Question 1

What is the meaning of perfectly inelastic demand and perfectly elastic demand? How would each be graphed?

Accepted Answer

Perfectly inelastic demand means there i...

Question 2

Refer to the information. Over the $9-$7 price range, demand is

Accepted Answer

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

Question 3

When the price of a product is increased 8 percent, the quantity demanded decreases 20 percent. The price-elasticity of demand coefficient for this product is

Accepted Answer

A)  2.5.
B)  25.
C)  0.4.
D)  4.E) All of the above
F) A) and B)

Question 4

Refer to the diagram. In the P₃P₄ price range, demand is

Accepted Answer

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

Question 5

Which of the following factors will make the demand for a product relatively elastic?

Accepted Answer

A)  There are few substitutes.
B)  The time interval considered is long.
C)  The good is considered a necessity.
D)  Purchases of the good require a small portion of consumers' budgets.E) None of the above
F) B) and C)

Question 6

If a 6 percent decrease in the price of Good A results in an increase of 4 percent in the quantity demanded of Good B, then it can be concluded that Goods A and B are

Accepted Answer

A)  substitutes goods.
B)  complementary goods.
C)  independent goods.
D)  normal goods.E) A) and B)
F) A) and C)

Question 7

If price and total revenue vary in opposite directions, demand is

Accepted Answer

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

Question 8

A leftward shift in the supply curve of product X will increase equilibrium price to a greater extent the

Accepted Answer

A)  more elastic the supply curve.
B)  larger the elasticity of demand coefficient.
C)  more elastic the demand for the product.
D)  more inelastic the demand for the product.E) All of the above
F) A) and B)

Question 9

Suppose that a 7 percent increase in the price of normal good Y causes a 4 percent increase 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)  positive, and therefore these goods are substitutes.
C)  negative, and therefore these goods are complements.
D)  positive, and therefore these goods are complements.E) C) and D)
F) A) and B)

Question 10

The diagram concerns supply adjustments to an increase in demand (D₁ to D₂) in the immediate market period, the short run, and the long run. Supply curves S₁, S₂, and S₃ apply to the

Accepted Answer

A)  immediate market period, long run, and short run, respectively.
B)  immediate market period, short run, and long run, respectively.
C)  long run, short run, and immediate market period, respectively.
D)  short run, long run, and immediate market period, respectively.E) A) and B)
F) All of the above

Question 11

When universities announce a large tuition increase and follow it with an announcement that more financial aid will be available, they are assuming that students who pay full tuition

Accepted Answer

A)  have elastic demand and students who use financial aid have inelastic demand.
B)  have inelastic demand and students who use financial aid have elastic demand.
C)  view a college education as an inferior good and students who use financial aid view it as a normal good.
D)  view a college education as a normal good and students who use financial aid view it as an inferior good.E) A) and C)
F) A) and D)

Question 12

If the price-elasticity coefficient for a product is 0.68 and the seller wants to raise revenues by changing its price, then the seller should cut the price of the product.

Accepted Answer

A) True 
 B)False

Question 13

In which of the following instances will total revenue decline?

Accepted Answer

A)  Price rises and supply is elastic.
B)  Price falls and demand is elastic.
C)  Price rises and demand is inelastic.
D)  Price rises and demand is elastic.E) B) and C)
F) A) and C)

Question 14

In which of the following instances will total revenues decline?

