Question 1

The price elasticity of demand for gasoline in the short run has been estimated to be 0.1. If a war in the Middle East causes the price of oil (from which gasoline is made)  to increase, how will that affect total expenditures on gasoline in the short run, all other things equal?

Accepted Answer

A)   Quantity demanded will stay the same, but total expenditures will fall.
B)   Quantity demanded will decrease, but total expenditures will rise.
C)   Total expenditures will remain unchanged.
D)   Quantity demanded will not change much, but total expenditures will rise.

Question 2

The price elasticity of the supply of paintings by Rembrandt is greater than 1.

Accepted Answer

A) True 
 B)False

Question 3

The price elasticity of demand can be found by:

Accepted Answer

A)   examining only the slope of the demand curve.
B)   measuring absolute changes in price and quantity demanded.
C)   comparing the percentage change in quantity demanded to the percentage change in price.
D)   knowing that when price changes, quantity demanded goes in the opposite direction.

Question 4

Use the following to answer questions 
Figure: The Demand Curve 
-(Figure: The Demand Curve)  Look at the figure The Demand Curve. By the midpoint method, the price elasticity of demand between $1 and $2 is approximately:

Accepted Answer

A)   0.16.
B)   0.56.
C)   1.80.
D)   5.67.

Question 5

If the price elasticity of demand equals 0, the demand curve is:

Accepted Answer

A)   horizontal.
B)   vertical.
C)   upward-sloping.
D)   unit-elastic.

Question 6

The price elasticity of demand is computed as the percentage change in the _____ divided by the percentage change in _____.

Accepted Answer

A)   quantity demanded; the quantity supplied.
B)   price; the quantity demanded.
C)   quantity demanded; income.
D)   quantity demanded; the price.

Question 7

The price elasticity of demand for ground beef has been estimated to be 1.0. If mad cow disease strikes the United States and a large percentage of the cattle are removed from the market, how will that affect total expenditures on ground beef, all other things equal?

Accepted Answer

A)   Total expenditures will remain unchanged.
B)   Total expenditures will fall by more than 1%.
C)   Demand will fall by 1%, but total expenditures will fall by less than 1%.
D)   Total expenditures will rise.

Question 8

When the absolute value of the percentage change in quantity demanded is less than the absolute value of the percentage change in price, demand is:

Accepted Answer

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

Question 9

Use the following to answer questions 
Figure: The Demand Curve 
-(Figure: The Demand Curve)  Look at the figure The Demand Curve. Between prices $4 and $5, demand is _____, and total revenue will _____ if price increases.

Accepted Answer

A)   elastic; increase
B)   elastic; decrease
C)   inelastic; increase
D)   inelastic; decrease

Question 10

A group of dairy farmers is trying to raise milk prices by 10%. If the price elasticity of demand for milk is 0.75 and the price elasticity of supply for milk is 0, by how much should farmers reduce their milk production to obtain the 10% increase?

Accepted Answer

A)   10%
B)   7.5%
C)   15%
D)   13%

Question 11

Use the following to answer questions 
Figure: The Market for Lattes 
-(Figure: The Market for Lattes)  Look at the figure The Market for Lattes. What is the price elasticity of demand between $2 and $2.50 per cup, using the midpoint formula?

Accepted Answer

A)   1.00
B)   1.29
C)   2.51
D)   3.00

Question 12

Given a price increase for any good, the price effect on revenue is always larger than the quantity effect on revenue.

Accepted Answer

A) True 
 B)False

Question 13

Use the following to answer questions 
Figure: The Demand for e-Books 
-(Figure: The Demand for e-Books)  If the price of e-Books decreases from $6 to $4, total revenue _____, which means that demand is _____.

Accepted Answer

A)   changes from $60 to $90; elastic
B)   remains constant; unit-elastic
C)   changes from $240 to $360; elastic
D)   changes from $40 to $50; inelastic

Question 14

Local cable companies recently increased the price of basic services. A news expert reporting on the increase stated, "While prices have increased 40%, the cable company reports only a 20% increase in revenue." This remark suggests the demand for basic cable service is elastic.

Accepted Answer

A) True 
 B)False

Question 15

Use the following to answer questions 
Figure: The Demand Curve 
-(Figure: The Demand Curve)  Look at the figure The Demand Curve. By the midpoint method, the price elasticity of demand between $8 and $9 is approximately:

Accepted Answer

A)   0.18.
B)   0.56.
C)   1.80.
D)   5.67.

Question 16

Assume the supply curve shifts to the right by a given amount at each price. The price in the market will decline the most if demand is more _____ and supply is more _____.

Accepted Answer

A)   price-elastic; price-elastic
B)   price-inelastic; price-elastic
C)   price-elastic; price-inelastic
D)   price-inelastic; price-inelastic

Question 17

Use the following to answer questions 
Figure: The Demand for e-Books 
-(Figure: The Demand for e-Books)  Look at the figure The Demand for e-Books. The demand schedule _____ when the price increases from $4 to $6 _____ when it increases from $6 to $8.

Accepted Answer

A)   is less elastic; than
B)   is more elastic; than
C)   has the same elasticity;; as
D)   is unit-elastic; and

Question 18

Use the following to answer questions 
Figure: The Demand for e-Books 
-(Figure: The Demand for e-Books)  Look at the figure The Demand for e-Books. What is the price elasticity of demand (by the midpoint method)  when the price decreases from $6 to $4?

