Question 1

Refer to the table above.Starting at a $5 price,at what price range does demand become inelastic?

Accepted Answer

A)   $1-2
B)   $2-3
C)   $3-4
D)   $4-5At $2-3,the change is (30 - 40) /(30 + 40) = 0.143 and the percent in price is (3 - 2) /(3 + 2) = 0.20.Thus,elasticity is 0.143/0.20 = 0.714,which is inelastic.

Question 2

An auto rental company lowers the price of its rentals to increase its market share.The price cut increases quantity demanded,but total revenue decreases.This result suggests that over this price range,the demand for the auto rentals is:

Accepted Answer

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

Question 3

3 to P4.In this price range,demand is relatively: A)  inelastic because the loss in total revenue (areas E + F + G) is greater than the gain in total revenue (area A) . B)  elastic because the loss in total revenue (areas E + F + G) is greater than the gain in total revenue (area A) . C)  elastic because the loss in total revenue (area A) is greater than the gain in total revenue (areas E + F + G) . D)  inelastic because the loss in total revenue (area A) is greater than the gain in total revenue (areas E + F + G) ." class="answers-bank-image d-inline" rel="preload" > Refer to the graph above and assume that the areas of the boxes are the same.Consider a situation where price increases from P3 to P4.In this price range,demand is relatively:

Accepted Answer

A)   inelastic because the loss in total revenue (areas E + F + G) is greater than the gain in total revenue (area 
A)  .
B)   elastic because the loss in total revenue (areas E + F + G) is greater than the gain in total revenue (area 
A)  .
C)   elastic because the loss in total revenue (area 
A)  is greater than the gain in total revenue (areas E + F + G) .
D)   inelastic because the loss in total revenue (area 
A)  is greater than the gain in total revenue (areas E + F + G) .

Question 4

Refer to the above graph.At total revenue of $8,000,the price elasticity of demand is:

Accepted Answer

A)   elastic.
B)   inelastic.
C)   unit-elastic.
D)   perfectly inelastic.

Question 5

If the cross-price-elasticity of goods X and Y is positive,then the sales of X move:

Accepted Answer

A)   in the same direction as the price of Y,and X and Y are complementary goods.
B)   in the opposite direction as the price of Y,and X and Y are complementary goods.
C)   in the opposite direction as the price of Y,and X and Y are substitute goods.
D)   in the same direction as the price of Y,and X and Y are substitute goods.

Question 6

If a 10 percent increase in the price of product X causes the demand for product Y to decrease by 15 percent,then:

Accepted Answer

A)   X and Y are substitutes.
B)   X and Y are complements.
C)   X and Y are independent goods.
D)   the demand for X is elastic.

Question 7

The price of season tickets to a performing arts theater decreases by 3 percent.As a result,the quantity demanded increases by 6 percent.The price elasticity of demand for season tickets is:

Accepted Answer

A)   0.
B)   1.
C)   2.
D)   3.

Question 8

Price elasticity of demand is lower for goods with few close substitutes.

Accepted Answer

A) True 
 B)False

Question 9

A study of mass transit systems in American cities revealed that long-run revenues generally decline after substantial fare increases.This suggests that:

Accepted Answer

A)   the demand for mass transit is price-elastic in the long run.
B)   the demand for mass transit is price-inelastic in the long run.
C)   mass transit service deteriorates in the long run as price rises.
D)   there are few good substitutes for such systems in urban areas.

Question 10

At a price of $20 per unit,140 units of goods are demanded and 100 units are supplied.When the price is raised to $30 per unit,100 units are demanded and 140 units are supplied.The price elasticity of supply in this range is:

Accepted Answer

A)   1.0.
B)   0.834.
C)   0.417.
D)   1.20.The change in quantity is (140 - 100) /(140 + 100) = 0.167 and the change in price is (30 - 20) /(30 + 20) = 0.20.Thus,elasticity is 0.167/0.20 = 0.835.

Question 11

If the price of a product increases from $10 to $12 and the quantity demanded decreases from 40 to 30,then according to the total-revenue test,the product is price elastic in this price range.

Accepted Answer

A) True 
 B)False

Question 12

For complementary goods,the coefficient of cross-price-elasticity of demand is:

Accepted Answer

A)   negative.
B)   positive.
C)   greater than one.
D)   near zero.

