Question 1

Blossom, Inc., sells 900 bottles of perfume a month when the price is $10. A huge increase in resource costs forces Blossom to raise the price to $12, and the firm only manages to sell 750 bottles of perfume. Using the midpoint formula, the price elasticity of demand coefficient is

Accepted Answer

A)  1 and elastic.
B)  1.4 and elastic.
C)  1 and unit elastic.
D)  1.67 and elastic.E) A) and B)
F) A) and C)

Question 2

An antidrug policy that reduces the supply of heroin might

Accepted Answer

A)  increase street crime because the addict's demand for heroin is highly inelastic.
B)  reduce street crime because the addict's demand for heroin is highly elastic.
C)  reduce street crime because the addict's demand for heroin is highly inelastic.
D)  increase street crime because the addict's demand for heroin is highly elastic.E) A) and B)
F) A) and C)

Question 3

In the graph above, what is the price elasticity of supply (using the midpoint formula) between points A and B?

Accepted Answer

A)  1
B)  3
C)  2
D)  1/3E) All of the above
F) B) and D)

Question 4

Given that the demand for grains is price-inelastic, we would expect that if the harvest of grains increases significantly, other factors constant, then grain farmers' total revenues would increase.

Accepted Answer

A) True 
 B)False

Question 5

Refer to the total revenue graph above. If the quantity of product X demanded falls from 14,000 to 10,000 units, then it suggests that the price of 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) B) and C)
F) None of the above

Question 6

Refer to the diagrams. The case of complementary goods is represented by figure

Accepted Answer

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

Question 7

Suppose 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 2 units to 3 units.
B)  elastic for price declines that increase quantity demanded from 5 units to 6 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 4 units to 3 units.E) A) and C)
F) All of the above

Question 8

The total revenue received by sellers of a good is computed by

Accepted Answer

A)  multiplying the price times the quantity sold.
B)  adding the price and the quantity sold.
C)  multiplying the percentage change in price times the percentage change in quantity.
D)  dividing the percentage change in quantity by the percentage change in price.E) All of the above
F) None of the above

Question 9

The price elasticity of demand for widgets is 0.8. Assuming no change in the demand curve for widgets, an increase in sales of 16 percent implies a(n)

Accepted Answer

A)  1 percent reduction in price.
B)  12 percent reduction in price.
C)  20 percent reduction in price.
D)  40 percent reduction in price.E) C) and D)
F) A) and D)

Question 10

We would expect the coefficient of cross elasticity of demand for DVD players and DVDs to be positive.

Accepted Answer

A) True 
 B)False

Question 11

The diagram suggests that

Accepted Answer

A)  X and Y are both inferior goods.
B)  X and Y are both normal goods.
C)  X and Y are substitute goods.
D)  X and Y are independent goods.E) C) and D)
F) None of the above

Question 12

When the percentage change in price is greater than the resulting percentage change in quantity demanded,

Accepted Answer

A)  a decrease in price will increase total revenue.
B)  demand may be either elastic or inelastic.
C)  an increase in price will increase total revenue.
D)  demand is elastic.E) C) and D)
F) A) and B)

Question 13

Refer to the above graph. If the price is P₃, then the total revenue is represented by area

Accepted Answer

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

Question 14

In markets entered by Southwest Airlines, gains in passenger traffic and profits

Accepted Answer

A)  went primarily to airlines already in those markets.
B)  were evenly distributed among airlines in those markets.
C)  went almost entirely to Southwest.
D)  were minimal, as the highly inelastic demand for air travel meant reduced revenues for all airlines in those markets.E) None of the above
F) A) and B)

Question 15

If quantity demanded is completely unresponsive to price changes, demand is

Accepted Answer

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

Question 16

It is argued that, with a rising demand for college education, if the supply were to become more elastic, then college tuition costs would

Accepted Answer

A)  rise faster.
B)  decrease slowly.
C)  increase more slowly.
D)  decrease steeply.E) B) and C)
F) A) and B)

Question 17

We would expect the income elasticity of demand for steak to be positive, and that for hamburger to be negative.

Accepted Answer

A) True 
 B)False

Question 18

List the four determinants of price elasticity of demand.

Accepted Answer

The four determinants are (1)s...

Question 19

The more time consumers have to adjust to a change in price,

Accepted Answer

A)  the smaller will be the price elasticity of demand.
B)  the greater will be the price elasticity of demand.
C)  the more likely the product is a normal good.
D)  the more likely the product is an inferior good.E) A) and C)
F) All of the above

Question 20

Suppose the supply of product X is perfectly inelastic. If there is an increase in the demand for this product, equilibrium price

Accepted Answer

A)  will decrease, but equilibrium quantity will increase.
B)  and quantity will both decrease.
C)  will increase, but equilibrium quantity will decline.
D)  will increase, but equilibrium quantity will be unchanged.E) A) and B)
F) All of the above

Exam 6: Elasticity

We would expect the income elasticity of demand for steak to be positive, and that for hamburger to be negative.

Correct AnswerverifiedShow Answer

The price elasticity of demand for widgets is 0.8. Assuming no change in the demand curve for widgets, an increase in sales of 16 percent implies a(n)

Correct AnswerverifiedShow Answer

The more time consumers have to adjust to a change in price,

Correct AnswerverifiedShow Answer

An antidrug policy that reduces the supply of heroin might

Correct AnswerverifiedShow Answer

Blossom, Inc., sells 900 bottles of perfume a month when the price is $10. A huge increase in resource costs forces Blossom to raise the price to $12, and the firm only manages to sell 750 bottles of perfume. Using the midpoint formula, the price elasticity of demand coefficient is

Correct AnswerverifiedShow Answer

List the four determinants of price elasticity of demand.

Correct AnswerverifiedThe four determinants are (1)s...View AnswerShow Answer

Refer to the diagrams. The case of complementary goods is represented by figure

Correct AnswerverifiedShow Answer

Suppose the supply of product X is perfectly inelastic. If there is an increase in the demand for this product, equilibrium price

Correct AnswerverifiedShow Answer

When the percentage change in price is greater than the resulting percentage change in quantity demanded,

Correct AnswerverifiedShow Answer

If quantity demanded is completely unresponsive to price changes, demand is

Correct AnswerverifiedShow Answer

In markets entered by Southwest Airlines, gains in passenger traffic and profits

Correct AnswerverifiedShow Answer

Refer to the above graph. If the price is P₃, then the total revenue is represented by area

Correct AnswerverifiedShow Answer

It is argued that, with a rising demand for college education, if the supply were to become more elastic, then college tuition costs would

Correct AnswerverifiedShow Answer

Refer to the total revenue graph above. If the quantity of product X demanded falls from 14,000 to 10,000 units, then it suggests that the price of X was

Correct AnswerverifiedShow Answer

The total revenue received by sellers of a good is computed by

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

We would expect the coefficient of cross elasticity of demand for DVD players and DVDs to be positive.

Correct AnswerverifiedShow Answer

In the graph above, what is the price elasticity of supply (using the midpoint formula) between points A and B?

Correct AnswerverifiedShow Answer

Given that the demand for grains is price-inelastic, we would expect that if the harvest of grains increases significantly, other factors constant, then grain farmers' total revenues would increase.

Correct AnswerverifiedShow Answer

The diagram suggests that

Correct AnswerverifiedShow Answer

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The four determinants are (1)s...
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