Question 1

Which of the following products has the most elastic demand?

Accepted Answer

A)   Ben and Jerry's Chunky Monkey ice cream in the pint container
B)   all Ben and Jerry's ice cream
C)   all premium ice cream
D)   all ice cream

Question 2

Figure 4.4
-In Figure 4.4 supply is perfectly elastic in graph

Accepted Answer

A)   A.
B)   B.
C)   C.
D)   D.

Question 3

What is total revenue for a firm?

Accepted Answer

Total revenue is the...

Question 4

Suppose that the percentage change in demand is 20%, the price elasticity of supply is 2, and the percentage change in the equilibrium price is 4%. What is the price elasticity of demand?

Accepted Answer

A)   0
B)   1
C)   2
D)   3

Question 5

Recall the Application about finding estimates of elasticities of demand to answer the following question(s) .
-According to the Application, the regular price elasticities of demand found at www.ers.usda.gov are reported as

Accepted Answer

A)   positive numbers.
B)   negative numbers.
C)   dollars per unit of foreign currency.
D)   foreign currency units per dollar.

Question 6

If the income elasticity of a good is greater than one, we say that its demand is

Accepted Answer

A)   price sensitive.
B)   income-inelastic.
C)   income-elastic.
D)   price insensitive.

Question 7

How do you interpret the value of cross-price elasticity?

Accepted Answer

If cross-price elasticity is n...

Question 8

If the quantity demanded of restaurant meals increases by 20% when income increases by 10%, the demand for restaurant meals is

Accepted Answer

A)   price sensitive.
B)   income-inelastic.
C)   income-elastic.
D)   price insensitive.

Question 9

Suppose that the elasticity of demand for newspapers is 2.0 and quantity demanded decreases by 40%. What must the percentage increase in price have been?

Accepted Answer

A)   2%
B)   20%
C)   80%
D)   200%

Question 10

If Maria spends a fixed dollar amount per week on movie rentals regardless of changes in the price, Maria's demand for movie rental can be considered

Accepted Answer

A)   elastic.
B)   unit elastic.
C)   inelastic.
D)   There is no sufficient information to determine the price elasticity.

Question 11

Recall the Application about finding estimates of elasticities of demand to answer the following question(s) .
-According to the Application, ________ has a Web site that provides estimates of demand elasticities for hundreds of food products for dozens of countries.

Accepted Answer

A)   the U.S. Department of Agriculture
B)   the U.S. State Department
C)   the United Nations
D)   the World Bank

Question 12

The ratio of the percentage change in quantity demanded to the percentage change in price is known as the

Accepted Answer

A)   demand-side shift factor.
B)   income elasticity of demand.
C)   price elasticity of demand.
D)   cross elasticity of demand.

Question 13

Suppose that the income elasticity of demand for good X is positive but less than 1. Other things being equal, which of the following statements is INCORRECT?

Accepted Answer

A)   Good X is a normal good.
B)   The quantity demanded of good X decreases as a consumer's income declines.
C)   A consumer buys more X as income rises, but the share of income spent on good X falls.
D)   A consumer buys more X as income rises and the share of income spent on good X also rises.

Question 14

Suppose that the price elasticity of supply is 0.8 and the price increases by 10%. We would predict

Accepted Answer

A)   an 8% increase in quantity supplied.
B)   a 12.5% increase in quantity supplied.
C)   a 0.8% increase in quantity supplied.
D)   a 1.25% increase in quantity supplied.

Question 15

Suppose that in a month the price of a gallon of milk increases from $2 to $2.50. At the same time, the quantity of gallons of milk demanded decreases from 100 to 80. The price elasticity of demand for gallons of milk (calculated using the midpoint formula)  is approximately

Accepted Answer

A)   0.11.
B)   0.2.
C)   1.
D)   1.2.

Question 16

Suppose that the elasticity of demand for a product is 0.5 and price decreases by 20%. By what percentage will quantity demanded increase?

Accepted Answer

A)   0.5%
B)   5%
C)   10%
D)   40%

Question 17

How do you calculate a percentage change in quantity if given an elasticity of demand and a percentage change in price?

Accepted Answer

Since demand elasticity is the absolute ...

Question 18

The cross-price elasticity of demand measures

Accepted Answer

A)   the relationship between the demand for one good and the supply of another.
B)   the relationship between the demand for one good and the price of another.
C)   the relationship between the demand and supply of one good at the intersection of the curves.
D)   the elasticity of demand at the intersection of the supply and demand curves.

Question 19

If the percentage change in price is 10 and the percentage change in quantity supplied is 10, supply is

Accepted Answer

A)   unaffected by price changes.
B)   inelastic.
C)   unit elastic.
D)   elastic.

Question 20

The supply curve for gasoline will be more elastic in

Accepted Answer

A)   the short run because of the principle of diminishing returns.
B)   the long run because of the principle of diminishing returns.
C)   the short run because firms have more time in which to respond to the price change.
D)   the long run because firms have more time in which to respond to the price change.

Exam 4: Elasticity: A Measure of Responsiveness

What is total revenue for a firm?

Correct AnswerverifiedTotal revenue is the...View AnswerShow Answer

Recall the Application about finding estimates of elasticities of demand to answer the following question(s) . -According to the Application, ________ has a Web site that provides estimates of demand elasticities for hundreds of food products for dozens of countries.

Correct AnswerverifiedShow Answer

Suppose that the elasticity of demand for newspapers is 2.0 and quantity demanded decreases by 40%. What must the percentage increase in price have been?

Correct AnswerverifiedShow Answer

The ratio of the percentage change in quantity demanded to the percentage change in price is known as the

Correct AnswerverifiedShow Answer

Suppose that the income elasticity of demand for good X is positive but less than 1. Other things being equal, which of the following statements is INCORRECT?

Correct AnswerverifiedShow Answer

The supply curve for gasoline will be more elastic in

Correct AnswerverifiedShow Answer

If the percentage change in price is 10 and the percentage change in quantity supplied is 10, supply is

Correct AnswerverifiedShow Answer

How do you interpret the value of cross-price elasticity?

Correct AnswerverifiedIf cross-price elasticity is n...View AnswerShow Answer

Recall the Application about finding estimates of elasticities of demand to answer the following question(s) . -According to the Application, the regular price elasticities of demand found at www.ers.usda.gov are reported as

Correct AnswerverifiedShow Answer

Suppose that the percentage change in demand is 20%, the price elasticity of supply is 2, and the percentage change in the equilibrium price is 4%. What is the price elasticity of demand?

Correct AnswerverifiedShow Answer

Suppose that the price elasticity of supply is 0.8 and the price increases by 10%. We would predict

Correct AnswerverifiedShow Answer

Suppose that the elasticity of demand for a product is 0.5 and price decreases by 20%. By what percentage will quantity demanded increase?

Correct AnswerverifiedShow Answer

If the quantity demanded of restaurant meals increases by 20% when income increases by 10%, the demand for restaurant meals is

Correct AnswerverifiedShow Answer

Which of the following products has the most elastic demand?

Correct AnswerverifiedShow Answer

Suppose that in a month the price of a gallon of milk increases from $2 to $2.50. At the same time, the quantity of gallons of milk demanded decreases from 100 to 80. The price elasticity of demand for gallons of milk (calculated using the midpoint formula) is approximately

Correct AnswerverifiedShow Answer

If the income elasticity of a good is greater than one, we say that its demand is

Correct AnswerverifiedShow Answer

How do you calculate a percentage change in quantity if given an elasticity of demand and a percentage change in price?

Correct AnswerverifiedSince demand elasticity is the absolute ...View AnswerShow Answer

If Maria spends a fixed dollar amount per week on movie rentals regardless of changes in the price, Maria's demand for movie rental can be considered

Correct AnswerverifiedShow Answer

Figure 4.4 -In Figure 4.4 supply is perfectly elastic in graph

Correct AnswerverifiedShow Answer

The cross-price elasticity of demand measures

Correct AnswerverifiedShow Answer

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Total revenue is the...
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If cross-price elasticity is n...
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Since demand elasticity is the absolute ...
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