Question 1

Assume that a 9 percent increase in income across the economy produces a 6 percent decrease in the quantity demanded of good X. The coefficient of income elasticity of demand is

Accepted Answer

A)  positive, and therefore X is a normal good.
B)  negative, and therefore X is a normal good.
C)  positive, and therefore X is an inferior good.
D)  negative, and therefore X is an inferior good.E) B) and D)
F) A) and D)

Question 2

Refer to the total revenue graph above. An increase in the quantity of product X demanded from 14,000 to 16,000 units implies that the price of product X was

Accepted Answer

A)  reduced and the demand is elastic.
B)  increased and the demand is elastic.
C)  reduced and the demand is inelastic.
D)  increased and the demand is inelastic.E) A) and D)
F) C) and D)

Question 3

Describe the elasticity of supply of a farm product that is sold at a farmer's market on a particular day.

Accepted Answer

The immediate market period is the lengt...

Question 4

Which of the following goods will least likely suffer a decline in demand during a recession?

Accepted Answer

A)  dinner at a nice restaurant
B)  iPods
C)  toothpaste
D)  plasma screen and LCD TVsE) B) and D)
F) C) and D)

Question 5

The price of season tickets to a performing arts theater decreases by 3 percent. As a result, the quantity demanded increases by 6 percent. The price elasticity of demand for season tickets is

Accepted Answer

A)  0.5.
B)  9.
C)  2.
D)  18.E) A) and D)
F) A) and B)

Question 6

A good with a price-elasticity of demand coefficient of 0.75 has a demand that is price-inelastic.

Accepted Answer

A) True 
 B)False

Question 7

Refer to the total revenue graph above. Demand is price-elastic between points

Accepted Answer

A)  A and B.
B)  D and E.
C)  F and G.
D)  G and H.E) B) and C)
F) A) and D)

Question 8

Suppose the price of a product rises and the total revenue of sellers increases.

Accepted Answer

A)  It can be concluded that the demand for the product is elastic.
B)  It can be concluded that the supply of the product is elastic.
C)  It can be concluded that the supply of the product is inelastic.
D)  No conclusion can be reached with respect to the elasticity of supply.E) C) and D)
F) A) and C)

Question 9

The supply of product X is inelastic (but not perfectly inelastic) if the price of X rises by

Accepted Answer

A)  5 percent and quantity supplied rises by 7 percent.
B)  8 percent and quantity supplied rises by 8 percent.
C)  10 percent and quantity supplied remains the same.
D)  7 percent and quantity supplied rises by 5 percent.E) A) and B)
F) A) and C)

Question 10

The total-revenue test for elasticity

Accepted Answer

A)  is equally applicable to both demand and supply.
B)  does not apply to demand, because price and quantity are inversely related.
C)  does not apply to supply, because price and total revenue have a positive correlation.
D)  applies to the short-run supply curve but not to the long-run supply curve.E) A) and C)
F) C) and D)

Question 11

If demand for a product is elastic, the value of the price elasticity coefficient is

Accepted Answer

A)  zero.
B)  greater than one.
C)  equal to one.
D)  less than one.E) All of the above
F) None of the above

Question 12

Economists distinguish among the immediate market period, the short run, and the long run by noting that

Accepted Answer

A)  supply is most elastic in the short run and least elastic in the immediate market period.
B)  demand is most elastic in the short run, and least elastic in the long run.
C)  supply is most elastic in the long run and least elastic in the immediate market period.
D)  supply is most elastic in the short run and least elastic in the long run.E) B) and D)
F) B) and C)

Question 13

The income elasticity of demand for food is roughly 1. Suppose a consumer's monthly income is $2,000, of which 20 percent is spent on food. If the income of this consumer doubles, the amount she'll spend on food will be

Accepted Answer

A)  $400 per month.
B)  $500 per month.
C)  $800 per month.
D)  $1,000 per month.E) None of the above
F) A) and D)

Question 14

If price changes and total revenue changes in the opposite direction, demand is relatively elastic.

