Question 1

Donuts and coffee are complements. When the price of a donut increases, the demand for coffee _______ And the cross elasticity of demand for coffee with respect to the price of a donut is _______.

Accepted Answer

A)   decreases; positive
B)   decreases; negative
C)   increases; negative
D)   increases; positiveE) B) and C)
F) A) and D)

Question 2

A fall in the price of cabbage from $10.50 to $9.50 per carton increases the quantity demanded from 18,800 to 21,200 cartons. The price elasticity of demand is

Accepted Answer

A)   1.25.
B)   0.80.
C)   8.00.
D)   1.20.E) None of the above
F) All of the above

Question 3

A rise in the price of cabbage from $14 to $18 per carton increases the quantity supplied from 4,000 to 6,000 cartons. The elasticity of supply is

Accepted Answer

A)   0.8.
B)   1.0.
C)   0.6.
D)   1.6.E) A) and D)
F) All of the above D

Question 4

-The table above gives some data on the supply of roses in a small town. When the price rises from
$15 a dozen to $25 a dozen, the elasticity of supply is

Accepted Answer

A)   0.80.
B)   5.00.
C)   0.20.
D)   1.25.E) A) and C)
F) B) and C)

Question 5

If the demand curve for oranges is a downward- sloping straight line, the price elasticity of demand will increase the

Accepted Answer

A)   higher the price of oranges.
B)   higher the income level of consumers.
C)   higher the price of other fruits.
D)   lower the price of oranges.E) B) and D)
F) B) and C)

Question 6

At the midpoint of a downward- sloping straight- line demand curve, the demand

Accepted Answer

A)   is inelastic.
B)   is elastic.
C)   has an elasticity exactly equal to zero.
D)   is unit elastic.E) A) and B)
F) B) and C)

Question 7

If a small percentage decrease in the price of chocolate causes a larger percentage decrease in the quantity supplied, the

Accepted Answer

A)   demand for chocolate is elastic.
B)   supply of chocolate is elastic.
C)   demand for chocolate is inelastic.
D)   supply of chocolate is inelastic.E) A) and D)
F) All of the above

Question 8

-The above figure illustrates the demand for peanuts. If the price falls from $12 to $9 a bag, total revenue will _______, and if the price rises from $3 to $6 a bag, total revenue will _______.

Accepted Answer

A)   increase; decrease
B)   decrease; decrease
C)   increase; increase
D)   decrease; increaseE) A) and C)
F) None of the above

Question 9

If a 6 per cent decrease in the price leads to a 5 per cent increase in the quantity demanded, the price elasticity of demand is

Accepted Answer

A)   1.20.
B)   0.60.
C)   0.30.
D)   0.83.E) None of the above
F) All of the above

Question 10

A university conducts a survey of students, which shows that a 10 per cent tuition fee hike would lead to a 12 per cent decrease in enrolments. If the university wants to increase its total revenue, it should _______ tuition fees because the demand for education at this university is _______.

Accepted Answer

A)   not raise; inelastic
B)   not raise; elastic
C)   raise; inelastic
D)   raise; elasticE) A) and D)
F) A) and C)

Question 11

To maximise its revenue,

Accepted Answer

A)   a firm facing elastic demand should always raise its price.
B)   a firm should always charge the highest price possible regardless of the elasticity of demand.
C)   a firm facing inelastic demand should always raise its price.
D)   None of the above answers is correct.E) A) and D)
F) B) and C)

Question 12

Suppose a 10 per cent increase in the price of textbooks decreases the quantity demanded by 20 per cent. The elasticity of demand for textbooks is

Accepted Answer

A)   10.0.
B)   0.2.
C)   2.0.
D)   5.0.E) B) and C)
F) B) and D)

Question 13

Because of an increase in the price of leather, the price of a pair of women's dress shoes increased by 12 per cent. If the price elasticity of demand for women's dress shoes is 0.85, which of the following will happen?

Accepted Answer

A)   The number of pairs of women's dress shoes demanded will decrease by 10.2 per cent.
B)   Total expenditure on women's dress shoes will decrease.
C)   Total revenue from the sale of women's dress shoes will decrease.
D)   None of the aboveE) C) and D)
F) All of the above A

Question 14

Demand is inelastic if

Accepted Answer

A)   the price elasticity of demand is less than 1.
B)   the price elasticity of demand is greater than 1.
C)   the quantity demanded is very responsive to changes in price.
D)   a large change in quantity demanded results in a small change in price.E) B) and D)
F) None of the above

Question 15

To say that turnips are inferior goods means that the income elasticity of demand

Accepted Answer

A)   is negative.
B)   is positive but could be greater than or less then (or equal to)  1.
C)   is definitely greater than 1.
D)   is definitely between 0 and 1.E) None of the above
F) A) and B) A

Question 16

On most days the price of a rose is $1 and 80 roses are purchased. On Valentine's Day demand increases so that the price of a rose rises to $2 and 320 roses are purchased. Therefore, the price elasticity of

Accepted Answer

A)   supply of roses is about 0.55.
B)   demand for roses is about 1.8.
C)   supply of roses is about 1.8.
D)   demand for roses is about 0.55.E) B) and D)
F) B) and C)

Question 17

-The increase in the demand for widgets, shown in the figure above, is the result of an increase in the price of McBoover devices. Therefore,

Accepted Answer

A)   widgets are a normal good.
B)   McBoover devices are a normal good.
C)   widgets and McBoover devices are substitutes.
D)   widgets and McBoover devices are complements.E) A) and D)
F) A) and B)

Question 18

If the cross elasticity of demand between goods X and Y is positive and between goods X and Z is negative, then X and Y are _______ and X and Z are _______.

