Question 1

The basic formula for the price elasticity of demand coefficient is:

Accepted Answer

A)   absolute decline in quantity demanded/absolute increase in price.
B)   percentage change in quantity demanded/percentage change in price.
C)   absolute decline in price/absolute increase in quantity demanded.
D)   percentage change in price/percentage change in quantity demanded.E) A) and D)
F) None of the above

Question 2

Which of the following is correct?

Accepted Answer

A)   If the demand for a product is inelastic,a change in price will cause total revenue to change in the opposite direction.
B)   If the demand for a product is inelastic,a change in price will cause total revenue to change in the same direction.
C)   If the demand for a product is inelastic,a change in price may cause total revenue to change in either the opposite or the same direction.
D)   The price elasticity coefficient applies to demand,but not to supply.E) A) and D)
F) B) and C)

Question 3

Suppose the price of a product rises and the total revenue of sellers increases.

Accepted Answer

A)   It can be concluded that the demand for the product is elastic.
B)   It can be concluded that the supply of the product is elastic.
C)   It can be concluded that the supply of the product is inelastic.
D)   No conclusion can be reached with respect to the elasticity of supply.E) B) and D)
F) B) and C)

Question 4

A manufacturer of frozen pizzas found that total revenue decreased when price was lowered from $5 to $4.It was also found that total revenue decreased when price was raised from $5 to $6.Thus,

Accepted Answer

A)   the demand for pizza is elastic above $5 and inelastic below $5.
B)   the demand for pizza is elastic both above and below $5.
C)   the demand for pizza is inelastic above $5 and elastic below $5.
D)   $5 is not the equilibrium price of pizza.E) B) and D)
F) None of the above

Question 5

Answer the question on the basis of the following demand schedule:   Quantity  Price‾ Demanded‾$615243342516\begin{array}{l}\begin{array}{ccc}&	ext { Quantity }\\underline{	ext { Price} } &  \underline{	ext { Demanded}} \ \$6 & 1 \5 &  2 \4 &  3 \3 &  4 \2 &  5 \1 &  6\end{array}\end{array} Price​$654321​ Quantity  Demanded​123456​​  Refer to the data.The price elasticity of demand is relatively inelastic:

Accepted Answer

A)   in the $6-$4 price range.
B)   over the entire $6-$1 price range.
C)   in the $3-$1 price range.
D)   in the $6-$5 price range only. E) A) and C)
F) None of the above

Question 6

The Illinois Central Railroad once asked the Illinois Commerce Commission for permission to increase its commuter rates by 20 percent.The railroad argued that declining revenues made this rate increase essential.Opponents of the rate increase contended that the railroad's revenues would fall because of the rate hike.It can be concluded that:

Accepted Answer

A)   both groups felt that the demand was elastic but for different reasons.
B)   both groups felt that the demand was inelastic but for different reasons.
C)   the railroad felt that the demand for passenger service was inelastic and opponents of the rate increase felt it was elastic.
D)   the railroad felt that the demand for passenger service was elastic and opponents of the rate increase felt it was inelastic.E) All of the above
F) A) and B)

Question 7

The smaller the number of good substitutes for a product,the greater will be the price elasticity of demand for it.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following goods (with their respective income elasticity coefficients in parentheses) will most likely suffer a decline in demand during a recession?

Accepted Answer

A)   Dinner at a nice restaurant (+1.8) 
B)   Chicken purchased at the grocery store for preparation at home (+0.25) 
C)   Facial tissue (+0.6) 
D)   Plasma screen and LCD TVs (+4.2) E) None of the above
F) C) and D)

Question 9

If the University Chamber Music Society decides to raise ticket prices to provide more funds to finance concerts,the Society is assuming that the demand for tickets is:

Accepted Answer

A)   parallel to the horizontal axis.
B)   shifting to the left.
C)   inelastic.
D)   elastic.E) B) and D)
F) C) and D)

Question 10

An antidrug policy that reduces the supply of heroin might:

Accepted Answer

A)   increase street crime because the addict's demand for heroin is highly inelastic.
B)   reduce street crime because the addict's demand for heroin is highly elastic.
C)   reduce street crime because the addict's demand for heroin is highly inelastic.
D)   increase street crime because the addict's demand for heroin is highly elastic.E) All of the above
F) A) and D)

Question 11

If the coefficient of cross elasticity of demand is positive,the two products are complementary goods.

Accepted Answer

A) True 
 B)False

Question 12

Generally speaking,the smaller the percentage of one's total budget devoted to a particular product,the more price elastic will be the demand for that product.

Accepted Answer

A) True 
 B)False

Question 13

If the price elasticity of demand for a product is unity,a decrease in price will:

Accepted Answer

A)   have no effect upon the amount purchased.
B)   increase the quantity demanded and increase total revenue.
C)   increase the quantity demanded but decrease total revenue.
D)   increase the quantity demanded,but total revenue will be unchanged.E) None of the above
F) A) and C)

Question 14

The supply of known Monet paintings is:

Accepted Answer

A)   perfectly elastic.
B)   perfectly inelastic.
C)   relatively elastic.
D)   relatively inelastic.E) B) and D)
F) All of the above

Question 15

We would expect the cross elasticity of demand between dress shirts and ties to be:

Accepted Answer

A)   positive,indicating normal goods.
B)   positive,indicating complementary goods.
C)   negative,indicating substitute goods.
D)   negative,indicating complementary goods.E) B) and C)
F) All of the above

Question 16

Which type of goods is most adversely affected by recessions?

