Accepted Answer

A)  total income earned by the buyers.
B)  total amount spent on the good by the buyers.
C)  price paid by the buyers for each unit of the good.
D)  profits earned by the sellers of the good.E) C) and D)
F) B) and D)

Question 19

The demand schedules for such products as eggs, bread, and electricity tend to be

Accepted Answer

A)  perfectly price elastic.
B)  of unit price elasticity.
C)  relatively price inelastic.
D)  relatively price elastic.E) None of the above
F) A) and C)

Question 20

The price elasticity of demand for widgets is 0.80.Assuming no change in the demand curve for widgets, a 16 percent increase in sales implies a

Accepted Answer

A)  1 percent reduction in price.
B)  12 percent reduction in price.
C)  20 percent reduction in price.
D)  40 percent reduction in price.E) A) and B)
F) A) and C)

Exam 6: Elasticity

The formula for cross elasticity of demand is percentage change in

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A linear demand curve has a constant elasticity over the full range of the curve.

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If the demand for wheat is highly price inelastic, an extraordinarily large crop may reduce farm incomes.

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

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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

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A cross elasticity of demand coefficient of +2.5 indicates that the two products are substitutes.Difficulty: 03 Hard Learning Objective: 06-05 Apply cross elasticity of demand and income elasticity of demand.Topic: Cross Elasticity and Income Elasticity of Demand

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Refer to the table.Over the $8-$6 price range, supply is

Correct AnswerverifiedShow Answer

The supply of antiques is highly inelastic.Thus,increases in demand would have a small effect on price.

Correct AnswerverifiedShow Answer

If the income elasticity of demand for store brand macaroni and cheese is −3.00, this means that

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(Consider This) Elastic demand is analogous to a , and inelastic demand to a .

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If the elasticity coefficient of supply is 0.7, supply is elastic.

Correct AnswerverifiedShow Answer

The price elasticity of demand for widgets is 0.80.Assuming no change in the demand curve for widgets, a 16 percent increase in sales implies a

Correct AnswerverifiedShow Answer

If the demand for farm products is price inelastic, a good harvest will cause farm revenues to

Correct AnswerverifiedShow Answer

The demand schedules for such products as eggs, bread, and electricity tend to be

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Which of the following is not characteristic of a product with relatively inelastic demand?

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The total revenue received by sellers of a good is the same amount as the

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If the University Chamber Music Society decides to raise ticket prices to provide more funds to finance concerts, the Society is assuming that the demand for tickets is

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If the quantity demanded for good A increases from 40 to 60 when price decreases from $9 to $7, price elasticity of demand in this price range is 1.6.

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Which of the following is correct?

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When the percentage change in price is greater than the resulting percentage change in quantity demanded,

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