Question 1

Suppose that when the price per ream of recycled printer paper rises from $4 to $4.50, the quantity demanded falls from 800 to 600 reams per day. Using the midpoint formula, what is the price elasticity of demand (in absolute value)  over this range?

Accepted Answer

A)   0.003
B)   0.41
C)   2.43
D)   4

Question 2

Figure 6-12 B represents supply in the short run and SA represents supply in the long run. B)  Either SA or SB could represent supply in the short run; in the long run the supply curve must be a vertical line. C)  Either SA or SB could represent supply in the long run; in the short run the supply curve must be a horizontal line. D)  SA represents supply in the short run and SB represents supply in the long run." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 6-12. Suppose the diagram shows the supply curves for a product in the short run and in the long run. Which supply curve represents supply in the short run and which curve represents supply in the long run?

Accepted Answer

A)   SB represents supply in the short run and SA represents supply in the long run.
B)   Either SA or SB could represent supply in the short run; in the long run the supply curve must be a vertical line.
C)   Either SA or SB could represent supply in the long run; in the short run the supply curve must be a horizontal line.
D)   SA represents supply in the short run and SB represents supply in the long run.

Question 3

Assume that you own a small boutique hotel. In an attempt to raise revenue, you reduce your rates by 20 percent. However, your revenue falls. What does this indicate about the demand for your boutique hotel rooms?

Accepted Answer

A)   Boutique hotel rooms are inferior goods.
B)   Demand is inelastic.
C)   The demand curve for your hotel rooms is vertical.
D)   Demand is elastic.

Question 4

If the cross-price elasticity of demand for computers and software is negative, this means the two goods are

Accepted Answer

A)   substitutes.
B)   complements.
C)   inferior.
D)   normal.

Question 5

The cross-price elasticity of demand measures the

Accepted Answer

A)   absolute change in the quantity demanded of one good divided by the absolute change in the price of another good.
B)   percentage change in the quantity demanded of one good divided by the percentage change in the price of another good.
C)   percentage change in the price of one good divided by the percentage change in the quantity demanded of another good.
D)   percentage change in the quantity demanded of one good in one location divided by the price of the same good in another location.

Question 6

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.

Question 7

Table 6-3
 
-Refer to Table 6-3. Over what range of prices is the demand inelastic?

Accepted Answer

A)   over the entire range of prices
B)   between $12 and $16
C)   between $8 and $16
D)   between $2 and $8

Question 8

When the price of tortilla chips rose by 10 percent, the quantity of tortilla chips sold fell 4 percent, and the sale of dips (like salsa and bean dip)  fell 8 percent. This set of facts indicates that the cross-price elasticity between tortilla chips and dips is ________, so the two are ________.

Accepted Answer

A)   0.8; substitutes
B)   -0.4; complements
C)   -0.8; complements
D)   0.4; substitutes

Question 9

Figure 6-12 A and SB. As price rises from P0 to P1, which supply curve is more elastic? A)  SA B)  SB C)  They are equally inelastic. D)  They are equally elastic." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 6-12. The diagram shows two supply curves, SA and SB. As price rises from P0 to P1, which supply curve is more elastic?

Accepted Answer

A)   SA
B)   SB
C)   They are equally inelastic.
D)   They are equally elastic.

Question 10

Suppose the value of the price elasticity of supply is 4. What does this mean?

Accepted Answer

A)   A 4 percent increase in the price of the good causes quantity supplied to increase by 1 percent.
B)   A 1 percent increase in the price of the good causes the supply curve to shift upward by 4 percent.
C)   A 1 percent increase in the price of the good causes quantity supplied to increase by 4 percent.
D)   For every $1 increase in price, quantity supplied increases by 4 units.

Question 11

The demand for gasoline is perfectly inelastic because most people need gasoline to drive their cars.

Accepted Answer

A) True 
 B)False

Question 12

Figure 6-10 
-Refer to Figure 6-10. The supply curve on which price elasticity changes at every point is shown in

Accepted Answer

A)   Panel A.
B)   Panel B.
C)   Panel C.
D)   Panel D.

Question 13

Figure 6-6 A to PB, the quantity demanded increases the most along D1; therefore A)  D1 is unit elastic. B)  D1 is more inelastic than D2 or D3. C)  D1 is more elastic than D2 or D3. D)  D1 is elastic at PA but inelastic at PB." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 6-6. As price falls from PA to PB, the quantity demanded increases the most along D1; therefore

Accepted Answer

A)   D1 is unit elastic.
B)   D1 is more inelastic than D2 or D3.
C)   D1 is more elastic than D2 or D3.
D)   D1 is elastic at PA but inelastic at PB.

