Question 1

If demand for farm crops is inelastic, a good harvest will cause farm revenues to

Accepted Answer

A)  increase because of the increase in the quantity that farmers can sell.
B)  increase because of a downward movement along the supply curve, encouraging an increase in demand.
C)  decrease because of a percentage fall in price that is greater than the percentage increase in quantity sold.
D)  remain unchanged, because the increase in quantity that can be sold will be matched by an equal decrease in price.E) B) and C)
F) All of the above

Question 2

The supply of product X is elastic if the price of X rises by

Accepted Answer

A)  1 percent and quantity supplied rises by 5 percent.
B)  4 percent and quantity supplied rises by 4 percent.
C)  8 percent and quantity supplied remains the same.
D)  10 percent and quantity supplied rises by 2 percent.E) None of the above
F) B) and C)

Question 3

When the price of a product is increased 10 percent, the quantity demanded decreases 15 percent. The price-elasticity-of-demand coefficient for this product is

Accepted Answer

A)  1.5.
B)  0.15.
C)  0.67.
D)  6.7.E) A) and B)
F) C) and D)

Question 4

The price elasticity of demand for a popular sporting event is 0.5. If the price of a ticket to this event increases by 12 percent, the quantity of tickets demanded will

Accepted Answer

A)  decrease by 24 percent.
B)  decrease by 6 percent.
C)  increase by 6 percent.
D)  increase by 24 percent.E) None of the above
F) B) and C)

Question 5

The coefficient of price-elasticity of supply for a product is 2 if

Accepted Answer

A)  a 1 percent decrease in the price causes a 0.2 percent decrease in quantity supplied.
B)  a 2 percent decrease in price causes a 1 percent decrease in quantity supplied.
C)  a 1 percent decrease in price causes a 2 percent decrease in quantity supplied.
D)  a 2 percent decrease in price causes a 2 percent decrease in quantity supplied.E) None of the above
F) A) and B)

Question 6

Which product is most likely to be the most price elastic?

Accepted Answer

A)  milk
B)  housing
C)  clothing
D)  automobilesE) None of the above
F) All of the above

Question 7

The price of gold is often volatile because

Accepted Answer

A)  demand is relatively inelastic, so changes in supply have a large effect on price.
B)  supply is relatively elastic, so changes in demand have a large effect on price.
C)  demand is relatively elastic, so changes in supply have a large effect on price.
D)  supply is relatively inelastic, so changes in demand have a large effect on price.E) A) and B)
F) A) and C)

Question 8

Assume that pizza and hamburgers are the only food items available to consumers. If the price of pizza increases, other factors constant, then which of the following will definitely happen?

Accepted Answer

A)  Total revenues received by pizza sellers will increase.
B)  Total revenues received by pizza sellers will decrease.
C)  Total revenues received by hamburger sellers will increase.
D)  Total revenues received by hamburger sellers will decrease.E) None of the above
F) B) and C)

Question 9

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. In the immediate market period, the increase in demand will

Accepted Answer

A)  have no effect on either equilibrium price or quantity.
B)  increase equilibrium price but not equilibrium quantity.
C)  increase equilibrium quantity but not equilibrium price.
D)  increase both equilibrium price and quantity.E) A) and B)
F) All of the above

Question 10

If the price of hand calculators falls from $10 to $9 and, as a result, the quantity demanded increases from 100 to 125, then

Accepted Answer

A)  demand is price elastic.
B)  demand is price inelastic.
C)  demand is unit elastic with respect to price.
D)  not enough information is given to make a statement about elasticity.E) B) and C)
F) A) and D)

Question 11

If the supply of product X is perfectly elastic, an increase in the demand for it will increase

Accepted Answer

A)  equilibrium quantity but reduce equilibrium price.
B)  equilibrium quantity, but equilibrium price will be unchanged.
C)  equilibrium price but reduce equilibrium quantity.
D)  equilibrium price, but equilibrium quantity will be unchanged.E) All of the above
F) B) and C)

Question 12

If a product has a short-run elasticity of supply equal to zero, then an increase in the demand for the product will

Accepted Answer

A)  have no effect on price or quantity sold.
B)  increase price and leave quantity sold unchanged.
C)  increase price and reduce the quantity sold to zero.
D)  leave the price unchanged and reduce the quantity sold.E) A) and B)
F) B) and C)

Question 13

The price of old baseball cards rises rapidly with increases in demand because

Accepted Answer

A)  the supply of old baseball cards is price inelastic.
B)  the supply of old baseball cards in price elastic.
C)  the demand for old baseball cards is price inelastic.
D)  the demand for old baseball cards is price elastic.E) A) and D)
F) A) and C)

