Question 1

When two goods are complements, their cross-price elasticity of demand is:

Accepted Answer

A)   positive.
B)   negative.
C)   zero.
D)   equal to one.

Question 2

If a good has an income elasticity of 1.83, then it is a(n)  _____good.

Accepted Answer

A)   normal
B)   inferior
C)   substitute
D)   luxury

Question 3

The percentage change in the quantity supplied of a good or service when its price changes by one percent is:

Accepted Answer

A)   price elasticity of supply.
B)   price elasticity of demand.
C)   cross-price elasticity.
D)   income elasticity of supply.

Question 4

Demand for a good is inelastic if:

Accepted Answer

A)   total revenue decreases when price decreases.
B)   the quantity effect outweighs the price effect of a price increase.
C)   the absolute value of price elasticity is greater than 1.
D)   None of these are correct.

Question 5

A vertical demand curve indicates that:

Accepted Answer

A)   the quantity demanded will drop to zero if the price increases by any amount.
B)   the quantity demanded will remain unchanged no matter what happens to the price.
C)   the quantity demanded will rise if the price increases by any amount.
D)   the quantity demanded will only react to large changes in price.

Question 6

Suppose the price elasticity of demand for eggs is −0.27. Therefore, an increase in the price of eggs will cause:

Accepted Answer

A)   a decrease in egg suppliers' total revenue.
B)   an increase in the demand for eggs.
C)   an increase in egg suppliers' total revenue.
D)   an increase in the quantity demand of eggs.

Question 7

If the price elasticity of demand for leisure air travel is −1.60 a _____ percent decrease in its price will cause a _____ in the amount of leisure air travel demanded.

Accepted Answer

A)   10; 16 percent decrease
B)   10; 16 percent increase
C)   16; 10 percent increase
D)   16; 10 percent decrease

Question 8

When demand is perfectly inelastic:

Accepted Answer

A)   the demand curve is perfectly vertical.
B)   the demand curve is perfectly horizontal.
C)   the measured elasticity is exactly −1.
D)   the response to a change in price is immediate.

Question 9

How does price elasticity of demand appear when calculated?

Accepted Answer

A)   It is always a negative number, although it is sometimes reported as an absolute value.
B)   It is sometimes a negative number and sometimes a positive number, depending on the magnitude of response.
C)   It is always a positive number because price and quantity are directly related in terms of demand.
D)   It can be a positive number or a negative number, but is always reported as an absolute value.

Question 10

Perfectly elastic demand occurs when:

Accepted Answer

A)   consumers are extremely sensitive to a change in price.
B)   the quantity demanded is unchanged when price changes by any amount.
C)   consumers are slow to alter their demand when the price changes.
D)   only large changes in price affect the quantity demanded.

Question 11

The demand for a particular brand of apple juice is likely to be:

Accepted Answer

A)   very price elastic, because there are many close substitutes available.
B)   less price elastic, because there are many close substitutes available.
C)   very price elastic, because the adjustment time is so fast.
D)   less price elastic, because the adjustment time is so slow.

Question 12

Suppose the price elasticity of demand for business air travel is −0.80 and the price elasticity of demand for leisure air travel is −1.60. Therefore, the demand for leisure air travel is:

Accepted Answer

A)   less elastic than the demand for business travel.
B)   inelastic.
C)   more elastic than the demand for business travel.
D)   unrelated to consumers' incomes.

Question 13

Suppose when the price of pineapples goes from $5 to $3 per pineapple, production decreases from 3,500 pineapples to 2,000 pineapples per year. Using the mid-point method, what is the percentage change in price?

Accepted Answer

A)   −0.5 percent
B)   −50 percent
C)   −33 percent
D)   −40 percent

Question 14

The price elasticity of supply becomes ________ elastic over time because _________.

Accepted Answer

A)   less; producers grow accustomed to the price changes
B)   less; firms have time to move into or out of the industry
C)   more; producers have more time to adjust their production decisions
D)   more; producers grow accustomed to the price changes

Question 15

How does the amount of time consumers have to adjust to a price change affect elasticity?

Accepted Answer

A)   The more time consumers have to adjust, the less elastic their demand will be.
B)   The time consumers have to adjust does not affect the elasticity of their response unless it is a luxury good.
C)   The more time consumers have to adjust, the more elastic their demand will be.
D)   The time consumers have to adjust will not affect the elasticity of their response unless the good is a necessity.

Question 16

Consider the market in the graph shown. Using the mid-point method, what is the price elasticity of supply when the price increases from $4 to $7?

Accepted Answer

A)   1.13
B)   0.4
C)   0.45
D)   0.89

Question 17

Which of the following is not a determinant of price elasticity of demand?

Accepted Answer

A)   Scope of the market
B)   Availability of complements
C)   Cost relative to income
D)   Adjustment time

Question 18

If the cross-price elasticity of demand between two goods is 0.25, then we know that these goods are _____ because the cross-price elasticity of demand is _____.

