Question 1

A firm lowers the price it charges.The firm's total revenue decreases.What can we conclude about the price elasticity of demand?

Accepted Answer

A)  Demand is elastic.
B)  Demand is unit elastic.
C)  Demand is inelastic.
D)  Demand is perfectly elastic.
E)  Not enough information is given to conclude anything about price elasticity of demand.

Question 2

For a product with a constant or gently increasing opportunity cost of producing additional units,as more is produced,we expect that

Accepted Answer

A)  demand is price elastic.
B)  supply is price elastic.
C)  demand is price inelastic.
D)  supply is price inelastic.
E)  demand is unit elastic.

Question 3

Which of the following does NOT influence the price elasticity of demand?

Accepted Answer

A)  the amount by which the demand curve shifts when the price of another good changes
B)  the number of substitutes available to consumers
C)  the price of the good relative to total income
D)  the time period buyers have to respond to a price change
E)  whether the good is a necessity or a luxury

Question 4

Taco Bell firm raises the price of its tacos.The price elasticity of demand for Taco Bell tacos equals 5.0.What happens to the Taco Bell's total revenue?

Accepted Answer

A)  nothing
B)  It increases.
C)  It decreases.
D)  It becomes negative.
E)  It might change,but more information is needed to determine if it increases,decreases,or does not change.

Question 5

The total revenue test says
I.Demand is elastic if a decrease in price results in an increase in total revenue.
Ii.Total revenue is maximized when demand is elastic.
Iii.Total revenue is minimized when demand is unit elastic.

Accepted Answer

A)  i only
B)  i and ii
C)  ii and iii
D)  i,ii and iii
E)  ii only

Question 6

"If the price falls and,as a result,the total revenue decreases,demand is elastic." Is the previous assertion correct?

Accepted Answer

No,the assertion is incorrect....

Question 7

Recently the governor of Vermont proposed that cigarette taxes in Vermont should be increased substantially,from 44 cents a pack to 66 cents a pack.He estimates that Vermont can raise $20 million in revenue from this tax hike.He also pointed out that the neighboring state of New Hampshire was considering an increase in cigarette taxes.
a.How can it be that an increase in cigarette taxes will increase tax revenue,because,after all,a higher tax will increase cigarette prices and thereby decrease the quantity demanded?
b.If New Hampshire chooses not to increase cigarette taxes,is it likely that Vermont can still raise $20 million in tax revenue? Why or why not? Explain

Accepted Answer

a.The governor knows that cigarettes hav...

Question 8

The income elasticity of demand for used cars is less than zero,so used cars are

Accepted Answer

A)  an inferior good.
B)  a normal good.
C)  an inelastic good.
D)  a perfectly inelastic good.
E)  a substitute good.

Question 9

The price of coffee rose 40 percent and the quantity of coffee demanded fell by 20 percent.The quantity of doughnuts demanded also fell by 20 percent.From this information,we can conclude that

Accepted Answer

A)  the demand for coffee is elastic.
B)  the demand for coffee is unit elastic.
C)  coffee is an inferior good.
D)  the cross elasticity demand between coffee and doughnuts is -0.5.
E)  the income elasticity of demand for coffee is 2.

Question 10

If a Pizza Hut raises the price of a slice of pizza from $3.00 to $3.25,the quantity demanded decreases from 1,500 slices per week to 1,300 slices per week.The demand for slices of pizza is ________ and the total revenue received by this Pizza Hut ________.

Accepted Answer

A)  elastic;decreases
B)  inelastic;decreases
C)  elastic;increases
D)  inelastic;increases
E)  unit elastic;does not change

Question 11

Natural gas is difficult to store.What implication does this fact have for the elasticity of supply of natural gas?

Accepted Answer

Because natural gas is difficult to stor...

Question 12

-The table above gives the demand schedule for a good.What is the total revenue at point A? At point B? At point C? At point D? At point E?

Accepted Answer

The total revenue is the price multiplie...

Question 13

Which of the following explains why supply is more elastic as more time passes?

Accepted Answer

A)  It is difficult or impossible to increase the quantity produced in a short period of time.
B)  Consumers have more time to search for substitutes.
C)  Sellers try to take advantage of a high price in the short term.
D)  The supply curve becomes generally steeper as more time passes.
E)  There is no explanation for this phenomenon.

Question 14

The total revenue test says that if a price decrease leads to

Accepted Answer

A)  an increase in total revenue,demand is income elastic.
B)  a decrease in total revenue,demand is income inelastic.
C)  a decrease in total revenue,demand is price inelastic.
D)  a decrease in total revenue,supply is price inelastic.
E)  a decrease in total revenue,supply is price elastic.

