Question 1

Considering the concept of cross-price elasticity, if two goods are complements:

Accepted Answer

A)   an increase in the price of one will cause a decrease in the demand for the other.
B)   an increase in the price of one will cause an increase in the demand for the other.
C)   a decrease in the price of one will cause a decrease in the demand for the other.
D)   the cross-price elasticity is positive.

Question 2

If consumers spend more money on coffee than on sugar, then the demand for a pound of coffee is probably _________________ than is the demand for a pound sugar of because ________________.

Accepted Answer

A)   less price elastic; coffee requires a larger portion of consumers' incomes.
B)   more price elastic; coffee requires a larger portion of consumers' incomes.
C)   less price elastic; people will take a longer time to adjust to the change in its price.
D)   more price elastic; people will take a longer time to adjust to the change in its price

Question 3

A determinant of the price elasticity of supply that is also a determinant of the price elasticity of demand is:

Accepted Answer

A)   availability of inputs.
B)   flexibility of the production process.
C)   adjustment time.
D)   whether the good is a luxury or a necessity.

Question 4

When the quantity effect outweighs the price effect:

Accepted Answer

A)   a price increase will cause a decrease in total revenue.
B)   a price increase will cause an increase in total revenue.
C)   a price decrease will cause a decrease in total revenue.
D)   None of these is true.

Question 5

Economists use the percentage change in quantity rather than the absolute change in quantity because:

Accepted Answer

A)   percentage changes are easier to calculate than absolute changes.
B)   the measured elasticity is the same regardless of the unit of measurement for quantity.
C)   absolute changes are confusing to convert.
D)   absolute changes often result in negative numbers.

Question 6

The price elasticity of supply tells us:

Accepted Answer

A)   the percentage change in quantity supplied when the price of the good changes by one percent.
B)   in which direction the quantity supplied changes as we move along the supply curve.
C)   how quickly the supply will respond to a change in price.
D)   the magnitude of shift in the supply curve in response to a change in price.

Question 7

The demand for dolls is __________________ than is the demand for Barbie dolls because ___________________.

Accepted Answer

A)   less price elastic; the scope of the market for dolls is more broadly defined
B)   more price elastic; the scope of the market for dolls is more broadly defined
C)   less price elastic; Barbie dolls have more available substitutes
D)   more price elastic; Barbie dolls have more available substitutes

Question 8

Ray just got a raise, and decided to splurge on a fancy dinner to celebrate. The change to Ray's demand for fancy dinners could be measured by the:

Accepted Answer

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

Question 9

The most commonly used measures of elasticity are:

Accepted Answer

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

Question 10

Assuming price elasticity of demand is reported as an absolute value, an inelastic demand has a measured elasticity:

Accepted Answer

A)   greater than zero.
B)   greater than one.
C)   less than one.
D)   exactly one.

Question 11

If the price of hairbrushes decreases by 20 percent, the quantity demanded increases by 2 percent. The price elasticity of demand is:

Accepted Answer

A)   0.1, and is elastic.
B)   10 and is elastic.
C)   0.1 and is inelastic.
D)   10 and is inelastic.

Question 12

A perfectly elastic demand:

Accepted Answer

A)   means consumers are extremely sensitive to a change in price.
B)   means quantity demanded is unchanged if the price changes by any amount.
C)   is demonstrated by a vertical demand curve.
D)   has a price elasticity of 1.

Question 13

Elasticity along a demand curve:

Accepted Answer

A)   is constant if the demand curve is linear.
B)   changes only when the demand curve is bowed out.
C)   changes when the demand curve is linear.
D)   changes only when the demand curve is bowed in.

Question 14

The demand for steak is _______________________ than is the demand for food because _____________________.

Accepted Answer

A)   less price elastic; the scope of the market for steak is more broadly defined
B)   more price elastic; the scope of the market for steak is more broadly defined
C)   less price elastic; the scope of the market for steak is less broadly defined
D)   more price elastic; the scope of the market for steak is less broadly defined

Question 15

If a large percentage change in price leads to a smaller percentage change in quantity demanded, the result is a:

Accepted Answer

A)   very elastic demand.
B)   less elastic demand.
C)   low magnitude of response.
D)   high magnitude of response.

