Question 1

The demand for a specific brand of corn flakes cereal is likely to be:

Accepted Answer

A)  very price elastic, because there are many close substitutes available.
B)  less price elastic, because there are many close substitutes available.
C)  very price elastic, because the cost of cornflakes relative to income is low.
D)  less price elastic, because cornflakes are an inferior good for many consumers.E) B) and D)
F) All of the above

Question 2

If the price of a DVD decreases by 50 percent and the quantity of DVDs demanded increases by 75 percent, the price elasticity of demand is _____ and is _____.

Accepted Answer

A)  −1.5; inelastic
B)  −1.5; elastic
C)  −0.67; elastic
D)  −0.67; inelasticE) C) and D)
F) A) and C)

Question 3

A good with an income elasticity of 2.3 is:

Accepted Answer

A)  a luxury.
B)  inferior.
C)  a necessity.
D)  a complement.E) A) and B)
F) A) and C)

Question 4

When Bob was employed, he would see a movie at the theater once a month. However, Bob got laid off six months ago, and since then he has only gone to the movie theater twice. This type of behavior can be measured using:

Accepted Answer

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

Question 5

A decrease in price:

Accepted Answer

A)  causes a decrease in total revenue due to the quantity effect.
B)  causes an increase in total revenue due to the price effect.
C)  does not cause a quantity effect when demand is perfectly inelastic.
D)  does not change quantity demanded if demand is elastic.E) A) and C)
F) B) and C)

Question 6

Suppose when the price of pineapples goes from $5 to $3 per pineapple, production decreases from 3,500 pineapples to 2,000 pineapples per year. Using the mid-point method, what is the percentage change in price?

Accepted Answer

A)  −0.5 percent
B)  −50 percent
C)  −33 percent
D)  −40 percentE) All of the above
F) A) and C)

Question 7

A baker of chocolate chip cookies is likely to have a _____ price elasticity of supply than the seller of rare baseball cards due to _____.

Accepted Answer

A)  more elastic; the availability of inputs
B)  less elastic; the availability of inputs
C)  less elastic; a shorter adjustment time
D)  less elastic; a more flexible production processE) A) and D)
F) B) and C)

Question 8

Total revenue is the amount a firm:

Accepted Answer

A)  receives from the sale of goods and services.
B)  keeps after all expenses are paid.
C)  reinvests in itself from sales.
D)  receives from dividends.E) A) and D)
F) A) and C)

Question 9

The demand for ice cream is _____ price elastic than the demand for frozen treats overall because _____.

Accepted Answer

A)  less; ice cream has fewer substitutes than frozen treats.
B)  more; ice cream has fewer substitutes than frozen treats.
C)  less; the scope of the market for ice cream is less broadly defined
D)  more; the scope of the market for ice cream is less broadly definedE) A) and B)
F) A) and D)

Question 10

Economists typically use the mid-point method of calculating elasticity because:

Accepted Answer

A)  it is easier to calculate.
B)  it is universally understood by all economists.
C)  the negative sign can then be ignored.
D)  the elasticity between two points is the same, regardless of the direction of the movement.E) A) and B)
F) A) and D)

Question 11

Suppose the price of a good increases from $9 to $11. Using the mid-point formula, what is the percentage change in price?

Accepted Answer

A)  −20 percent
B)  25 percent
C)  20 percent
D)  2 percentE) C) and D)
F) All of the above

Question 12

Measurements of elasticity include:

Accepted Answer

A)  income elasticity of demand and income elasticity of supply.
B)  price elasticity of demand and price elasticity of supply.
C)  cross-price elasticity of demand and income elasticity of supply.
D)  preference elasticity of demand and cross-price elasticity of supply.E) None of the above
F) A) and B)

Question 13

Elasticity along a demand curve:

Accepted Answer

A)  is constant if the demand curve is linear.
B)  changes only when the demand curve is bowed out.
C)  changes when the demand curve is linear.
D)  changes only when the demand curve is bowed in.E) B) and D)
F) A) and D)

Question 14

Consider the market in the graph shown. Using the mid-point method, what is the price elasticity of supply when the price increases from $4 to $7?

