Question 1

Which of the following explains why a firm would be interested in the knowing the price elasticity of demand for a good it sells?

Accepted Answer

A)   The price elasticity of demand can be used to determine the impact of changes in income on quantity sold.
B)   Knowing the price elasticity of demand allows the firm to determine how the cost of producing additional units of the good will change.
C)   Knowing the price elasticity of demand allows the firm to calculate how changes in the price of the good will affect the firm's total profit.
D)   The price elasticity of demand allows the firm to calculate how changes in the price of the good will affect the firm's total revenue.E) A) and C)
F) C) and D)

Question 2

The demand for The Federalist Papers is likely to be more elastic than the demand for a best-selling mystery novel.

Accepted Answer

A) True 
 B)False

Question 3

If a 5 percent increase in income leads to a 10 percent decrease in quantity demanded for a product, this product is

Accepted Answer

A)   an income elastic good.
B)   an inferior good.
C)   a necessity.
D)   a luxury good.E) A) and B)
F) A) and C)

Question 4

Between 1950 and 2013 the number of acres devoted to wheat production in the United States ________ and the price of wheat ________.

Accepted Answer

A)   declined; decreased
B)   more than doubled; increased by about 50 percent
C)   declined; more than doubled
D)   increased; more than doubledE) None of the above
F) All of the above

Question 5

Figure 6-4 
-At a price of $100, Beachside Canoe Rentals rented 11 canoes. When it increased its rental price to $125, 9 canoes were rented. Calculate the absolute value of the price elasticity of demand for canoe rentals, using the midpoint formula.

Accepted Answer

A)   2
B)   1.25
C)   0.9
D)   0.75E) A) and D)
F) B) and D)

Question 6

Briefly explain the economic concept of elasticity.

Accepted Answer

Elasticity is a measure of how...

Question 7

Figure 6-12 
-Refer to Figure 6-12. The diagram shows two supply curves, SA and SB. As price rises from P0 to P1, which supply curve is more elastic?

Accepted Answer

A)   SA
B)   SB
C)   They are equally inelastic.
D)   They are equally elastic.E) B) and C)
F) All of the above

Question 8

If the absolute value of the price elasticity of demand for gasoline is 0.5, then a 10 percent increase in the price of gasoline leads to a 0.5 percent decrease in the quantity demanded.

Accepted Answer

A) True 
 B)False

Question 9

With the increased usage of cell phone services, what has happened to the price elasticity of demand for land-line telephone services?

Accepted Answer

A)   It has become more price inelastic.
B)   It has become more price elastic.
C)   It has become more income elastic.
D)   The absolute value of the price elasticity coefficient has probably gone down.E) None of the above
F) A) and C)

Question 10

Suppose when Nablom's Bakery raised the price of its breads by 10 percent, the quantity demanded fell by 15 percent. What was the effect on sales revenue?

Accepted Answer

A)   Sales revenue increased.
B)   Sales revenue remained unchanged.
C)   Sales revenue decreased.
D)   It cannot be determined without information on prices.E) A) and B)
F) C) and D)

Question 11

Figure 6-4 
-Refer to Figure 6-4. The inelastic segment of the demand curve

Accepted Answer

A)   is coincident with the horizontal axis.
B)   is coincident with the vertical axis.
C)   lies below the midpoint of the curve.
D)   lies above the midpoint of the curve.E) A) and D)
F) A) and C)

Question 12

Shifts in the supply of oil have caused large changes in price since the 1970s because

Accepted Answer

A)   the supply of oil is very inelastic while the demand for oil is very elastic over short periods of time.
B)   the supply of oil is very elastic while the demand for oil is inelastic over short periods of time.
C)   both the supply of oil and the demand for oil are inelastic over short periods of time.
D)   the supply of oil and the demand for oil are perfectly elastic over short periods of time.E) B) and C)
F) A) and B)

Question 13

Figure 6-1 
-Refer to Figure 6-1. A perfectly inelastic demand curve is shown in

Accepted Answer

A)   Panel A.
B)   Panel B.
C)   Panel C.
D)   Panel D.E) A) and B)
F) None of the above

Question 14

The price elasticity of an upward-sloping supply curve is always

Accepted Answer

A)   positive.
B)   negative.
C)   greater than one.
D)   impossible to determine.E) C) and D)
F) A) and B)

Question 15

In the alcohol industry, both wine and spirits are considered to be substitutes for beer.

Accepted Answer

A) True 
 B)False

Question 16

Economists estimated that the cross-price elasticity of demand for beer and wine is -0.83 and the income elasticity of wine is 5.03. This means that

Accepted Answer

A)   beer and wine are substitutes and wine is an inferior good.
B)   beer and wine are complements and wine is a luxury good.
C)   beer and wine are substitutes and wine is a luxury good.
D)   beer and wine are complements and wine is an inferior good.E) A) and B)
F) All of the above

Question 17

If the market for a product is narrowly defined, then there are likely to be many substitutes for the product and the demand for the product is relatively elastic.