Question 16

Suppose price increases from $7.00 to $13.00. Using the mid-point formula, the percentage change in price is:

Accepted Answer

A)   .0.6 = 60 percent.
B)   0.6 = 60 percent.
C)   70 percent.
D)   130 percent.

Question 17

If the price of jelly increases 10 percent and the amount of peanut butter purchased decreases 20 percent, then the cross-price elasticity of these goods is:

Accepted Answer

A)   0.5.
B)   2.
C)   0.5
D)   2

Question 18

If the price of a Domino's pizza decreases while the price of a Pizza Hut pizza is unchanged, then probably the demand for Pizza Hut pizza:

Accepted Answer

A)   increases as some people switch from Pizza Hut to Domino's.
B)   decreases as some people switch from Pizza Hut to Domino's.
C)   remains unchanged.
D)   will depend on what happens to the supply of Pizza Hut pizza.

Question 19

The demand for Ben & Jerry's ice cream is _________________ than is the demand for all ice cream because _______________.

Accepted Answer

A)   less price elastic; the scope of the market for Ben & Jerry's is less broadly defined
B)   more price elastic; the scope of the market for Ben & Jerry's is less broadly defined
C)   less price elastic; Ben & Jerry's has fewer available substitutes
D)   more price elastic; Ben & Jerry's has fewer available substitutes

Question 20

If a manager multiplies the quantity sold by the price paid for each unit, the manager calculates:

Accepted Answer

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

Exam 4: Elasticity

A determinant of the price elasticity of supply that is also a determinant of the price elasticity of demand is:

Correct AnswerverifiedShow Answer

If consumers spend more money on coffee than on sugar, then the demand for a pound of coffee is probably _________________ than is the demand for a pound sugar of because ________________.

Correct AnswerverifiedShow Answer

The demand for steak is _______________________ than is the demand for food because _____________________.

Correct AnswerverifiedShow Answer

Ray just got a raise, and decided to splurge on a fancy dinner to celebrate. The change to Ray's demand for fancy dinners could be measured by the:

Correct AnswerverifiedShow Answer

If the price of a Domino's pizza decreases while the price of a Pizza Hut pizza is unchanged, then probably the demand for Pizza Hut pizza:

Correct AnswerverifiedShow Answer

A perfectly elastic demand:

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The demand for dolls is __________________ than is the demand for Barbie dolls because ___________________.

Correct AnswerverifiedShow Answer

If the price of jelly increases 10 percent and the amount of peanut butter purchased decreases 20 percent, then the cross-price elasticity of these goods is:

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If a manager multiplies the quantity sold by the price paid for each unit, the manager calculates:

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Assuming price elasticity of demand is reported as an absolute value, an inelastic demand has a measured elasticity:

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The most commonly used measures of elasticity are:

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Economists use the percentage change in quantity rather than the absolute change in quantity because:

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Elasticity along a demand curve:

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If a large percentage change in price leads to a smaller percentage change in quantity demanded, the result is a:

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If the price of hairbrushes decreases by 20 percent, the quantity demanded increases by 2 percent. The price elasticity of demand is:

Correct AnswerverifiedShow Answer

Suppose price increases from $7.00 to $13.00. Using the mid-point formula, the percentage change in price is:

Correct AnswerverifiedShow Answer

The demand for Ben & Jerry's ice cream is _________________ than is the demand for all ice cream because _______________.

Correct AnswerverifiedShow Answer

Considering the concept of cross-price elasticity, if two goods are complements:

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The price elasticity of supply tells us:

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When the quantity effect outweighs the price effect:

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If consumers spend more money on coffee than on sugar, then the demand for a pound of coffee is probably _ than is the demand for a pound sugar of because .

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The demand for steak is ___ than is the demand for food because _.

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The demand for dolls is than is the demand for Barbie dolls because _.

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The demand for Ben & Jerry's ice cream is ___ than is the demand for all ice cream because _.

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