Question 1

After long hair for men became popular,barbers found that their incomes fell.In an attempt to boost their incomes,many barbers raised the price of a haircut and yet their total revenue fell even more.What can explain this result?

Accepted Answer

A)   The demand for haircuts by barbers is elastic because of many substitutes.
B)   The demand for haircuts by barbers became inelastic after the increase in price.
C)   Haircuts are inferior products.
D)   The demand for haircuts by barbers is inelastic because most people need haircuts.
E)   None of the above can explain the phenomenon.

Question 2

For a good such as food,the income elasticity is likely

Accepted Answer

A)   negative.
B)   equal to zero.
C)   positive and less than one.
D)   positive and greater than one.
E)   undefined because people always buy the same amount of food.

Question 3

When income increases from $20,000 to $30,000 the quantity of inter-city bus trips taken per year decreases from 10 to 8.Hence

Accepted Answer

A)   inter-city bus trips are a normal good.
B)   the income elasticity of demand for inter-city bus trips is -1.8.
C)   the income elasticity of demand for inter-city bus trips is -0.56.
D)   Both answers A and B are correct.
E)   Both answers A and C are correct.

Question 4

The price elasticity of supply is a measure of the extent to which the quantity supplied of a good changes when the

Accepted Answer

A)   cost of producing the product increases.
B)   quantity of the good demanded increases.
C)   supply increases.
D)   price changes.
E)   number of firms supplying the good changes.

Question 5

-The demand curve shown in the figure above reflects demand that is

Accepted Answer

A)   perfectly elastic.
B)   perfectly inelastic.
C)   unit elastic.
D)   elastic but not perfectly elastic.
E)   inelastic but not perfectly inelastic.

Question 6

-A firm raises 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 inelastic.
E)   Not enough information is given to conclude anything about price elasticity of demand.

Question 7

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 8

If a 10 percent increase in income leads to a 5 percent decrease in the demand for a good,the income elasticity of demand equals ________ and the good is ________ good.

Accepted Answer

A)   1/2; a normal
B)   -1/2; an inferior
C)   2; a normal
D)   -2; a normal
E)   -5; an inferior

Question 9

-The demand curve shown in the figure above is ________ over the price range from $95 to $105 per trip.

Accepted Answer

A)   perfectly elastic
B)   perfectly inelastic
C)   unit elastic
D)   elastic but not perfectly elastic
E)   inelastic but not perfectly inelastic

Question 10

The demand for a good is more elastic if the

Accepted Answer

A)   good is a necessity.
B)   good has few substitutes.
C)   good is narrowly defined.
D)   supply of the good is plentiful.
E)   Both answers B and C are correct.

Question 11

-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 percentage change in price?

Accepted Answer

A)   8.2 percent
B)   15.5 percent
C)   10.5 percent
D)   5.0 percent
E)   1.0 percent

Question 12

-The figure above shows the demand curve for pizza.Using the midpoint method and moving from point A to point B,calculate the
a.percentage change in price.
b.percentage change in quantity demanded.
c.price elasticity of demand.

Accepted Answer

a.Between points A and B,the p...

Question 13

The demand for a necessity generally is

Accepted Answer

A)   very elastic.
B)   infinitely elastic.
C)   unaffected by income.
D)   inelastic.
E)   unit elastic.

Question 14

The figure above shows the supply curve for roses.
-In the figure above,at the point where the price is $60 per bunch,the price elasticity of supply is

Accepted Answer

A)   1.8.
B)   0.56.
C)   1.
D)   1.5.
E)   0.

Question 15

The cross elasticity of demand for strawberry jelly and grape jelly is likely to be

Accepted Answer

A)   positive because they are substitutes.
B)   positive because they are complements.
C)   negative because they are substitutes.
D)   negative because they are complements.
E)   negative because they are inferior goods.

