Question 1

If the price elasticity of demand for a product is 1.5, then a price cut from$3.00 to$2.70 will

Accepted Answer

A)  increase the quantity demanded by about 1.5 percent.
B)  decrease the quantity demanded by about 1.5 percent.
C)  increase the quantity demanded by about 15 percent.
D)  increase the quantity demanded by about 30 percent.E) B) and C)
F) B) and D)

Question 2

Sony is considering a 10 percent price reduction on its HD televisions. If the price-elasticity coefficient for the sets in this price range is 0.75, then the price cut will cause

Accepted Answer

A)  sales quantity to increase and revenues to also increase.
B)  sales quantity to increase but revenues to decrease.
C)  sales quantity to decrease and revenues to also decrease.
D)  sales quantity to decrease but revenues to increase.E) B) and C)
F) All of the above

Question 3

The supply of product X is inelastic (but not perfectly inelastic) if the price of X rises by

Accepted Answer

A)  4 percent and quantity supplied rises by 6 percent.
B)  7 percent and quantity supplied rises by 7 percent.
C)  12 percent and quantity supplied remains the same.
D)  5 percent and quantity supplied rises by 2 percent.E) None of the above
F) B) and D)

Question 4

A straight-line downward-sloping demand curve has a price elasticity of demand which

Accepted Answer

A)  decreases as price decreases.
B)  increases as price decreases.
C)  is zero at all prices.
D)  is unitary at all prices.E) B) and C)
F) A) and D)

Question 5

Paper newspapers have an elasticity of demand of .10. Interpret this number and offer an explanation to why the elasticity is so low.

Accepted Answer

An elasticity of demand of .10 reflects ...

Question 6

Studies of the minimum wage suggest that the price elasticity of demand for teenage workers is relatively inelastic. This means that

Accepted Answer

A)  an increase in the minimum wage would increase the total incomes of teenage workers as a group.
B)  an increase in the minimum wage would decrease the total incomes of teenage workers as a group.
C)  the unemployment effect of an increase in the minimum wage would be relatively large.
D)  the cross elasticity of demand between teenage and adult workers is positive and very large.E) A) and B)
F) All of the above

Question 7

The elasticity of demand for a product is likely to be greater,

Accepted Answer

A)  if the product is a necessity, rather than a luxury good.
B)  the greater the amount of time over which buyers adjust to a price change.
C)  the smaller the proportion of one's income spent on the product.
D)  the smaller the number of substitute products available.E) A) and C)
F) A) and D)

Question 8

Refer to the diagrams. The case of a normal good is represented by figure

Accepted Answer

A)  A.
B)  B.
C)  C.
D)  D.E) A) and D)
F) A) and C)

Question 9

Based on the concept of price elasticity of demand, which of the following cases is most likely to occur?

Accepted Answer

A)  golf courses charging higher prices for golf during the week than on weekends
B)  movie theaters charging higher prices for senior citizens
C)  colleges charging lower tuition for low-income students
D)  airlines charging lower fares for business travelersE) B) and D)
F) A) and B)

Question 10

A firm produces and sells two goods, A and B. Good A is known to have many close substitutes; Good B makes up a significant portion of most families' budgets. From these facts, we would expect that the demand for Good A would be ______, while that of Good B would be________.

Accepted Answer

A)  elastic; elastic also
B)  inelastic; inelastic also
C)  elastic; inelastic
D)  inelastic; elasticE) A) and D)
F) All of the above

Question 11

The law of supply indicates that the price-elasticity of supply coefficient would have a negative sign.

Accepted Answer

A) True 
 B)False

Question 12

Refer to the diagram and assume that price increases from $2 to $10. The coefficient of the price elasticity of supply (midpoint formula) relating to this price change is about

Accepted Answer

A)  5, and supply is elastic.
B)  1, and supply is unit elastic.
C)  0.25, and supply is inelastic.
D)  2.5, and supply is elastic.E) B) and D)
F) B) and C)

Question 13

Refer to the above table. Which product is most responsive to a change in income?

