Question 1

The price elasticity of demand for beef is about 0.60. Other things equal, this means that a 20 percent increase in the price of beef will cause the quantity of beef demanded to

Accepted Answer

A)   increase by approximately 12 percent.
B)   decrease by approximately 12 percent.
C)   decrease by approximately 32 percent.
D)   decrease by approximately 26 percent.E) None of the above
F) B) and C)

Question 2

Studies show that the demand for gasoline is

Accepted Answer

A)   price inelastic in the short run but elastic in the long run.
B)   price inelastic in both the short and long run.
C)   price elastic in the short run but inelastic in the long run.
D)   price elastic in both the short and long run.E) All of the above
F) A) and B)

Question 3

The supply of product X is elastic if the price of X rises by

Accepted Answer

A)   5 percent and quantity supplied rises by 7 percent.
B)   8 percent and quantity supplied rises by 8 percent.
C)   10 percent and quantity supplied remains the same.
D)   7 percent and quantity supplied rises by 5 percent.E) A) and D)
F) B) and D)

Question 4

We would expect the income elasticity of demand for steak to be positive, and that for hamburger to be negative.

Accepted Answer

A) True 
 B)False

Question 5

The demand schedules for such products as eggs, bread, and electricity tend to be

Accepted Answer

A)   perfectly price elastic.
B)   of unit price elasticity.
C)   relatively price inelastic.
D)   relatively price elastic.E) B) and C)
F) A) and D)

Question 6

The supply of product X is perfectly inelastic if the price of X rises by

Accepted Answer

A)   5 percent and quantity supplied rises by 7 percent.
B)   8 percent and quantity supplied rises by 8 percent.
C)   10 percent and quantity supplied stays the same.
D)   7 percent and quantity supplied rises by 5 percent.E) A) and D)
F) A) and B)

Question 7

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) C) and D)
F) None of the above

Question 8

Answer the question based on the following data.  What is the price elasticity of demand over the range of $8 to $10?

Accepted Answer

A)   0.11
B)   0.47
C)   1.93
D)   1.43E) All of the above
F) A) and B)

Question 9

The relationship between a consumer's monthly income and monthly consumption of four products, A-D, is shown below.  Which product listed is an example of an inferior good?

Accepted Answer

A)   A
B)   B
C)   C
D)   DE) C) and D)
F) B) and D)

Question 10

Suppose that as the price of Y falls from $2.00 to $1.90, the quantity of Y demanded increases from 110 to 118. Then the absolute value of the price elasticity (using the midpoint formula)  is

Accepted Answer

A)   4.00.
B)   2.09.
C)   1.37.
D)   3.94.E) C) and D)
F) None of the above

Question 11

(Consider This)  The supply of higher education in the United States is

Accepted Answer

A)   highly price elastic.
B)   highly price inelastic.
C)   unitary elastic with respect to price.
D)   perfectly price elastic.E) A) and B)
F) B) and C)

Question 12

Farmers often find that large bumper crops are associated with declines in their gross incomes. This suggests that

Accepted Answer

A)   farm products are normal goods.
B)   farm products are inferior goods.
C)   the price elasticity of demand for farm products is less than 1.
D)   the price elasticity of demand for farm products is greater than 1.E) B) and D)
F) A) and C)

Question 13

The demand for Cheerios cereal is more price-elastic than the demand for cereals as a whole. This is best explained by the fact that

Accepted Answer

A)   Cheerios are a luxury.
B)   Cereals are a necessity.
C)   there are more substitutes for Cheerios than for cereals as a whole.
D)   consumption of cereals as a whole is greater than consumption of Cheerios.E) All of the above
F) B) and C)

Question 14

An antidrug policy that reduces the supply of heroin might

Accepted Answer

A)   increase street crime because the addict's demand for heroin is highly inelastic.
B)   reduce street crime because the addict's demand for heroin is highly elastic.
C)   reduce street crime because the addict's demand for heroin is highly inelastic.
D)   increase street crime because the addict's demand for heroin is highly elastic.E) C) and D)
F) None of the above

Question 15

(Consider This)  Elasticity can be thought of as degree of relative

Accepted Answer

A)   video brightness.
B)   price bounce.
C)   audio volume.
D)   quantity stretch.E) C) and D)
F) B) and C)

Question 16

Answer the question on the basis of the following demand schedule.  Which of the following is correct?