Question 16

The price elasticity of demand for Red Delicious apples,a certain type of apple,is likely

Accepted Answer

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

Question 17

Suppose the University of Oklahoma increases the price of student football tickets for the 2012 season by 30 percent.If the price elasticity of demand for student tickets is 1.22,the price increase leads to

Accepted Answer

A)   a 36.6 percent decrease in the quantity demanded.
B)   a 30 percent decrease in the quantity demanded.
C)   a 1.22 percent decrease in the quantity demanded.
D)   28.78 percent decrease in the quantity demanded.
E)   no change in the quantity demanded.

Question 18

The cross elasticity of demand is a measure of how

Accepted Answer

A)   responsive consumers are to changes in the price of a product.
B)   responsive suppliers are to changes in the price of a product.
C)   demand for a product changes when the price of a substitute or complement changes.
D)   total revenue changes when the price of a product changes.
E)   demand for a product changes when income changes.

Question 19

For which of the following would the supply likely be most inelastic?

Accepted Answer

A)   aircraft carrier
B)   canned soup
C)   toy airplane
D)   t-shirt
E)   bottled water

Question 20

Demand for a product tends to be more elastic the longer the time period considered because

Accepted Answer

A)   sellers have more time to expand production.
B)   buyers have more time to search for substitutes.
C)   price increases over time make the price larger relative to buyers' incomes.
D)   the inverse relationship between the price and the quantity demanded weakens over time.
E)   buyers get used to the new price.

Exam 5: Elasticities of Demand and Supply

When income increases from $20,000 to $30,000 the quantity of inter-city bus trips taken per year decreases from 10 to 8.Hence

Correct AnswerverifiedShow Answer

For a good such as food,the income elasticity is likely

Correct AnswerverifiedShow Answer

-The figure above shows the demand curve for pizza.Using the midpoint method and moving from point A to point B,calculate the a.percentage change in price. b.percentage change in quantity demanded. c.price elasticity of demand.

Correct Answerverifieda.Between points A and B,the p...View AnswerShow Answer

Demand for a product tends to be more elastic the longer the time period considered because

Correct AnswerverifiedShow Answer

After long hair for men became popular,barbers found that their incomes fell.In an attempt to boost their incomes,many barbers raised the price of a haircut and yet their total revenue fell even more.What can explain this result?

Correct AnswerverifiedShow Answer

The demand for a good is more elastic if the

Correct AnswerverifiedShow Answer

The price elasticity of demand for Red Delicious apples,a certain type of apple,is likely

Correct AnswerverifiedShow Answer

If a 10 percent increase in income leads to a 5 percent decrease in the demand for a good,the income elasticity of demand equals ________ and the good is ________ good.

Correct AnswerverifiedShow Answer

-The demand curve shown in the figure above reflects demand that is

Correct AnswerverifiedShow Answer

The figure above shows the supply curve for roses. -In the figure above,at the point where the price is $60 per bunch,the price elasticity of supply is

Correct AnswerverifiedShow Answer

The cross elasticity of demand is a measure of how

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose the University of Oklahoma increases the price of student football tickets for the 2012 season by 30 percent.If the price elasticity of demand for student tickets is 1.22,the price increase leads to

Correct AnswerverifiedShow Answer

The price elasticity of supply is a measure of the extent to which the quantity supplied of a good changes when the

Correct AnswerverifiedShow 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 percentage change in price?

Correct AnswerverifiedShow Answer

For which of the following would the supply likely be most inelastic?

Correct AnswerverifiedShow Answer

The demand for a necessity generally is

Correct AnswerverifiedShow Answer

The cross elasticity of demand for strawberry jelly and grape jelly is likely to be

Correct AnswerverifiedShow Answer

-The demand curve shown in the figure above is ________ over the price range from $95 to $105 per trip.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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a.Between points A and B,the p...
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If a 10 percent increase in income leads to a 5 percent decrease in the demand for a good,the income elasticity of demand equals and the good is good.

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