Question 1

The effect of a change in the price of tea on the quantity of coffee demanded is measured by the

Accepted Answer

A)   price elasticity of demand
B)   substitute elasticity of demand
C)   cross-price elasticity of demand
D)   income elasticity of demand
E)   alternative elasticity of demandF) B) and D)
G) B) and E)

Question 2

Demand for a good is likely to be less elastic

Accepted Answer

A)   the more narrowly defined the good is
B)   the larger the good's share of the buyer's budget
C)   in the long run than in the short run
D)   the smaller the number of substitute goods available
E)   at high pricesF) B) and C)
G) None of the above

Question 3

The price elasticity of demand is important to firms because

Accepted Answer

A)   it explains the relationship between income and demand for the goods they sell
B)   it shows how price changes affect total expenditures on the goods they sell
C)   the law of demand suggests that elasticity falls as total expenditures continuously rises
D)   it helps identify the equilibrium price and quantity in the market
E)   it relates price to supplyF) None of the above
G) All of the above

Question 4

A perfectly inelastic supply curve

Accepted Answer

A)   cannot exist
B)   is horizontal
C)   has an elasticity of 0
D)   has an elasticity of 1
E)   is verticalF) C) and E)
G) D) and E)

Question 5

A $1.00 increase in the price of a restaurant meal results in a drop in quantity demanded of 5 meals.Which of the following statements is correct?

Accepted Answer

A)   The slope of the demand curve is -1/5;there is insufficient information to determine the price elasticity of demand.
B)   The price elasticity of demand is -1/5;there is insufficient information to determine the slope of the demand curve.
C)   Both the slope of the demand curve and the price elasticity of demand are equal to -1/5.
D)   There is insufficient information to determine either the slope of the demand curve or the price elasticity of demand.
E)   The slope of the demand curve is -1/5;the price elasticity of demand is 5.F) A) and E)
G) C) and E)

Question 6

If demand is perfectly inelastic,a decrease in price results in a(n)

Accepted Answer

A)   decrease in seller's total revenue
B)   increase in total seller's expenditure
C)   increase in expenditure on the good,but a decrease in revenue to the seller
D)   unfavorable shift in tastes and preferences
E)   increase in total revenue to the sellerF) All of the above
G) A) and D)

Question 7

If the demand curve is a horizontal line,

Accepted Answer

A)   demand is perfectly elastic
B)   demand is perfectly inelastic
C)   demand is unitary elastic
D)   demand is relatively inelastic
E)   total expenditure is maximizedF) B) and E)
G) D) and E)

Question 8

The sensitivity of one economic variable to changes in another variable is known as

Accepted Answer

A)   the variability coefficient
B)   elasticity
C)   the sensitivity coefficient
D)   the cross-variability coefficient
E)   the law of demandF) A) and D)
G) C) and E)

Question 9

If the demand curve is a straight line and has the normal negative slope,then as quantity demanded increases,demand

Accepted Answer

A)   becomes more elastic
B)   becomes more inelastic
C)   is unitary elastic
D)   rises and then falls
E)   is an inverse function of supplyF) A) and B)
G) A) and E)

Question 10

When there is a positive cross-price elasticity of demand between two goods,

Accepted Answer

A)   they are independent goods
B)   they are complementary goods
C)   they are substitute goods
D)   they are normal goods
E)   the income elasticity of demand is positiveF) B) and E)
G) A) and E)

Question 11

If the percentage change in quantity demanded is smaller (in absolute value) than the percentage change in price,then demand is

Accepted Answer

A)   inelastic
B)   elastic
C)   unit elastic
D)   determined by supply
E)   inadequate compared to supplyF) B) and E)
G) A) and D)

Question 12

-Figure 5-8 shows the demand schedule for hockey pucks.At which price is demand the most price elastic?

Accepted Answer

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

Question 13

-Bill's Office Furniture sells office chairs and desks.Bill's has changed the price per chair by $10 in each of four successive weeks.Figure 5-12 shows the four prices along with the corresponding sales of desks.What is the cross-price elasticity of demand of desks with respect to chairs when the price of a chair changes in the $45 to $55 range?

Accepted Answer

A)   -2.0
B)   2.0
C)   0.5
D)   -0.5
E)   1.0F) A) and E)
G) A) and D)

Question 14

If two commodities are substitutes,then

Accepted Answer

A)   they tend to be used together by consumers
B)   their prices are generally regulated by the government
C)   an increase in the price of one of them increases the supply of the other
D)   the cross-price elasticity of demand is positive
E)   the cross-price elasticity of demand is negativeF) B) and D)
G) A) and B)

Question 15

-Figure 5-7 shows Sally's demand for movie theater tickets (quantity of movies per year) .At a price of $9 per ticket,her

Accepted Answer

A)   demand is inelastic
B)   demand is perfectly elastic
C)   demand is elastic
D)   total expenditure is being maximized
E)   demand is perfectly inelasticF) All of the above
G) A) and B)

Question 16

The concept of elasticity is used to

Accepted Answer

A)   indicate the economy's ability to rebound from a recession
B)   measure the robustness of a variable
C)   measure the sensitivity of one variable to changes in another
D)   measure price changes
E)   measure income changesF) A) and E)
G) C) and D)

Question 17

A local store noticed that when it increased the price of milk from $2.50 to $3.50 per gallon,it sold 33% less milk.Since everything else remained the same,we would say the

Accepted Answer

A)   demand for milk is perfectly elastic
B)   demand for milk is elastic
C)   demand for milk is perfectly inelastic
D)   demand for milk is unitary elastic
E)   law of supply does not apply in this situationF) A) and B)
G) A) and E)

Question 18

The more narrowly we define a good,the easier it is to find substitutes,and

Accepted Answer

A)   the greater is the number of producers of that good
B)   the greater is the supply-side response
C)   fewer consumers therefore wish to purchase the good
D)   less elastic is the demand for that good
E)   more elastic is the demand for that goodF) C) and D)
G) B) and D)

Question 19

Consider a good with a price elasticity equal to 1 at every point on its demand curve.Which of the following statements is correct?

