Question 1

The price elasticity of demand for gasoline measures the:

Accepted Answer

A)   responsiveness of gasoline producers to changes in the quality of gasoline.
B)   responsiveness of customers to changes in the price of gasoline.
C)   responsiveness of consumer preferences to changes in the quality of gasoline.
D)   both a and c above.

Question 2

Suppose that when price is $10, quantity supplied is 20. When price is $6, quantity supplied is 12 units. The price elasticity of supply is:

Accepted Answer

A)   0.5.
B)   0.8.
C)   1.0.
D)   1.5.
E)   2.0.

Question 3

If the value of the price elasticity of demand is 0.2, this means that:

Accepted Answer

A)   a 20 percent decrease in price causes a 1 percent increase in quantity demanded.
B)   a 0.2 percent decrease in price causes a 1 percent increase in quantity demanded.
C)   a 5 percent decrease in price causes a 1 percent increase in quantity demanded.
D)   a 0.2 percent decrease in price causes a 0.2 percent increase in quantity demanded.
E)   a 100 percent decrease in price causes a 200 percent increase in quantity demanded.

Question 4

If the quantity of bread demanded rises 2 percent when the price of bread declines 10 percent, then the price elasticity of demand is:​

Accepted Answer

A)   ​0.2.
B)   ​1.
C)   ​ 2.
D)   10.​
E)   ​ Cannot be determined.

Question 5

Exhibit 5-8 Supply and demand curves for good X
​ 
-As shown in Exhibit 5-8, assuming good X is a normal good, a decrease in consumer income, other factors held constant, will move the equilibrium from point E to point:

Accepted Answer

A)   X.
B)   Z.
C)   Y.
D)   W.

Question 6

A demand curve that has constant price elasticity of demand coefficient equals to one at all points is a(n) :

Accepted Answer

A)   rectangular hyperbola.
B)   downward-sloping straight line.
C)   upward-sloping straight line.
D)   none of these.

Question 7

Exhibit 5-4 Demand curves for silver
​ 
-If the quantity of concert tickets sold decreases by 10 percent when the price increases by 5 percent, the price elasticity of demand over this range of the demand curve is:

Accepted Answer

A)   price elastic.
B)   price inelastic.
C)   perfectly inelastic.
D)   unitary elastic.

Question 8

If New York City expects that an increase in bus fares will raise mass transit revenues, it must think that the demand for bus travel is:

Accepted Answer

A)   elastic.
B)   unit elastic.
C)   inelastic.
D)   perfectly inelastic.
E)   10.

Question 9

If Sam, the Pizza Man, lowers the price of his pizzas from $6 to $5 and finds that sales increase from 400 to 600 pizzas per week, then the demand for Sam's pizzas in this range is:

Accepted Answer

A)   price inelastic.
B)   price elastic.
C)   unit elastic.
D)   cross elastic.
E)   income inelastic.

Question 10

When demand is price inelastic:

Accepted Answer

A)   price and total revenue move in the same direction.
B)   price and total revenue move in the opposite direction.
C)   total revenue increases whether price goes up or down.
D)   total revenue decreases whether price goes up or down.

Question 11

Exhibit 5-9 Supply and demand curves for good X
​ 
-In Exhibit 5-9, the price elasticity of supply for good X between points A and E is:

Accepted Answer

A)   3/5 = 0.60.
B)   5/3 = 1.66.
C)   1/2 = 0.50.
D)   1.

Question 12

If the demand for cigarettes is highly inelastic, this indicates that:

Accepted Answer

A)   higher cigarette prices will increase the demand for cigarettes.
B)   the price elasticity coefficient of cigarettes exceeds 1.
C)   the price elasticity coefficient of cigarettes equals 1.
D)   the quantity of cigarettes purchased by consumers is not very responsive to a change in the price of cigarettes.

Question 13

The responsiveness of suppliers to changing prices is called the:

Accepted Answer

A)   cross elasticity.
B)   supply elasticity.
C)   supply period.
D)   long-run.
E)   market-day.

Question 14

If demand for a good is price elastic, it must also be income elastic.
​
​

Accepted Answer

A) True 
 B)False

Question 15

A local Krispy Kreme doughnut shop reduced the price of its doughnuts from $4 per dozen to $3.50 per dozen, and as a result, the daily sales increased from 300 to 400 dozen. This indicates that the price elasticity of demand for the doughnuts was:

Accepted Answer

A)   elastic.
B)   inelastic.
C)   of unitary elasticity.
D)   indeterminate; more information is needed to determine the price elasticity of demand.

Question 16

Exhibit 5-5 Demand curve for computers
​ 
-In Exhibit 5-5, if the area OABC equals the area ODEF, the demand curve is:

Accepted Answer

A)   elastic.
B)   inelastic.
C)   unitary elastic.
D)   nonelastic.

Question 17

The cross elasticity between two goods, X and Y, is positive. From this, we can conclude that goods X and Y are:

Accepted Answer

A)   substitute goods.
B)   complementary goods.
C)   unrelated goods.
D)   inferior goods.
E)   normal goods.

Question 18

The sign of the price elasticity coefficient for a normal good will:

Accepted Answer

A)   always be negative.
B)   always be positive.
C)   be positive if demand is elastic but negative if demand is inelastic.
D)   be positive if demand is inelastic but negative if demand is elastic.

Question 19

Suppose that a jewelry store found that when it increased prices by 10 percent, sales revenue increased by 3 percent. Which of the following is true about the price elasticity of demand for the store's goods?

Accepted Answer

A)   Demand is perfectly inelastic.
B)   Demand is inelastic, but not perfectly.
C)   Demand is unitary classic.
D)   Demand is elastic, but not perfectly.
E)   Demand is perfectly elastic.

Question 20

For which of the following medical goods or services is the income elasticity of demand largest?

Accepted Answer

A)   Emergency services after a car accident.
B)   Measles shots.
C)   Physical examinations for life insurance applications.
D)   Medical tests to diagnose specific symptoms.
E)   Face-lifts.

Exam 5: Price Elasticity of Demand and Supply

If the quantity of bread demanded rises 2 percent when the price of bread declines 10 percent, then the price elasticity of demand is:​

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The sign of the price elasticity coefficient for a normal good will:

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A local Krispy Kreme doughnut shop reduced the price of its doughnuts from $4 per dozen to $3.50 per dozen, and as a result, the daily sales increased from 300 to 400 dozen. This indicates that the price elasticity of demand for the doughnuts was:

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When demand is price inelastic:

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Exhibit 5-5 Demand curve for computers ​ -In Exhibit 5-5, if the area OABC equals the area ODEF, the demand curve is:

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If demand for a good is price elastic, it must also be income elastic. ​ ​

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Exhibit 5-8 Supply and demand curves for good X ​ -As shown in Exhibit 5-8, assuming good X is a normal good, a decrease in consumer income, other factors held constant, will move the equilibrium from point E to point:

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If the demand for cigarettes is highly inelastic, this indicates that:

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The cross elasticity between two goods, X and Y, is positive. From this, we can conclude that goods X and Y are:

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If Sam, the Pizza Man, lowers the price of his pizzas from $6 to $5 and finds that sales increase from 400 to 600 pizzas per week, then the demand for Sam's pizzas in this range is:

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The responsiveness of suppliers to changing prices is called the:

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If New York City expects that an increase in bus fares will raise mass transit revenues, it must think that the demand for bus travel is:

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The price elasticity of demand for gasoline measures the:

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Suppose that a jewelry store found that when it increased prices by 10 percent, sales revenue increased by 3 percent. Which of the following is true about the price elasticity of demand for the store's goods?

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If the value of the price elasticity of demand is 0.2, this means that:

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Exhibit 5-9 Supply and demand curves for good X ​ -In Exhibit 5-9, the price elasticity of supply for good X between points A and E is:

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A demand curve that has constant price elasticity of demand coefficient equals to one at all points is a(n) :

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Suppose that when price is $10, quantity supplied is 20. When price is $6, quantity supplied is 12 units. The price elasticity of supply is:

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Exhibit 5-4 Demand curves for silver ​ -If the quantity of concert tickets sold decreases by 10 percent when the price increases by 5 percent, the price elasticity of demand over this range of the demand curve is:

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For which of the following medical goods or services is the income elasticity of demand largest?

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If the quantity of bread demanded rises 2 percent when the price of bread declines 10 percent, then the price elasticity of demand is:

Correct Answer
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Exhibit 5-5 Demand curve for computers -In Exhibit 5-5, if the area OABC equals the area ODEF, the demand curve is:

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If demand for a good is price elastic, it must also be income elastic.

Correct Answer
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Exhibit 5-8 Supply and demand curves for good X -As shown in Exhibit 5-8, assuming good X is a normal good, a decrease in consumer income, other factors held constant, will move the equilibrium from point E to point:

Correct Answer
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Exhibit 5-9 Supply and demand curves for good X -In Exhibit 5-9, the price elasticity of supply for good X between points A and E is:

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Exhibit 5-4 Demand curves for silver -If the quantity of concert tickets sold decreases by 10 percent when the price increases by 5 percent, the price elasticity of demand over this range of the demand curve is:

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Correct Answer
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