Question 1

The price elasticity of demand for ground beef has been estimated to be 1.0. If mad cow disease strikes the United States and a large percentage of the cattle are removed from the market, how will that affect total expenditures on ground beef, all other things equal?

Accepted Answer

A)   Total expenditures will remain unchanged.
B)   Total expenditures will fall by more than 1%.
C)   Demand will fall by 1%, but total expenditures will fall by less than 1%.
D)   Total expenditures will rise.E) B) and D)
F) A) and C)

Question 2

The price elasticity of demand measures the:

Accepted Answer

A)   responsiveness of the change in quantity demanded to a change in price.
B)   change in price versus a change in quantity demanded.
C)   responsiveness of the change in the slope of the demand curve to a change in price.
D)   change in the slope of the demand curve versus a change in the quantity demanded.E) None of the above
F) B) and D)

Question 3

The pair of items that is most likely to have a negative cross-price elasticity of demand is:

Accepted Answer

A)   aspirin and hamburgers.
B)   hot dogs and mustard.
C)   margarine and butter.
D)   ketchup and coffee.E) A) and B)
F) A) and C)

Question 4

The cross-price elasticity of demand of complementary goods is:

Accepted Answer

A)   less than 0.
B)   equal to 0.
C)   greater than 0.
D)   between 0 and 1.E) None of the above
F) All of the above

Question 5

An important determinant of the price elasticity of demand is:

Accepted Answer

A)   time.
B)   the price of related goods.
C)   the level of technology.
D)   the quantity of the good supplied.E) A) and C)
F) A) and D)

Question 6

In the market for computers, if the demand curve is elastic and the price of a computer decreases, we expect total revenue to _____. If the demand curve is inelastic and the price of a computer decreases, we expect total revenue to _____.

Accepted Answer

A)   increase; decrease
B)   increase; increase
C)   decrease; increase
D)   decrease; decreaseE) A) and B)
F) A) and C)

Question 7

A good is likely to have an inelastic demand curve if:

Accepted Answer

A)   the consumer has significant time to respond to the price change.
B)   the good has few available substitutes.
C)   the good is a luxury.
D)   the good accounts for a large share of consumer income.E) All of the above
F) None of the above

Question 8

After a price decrease, the quantity effect tends to:

Accepted Answer

A)   decrease total revenue.
B)   increase total revenue.
C)   make the price effect stronger.
D)   make the price effect weaker.E) All of the above
F) C) and D)

Question 9

Use the following to answer questions:
Figure: Demand Curves 
-(Figure: Demand Curves)  Look at the figure Demand Curves. Which graph shows a perfectly inelastic demand curve?

Accepted Answer

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

Question 10

If the quantity demanded is 5,000 gallons at $3.00 per gallon, the price elasticity of demand for gasoline is 0.5, and the price rises to $3.15 per gallon, how many gallons of gas will be sold at this higher price? (Use the conventional method, not the midpoint method, of calculating price elasticity of demand.)

Accepted Answer

A rise from $3.00 to $3.15 is a 5% incre...

Question 11

If total revenue goes up when the price falls, demand is said to:

Accepted Answer

A)   be price-inelastic.
B)   be price unit-elastic.
C)   be price-elastic.
D)   have positive price elasticity.E) C) and D)
F) A) and C)

Question 12

The cross-price elasticity of demand of substitute goods is:

Accepted Answer

A)   between -1 and 0.
B)   less than 0.
C)   equal to 0.
D)   greater than 0.E) A) and C)
F) A) and B)

Question 13

Suppose the price elasticity of demand for fishing lures equals 1.5 in South Carolina and 0.63 in Alabama. To increase revenue, fishing lure manufacturers should:

Accepted Answer

A)   lower prices in each state.
B)   raise prices in each state.
C)   lower prices in South Carolina and raise prices in Alabama.
D)   leave prices unchanged in South Carolina and raise prices in Alabama.E) A) and B)
F) None of the above

Question 14

Which of the following is NOT a factor in determining the price elasticity of demand?

