Question 1

If the price of a cup of Dunkin' Donuts coffee increases while the price of a Starbucks latte is unchanged, we expect the number of lattes purchased at Starbucks to:

Accepted Answer

A)   increase as some people switch from Dunkin' Donuts coffee to Starbucks lattes.
B)   decrease as some people switch from Dunkin' Donuts coffee to the Starbucks lattes.
C)   decrease as some people have less money to spend on caffeinated beverages.
D)   decrease as some people switch from Starbucks lattes to Dunkin' Donuts coffee.E) C) and D)
F) All of the above A

Question 2

The demand for a pack of gum is ______________ than is the demand for a steak because _______________.

Accepted Answer

A)   less price elastic; a pack of gum requires a smaller portion of one's income.
B)   more price elastic; a pack of gum requires a smaller portion of one's income.
C)   less price elastic; a pack of gum is more of a luxury.
D)   more price elastic; a pack of gum is more of a luxury.E) A) and C)
F) B) and C)

Question 3

The more time people have to adjust to a price change:

Accepted Answer

A)   the less elastic their demand will be.
B)   will not affect the elasticity of their response unless it is a luxury good.
C)   the more elastic their demand will be.
D)   will not affect the elasticity of their response unless the good is a necessity.E) B) and C)
F) A) and D)

Question 4

The demand for classical music is _______________ than is the demand for Beethoven's music because _______________.

Accepted Answer

A)   less price elastic; classical music requires a smaller portion of one's income
B)   more price elastic; classical music requires a smaller portion of one's income
C)   less price elastic; the scope of the market for classical music is more broadly defined
D)   more price elastic; the scope of the market for classical music is more broadly definedE) C) and D)
F) A) and B) C

Question 5

Income elasticity will be positive for:

Accepted Answer

A)   all normal goods.
B)   all inferior goods.
C)   only necessities.
D)   only luxury goods with substitutes.E) None of the above
F) All of the above

Question 6

A perfectly inelastic demand:

Accepted Answer

A)   means people will quickly change the quantity they purchase when price changes.
B)   means people will not respond to any change in price.
C)   is demonstrated by a perfectly horizontal demand curve.
D)   has an absolute value greater than 1.E) B) and C)
F) A) and D)

Question 7

Mathematically, price elasticity of demand is the percentage change in the:

Accepted Answer

A)   quantity demanded of a good in response to a given percentage change in the price of the good.
B)   price of a good that is demanded in response to a given percentage change in quantity.
C)   quantity of a good that is supplied in response to a given percentage change in price.
D)   price of a good that is supplied in response to a given percentage change in quantity.E) A) and D)
F) A) and B)

Question 8

Whether a cross-price elasticity of demand is positive or negative indicates whether the:

Accepted Answer

A)   goods are substitutes or complements.
B)   elasticity is reported in absolute value.
C)   good's demand is elastic or inelastic.
D)   good is a luxury or a necessity.E) None of the above
F) All of the above

Question 9

When consumers' incomes decline during a recession, they increase their consumption of instant coffee and reduce their consumption of other beverages. Therefore, instant coffee:

Accepted Answer

A)   is a necessity because consumers buy more during a recession.
B)   has a negative income elasticity of demand.
C)   has an income elasticity of demand greater than zero but less than one.
D)   is normal.E) B) and D)
F) None of the above

Question 10

When price was 5, quantity demanded was 10. When price increased to 6, quantity demanded decreased to 9. Therefore, when price increased, total revenue

Accepted Answer

A)   decreased from 54 to 50, indicating that demand is inelastic.
B)   decreased from 54 to 50, indicating that demand is elastic.
C)   increased from 50 to 54, indicating that demand is inelastic.
D)   increased from 50 to 54, indicating that demand is elastic.E) All of the above
F) B) and D)

Question 11

For many consumers, bacon and eggs are complements. Therefore, egg producers monitor the price of bacon because the cross elasticity between bacon and eggs is

Accepted Answer

A)   negative, and a decrease in the price of bacon will decrease the demand for eggs.
B)   positive, and a decrease in the price of bacon will increase the demand for eggs.
C)   negative, and a decrease in the price of bacon will increase the demand for eggs.
D)   positive, and an increase in the price of bacon will increase the demand for eggs.E) B) and C)
F) All of the above

Question 12

The demand for Farm fresh brand apple juice is likely to be:

Accepted Answer

A)   very price elastic, because there are many close substitutes available.
B)   less price elastic, because there are many close substitutes available.
C)   very price elastic, because the adjustment time is so fast.
D)   less price elastic, because the adjustment time is so slow.E) A) and B)
F) B) and D)

Question 13

If a small percentage change in price causes a larger percentage change in the quantity demanded, the good has:

Accepted Answer

A)   an inelastic demand.
B)   a low magnitude of response.
C)   an elastic demand.
D)   a high magnitude of response.E) B) and D)
F) All of the above

Question 14

A good with a unit elastic demand has a:

Accepted Answer

A)   perfectly horizontal demand curve.
B)   perfectly vertical demand curve.
C)   price elasticity greater than 1.
D)   price elasticity equal to 1.E) All of the above
F) B) and C)

Question 15

The demand for spring break vacations is _________________ than is the demand for textbooks because ________________.

