Question 1

Elasticity of supply looks at

Accepted Answer

A)   How responsive producers are to a change in quantity demanded.
B)   How much quantity demanded changes with a change in price.
C)   The responsiveness of sellers to a change in consumer's incomes.
D)   How responsive sellers are to a change in price.E) A) and D)
F) B) and D)

Question 2

Which of the following causes demand to be more elastic with respect to price?

Accepted Answer

A)   Shorter periods of time to adjust to a change in price.
B)   A steeper demand curve for a given price and quantity.
C)   Fewer substitutes.
D)   A high ratio of price to income.E) B) and C)
F) All of the above

Question 3

Which of the following is the best measure of the effects of a recession?

Accepted Answer

A)   Income elasticity of demand.
B)   Price elasticity of demand.
C)   Cross-price elasticity of demand.
D)   Utility-maximizing rule.E) A) and C)
F) C) and D)

Question 4

When the prices of postage stamps rise, the demand for Internet service increases, ceteris paribus.Postage stamps and Internet service are therefore

Accepted Answer

A)   Elastic.
B)   Inelastic.
C)   Complements.
D)   Substitutes.E) B) and D)
F) None of the above

Question 5

Suppose the price of video games falls from $40 to $20 and as a result the quantity demanded of scooters falls from 40,000 to 10,000 per year.The value of the cross-price elasticity of demand is

Accepted Answer

A)   1.80.
B)   1.00.
C)   0.83.
D)   0.56.E) A) and B)
F) A) and C)

Question 6

Total revenue is equal to

Accepted Answer

A)   The income from sales.
B)   Profit.
C)   Cost of production.
D)   Total revenue minus total cost.E) A) and B)
F) A) and C)

Question 7

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

Accepted Answer

A)   The availability of substitutes.
B)   The price of the item relative to the consumer's budget.
C)   Costs of production.
D)   The length of time.E) All of the above
F) A) and D)

Question 8

Demand is elastic if the consumer has only a few substitutes to choose from.

Accepted Answer

A) True 
 B)False

Question 9

To reduce our dependence on foreign oil, policy makers must realize that the cross-price elasticity sign for gasoline and fossil fuel-burning cars is negative.

Accepted Answer

A) True 
 B)False

Question 10

If the price increases by 10 percent, and the quantity demanded falls by 5 percent, the absolute value of the price elasticity will be

Accepted Answer

A)   0.5.
B)   5.0.
C)   50.
D)   -5.0.E) None of the above
F) All of the above

Question 11

Total revenue is

Accepted Answer

A)   Price times income.
B)   Quantity sold times price.
C)   Equal to total profit.
D)   Equal to costs of production.E) B) and C)
F) C) and D)

Question 12

Income elasticity measures the

Accepted Answer

A)   Responsiveness of quantity demanded for one good to a percentage change in price of another good.
B)   Responsiveness of quantity demanded to a percentage change in income.
C)   Way in which consumers switch from one product to another when price rises.
D)   Percentage change in quantity demanded given a percentage change in wealth.E) B) and C)
F) B) and D)

Question 13

The price elasticity of supply will always be a negative number.

Accepted Answer

A) True 
 B)False

Question 14

The total revenue effect of a movement along a demand curve can best be predicted using the

Accepted Answer

A)   Law of diminishing marginal utility.
B)   Price elasticity of demand.
C)   Utility-maximizing rule.
D)   Law of demand.E) A) and D)
F) A) and C)

Question 15

If the elasticity number (E) is less than 1, a price increase will cause total revenue to fall.

Accepted Answer

A) True 
 B)False

Question 16

The cross-price elasticity sign for substitute goods is negative.

Accepted Answer

A) True 
 B)False

Question 17

If income rises by 10 percent and the quantity sold of a particular vehicle falls by 7 percent, then this particular type of vehicle is

Accepted Answer

A)   A normal good.
B)   An inferior good.
C)   An irregular good.
D)   A substandard good.E) None of the above
F) A) and D)

Question 18

Suppose computer prices at an office supply store fall from $1,000 to $900 and as a result the quantity demanded of typewriters decreases from 40 to 20 per month.The cross-price elasticity of demand is closest to

Accepted Answer

A)   0.16.
B)   0.2.
C)   5.0.
D)   6.3.E) All of the above
F) C) and D)

Question 19

Discuss how the concepts of cross-price elasticity of demand and income elasticity of demand can help businesses plan production and pricing.

Accepted Answer

Cross-price elasticity measures how the ...

Question 20

Which of the following products will have elastic demand?

Accepted Answer

A)   Gasoline.
B)   Cigarettes.
C)   European travel.
D)   Alcohol.E) None of the above
F) A) and B)

Exam 6: Elasticity

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

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If income rises by 10 percent and the quantity sold of a particular vehicle falls by 7 percent, then this particular type of vehicle is

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Total revenue is

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Suppose computer prices at an office supply store fall from $1,000 to $900 and as a result the quantity demanded of typewriters decreases from 40 to 20 per month.The cross-price elasticity of demand is closest to

Correct AnswerverifiedShow Answer

The cross-price elasticity sign for substitute goods is negative.

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The total revenue effect of a movement along a demand curve can best be predicted using the

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When the prices of postage stamps rise, the demand for Internet service increases, ceteris paribus.Postage stamps and Internet service are therefore

Correct AnswerverifiedShow Answer

Total revenue is equal to

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If the elasticity number (E) is less than 1, a price increase will cause total revenue to fall.

Correct AnswerverifiedShow Answer

If the price increases by 10 percent, and the quantity demanded falls by 5 percent, the absolute value of the price elasticity will be

Correct AnswerverifiedShow Answer

Discuss how the concepts of cross-price elasticity of demand and income elasticity of demand can help businesses plan production and pricing.

Correct AnswerverifiedCross-price elasticity measures how the ...View AnswerShow Answer

Income elasticity measures the

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Suppose the price of video games falls from $40 to $20 and as a result the quantity demanded of scooters falls from 40,000 to 10,000 per year.The value of the cross-price elasticity of demand is

Correct AnswerverifiedShow Answer

Elasticity of supply looks at

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To reduce our dependence on foreign oil, policy makers must realize that the cross-price elasticity sign for gasoline and fossil fuel-burning cars is negative.

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Which of the following products will have elastic demand?

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The price elasticity of supply will always be a negative number.

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Which of the following is the best measure of the effects of a recession?

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Demand is elastic if the consumer has only a few substitutes to choose from.

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Which of the following causes demand to be more elastic with respect to price?

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Cross-price elasticity measures how the ...
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