Question 14

The price elasticity of demand is generally

Accepted Answer

A)  negative, but the minus sign is ignored.
B)  positive, but the plus sign is ignored.
C)  positive for normal goods and negative for inferior goods.
D)  positive because price and quantity demanded are inversely related.E) C) and D)
F) B) and D)

Question 15

Cross elasticity of demand measures how sensitive purchases of a specific product are to changes in

Accepted Answer

A)  the price of some other product.
B)  the price of that same product.
C)  income.
D)  the general price level.E) C) and D)
F) A) and D)

Question 16

Refer to the total revenue graph above. When the seller is earning maximum revenues from selling Product X, the demand is

Accepted Answer

A)  elastic.
B)  inelastic.
C)  unit-elastic.
D)  perfectly inelastic.E) A) and D)
F) C) and D)

Question 17

Suppose that the total-revenue curve is derived from a particular linear demand curve. That demand curve must be

Accepted Answer

A)  inelastic for price declines that increase quantity demanded from 6 units to 7 units.
B)  elastic for price declines that increase quantity demanded from 6 units to 7 units.
C)  inelastic for price increases that reduce quantity demanded from 4 units to 3 units.
D)  elastic for price increases that reduce quantity demanded from 8 units to 7 units.E) All of the above
F) C) and D)

Question 18

Suppose Aiyanna's Pizzeria currently faces a linear demand curve and is charging a very high price per pizza and doing very little business. Aiyanna now decides to lower pizza prices by 5 percent per week for an indefinite period of time. We can expect that each successive week,

Accepted Answer

A)  demand will become more price elastic.
B)  price elasticity of demand will not change as price is lowered.
C)  demand will become less price elastic.
D)  the elasticity of supply will increase.E) A) and B)
F) B) and C)

Question 19

You are the only seller of eggs in town, and the price-elasticity coefficient for eggs is known to be 0.5. If you want to increase your sales quantity by 6 percent through a price change, what should you do to the price?

Accepted Answer

A)  reduce price by 12 percent
B)  increase price by 12 percent
C)  reduce price by 3 percent
D)  increase price by 3 percentE) B) and D)
F) None of the above

Question 20

Answer the question based on the following data.  What is the price elasticity of demand over the range of $8 to $10?

Accepted Answer

A)  0.11
B)  0.47
C)  1.93
D)  1.43E) All of the above
F) A) and D)

Exam 6: Elasticity

If a product has a short-run elasticity of supply equal to zero, then an increase in the demand for the product will

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Refer to the total revenue graph above. When the seller is earning maximum revenues from selling Product X, the demand is

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The coefficient of price-elasticity of supply for a product is 2 if

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Which product is most likely to be the most price elastic?

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If the price of hand calculators falls from $10 to $9 and, as a result, the quantity demanded increases from 100 to 125, then

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Cross elasticity of demand measures how sensitive purchases of a specific product are to changes in

Correct AnswerverifiedShow Answer

If demand for farm crops is inelastic, a good harvest will cause farm revenues to

Correct AnswerverifiedShow Answer

If the supply of product X is perfectly elastic, an increase in the demand for it will increase

Correct AnswerverifiedShow Answer

The price elasticity of demand is generally

Correct AnswerverifiedShow Answer

The supply of product X is elastic if the price of X rises by

Correct AnswerverifiedShow Answer

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. In the immediate market period, the increase in demand will

Correct AnswerverifiedShow Answer

When the price of a product is increased 10 percent, the quantity demanded decreases 15 percent. The price-elasticity-of-demand coefficient for this product is

Correct AnswerverifiedShow Answer

The price of gold is often volatile because

Correct AnswerverifiedShow Answer

Assume that pizza and hamburgers are the only food items available to consumers. If the price of pizza increases, other factors constant, then which of the following will definitely happen?

Correct AnswerverifiedShow Answer

Suppose Aiyanna's Pizzeria currently faces a linear demand curve and is charging a very high price per pizza and doing very little business. Aiyanna now decides to lower pizza prices by 5 percent per week for an indefinite period of time. We can expect that each successive week,

Correct AnswerverifiedShow Answer

The price elasticity of demand for a popular sporting event is 0.5. If the price of a ticket to this event increases by 12 percent, the quantity of tickets demanded will

Correct AnswerverifiedShow Answer

Answer the question based on the following data. What is the price elasticity of demand over the range of $8 to $10?

Correct AnswerverifiedShow Answer

The price of old baseball cards rises rapidly with increases in demand because

Correct AnswerverifiedShow Answer

Suppose that the total-revenue curve is derived from a particular linear demand curve. That demand curve must be

Correct AnswerverifiedShow Answer

You are the only seller of eggs in town, and the price-elasticity coefficient for eggs is known to be 0.5. If you want to increase your sales quantity by 6 percent through a price change, what should you do to the price?

Correct AnswerverifiedShow Answer

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