Question 1

If a 10 percent decrease in the price of product A brings about a 3 percent increase in the sales of product B, then:

Accepted Answer

A)   products A and B are complementary.
B)   the cross elasticity of demand between these two products is positive.
C)   products A and B are substitutes.
D)   the demand for these products is inelastic.
E)   the total revenue earned from product A will decrease.F) B) and E)
G) B) and D)

Question 2

The cross elasticity of demand for substitute products must:

Accepted Answer

A)   be greater than one.
B)   be less than one.
C)   be zero.
D)   exceed zero.
E)   be negative.F) All of the above
G) None of the above

Question 3

A perfectly elastic demand curve has a price elasticity of demand coefficient of:

Accepted Answer

A)   zero.
B)   1.
C)   greater than 1, but less than infinity.
D)   less than 1, but greater than zero.
E)   infinity.F) A) and B)
G) A) and C)

Question 4

As one moves down a straight-line, down-sloping demand curve, price elasticity will:

Accepted Answer

A)   change from elastic, to unit elastic, then to inelastic.
B)   remain the same between any two points.
C)   change from inelastic, to elastic, then to unit elastic.
D)   change from unit elastic, to elastic, then to inelastic.
E)   change from elastic, to inelastic, then to unit elastic.F) B) and E)
G) All of the above A

Question 5

The cross elasticity of demand for complementary products must:

Accepted Answer

A)   be greater than one.
B)   be less than one.
C)   be zero.
D)   exceed zero.
E)   be negative.F) A) and C)
G) None of the above

Question 6

Dana is an art historian who needs to travel to Italy to do research. Art historians usually don't have a lot of money, and therefore are very sensitive to price changes. Dana's funding agency pays her a fixed amount to travel. At current exchange rates, Dana can stay in Italy for 35 days. If the exchange rate improves by 10 percent, she can stay for 40 days. What is Dana's price elasticity of demand for days spent in Italy?

Accepted Answer

A)   It is approximately equal to 2.3.
B)   It is approximately equal to 1.6.
C)   It is approximately equal to 1.4.
D)   It is approximately equal to 0.4.
E)   It is approximately equal to 0.1.F) All of the above
G) A) and C)

Question 7

Consider the market for bicycles. If a dealer cuts prices by 10 percent and sells 20 percent more bikes, then demand for bicycles is:

Accepted Answer

A)   inelastic, and total revenue will increase.
B)   elastic, and total revenue will increase.
C)   inelastic, and total revenue will decrease.
D)   elastic, and total revenue will decrease.
E)   unit elastic, and total revenue will remain the same.F) A) and E)
G) C) and D) B

Question 8

Suppose there is no change in total revenue when the price changes. The demand curve for this good is:

Accepted Answer

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

Question 9

On a part of the demand curve where the price elasticity of demand is less than 1, a decrease in price:

Accepted Answer

A)   is impossible.
B)   will increase total revenue.
C)   will decrease total revenue.
D)   raises the price elasticity of demand.
E)   decreases quantity demanded.F) B) and C)
G) All of the above

Question 10

As price decreases and we move down further along a linear demand curve, the price elasticity of demand will:

Accepted Answer

A)   decrease.
B)   increase.
C)   stay the same.
D)   approach infinity.
E)   increase or decrease.F) A) and E)
G) None of the above

Question 11

To determine whether two goods are substitutes or complements, an economist would estimate the:

Accepted Answer

A)   price elasticity of demand.
B)   income elasticity of demand.
C)   cross-elasticity of demand.
D)   price elasticity of supply.E) A) and C)
F) None of the above

Question 12

If a 10 percent price increase causes the quantity demanded for a good to decrease by 5 percent, demand is elastic.

Accepted Answer

A) True 
 B)False

Question 13

Two goods are complementary if:

Accepted Answer

A)   they are part of the basic food group.
B)   each performs the same basic task.
C)   the cross elasticity of demand is positive.
D)   they are used together.
E)   the income elasticity of demand is negative.F) B) and D)
G) None of the above

Question 14

The longer the time period under study,

Accepted Answer

A)   the more elastic is the price elasticity of demand.
B)   the less sensitive consumers will be to price changes.
C)   the less adjustment consumers will make to price changes.
D)   the more inelastic is the price elasticity of demand.
E)   the more likely any given price cut will result in a smaller reaction by the consumer.F) B) and E)
G) D) and E)

Question 15

If a good has a price elasticity of demand coefficient greater than 1, total revenue can be increased by raising the price.
​

Accepted Answer

A) True 
 B)False

Question 16

Exhibit 5-6 Demand curve for concert tickets
​ 
-In Exhibit 5-6, if promoters lower their ticket price form $30 to $20, then:

Accepted Answer

A)   they will receive less money from their ticket sales.
B)   people will continue to buy the same number of tickets.
C)   customers will spend less total money on concert tickets.
D)   both ticket sales and total revenue will rise.E) B) and C)
F) None of the above

Question 17

Looking at the relationship between elasticity and total revenue, we can see that ____.

Accepted Answer

A)   b and c
B)   when demand is unit elastic, small price changes don't change total revenue
C)   when a good is price inelastic, revenue increases when prices increase
D)   when a good is price elastic, revenue increases when prices increase
E)   total revenue is maximized when the elasticity has stopped changingF) A) and B)
G) B) and E)

Question 18

Exhibit 5-7 Demand curve for concert tickets
​ 
-According to Exhibit 5-7, the demand for concert tickets is:

Accepted Answer

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

Question 19

A good is classified as inferior if:

Accepted Answer

A)   consumers buy less when the price rises.
B)   consumers buy less when income rises.
C)   consumers buy less when the price falls.
D)   consumers buy more when income rises.
E)   better quality goods exist.F) A) and B)
G) C) and D)

Question 20

The president of Tucker Motors says, "Lowering the price won't sell a single additional Tucker car." The president believes that the price elasticity of demand is:

Accepted Answer

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

Exam 5: Price Elasticity of Demand and Supply

If a 10 percent decrease in the price of product A brings about a 3 percent increase in the sales of product B, then:

Correct Answer
verified

The cross elasticity of demand for substitute products must:

Correct Answer
verified

A perfectly elastic demand curve has a price elasticity of demand coefficient of:

Correct Answer
verified

As one moves down a straight-line, down-sloping demand curve, price elasticity will:

Correct Answer
verified
A

The cross elasticity of demand for complementary products must:

Correct Answer
verified

Correct Answer
verified

Consider the market for bicycles. If a dealer cuts prices by 10 percent and sells 20 percent more bikes, then demand for bicycles is:

Correct Answer
verified
B

Suppose there is no change in total revenue when the price changes. The demand curve for this good is:

Correct Answer
verified

On a part of the demand curve where the price elasticity of demand is less than 1, a decrease in price:

Correct Answer
verified

As price decreases and we move down further along a linear demand curve, the price elasticity of demand will:

Correct Answer
verified

To determine whether two goods are substitutes or complements, an economist would estimate the:

Correct Answer
verified

If a 10 percent price increase causes the quantity demanded for a good to decrease by 5 percent, demand is elastic.

Correct Answer
verified

Two goods are complementary if:

Correct Answer
verified

The longer the time period under study,

Correct Answer
verified

If a good has a price elasticity of demand coefficient greater than 1, total revenue can be increased by raising the price.

Correct Answer
verified

Exhibit 5-6 Demand curve for concert tickets -In Exhibit 5-6, if promoters lower their ticket price form $30 to $20, then:

Correct Answer
verified

Looking at the relationship between elasticity and total revenue, we can see that ____.

Correct Answer
verified

Exhibit 5-7 Demand curve for concert tickets -According to Exhibit 5-7, the demand for concert tickets is:

Correct Answer
verified
A

A good is classified as inferior if:

Correct Answer
verified

The president of Tucker Motors says, "Lowering the price won't sell a single additional Tucker car." The president believes that the price elasticity of demand is:

Correct Answer
verified

Exam 5: Price Elasticity of Demand and Supply

If a 10 percent decrease in the price of product A brings about a 3 percent increase in the sales of product B, then:

Correct AnswerverifiedShow Answer

The cross elasticity of demand for substitute products must:

Correct AnswerverifiedShow Answer

A perfectly elastic demand curve has a price elasticity of demand coefficient of:

Correct AnswerverifiedShow Answer

As one moves down a straight-line, down-sloping demand curve, price elasticity will:

Correct AnswerverifiedA

The cross elasticity of demand for complementary products must:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Consider the market for bicycles. If a dealer cuts prices by 10 percent and sells 20 percent more bikes, then demand for bicycles is:

Correct AnswerverifiedB

Suppose there is no change in total revenue when the price changes. The demand curve for this good is:

Correct AnswerverifiedShow Answer

On a part of the demand curve where the price elasticity of demand is less than 1, a decrease in price:

Correct AnswerverifiedShow Answer

As price decreases and we move down further along a linear demand curve, the price elasticity of demand will:

Correct AnswerverifiedShow Answer

To determine whether two goods are substitutes or complements, an economist would estimate the:

Correct AnswerverifiedShow Answer

If a 10 percent price increase causes the quantity demanded for a good to decrease by 5 percent, demand is elastic.

Correct AnswerverifiedShow Answer

Two goods are complementary if:

Correct AnswerverifiedShow Answer

The longer the time period under study,

Correct AnswerverifiedShow Answer

If a good has a price elasticity of demand coefficient greater than 1, total revenue can be increased by raising the price. ​

Correct AnswerverifiedShow Answer

Exhibit 5-6 Demand curve for concert tickets ​ -In Exhibit 5-6, if promoters lower their ticket price form $30 to $20, then:

Correct AnswerverifiedShow Answer

Looking at the relationship between elasticity and total revenue, we can see that ____.

Correct AnswerverifiedShow Answer

Exhibit 5-7 Demand curve for concert tickets ​ -According to Exhibit 5-7, the demand for concert tickets is:

Correct AnswerverifiedA

A good is classified as inferior if:

Correct AnswerverifiedShow Answer

The president of Tucker Motors says, "Lowering the price won't sell a single additional Tucker car." The president believes that the price elasticity of demand is:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
B

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

If a good has a price elasticity of demand coefficient greater than 1, total revenue can be increased by raising the price.

Correct Answer
verified

Exhibit 5-6 Demand curve for concert tickets -In Exhibit 5-6, if promoters lower their ticket price form $30 to $20, then:

Correct Answer
verified

Correct Answer
verified

Exhibit 5-7 Demand curve for concert tickets -According to Exhibit 5-7, the demand for concert tickets is:

Correct Answer
verified
A

Correct Answer
verified

Correct Answer
verified