Question 1

-Refer to the above table. Based on the information in the table, we can say that

Accepted Answer

A)  all three goods are substitutes for each other.
B)  all three goods are complements.
C)  X and Y are substitutes, Y and Z are complements, and X and Z are substitutes.
D)  X and Y are complements, Y and Z are substitutes, and X and Z are complements.

Question 2

Which of the following goods is likely to have the highest income elasticity?

Accepted Answer

A)  A designer blouse
B)  Tomato soup
C)  Hamburger
D)  Can of tuna

Question 3

Suppose the price of X increases by 20 percent while the quantity demanded of Y does not change. We would conclude that

Accepted Answer

A)  the two goods are substitutes, but the cross elasticity of demand is not large.
B)  the two goods are complements, but the cross elasticity of demand is not large.
C)  the two goods are perfect substitutes.
D)  the two goods are not related.

Question 4

Two items which have a positive cross price elasticity of demand are referred to as

Accepted Answer

A)  luxury goods.
B)  inferior goods.
C)  substitutes.
D)  complements.

Question 5

Two items which have a negative cross price elasticity of demand are referred to as

Accepted Answer

A)  luxury goods.
B)  inferior goods.
C)  substitutes.
D)  complements.

Question 6

When demand is unit elastic, a 10 percent change in the price of the good

Accepted Answer

A)  will cause a change in quantity demanded of less than 10 percent.
B)  will cause a change in quantity demanded equal to 10 percent.
C)  will cause a change in quantity demanded greater than 10 percent.
D)  will not cause any change in quantity demanded.

Question 7

A consumer is willing and able to buy 1,000 units of a good at $10, but the consumer's quantity demanded falls to zero if the price rises even a fraction of a cent. The consumer's demand curve is

Accepted Answer

A)  horizontal and is perfectly inelastic.
B)  horizontal and is perfectly elastic.
C)  vertical and is perfectly elastic.
D)  downward sloping from higher prices down to $10 and then horizontal.

Question 8

-Explain why an increase in price can raise total revenues if the price elasticity of demand is inelastic.

Accepted Answer

Total revenues equal price times quantit...

Question 9

-Refer to the above table. What is the absolute price elasticity of demand when a price rises from $8 to $8.50?

Accepted Answer

A)  5.15
B)  1.94
C)  0.515
D)  0.194

Question 10

-Refer to the above figure. Demand is

Accepted Answer

A)  perfectly elastic.
B)  unitary elastic.
C)  perfectly inelastic.
D)  undetermined without more information.

Question 11

When demand is elastic, a decrease in price will

Accepted Answer

A)  decrease total revenue.
B)  not change total revenue.
C)  increase total revenue.
D)  reduce quantity demanded.

Question 12

Which of the following statements is correct?

Accepted Answer

A)  Supply is more elastic in the short run than in long run.
B)  Supply is more elastic in the long run than in short run.
C)  Price elasticity of supply is constant along the supply curve.
D)  Price elasticity of supply is always a negative number.

Question 13

-Which of the following is a determinant of the price elasticity of demand for an item?

Accepted Answer

A)  The availability of a close substitute for the item
B)  The percentage of a consumers budget allocated to expenditures on the item
C)  The amount of time available to adjust to a change in the price of the item
D)  All of the above are correct

Question 14

Julie always purchases the soda with the lowest price. For Julie, the cross price elasticity of demand for brand X and brand Y will be

Accepted Answer

A)  equal to 0.
B)  negative.
C)  positive.
D)  impossible to determine without more information.

Question 15

When the price of gasoline is $2.20 per gallon, 11 million gallons are demanded, and when the price of gasoline goes up to $2.60 per gallon, 10 million gallons are demanded. The gasoline in this range has a(n)

Accepted Answer

A)  elastic demand.
B)  inelastic demand.
C)  unit elastic demand.
D)  perfectly elastic demand.

Question 16

The price elasticity of demand is

Accepted Answer

A)  always negative.
B)  sometimes positive.
C)  always positive.
D)  constant along the demand curve.

Question 17

A vertical demand curve has

Accepted Answer

A)  infinite elasticity.
B)  positive elasticity.
C)  zero elasticity.
D)  negative elasticity.

Question 18

A perfectly elastic demand would imply what kind of demand curve?

Accepted Answer

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

Question 19

When the Gizmo Company could sell a gizmo for $10, it produced 2,500 per month. More recently, the price of a gizmo has fallen to $9 and so Gizmo is only producing 2,000 units per month. What is the price elasticity of supply for gizmos?

Accepted Answer

A)  0.47
B)  -0.47
C)  -2.11
D)  2.11

Question 20

-In the above table, the cross price elasticity of demand for good Y with good X when PX rises from $10 to $12 is

Accepted Answer

A)  +0.29.
B)  +1.83.
C)  +0.58.
D)  -0.58.

Exam 19: Demand and Supply Elasticity

When demand is elastic, a decrease in price will

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When demand is unit elastic, a 10 percent change in the price of the good

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Which of the following statements is correct?

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A perfectly elastic demand would imply what kind of demand curve?

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-Refer to the above table. Based on the information in the table, we can say that

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-Refer to the above table. What is the absolute price elasticity of demand when a price rises from $8 to $8.50?

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-Refer to the above figure. Demand is

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-Explain why an increase in price can raise total revenues if the price elasticity of demand is inelastic.

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-In the above table, the cross price elasticity of demand for good Y with good X when PX rises from $10 to $12 is

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The price elasticity of demand is

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Which of the following goods is likely to have the highest income elasticity?

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When the Gizmo Company could sell a gizmo for $10, it produced 2,500 per month. More recently, the price of a gizmo has fallen to $9 and so Gizmo is only producing 2,000 units per month. What is the price elasticity of supply for gizmos?

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-Which of the following is a determinant of the price elasticity of demand for an item?

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A consumer is willing and able to buy 1,000 units of a good at $10, but the consumer's quantity demanded falls to zero if the price rises even a fraction of a cent. The consumer's demand curve is

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Two items which have a positive cross price elasticity of demand are referred to as

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A vertical demand curve has

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Two items which have a negative cross price elasticity of demand are referred to as

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Suppose the price of X increases by 20 percent while the quantity demanded of Y does not change. We would conclude that

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Julie always purchases the soda with the lowest price. For Julie, the cross price elasticity of demand for brand X and brand Y will be

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When the price of gasoline is $2.20 per gallon, 11 million gallons are demanded, and when the price of gasoline goes up to $2.60 per gallon, 10 million gallons are demanded. The gasoline in this range has a(n)

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Total revenues equal price times quantit...
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