Question 1

If the percentage change in the quantity demanded is negative while the percentage change in income is positive,the good is an inferior good.

Accepted Answer

A) True 
 B)False

Question 2

The supply of antiques is highly inelastic so increases in demand have a large effect on increases in price.

Accepted Answer

A) True 
 B)False

Question 3

You are the newly appointed sales manager of the Rock Record Company and have been charged with the task of increasing revenues.Your economics consultants tell you that at present price and output levels,price elasticity of demand for your product is less than one.You should:

Accepted Answer

A)   decrease prices.
B)   increase prices.
C)   hold prices constant and increase supply.
D)   cut advertising expenditures to decrease the demand for these records.E) B) and C)
F) A) and D)

Question 4

An inferior good has an income elasticity coefficient that is greater than zero but less than one.

Accepted Answer

A) True 
 B)False

Question 5

Tickets to a university football game always sell out.In this case,the:

Accepted Answer

A)   demand for tickets is highly inelastic.
B)   demand for tickets is highly elastic.
C)   supply of tickets is highly inelastic.
D)   supply of tickets is highly elastic.E) B) and D)
F) A) and D)

Question 6

If the price of shoes falls from $10 to $8 and the amount sold increases by 12 percent,it can be concluded that:

Accepted Answer

A)   the demand for shoes is perfectly inelastic.
B)   the demand for shoes is inelastic.
C)   the demand for shoes is elastic.
D)   shoes are complementary goods.E) All of the above
F) A) and B)

Question 7

A negative cross-price-elasticity of demand for two products indicates that they are:

Accepted Answer

A)   substitutes.
B)   complements.
C)   independent goods.
D)   normal goods.E) B) and C)
F) A) and C)

Question 8

Refer to the above data.Over which price range is the price elasticity of demand elastic?

Accepted Answer

A)   $4-$6
B)   $6-$8
C)   $10-$12
D)   $12-$14Price elasticity is always highest the farther up the demand curve one goes under a straight-line,downsloping demand curve.E) A) and B)
F) A) and C)

Question 9

Assuming pizza and hamburgers are substitutes,when the price of pizza increases,what must always happen?

Accepted Answer

A)   Total revenue received by pizza sellers increases.
B)   Total revenue received by pizza sellers decreases.
C)   Total revenue received by hamburger sellers increases.
D)   Total revenue received by hamburger sellers decreases.E) None of the above
F) A) and B)

Question 10

The price of gold is volatile because the supply is highly inelastic,so changes in demand have a large effect on price.

Accepted Answer

A) True 
 B)False

Question 11

Refer to the figure above.Over the $5-$6 range,demand is:

Accepted Answer

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

Question 12

If the percentage change in price is less than the percentage change in quantity demanded,the price elasticity coefficient is greater than 1.

Accepted Answer

A) True 
 B)False

Question 13

In which instances will total revenues decline?

Accepted Answer

A)   Price rises and Ed equals 0.41.
B)   Price rises and demand is of unit elasticity.
C)   Price falls and demand is elastic.
D)   Price rises and Ed equals 2.47.E) All of the above
F) B) and C)

Question 14

The price of gold is volatile because the supply is highly elastic,so changes in demand have a large effect on price.

Accepted Answer

A) True 
 B)False

Question 15

Demand tends to be elastic at higher prices and inelastic at lower prices.

Accepted Answer

A) True 
 B)False

Question 16

The following data relate to the supply schedule of a product.  Over which price range is the elasticity of supply greater than 1?

Accepted Answer

A)   $10 to $15
B)   $15 to $20
C)   $20 to $25
D)   $25 to $30Over the price range $25 to $30,the change in quantity is (350 - 500) /(300 + 500) = 0.188 and the change in price is (25 - 30) /(25 + 30) = 0.091.Thus,elasticity is 0.188/0.091 = 2.07,which is greater than1.E) A) and B)
F) A) and D)

Question 17

Refer to the graph above.Over the $5-$6 range,supply is:

Accepted Answer

A)   one.
B)   zero.
C)   elastic.
D)   inelastic.E) A) and B)
F) All of the above

Question 18

Price elasticity of supply decreases the longer the time period.

Accepted Answer

A) True 
 B)False

Question 19

Block's sells 500 bottles of perfume a month when the price is $7.A huge increase in resource costs causes price to rise to $9 and Block's only manages to sell 460 bottles of perfume.The price elasticity of demand is:

Accepted Answer

A)   0.33 and elastic.
B)   3.0 and elastic.
C)   0.33 and inelastic.
D)   3.0 and inelastic.The change in quantity is (500 - 460) /(500 + 460) = 0.0417 and the change in price is (7 - 9) /(7 + 9) = 0.125.Elasticity,then is 0.0417/0.125 = 0.33.E) All of the above
F) A) and B)

Question 20

As price decreases along a downsloping linear demand curve,price elasticity of demand decreases.

Accepted Answer

A) True 
 B)False

Exam 4: Elasticity of Demand and Supply

The price of gold is volatile because the supply is highly inelastic,so changes in demand have a large effect on price.

Correct AnswerverifiedShow Answer

In which instances will total revenues decline?

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Tickets to a university football game always sell out.In this case,the:

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Block's sells 500 bottles of perfume a month when the price is $7.A huge increase in resource costs causes price to rise to $9 and Block's only manages to sell 460 bottles of perfume.The price elasticity of demand is:

Correct AnswerverifiedShow Answer

Price elasticity of supply decreases the longer the time period.

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If the percentage change in price is less than the percentage change in quantity demanded,the price elasticity coefficient is greater than 1.

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Refer to the graph above.Over the $5-$6 range,supply is:

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An inferior good has an income elasticity coefficient that is greater than zero but less than one.

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The following data relate to the supply schedule of a product. Over which price range is the elasticity of supply greater than 1?

Correct AnswerverifiedShow Answer

Refer to the figure above.Over the $5-$6 range,demand is:

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If the price of shoes falls from $10 to $8 and the amount sold increases by 12 percent,it can be concluded that:

Correct AnswerverifiedShow Answer

The supply of antiques is highly inelastic so increases in demand have a large effect on increases in price.

Correct AnswerverifiedShow Answer

Assuming pizza and hamburgers are substitutes,when the price of pizza increases,what must always happen?

Correct AnswerverifiedShow Answer

Demand tends to be elastic at higher prices and inelastic at lower prices.

Correct AnswerverifiedShow Answer

If the percentage change in the quantity demanded is negative while the percentage change in income is positive,the good is an inferior good.

Correct AnswerverifiedShow Answer

Refer to the above data.Over which price range is the price elasticity of demand elastic?

Correct AnswerverifiedShow Answer

A negative cross-price-elasticity of demand for two products indicates that they are:

Correct AnswerverifiedShow Answer

As price decreases along a downsloping linear demand curve,price elasticity of demand decreases.

Correct AnswerverifiedShow Answer

The price of gold is volatile because the supply is highly elastic,so changes in demand have a large effect on price.

Correct AnswerverifiedShow Answer

You are the newly appointed sales manager of the Rock Record Company and have been charged with the task of increasing revenues.Your economics consultants tell you that at present price and output levels,price elasticity of demand for your product is less than one.You should:

Correct AnswerverifiedShow Answer

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