Accepted Answer

A)   less price elastic; vacations have more available substitutes.
B)   more price elastic; vacations have less available substitutes.
C)   less price elastic; vacations are more of a luxury.
D)   more price elastic; vacations are more of a luxury.E) A) and C)
F) B) and C)

Question 16

Suppose when the price of a cookie is $2.50, the quantity demanded is 50, and when the price is $1, the quantity demanded is 200. Using the midpoint method, the price elasticity of demand is:

Accepted Answer

A)   -1.40
B)   -0.72
C)   -140
D)   -7.2E) A) and C)
F) All of the above

Question 17

Suppose when the price of novels goes from $15 to $20 per book, production increases from 760 million books to 840 million books per year. Using the mid-point method, the price elasticity of supply is:

Accepted Answer

A)   0.77
B)   28.5 percent
C)   37 percent
D)   0.35E) A) and D)
F) B) and C)

Question 18

Elasticities are used to measure responses to a change in:

Accepted Answer

A)   the price of a good.
B)   the price of a related good.
C)   income.
D)   All of these are true.E) A) and B)
F) A) and C)

Question 19

Total revenue is the amount:

Accepted Answer

A)   a firm receives from the sale of goods and services.
B)   a firm keeps after all expenses are paid.
C)   of sales that get reinvested in the firm.
D)   a firm receives from dividends.E) A) and B)
F) All of the above

Question 20

When two goods are complements, their cross-price elasticity of demand is:

Accepted Answer

A)   positive.
B)   negative.
C)   zero.
D)   equal to one.E) None of the above
F) C) and D) B

Exam 4: Elasticity

If the price of a cup of Dunkin' Donuts coffee increases while the price of a Starbucks latte is unchanged, we expect the number of lattes purchased at Starbucks to:

Correct AnswerverifiedA

The demand for a pack of gum is ______________ than is the demand for a steak because _______________.

Correct AnswerverifiedShow Answer

The more time people have to adjust to a price change:

Correct AnswerverifiedShow Answer

The demand for classical music is _______________ than is the demand for Beethoven's music because _______________.

Correct AnswerverifiedC

Income elasticity will be positive for:

Correct AnswerverifiedShow Answer

A perfectly inelastic demand:

Correct AnswerverifiedShow Answer

Mathematically, price elasticity of demand is the percentage change in the:

Correct AnswerverifiedShow Answer

Whether a cross-price elasticity of demand is positive or negative indicates whether the:

Correct AnswerverifiedShow Answer

When consumers' incomes decline during a recession, they increase their consumption of instant coffee and reduce their consumption of other beverages. Therefore, instant coffee:

Correct AnswerverifiedShow Answer

When price was 5, quantity demanded was 10. When price increased to 6, quantity demanded decreased to 9. Therefore, when price increased, total revenue

Correct AnswerverifiedShow Answer

For many consumers, bacon and eggs are complements. Therefore, egg producers monitor the price of bacon because the cross elasticity between bacon and eggs is

Correct AnswerverifiedShow Answer

The demand for Farm fresh brand apple juice is likely to be:

Correct AnswerverifiedShow Answer

If a small percentage change in price causes a larger percentage change in the quantity demanded, the good has:

Correct AnswerverifiedShow Answer

A good with a unit elastic demand has a:

Correct AnswerverifiedShow Answer

The demand for spring break vacations is _________________ than is the demand for textbooks because ________________.

Correct AnswerverifiedShow Answer

Suppose when the price of a cookie is $2.50, the quantity demanded is 50, and when the price is $1, the quantity demanded is 200. Using the midpoint method, the price elasticity of demand is:

Correct AnswerverifiedShow Answer

Suppose when the price of novels goes from $15 to $20 per book, production increases from 760 million books to 840 million books per year. Using the mid-point method, the price elasticity of supply is:

Correct AnswerverifiedShow Answer

Elasticities are used to measure responses to a change in:

Correct AnswerverifiedShow Answer

Total revenue is the amount:

Correct AnswerverifiedShow Answer

When two goods are complements, their cross-price elasticity of demand is:

Correct AnswerverifiedB

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A

The demand for a pack of gum is than is the demand for a steak because _.

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The demand for classical music is _ than is the demand for Beethoven's music because _.

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C

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The demand for spring break vacations is _ than is the demand for textbooks because .

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B