Question 15

If the price elasticity of demand for a good is 2,then a 10 percent increase in the price of that good ________ the quantity demanded by ________ percent.

Accepted Answer

A)  increases;20
B)  decreases;2
C)  decreases;10
D)  decreases;20
E)  increases;8

Question 16

Explain why the cross elasticity of demand for substitute goods is positive and the cross elasticity of demand for complements is negative.

Accepted Answer

The formula for the cross elasticity of ...

Question 17

-The table above gives the demand schedule for a good.Using the midpoint method,find the price elasticity of demand between points A and B,between B and C,between C and D,and between D and E.

Accepted Answer

The price elasticity of demand between p...

Question 18

If we are trying to determine if two different products are substitutes,complements,or not related at all,we should find the value of the

Accepted Answer

A)  price elasticity of demand for both goods.
B)  price elasticity of supply for both goods.
C)  income elasticity of demand for both goods.
D)  cross elasticity of demand.
E)  price elasticity of demand and the price elasticity of supply for both goods.

Question 19

When the price of a burrito increases from $2 to $4,the quantity demanded decreases from 50 to 40.Using the midpoint method,the price elasticity of demand equals

Accepted Answer

A)  1/3.
B)  3.
C)  2.
D)  1.
E)  1/2.

Question 20

-The data in the table above give two points on the demand curve for pizza.Using the midpoint method,when the price of a pizza falls from $10 to $9,what is the price elasticity of demand?

Accepted Answer

A)  0.5
B)  0.6
C)  0.9
D)  2.1
E)  8.6

Exam 5: Elasticities of Demand and Supply

Correct Answer
verified
a.The governor knows that cigarettes hav...
View Answer

A firm lowers the price it charges.The firm's total revenue decreases.What can we conclude about the price elasticity of demand?

Correct Answer
verified

Natural gas is difficult to store.What implication does this fact have for the elasticity of supply of natural gas?

Correct Answer
verified
Because natural gas is difficult to stor...
View Answer

-The table above gives the demand schedule for a good.What is the total revenue at point A? At point B? At point C? At point D? At point E?

Correct Answer
verified
The total revenue is the price multiplie...
View Answer

-The data in the table above give two points on the demand curve for pizza.Using the midpoint method,when the price of a pizza falls from $10 to $9,what is the price elasticity of demand?

Correct Answer
verified

For a product with a constant or gently increasing opportunity cost of producing additional units,as more is produced,we expect that

Correct Answer
verified

The income elasticity of demand for used cars is less than zero,so used cars are

Correct Answer
verified

Which of the following does NOT influence the price elasticity of demand?

Correct Answer
verified

When the price of a burrito increases from $2 to $4,the quantity demanded decreases from 50 to 40.Using the midpoint method,the price elasticity of demand equals

Correct Answer
verified

If the price elasticity of demand for a good is 2,then a 10 percent increase in the price of that good the quantity demanded by percent.

Correct Answer
verified

Which of the following explains why supply is more elastic as more time passes?

Correct Answer
verified

The total revenue test says that if a price decrease leads to

Correct Answer
verified

The total revenue test says I.Demand is elastic if a decrease in price results in an increase in total revenue. Ii.Total revenue is maximized when demand is elastic. Iii.Total revenue is minimized when demand is unit elastic.

Correct Answer
verified

If we are trying to determine if two different products are substitutes,complements,or not related at all,we should find the value of the

Correct Answer
verified

Taco Bell firm raises the price of its tacos.The price elasticity of demand for Taco Bell tacos equals 5.0.What happens to the Taco Bell's total revenue?

Correct Answer
verified

The price of coffee rose 40 percent and the quantity of coffee demanded fell by 20 percent.The quantity of doughnuts demanded also fell by 20 percent.From this information,we can conclude that

Correct Answer
verified

Explain why the cross elasticity of demand for substitute goods is positive and the cross elasticity of demand for complements is negative.

Correct Answer
verified
The formula for the cross elasticity of ...
View Answer

"If the price falls and,as a result,the total revenue decreases,demand is elastic." Is the previous assertion correct?

Correct Answer
verified
No,the assertion is incorrect....
View Answer

If a Pizza Hut raises the price of a slice of pizza from $3.00 to $3.25,the quantity demanded decreases from 1,500 slices per week to 1,300 slices per week.The demand for slices of pizza is and the total revenue received by this Pizza Hut .