Accepted Answer

A) True 
 B)False

Question 15

Refer to the diagram, which is a rectangular hyperbola, that is, a curve such that each rectangle drawn from any point on the curve will be of identical area. If this rectangular hyperbola was a demand curve, we could say that it would be

Accepted Answer

A)  elastic at high prices and inelastic at low prices.
B)  elastic at low prices and inelastic at high prices.
C)  impossible to generalize about its elasticity.
D)  of unit elasticity throughout.E) B) and C)
F) C) and D)

Question 16

The price elasticity of supply measures how

Accepted Answer

A)  easily labor and capital can be substituted for one another in the production process.
B)  responsive the quantity supplied of X is to changes in the price of X.
C)  responsive the quantity supplied of Y is to changes in the price of X.
D)  responsive quantity supplied is to a change in incomes.E) B) and C)
F) A) and B)

Question 17

If the price elasticity of demand for a product is equal to 0.5, then a decrease in price of 10 percent will increase quantity demanded by

Accepted Answer

A)  20 percent.
B)  0.5 percent.
C)  5 percent.
D)  0.05 percent.E) B) and C)
F) A) and B)

Question 18

Refer to the information. If the Mudhens' management wanted to maximize total ticket revenue from the game, it would set the ticket price at

Accepted Answer

A)  $5.
B)  $7.
C)  $9.
D)  $13.E) A) and C)
F) B) and C)

Question 19

Refer to the information and assume the stadium capacity is 5,000. The supply of seats for the game

Accepted Answer

A)  varies inversely with ticket prices.
B)  varies directly with ticket prices.
C)  is perfectly inelastic.
D)  is perfectly elastic.E) C) and D)
F) A) and B)

Question 20

The larger the positive cross elasticity coefficient of demand between products X and Y, the

Accepted Answer

A)  stronger their complementariness.
B)  greater their substitutability.
C)  smaller the price elasticity of demand for both products.
D)  less sensitive purchases of each are to increases in income.E) All of the above
F) A) and D)

Exam 6: Elasticity

The price of season tickets to a performing arts theater decreases by 3 percent. As a result, the quantity demanded increases by 6 percent. The price elasticity of demand for season tickets is

Correct AnswerverifiedShow Answer

Refer to the information. If the Mudhens' management wanted to maximize total ticket revenue from the game, it would set the ticket price at

Correct AnswerverifiedShow Answer

If demand for a product is elastic, the value of the price elasticity coefficient is

Correct AnswerverifiedShow Answer

The supply of product X is inelastic (but not perfectly inelastic) if the price of X rises by

Correct AnswerverifiedShow Answer

Describe the elasticity of supply of a farm product that is sold at a farmer's market on a particular day.

Correct AnswerverifiedThe immediate market period is the lengt...View AnswerShow Answer

Refer to the total revenue graph above. An increase in the quantity of product X demanded from 14,000 to 16,000 units implies that the price of product X was

Correct AnswerverifiedShow Answer

If the price elasticity of demand for a product is equal to 0.5, then a decrease in price of 10 percent will increase quantity demanded by

Correct AnswerverifiedShow Answer

Refer to the diagram, which is a rectangular hyperbola, that is, a curve such that each rectangle drawn from any point on the curve will be of identical area. If this rectangular hyperbola was a demand curve, we could say that it would be

Correct AnswerverifiedShow Answer

Refer to the information and assume the stadium capacity is 5,000. The supply of seats for the game

Correct AnswerverifiedShow Answer

Suppose the price of a product rises and the total revenue of sellers increases.

Correct AnswerverifiedShow Answer

A good with a price-elasticity of demand coefficient of 0.75 has a demand that is price-inelastic.

Correct AnswerverifiedShow Answer

The price elasticity of supply measures how

Correct AnswerverifiedShow Answer

The income elasticity of demand for food is roughly 1. Suppose a consumer's monthly income is $2,000, of which 20 percent is spent on food. If the income of this consumer doubles, the amount she'll spend on food will be

Correct AnswerverifiedShow Answer

Refer to the total revenue graph above. Demand is price-elastic between points

Correct AnswerverifiedShow Answer

If price changes and total revenue changes in the opposite direction, demand is relatively elastic.

Correct AnswerverifiedShow Answer

Assume that a 9 percent increase in income across the economy produces a 6 percent decrease in the quantity demanded of good X. The coefficient of income elasticity of demand is

Correct AnswerverifiedShow Answer

The larger the positive cross elasticity coefficient of demand between products X and Y, the

Correct AnswerverifiedShow Answer

Economists distinguish among the immediate market period, the short run, and the long run by noting that

Correct AnswerverifiedShow Answer

The total-revenue test for elasticity

Correct AnswerverifiedShow Answer

Which of the following goods will least likely suffer a decline in demand during a recession?

Correct AnswerverifiedShow Answer

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The immediate market period is the lengt...
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