Question 1

The cross-price elasticity of demand for substitute goods must be

Accepted Answer

A)   greater than one.
B)   less than one.
C)   zero.
D)   greater than zero.E) All of the above
F) A) and C)

Question 2

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the

Accepted Answer

A)   cross-price elasticity of demand is negative.
B)   price elasticity of demand is elastic.
C)   income elasticity of demand is negative.
D)   income elasticity of demand is positive.E) B) and D)
F) A) and B)

Question 3

If a small percentage increase in the price of a good greatly reduces the quantity demanded for that good, the demand for that good is

Accepted Answer

A)   income inelastic.
B)   price inelastic.
C)   price elastic.
D)   unit price elastic.
E)   income elastic.F) A) and B)
G) B) and E)

Question 4

Suppose that at a price of €30 per month, there are 30,000 subscribers to cable television in Small Town. If Small Town Cablevision raises its price to €40 per month, the number of subscribers will fall to 20,000. At which of the following prices does Small Town Cablevision earn the greatest total revenue?

Accepted Answer

A)   €0 per month
B)   €30 per month
C)   €40 per month
D)   Either €30 or €40 per month because the price elasticity of demand is 1.0.E) B) and C)
F) C) and D)

Question 5

Which of the following would cause a demand curve for a good to be price inelastic?

Accepted Answer

A)   The good is a luxury.
B)   There are a great number of substitutes for the good.
C)   The good is a necessity.
D)   The good is an inferior good.E) A) and B)
F) B) and C)

Question 6

The price elasticity of demand is defined as

Accepted Answer

A)   the percentage change in the quantity demanded divided by the percentage change in income.
B)   the percentage change in income divided by the percentage change in the quantity demanded.
C)   the percentage change in the quantity demanded of a good divided by the percentage change in the price of that good.
D)   the percentage change in the price of a good multiplied by the inverse of the percentage change in demand
E)   the percentage change in price of a good divided by the percentage change in the quantity demanded of that good.F) A) and D)
G) A) and E)

Question 7

Price elasticity of supply for the long run is

Accepted Answer

A)   always greater than the long-run price elasticity of demand.
B)   always zero.
C)   perfectly inelastic.
D)   always greater than the short-run price elasticity of supply.E) None of the above
F) B) and C)

Question 8

If a supply curve for a good is price elastic, then

Accepted Answer

A)   the quantity supplied is sensitive to changes in the price of that good.
B)   the quantity demanded is insensitive to changes in the price of that good.
C)   the quantity demanded is sensitive to changes in the price of that good.
D)   the quantity supplied is insensitive to changes in the price of that good.E) All of the above
F) B) and C)

Question 9

If an increase in the price of a good has no impact on the total revenue in that market, demand must be

Accepted Answer

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

Question 10

Using the midpoint method, compute the elasticity of demand between points A and B. Is demand along this portion of the curve elastic or inelastic? Interpret your answer with regard to price and quantity demanded. Now compute the elasticity of demand between points B and C. Is demand along this portion of the curve elastic or inelastic?

Accepted Answer

In the section of the demand curve from ...

Question 11

Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes.

Accepted Answer

A) True 
 B)False

Question 12

If demand is elastic, how will an increase in price change total revenue?

Accepted Answer

If demand is price elastic, an increase ...

Question 13

Consider the following pairs of goods. For which of the two goods would you expect the demand to be more price elastic? Why?
a. water or diamonds
b. insulin or nasal decongestant spray
c. food in general or breakfast cereal
d. petrol over the course of a week or gasoline over the course of a year

Accepted Answer

a. Diamonds are luxuries, and water is a...

Question 14

In the market for oil in the short run, demand

Accepted Answer

A)   and supply are both elastic.
B)   and supply are both inelastic.
C)   is elastic and supply is inelastic.
D)   is inelastic and supply is elastic.E) C) and D)
F) None of the above

Question 15

Recently, in a small village shop, the price of Snickers fell from €0.80 to €0.70. As a result, the quantity demanded of Mars Bars decreased from 120 to 100 in a week. What would be the appropriate elasticity to compute? Using the midpoint method, compute this elasticity. What does your answer tell you?

Accepted Answer

The appropriate elasticity to compute wo...

Question 16

For which of the following goods is the income elasticity of demand likely lowest?

Accepted Answer

A)   water
B)   sapphire pendant necklaces
C)   filet mignon steaks
D)   fresh fruitE) None of the above
F) All of the above

Question 17

If the income elasticity of demand for a good is negative, it must be

Accepted Answer

A)   an elastic good.
B)   an inferior good.
C)   a normal good.
D)   a luxury good.E) None of the above
F) C) and D)

Question 18

When the Jones family had a monthly income of €4,000, they usually ate out 8 times a month. Now that the couple makes €4,500 a month, they eat out 10 times a month. Compute the couple's income elasticity of demand using the midpoint method. Explain your answer. Is a restaurant meal a normal or inferior good to the couple?

