Question 1

Suppose the price of a good is $5 and quantity demanded is 10 units. When price increases to $6, quantity demanded decreases to 9 units. What does this indicate?

Accepted Answer

A)   The quantity effect is larger than the price effect, indicating that demand is inelastic.
B)   The quantity effect is larger than the price effect, indicating that demand is elastic.
C)   The price effect is larger than the quantity effect, indicating that demand is inelastic.
D)   The price effect is larger than the quantity effect, indicating that demand is elastic.E) A) and B)
F) All of the above

Question 2

Measurements of elasticity include:

Accepted Answer

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

Question 3

A rare coin dealer is likely to have a _____ price elasticity of supply than a coffee shop due to _____.

Accepted Answer

A)   more elastic; the availability of inputs
B)   less elastic; the availability of inputs
C)   more elastic; a longer adjustment time
D)   more elastic; a shorter adjustment timeE) B) and C)
F) C) and D)

Question 4

If consumers spend more money on coffee than on sugar, then the demand for a pound of coffee is likely _____ price elastic than the demand for a pound sugar of because _____.

Accepted Answer

A)   less; coffee requires a larger portion of consumers' incomes
B)   more; coffee requires a larger portion of consumers' incomes
C)   less; consumers will take a longer time to adjust to a change in the price
D)   more; consumers will take a longer time to adjust to a change in the priceE) C) and D)
F) All of the above

Question 5

A corn farmer is likely to have a _____ price elasticity of supply than a tree farmer due to a _____ production process.

Accepted Answer

A)   more elastic; more flexible
B)   less elastic; more flexible
C)   less elastic; less flexible
D)   more elastic; less flexibleE) A) and D)
F) A) and C)

Question 6

Perfectly inelastic demand occurs when:

Accepted Answer

A)   consumers are extremely sensitive to a change in price.
B)   consumers are quick to alter their demand when the price changes.
C)   the quantity demanded is unchanged when the price changes by any amount.
D)   only large changes in price affect the quantity demanded.E) B) and C)
F) All of the above

Question 7

Cross-price elasticity of demand measures:

Accepted Answer

A)   how much the quantity demanded of one good changes in response to a change in the price of a different good.
B)   how much the quantity demanded of one good changes in response to a change in its price.
C)   the magnitude of the shift in demand for a good in response to a change in its price.
D)   how much the quantity demanded of a good changes in response to a change in consumers' incomes.E) A) and C)
F) None of the above

Question 8

If a good has an income elasticity of −0.85, then it:

Accepted Answer

A)   is a normal good, and a necessity.
B)   is an inferior good.
C)   is a necessity, but may be normal or inferior.
D)   is a luxury.E) B) and C)
F) A) and C)

Question 9

Assuming price elasticity of demand is reported as an absolute value, a price elasticity of demand of 0.4 indicates an _____ demand, meaning the percentage change in quantity demanded will be _____ than the percentage change in price.

Accepted Answer

A)   elastic; greater
B)   inelastic; greater
C)   elastic; less
D)   inelastic; lessE) All of the above
F) None of the above

Question 10

What is price elasticity of supply?

Accepted Answer

A)   It is the percentage change in the quantity supplied of a good or service divided by the percentage change in the price of the good or service.
B)   It is a measure of consumers' responsiveness to a change in price.
C)   It is the absolute value of the quantity supplied of a good or service and is always a negative number.
D)   It is the percentage change in the price of a good or service divided by the percentage change in the quantity supplied of the good or service.E) B) and C)
F) None of the above

Question 11

If a small percentage change in price causes a larger percentage change in the quantity demanded, the good has:

Accepted Answer

A)   an inelastic demand.
B)   a low magnitude of response.
C)   an elastic demand.
D)   a high magnitude of response.E) A) and C)
F) B) and C)

Question 12

Suppose that the price of a good is $10 and quantity demanded is 50 units. When price increases to $12, quantity demanded decreases to 40 units. What happened to total revenue and what does this indicate?

Accepted Answer

A)   Total revenue decreased from $500 to $480, indicating that demand is inelastic.
B)   Total revenue decreased from $500 to $480, indicating that demand is elastic.
C)   Total revenue increased from $480 to $500, indicating that demand is inelastic.
D)   Total revenue increased from $480 to $500, indicating that demand is elastic.E) C) and D)
F) A) and B)

Question 13

An automobile manufacturing plant is likely to have a _____ price elasticity of supply than a bread bakery due to _____.

Accepted Answer

A)   more elastic; a more flexible production process
B)   more elastic; greater availability of inputs
C)   less elastic; a less flexible production process
D)   more elastic; lower availability of inputsE) All of the above
F) A) and B)

Question 14

Assuming price elasticity of demand is reported as an absolute value, a good with unit elastic demand has an elasticity:

Accepted Answer

A)   between zero and one.
B)   greater than one.
C)   less than one, but greater than zero.
D)   equal to one.E) B) and D)
F) None of the above

Question 15

If the price of a Domino's pizza decreases while the price of a Pizza Hut pizza is unchanged, we expect the demand for Pizza Hut pizza to:

Accepted Answer

A)   increase as some consumers switch from Pizza Hut pizza to Domino's pizza.
B)   decrease as some consumers switch from Pizza Hut pizza to Domino's pizza.
C)   remain unchanged.
D)   change depending on what happens to the supply of Pizza Hut pizza.E) All of the above
F) B) and D)

Question 16

A price increase will cause an increase in total revenue when:

Accepted Answer

A)   the price effect outweighs the quantity effect.
B)   the quantity effect outweighs the price effect.
C)   demand is perfectly elastic.
D)   demand is unit elastic.E) None of the above
F) B) and D)

Question 17

The demand for markers is _____ price elastic than the demand for Sharpies because _____.

Accepted Answer

A)   less; markers require a smaller portion of one's income
B)   more; markers require a smaller portion of one's income
C)   less; the scope of the market for markers is more broadly defined
D)   more; the scope of the market is for markers is more broadly definedE) B) and C)
F) A) and C)

Question 18

Suppose the price of science textbooks increases by 50 percent. Suppose that the price of mystery novels also increases by 50 percent. The price of other books remains unchanged. The demand for science textbooks is _____ price elastic than the demand for mystery novels because science textbooks have _____ available substitutes.

Accepted Answer

A)   less; more
B)   more; less
C)   less; less
D)   more; moreE) A) and B)
F) B) and D)

Question 19

What does price elasticity measure?

Accepted Answer

A)   How much a market responds to a change in market conditions
B)   How much consumers or producers respond to a change in market price
C)   How quickly consumers or producers respond to a change in market price
D)   How quickly a market will respond to a change in market conditionsE) A) and B)
F) B) and C)

Question 20

If a large percentage change in price leads to a smaller percentage change in quantity demanded, the good has a

Accepted Answer

A)   very elastic demand.
B)   less elastic demand.
C)   low magnitude of response.
D)   high magnitude of response.E) B) and C)
F) All of the above

Exam 4: Elasticity

Cross-price elasticity of demand measures:

Correct Answer
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Suppose that the price of a good is $10 and quantity demanded is 50 units. When price increases to $12, quantity demanded decreases to 40 units. What happened to total revenue and what does this indicate?

Correct Answer
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Correct Answer
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Assuming price elasticity of demand is reported as an absolute value, a good with unit elastic demand has an elasticity:

Correct Answer
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Measurements of elasticity include:

Correct Answer
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What is price elasticity of supply?

Correct Answer
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A price increase will cause an increase in total revenue when:

Correct Answer
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If consumers spend more money on coffee than on sugar, then the demand for a pound of coffee is likely _ price elastic than the demand for a pound sugar of because _.

Correct Answer
verified

Assuming price elasticity of demand is reported as an absolute value, a price elasticity of demand of 0.4 indicates an _ demand, meaning the percentage change in quantity demanded will be _ than the percentage change in price.

Correct Answer
verified

If a small percentage change in price causes a larger percentage change in the quantity demanded, the good has:

Correct Answer
verified

What does price elasticity measure?

Correct Answer
verified

An automobile manufacturing plant is likely to have a _ price elasticity of supply than a bread bakery due to _.

Correct Answer
verified

The demand for markers is _ price elastic than the demand for Sharpies because _.

Correct Answer
verified

If a large percentage change in price leads to a smaller percentage change in quantity demanded, the good has a

Correct Answer
verified

Suppose the price of a good is $5 and quantity demanded is 10 units. When price increases to $6, quantity demanded decreases to 9 units. What does this indicate?

Correct Answer
verified

A corn farmer is likely to have a _ price elasticity of supply than a tree farmer due to a _ production process.

Correct Answer
verified

Perfectly inelastic demand occurs when:

Correct Answer
verified

A rare coin dealer is likely to have a _ price elasticity of supply than a coffee shop due to _.

Correct Answer
verified

If a good has an income elasticity of −0.85, then it:

Correct Answer
verified

If the price of a Domino's pizza decreases while the price of a Pizza Hut pizza is unchanged, we expect the demand for Pizza Hut pizza to:

Correct Answer
verified

Exam 4: Elasticity

Cross-price elasticity of demand measures:

Correct AnswerverifiedShow Answer

Suppose that the price of a good is $10 and quantity demanded is 50 units. When price increases to $12, quantity demanded decreases to 40 units. What happened to total revenue and what does this indicate?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Assuming price elasticity of demand is reported as an absolute value, a good with unit elastic demand has an elasticity:

Correct AnswerverifiedShow Answer

Measurements of elasticity include:

Correct AnswerverifiedShow Answer

What is price elasticity of supply?

Correct AnswerverifiedShow Answer

A price increase will cause an increase in total revenue when:

Correct AnswerverifiedShow Answer

If consumers spend more money on coffee than on sugar, then the demand for a pound of coffee is likely _____ price elastic than the demand for a pound sugar of because _____.

Correct AnswerverifiedShow Answer

Assuming price elasticity of demand is reported as an absolute value, a price elasticity of demand of 0.4 indicates an _____ demand, meaning the percentage change in quantity demanded will be _____ than the percentage change in price.

Correct AnswerverifiedShow Answer

If a small percentage change in price causes a larger percentage change in the quantity demanded, the good has:

Correct AnswerverifiedShow Answer

What does price elasticity measure?

Correct AnswerverifiedShow Answer

An automobile manufacturing plant is likely to have a _____ price elasticity of supply than a bread bakery due to _____.

Correct AnswerverifiedShow Answer

The demand for markers is _____ price elastic than the demand for Sharpies because _____.

Correct AnswerverifiedShow Answer

If a large percentage change in price leads to a smaller percentage change in quantity demanded, the good has a

Correct AnswerverifiedShow Answer

Suppose the price of a good is $5 and quantity demanded is 10 units. When price increases to $6, quantity demanded decreases to 9 units. What does this indicate?

Correct AnswerverifiedShow Answer

A corn farmer is likely to have a _____ price elasticity of supply than a tree farmer due to a _____ production process.

Correct AnswerverifiedShow Answer

Perfectly inelastic demand occurs when:

Correct AnswerverifiedShow Answer

A rare coin dealer is likely to have a _____ price elasticity of supply than a coffee shop due to _____.

Correct AnswerverifiedShow Answer

If a good has an income elasticity of −0.85, then it:

Correct AnswerverifiedShow Answer

If the price of a Domino's pizza decreases while the price of a Pizza Hut pizza is unchanged, we expect the demand for Pizza Hut pizza to:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

If consumers spend more money on coffee than on sugar, then the demand for a pound of coffee is likely _ price elastic than the demand for a pound sugar of because _.

Correct Answer
verified

Assuming price elasticity of demand is reported as an absolute value, a price elasticity of demand of 0.4 indicates an _ demand, meaning the percentage change in quantity demanded will be _ than the percentage change in price.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

An automobile manufacturing plant is likely to have a _ price elasticity of supply than a bread bakery due to _.

Correct Answer
verified

The demand for markers is _ price elastic than the demand for Sharpies because _.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

A corn farmer is likely to have a _ price elasticity of supply than a tree farmer due to a _ production process.

Correct Answer
verified

Correct Answer
verified

A rare coin dealer is likely to have a _ price elasticity of supply than a coffee shop due to _.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified