Question 1

Suppose the income elasticity of demand for toys is +2.00.This means that

Accepted Answer

A)  a 10 percent increase in income will increase the purchase of toys by 20 percent.
B)  a 10 percent increase in income will increase the purchase of toys by 2 percent.
C)  a 10 percent increase in income will decrease the purchase of toys by 2 percent.
D)  toys are an inferior good.E) B) and D)
F) A) and D)

Question 2

The cross elasticity of demand between digital cameras and memory cards is likely to be

Accepted Answer

A)  zero.
B)  a negative number.
C)  a positive number greater than 1.
D)  a positive number between zero and 1.E) B) and C)
F) All of the above

Question 3

If sellers could price-discriminate and charge two different prices to two different groups of buyers in order to increase revenues, then the sellers would charge

Accepted Answer

A)  a higher price to the buyers whose demand is elastic.
B)  a higher price to the buyers whose demand is inelastic.
C)  a higher price to the buyers whose demand is unit-elastic.
D)  the same price, actually, because price-discrimination will result in lower revenues.E) None of the above
F) A) and C)

Question 4

The demand for autos is likely to be

Accepted Answer

A)  less price elastic than the demand for Honda Accords.
B)  more price elastic than the demand for Honda Accords.
C)  of the same price elasticity as the demand for Honda Accords.
D)  perfectly inelastic.E) A) and D)
F) A) and B)

Question 5

Suppose the supply of product X is perfectly inelastic.If there is an increase in the demand for this product, equilibrium price

Accepted Answer

A)  will decrease, but equilibrium quantity will increase.
B)  and quantity will both decrease.
C)  will increase, but equilibrium quantity will decline.
D)  will increase, but equilibrium quantity will be unchanged.E) A) and D)
F) A) and B)

Question 6

If the coefficient of income elasticity of demand is positive, the product is an inferior good.Difficulty: 03 Hard
Learning Objective: 06-05 Apply cross elasticity of demand and income elasticity of demand.Topic: Cross Elasticity and Income Elasticity of Demand
Difficulty: 03 Hard
Learning Objective: 06-05 Apply cross elasticity of demand and income elasticity of demand.Topic: Cross Elasticity and Income Elasticity of Demand

Accepted Answer

A) True 
 B)False

Question 7

Airlines charge business travelers more than leisure travelers because there is a more

Accepted Answer

A)  elastic supply of business travel.
B)  inelastic supply of business travel.
C)  elastic demand for business travel.
D)  inelastic demand for business travel.E) All of the above
F) B) and D)

Question 8

Cross elasticity of demand measures the effect of a change in the price of one product on the quantity demanded of another product.Difficulty: 03 Hard
Learning Objective: 06-05 Apply cross elasticity of demand and income elasticity of demand.Topic: Cross Elasticity and Income Elasticity of Demand

Accepted Answer

A) True 
 B)False

Question 9

You are the sales manager for a software company and have been informed that the price elasticity of demand for your most popular software is less than 1.In order to increase total revenues from that product, you should

Accepted Answer

A)  increase the price of the software.
B)  decrease the price of the software.
C)  hold the price of the software constant.
D)  increase the supply of the software.E) B) and C)
F) B) and D)

Question 10

A firm can sell as much as it wants at a constant price.Demand is thus

Accepted Answer

A)  perfectly inelastic.
B)  perfectly elastic.
C)  relatively inelastic.
D)  relatively elastic.E) B) and C)
F) A) and C)

Question 11

The state legislature has cut Gigantic State University's appropriations.GSU's Board of Regents decides to increase tuition and fees to compensate for the loss of revenue.The board is assuming that the

Accepted Answer

A)  demand for education at GSU is elastic.
B)  demand for education at GSU is inelastic.
C)  coefficient of price elasticity of demand for education at GSU is unity.
D)  coefficient of price elasticity of demand for education at GSU is greater than unity.E) A) and B)
F) All of the above

Question 12

If the price of hand calculators falls from $10 to $9 and, as a result, the quantity demanded increases from 100 to 125, then

Accepted Answer

A)  demand is price elastic.
B)  demand is price inelastic.
C)  demand is unit elastic with respect to price.
D)  not enough information is given to make a statement about elasticity.E) All of the above
F) C) and D)

Question 13

The price elasticity of demand is a measure of the

Accepted Answer

A)  effect of changes in demand on the price.
B)  relationship between price and profitability.
C)  responsiveness of buyers of a good to changes in its price.
D)  sensitivity of a good's price to changes in demand.E) All of the above
F) B) and C)

Question 14

At a price of $4 per unit, Gadgets Inc.is willing to supply 20,000 gadgets, while United Gadgets is willing to supply 10,000 gadgets.If the price were to rise to $8 per unit, their respective quantities supplied would rise to 45,000 and 25,000.If these are the only two firms supplying gadgets, what is the elasticity of supply in the market for gadgets?

Accepted Answer

A)  1.2
B)  1.0
C)  .833
D)  .80E) B) and C)
F) All of the above

Question 15

Suppose that the price of peanuts falls from $3 to $2 per bushel and that, as a result, the total revenue received by peanut farmers changes from $16 to $14 billion.Thus,

Accepted Answer

A)  the demand for peanuts is elastic.
B)  the demand for peanuts is inelastic.
C)  the demand curve for peanuts has shifted to the right.
D)  no inference can be made as to the elasticity of demand for peanuts.E) A) and B)
F) A) and C)

Question 16

A perfectly inelastic demand curve

Accepted Answer

A)  has a price elasticity coefficient greater than unity.
B)  has a price elasticity coefficient of unity throughout.
C)  graphs as a line parallel to the vertical axis.
D)  graphs as a line parallel to the horizontal axis.E) A) and D)
F) B) and C)

Question 17

Price elasticity of demand tends to be low for goods with few close substitutes.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A)  20 percent.
B)  0.5 percent.
C)  5 percent.
D)  0.05 percent.E) B) and C)
F) A) and B)

Question 19

Which product is most likely to be the most price elastic?

Accepted Answer

A)  milk
B)  housing
C)  clothing
D)  automobilesE) A) and D)
F) B) and D)

Question 20

The supply of cars will be more elastic the

Accepted Answer

A)  greater the quantity demanded.
B)  longer the time interval considered.
C)  greater the decline in input prices.
D)  less able producers are to make other goods.E) A) and B)
F) A) and C)

Exam 6: Elasticity

Correct Answer
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The demand for autos is likely to be

Correct Answer
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A firm can sell as much as it wants at a constant price.Demand is thus

Correct Answer
verified

Suppose the income elasticity of demand for toys is +2.00.This means that

Correct Answer
verified

Suppose the supply of product X is perfectly inelastic.If there is an increase in the demand for this product, equilibrium price

Correct Answer
verified

The cross elasticity of demand between digital cameras and memory cards is likely to be

Correct Answer
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Airlines charge business travelers more than leisure travelers because there is a more

Correct Answer
verified

Which product is most likely to be the most price elastic?

Correct Answer
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Correct Answer
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Suppose that the price of peanuts falls from $3 to $2 per bushel and that, as a result, the total revenue received by peanut farmers changes from $16 to $14 billion.Thus,

Correct Answer
verified

The price elasticity of demand is a measure of the

Correct Answer
verified

You are the sales manager for a software company and have been informed that the price elasticity of demand for your most popular software is less than 1.In order to increase total revenues from that product, you should

Correct Answer
verified

Price elasticity of demand tends to be low for goods with few close substitutes.

Correct Answer
verified

The state legislature has cut Gigantic State University's appropriations.GSU's Board of Regents decides to increase tuition and fees to compensate for the loss of revenue.The board is assuming that the

Correct Answer
verified

Cross elasticity of demand measures the effect of a change in the price of one product on the quantity demanded of another product.Difficulty: 03 Hard Learning Objective: 06-05 Apply cross elasticity of demand and income elasticity of demand.Topic: Cross Elasticity and Income Elasticity of Demand

Correct Answer
verified

The supply of cars will be more elastic the

Correct Answer
verified

If sellers could price-discriminate and charge two different prices to two different groups of buyers in order to increase revenues, then the sellers would charge

Correct Answer
verified

If the price of hand calculators falls from $10 to $9 and, as a result, the quantity demanded increases from 100 to 125, then

Correct Answer
verified

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

Correct Answer
verified

A perfectly inelastic demand curve

Correct Answer
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Exam 6: Elasticity

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The demand for autos is likely to be

Correct AnswerverifiedShow Answer

A firm can sell as much as it wants at a constant price.Demand is thus

Correct AnswerverifiedShow Answer

Suppose the income elasticity of demand for toys is +2.00.This means that

Correct AnswerverifiedShow Answer

Suppose the supply of product X is perfectly inelastic.If there is an increase in the demand for this product, equilibrium price

Correct AnswerverifiedShow Answer

The cross elasticity of demand between digital cameras and memory cards is likely to be

Correct AnswerverifiedShow Answer

Airlines charge business travelers more than leisure travelers because there is a more

Correct AnswerverifiedShow Answer

Which product is most likely to be the most price elastic?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose that the price of peanuts falls from $3 to $2 per bushel and that, as a result, the total revenue received by peanut farmers changes from $16 to $14 billion.Thus,

Correct AnswerverifiedShow Answer

The price elasticity of demand is a measure of the

Correct AnswerverifiedShow Answer

You are the sales manager for a software company and have been informed that the price elasticity of demand for your most popular software is less than 1.In order to increase total revenues from that product, you should

Correct AnswerverifiedShow Answer

Price elasticity of demand tends to be low for goods with few close substitutes.

Correct AnswerverifiedShow Answer

The state legislature has cut Gigantic State University's appropriations.GSU's Board of Regents decides to increase tuition and fees to compensate for the loss of revenue.The board is assuming that the

Correct AnswerverifiedShow Answer

Cross elasticity of demand measures the effect of a change in the price of one product on the quantity demanded of another product.Difficulty: 03 Hard Learning Objective: 06-05 Apply cross elasticity of demand and income elasticity of demand.Topic: Cross Elasticity and Income Elasticity of Demand

Correct AnswerverifiedShow Answer

The supply of cars will be more elastic the

Correct AnswerverifiedShow Answer

If sellers could price-discriminate and charge two different prices to two different groups of buyers in order to increase revenues, then the sellers would charge

Correct AnswerverifiedShow Answer

If the price of hand calculators falls from $10 to $9 and, as a result, the quantity demanded increases from 100 to 125, then

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A perfectly inelastic demand curve

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