Accepted Answer

The income elasticity of deman...

Question 19

Total revenue

Accepted Answer

A)   always increases as price increases.
B)   increases as price increases, as long as demand is elastic.
C)   decreases as price increases, as long as demand is inelastic.
D)   remains unchanged as price increases when demand is unit elastic.E) A) and B)
F) C) and D)

Question 20

The price elasticity of demand for a good measures the willingness of

Accepted Answer

A)   consumers to buy less of the good as price rises.
B)   consumers to avoid monopolistic markets in favour of competitive markets.
C)   firms to produce more of a good as price rises.
D)   firms to respond to the tastes of consumers.E) A) and B)
F) None of the above

Exam 4: Elasticity and Its Applications

The cross-price elasticity of demand for substitute goods must be

Correct Answer
verified

Which of the following would cause a demand curve for a good to be price inelastic?

Correct Answer
verified

If an increase in the price of a good has no impact on the total revenue in that market, demand must be

Correct Answer
verified

Correct Answer
verified
In the section of the demand curve from ...
View Answer

Price elasticity of supply for the long run is

Correct Answer
verified

Total revenue

Correct Answer
verified

If the income elasticity of demand for a good is negative, it must be

Correct Answer
verified

Consider the following pairs of goods. For which of the two goods would you expect the demand to be more price elastic? Why? a. water or diamonds b. insulin or nasal decongestant spray c. food in general or breakfast cereal d. petrol over the course of a week or gasoline over the course of a year

Correct Answer
verified
a. Diamonds are luxuries, and water is a...
View Answer

If a supply curve for a good is price elastic, then

Correct Answer
verified

Correct Answer
verified
The income elasticity of deman...
View Answer

The price elasticity of demand is defined as

Correct Answer
verified

Correct Answer
verified

For which of the following goods is the income elasticity of demand likely lowest?

Correct Answer
verified

If a small percentage increase in the price of a good greatly reduces the quantity demanded for that good, the demand for that good is

Correct Answer
verified

If demand is elastic, how will an increase in price change total revenue?

Correct Answer
verified
If demand is price elastic, an increase ...
View Answer

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the

Correct Answer
verified

Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes.

Correct Answer
verified

In the market for oil in the short run, demand

Correct Answer
verified

The price elasticity of demand for a good measures the willingness of

Correct Answer
verified

Correct Answer
verified
The appropriate elasticity to compute wo...
View Answer

Exam 4: Elasticity and Its Applications

The cross-price elasticity of demand for substitute goods must be

Correct AnswerverifiedShow Answer

Which of the following would cause a demand curve for a good to be price inelastic?

Correct AnswerverifiedShow Answer

If an increase in the price of a good has no impact on the total revenue in that market, demand must be

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIn the section of the demand curve from ...View AnswerShow Answer

Price elasticity of supply for the long run is

Correct AnswerverifiedShow Answer

Total revenue

Correct AnswerverifiedShow Answer

If the income elasticity of demand for a good is negative, it must be

Correct AnswerverifiedShow Answer

Consider the following pairs of goods. For which of the two goods would you expect the demand to be more price elastic? Why? a. water or diamonds b. insulin or nasal decongestant spray c. food in general or breakfast cereal d. petrol over the course of a week or gasoline over the course of a year

Correct Answerverifieda. Diamonds are luxuries, and water is a...View AnswerShow Answer

If a supply curve for a good is price elastic, then

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe income elasticity of deman...View AnswerShow Answer

The price elasticity of demand is defined as

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

For which of the following goods is the income elasticity of demand likely lowest?

Correct AnswerverifiedShow Answer

If a small percentage increase in the price of a good greatly reduces the quantity demanded for that good, the demand for that good is

Correct AnswerverifiedShow Answer

If demand is elastic, how will an increase in price change total revenue?

Correct AnswerverifiedIf demand is price elastic, an increase ...View AnswerShow Answer

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the

Correct AnswerverifiedShow Answer

Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes.

Correct AnswerverifiedShow Answer

In the market for oil in the short run, demand

Correct AnswerverifiedShow Answer

The price elasticity of demand for a good measures the willingness of

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe appropriate elasticity to compute wo...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
In the section of the demand curve from ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a. Diamonds are luxuries, and water is a...
View Answer

Correct Answer
verified

Correct Answer
verified
The income elasticity of deman...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
If demand is price elastic, an increase ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The appropriate elasticity to compute wo...
View Answer