Question 1

Consider the segment of a demand curve along which all price elasticities of demand are less than 1. A decrease in price anywhere along that segment

Accepted Answer

A)   shifts that segment of the demand curve to the right
B)   increases total revenue
C)   decreases total revenue
D)   shifts that segment of the demand curve to the left
E)   raises the price elasticity of demand

Question 2

The "Applied Perspective" titled "Cross Elasticity in the Salmon Industry" suggests that the cross elasticity of demand between farm-raised salmon and wild salmon is

Accepted Answer

A)   positive and fairly large so the two types of fish are close substitutes consumers
B)   positive but close to zero so the two types of fish are in different markets
C)   negative because consumers like to serve both types as complementary goods
D)   high so that a price decrease leads to a total revenue increase
E)   low so that a price decrease leads to a total revenue decrease

Question 3

The numerical value of a price elasticity represents the percentage amount by which the quantity demanded changes when the price

Accepted Answer

A)   increases by 1 unit
B)   changes by 1 percent
C)   is in equilibrium
D)   is fixed in the market
E)   falls by 1 dollar

Question 4

Breakfast anyone? Which of the following pairs best represents complementary goods?

Accepted Answer

A)   bacon and saugage
B)   butter and margarine
C)   bacon and eggs
D)   toast and rolls
E)   coffee and tea

Question 5

If the price elasticity of demand for shelled, roasted, unsalted peanuts is 0.86 at current prices, a small increase in price will raise producers' total revenue.

Accepted Answer

A) True 
 B)False

Question 6

Economists use elasticity as a tool to measure

Accepted Answer

A)   the relationship between people's attitudes and their income
B)   the relationship between people's willingness to supply a good and their willingness to demand that good
C)   people's sensitivity to changes in price or income
D)   the effect of changes in supply on people's willingness to demand goods
E)   the effect of changes in supply on the government's ability to tax

Question 7

If a 1 percent decrease in the price of one good generates a 3 percent increase in the quantity demanded for another good, then the

Accepted Answer

A)   two goods are complementary
B)   cross elasticity between the two goods is positive
C)   two goods are substitutes
D)   price elasticity of demand for the good whose quantity demanded increased must be inelastic
E)   price elasticity of demand for the good whose quantity demanded increased must be elastic

Question 8

If a $1 increase in price leads to a $1 decrease in total revenue, then demand must be elastic.

Accepted Answer

A) True 
 B)False

Question 9

Sue's Bagel Shop wants to estimate how responsive the demand for bagels is to a change in her cream cheese prices. To accomplish this task, the following data would not be needed:

Accepted Answer

A)   percentage change in bagel prices
B)   original price of cream cheese
C)   new quantity of bagels sold
D)   original quantity of bagels sold
E)   new price of cream cheese

Question 10

An increase in the price of good X causes the demand curve for good Y to shift to the left. We know then that

Accepted Answer

A)   X and Y are complementary goods
B)   X and Y are substitute goods
C)   X and Y are inferior goods
D)   X is a normal good and Y is an inferior good
E)   X is an inferior good and Y is a normal good

Question 11

The demand for gasoline is expected to be more elastic in the long run than in the short run.

Accepted Answer

A) True 
 B)False

Question 12

All cross elasticities are positive.

Accepted Answer

A) True 
 B)False

Question 13

An elasticity is a measure of sensitivity.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements is true?

Accepted Answer

A)   The demand for tobacco products tends to be elastic.
B)   Total revenue is maximized when price elasticity of demand is one.
C)   Goods are said to be price inelastic when the elasticity is greater than two.
D)   The demand for milk is more elastic than the demand for luxury travel cruises.
E)   The demand for 5-cent candy is more elastic than the demand for Irish lace tablecloths.

Question 15

Price elasticity of demand measures the

Accepted Answer

A)   change in quantity demanded generated by a change in price
B)   change in price generated by a change in quantity demanded
C)   percentage change in the price of a good demanded generated by a percentage change in people's income
D)   percentage change in quantity demanded generated by a percentage change in price
E)   percentage change in price generated by a percentage change in quantity demanded

Question 16

Suppose we have two pairs of substitute goods. The first are very close substitutes, such as Coke and Pepsi, while the others are less close, such as Coke and iced tea. We would expect the cross elasticity of the closer pair to be

Accepted Answer

A)   positive while the less close pair to be negative
B)   negative while the less close pair to be positive
C)   one while the less close pair to be zero
D)   the smaller of the two
E)   the larger of the two

Question 17

Engel's Law claims that

Accepted Answer

A)   the percentage increase in quantity demanded for food is less than the percentage increase in income
B)   food is an inferior good (as economists define inferior good, of course) 
C)   the demand for food is income elastic
D)   the income elasticity for food is negative
E)   consumers' demand for food does not increase when the price of food falls

Question 18

The more price elastic the demand curve, the less quantity demanded will fall when a per-unit tax is imposed.

Accepted Answer

A) True 
 B)False

Question 19

All elasticities are measures of responsiveness.

Accepted Answer

A) True 
 B)False

Question 20

The calculation of the responsiveness of suppliers to changing prices is represented by

Accepted Answer

A)   cross elasticity
B)   supply elasticity
C)   the supply coefficient
D)   long-run supply
E)   market-day supply

Exam 4: Elasticity

An increase in the price of good X causes the demand curve for good Y to shift to the left. We know then that

Correct AnswerverifiedShow Answer

The calculation of the responsiveness of suppliers to changing prices is represented by

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

If a $1 increase in price leads to a $1 decrease in total revenue, then demand must be elastic.

Correct AnswerverifiedShow Answer

The demand for gasoline is expected to be more elastic in the long run than in the short run.

Correct AnswerverifiedShow Answer

Breakfast anyone? Which of the following pairs best represents complementary goods?

Correct AnswerverifiedShow Answer

If the price elasticity of demand for shelled, roasted, unsalted peanuts is 0.86 at current prices, a small increase in price will raise producers' total revenue.

Correct AnswerverifiedShow Answer

Consider the segment of a demand curve along which all price elasticities of demand are less than 1. A decrease in price anywhere along that segment

Correct AnswerverifiedShow Answer

An elasticity is a measure of sensitivity.

Correct AnswerverifiedShow Answer

Suppose we have two pairs of substitute goods. The first are very close substitutes, such as Coke and Pepsi, while the others are less close, such as Coke and iced tea. We would expect the cross elasticity of the closer pair to be

Correct AnswerverifiedShow Answer

If a 1 percent decrease in the price of one good generates a 3 percent increase in the quantity demanded for another good, then the

Correct AnswerverifiedShow Answer

All elasticities are measures of responsiveness.

Correct AnswerverifiedShow Answer

All cross elasticities are positive.

Correct AnswerverifiedShow Answer

The more price elastic the demand curve, the less quantity demanded will fall when a per-unit tax is imposed.

Correct AnswerverifiedShow Answer

Economists use elasticity as a tool to measure

Correct AnswerverifiedShow Answer

The numerical value of a price elasticity represents the percentage amount by which the quantity demanded changes when the price

Correct AnswerverifiedShow Answer

Engel's Law claims that

Correct AnswerverifiedShow Answer

Sue's Bagel Shop wants to estimate how responsive the demand for bagels is to a change in her cream cheese prices. To accomplish this task, the following data would not be needed:

Correct AnswerverifiedShow Answer

The "Applied Perspective" titled "Cross Elasticity in the Salmon Industry" suggests that the cross elasticity of demand between farm-raised salmon and wild salmon is

Correct AnswerverifiedShow Answer

Price elasticity of demand measures the

Correct AnswerverifiedShow Answer

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