Question 1

Use the figure below to answer the following questions.
  
Figure 4.1.2
-Figure 4.1.2 illustrates a linear demand curve.If the price falls from $13 to $11,

Accepted Answer

A)  total revenue increases.
B)  total revenue decreases.
C)  total revenue remains unchanged.
D)  total revenue initially increases then decreases.
E)  total revenue initially decreases then increases.

Question 2

Demand will be more inelastic the

Accepted Answer

A)  higher the income level.
B)  lower the income level.
C)  longer the passage of time after a price increase.
D)  fewer good substitutes that are available.
E)  larger the fraction of income spent on the good.

Question 3

All normal goods have

Accepted Answer

A)  an income elasticity of demand greater than 1.0.
B)  a price elasticity of demand greater than 1.0.
C)  a negative price elasticity of demand.
D)  a positive income elasticity of demand.
E)  a negative cross elasticity of demand

Question 4

The price elasticity of demand for purses is measured in

Accepted Answer

A)  dollars.
B)  purses.
C)  dollars per purse.
D)  purses per dollar.
E)  none of the above.

Question 5

Suppose there is an increase in the cost of resources used in the production of good A.Then

Accepted Answer

A)  if the price of A rises, we know the demand for A is elastic.
B)  if the total revenue from sales of A rises, we know the demand for A is elastic.
C)  if the total revenue from sales of A falls, we know the demand for A is elastic.
D)  total revenue will increase because the price of A must rise.
E)  total revenue must fall because the quantity bought and sold of A must fall.

Question 6

Suppose that Simon Fraser University decides to raise tuition fees to increase the total revenue it receives from students.This policy works only if the demand for a Simon Fraser University education is

Accepted Answer

A)  unit elastic.
B)  inelastic.
C)  elastic.
D)  greater than the demand for a University of Western Ontario education.
E)  perfectly elastic.

Question 7

If an increase in the supply of good A increases the demand for good B,then

Accepted Answer

A)  the demands for A and B are independent.
B)  the elasticity of supply for good A is greater than 1.
C)  A and B are complements.
D)  A and B are substitutes.
E)  the demand for A is price elastic.

Question 8

Total revenue from the sale of a good will decrease if

Accepted Answer

A)  income increases and the good is normal.
B)  its price rises and demand is elastic.
C)  its price rises and demand is inelastic.
D)  income falls and the good is an inferior good.
E)  its price falls and demand is elastic.

Question 9

Short-run supply is

Accepted Answer

A)  more elastic than momentary supply but less elastic than long-run supply.
B)  less elastic than momentary supply but more elastic than long-run supply.
C)  less elastic than both momentary and long-run supply.
D)  more elastic than both momentary and long-run supply.
E)  as elastic as either the momentary or the long-run supply.

Question 10

Suppose your annual income is $65 000 and your favourite TV Guide magazine costs you $28 a year.Your demand for the TV Guide magazine is likely to be

Accepted Answer

A)  perfectly elastic.
B)  inelastic.
C)  unit elastic.
D)  elastic.
E)  elastic -- the same as your demand for all other goods.

Question 11

Luxury goods tend to have income elasticities of demand that are

Accepted Answer

A)  greater than 1.
B)  greater than zero but less than 1.
C)  less than the income elasticities of demand for necessary goods.
D)  negative.
E)  first positive and then negative as income increases.

Question 12

Total revenue is more likely to rise when the price rises if

Accepted Answer

A)  there are few substitutes for the good.
B)  a high proportion of income is spent on the good.
C)  some extended period of time passes.
D)  all of the above.
E)  none of the above.

Question 13

In the market for farm crops momentary supply is ________.In the market for farm crops,short-run supply is ________.

Accepted Answer

A)  less elastic than short-run supply;less elastic than long-run supply
B)  more elastic than short-run supply;more elastic than long-run supply
C)  negative;positive
D)  positive;negative
E)  perfectly elastic;perfectly inelastic

Question 14

The price elasticity of demand for oranges ________ if the quantity is measured in pounds instead of kilograms and ________ if the price is measured in dollars instead of cents.

