Question 1

Income elasticity measures the effect of a change in income on the purchases of some good or service.

Accepted Answer

A) True 
 B)False

Question 2

A demand curve that is parallel to the horizontal axis is

Accepted Answer

A)   perfectly inelastic.
B)   perfectly elastic.
C)   relatively inelastic.
D)   relatively elastic.E) A) and B)
F) C) and D)

Question 3

Which of the following is correct?

Accepted Answer

A)   If the demand for a product is inelastic, a change in price will cause total revenue to change in the opposite direction.
B)   If the demand for a product is inelastic, a change in price will cause total revenue to change in the same direction.
C)   If the demand for a product is inelastic, a change in price may cause total revenue to change in either the opposite or the same direction.
D)   The price elasticity coefficient applies to demand, but not to supply.E) A) and D)
F) B) and D)

Question 4

A supply curve that is parallel to the horizontal axis suggests that

Accepted Answer

A)   the industry is organized monopolistically.
B)   the relationship between price and quantity supplied is inverse.
C)   a change in demand will change price in the same direction.
D)   a change in demand will change the equilibrium quantity but not price.E) A) and B)
F) A) and C)

Question 5

The price of season tickets to a performing arts theater decreases by 3 percent. As a result, the quantity demanded increases by 6 percent. The price elasticity of demand for season tickets is

Accepted Answer

A)   0.5.
B)   9.
C)   2.
D)   18.E) None of the above
F) All of the above

Question 6

If 100 shirts are sold when the unit price is $10, while 75 shirts are sold when the unit price is $15, one can conclude that in this price range,

Accepted Answer

A)   demand for the shirts is elastic.
B)   demand for the shirts is inelastic.
C)   demand for the shirts has shifted to the right.
D)   consumers are quite sensitive to changes in the price of the shirt.E) All of the above
F) A) and C)

Question 7

A supply curve that is a vertical straight line indicates that

Accepted Answer

A)   production costs for this product cannot be calculated.
B)   the relationship between price and quantity supplied is inverse.
C)   a change in price will have no effect on the quantity supplied.
D)   an unlimited amount of the product will be supplied at a constant price.E) B) and C)
F) A) and B)

Question 8

If quantity demanded is completely unresponsive to price changes, demand is

Accepted Answer

A)   perfectly inelastic.
B)   perfectly elastic.
C)   relatively inelastic.
D)   relatively elastic.E) All of the above
F) A) and C)

Question 9

Suppose you are given the following data on demand for a product. The price elasticity of demand (based on the midpoint formula)  when price decreases from $9 to $7 is

Accepted Answer

A)   0.63.
B)   1.16.
C)   1.60.
D)   2.27.E) B) and D)
F) None of the above

Question 10

Which of the following is not characteristic of the demand for a commodity that is elastic?

Accepted Answer

A)   The relative change in quantity demanded is greater than the relative change in price.
B)   Buyers are relatively sensitive to price changes.
C)   Total revenue increases if price is increased.
D)   The elasticity coefficient is greater than one.E) A) and B)
F) None of the above

Question 11

If the elasticity coefficient of supply is 0.7, supply is elastic.

Accepted Answer

A) True 
 B)False

Question 12

If the income elasticity of demand for store brand macaroni and cheese is −3.00, this means that

Accepted Answer

A)   store brand macaroni and cheese is a substitute for name brand macaroni and cheese.
B)   store brand macaroni and cheese is a normal good.
C)   store brand macaroni and cheese is an inferior good.
D)   more store brand macaroni and cheese will be purchased when its price falls.E) B) and C)
F) A) and D)

Question 13

When the price of a product is increased 10 percent, the quantity demanded decreases 15 percent. The price-elasticity of demand coefficient for this product is

Accepted Answer

A)   1.5.
B)   0.15.
C)   0.67.
D)   67.E) C) and D)
F) A) and B)

Question 14

The larger the positive cross elasticity coefficient of demand between products X and Y, the

Accepted Answer

A)   stronger their complementariness.
B)   greater their substitutability.
C)   smaller the price elasticity of demand for both products.
D)   less sensitive purchases of each are to increases in income.E) B) and D)
F) None of the above

Question 15

If the government tightens up on drug dealers and raises the costs of dealing illegal drugs, then the drug addicts' dollar expenditures to feed their addiction will tend to

Accepted Answer

A)   increase because their demand is price-elastic.
B)   decrease because their demand is price-Inelastic.
C)   decrease because their demand is price-elastic.
D)   increase because their demand is price-Inelastic.E) A) and C)
F) All of the above

Question 16

What is the most likely effect of the development of rental movies and online movie streaming on the movie theater (or cinema)  industry?

Accepted Answer

A)   decreased costs of producing movies
B)   increased demand for movie theater tickets
C)   movie theater tickets become an inferior good
D)   increased price elasticity of demand for movie theater ticketsE) A) and B)
F) A) and C)

Question 17

The demand for a luxury good whose purchase would exhaust a big portion of one's income is

Accepted Answer

A)   perfectly price inelastic.
B)   perfectly price elastic.
C)   relatively price inelastic.
D)   relatively price elastic.E) B) and C)
F) A) and C)

Question 18

Sony is considering a 10 percent price reduction on its HD TV sets. If the price-elasticity coefficient for the sets in this price range is 0.75, then the price cut will cause

Accepted Answer

A)   sales quantity to increase and revenues to also increase.
B)   sales quantity to increase but revenues to decrease.
C)   sales quantity to decrease and revenues to also decrease.
D)   sales quantity to decrease but revenues to increase.E) None of the above
F) All of the above

Question 19

An income elasticity coefficient of −1.8 means the product is a normal good.

Accepted Answer

A) True 
 B)False

Question 20

The price elasticity of demand coefficient measures

Accepted Answer

A)   buyer responsiveness to price changes.
B)   the extent to which a demand curve shifts as incomes change.
C)   the slope of the demand curve.
D)   how far business executives can stretch their fixed costs.E) All of the above
F) B) and C)

Exam 6: Elasticity

If 100 shirts are sold when the unit price is $10, while 75 shirts are sold when the unit price is $15, one can conclude that in this price range,

Correct AnswerverifiedShow Answer

The price of season tickets to a performing arts theater decreases by 3 percent. As a result, the quantity demanded increases by 6 percent. The price elasticity of demand for season tickets is

Correct AnswerverifiedShow Answer

A supply curve that is parallel to the horizontal axis suggests that

Correct AnswerverifiedShow Answer

Which of the following is not characteristic of the demand for a commodity that is elastic?

Correct AnswerverifiedShow Answer

When the price of a product is increased 10 percent, the quantity demanded decreases 15 percent. The price-elasticity of demand coefficient for this product is

Correct AnswerverifiedShow Answer

If the income elasticity of demand for store brand macaroni and cheese is −3.00, this means that

Correct AnswerverifiedShow Answer

The demand for a luxury good whose purchase would exhaust a big portion of one's income is

Correct AnswerverifiedShow Answer

Which of the following is correct?

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A supply curve that is a vertical straight line indicates that

Correct AnswerverifiedShow Answer

Suppose you are given the following data on demand for a product. The price elasticity of demand (based on the midpoint formula) when price decreases from $9 to $7 is

Correct AnswerverifiedShow Answer

Sony is considering a 10 percent price reduction on its HD TV sets. If the price-elasticity coefficient for the sets in this price range is 0.75, then the price cut will cause

Correct AnswerverifiedShow Answer

The price elasticity of demand coefficient measures

Correct AnswerverifiedShow Answer

If the elasticity coefficient of supply is 0.7, supply is elastic.

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If quantity demanded is completely unresponsive to price changes, demand is

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An income elasticity coefficient of −1.8 means the product is a normal good.

Correct AnswerverifiedShow Answer

If the government tightens up on drug dealers and raises the costs of dealing illegal drugs, then the drug addicts' dollar expenditures to feed their addiction will tend to

Correct AnswerverifiedShow Answer

The larger the positive cross elasticity coefficient of demand between products X and Y, the

Correct AnswerverifiedShow Answer

What is the most likely effect of the development of rental movies and online movie streaming on the movie theater (or cinema) industry?

Correct AnswerverifiedShow Answer

A demand curve that is parallel to the horizontal axis is

Correct AnswerverifiedShow Answer

Income elasticity measures the effect of a change in income on the purchases of some good or service.

Correct AnswerverifiedShow Answer

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