Accepted Answer

A)   the number of available substitutes
B)   time
C)   the proportion of the budget spent on the item
D)   the slope of the supply curveE) B) and C)
F) All of the above

Question 15

One would expect to see the supply become more price _____ as harvest season approaches and crops are being brought in from the fields.

Accepted Answer

A)   elastic
B)   inelastic
C)   unit-elastic
D)   inferiorE) B) and C)
F) B) and D)

Question 16

Suppose that an increase in the price of a good leads to an increase in total revenue. Ignoring other factors (like supply) , at its current price the good must be:

Accepted Answer

A)   price-inelastic.
B)   price-elastic.
C)   perfectly price-elastic.
D)   inferior.E) A) and D)
F) None of the above

Question 17

If the price of a good increases by 15% and quantity demanded changes by 20%, then the price elasticity of demand is equal to:

Accepted Answer

A)   0.75.
B)   approximately 0.33.
C)   approximately 1.33.
D)   1.E) None of the above
F) A) and B)

Question 18

Use the following to answer questions:
Figure: The Demand for Shirts 
-(Figure: The Demand for Shirts)  Look at the figure The Demand for Shirts. At a price of $30, total revenue is _____, and at a price of $10, total revenue is _____.

Accepted Answer

A)   $9,000; $12,000
B)   $3,000; $5,000
C)   $9,000; $5,000
D)   $5,000; $9,000E) B) and C)
F) A) and C)

Question 19

The price elasticity of demand for fresh zucchini has been estimated to be 2.25. A new irrigation system yields a 25% increase in the nation's crop of fresh zucchini. Which of the following best describes how this will affect total expenditures on zucchini, all other things equal?

Accepted Answer

A)   Total expenditures will remain unchanged.
B)   Total expenditures will fall.
C)   Total expenditures will rise.
D)   The information is insufficient to answer the question.E) None of the above
F) A) and D)

Question 20

The university hopes to raise more revenue by increasing parking fees. This plan will work only if:

Accepted Answer

A)   the price effect is larger than the quantity effect.
B)   the price effect is smaller than the quantity effect.
C)   the price effect and quantity effect are the same.
D)   there is no price or quantity effect.E) B) and C)
F) None of the above

Exam 6: Elasticity

If total revenue goes up when the price falls, demand is said to:

Correct Answer
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The price elasticity of demand for fresh zucchini has been estimated to be 2.25. A new irrigation system yields a 25% increase in the nation's crop of fresh zucchini. Which of the following best describes how this will affect total expenditures on zucchini, all other things equal?

Correct Answer
verified

The price elasticity of demand measures the:

Correct Answer
verified

Suppose that an increase in the price of a good leads to an increase in total revenue. Ignoring other factors (like supply) , at its current price the good must be:

Correct Answer
verified

Suppose the price elasticity of demand for fishing lures equals 1.5 in South Carolina and 0.63 in Alabama. To increase revenue, fishing lure manufacturers should:

Correct Answer
verified

A good is likely to have an inelastic demand curve if:

Correct Answer
verified

The price elasticity of demand for ground beef has been estimated to be 1.0. If mad cow disease strikes the United States and a large percentage of the cattle are removed from the market, how will that affect total expenditures on ground beef, all other things equal?

Correct Answer
verified

The cross-price elasticity of demand of substitute goods is:

Correct Answer
verified

Use the following to answer questions: Figure: Demand Curves -(Figure: Demand Curves) Look at the figure Demand Curves. Which graph shows a perfectly inelastic demand curve?

Correct Answer
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Correct Answer
verified
A rise from $3.00 to $3.15 is a 5% incre...
View Answer

In the market for computers, if the demand curve is elastic and the price of a computer decreases, we expect total revenue to _. If the demand curve is inelastic and the price of a computer decreases, we expect total revenue to _.

Correct Answer
verified

The pair of items that is most likely to have a negative cross-price elasticity of demand is:

Correct Answer
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Which of the following is NOT a factor in determining the price elasticity of demand?

Correct Answer
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One would expect to see the supply become more price _____ as harvest season approaches and crops are being brought in from the fields.