Accepted Answer

A)  Product W
B)  Product X
C)  Product Y
D)  Product ZE) B) and C)
F) A) and C)

Question 14

Refer to the information and assume the stadium capacity is 5,000. If the Mudhens' management wanted a full house for the game, it would

Accepted Answer

A)  set price so as to maximize its total revenue.
B)  encourage scalpers to sell their tickets for more than $7.
C)  set ticket prices at $5.
D)  set ticket prices at $9.E) A) and C)
F) B) and C)

Question 15

The price elasticity of demand increases with the length of the period considered because

Accepted Answer

A)  consumers' incomes will increase over time.
B)  the demand curve will shift outward as time passes.
C)  all prices will increase over time.
D)  consumers will be better able to find substitutes.E) C) and D)
F) A) and B)

Question 16

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) A) and D)
F) All of the above

Question 17

Suppose we find that the price elasticity of demand for a product is 1.25 when its price is increased by 8 percent. We can conclude that quantity demanded

Accepted Answer

A)  increased by 0.16 percent.
B)  decreased by 10 percent.
C)  decreased by 0.8 percent.
D)  decreased by 0.16 percent.E) A) and B)
F) All of the above

Question 18

Federal and state governments often seek to raise tax revenue by levying excise or sales taxes on specific products. What economic factors should be considered in determining the products that will raise the most tax revenue?

Accepted Answer

The government pays attention to elastic...

Question 19

If the price elasticity of demand for a product is equal to 0.5, then a decrease in price of 10 percent will increase quantity demanded by

Accepted Answer

A)  20 percent.
B)  0.5 percent.
C)  5 percent.
D)  0.05 percent.E) B) and D)
F) None of the above

Question 20

When the price of a product increases by 15 percent, the quantity demanded decreases by 10 percent. We can therefore conclude that the demand for this product is

Accepted Answer

A)  elastic.
B)  inelastic.
C)  cross-elastic.
D)  unitary elastic.E) A) and C)
F) C) and D)

Exam 6: Elasticity

Refer to the information and assume the stadium capacity is 5,000. If the Mudhens' management wanted a full house for the game, it would

Correct AnswerverifiedShow Answer

Refer to the above table. Which product is most responsive to a change in income?

Correct AnswerverifiedShow Answer

Federal and state governments often seek to raise tax revenue by levying excise or sales taxes on specific products. What economic factors should be considered in determining the products that will raise the most tax revenue?

Correct AnswerverifiedThe government pays attention to elastic...View AnswerShow Answer

Refer to the diagram and assume that price increases from $2 to $10. The coefficient of the price elasticity of supply (midpoint formula) relating to this price change is about

Correct AnswerverifiedShow Answer

Suppose we find that the price elasticity of demand for a product is 1.25 when its price is increased by 8 percent. We can conclude that quantity demanded

Correct AnswerverifiedShow Answer

The price elasticity of demand increases with the length of the period considered because

Correct AnswerverifiedShow Answer

The law of supply indicates that the price-elasticity of supply coefficient would have a negative sign.

Correct AnswerverifiedShow Answer

Paper newspapers have an elasticity of demand of .10. Interpret this number and offer an explanation to why the elasticity is so low.

Correct AnswerverifiedAn elasticity of demand of .10 reflects ...View AnswerShow Answer

Studies of the minimum wage suggest that the price elasticity of demand for teenage workers is relatively inelastic. This means that

Correct AnswerverifiedShow Answer

If the price elasticity of demand for a product is 1.5, then a price cut from$3.00 to$2.70 will

Correct AnswerverifiedShow Answer

The elasticity of demand for a product is likely to be greater,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When the price of a product increases by 15 percent, the quantity demanded decreases by 10 percent. We can therefore conclude that the demand for this product is

Correct AnswerverifiedShow Answer

Based on the concept of price elasticity of demand, which of the following cases is most likely to occur?

Correct AnswerverifiedShow Answer

A firm produces and sells two goods, A and B. Good A is known to have many close substitutes; Good B makes up a significant portion of most families' budgets. From these facts, we would expect that the demand for Good A would be ______, while that of Good B would be________.

Correct AnswerverifiedShow Answer

A straight-line downward-sloping demand curve has a price elasticity of demand which

Correct AnswerverifiedShow Answer

The supply of product X is inelastic (but not perfectly inelastic) if the price of X rises by

Correct AnswerverifiedShow Answer

Refer to the diagrams. The case of a normal good is represented by figure

Correct AnswerverifiedShow Answer

Sony is considering a 10 percent price reduction on its HD televisions. If the price-elasticity coefficient for the sets in this price range is 0.75, then the price cut will cause

Correct AnswerverifiedShow Answer

If the price elasticity of demand for a product is equal to 0.5, then a decrease in price of 10 percent will increase quantity demanded by

Correct AnswerverifiedShow Answer

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The government pays attention to elastic...
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An elasticity of demand of .10 reflects ...
View Answer

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A firm produces and sells two goods, A and B. Good A is known to have many close substitutes; Good B makes up a significant portion of most families' budgets. From these facts, we would expect that the demand for Good A would be , while that of Good B would be__.

Correct Answer
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