Accepted Answer

A)  changes;changes
B)  changes;does not change
C)  does not change;changes
D)  does not change;does not change
E)  increases;decreases

Question 15

If the quantity of carrots demanded increases by a small percentage when income increases by a large amount,we know that the demand for carrots is

Accepted Answer

A)  price elastic.
B)  price inelastic.
C)  income inferior.
D)  income elastic.
E)  income inelastic.

Question 16

If a 10 percent increase in income results in a 10 percent decrease in the consumption of widgets,then

Accepted Answer

A)  the price elasticity of demand for widgets equals 1.
B)  the income elasticity of demand for widgets is negative.
C)  the income elasticity of demand for widgets equals 1.
D)  widgets are a normal good.
E)  the price elasticity demand for widgets is negative.

Question 17

Business people speak about price elasticity of demand without using the actual term.Which one of the following statements reflects elastic demand for a good?

Accepted Answer

A)  "A price cut won't help me.It won't increase sales, and I'll just get less money for each unit."
B)  "I don't think a price cut will make any difference to my bottom line.What I may gain from selling more I would lose on the lower price."
C)  "My customers are real bargain hunters.Since I set my prices just a few cents below my competitors, customers have flocked to the store, and sales are booming."
D)  "With the recent economic recovery, people have more income to spend and sales are booming, even at the previous prices."
E)  none of the above

Question 18

In the nation of Transporta,the income elasticity of demand for used cars is -2.66.If incomes in this nation increase by 10 percent,

Accepted Answer

A)  the quantity of used cars demanded increase by 26.6 percent.
B)  used cars will be normal goods.
C)  the quantity of used cars demanded decrease by 26.6 percent.
D)  the demand curve for used cars shifts rightward.
E)  the supply curve of used cars shifts rightward.

Question 19

If the demand for a good is unit elastic,then a 5 percent increase in price results in

Accepted Answer

A)  a 5 percent increase in total revenue.
B)  a 5 percent decrease in total revenue.
C)  no change in total revenue.
D)  an increase in total revenue greater than 5 percent.
E)  an increase in total revenue less than 5 percent.

Question 20

The demand for a good is price inelastic if

Accepted Answer

A)  a rise in price results in an increase in total revenue.
B)  a rise in price results in a decrease in total revenue.
C)  an increase in income results in a decrease in total revenue.
D)  an increase in income results in an increase in total revenue.
E)  the good is a luxury.

Exam 4: Elasticity

Total revenue is more likely to rise when the price rises if

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Use the figure below to answer the following questions. Figure 4.1.2 -Figure 4.1.2 illustrates a linear demand curve.If the price falls from $13 to $11,

Correct AnswerverifiedShow Answer

Suppose your annual income is $65 000 and your favourite TV Guide magazine costs you $28 a year.Your demand for the TV Guide magazine is likely to be

Correct AnswerverifiedShow Answer

The price elasticity of demand for oranges ________ if the quantity is measured in pounds instead of kilograms and ________ if the price is measured in dollars instead of cents.

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Suppose there is an increase in the cost of resources used in the production of good A.Then

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The demand for a good is price inelastic if

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In the market for farm crops momentary supply is ________.In the market for farm crops,short-run supply is ________.

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If the demand for a good is unit elastic,then a 5 percent increase in price results in

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Short-run supply is

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In the nation of Transporta,the income elasticity of demand for used cars is -2.66.If incomes in this nation increase by 10 percent,

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If a 10 percent increase in income results in a 10 percent decrease in the consumption of widgets,then

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Demand will be more inelastic the

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Business people speak about price elasticity of demand without using the actual term.Which one of the following statements reflects elastic demand for a good?

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Total revenue from the sale of a good will decrease if

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Suppose that Simon Fraser University decides to raise tuition fees to increase the total revenue it receives from students.This policy works only if the demand for a Simon Fraser University education is

Correct AnswerverifiedShow Answer

The price elasticity of demand for purses is measured in

Correct AnswerverifiedShow Answer

All normal goods have

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If an increase in the supply of good A increases the demand for good B,then

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Luxury goods tend to have income elasticities of demand that are

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If the quantity of carrots demanded increases by a small percentage when income increases by a large amount,we know that the demand for carrots is

Correct AnswerverifiedShow Answer

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The price elasticity of demand for oranges if the quantity is measured in pounds instead of kilograms and if the price is measured in dollars instead of cents.

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In the market for farm crops momentary supply is .In the market for farm crops,short-run supply is .

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