Correct Answer
verified

After a price decrease, the quantity effect tends to:

Correct Answer
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Use the following to answer questions: Figure: The Demand for Shirts -(Figure: The Demand for Shirts) Look at the figure The Demand for Shirts. At a price of $30, total revenue is _, and at a price of $10, total revenue is _.

Correct Answer
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An important determinant of the price elasticity of demand is:

Correct Answer
verified

If the price of a good increases by 15% and quantity demanded changes by 20%, then the price elasticity of demand is equal to:

Correct Answer
verified

The university hopes to raise more revenue by increasing parking fees. This plan will work only if:

Correct Answer
verified

The cross-price elasticity of demand of complementary goods is:

Correct Answer
verified

Exam 6: Elasticity

If total revenue goes up when the price falls, demand is said to:

Correct AnswerverifiedShow Answer

The price elasticity of demand for fresh zucchini has been estimated to be 2.25. A new irrigation system yields a 25% increase in the nation's crop of fresh zucchini. Which of the following best describes how this will affect total expenditures on zucchini, all other things equal?

Correct AnswerverifiedShow Answer

The price elasticity of demand measures the:

Correct AnswerverifiedShow Answer

Suppose that an increase in the price of a good leads to an increase in total revenue. Ignoring other factors (like supply) , at its current price the good must be:

Correct AnswerverifiedShow Answer

Suppose the price elasticity of demand for fishing lures equals 1.5 in South Carolina and 0.63 in Alabama. To increase revenue, fishing lure manufacturers should:

Correct AnswerverifiedShow Answer

A good is likely to have an inelastic demand curve if:

Correct AnswerverifiedShow Answer

The price elasticity of demand for ground beef has been estimated to be 1.0. If mad cow disease strikes the United States and a large percentage of the cattle are removed from the market, how will that affect total expenditures on ground beef, all other things equal?

Correct AnswerverifiedShow Answer

The cross-price elasticity of demand of substitute goods is:

Correct AnswerverifiedShow Answer

Use the following to answer questions: Figure: Demand Curves -(Figure: Demand Curves) Look at the figure Demand Curves. Which graph shows a perfectly inelastic demand curve?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA rise from $3.00 to $3.15 is a 5% incre...View AnswerShow Answer

In the market for computers, if the demand curve is elastic and the price of a computer decreases, we expect total revenue to _____. If the demand curve is inelastic and the price of a computer decreases, we expect total revenue to _____.

Correct AnswerverifiedShow Answer

The pair of items that is most likely to have a negative cross-price elasticity of demand is:

Correct AnswerverifiedShow Answer

Which of the following is NOT a factor in determining the price elasticity of demand?

Correct AnswerverifiedShow Answer

One would expect to see the supply become more price _____ as harvest season approaches and crops are being brought in from the fields.

Correct AnswerverifiedShow Answer

After a price decrease, the quantity effect tends to:

Correct AnswerverifiedShow Answer

Use the following to answer questions: Figure: The Demand for Shirts -(Figure: The Demand for Shirts) Look at the figure The Demand for Shirts. At a price of $30, total revenue is _____, and at a price of $10, total revenue is _____.

Correct AnswerverifiedShow Answer

An important determinant of the price elasticity of demand is:

Correct AnswerverifiedShow Answer

If the price of a good increases by 15% and quantity demanded changes by 20%, then the price elasticity of demand is equal to:

Correct AnswerverifiedShow Answer

The university hopes to raise more revenue by increasing parking fees. This plan will work only if:

Correct AnswerverifiedShow Answer

The cross-price elasticity of demand of complementary goods is:

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
A rise from $3.00 to $3.15 is a 5% incre...
View Answer

In the market for computers, if the demand curve is elastic and the price of a computer decreases, we expect total revenue to _. If the demand curve is inelastic and the price of a computer decreases, we expect total revenue to _.

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Use the following to answer questions: Figure: The Demand for Shirts -(Figure: The Demand for Shirts) Look at the figure The Demand for Shirts. At a price of $30, total revenue is _, and at a price of $10, total revenue is _.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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