Accepted Answer

A)   Total revenue always rises exactly in proportion to a drop in the price.
B)   Total revenue always rises exactly in proportion to a rise in the price.
C)   Total revenue does not change if the price changes.
D)   Total revenue drops to zero whenever the price rises.
E)   Total revenue always doubles if the price drops.F) A) and D)
G) B) and E)

Question 20

A perfectly elastic supply curve

Accepted Answer

A)   has an elasticity of 1
B)   has an elasticity less than 1
C)   has an elasticity of 0
D)   is horizontal
E)   is upward slopingF) B) and E)
G) C) and D)

Exam 5: Elasticity

The more narrowly we define a good,the easier it is to find substitutes,and

Correct Answer
verified

Consider a good with a price elasticity equal to 1 at every point on its demand curve.Which of the following statements is correct?

Correct Answer
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-Figure 5-7 shows Sally's demand for movie theater tickets (quantity of movies per year) .At a price of $9 per ticket,her

Correct Answer
verified

A perfectly elastic supply curve

Correct Answer
verified

A $1.00 increase in the price of a restaurant meal results in a drop in quantity demanded of 5 meals.Which of the following statements is correct?

Correct Answer
verified

Correct Answer
verified

If two commodities are substitutes,then

Correct Answer
verified

The price elasticity of demand is important to firms because

Correct Answer
verified

The effect of a change in the price of tea on the quantity of coffee demanded is measured by the

Correct Answer
verified

If the demand curve is a horizontal line,

Correct Answer
verified

Demand for a good is likely to be less elastic

Correct Answer
verified

-Figure 5-8 shows the demand schedule for hockey pucks.At which price is demand the most price elastic?

Correct Answer
verified

A local store noticed that when it increased the price of milk from $2.50 to $3.50 per gallon,it sold 33% less milk.Since everything else remained the same,we would say the

Correct Answer
verified

If demand is perfectly inelastic,a decrease in price results in a(n)

Correct Answer
verified

If the percentage change in quantity demanded is smaller (in absolute value) than the percentage change in price,then demand is

Correct Answer
verified

The sensitivity of one economic variable to changes in another variable is known as

Correct Answer
verified

A perfectly inelastic supply curve

Correct Answer
verified

When there is a positive cross-price elasticity of demand between two goods,

Correct Answer
verified

The concept of elasticity is used to

Correct Answer
verified

If the demand curve is a straight line and has the normal negative slope,then as quantity demanded increases,demand

Correct Answer
verified

Exam 5: Elasticity

The more narrowly we define a good,the easier it is to find substitutes,and

Correct AnswerverifiedShow Answer

Consider a good with a price elasticity equal to 1 at every point on its demand curve.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

-Figure 5-7 shows Sally's demand for movie theater tickets (quantity of movies per year) .At a price of $9 per ticket,her

Correct AnswerverifiedShow Answer

A perfectly elastic supply curve

Correct AnswerverifiedShow Answer

A $1.00 increase in the price of a restaurant meal results in a drop in quantity demanded of 5 meals.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If two commodities are substitutes,then

Correct AnswerverifiedShow Answer

The price elasticity of demand is important to firms because

Correct AnswerverifiedShow Answer

The effect of a change in the price of tea on the quantity of coffee demanded is measured by the

Correct AnswerverifiedShow Answer

If the demand curve is a horizontal line,

Correct AnswerverifiedShow Answer

Demand for a good is likely to be less elastic

Correct AnswerverifiedShow Answer

-Figure 5-8 shows the demand schedule for hockey pucks.At which price is demand the most price elastic?

Correct AnswerverifiedShow Answer

A local store noticed that when it increased the price of milk from $2.50 to $3.50 per gallon,it sold 33% less milk.Since everything else remained the same,we would say the

Correct AnswerverifiedShow Answer

If demand is perfectly inelastic,a decrease in price results in a(n)

Correct AnswerverifiedShow Answer

If the percentage change in quantity demanded is smaller (in absolute value) than the percentage change in price,then demand is

Correct AnswerverifiedShow Answer

The sensitivity of one economic variable to changes in another variable is known as

Correct AnswerverifiedShow Answer

A perfectly inelastic supply curve

Correct AnswerverifiedShow Answer

When there is a positive cross-price elasticity of demand between two goods,

Correct AnswerverifiedShow Answer

The concept of elasticity is used to

Correct AnswerverifiedShow Answer

If the demand curve is a straight line and has the normal negative slope,then as quantity demanded increases,demand

Correct AnswerverifiedShow Answer

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