Accepted Answer

A) True 
 B)False

Question 18

Between 1950 and 2013, the productivity of wheat farmers in the United States more than doubled. This means that

Accepted Answer

A)   the amount of land and other resources devoted to wheat production more than doubled.
B)   the incomes of wheat farmers more than doubled.
C)   the total amount of wheat produced more than doubled.
D)   the amount of wheat produced by the average farmer more than doubled.E) A) and B)
F) All of the above

Question 19

Which of the following pairs of goods is likely to have a negative cross-price elasticity of demand?

Accepted Answer

A)   pancakes and syrup
B)   hot dogs and hamburgers
C)   orange juice and grapefruit juice
D)   peanuts and cat foodE) A) and C)
F) None of the above

Question 20

Suppose at the going wage rate of $20 per hour, firms can hire as many hours of janitorial services as it desires. If any firm tries to lower the wage rate to $19, it will not be able to hire any janitor. What does this indicate about the supply curve for janitorial services?

Accepted Answer

A)   Supply is unit-elastic.
B)   Supply is perfectly elastic.
C)   Supply is perfectly inelastic.
D)   Supply is relatively inelastic.E) None of the above
F) A) and B)

Exam 6: Elasticity: the Responsiveness of Demand and Supply

Which of the following pairs of goods is likely to have a negative cross-price elasticity of demand?

Correct AnswerverifiedShow Answer

In the alcohol industry, both wine and spirits are considered to be substitutes for beer.

Correct AnswerverifiedShow Answer

With the increased usage of cell phone services, what has happened to the price elasticity of demand for land-line telephone services?

Correct AnswerverifiedShow Answer

If the absolute value of the price elasticity of demand for gasoline is 0.5, then a 10 percent increase in the price of gasoline leads to a 0.5 percent decrease in the quantity demanded.

Correct AnswerverifiedShow Answer

The demand for The Federalist Papers is likely to be more elastic than the demand for a best-selling mystery novel.

Correct AnswerverifiedShow Answer

Suppose at the going wage rate of $20 per hour, firms can hire as many hours of janitorial services as it desires. If any firm tries to lower the wage rate to $19, it will not be able to hire any janitor. What does this indicate about the supply curve for janitorial services?

Correct AnswerverifiedShow Answer

Figure 6-12 -Refer to Figure 6-12. The diagram shows two supply curves, SA and SB. As price rises from P0 to P1, which supply curve is more elastic?

Correct AnswerverifiedShow Answer

If the market for a product is narrowly defined, then there are likely to be many substitutes for the product and the demand for the product is relatively elastic.

Correct AnswerverifiedShow Answer

Economists estimated that the cross-price elasticity of demand for beer and wine is -0.83 and the income elasticity of wine is 5.03. This means that

Correct AnswerverifiedShow Answer

Figure 6-4 -Refer to Figure 6-4. The inelastic segment of the demand curve

Correct AnswerverifiedShow Answer

Suppose when Nablom's Bakery raised the price of its breads by 10 percent, the quantity demanded fell by 15 percent. What was the effect on sales revenue?

Correct AnswerverifiedShow Answer

Between 1950 and 2013 the number of acres devoted to wheat production in the United States ________ and the price of wheat ________.

Correct AnswerverifiedShow Answer

Briefly explain the economic concept of elasticity.

Correct AnswerverifiedElasticity is a measure of how...View AnswerShow Answer

The price elasticity of an upward-sloping supply curve is always

Correct AnswerverifiedShow Answer

Shifts in the supply of oil have caused large changes in price since the 1970s because

Correct AnswerverifiedShow Answer

Figure 6-1 -Refer to Figure 6-1. A perfectly inelastic demand curve is shown in

Correct AnswerverifiedShow Answer

Figure 6-4 -At a price of $100, Beachside Canoe Rentals rented 11 canoes. When it increased its rental price to $125, 9 canoes were rented. Calculate the absolute value of the price elasticity of demand for canoe rentals, using the midpoint formula.

Correct AnswerverifiedShow Answer

Which of the following explains why a firm would be interested in the knowing the price elasticity of demand for a good it sells?

Correct AnswerverifiedShow Answer

If a 5 percent increase in income leads to a 10 percent decrease in quantity demanded for a product, this product is

Correct AnswerverifiedShow Answer

Between 1950 and 2013, the productivity of wheat farmers in the United States more than doubled. This means that

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Between 1950 and 2013 the number of acres devoted to wheat production in the United States and the price of wheat .

Correct Answer
verified

Correct Answer
verified
Elasticity is a measure of how...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified