Question 1

If sellers could price-discriminate and charge two different prices to two different groups of buyers in order to increase revenues, then the sellers would charge

Accepted Answer

A)  a higher price to the buyers whose demand is elastic.
B)  a higher price to the buyers whose demand is inelastic.
C)  a higher price to the buyers whose demand is unit-elastic.
D)  the same price, actually, because price-discrimination will result in lower revenues.E) B) and D)
F) A) and B)

Question 2

Most demand curves are relatively elastic in the upper-left portion because the original price

Accepted Answer

A)  and quantity from which the percentage changes in price and quantity are calculated are both large.
B)  and quantity from which the percentage changes in price and quantity are calculated are both small.
C)  from which the percentage price change is calculated is small and the original quantity from which the percentage change in quantity is calculated is large.
D)  from which the percentage price change is calculated is large and the original quantity from which the percentage change in quantity is calculated is small.E) A) and C)
F) A) and B)

Question 3

A product that is successfully advertised and has loyal buyers would have a low price-elasticity coefficient.

Accepted Answer

A) True 
 B)False

Question 4

How do you interpret the coefficient of the price elasticity of demand? Explain when Ed is 1.5, 0.7, and 1.0.

Accepted Answer

An elasticity of demand of 1.5 means tha...

Question 5

Refer to the information and assume the stadium capacity is 5,000. If the Mudhens' management charges $7 per ticket,

Accepted Answer

A)  some fans who want to see the game will find that tickets are not available.
B)  there will be 2,000 empty seats.
C)  there will be 1,000 empty seats.
D)  the game will be sold out.E) B) and C)
F) B) and D)

Question 6

If a firm finds that it can sell $13,000 worth of a product when its price is $5 per unit and $11,000 worth of it when its price is $6, then

Accepted Answer

A)  the demand for the product is elastic in the $6-$5 price range.
B)  the demand for the product must have increased.
C)  elasticity of demand is 0.74.
D)  the demand for the product is inelastic in the $6-$5 price range.E) None of the above
F) A) and D)

Question 7

A firm produces and sells two goods, A and B. Good A is known to have many close substitutes; Good B makes up a significant portion of most families' budgets. A price increase for each good would most likely cause total revenues from Good A to

Accepted Answer

A)  increase and total revenues from Good B to decrease
B)  increase and total revenues from Good B to increase.
C)  decrease and total revenues from Good B to increase.
D)  decrease and total revenues from Good B to decrease.E) A) and D)
F) C) and D)

Question 8

If the price elasticity of demand for orange juice is 0.8, then a reduction in the price of orange juice will cause buyers to buy

Accepted Answer

A)  fewer bottles of orange juice, and their total spending on orange juice will decrease.
B)  fewer bottles of orange juice, but their total spending on orange juice will increase.
C)  more bottles of orange juice, and their total spending on orange juice will increase.
D)  more bottles of orange juice, but their total spending on orange juice will decrease.E) A) and B)
F) A) and D)

Question 9

Refer to the above graphs. Which graph depicts a situation where sellers are increasing their output because their product is becoming more popular among buyers?

Accepted Answer

A)  graph A
B)  graph B
C)  graph C
D)  graph DE) B) and D)
F) All of the above

Question 10

Explain how the price elasticity of supply is related to the prices of antiques.

Accepted Answer

The high price of an antique results fro...

Question 11

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) A) and D)

Question 12

Refer to the diagrams. The case of an inferior good is represented by figure

Accepted Answer

A)  A.
B)  B.
C)  C.
D)  D.E) A) and B)
F) None of the above

Question 13

Suppose the income elasticity of demand for toys is −0.5. This means that

Accepted Answer

A)  a 12 percent increase in income will decrease the purchase of toys by 6 percent.
B)  a 12 percent increase in income will decrease the purchase of toys by 24 percent.
C)  a 12 percent increase in income will increase the purchase of toys by 6 percent.
D)  toys are a normal good.E) A) and B)
F) C) and D)

Question 14

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

Question 15

Microsoft charges a substantially lower price for a software upgrade than for the initial purchase of the software. This implies that Microsoft views the demand curve for the software upgrade to be

Accepted Answer

A)  more elastic than the demand for the original software.
B)  upsloping rather than downsloping.
C)  less elastic than the demand for the original software.
D)  of less value than the original software.E) A) and B)
F) All of the above

