Question 1

Evan and Elaine sold 40 cups of lemonade at their neighborhood lemonade stand. Their total revenue equaled $120. What was the price per cup?

Accepted Answer

A)   $1.20
B)   $4.00
C)   $3.50
D)   $3.00

Question 2

As incomes decline, which of the following would likely see an increase in demand?

Accepted Answer

A)   luxury cars
B)   dollar stores
C)   designer handbags
D)   second homes

Question 3

A price elasticity of 1.25 means that if price changes by 10%, then quantity will change by:

Accepted Answer

A)   1.25%.
B)   .125%.
C)   12.5%.
D)   -1.25%.

Question 4

Perfectly inelastic supply will MOST likely occur in the:

Accepted Answer

A)   very short run.
B)   short run.
C)   very long run.
D)   long run.

Question 5

In general, when the price elasticity of demand is greater than 1 and a firm wants to increase total revenue, the firm should:

Accepted Answer

A)   decrease prices.
B)   increase prices.
C)   advertise less.
D)   advertise more.

Question 6

As income rises, the demand for inferior goods:

Accepted Answer

A)   increases.
B)   decreases.
C)   remains the same.
D)   is absolute.

Question 7

A measure of the sensitivity or responsiveness of one variable to another is:

Accepted Answer

A)   price.
B)   demand.
C)   supply.
D)   elasticity.

Question 8

If prices rise substantially on peanut butter and total revenue decreases significantly, then peanut butter is probably:

Accepted Answer

A)   elastic.
B)   inelastic.
C)   unit elastic.
D)   absolute.

Question 9

(Table: The Price of a Movie Ticket)  Using the midpoint formula, what is the price elasticity of the demand for movie tickets?
   Price  Quantity $10750$20450\begin{array}{|l|l|}\hline 	ext { Price } & 	ext { Quantity } \\hline \$ 10 & 750 \\hline \$ 20 & 450 \\hline\end{array} Price $10$20​ Quantity 750450​​

Accepted Answer

A)   10
B)   3.33
C)   .75
D)   1.32

Question 10

Total revenue maximized at the point of:

Accepted Answer

A)   elasticity.
B)   inelasticity.
C)   unit elasticity.
D)   absolute elasticity.

Question 11

The standard way to calculate a percentage of change in price is to put the change in price over the initial price and to express that fraction as a percentage. Why is this problematic?

Accepted Answer

The accuracy of this method depends on t...

Question 12

Price changes have little impact on the quantity demanded of:

Accepted Answer

A)   substitute goods.
B)   inferior goods.
C)   normal goods.
D)   necessities.

Question 13

Elasticity is:

Accepted Answer

A)   a measure of changing market conditions brought on by a recession.
B)   a measure of the sensitivity or responsiveness of one variable to another in response to price or income changes.
C)   a function of price in an expanding economy.
D)   a measure of sensitivity to demand in an expanding economy when income increases.

Question 14

As income rises, the demand for hamburger (an inferior good)  _____, and the demand for steak (a normal good)  ______.

Accepted Answer

A)   increases; decreases
B)   decreases; increases
C)   remains the same; increases
D)   increases; remains the same

Question 15

Demand for gasoline is less price elastic in the short run than in the long run because in the long run:

Accepted Answer

A)   there is a lack of substitutes.
B)   consumers have more time to adjust.
C)   gasoline's share of a budget is unimportant.
D)   gasoline is a luxury good.

Question 16

Consumers are less responsive to price increases when a good is a:

Accepted Answer

A)   large share of their budget.
B)   frequently advertised item.
C)   necessity.
D)   branded good.

Question 17

Demand tends to be more price elastic at _____ prices and more price inelastic at _____ prices.

Accepted Answer

A)   lower; lower
B)   lower; higher
C)   higher; higher
D)   higher; lower

Question 18

If the price elasticity of demand is 2.7, then price is relatively:

Accepted Answer

A)   absolute.
B)   unit elastic.
C)   inelastic.
D)   elastic.

Question 19

As incomes increase, which of the following would likely see the largest increase in demand?

Accepted Answer

A)   gum
B)   luxury cars
C)   hot dogs
D)   thrift store purchases

Question 20

An example of a substitute good for steak is:

Accepted Answer

A)   hamburger.
B)   cereal.
C)   cake.
D)   jelly beans.

Exam 4: Elasticity

If prices rise substantially on peanut butter and total revenue decreases significantly, then peanut butter is probably:

Correct AnswerverifiedShow Answer

Demand tends to be more price elastic at _____ prices and more price inelastic at _____ prices.

Correct AnswerverifiedShow Answer

A price elasticity of 1.25 means that if price changes by 10%, then quantity will change by:

Correct AnswerverifiedShow Answer

Consumers are less responsive to price increases when a good is a:

Correct AnswerverifiedShow Answer

Evan and Elaine sold 40 cups of lemonade at their neighborhood lemonade stand. Their total revenue equaled $120. What was the price per cup?

Correct AnswerverifiedShow Answer

As incomes increase, which of the following would likely see the largest increase in demand?

Correct AnswerverifiedShow Answer

Perfectly inelastic supply will MOST likely occur in the:

Correct AnswerverifiedShow Answer

In general, when the price elasticity of demand is greater than 1 and a firm wants to increase total revenue, the firm should:

Correct AnswerverifiedShow Answer

Demand for gasoline is less price elastic in the short run than in the long run because in the long run:

Correct AnswerverifiedShow Answer

As income rises, the demand for inferior goods:

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An example of a substitute good for steak is:

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As income rises, the demand for hamburger (an inferior good) _____, and the demand for steak (a normal good) ______.

Correct AnswerverifiedShow Answer

The standard way to calculate a percentage of change in price is to put the change in price over the initial price and to express that fraction as a percentage. Why is this problematic?

Correct AnswerverifiedThe accuracy of this method depends on t...View AnswerShow Answer

A measure of the sensitivity or responsiveness of one variable to another is:

Correct AnswerverifiedShow Answer

Price changes have little impact on the quantity demanded of:

Correct AnswerverifiedShow Answer

Elasticity is:

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As incomes decline, which of the following would likely see an increase in demand?

Correct AnswerverifiedShow Answer

Total revenue maximized at the point of:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the price elasticity of demand is 2.7, then price is relatively:

Correct AnswerverifiedShow Answer

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Demand tends to be more price elastic at _ prices and more price inelastic at _ prices.

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As income rises, the demand for hamburger (an inferior good) _, and the demand for steak (a normal good) __.

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The accuracy of this method depends on t...
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