Question 13

If the price elasticity of demand for a good is .75,the demand for the good can be described as:

Accepted Answer

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

Question 14

Refer to the above data.What is the elasticity of demand between the prices of $3 and $2?

Accepted Answer

A)   0.22
B)   0.40
C)   0.56
D)   1.22The change in quantity is (400 - 500) /(400 + 500) = 0.111 and the change in price is (2 - 3) /(2 + 3) = 0.20.Thus,elasticity is 0.56.

Question 15

Elasticity of supply will increase when:

Accepted Answer

A)   the number of producers selling a product decreases.
B)   producers are given less time to respond to price changes.
C)   the number of consumers wanting to purchase a product increases.
D)   it becomes easier to substitute one factor of production for another in a manufacturing process.

Question 16

An increase in the price of a good will cause total revenue to fall if price elasticity of demand is:

Accepted Answer

A)   elastic.
B)   inelastic.
C)   unitary elastic.
D)   perfectly elastic.

Question 17

Assume the price of a product rises from $2 to $3 and the quantity demanded of the product decreases from 600 to 400.The price elasticity of demand coefficient,using the midpoint formula,is:

Accepted Answer

A)   0.40.
B)   1.00.
C)   1.60.
D)   2.10.The change in quantity is (400 - 600) /(400 + 600) = 0.20 and the change in price is (3 - 2) /(3 + 2) = 0.20.Thus,price elasticity is 0.20/0.20 = 1.0.

Question 18

The relationship between a consumer's monthly income and monthly consumption of four products,A-D,is shown below.  Which product listed is an example of an inferior good?

Accepted Answer

A)   A
B)   B
C)   C
D)   D

Question 19

Refer to the graph above.If demand increased:

Accepted Answer

A)   price and quantity would increase.
B)   price and quantity would decrease.
C)   price would stay the same and quantity would decrease.
D)   price would stay the same and quantity would increase.

Question 20

Refer to the graph above.If the price of the product increases from $5 to $6 because of a decrease in supply that is shown by curve S,total revenue would:

Accepted Answer

A)   increase by $300.
B)   increase by $100.
C)   decrease.
D)   stay the same.

Exam 4: Elasticity of Demand and Supply

Refer to the above data.What is the elasticity of demand between the prices of $3 and $2?

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An auto rental company lowers the price of its rentals to increase its market share.The price cut increases quantity demanded,but total revenue decreases.This result suggests that over this price range,the demand for the auto rentals is:

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Refer to the table above.Starting at a $5 price,at what price range does demand become inelastic?

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Refer to the graph above.If the price of the product increases from $5 to $6 because of a decrease in supply that is shown by curve S,total revenue would:

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If the price of a product increases from $10 to $12 and the quantity demanded decreases from 40 to 30,then according to the total-revenue test,the product is price elastic in this price range.

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If a 10 percent increase in the price of product X causes the demand for product Y to decrease by 15 percent,then:

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If the cross-price-elasticity of goods X and Y is positive,then the sales of X move:

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The price of season tickets to a performing arts theater decreases by 3 percent.As a result,the quantity demanded increases by 6 percent.The price elasticity of demand for season tickets is:

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Refer to the above graph.At total revenue of $8,000,the price elasticity of demand is:

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If the price elasticity of demand for a good is .75,the demand for the good can be described as:

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Price elasticity of demand is lower for goods with few close substitutes.

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An increase in the price of a good will cause total revenue to fall if price elasticity of demand is:

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Elasticity of supply will increase when:

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For complementary goods,the coefficient of cross-price-elasticity of demand is:

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The relationship between a consumer's monthly income and monthly consumption of four products,A-D,is shown below. Which product listed is an example of an inferior good?

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At a price of $20 per unit,140 units of goods are demanded and 100 units are supplied.When the price is raised to $30 per unit,100 units are demanded and 140 units are supplied.The price elasticity of supply in this range is:

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A study of mass transit systems in American cities revealed that long-run revenues generally decline after substantial fare increases.This suggests that:

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Refer to the graph above and assume that the areas of the boxes are the same.Consider a situation where price increases from P3 to P4.In this price range,demand is relatively:

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Assume the price of a product rises from $2 to $3 and the quantity demanded of the product decreases from 600 to 400.The price elasticity of demand coefficient,using the midpoint formula,is:

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Refer to the graph above.If demand increased:

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Refer to the graph above and assume that the areas of the boxes are the same.Consider a situation where price increases from P₃ to P₄.In this price range,demand is relatively:

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