Accepted Answer

A)   price inelastic; income elastic
B)   substitutes; complements
C)   price inelastic; complements
D)   complements; substitutesE) A) and C)
F) All of the above

Question 19

The price elasticity of demand measures

Accepted Answer

A)   how sensitive the quantity demanded is to changes in demand.
B)   the responsiveness of the quantity demanded to changes in price.
C)   how often the price of a good changes.
D)   the slope of a budget curve.E) A) and D)
F) None of the above

Question 20

The price elasticity of demand for new cars is 1.2. Hence, a 10 per cent price increase will

Accepted Answer

A)   decrease the quantity of new cars demanded by 1.2 per cent.
B)   increase consumer expenditure on new cars by 1.2 per cent.
C)   increase consumer expenditure on new cars by 12 per cent.
D)   decrease the quantity of new cars demanded by 12 per cent.E) B) and C)
F) A) and D)

Exam 4: Elasticity

Donuts and coffee are complements. When the price of a donut increases, the demand for coffee _______ And the cross elasticity of demand for coffee with respect to the price of a donut is _______.

Correct AnswerverifiedShow Answer

A fall in the price of cabbage from $10.50 to $9.50 per carton increases the quantity demanded from 18,800 to 21,200 cartons. The price elasticity of demand is

Correct AnswerverifiedShow Answer

A rise in the price of cabbage from $14 to $18 per carton increases the quantity supplied from 4,000 to 6,000 cartons. The elasticity of supply is

Correct AnswerverifiedD

-The table above gives some data on the supply of roses in a small town. When the price rises from $15 a dozen to $25 a dozen, the elasticity of supply is

Correct AnswerverifiedShow Answer

If the demand curve for oranges is a downward- sloping straight line, the price elasticity of demand will increase the

Correct AnswerverifiedShow Answer

At the midpoint of a downward- sloping straight- line demand curve, the demand

Correct AnswerverifiedShow Answer

If a small percentage decrease in the price of chocolate causes a larger percentage decrease in the quantity supplied, the

Correct AnswerverifiedShow Answer

-The above figure illustrates the demand for peanuts. If the price falls from $12 to $9 a bag, total revenue will _______, and if the price rises from $3 to $6 a bag, total revenue will _______.

Correct AnswerverifiedShow Answer

If a 6 per cent decrease in the price leads to a 5 per cent increase in the quantity demanded, the price elasticity of demand is

Correct AnswerverifiedShow Answer

A university conducts a survey of students, which shows that a 10 per cent tuition fee hike would lead to a 12 per cent decrease in enrolments. If the university wants to increase its total revenue, it should _______ tuition fees because the demand for education at this university is _______.

Correct AnswerverifiedShow Answer

To maximise its revenue,

Correct AnswerverifiedShow Answer

Suppose a 10 per cent increase in the price of textbooks decreases the quantity demanded by 20 per cent. The elasticity of demand for textbooks is

Correct AnswerverifiedShow Answer

Because of an increase in the price of leather, the price of a pair of women's dress shoes increased by 12 per cent. If the price elasticity of demand for women's dress shoes is 0.85, which of the following will happen?

Correct AnswerverifiedA

Demand is inelastic if

Correct AnswerverifiedShow Answer

To say that turnips are inferior goods means that the income elasticity of demand

Correct AnswerverifiedA

On most days the price of a rose is $1 and 80 roses are purchased. On Valentine's Day demand increases so that the price of a rose rises to $2 and 320 roses are purchased. Therefore, the price elasticity of

Correct AnswerverifiedShow Answer

-The increase in the demand for widgets, shown in the figure above, is the result of an increase in the price of McBoover devices. Therefore,

Correct AnswerverifiedShow Answer

If the cross elasticity of demand between goods X and Y is positive and between goods X and Z is negative, then X and Y are _______ and X and Z are _______.

Correct AnswerverifiedShow Answer

The price elasticity of demand measures

Correct AnswerverifiedShow Answer

The price elasticity of demand for new cars is 1.2. Hence, a 10 per cent price increase will

Correct AnswerverifiedShow Answer

Donuts and coffee are complements. When the price of a donut increases, the demand for coffee _ And the cross elasticity of demand for coffee with respect to the price of a donut is _.

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-The above figure illustrates the demand for peanuts. If the price falls from $12 to $9 a bag, total revenue will _, and if the price rises from $3 to $6 a bag, total revenue will _.

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A university conducts a survey of students, which shows that a 10 per cent tuition fee hike would lead to a 12 per cent decrease in enrolments. If the university wants to increase its total revenue, it should _ tuition fees because the demand for education at this university is _.

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If the cross elasticity of demand between goods X and Y is positive and between goods X and Z is negative, then X and Y are _ and X and Z are _.

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