Question 1

When Audrina raised the price of her homemade cookies,her total revenue increased.This suggests that the demand for Audrina's cookies is elastic.

Accepted Answer

A) True 
 B)False

Question 2

In order to prove that Motrin and Ibuprofen are substitutes,one should measure the ________ and get a ________.

Accepted Answer

A)   cross-price elasticity; positive number
B)   cross-price elasticity; negative number
C)   price elasticity of demand; number greater than 1 (in absolute value) 
D)   price elasticity of demand; number less than 1 (in absolute value) E) A) and D)
F) B) and C)

Question 3

A supply curve that is vertical

Accepted Answer

A)   is perfectly elastic.
B)   is perfectly inelastic.
C)   is impossible.
D)   has an elasticity equal to 1.E) A) and B)
F) B) and C)

Question 4

Income elasticity measures

Accepted Answer

A)   how a good's quantity demanded responds to change in the good's price.
B)   how a good's quantity demanded responds to change in the price of another good.
C)   how a good's quantity demanded responds to change in buyers' incomes.
D)   how a good's quantity demanded responds to producers' incomes.E) A) and C)
F) C) and D)

Question 5

Suppose the demand for milk is relatively inelastic.What happens to sales revenue if the government imposes a price floor above the free market equilibrium price in the market for milk?

Accepted Answer

A)   Sales revenue falls.
B)   Sales revenue rises.
C)   Sales revenue remains unchanged.
D)   It cannot be determined without information on prices.E) B) and C)
F) All of the above

Question 6

When the price of tortilla chips rose by 10 per cent,the quantity of tortilla chips sold fell 4 per cent.This indicates that the demand for tortilla chips is

Accepted Answer

A)   inelastic.
B)   elastic.
C)   unit-elastic.
D)   perfectly inelastic.E) A) and B)
F) A) and C)

Question 7

Suppose a decrease in the supply of bottled water results in a decrease in revenue.This indicates that

Accepted Answer

A)   the demand for bottled water is inelastic in the price range considered.
B)   the demand for bottled water is elastic in the price range considered.
C)   the supply of bottled water is inelastic in the price range considered.
D)   the supply of bottled water is elastic in the price range considered.E) A) and D)
F) A) and C)

Question 8

If demand is perfectly elastic,the absolute value of the price elasticity coefficient is

Accepted Answer

A)   infinity.
B)   zero.
C)   more than one.
D)   equal to the absolute value of the slope of the demand curve.E) A) and B)
F) A) and C)

Question 9

Which of the following statements is true?

Accepted Answer

A)   If the price of a good is lowered and total revenue decreases, demand is elastic.
B)   If the price of a good is raised and total revenue does not change, demand is perfectly elastic.
C)   If the price of a good is raised and total revenue increases, demand is inelastic.
D)   If the price of a good is lowered and total revenue increases, demand is inelastic.E) A) and B)
F) B) and C)

Question 10

Suppose that at a price of $55,100 units were sold while at a price of $33,153 units were sold.Without calculating the price elasticity value,can you determine whether demand is elastic,unit-elastic,or inelastic? Explain your answer.

Accepted Answer

The first total revenue is ($5...

Question 11

Suppose the cross-price elasticity of demand between grapefruit juice and orange juice is approximately 6.What does this mean?

Accepted Answer

A)   A 1 per cent decrease in the price of grapefruit juice leads to a 6 per cent increase in orange juice consumption.
B)   A 6 per cent increase in the price of grapefruit juice leads to a 1 per cent increase in orange juice consumption.
C)   If the price of grapefruit juice rises by $1, 6 more cartons of orange juice will be purchased.
D)   The demand for orange juice is 6 times more than the demand for grapefruit juice.E) None of the above
F) A) and B)

Question 12

Calculate the income elasticity if an 8 per cent increase in income leads to a 4 per cent increase in quantity demanded for organic produce.

Accepted Answer

A)   -0.66
B)   0.5
C)   1.5
D)   2E) B) and D)
F) A) and D)

Question 13

Suppose the supply of bicycles is price elastic.This means that

Accepted Answer

A)   consumers will respond significantly to an increase in the quantity supplied of bicycles.
B)   suppliers will increase the quantity supplied of bicycles, but not immediately.
C)   suppliers face many substitutes for bicycles.
D)   suppliers will respond significantly to changes in the price of bicycles.E) C) and D)
F) A) and B)

Question 14

Which of the following would result in a higher absolute value of the price elasticity of demand for a product?

Accepted Answer

A)   A wide variety of substitutes are available for the good.
B)   The time period under consideration is short.
C)   The good is a necessity.
D)   The expenditure on the good is small relative to one's budget.E) None of the above
F) B) and C)

Question 15

The value of the price elasticity of supply depends primarily on how quickly firms can acquire inputs to increase quantity supplied when price increases.

