Question 1

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) B) and D)
F) All of the above

Question 2

We would expect the cross elasticity of demand between Pepsi and Coke to be

Accepted Answer

A)  positive, indicating normal goods.
B)  positive, indicating inferior goods.
C)  positive, indicating substitute goods.
D)  negative, indicating substitute goods.E) A) and B)
F) B) and C)

Question 3

The total revenue received by sellers of a good is computed by

Accepted Answer

A)  multiplying the price times the quantity sold.
B)  adding the price and the quantity sold.
C)  multiplying the percentage change in price times the percentage change in quantity.
D)  dividing the percentage change in quantity by the percentage change in price.E) A) and B)
F) A) and C)

Question 4

The total-revenue test for elasticity

Accepted Answer

A)  is equally applicable to both demand and supply.
B)  does not apply to demand, because price and quantity are inversely related.
C)  does not apply to supply, because price and total revenue have a positive correlation.
D)  applies to the short-run supply curve but not to the long-run supply curve.E) A) and C)
F) All of the above

Question 5

The price elasticity of demand for a popular sporting event is 1.2.If the price of a ticket to this event increases by 10 percent, the quantity of tickets demanded will

Accepted Answer

A)  decrease by 8.3 percent.
B)  decrease by 12 percent.
C)  increase by 12 percent.
D)  increase by 8.3 percent.E) A) and D)
F) None of the above

Question 6

The cross elasticity of demand between Quaker State motor oil and Texaco motor oil is likely to be

Accepted Answer

A)  zero.
B)  a positive number.
C)  a small negative number.
D)  a large negative number.E) A) and D)
F) B) and D)

Question 7

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) B) and D)
F) None of the above

Question 8

The demand for a necessity whose cost is a small portion of one's total income is

Accepted Answer

A)  perfectly price inelastic.
B)  perfectly price elastic.
C)  relatively price inelastic.
D)  relatively price elastic.E) None of the above
F) All of the above

Question 9

In the price range where demand is elastic, if the seller of the good raises its price, then total revenues will increase.

Accepted Answer

A) True 
 B)False

Question 10

The price-elasticity of demand coefficient, Ed, is measured in terms of

Accepted Answer

A)  dollar change in price and unit change in quantity demanded.
B)  dollar change in price and amount of shift in demand.
C)  percentage change in price and percentage change in quantity demanded.
D)  percentage change in price and unit change in demand.E) All of the above
F) B) and C)

Question 11

A product that is successfully advertised and has loyal buyers would have a low price-elasticity coefficient.

Accepted Answer

A) True 
 B)False

Question 12

You are the newly appointed sales manager of the Rock Computer Tablets Company and have been charged with the task of increasing revenues.Your economics consultants have informed you that at present price and output levels, price elasticity of demand for your product is less than one.You should

Accepted Answer

A)  decrease prices.
B)  increase prices.
C)  hold prices constant and increase supply.
D)  cut advertising expenditures to save money.E) A) and D)
F) B) and D)

Question 13

If the price elasticity of demand for a product is unity, a decrease in price will

Accepted Answer

A)  have no effect upon the amount purchased.
B)  increase the quantity demanded and increase total revenue.
C)  increase the quantity demanded but decrease total revenue.
D)  increase the quantity demanded, but total revenue will be unchanged.E) None of the above
F) B) and C)

Question 14

A perfectly inelastic demand schedule

Accepted Answer

A)  rises upward and to the right but has a constant slope.
B)  can be represented by a line parallel to the vertical axis.
C)  cannot be shown on a two-dimensional graph.
D)  can be represented by a line parallel to the horizontal axis.E) A) and B)
F) A) and C)

Question 15

Which type of goods is most adversely affected by recessions?

Accepted Answer

A)  Goods for which the income elasticity coefficient is relatively low or negative.
B)  Goods for which the income elasticity coefficient is relatively high and positive.
C)  Goods for which the cross elasticity coefficient is positive.
D)  Goods for which the cross elasticity coefficient is negative.E) C) and D)
F) A) and B)

Question 16

If the price-elasticity coefficient for a product is 0.68 and the seller wants to raise revenues by changing its price, then the seller should cut the price of the product.

Accepted Answer

A) True 
 B)False

Question 17

The supply of product X is elastic if the price of X rises by

Accepted Answer

A)  5 percent and quantity supplied rises by 7 percent.
B)  8 percent and quantity supplied rises by 8 percent.
C)  10 percent and quantity supplied remains the same.
D)  7 percent and quantity supplied rises by 5 percent.E) A) and D)
F) B) and C)

Question 18

We would expect the cross elasticity of demand between dress shirts and ties to be

Accepted Answer

A)  positive, indicating normal goods.
B)  positive, indicating complementary goods.
C)  negative, indicating substitute goods.
D)  negative, indicating complementary goods.E) A) and D)
F) A) and C)

Question 19

A good with a price-elasticity coefficient of 0.75 has a demand that is price-inelastic.

Accepted Answer

A) True 
 B)False

Question 20

The coefficient of price-elasticity of supply for a product is 2 if

Accepted Answer

A)  a 1 percent decrease in the price causes a 0.2 percent decrease in quantity supplied.
B)  a 2 percent decrease in price causes a 1 percent decrease in quantity supplied.
C)  a 1 percent decrease in price causes a 2 percent decrease in quantity supplied.
D)  a 2 percent decrease in price causes a 2 percent decrease in quantity supplied.E) A) and B)
F) A) and C)

Exam 6: Elasticity

Which type of goods is most adversely affected by recessions?

Correct AnswerverifiedShow Answer

In the price range where demand is elastic, if the seller of the good raises its price, then total revenues will increase.

Correct AnswerverifiedShow Answer

The total-revenue test for elasticity

Correct AnswerverifiedShow Answer

The price elasticity of demand for a popular sporting event is 1.2.If the price of a ticket to this event increases by 10 percent, the quantity of tickets demanded will

Correct AnswerverifiedShow Answer

The demand for a necessity whose cost is a small portion of one's total income is

Correct AnswerverifiedShow Answer

If the price-elasticity coefficient for a product is 0.68 and the seller wants to raise revenues by changing its price, then the seller should cut the price of the product.

Correct AnswerverifiedShow Answer

We would expect the cross elasticity of demand between dress shirts and ties to be

Correct AnswerverifiedShow Answer

The price-elasticity of demand coefficient, Ed, is measured in terms of

Correct AnswerverifiedShow Answer

A demand curve that is parallel to the horizontal axis is

Correct AnswerverifiedShow Answer

A good with a price-elasticity coefficient of 0.75 has a demand that is price-inelastic.

Correct AnswerverifiedShow Answer

We would expect the cross elasticity of demand between Pepsi and Coke to be

Correct AnswerverifiedShow Answer

You are the newly appointed sales manager of the Rock Computer Tablets Company and have been charged with the task of increasing revenues.Your economics consultants have informed you that at present price and output levels, price elasticity of demand for your product is less than one.You should

Correct AnswerverifiedShow Answer

If the price elasticity of demand for a product is unity, a decrease in price will

Correct AnswerverifiedShow Answer

The total revenue received by sellers of a good is computed by

Correct AnswerverifiedShow Answer

The supply of product X is elastic if the price of X rises by

Correct AnswerverifiedShow Answer

The cross elasticity of demand between Quaker State motor oil and Texaco motor oil is likely to be

Correct AnswerverifiedShow Answer

A perfectly inelastic demand schedule

Correct AnswerverifiedShow Answer

The coefficient of price-elasticity of supply for a product is 2 if

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

A product that is successfully advertised and has loyal buyers would have a low price-elasticity coefficient.

Correct AnswerverifiedShow Answer

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