Question 1

Suppose the price of mascara is $12 and the quantity demanded is 450. When the price drops to $8, the quantity demanded increases to 550. Using the mid-point method, what is the price elasticity of demand?

Accepted Answer

A)  −0.5
B)  −2.0
C)  −55
D)  −180E) B) and D)
F) B) and C)

Question 2

Assuming price elasticity of demand is reported as an absolute value, a price elasticity of demand less than one indicates that demand for the good is:

Accepted Answer

A)  elastic.
B)  inelastic.
C)  unitary elastic.
D)  unrelated to price.E) All of the above
F) B) and D)

Question 3

If the price of a good increases by 10 percent and its quantity demanded drops by 50 percent, the price elasticity of demand is:

Accepted Answer

A)  1.0.
B)  0.2.
C)  −5.0.
D)  2.0.E) A) and B)
F) A) and C)

Question 4

Assuming price elasticity of demand is reported as an absolute value, a price elasticity of demand greater than one indicates that demand for the good is:

Accepted Answer

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

Question 5

If the price of hairbrushes decreases by 20 percent and the quantity of hairbrushes demanded increases by 2 percent, the price elasticity of demand is _____ and is _____.

Accepted Answer

A)  −0.1; elastic
B)  10; elastic
C)  −0.1; inelastic
D)  10; inelasticE) A) and B)
F) A) and C)

Question 6

Consider the demand curve in the graph shown. Suppose price is initially $11 and falls to $8. Which of the following statements is true?

Accepted Answer

A)  The quantity effect will outweigh the price effect, and total revenue will rise.
B)  The quantity effect will outweigh the price effect, and total revenue will fall.
C)  The price effect will outweigh the quantity effect, and total revenue will rise.
D)  The price effect will outweigh the quantity effect, and total revenue will fall.E) A) and D)
F) A) and C)

Question 7

If a good has unitary price elasticity of demand, then the absolute value of the percentage change in _____ equals _____.

Accepted Answer

A)  quantity demanded; one
B)  price; one
C)  quantity demanded; the absolute value of the corresponding percentage change in price
D)  price; the absolute value of the percentage change in quantity demanded, plus oneE) B) and C)
F) A) and D)

Question 8

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 correct.E) A) and D)
F) None of the above

Question 9

The demand for dolls is _____ price elastic than the demand for Barbie dolls because _____.

Accepted Answer

A)  less; the scope of the market for dolls is more broadly defined
B)  more; the scope of the market for dolls is more broadly defined
C)  less; Barbie dolls have more available substitutes
D)  more; Barbie dolls have more available substitutesE) A) and C)
F) B) and D)

Question 10

For many consumers, bacon and eggs are complements. Egg producers monitor the price of bacon because the cross-price elasticity of demand between bacon and eggs is _____, meaning a(n) _____ in the price of bacon will _____ the demand for eggs.

Accepted Answer

A)  negative; decrease; decrease
B)  positive; decrease; increase
C)  negative; decrease; increase
D)  positive; increase; increaseE) C) and D)
F) A) and D)

Question 11

In general, the more elastic a demand curve is, the:

Accepted Answer

A)  flatter it will be.
B)  steeper it will be.
C)  more bowed-in it will be.
D)  faster it will shift when price changes.E) None of the above
F) A) and B)

Question 12

If a large percentage change in price leads to a smaller percentage change in quantity demanded, the good has a

Accepted Answer

A)  very elastic demand.
B)  less elastic demand.
C)  low magnitude of response.
D)  high magnitude of response.E) A) and B)
F) All of the above

Question 13

The demand for a pack of gum is _____ price elastic than the demand for a steak because a pack of gum _____.

Accepted Answer

A)  less; requires a smaller portion of one's income
B)  more; requires a smaller portion of one's income
C)  less; is more of a luxury
D)  more; is more of a luxuryE) A) and B)
F) None of the above

Question 14

The demand for Ben & Jerry's ice cream is _____ price elastic than the demand for all ice cream because _____.

Accepted Answer

A)  less; the scope of the market for Ben & Jerry's is less broadly defined
B)  more; the scope of the market for Ben & Jerry's is less broadly defined
C)  less; Ben & Jerry's has fewer available substitutes
D)  more; Ben & Jerry's has fewer available substitutesE) B) and D)
F) All of the above

Question 15

Suppose when the price of cupcakes goes from $2 to $3 per cupcake, production increases from 350,000 cupcakes to 450,000 cupcakes per year. Using the mid-point method, what is the price elasticity of supply?

Accepted Answer

A)  1.6
B)  0.4
C)  0.25
D)  0.63E) All of the above
F) A) and C)

Question 16

The demand for a particular brand of 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) None of the above
F) A) and B)

Question 17

An increase in price causes:I. a decrease in revenue due to the price effect.II. an increase in revenue due to the price effect.III. a decrease in revenue due to the quantity effect.IV. an increase in revenue due to the quantity effect.

Accepted Answer

A)  I and III
B)  II and III
C)  II and IV
D)  II onlyE) None of the above
F) All of the above

Question 18

Which elasticity measures producers' responsiveness to a change in price?

Accepted Answer

A)  Price elasticity of demand
B)  Cross-price elasticity
C)  Price elasticity of supply
D)  Income elasticity of supplyE) A) and D)
F) A) and C)

Question 19

Suppose the price of a movie ticket is $7.50 and the quantity demanded is 550. When the increases to $8.50, the quantity demanded drops to 450. Using the mid-point method, what is the price elasticity of demand for movie tickets?

Accepted Answer

A)  0.625
B)  −0.625
C)  −1.6
D)  1.6E) A) and C)
F) A) and B)

Question 20

Suppose the price of cereal increases by 10 percent and the amount of milk demanded decreases by 2 percent. What is the cross-price elasticity of demand between these two goods?

Accepted Answer

A)  5
B)  −5
C)  0.2
D)  −0.2E) B) and C)
F) A) and B)

Exam 4: Elasticity

Assuming price elasticity of demand is reported as an absolute value, a price elasticity of demand less than one indicates that demand for the good is:

Correct AnswerverifiedShow Answer

The demand for a particular brand of apple juice is likely to be:

Correct AnswerverifiedShow Answer

Suppose the price of mascara is $12 and the quantity demanded is 450. When the price drops to $8, the quantity demanded increases to 550. Using the mid-point method, what is the price elasticity of demand?

Correct AnswerverifiedShow Answer

Elasticities are used to measure responses to a change in:

Correct AnswerverifiedShow Answer

If a good has unitary price elasticity of demand, then the absolute value of the percentage change in _____ equals _____.

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If the price of a good increases by 10 percent and its quantity demanded drops by 50 percent, the price elasticity of demand is:

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Which elasticity measures producers' responsiveness to a change in price?

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Suppose the price of a movie ticket is $7.50 and the quantity demanded is 550. When the increases to $8.50, the quantity demanded drops to 450. Using the mid-point method, what is the price elasticity of demand for movie tickets?

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Consider the demand curve in the graph shown. Suppose price is initially $11 and falls to $8. Which of the following statements is true?

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If a large percentage change in price leads to a smaller percentage change in quantity demanded, the good has a

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The demand for dolls is _____ price elastic than the demand for Barbie dolls because _____.

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Assuming price elasticity of demand is reported as an absolute value, a price elasticity of demand greater than one indicates that demand for the good is:

Correct AnswerverifiedShow Answer

The demand for Ben & Jerry's ice cream is _____ price elastic than the demand for all ice cream because _____.

Correct AnswerverifiedShow Answer

If the price of hairbrushes decreases by 20 percent and the quantity of hairbrushes demanded increases by 2 percent, the price elasticity of demand is _____ and is _____.

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The demand for a pack of gum is _____ price elastic than the demand for a steak because a pack of gum _____.

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Suppose the price of cereal increases by 10 percent and the amount of milk demanded decreases by 2 percent. What is the cross-price elasticity of demand between these two goods?

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For many consumers, bacon and eggs are complements. Egg producers monitor the price of bacon because the cross-price elasticity of demand between bacon and eggs is _____, meaning a(n) _____ in the price of bacon will _____ the demand for eggs.

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An increase in price causes:I. a decrease in revenue due to the price effect.II. an increase in revenue due to the price effect.III. a decrease in revenue due to the quantity effect.IV. an increase in revenue due to the quantity effect.

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Suppose when the price of cupcakes goes from $2 to $3 per cupcake, production increases from 350,000 cupcakes to 450,000 cupcakes per year. Using the mid-point method, what is the price elasticity of supply?

Correct AnswerverifiedShow Answer

In general, the more elastic a demand curve is, the:

Correct AnswerverifiedShow Answer

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If a good has unitary price elasticity of demand, then the absolute value of the percentage change in _ equals _.

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The demand for dolls is _ price elastic than the demand for Barbie dolls because _.

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The demand for Ben & Jerry's ice cream is _ price elastic than the demand for all ice cream because _.

Correct Answer
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If the price of hairbrushes decreases by 20 percent and the quantity of hairbrushes demanded increases by 2 percent, the price elasticity of demand is _ and is _.

Correct Answer
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The demand for a pack of gum is _ price elastic than the demand for a steak because a pack of gum _.

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For many consumers, bacon and eggs are complements. Egg producers monitor the price of bacon because the cross-price elasticity of demand between bacon and eggs is ___, meaning a(n) _ in the price of bacon will ___ the demand for eggs.

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