Accepted Answer

A)   0.55
B)   0.5
C)   1
D)   0.67

Question 19

Use the following to answer questions 
Figure: The Demand Curve 
-(Figure: The Demand Curve)  Look at the figure The Demand Curve. By the midpoint method, the price elasticity of demand between $6 and $7 is approximately:

Accepted Answer

A)   0.19.
B)   1.00.
C)   1.86.
D)   5.40.

Question 20

A demand curve that is perfectly inelastic is:

Accepted Answer

A)   horizontal.
B)   vertical.
C)   downward-sloping.
D)   upward-sloping.

Exam 6: Elasticity

If the price elasticity of demand equals 0, the demand curve is:

Correct AnswerverifiedShow Answer

Use the following to answer questions Figure: The Demand for e-Books -(Figure: The Demand for e-Books) Look at the figure The Demand for e-Books. The demand schedule _____ when the price increases from $4 to $6 _____ when it increases from $6 to $8.

Correct AnswerverifiedShow Answer

A group of dairy farmers is trying to raise milk prices by 10%. If the price elasticity of demand for milk is 0.75 and the price elasticity of supply for milk is 0, by how much should farmers reduce their milk production to obtain the 10% increase?

Correct AnswerverifiedShow Answer

Given a price increase for any good, the price effect on revenue is always larger than the quantity effect on revenue.

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Assume the supply curve shifts to the right by a given amount at each price. The price in the market will decline the most if demand is more _____ and supply is more _____.

Correct AnswerverifiedShow Answer

Use the following to answer questions Figure: The Demand Curve -(Figure: The Demand Curve) Look at the figure The Demand Curve. By the midpoint method, the price elasticity of demand between $8 and $9 is approximately:

Correct AnswerverifiedShow Answer

The price elasticity of demand for gasoline in the short run has been estimated to be 0.1. If a war in the Middle East causes the price of oil (from which gasoline is made) to increase, how will that affect total expenditures on gasoline in the short run, all other things equal?

Correct AnswerverifiedShow Answer

Use the following to answer questions Figure: The Market for Lattes -(Figure: The Market for Lattes) Look at the figure The Market for Lattes. What is the price elasticity of demand between $2 and $2.50 per cup, using the midpoint formula?

Correct AnswerverifiedShow Answer

Use the following to answer questions Figure: The Demand for e-Books -(Figure: The Demand for e-Books) Look at the figure The Demand for e-Books. What is the price elasticity of demand (by the midpoint method) when the price decreases from $6 to $4?

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Use the following to answer questions Figure: The Demand Curve -(Figure: The Demand Curve) Look at the figure The Demand Curve. By the midpoint method, the price elasticity of demand between $6 and $7 is approximately:

Correct AnswerverifiedShow Answer

Local cable companies recently increased the price of basic services. A news expert reporting on the increase stated, "While prices have increased 40%, the cable company reports only a 20% increase in revenue." This remark suggests the demand for basic cable service is elastic.

Correct AnswerverifiedShow Answer

A demand curve that is perfectly inelastic is:

Correct AnswerverifiedShow Answer

The price elasticity of demand for ground beef has been estimated to be 1.0. If mad cow disease strikes the United States and a large percentage of the cattle are removed from the market, how will that affect total expenditures on ground beef, all other things equal?

Correct AnswerverifiedShow Answer

The price elasticity of demand can be found by:

Correct AnswerverifiedShow Answer

The price elasticity of demand is computed as the percentage change in the _____ divided by the percentage change in _____.

Correct AnswerverifiedShow Answer

Use the following to answer questions Figure: The Demand Curve -(Figure: The Demand Curve) Look at the figure The Demand Curve. By the midpoint method, the price elasticity of demand between $1 and $2 is approximately:

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The price elasticity of the supply of paintings by Rembrandt is greater than 1.

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Use the following to answer questions Figure: The Demand Curve -(Figure: The Demand Curve) Look at the figure The Demand Curve. Between prices $4 and $5, demand is _____, and total revenue will _____ if price increases.

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When the absolute value of the percentage change in quantity demanded is less than the absolute value of the percentage change in price, demand is:

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Use the following to answer questions Figure: The Demand for e-Books -(Figure: The Demand for e-Books) If the price of e-Books decreases from $6 to $4, total revenue _____, which means that demand is _____.

Correct AnswerverifiedShow Answer

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Use the following to answer questions Figure: The Demand for e-Books -(Figure: The Demand for e-Books) Look at the figure The Demand for e-Books. The demand schedule _ when the price increases from $4 to $6 _ when it increases from $6 to $8.

Correct Answer
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Assume the supply curve shifts to the right by a given amount at each price. The price in the market will decline the most if demand is more _ and supply is more _.

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The price elasticity of demand is computed as the percentage change in the _ divided by the percentage change in _.

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Use the following to answer questions Figure: The Demand Curve -(Figure: The Demand Curve) Look at the figure The Demand Curve. Between prices $4 and $5, demand is _, and total revenue will _ if price increases.

Correct Answer
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Use the following to answer questions Figure: The Demand for e-Books -(Figure: The Demand for e-Books) If the price of e-Books decreases from $6 to $4, total revenue _, which means that demand is _.

Correct Answer
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