Accepted Answer

A)   Although the slope of the demand curve is constant, price elasticity declines as we move from high to low price ranges.
B)   Although the slope of the demand curve is constant, price elasticity increases as we move from high to low price ranges.
C)   Although the demand curve is convex to the origin, price elasticity of demand is constant throughout.
D)   A steep slope means demand is inelastic; a flat slope means demand is elastic.E) B) and D)
F) C) and D)

Question 17

Most demand curves are relatively elastic in the upper-left portion because the original price

Accepted Answer

A)   and quantity from which the percentage changes in price and quantity are calculated are both large.
B)   and quantity from which the percentage changes in price and quantity are calculated are both small.
C)   from which the percentage price change is calculated is small and the original quantity from which the percentage change in quantity is calculated is large.
D)   from which the percentage price change is calculated is large and the original quantity from which the percentage change in quantity is calculated is small.E) B) and C)
F) A) and D)

Question 18

Answer the question on the basis of the following demand schedule.  The price elasticity of demand is relatively inelastic

Accepted Answer

A)   in the $6-$4 price range.
B)   over the entire $6-$1 price range.
C)   in the $3-$1 price range.
D)   in the $6-$5 price range only.E) A) and B)
F) B) and C)

Question 19

Suppose Aiyanna's Pizzeria currently faces a linear demand curve and is charging a very high price per pizza and doing very little business. Aiyanna now decides to lower pizza prices by 5 percent per week for an indefinite period of time. We can expect that each successive week,

Accepted Answer

A)   demand will become more price elastic.
B)   price elasticity of demand will not change as price is lowered.
C)   demand will become less price elastic.
D)   the elasticity of supply will increase.E) B) and C)
F) A) and D)

Question 20

A study of mass-transit systems in American cities revealed that in the long run, revenues generally decline after substantial fare increases. This would suggest that

Accepted Answer

A)   the demand for mass transit is price-elastic in the long run.
B)   the demand for mass transit is price-inelastic in the long run.
C)   mass-transit service deteriorates in the long run as price rises.
D)   there are few good substitutes for such systems in urban areas.E) A) and B)
F) A) and C)

Exam 6: Elasticity

The supply of product X is elastic if the price of X rises by

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Answer the question on the basis of the following demand schedule. Which of the following is correct?

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The relationship between a consumer's monthly income and monthly consumption of four products, A-D, is shown below. Which product listed is an example of an inferior good?

Correct AnswerverifiedShow Answer

We would expect the income elasticity of demand for steak to be positive, and that for hamburger to be negative.

Correct AnswerverifiedShow Answer

The price elasticity of demand for beef is about 0.60. Other things equal, this means that a 20 percent increase in the price of beef will cause the quantity of beef demanded to

Correct AnswerverifiedShow Answer

(Consider This) Elasticity can be thought of as degree of relative

Correct AnswerverifiedShow Answer

An antidrug policy that reduces the supply of heroin might

Correct AnswerverifiedShow Answer

(Consider This) The supply of higher education in the United States is

Correct AnswerverifiedShow Answer

Farmers often find that large bumper crops are associated with declines in their gross incomes. This suggests that

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following demand schedule. The price elasticity of demand is relatively inelastic

Correct AnswerverifiedShow Answer

Studies show that the demand for gasoline is

Correct AnswerverifiedShow Answer

Suppose that as the price of Y falls from $2.00 to $1.90, the quantity of Y demanded increases from 110 to 118. Then the absolute value of the price elasticity (using the midpoint formula) is

Correct AnswerverifiedShow Answer

Answer the question based on the following data. What is the price elasticity of demand over the range of $8 to $10?

Correct AnswerverifiedShow Answer

The demand for Cheerios cereal is more price-elastic than the demand for cereals as a whole. This is best explained by the fact that

Correct AnswerverifiedShow Answer

Most demand curves are relatively elastic in the upper-left portion because the original price

Correct AnswerverifiedShow Answer

Suppose Aiyanna's Pizzeria currently faces a linear demand curve and is charging a very high price per pizza and doing very little business. Aiyanna now decides to lower pizza prices by 5 percent per week for an indefinite period of time. We can expect that each successive week,

Correct AnswerverifiedShow Answer

A study of mass-transit systems in American cities revealed that in the long run, revenues generally decline after substantial fare increases. This would suggest that

Correct AnswerverifiedShow Answer

The demand schedules for such products as eggs, bread, and electricity tend to be

Correct AnswerverifiedShow Answer

The supply of cars will be more elastic the

Correct AnswerverifiedShow Answer

The supply of product X is perfectly inelastic if the price of X rises by

Correct AnswerverifiedShow Answer

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