Accepted Answer

A)   substitutes; greater than zero
B)   complements; less than one
C)   substitutes; less than one
D)   complements; greater than zero

Question 19

Multiplying the quantity sold by the price paid for each unit will give us:

Accepted Answer

A)   total profit.
B)   total revenue.
C)   total cost.
D)   total benefit.

Exam 4: Elasticity

The demand for a particular brand of apple juice is likely to be:

Correct Answer
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If the price elasticity of demand for leisure air travel is −1.60 a _ percent decrease in its price will cause a _ in the amount of leisure air travel demanded.

Correct Answer
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Suppose when the price of pineapples goes from $5 to $3 per pineapple, production decreases from 3,500 pineapples to 2,000 pineapples per year. Using the mid-point method, what is the percentage change in price?

Correct Answer
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If the cross-price elasticity of demand between two goods is 0.25, then we know that these goods are _ because the cross-price elasticity of demand is _.

Correct Answer
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Which of the following is not a determinant of price elasticity of demand?

Correct Answer
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Perfectly elastic demand occurs when:

Correct Answer
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Demand for a good is inelastic if:

Correct Answer
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Suppose the price elasticity of demand for eggs is −0.27. Therefore, an increase in the price of eggs will cause:

Correct Answer
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Suppose the price elasticity of demand for business air travel is −0.80 and the price elasticity of demand for leisure air travel is −1.60. Therefore, the demand for leisure air travel is:

Correct Answer
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If a good has an income elasticity of 1.83, then it is a(n) _____good.

Correct Answer
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The percentage change in the quantity supplied of a good or service when its price changes by one percent is:

Correct Answer
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How does the amount of time consumers have to adjust to a price change affect elasticity?

Correct Answer
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Multiplying the quantity sold by the price paid for each unit will give us:

Correct Answer
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How does price elasticity of demand appear when calculated?

Correct Answer
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A vertical demand curve indicates that:

Correct Answer
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When demand is perfectly inelastic:

Correct Answer
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The price elasticity of supply becomes elastic over time because _.

Correct Answer
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When two goods are complements, their cross-price elasticity of demand is:

Correct Answer
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Consider the market in the graph shown. Using the mid-point method, what is the price elasticity of supply when the price increases from $4 to $7?

Correct Answer
verified

Exam 4: Elasticity

The demand for a particular brand of apple juice is likely to be:

Correct AnswerverifiedShow Answer

If the price elasticity of demand for leisure air travel is −1.60 a _____ percent decrease in its price will cause a _____ in the amount of leisure air travel demanded.

Correct AnswerverifiedShow Answer

Suppose when the price of pineapples goes from $5 to $3 per pineapple, production decreases from 3,500 pineapples to 2,000 pineapples per year. Using the mid-point method, what is the percentage change in price?

Correct AnswerverifiedShow Answer

If the cross-price elasticity of demand between two goods is 0.25, then we know that these goods are _____ because the cross-price elasticity of demand is _____.

Correct AnswerverifiedShow Answer

Which of the following is not a determinant of price elasticity of demand?

Correct AnswerverifiedShow Answer

Perfectly elastic demand occurs when:

Correct AnswerverifiedShow Answer

Demand for a good is inelastic if:

Correct AnswerverifiedShow Answer

Suppose the price elasticity of demand for eggs is −0.27. Therefore, an increase in the price of eggs will cause:

Correct AnswerverifiedShow Answer

Suppose the price elasticity of demand for business air travel is −0.80 and the price elasticity of demand for leisure air travel is −1.60. Therefore, the demand for leisure air travel is:

Correct AnswerverifiedShow Answer

If a good has an income elasticity of 1.83, then it is a(n) _____good.

Correct AnswerverifiedShow Answer

The percentage change in the quantity supplied of a good or service when its price changes by one percent is:

Correct AnswerverifiedShow Answer

How does the amount of time consumers have to adjust to a price change affect elasticity?

Correct AnswerverifiedShow Answer

Multiplying the quantity sold by the price paid for each unit will give us:

Correct AnswerverifiedShow Answer

How does price elasticity of demand appear when calculated?

Correct AnswerverifiedShow Answer

A vertical demand curve indicates that:

Correct AnswerverifiedShow Answer

When demand is perfectly inelastic:

Correct AnswerverifiedShow Answer

The price elasticity of supply becomes ________ elastic over time because _________.

Correct AnswerverifiedShow Answer

When two goods are complements, their cross-price elasticity of demand is:

Correct AnswerverifiedShow Answer

Consider the market in the graph shown. Using the mid-point method, what is the price elasticity of supply when the price increases from $4 to $7?

Correct AnswerverifiedShow Answer

Correct Answer
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If the price elasticity of demand for leisure air travel is −1.60 a _ percent decrease in its price will cause a _ in the amount of leisure air travel demanded.

Correct Answer
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Correct Answer
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If the cross-price elasticity of demand between two goods is 0.25, then we know that these goods are _ because the cross-price elasticity of demand is _.

Correct Answer
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The price elasticity of supply becomes elastic over time because _.

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