Question 16

Refer to the diagram and assume that price decreases from $10 to $2. The coefficient of the price elasticity of supply (midpoint formula) relating to this price change is about

Accepted Answer

A)  4, and supply is elastic.
B)  1, and supply is unit elastic.
C)  0.5, and supply is inelastic.
D)  0.25, and supply is inelastic.E) All of the above
F) B) and C)

Question 17

Compared to coffee, we would expect the cross elasticity of demand for

Accepted Answer

A)  tea to be negative, but positive for cream.
B)  tea to be positive, but negative for cream.
C)  both tea and cream to be negative.
D)  both tea and cream to be positive.E) None of the above
F) B) and D)

Question 18

A normal good would have a positive price-elasticity of demand.

Accepted Answer

A) True 
 B)False

Question 19

Which types of goods are most adversely affected by recessions?

Accepted Answer

A)  Goods for which the income elasticity coefficient is relatively low or negative.
B)  Goods for which the income elasticity coefficient is relatively high and positive.
C)  Goods for which the cross elasticity coefficient is positive.
D)  Goods for which the cross elasticity coefficient is negative.E) B) and D)
F) None of the above

Question 20

A supply curve that is a vertical straight line indicates that

Accepted Answer

A)  production costs for this product cannot be calculated.
B)  the relationship between price and quantity supplied is inverse.
C)  a change in price will have no effect on the quantity supplied.
D)  an unlimited amount of the product will be supplied at a constant price.E) A) and B)
F) A) and C)

Exam 6: Elasticity

How do you interpret the coefficient of the price elasticity of demand? Explain when Ed is 1.5, 0.7, and 1.0.

Correct AnswerverifiedAn elasticity of demand of 1.5 means tha...View AnswerShow Answer

Explain how the price elasticity of supply is related to the prices of antiques.

Correct AnswerverifiedThe high price of an antique results fro...View AnswerShow Answer

If sellers could price-discriminate and charge two different prices to two different groups of buyers in order to increase revenues, then the sellers would charge

Correct AnswerverifiedShow Answer

If the price elasticity of demand for orange juice is 0.8, then a reduction in the price of orange juice will cause buyers to buy

Correct AnswerverifiedShow Answer

Which types of goods are most adversely affected by recessions?

Correct AnswerverifiedShow Answer

Suppose the income elasticity of demand for toys is −0.5. This means that

Correct AnswerverifiedShow Answer

Refer to the above graphs. Which graph depicts a situation where sellers are increasing their output because their product is becoming more popular among buyers?

Correct AnswerverifiedShow Answer

Refer to the diagrams. The case of an inferior good is represented by figure

Correct AnswerverifiedShow Answer

Microsoft charges a substantially lower price for a software upgrade than for the initial purchase of the software. This implies that Microsoft views the demand curve for the software upgrade to be

Correct AnswerverifiedShow Answer

Refer to the diagram and assume that price decreases from $10 to $2. The coefficient of the price elasticity of supply (midpoint formula) relating to this price change is about

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A product that is successfully advertised and has loyal buyers would have a low price-elasticity coefficient.

Correct AnswerverifiedShow Answer

Refer to the information and assume the stadium capacity is 5,000. If the Mudhens' management charges $7 per ticket,

Correct AnswerverifiedShow Answer

A perfectly inelastic demand curve

Correct AnswerverifiedShow Answer

If a firm finds that it can sell $13,000 worth of a product when its price is $5 per unit and $11,000 worth of it when its price is $6, then

Correct AnswerverifiedShow Answer

A normal good would have a positive price-elasticity of demand.

Correct AnswerverifiedShow Answer

A supply curve that is a vertical straight line indicates that

Correct AnswerverifiedShow Answer

Compared to coffee, we would expect the cross elasticity of demand for

Correct AnswerverifiedShow Answer

Most demand curves are relatively elastic in the upper-left portion because the original price

Correct AnswerverifiedShow Answer

A firm produces and sells two goods, A and B. Good A is known to have many close substitutes; Good B makes up a significant portion of most families' budgets. A price increase for each good would most likely cause total revenues from Good A to

Correct AnswerverifiedShow Answer

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An elasticity of demand of 1.5 means tha...
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The high price of an antique results fro...
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