Question 14

If the demand for a product is elastic, the quantity demanded changes by a smaller percentage than the percentage change in price.

Accepted Answer

A) True 
 B)False

Question 15

When there few close substitutes available for a good, demand tends to be

Accepted Answer

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

Question 16

The market demand for The Federalist Papers is likely to be more elastic than the market demand for a best-selling mystery novel.

Accepted Answer

A) True 
 B)False

Question 17

When Nablom's Bakery raised the price of its breads by 10 percent, the quantity demanded fell by 15 percent. What was the effect on sales revenue?

Accepted Answer

A)   Sales revenue increased.
B)   Sales revenue remained unchanged.
C)   Sales revenue decreased.
D)   It cannot be determined without information on prices.

Question 18

The Mass Rapid Transit (MRT) System in Hong Kong has been running significant losses. Transport Ministry officials have argued over whether to raise fares to combat the losses. One argument against a fare increase is that it will aggravate traffic congestion on the streets during peak commuter hours. Suppose that the current fare is $4 and the government is considering raising it to $6. Officials estimate that this reduces the number of rides purchased from 10,000 to 8,000 per day.
a. Using the midpoint formula, what is the estimated elasticity of demand for MRT rides?
b. What does this elasticity of demand suggest to you about what will happen to total revenue earned by the transit system if the fare increase happens?
c. Last year, the MRT system incurred a loss of $50,000 per day. Do you think the fare increase will resolve the deficit problem as well as Ministry officials anticipate? Explain.

Accepted Answer

a. Price elasticity = -0.56.
b...

Question 19

Table 6-4
The publisher of a magazine gives his staff the following information:
  He tells the staff, "Our costs are currently $150,000 more than our revenues each month. I propose to eliminate this problem by raising the price of the magazine to $3.00 per issue. This will result in our revenue being exactly equal to our cost."
-Refer to Table 6-4. Which of the following statements is correct?

Accepted Answer

A)   The publisher's analysis is correct only if the demand is perfectly elastic.
B)   The publisher's analysis is correct only if the demand is elastic.
C)   The publisher's analysis is correct only if the demand is perfectly inelastic.
D)   The publisher's analysis is correct only if the demand is unit elastic.

Question 20

Figure 6-5 
-Refer to Figure 6-5. The section of the demand curve labeled "A" represents

Accepted Answer

A)   the inelastic section of the demand curve.
B)   the unit-elastic section of the demand curve.
C)   the elastic section of the demand curve.
D)   the perfectly elastic section of the demand curve.

Exam 6: Elasticity: the Responsiveness of Demand and Supply

The demand for gasoline is perfectly inelastic because most people need gasoline to drive their cars.

Correct Answer
verified

When Nablom's Bakery raised the price of its breads by 10 percent, the quantity demanded fell by 15 percent. What was the effect on sales revenue?

Correct Answer
verified

Figure 6-10 -Refer to Figure 6-10. The supply curve on which price elasticity changes at every point is shown in

Correct Answer
verified

Assume that you own a small boutique hotel. In an attempt to raise revenue, you reduce your rates by 20 percent. However, your revenue falls. What does this indicate about the demand for your boutique hotel rooms?

Correct Answer
verified

Correct Answer
verified

Figure 6-12 -Refer to Figure 6-12. Suppose the diagram shows the supply curves for a product in the short run and in the long run. Which supply curve represents supply in the short run and which curve represents supply in the long run?

Correct Answer
verified

Figure 6-6 -Refer to Figure 6-6. As price falls from P_A to P_B, the quantity demanded increases the most along D_1;therefore

Correct Answer
verified

If the cross-price elasticity of demand for computers and software is negative, this means the two goods are

Correct Answer
verified

The market demand for The Federalist Papers is likely to be more elastic than the market demand for a best-selling mystery novel.

Correct Answer
verified

The income elasticity of demand measures

Correct Answer
verified

Suppose the value of the price elasticity of supply is 4. What does this mean?

Correct Answer
verified

If the demand for a product is elastic, the quantity demanded changes by a smaller percentage than the percentage change in price.

Correct Answer
verified

Figure 6-12 -Refer to Figure 6-12. The diagram shows two supply curves, S_A and S_B. As price rises from P₀ to P₁, which supply curve is more elastic?