Accepted Answer

A) True 
 B)False

Question 16

Barbara,the consummate hostess,proudly announced as she served dessert,'A port is often the perfect end to a meal,sipped with a piece of my scrumptious chocolate cake.' Evidently,Barbara views

Accepted Answer

A)   port and chocolate cake as luxury items.
B)   port and chocolate cake as necessities.
C)   port and chocolate cake as complementary goods.
D)   port and chocolate cake as substitutes to other desserts.E) A) and B)
F) A) and C)

Question 17

The process involved in bringing oil to world markets can take years.Substitutes for oil-based products such as petrol are limited.As a result

Accepted Answer

A)   the supply of oil is very elastic and the demand for oil is very elastic over short periods of time.
B)   the supply of oil is very inelastic and the demand for petrol is inelastic over short periods of time.
C)   the supply of oil and the demand for oil shift to the right over short periods of time.
D)   the supply of oil and the demand for oil are both perfectly elastic over short periods of time.E) A) and B)
F) None of the above

Question 18

Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from $120 a tonne to $180 a tonne and quantity sold decreased from 800 tonnes to 240 tonnes.What is the absolute value of the price elasticity of demand?

Accepted Answer

A)   0.11
B)   0.37
C)   2.69
D)   9.33E) B) and D)
F) A) and B)

Question 19

The income elasticity of demand measures

Accepted Answer

A)   the responsiveness of quantity demanded to changes in income.
B)   how a consumer's purchasing power is affected by a change in the price of a product.
C)   the percentage change in the price of a product divided by the percentage change in consumer income.
D)   the income effect of a change in price.E) B) and C)
F) A) and C)

Question 20

If,for a given percentage increase in price,quantity supplied increases by a proportionately larger percentage,then supply is

Accepted Answer

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

Exam 4: Market Efficiency and Market Failure

When Audrina raised the price of her homemade cookies,her total revenue increased.This suggests that the demand for Audrina's cookies is elastic.

Correct AnswerverifiedShow Answer

Which of the following would result in a higher absolute value of the price elasticity of demand for a product?

Correct AnswerverifiedShow Answer

Suppose that at a price of $55,100 units were sold while at a price of $33,153 units were sold.Without calculating the price elasticity value,can you determine whether demand is elastic,unit-elastic,or inelastic? Explain your answer.

Correct AnswerverifiedThe first total revenue is ($5...View AnswerShow Answer

Calculate the income elasticity if an 8 per cent increase in income leads to a 4 per cent increase in quantity demanded for organic produce.

Correct AnswerverifiedShow Answer

The process involved in bringing oil to world markets can take years.Substitutes for oil-based products such as petrol are limited.As a result

Correct AnswerverifiedShow Answer

Barbara,the consummate hostess,proudly announced as she served dessert,'A port is often the perfect end to a meal,sipped with a piece of my scrumptious chocolate cake.' Evidently,Barbara views

Correct AnswerverifiedShow Answer

In order to prove that Motrin and Ibuprofen are substitutes,one should measure the ________ and get a ________.

Correct AnswerverifiedShow Answer

Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from $120 a tonne to $180 a tonne and quantity sold decreased from 800 tonnes to 240 tonnes.What is the absolute value of the price elasticity of demand?

Correct AnswerverifiedShow Answer

Suppose the supply of bicycles is price elastic.This means that

Correct AnswerverifiedShow Answer

A supply curve that is vertical

Correct AnswerverifiedShow Answer

Income elasticity measures

Correct AnswerverifiedShow Answer

If demand is perfectly elastic,the absolute value of the price elasticity coefficient is

Correct AnswerverifiedShow Answer

When the price of tortilla chips rose by 10 per cent,the quantity of tortilla chips sold fell 4 per cent.This indicates that the demand for tortilla chips is

Correct AnswerverifiedShow Answer

Suppose a decrease in the supply of bottled water results in a decrease in revenue.This indicates that

Correct AnswerverifiedShow Answer

Suppose the cross-price elasticity of demand between grapefruit juice and orange juice is approximately 6.What does this mean?

Correct AnswerverifiedShow Answer

The income elasticity of demand measures

Correct AnswerverifiedShow Answer

Suppose the demand for milk is relatively inelastic.What happens to sales revenue if the government imposes a price floor above the free market equilibrium price in the market for milk?

Correct AnswerverifiedShow Answer

The value of the price elasticity of supply depends primarily on how quickly firms can acquire inputs to increase quantity supplied when price increases.

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

If,for a given percentage increase in price,quantity supplied increases by a proportionately larger percentage,then supply is

Correct AnswerverifiedShow Answer

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The first total revenue is ($5...
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In order to prove that Motrin and Ibuprofen are substitutes,one should measure the and get a .

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