Accepted Answer

A)  1.13
B)  0.4
C)  0.45
D)  0.89E) C) and D)
F) All of the above

Question 15

If supply and demand analysis is a measure of how, then elasticity is a measure of:

Accepted Answer

A)  how much.
B)  when.
C)  why.
D)  how quickly.E) A) and D)
F) B) and C)

Question 16

Whether a cross-price elasticity of demand is positive or negative indicates whether the:

Accepted Answer

A)  goods are substitutes or complements.
B)  elasticities are reported in absolute value.
C)  demands are elastic or inelastic.
D)  goods are a luxury or a necessity.E) All of the above
F) None of the above

Question 17

Suppose price decreases from $27.00 to $13.00. Using the mid-point formula, what is the percentage change in price?

Accepted Answer

A)  −0.35 = −35 percent
B)  −0.7 = −70 percent
C)  0.7 = 70 percent
D)  0.14 = 14 percent.E) B) and C)
F) All of the above

Question 18

Cross-price elasticity of demand measures:

Accepted Answer

A)  how much the quantity demanded of one good changes in response to a change in the price of a different good.
B)  how much the quantity demanded of one good changes in response to a change in its price.
C)  the magnitude of the shift in demand for a good in response to a change in its price.
D)  how much the quantity demanded of a good changes in response to a change in consumers' incomes.E) A) and C)
F) B) and C)

Question 19

Demand for a good is inelastic if:

Accepted Answer

A)  total revenue decreases when price increases.
B)  the quantity effect outweighs the price effect of a price increase.
C)  the absolute value of price elasticity is greater than 1.
D)  total revenue increases when price increases.E) A) and C)
F) C) and D)

Question 20

The cross-price elasticity of demand between peanut butter and jelly is likely:

Accepted Answer

A)  a positive number.
B)  a very high positive number.
C)  a negative number.
D)  less than one.E) None of the above
F) B) and C)

Exam 4: Elasticity

Total revenue is the amount a firm:

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The demand for a specific brand of corn flakes cereal is likely to be:

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Cross-price elasticity of demand measures:

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When Bob was employed, he would see a movie at the theater once a month. However, Bob got laid off six months ago, and since then he has only gone to the movie theater twice. This type of behavior can be measured using:

Correct AnswerverifiedShow Answer

If the price of a DVD decreases by 50 percent and the quantity of DVDs demanded increases by 75 percent, the price elasticity of demand is _____ and is _____.

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A good with an income elasticity of 2.3 is:

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Suppose price decreases from $27.00 to $13.00. Using the mid-point formula, what is the percentage change in price?

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A baker of chocolate chip cookies is likely to have a _____ price elasticity of supply than the seller of rare baseball cards due to _____.

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A decrease in price:

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Suppose the price of a good increases from $9 to $11. Using the mid-point formula, what is the percentage change in price?

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The demand for ice cream is _____ price elastic than the demand for frozen treats overall because _____.

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 $4 to $7?

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Demand for a good is inelastic if:

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Elasticity along a demand curve:

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Measurements of elasticity include:

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Suppose when the price of pineapples goes from $5 to $3 per pineapple, production decreases from 3,500 pineapples to 2,000 pineapples per year. Using the mid-point method, what is the percentage change in price?

Correct AnswerverifiedShow Answer

If supply and demand analysis is a measure of how, then elasticity is a measure of:

Correct AnswerverifiedShow Answer

The cross-price elasticity of demand between peanut butter and jelly is likely:

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Whether a cross-price elasticity of demand is positive or negative indicates whether the:

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Economists typically use the mid-point method of calculating elasticity because:

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If the price of a DVD decreases by 50 percent and the quantity of DVDs demanded increases by 75 percent, the price elasticity of demand is _ and is _.

Correct Answer
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Correct Answer
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A baker of chocolate chip cookies is likely to have a _ price elasticity of supply than the seller of rare baseball cards due to _.

Correct Answer
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Correct Answer
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The demand for ice cream is _ price elastic than the demand for frozen treats overall because _.

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