Question 1

-In the above table, the cross price elasticity of demand for good Y with good X when PX rises from $10 to $12 is

Accepted Answer

A)  +0.29.
B)  +1.83.
C)  +0.58.
D)  -0.58.

Question 2

A consumer is willing and able to buy 1,000 units of a good at $10, but the consumer's quantity demanded falls to zero if the price rises even a fraction of a cent. The consumer's demand curve is

Accepted Answer

A)  horizontal and is perfectly inelastic.
B)  horizontal and is perfectly elastic.
C)  vertical and is perfectly elastic.
D)  downward sloping from higher prices down to $10 and then horizontal.

Question 3

-Refer to the above table. Based on the information in the table, we can say that

Accepted Answer

A)  all three goods are substitutes for each other.
B)  all three goods are complements.
C)  X and Y are substitutes, Y and Z are complements, and X and Z are substitutes.
D)  X and Y are complements, Y and Z are substitutes, and X and Z are complements.

Question 4

Two items which have a negative cross price elasticity of demand are referred to as

Accepted Answer

A)  luxury goods.
B)  inferior goods.
C)  substitutes.
D)  complements.

Question 5

Which of the following goods is likely to have the highest income elasticity?

Accepted Answer

A)  A designer blouse
B)  Tomato soup
C)  Hamburger
D)  Can of tuna

Question 6

When demand is unit elastic, a 10 percent change in the price of the good

Accepted Answer

A)  will cause a change in quantity demanded of less than 10 percent.
B)  will cause a change in quantity demanded equal to 10 percent.
C)  will cause a change in quantity demanded greater than 10 percent.
D)  will not cause any change in quantity demanded.

Question 7

-Refer to the above figure. Demand is

Accepted Answer

A)  perfectly elastic.
B)  unitary elastic.
C)  perfectly inelastic.
D)  undetermined without more information.

Question 8

Julie always purchases the soda with the lowest price. For Julie, the cross price elasticity of demand for brand X and brand Y will be

Accepted Answer

A)  equal to 0.
B)  negative.
C)  positive.
D)  impossible to determine without more information.

Question 9

When the Gizmo Company could sell a gizmo for $10, it produced 2,500 per month. More recently, the price of a gizmo has fallen to $9 and so Gizmo is only producing 2,000 units per month. What is the price elasticity of supply for gizmos?

Accepted Answer

A)  0.47
B)  -0.47
C)  -2.11
D)  2.11

Question 10

When the price of gasoline is $2.20 per gallon, 11 million gallons are demanded, and when the price of gasoline goes up to $2.60 per gallon, 10 million gallons are demanded. The gasoline in this range has a(n)

Accepted Answer

A)  elastic demand.
B)  inelastic demand.
C)  unit elastic demand.
D)  perfectly elastic demand.

Question 11

Which of the following statements is correct?

Accepted Answer

A)  Supply is more elastic in the short run than in long run.
B)  Supply is more elastic in the long run than in short run.
C)  Price elasticity of supply is constant along the supply curve.
D)  Price elasticity of supply is always a negative number.

Question 12

-Explain why an increase in price can raise total revenues if the price elasticity of demand is inelastic.

Accepted Answer

Total revenues equal price times quantit...

Question 13

The price elasticity of demand is

Accepted Answer

A)  always negative.
B)  sometimes positive.
C)  always positive.
D)  constant along the demand curve.

Question 14

When demand is elastic, a decrease in price will

Accepted Answer

A)  decrease total revenue.
B)  not change total revenue.
C)  increase total revenue.
D)  reduce quantity demanded.

Question 15

-Which of the following is a determinant of the price elasticity of demand for an item?

Accepted Answer

A)  The availability of a close substitute for the item
B)  The percentage of a consumers budget allocated to expenditures on the item
C)  The amount of time available to adjust to a change in the price of the item
D)  All of the above are correct

Question 16

A vertical demand curve has

Accepted Answer

A)  infinite elasticity.
B)  positive elasticity.
C)  zero elasticity.
D)  negative elasticity.

Question 17

A perfectly elastic demand would imply what kind of demand curve?

Accepted Answer

A)  horizontal
B)  vertical
C)  upward sloping
D)  downward sloping

Question 18

Suppose the price of X increases by 20 percent while the quantity demanded of Y does not change. We would conclude that

Accepted Answer

A)  the two goods are substitutes, but the cross elasticity of demand is not large.
B)  the two goods are complements, but the cross elasticity of demand is not large.
C)  the two goods are perfect substitutes.
D)  the two goods are not related.

Question 19

Two items which have a positive cross price elasticity of demand are referred to as

Accepted Answer

A)  luxury goods.
B)  inferior goods.
C)  substitutes.
D)  complements.

Question 20

-Refer to the above table. What is the absolute price elasticity of demand when a price rises from $8 to $8.50?

Accepted Answer

A)  5.15
B)  1.94
C)  0.515
D)  0.194

Exam 19: Demand and Supply Elasticity

A perfectly elastic demand would imply what kind of demand curve?

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Which of the following statements is correct?

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When the Gizmo Company could sell a gizmo for $10, it produced 2,500 per month. More recently, the price of a gizmo has fallen to $9 and so Gizmo is only producing 2,000 units per month. What is the price elasticity of supply for gizmos?

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When demand is unit elastic, a 10 percent change in the price of the good

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-Explain why an increase in price can raise total revenues if the price elasticity of demand is inelastic.

Correct AnswerverifiedTotal revenues equal price times quantit...View AnswerShow Answer

Two items which have a negative cross price elasticity of demand are referred to as

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-Refer to the above table. Based on the information in the table, we can say that

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-Refer to the above table. What is the absolute price elasticity of demand when a price rises from $8 to $8.50?

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When the price of gasoline is $2.20 per gallon, 11 million gallons are demanded, and when the price of gasoline goes up to $2.60 per gallon, 10 million gallons are demanded. The gasoline in this range has a(n)

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A vertical demand curve has

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Julie always purchases the soda with the lowest price. For Julie, the cross price elasticity of demand for brand X and brand Y will be

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When demand is elastic, a decrease in price will

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The price elasticity of demand is

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-In the above table, the cross price elasticity of demand for good Y with good X when PX rises from $10 to $12 is

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-Which of the following is a determinant of the price elasticity of demand for an item?

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Which of the following goods is likely to have the highest income elasticity?

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-Refer to the above figure. Demand is

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Two items which have a positive cross price elasticity of demand are referred to as

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Suppose the price of X increases by 20 percent while the quantity demanded of Y does not change. We would conclude that

Correct AnswerverifiedShow Answer

A consumer is willing and able to buy 1,000 units of a good at $10, but the consumer's quantity demanded falls to zero if the price rises even a fraction of a cent. The consumer's demand curve is

Correct AnswerverifiedShow Answer

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Total revenues equal price times quantit...
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