Accepted Answer

A)  price rises and Ed equals 0.41
B)  price rises and demand is of unit elasticity
C)  price falls and demand is elastic
D)  price rises and Ed equals 2.47E) B) and C)
F) A) and B)

Question 15

Answer the question based on the following table, which shows a demand schedule.  The largest decline in total revenue will occur when price falls from

Accepted Answer

A)  $5 to $4.
B)  $4 to $3.
C)  $3 to $2.
D)  $2 to $1.E) A) and B)
F) A) and C)

Question 16

In interpreting the Ed value as either elastic or inelastic, we look at the

Accepted Answer

A)  Ed coefficient with its negative sign.
B)  absolute value of the Ed coefficient.
C)  percentage change in price.
D)  percentage change in quantity.E) B) and D)
F) B) and C)

Question 17

Gigantic State University raises tuition for the purpose of increasing its revenue so that more faculty can be hired. GSU is assuming that the demand for education at GSU is

Accepted Answer

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

Question 18

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

Question 19

Refer to the table above. What is the price that yields the maximum total revenue?

Accepted Answer

A)  $2
B)  $3
C)  $4
D)  $5E) None of the above
F) All of the above

Question 20

Suppose that the price of peanuts falls from $3.5 to $2.5 per bushel and that, as a result, the total revenue received by peanut farmers changes from $12 to $13 billion. Thus,

Accepted Answer

A)  the demand for peanuts is inelastic.
B)  the demand for peanuts is elastic.
C)  the demand curve for peanuts has shifted to the right.
D)  no inference can be made as to the elasticity of demand for peanuts.E) A) and B)
F) A) and C)

Exam 6: Elasticity

The diagram concerns supply adjustments to an increase in demand (D₁ to D₂) in the immediate market period, the short run, and the long run. Supply curves S₁, S₂, and S₃ apply to the

Correct AnswerverifiedShow Answer

Refer to the table above. What is the price that yields the maximum total revenue?

Correct AnswerverifiedShow Answer

In which of the following instances will total revenue decline?

Correct AnswerverifiedShow Answer

If price and total revenue vary in opposite directions, demand is

Correct AnswerverifiedShow Answer

A leftward shift in the supply curve of product X will increase equilibrium price to a greater extent the

Correct AnswerverifiedShow Answer

Suppose that a 7 percent increase in the price of normal good Y causes a 4 percent increase in the quantity demanded of normal good X. The coefficient of cross elasticity of demand is

Correct AnswerverifiedShow Answer

In which of the following instances will total revenues decline?

Correct AnswerverifiedShow Answer

Suppose that the price of peanuts falls from $3.5 to $2.5 per bushel and that, as a result, the total revenue received by peanut farmers changes from $12 to $13 billion. Thus,

Correct AnswerverifiedShow Answer

If a 6 percent decrease in the price of Good A results in an increase of 4 percent in the quantity demanded of Good B, then it can be concluded that Goods A and B are

Correct AnswerverifiedShow Answer

What is the meaning of perfectly inelastic demand and perfectly elastic demand? How would each be graphed?

Correct AnswerverifiedPerfectly inelastic demand means there i...View AnswerShow Answer

Which of the following factors will make the demand for a product relatively elastic?

Correct AnswerverifiedShow Answer

In interpreting the Ed value as either elastic or inelastic, we look at the

Correct AnswerverifiedShow Answer

When the price of a product is increased 8 percent, the quantity demanded decreases 20 percent. The price-elasticity of demand coefficient for this product is

Correct AnswerverifiedShow Answer

Gigantic State University raises tuition for the purpose of increasing its revenue so that more faculty can be hired. GSU is assuming that the demand for education at GSU is

Correct AnswerverifiedShow Answer

Answer the question based on the following table, which shows a demand schedule. The largest decline in total revenue will occur when price falls from

Correct AnswerverifiedShow Answer

Refer to the information. Over the $9-$7 price range, demand is

Correct AnswerverifiedShow Answer

When universities announce a large tuition increase and follow it with an announcement that more financial aid will be available, they are assuming that students who pay full tuition

Correct AnswerverifiedShow Answer

Refer to the diagram. In the P₃P₄ price range, demand is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the price-elasticity coefficient for a product is 0.68 and the seller wants to raise revenues by changing its price, then the seller should cut the price of the product.

Correct AnswerverifiedShow Answer

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Perfectly inelastic demand means there i...
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