Correct Answer
verified

Correct Answer
verified
a. Price elasticity = -0.56.
b...
View Answer

The cross-price elasticity of demand measures the

Correct Answer
verified

When the price of tortilla chips rose by 10 percent, the quantity of tortilla chips sold fell 4 percent, and the sale of dips (like salsa and bean dip) fell 8 percent. This set of facts indicates that the cross-price elasticity between tortilla chips and dips is , so the two are .

Correct Answer
verified

Suppose that when the price per ream of recycled printer paper rises from $4 to $4.50, the quantity demanded falls from 800 to 600 reams per day. Using the midpoint formula, what is the price elasticity of demand (in absolute value) over this range?

Correct Answer
verified

When there few close substitutes available for a good, demand tends to be

Correct Answer
verified

Table 6-3 -Refer to Table 6-3. Over what range of prices is the demand inelastic?

Correct Answer
verified

Figure 6-5 -Refer to Figure 6-5. The section of the demand curve labeled "A" represents

Correct Answer
verified

Exam 6: Elasticity: the Responsiveness of Demand and Supply

The demand for gasoline is perfectly inelastic because most people need gasoline to drive their cars.

Correct AnswerverifiedShow Answer

When Nablom's Bakery raised the price of its breads by 10 percent, the quantity demanded fell by 15 percent. What was the effect on sales revenue?

Correct AnswerverifiedShow Answer

Figure 6-10 -Refer to Figure 6-10. The supply curve on which price elasticity changes at every point is shown in

Correct AnswerverifiedShow Answer

Assume that you own a small boutique hotel. In an attempt to raise revenue, you reduce your rates by 20 percent. However, your revenue falls. What does this indicate about the demand for your boutique hotel rooms?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 6-12 -Refer to Figure 6-12. Suppose the diagram shows the supply curves for a product in the short run and in the long run. Which supply curve represents supply in the short run and which curve represents supply in the long run?

Correct AnswerverifiedShow Answer

Figure 6-6 -Refer to Figure 6-6. As price falls from PA to PB, the quantity demanded increases the most along D1; therefore

Correct AnswerverifiedShow Answer

If the cross-price elasticity of demand for computers and software is negative, this means the two goods are

Correct AnswerverifiedShow Answer

The market demand for The Federalist Papers is likely to be more elastic than the market demand for a best-selling mystery novel.

Correct AnswerverifiedShow Answer

The income elasticity of demand measures

Correct AnswerverifiedShow Answer

Suppose the value of the price elasticity of supply is 4. What does this mean?

Correct AnswerverifiedShow Answer

If the demand for a product is elastic, the quantity demanded changes by a smaller percentage than the percentage change in price.

Correct AnswerverifiedShow Answer

Figure 6-12 -Refer to Figure 6-12. The diagram shows two supply curves, SA and SB. As price rises from P0 to P1, which supply curve is more elastic?

Correct AnswerverifiedShow Answer

Correct Answerverifieda. Price elasticity = -0.56.b...View AnswerShow Answer

The cross-price elasticity of demand measures the

Correct AnswerverifiedShow Answer

When the price of tortilla chips rose by 10 percent, the quantity of tortilla chips sold fell 4 percent, and the sale of dips (like salsa and bean dip) fell 8 percent. This set of facts indicates that the cross-price elasticity between tortilla chips and dips is ________, so the two are ________.

Correct AnswerverifiedShow Answer

Suppose that when the price per ream of recycled printer paper rises from $4 to $4.50, the quantity demanded falls from 800 to 600 reams per day. Using the midpoint formula, what is the price elasticity of demand (in absolute value) over this range?

Correct AnswerverifiedShow Answer

When there few close substitutes available for a good, demand tends to be

Correct AnswerverifiedShow Answer

Table 6-3 -Refer to Table 6-3. Over what range of prices is the demand inelastic?

Correct AnswerverifiedShow Answer

Figure 6-5 -Refer to Figure 6-5. The section of the demand curve labeled "A" represents

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Figure 6-6 -Refer to Figure 6-6. As price falls from P_A to P_B, the quantity demanded increases the most along D_1;therefore

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Figure 6-12 -Refer to Figure 6-12. The diagram shows two supply curves, S_A and S_B. As price rises from P₀ to P₁, which supply curve is more elastic?

Correct Answer
verified

Correct Answer
verified
a. Price elasticity = -0.56.
b...
View Answer

Correct Answer
verified

When the price of tortilla chips rose by 10 percent, the quantity of tortilla chips sold fell 4 percent, and the sale of dips (like salsa and bean dip) fell 8 percent. This set of facts indicates that the cross-price elasticity between tortilla chips and dips is , so the two are .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified