Question 1

If the price of a cup of coffee increases by 50 percent and the quantity of cups demanded decreases by 50 percent, the price elasticity of demand is:

Accepted Answer

A)  elastic.
B)  inelastic.
C)  unit elastic.
D)  zero.E) None of the above
F) B) and D)

Question 2

The percentage change in the quantity supplied of a good or service when its price changes by one percent is:

Accepted Answer

A)  price elasticity of supply.
B)  price elasticity of demand.
C)  cross-price elasticity.
D)  income elasticity of supply.E) B) and C)
F) All of the above

Question 3

The price elasticity of supply becomes ________ elastic over time because _________.

Accepted Answer

A)  less; producers grow accustomed to the price changes
B)  less; firms have time to move into or out of the industry
C)  more; producers have more time to adjust their production decisions
D)  more; producers grow accustomed to the price changesE) All of the above
F) B) and C)

Question 4

If a good has an income elasticity of −0.85, then it:

Accepted Answer

A)  is a normal good, and a necessity.
B)  is an inferior good.
C)  is a necessity, but may be normal or inferior.
D)  is a luxury.E) A) and D)
F) B) and D)

Question 5

The mid-point method of calculating price elasticity of demand measures the _____ changes in quantity demanded and price relative to a point midway between _____.

Accepted Answer

A)  percentage; two points on a demand curve
B)  absolute; two points on a demand curve
C)  percentage; the demand and supply curves
D)  absolute; the demand and supply curvesE) All of the above
F) A) and B)

Question 6

Suppose the cross-price elasticity of demand between two goods is −2. This tells us the two goods are:

Accepted Answer

A)  substitutes.
B)  complements.
C)  unrelated.
D)  inelastic.E) C) and D)
F) B) and D)

Question 7

The concept of price elasticity can be applied to:

Accepted Answer

A)  demand, but not supply.
B)  supply, but not demand.
C)  both supply and demand.
D)  neither supply nor demand.E) A) and B)
F) None of the above

Question 8

When the quantity effect outweighs the price effect, a price _____ will cause a(n) _____ in total revenue.

Accepted Answer

A)  increase; decrease
B)  increase; increase
C)  decrease; decrease
D)  All of these could occur.E) C) and D)
F) A) and B)

Question 9

The demand for steak is _____ price elastic than the demand for meat because the scope of the market for steak is _____ broadly defined.

Accepted Answer

A)  less; more
B)  more; more
C)  less; less
D)  more; lessE) All of the above
F) C) and D)

Question 10

Assuming price elasticity of demand is reported as an absolute value, the measured elasticity for an inelastic demand would be:

Accepted Answer

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

Question 11

If the price of a Domino's pizza decreases while the price of a Pizza Hut pizza is unchanged, we expect the demand for Pizza Hut pizza to:

Accepted Answer

A)  increase as some consumers switch from Pizza Hut pizza to Domino's pizza.
B)  decrease as some consumers switch from Pizza Hut pizza to Domino's pizza.
C)  remain unchanged.
D)  change depending on what happens to the supply of Pizza Hut pizza.E) B) and C)
F) All of the above

Question 12

Suppose the price of a can of tuna is $1.30 and the quantity demanded is 9. When the price increases to $1.50, the quantity demanded drops to 7. Using the mid-point method, what is the price elasticity of demand?

Accepted Answer

A)  −1.75
B)  −0.57
C)  0.57
D)  1.75E) A) and B)
F) A) and C)

Question 13

Perfectly elastic demand occurs when:

Accepted Answer

A)  consumers are extremely sensitive to a change in price.
B)  the quantity demanded is unchanged when price changes by any amount.
C)  consumers are slow to alter their demand when the price changes.
D)  only large changes in price affect the quantity demanded.E) C) and D)
F) B) and D)

Question 14

A rare coin dealer is likely to have a _____ price elasticity of supply than a coffee shop due to _____.

Accepted Answer

A)  more elastic; the availability of inputs
B)  less elastic; the availability of inputs
C)  more elastic; a longer adjustment time
D)  more elastic; a shorter adjustment timeE) B) and D)
F) B) and C)

Question 15

How much the demand for one good changes in response to a change in the price of a different good is measured by:

Accepted Answer

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

Question 16

Consider the market in the graph shown. Using the mid-point method, what is the price elasticity of supply when the price increases from $40 to $60?

Accepted Answer

A)  1.67
B)  0.4
C)  0.67
D)  0.60E) B) and D)
F) B) and C)

Question 17

If increasing the admission charge for national parks increases the National Park Service's total revenue, then the demand for national park visits is:

Accepted Answer

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

Question 18

Suppose when the price of novels goes from $15 to $20 per book, production increases from 760 million books to 840 million books per year. Using the mid-point method, what is the price elasticity of supply?

Accepted Answer

A)  0.77
B)  2.85
C)  2.0
D)  0.35E) A) and B)
F) A) and C)

Question 19

Mathematically, price elasticity of demand is the percentage change in the _____ of a good divided by the percentage change in the _____ of that good.

Accepted Answer

A)  quantity demanded; price
B)  price; quantity
C)  quantity; price
D)  price; quantity.E) None of the above
F) A) and D)

Question 20

If the cross-price elasticity of demand between two goods is 0.25, then we know that these goods are _____ because the cross-price elasticity of demand is _____.

Accepted Answer

A)  substitutes; greater than zero
B)  complements; less than one
C)  substitutes; less than one
D)  complements; greater than zeroE) A) and D)
F) None of the above

Exam 4: Elasticity

If the cross-price elasticity of demand between two goods is 0.25, then we know that these goods are _____ because the cross-price elasticity of demand is _____.

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How much the demand for one good changes in response to a change in the price of a different good is measured by:

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The percentage change in the quantity supplied of a good or service when its price changes by one percent is:

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Perfectly elastic demand occurs when:

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When the quantity effect outweighs the price effect, a price _____ will cause a(n) _____ in total revenue.

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If a good has an income elasticity of −0.85, then it:

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Mathematically, price elasticity of demand is the percentage change in the _____ of a good divided by the percentage change in the _____ of that good.

Correct AnswerverifiedShow Answer

Assuming price elasticity of demand is reported as an absolute value, the measured elasticity for an inelastic demand would be:

Correct AnswerverifiedShow Answer

If increasing the admission charge for national parks increases the National Park Service's total revenue, then the demand for national park visits is:

Correct AnswerverifiedShow Answer

If the price of a Domino's pizza decreases while the price of a Pizza Hut pizza is unchanged, we expect the demand for Pizza Hut pizza to:

Correct AnswerverifiedShow Answer

Suppose when the price of novels goes from $15 to $20 per book, production increases from 760 million books to 840 million books per year. Using the mid-point method, what is the price elasticity of supply?

Correct AnswerverifiedShow Answer

The price elasticity of supply becomes ________ elastic over time because _________.

Correct AnswerverifiedShow Answer

The mid-point method of calculating price elasticity of demand measures the _____ changes in quantity demanded and price relative to a point midway between _____.

Correct AnswerverifiedShow Answer

Consider the market in the graph shown. Using the mid-point method, what is the price elasticity of supply when the price increases from $40 to $60?

Correct AnswerverifiedShow Answer

Suppose the price of a can of tuna is $1.30 and the quantity demanded is 9. When the price increases to $1.50, the quantity demanded drops to 7. Using the mid-point method, what is the price elasticity of demand?

Correct AnswerverifiedShow Answer

Suppose the cross-price elasticity of demand between two goods is −2. This tells us the two goods are:

Correct AnswerverifiedShow Answer

The demand for steak is _____ price elastic than the demand for meat because the scope of the market for steak is _____ broadly defined.

Correct AnswerverifiedShow Answer

If the price of a cup of coffee increases by 50 percent and the quantity of cups demanded decreases by 50 percent, the price elasticity of demand is:

Correct AnswerverifiedShow Answer

A rare coin dealer is likely to have a _____ price elasticity of supply than a coffee shop due to _____.

Correct AnswerverifiedShow Answer

The concept of price elasticity can be applied to:

Correct AnswerverifiedShow Answer

If the cross-price elasticity of demand between two goods is 0.25, then we know that these goods are _ because the cross-price elasticity of demand is _.

Correct Answer
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When the quantity effect outweighs the price effect, a price _ will cause a(n) _ in total revenue.

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Mathematically, price elasticity of demand is the percentage change in the _ of a good divided by the percentage change in the _ of that good.

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The price elasticity of supply becomes elastic over time because _.

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The mid-point method of calculating price elasticity of demand measures the _ changes in quantity demanded and price relative to a point midway between _.

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The demand for steak is _ price elastic than the demand for meat because the scope of the market for steak is _ broadly defined.

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A rare coin dealer is likely to have a _ price elasticity of supply than a coffee shop due to _.

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