Correct Answer
verified

-The table above gives the demand schedule for a good.Using the midpoint method,find the price elasticity of demand between points A and B,between B and C,between C and D,and between D and E.

Correct Answer
verified
The price elasticity of demand between p...
View Answer

Exam 5: Elasticities of Demand and Supply

Correct Answerverifieda.The governor knows that cigarettes hav...View AnswerShow Answer

A firm lowers the price it charges.The firm's total revenue decreases.What can we conclude about the price elasticity of demand?

Correct AnswerverifiedShow Answer

Natural gas is difficult to store.What implication does this fact have for the elasticity of supply of natural gas?

Correct AnswerverifiedBecause natural gas is difficult to stor...View AnswerShow Answer

-The table above gives the demand schedule for a good.What is the total revenue at point A? At point B? At point C? At point D? At point E?

Correct AnswerverifiedThe total revenue is the price multiplie...View AnswerShow Answer

-The data in the table above give two points on the demand curve for pizza.Using the midpoint method,when the price of a pizza falls from $10 to $9,what is the price elasticity of demand?

Correct AnswerverifiedShow Answer

For a product with a constant or gently increasing opportunity cost of producing additional units,as more is produced,we expect that

Correct AnswerverifiedShow Answer

The income elasticity of demand for used cars is less than zero,so used cars are

Correct AnswerverifiedShow Answer

Which of the following does NOT influence the price elasticity of demand?

Correct AnswerverifiedShow Answer

When the price of a burrito increases from $2 to $4,the quantity demanded decreases from 50 to 40.Using the midpoint method,the price elasticity of demand equals

Correct AnswerverifiedShow Answer

If the price elasticity of demand for a good is 2,then a 10 percent increase in the price of that good ________ the quantity demanded by ________ percent.

Correct AnswerverifiedShow Answer

Which of the following explains why supply is more elastic as more time passes?

Correct AnswerverifiedShow Answer

The total revenue test says that if a price decrease leads to

Correct AnswerverifiedShow Answer

The total revenue test says I.Demand is elastic if a decrease in price results in an increase in total revenue. Ii.Total revenue is maximized when demand is elastic. Iii.Total revenue is minimized when demand is unit elastic.

Correct AnswerverifiedShow Answer

If we are trying to determine if two different products are substitutes,complements,or not related at all,we should find the value of the

Correct AnswerverifiedShow Answer

Taco Bell firm raises the price of its tacos.The price elasticity of demand for Taco Bell tacos equals 5.0.What happens to the Taco Bell's total revenue?

Correct AnswerverifiedShow Answer

The price of coffee rose 40 percent and the quantity of coffee demanded fell by 20 percent.The quantity of doughnuts demanded also fell by 20 percent.From this information,we can conclude that

Correct AnswerverifiedShow Answer

Explain why the cross elasticity of demand for substitute goods is positive and the cross elasticity of demand for complements is negative.

Correct AnswerverifiedThe formula for the cross elasticity of ...View AnswerShow Answer

"If the price falls and,as a result,the total revenue decreases,demand is elastic." Is the previous assertion correct?

Correct AnswerverifiedNo,the assertion is incorrect....View AnswerShow Answer

If a Pizza Hut raises the price of a slice of pizza from $3.00 to $3.25,the quantity demanded decreases from 1,500 slices per week to 1,300 slices per week.The demand for slices of pizza is ________ and the total revenue received by this Pizza Hut ________.

Correct AnswerverifiedShow Answer

-The table above gives the demand schedule for a good.Using the midpoint method,find the price elasticity of demand between points A and B,between B and C,between C and D,and between D and E.

Correct AnswerverifiedThe price elasticity of demand between p...View AnswerShow Answer

Correct Answer
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a.The governor knows that cigarettes hav...
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Correct Answer
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Correct Answer
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Because natural gas is difficult to stor...
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Correct Answer
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The total revenue is the price multiplie...
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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If the price elasticity of demand for a good is 2,then a 10 percent increase in the price of that good the quantity demanded by percent.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The formula for the cross elasticity of ...
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Correct Answer
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No,the assertion is incorrect....
View Answer

If a Pizza Hut raises the price of a slice of pizza from $3.00 to $3.25,the quantity demanded decreases from 1,500 slices per week to 1,300 slices per week.The demand for slices of pizza is and the total revenue received by this Pizza Hut .

Correct Answer
verified

Correct Answer
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The price elasticity of demand between p...
View Answer