Accepted Answer

A)   Goods for which the income elasticity coefficient is relatively low or negative.
B)   Goods for which the income elasticity coefficient is relatively high and positive.
C)   Goods for which the cross elasticity coefficient is positive.
D)   Goods for which the cross elasticity coefficient is negative.E) All of the above
F) B) and C)

Question 17

(Last Word) Suppose that a firm has "pricing power" and can segregate its market into two distinct groups based on differences in elasticities of demand.The firm might charge:

Accepted Answer

A)   a lower price to the group that has the less elastic demand.
B)   a higher price to the group that has the less elastic demand.
C)   the same price to both groups but include a "free" related product for the group that has an inelastic demand.
D)   the same price to both groups but make it difficult for the group with the more elastic demand to gain access to the product.E) C) and D)
F) All of the above

Question 18

The greater the ease of shifting resources from product X to product Y in the production process,the greater is the elasticity of supply of product Y.

Accepted Answer

A) True 
 B)False

Question 19

The supply of product X is perfectly inelastic if the price of X rises by:

Accepted Answer

A)   5 percent and quantity supplied rises by 7 percent.
B)   8 percent and quantity supplied rises by 8 percent.
C)   10 percent and quantity supplied stays the same.
D)   7 percent and quantity supplied rises by 5 percent.E) C) and D)
F) A) and D)

Question 20

Assume that a 3 percent increase in income across the economy produces a 1 percent decline in the quantity demanded of good X.The coefficient of income elasticity of demand for good X is:

Accepted Answer

A)   negative and therefore X is an inferior good.
B)   negative and therefore X is a normal good.
C)   positive and therefore X is an inferior good.
D)   positive and therefore X is a normal good.E) A) and B)
F) A) and C)

Exam 6: Elasticity

Which type of goods is most adversely affected by recessions?

Correct Answer
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The supply of known Monet paintings is:

Correct Answer
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The basic formula for the price elasticity of demand coefficient is:

Correct Answer
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If the University Chamber Music Society decides to raise ticket prices to provide more funds to finance concerts,the Society is assuming that the demand for tickets is:

Correct Answer
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The smaller the number of good substitutes for a product,the greater will be the price elasticity of demand for it.

Correct Answer
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The greater the ease of shifting resources from product X to product Y in the production process,the greater is the elasticity of supply of product Y.

Correct Answer
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Assume that a 3 percent increase in income across the economy produces a 1 percent decline in the quantity demanded of good X.The coefficient of income elasticity of demand for good X is:

Correct Answer
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(Last Word) Suppose that a firm has "pricing power" and can segregate its market into two distinct groups based on differences in elasticities of demand.The firm might charge:

Correct Answer
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Which of the following is correct?

Correct Answer
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Suppose the price of a product rises and the total revenue of sellers increases.

Correct Answer
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The supply of product X is perfectly inelastic if the price of X rises by:

Correct Answer
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If the price elasticity of demand for a product is unity,a decrease in price will:

Correct Answer
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Correct Answer
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A manufacturer of frozen pizzas found that total revenue decreased when price was lowered from $5 to $4.It was also found that total revenue decreased when price was raised from $5 to $6.Thus,

Correct Answer
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An antidrug policy that reduces the supply of heroin might:

Correct Answer
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If the coefficient of cross elasticity of demand is positive,the two products are complementary goods.

Correct Answer
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Which of the following goods (with their respective income elasticity coefficients in parentheses) will most likely suffer a decline in demand during a recession?

Correct Answer
verified

We would expect the cross elasticity of demand between dress shirts and ties to be:

Correct Answer
verified

Generally speaking,the smaller the percentage of one's total budget devoted to a particular product,the more price elastic will be the demand for that product.

Correct Answer
verified

Correct Answer
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Exam 6: Elasticity

Which type of goods is most adversely affected by recessions?

Correct AnswerverifiedShow Answer

The supply of known Monet paintings is:

Correct AnswerverifiedShow Answer

The basic formula for the price elasticity of demand coefficient is:

Correct AnswerverifiedShow Answer

If the University Chamber Music Society decides to raise ticket prices to provide more funds to finance concerts,the Society is assuming that the demand for tickets is:

Correct AnswerverifiedShow Answer

The smaller the number of good substitutes for a product,the greater will be the price elasticity of demand for it.

Correct AnswerverifiedShow Answer

The greater the ease of shifting resources from product X to product Y in the production process,the greater is the elasticity of supply of product Y.

Correct AnswerverifiedShow Answer

Assume that a 3 percent increase in income across the economy produces a 1 percent decline in the quantity demanded of good X.The coefficient of income elasticity of demand for good X is:

Correct AnswerverifiedShow Answer

(Last Word) Suppose that a firm has "pricing power" and can segregate its market into two distinct groups based on differences in elasticities of demand.The firm might charge:

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Suppose the price of a product rises and the total revenue of sellers increases.

Correct AnswerverifiedShow Answer

The supply of product X is perfectly inelastic if the price of X rises by:

Correct AnswerverifiedShow Answer

If the price elasticity of demand for a product is unity,a decrease in price will:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A manufacturer of frozen pizzas found that total revenue decreased when price was lowered from $5 to $4.It was also found that total revenue decreased when price was raised from $5 to $6.Thus,

Correct AnswerverifiedShow Answer

An antidrug policy that reduces the supply of heroin might:

Correct AnswerverifiedShow Answer

If the coefficient of cross elasticity of demand is positive,the two products are complementary goods.

Correct AnswerverifiedShow Answer

Which of the following goods (with their respective income elasticity coefficients in parentheses) will most likely suffer a decline in demand during a recession?

Correct AnswerverifiedShow Answer

We would expect the cross elasticity of demand between dress shirts and ties to be:

Correct AnswerverifiedShow Answer

Generally speaking,the smaller the percentage of one's total budget devoted to a particular product,the more price elastic will be the demand for that product.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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