Question 1

If the price of subway rides increases, quantity demanded will be:

Accepted Answer

A)   more elastic in six weeks than in six months.
B)   more elastic in six months than in six weeks.
C)   the same over any time period.
D)   unpredictable without more information.

Question 2

If the quantity effect outweighs the price effect of a price increase, then demand is:

Accepted Answer

A)   elastic.
B)   inelastic.
C)   unit elastic.
D)   normal.

Question 3

An increase in price:

Accepted Answer

A)   cannot cause a quantity effect.
B)   always increases revenue due to the price effect.
C)   may increase or decrease revenue.
D)   always decreases revenue due to the quantity effect.

Question 4

The demand for steak is _____ price elastic than the demand for meat because the scope of the market for steak is _____ broadly defined.

Accepted Answer

A)   less; more
B)   more; more
C)   less; less
D)   more; less

Question 5

Suppose quantity supplied increases from 16 to 24 units. Using the mid-point formula, what is the percentage change in quantity supplied?

Accepted Answer

A)   −40 percent
B)   0.4 percent
C)   4 percent
D)   40 percent

Question 6

Considering the concept of cross-price elasticity, if two goods are substitutes:

Accepted Answer

A)   an increase in the price of one causes a decrease in the demand for the other.
B)   a decrease in the price of one causes an increase in the demand of the other.
C)   an increase in the price of one causes an increase in the demand for the other.
D)   a decrease in the price of one has no effect on the demand for the other.

Question 7

Suppose the price of a cookie is $2.50 and the quantity demanded is 50. When the price drops to $1, the quantity demanded increases to 200. Using the midpoint method, what is the price elasticity of demand?

Accepted Answer

A)   −1.40
B)   −0.72
C)   −140
D)   −7.2

Question 8

Suppose the price of a good is $10 and quantity demanded is 50 units. When price increases to $12, quantity demanded decreases to 40 units. What does this indicate?

Accepted Answer

A)   The quantity effect is larger than the price effect, indicating that demand is inelastic.
B)   The quantity effect is larger than the price effect, indicating that demand is elastic.
C)   The price effect is larger than the quantity effect, indicating that demand is inelastic.
D)   The price effect is larger than the quantity effect, indicating that demand is elastic.

Question 9

If a good has an income elasticity of 0.18, then it is a(n)  _____ good and a _____.

Accepted Answer

A)   normal; necessity
B)   normal; luxury
C)   inferior; necessity
D)   inferior; luxury

Question 10

Elasticity along a demand curve:

Accepted Answer

A)   is constant if the demand curve is linear.
B)   changes only when the demand curve is bowed out.
C)   changes when the demand curve is linear.
D)   changes only when the demand curve is bowed in.

Question 11

Suppose the price of a good increases from $9 to $11. Using the mid-point formula, what is the percentage change in price?

Accepted Answer

A)   −20 percent
B)   25 percent
C)   20 percent
D)   2 percent

Question 12

Mathematically, price elasticity of demand is the percentage change in the _____ of a good divided by the percentage change in the _____ of that good.

Accepted Answer

A)   quantity demanded; price
B)   price; quantity
C)   quantity; price

Question 13

If two goods are substitutes, then their cross-price elasticity of demand is:

Accepted Answer

A)   positive.
B)   negative.
C)   zero.
D)   between zero and minus one.

Question 14

A tavern is likely to have a _____ price elasticity of supply than an antiques dealer due to _____.

Accepted Answer

A)   more elastic; availability of inputs
B)   less elastic; availability of inputs
C)   less elastic; a longer adjustment time
D)   less elastic; a shorter adjustment time

Question 15

Which of the following is not a determinant of price elasticity of supply?

Accepted Answer

A)   Adjustment time
B)   Scope of the market
C)   Flexibility of the production process
D)   Availability of inputs

Question 16

Suppose price decreases from $27.00 to $13.00. Using the mid-point formula, what is the percentage change in price?

Accepted Answer

A)   −0.35 = −35 percent
B)   −0.7 = −70 percent
C)   0.7 = 70 percent
D)   0.14 = 14 percent.

Question 17

Considering the concept of cross-price elasticity, if two goods are complements:

Accepted Answer

A)   an increase in the price of one will cause a decrease in the demand for the other.
B)   an increase in the price of one will cause an increase in the demand for the other.
C)   a decrease in the price of one will cause a decrease in the demand for the other.
D)   a decrease in the price of one has no effect on the demand for the other.

Question 18

The most commonly used measures of elasticity are:

Accepted Answer

A)   income elasticity of demand and price elasticity of supply.
B)   price elasticity of demand and price elasticity of supply.
C)   cross-price elasticity of demand and cross-price elasticity of supply.
D)   price elasticity of demand and cross-price elasticity of supply.

Question 19

Assuming price elasticity of demand is reported as an absolute value, a price elasticity of one indicates that:

Accepted Answer

A)   the percentage change in quantity demanded will equal the percentage change in price.
B)   the percentage change in quantity demanded will equal one.
C)   both the percentage change in price and quantity demanded must equal one.
D)   the percentage change in quantity demanded and the percentage change in price must sum to one.

Question 20

The cross-price elasticity of demand is most likely to be negative between which of the following pairs of goods?

Accepted Answer

A)   Hot dogs and hamburgers
B)   Peanut butter and jelly
C)   Butter and margarine
D)   Milk and pencils

Exam 4: Elasticity

Suppose the price of a good increases from $9 to $11. Using the mid-point formula, what is the percentage change in price?

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The demand for steak is _____ price elastic than the demand for meat because the scope of the market for steak is _____ broadly defined.

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If the price of subway rides increases, quantity demanded will be:

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Assuming price elasticity of demand is reported as an absolute value, a price elasticity of one indicates that:

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Suppose quantity supplied increases from 16 to 24 units. Using the mid-point formula, what is the percentage change in quantity supplied?

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If a good has an income elasticity of 0.18, then it is a(n) _____ good and a _____.

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Which of the following is not a determinant of price elasticity of supply?

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An increase in price:

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If the quantity effect outweighs the price effect of a price increase, then demand is:

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Suppose the price of a good is $10 and quantity demanded is 50 units. When price increases to $12, quantity demanded decreases to 40 units. What does this indicate?

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Suppose price decreases from $27.00 to $13.00. Using the mid-point formula, what is the percentage change in price?

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Considering the concept of cross-price elasticity, if two goods are complements:

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A tavern is likely to have a _____ price elasticity of supply than an antiques dealer due to _____.

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Suppose the price of a cookie is $2.50 and the quantity demanded is 50. When the price drops to $1, the quantity demanded increases to 200. Using the midpoint method, what is the price elasticity of demand?

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The most commonly used measures of elasticity are:

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Mathematically, price elasticity of demand is the percentage change in the _____ of a good divided by the percentage change in the _____ of that good.

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Elasticity along a demand curve:

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The cross-price elasticity of demand is most likely to be negative between which of the following pairs of goods?

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If two goods are substitutes, then their cross-price elasticity of demand is:

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Considering the concept of cross-price elasticity, if two goods are substitutes:

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The demand for steak is _ price elastic than the demand for meat because the scope of the market for steak is _ broadly defined.

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If a good has an income elasticity of 0.18, then it is a(n) _ good and a _.

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A tavern is likely to have a _ price elasticity of supply than an antiques dealer due to _.

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Mathematically, price elasticity of demand is the percentage change in the _ of a good divided by the percentage change in the _ of that good.

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