Question 1

Demand for a good is inelastic if:

Accepted Answer

A)  total revenue decreases when price increases.
B)  the quantity effect outweighs the price effect of a price increase.
C)  the absolute value of price elasticity is greater than 1.
D)  total revenue increases when price increases.E) A) and B)
F) C) and D)

Question 2

When Bob was employed, he would see a movie at the theater once a month. However, Bob got laid off six months ago, and since then he has only gone to the movie theater twice. This type of behavior can be measured using:

Accepted Answer

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

Question 3

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) A) and B)
F) C) and D)

Question 4

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, what is the percentage change in price?

Accepted Answer

A)  −0.5 percent
B)  −50 percent
C)  −33 percent
D)  −40 percentE) None of the above
F) All of the above

Question 5

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 C)
F) B) and C)

Question 6

The cross-price elasticity of demand between peanut butter and jelly is likely:

Accepted Answer

A)  a positive number.
B)  a very high positive number.
C)  a negative number.
D)  less than one.E) C) and D)
F) B) and C)

Question 7

If the price of a DVD decreases by 50 percent and the quantity of DVDs demanded increases by 75 percent, the price elasticity of demand is _____ and is _____.

Accepted Answer

A)  −1.5; inelastic
B)  −1.5; elastic
C)  −0.67; elastic
D)  −0.67; inelasticE) None of the above
F) A) and D)

Question 8

Elasticity along a demand curve:

Accepted Answer

A)  is constant if the demand curve is linear.
B)  changes only when the demand curve is bowed out.
C)  changes when the demand curve is linear.
D)  changes only when the demand curve is bowed in.E) C) and D)
F) B) and D)

Question 9

A baker of chocolate chip cookies is likely to have a _____ price elasticity of supply than 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) C) and D)
F) None of the above

Question 10

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

Accepted Answer

A)  −0.35 = −35 percent
B)  −0.7 = −70 percent
C)  0.7 = 70 percent
D)  0.14 = 14 percent.E) C) and D)
F) B) and D)

Question 11

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) All of the above
F) C) and D)

Question 12

Consider the market in the graph shown. Using the mid-point method, what is the price elasticity of supply when the price increases from $4 to $7?

Accepted Answer

A)  1.13
B)  0.4
C)  0.45
D)  0.89E) A) and C)
F) A) and B)

Question 13

The demand for ice cream is _____ price elastic than the demand for frozen treats overall because _____.

Accepted Answer

A)  less; ice cream has fewer substitutes than frozen treats.
B)  more; ice cream has fewer substitutes than frozen treats.
C)  less; the scope of the market for ice cream is less broadly defined
D)  more; the scope of the market for ice cream is less broadly definedE) C) and D)
F) All of the above

Question 14

A good with an income elasticity of 2.3 is:

Accepted Answer

A)  a luxury.
B)  inferior.
C)  a necessity.
D)  a complement.E) A) and B)
F) All of the above

Question 15

The demand for a specific brand of corn flakes cereal is likely to be:

Accepted Answer

A)  very price elastic, because there are many close substitutes available.
B)  less price elastic, because there are many close substitutes available.
C)  very price elastic, because the cost of cornflakes relative to income is low.
D)  less price elastic, because cornflakes are an inferior good for many consumers.E) B) and D)
F) A) and D)

Question 16

Total revenue is the amount a firm:

Accepted Answer

A)  receives from the sale of goods and services.
B)  keeps after all expenses are paid.
C)  reinvests in itself from sales.
D)  receives from dividends.E) C) and D)
F) A) and D)

Question 17

Suppose the price of a good increases from $9 to $11. Using the mid-point formula, what is the percentage change in price?

Accepted Answer

A)  −20 percent
B)  25 percent
C)  20 percent
D)  2 percentE) B) and D)
F) C) and D)

Question 18

Economists typically use the mid-point method of calculating elasticity because:

Accepted Answer

A)  it is easier to calculate.
B)  it is universally understood by all economists.
C)  the negative sign can then be ignored.
D)  the elasticity between two points is the same, regardless of the direction of the movement.E) A) and D)
F) C) and D)

Question 19

Whether a cross-price elasticity of demand is positive or negative indicates whether the:

Accepted Answer

A)  goods are substitutes or complements.
B)  elasticities are reported in absolute value.
C)  demands are elastic or inelastic.
D)  goods are a luxury or a necessity.E) None of the above
F) A) and B)

Question 20

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) C) and D)
F) All of the above

Exam 4: Elasticity

Cross-price elasticity of demand measures:

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Total revenue is the amount a firm:

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Elasticity along a demand curve:

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When Bob was employed, he would see a movie at the theater once a month. However, Bob got laid off six months ago, and since then he has only gone to the movie theater twice. This type of behavior can be measured using:

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Suppose the price of a good increases from $9 to $11. Using the mid-point formula, what is the percentage change in price?

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Whether a cross-price elasticity of demand is positive or negative indicates whether the:

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Demand for a good is inelastic if:

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The demand for ice cream is _____ price elastic than the demand for frozen treats overall because _____.

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

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Economists typically use the mid-point method of calculating elasticity because:

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A good with an income elasticity of 2.3 is:

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A decrease in price:

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If the price of a DVD decreases by 50 percent and the quantity of DVDs demanded increases by 75 percent, the price elasticity of demand is _____ and is _____.

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

Correct AnswerverifiedShow Answer

The demand for a specific brand of corn flakes cereal is likely to be:

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

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Measurements of elasticity include:

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Consider the market in the graph shown. Using the mid-point method, what is the price elasticity of supply when the price increases from $4 to $7?

Correct AnswerverifiedShow Answer

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, what is the percentage change in price?

Correct AnswerverifiedShow Answer

The cross-price elasticity of demand between peanut butter and jelly is likely:

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The demand for ice cream is _ price elastic than the demand for frozen treats overall because _.

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If the price of a DVD decreases by 50 percent and the quantity of DVDs demanded increases by 75 percent, the price elasticity of demand is _ and is _.

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

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