Question 1

Suppose that Jane enjoys Diet Coke so much that she consumes one can every day. Although she enjoys gourmet cheese, she consumes it sporadically. If the price of Diet Coke rises, Jane decreases her consumption by only a very small amount. But if the price of gourmet cheese rises, Jane decreases her consumption by a lot. These examples illustrate the importance of

Accepted Answer

A)   the availability of close substitutes in determining the price elasticity of demand.
B)   a necessity versus a luxury in determining the price elasticity of demand.
C)   the definition of a market in determining the price elasticity of demand.
D)   the time horizon in determining the price elasticity of demand.

Question 2

Suppose the cross-price elasticity of demand between hot dogs and mustard is -2.00. This implies that a 20 percent increase in the price of hot dogs will cause the quantity of mustard purchased to

Accepted Answer

A)   fall by 200 percent.
B)   fall by 40 percent.
C)   rise by 200 percent.
D)   rise by 40 percent.

Question 3

Suppose a market has the demand function Qd=20-0.5P. At what price will total revenue be maximized?

Accepted Answer

The answer of Suppose a market has the demand function...

Question 4

In the case of perfectly inelastic demand,

Accepted Answer

A)   the change in quantity demanded equals the change in price.
B)   the percentage change in quantity demanded equals the percentage change in price.
C)   infinitely-large changes in quantity demanded result from very small changes in the price.
D)   quantity demanded stays the same whenever price changes.

Question 5

If demand is price inelastic, then

Accepted Answer

A)   buyers do not respond much to a change in price.
B)   buyers respond substantially to a change in price, but the response is very slow.
C)   buyers do not alter their quantities demanded much in response to advertising, fads, or general changes in tastes.
D)   the demand curve is very flat.

Question 6

Scenario 5-2
Suppose the demand function for good X is given by:  where  is the quantity demanded of good X,  is the price of good X, and  is the price of good Y, which is related to good X.
-Refer to Scenario 5-2. Using the midpoint method, if the price of good X is constant at $10 and the price of good Y decreases from $10 to $8, the cross price elasticity of demand is about

Accepted Answer

A)   0.57, and X and Y are substitutes.
B)   -0.22, and X and Y are complements.
C)   -0.80, and X and Y are complements.
D)   -2.57, and X and Y are complements.

Question 7

Scenario 5-4
The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%.
-Refer to Scenario 5-4. Total consumer spending on aged cheddar cheese will

Accepted Answer

A)   increase, and total consumer spending on bread will increase.
B)   increase, and total consumer spending on bread will decrease.
C)   decrease, and total consumer spending on bread will increase.
D)   decrease, and total consumer spending on bread will decrease.

Question 8

If the cross-price elasticity of demand for two goods is negative, then the two goods are complements.

Accepted Answer

A) True 
 B)False

Question 9

Figure 5-12 
-Refer to Figure 5-12. If the price decreased from $36 to $12, total revenue would

Accepted Answer

A)   increase by $4,800, and demand is elastic between points X and Z.
B)   increase by $7,200, and demand is elastic between points X and Z.
C)   decrease by $4,800, and demand is inelastic between points X and Z.
D)   decrease by $7,200, and demand is inelastic between points X and Z.

Question 10

In January the price of dark chocolate candy bars was $2.00, and Willy's Chocolate Factory produced 80 pounds. In February the price of dark chocolate candy bars was $2.50, and Willy's produced 110 pounds. In March the price of dark chocolate candy bars was $3.00, and Willy's produced 140 pounds. The price elasticity of supply of Willy's dark chocolate candy bars was about

Accepted Answer

A)   0.70 when the price increased from $2.00 to $2.50 and 0.76 when the price increased from $2.50 to $3.00.
B)   0.88 when the price increased from $2.00 to $2.50 and 1.08 when the price increased from $2.50 to $3.00.
C)   1.42 when the price increased from $2.00 to $2.50 and 1.32 when the price increased from $2.50 to $3.00.
D)   1.50 when the price increased from $2.00 to $2.50 and 1.18 when the price increased from $2.50 to $3.00.

Question 11

If the price elasticity of demand for a good is 2.0, then a 10 percent increase in price results in a

Accepted Answer

A)   0.2 percent decrease in the quantity demanded.
B)   5 percent decrease in the quantity demanded.
C)   20 percent decrease in the quantity demanded.
D)   40 percent decrease in the quantity demanded.

Question 12

Suppose goods A and B are substitutes for each other. We would expect the cross-price elasticity between these two goods to be

Accepted Answer

A)   positive.
B)   negative.
C)   either positive or negative. It depends whether A and B are normal goods or inferior goods.
D)   either positive or negative. It depends whether the current price level is on the elastic or inelastic portion of the demand curve.

Question 13

Which of the following statements about the consumers' responses to rising gasoline prices is correct?

Accepted Answer

A)   About 10 percent of the long-run reduction in quantity demanded arises because people drive less and about 90 percent arises because they switch to more fuel-efficient cars.
B)   About 90 percent of the long-run reduction in quantity demanded arises because people drive less and about 10 percent arises because they switch to more fuel-efficient cars.
C)   About half of the long-run reduction in quantity demanded arises because people drive less and about half arises because they switch to more fuel-efficient cars.
D)   Because gasoline is a necessity, consumers do not decrease their quantity demanded in either the short run or the long run.

Question 14

Figure 5-12 
-Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point X and point Y is

Accepted Answer

A)   0.4.
B)   1.
C)   2.
D)   2.5.

Question 15

If the price elasticity of demand for a good is 1.2, then a 3 percent decrease in price results in a

Accepted Answer

A)   0.4 percent increase in the quantity demanded.
B)   2.5 percent increase in the quantity demanded.
C)   3.6 percent increase in the quantity demanded.
D)   6 percent increase in the quantity demanded.

Question 16

Suppose the price of natural gas, a typical fuel for heating homes, rises in January in Alaska. Would you expect the price elasticity of demand for natural gas to more inelastic immediately after the price increase or at some point in the future?

Accepted Answer

The price elasticity...

Question 17

Suppose demand is given by the equation:  At what price will total revenue be maximized?

Accepted Answer

Total revenue will be maximize...

Question 18

If the demand for textbooks is inelastic, then a decrease in the price of textbooks will

Accepted Answer

A)   increase total revenue of textbook sellers.
B)   decrease total revenue of textbook sellers.
C)   not change total revenue of textbook sellers.
D)   There is not enough information to answer this question.

Exam 5: Elasticity and Its Application

Suppose the cross-price elasticity of demand between hot dogs and mustard is -2.00. This implies that a 20 percent increase in the price of hot dogs will cause the quantity of mustard purchased to

Correct Answer
verified

If the cross-price elasticity of demand for two goods is negative, then the two goods are complements.

Correct Answer
verified

Suppose goods A and B are substitutes for each other. We would expect the cross-price elasticity between these two goods to be

Correct Answer
verified

Correct Answer
verified

If demand is price inelastic, then

Correct Answer
verified

In the case of perfectly inelastic demand,

Correct Answer
verified

If the demand for textbooks is inelastic, then a decrease in the price of textbooks will

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Which of the following statements about the consumers' responses to rising gasoline prices is correct?

Correct Answer
verified

If the price elasticity of demand for a good is 1.2, then a 3 percent decrease in price results in a

Correct Answer
verified

Figure 5-12 -Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point X and point Y is

Correct Answer
verified

Suppose a market has the demand function Qd=20-0.5P. At what price will total revenue be maximized?

Correct Answer
verified

Correct Answer
verified

Suppose demand is given by the equation: At what price will total revenue be maximized?

Correct Answer
verified
Total revenue will be maximize...
View Answer

Figure 5-12 -Refer to Figure 5-12. If the price decreased from $36 to $12, total revenue would

Correct Answer
verified

Suppose the price of natural gas, a typical fuel for heating homes, rises in January in Alaska. Would you expect the price elasticity of demand for natural gas to more inelastic immediately after the price increase or at some point in the future?

Correct Answer
verified
The price elasticity...
View Answer

If the price elasticity of demand for a good is 2.0, then a 10 percent increase in price results in a

Correct Answer
verified

Exam 5: Elasticity and Its Application

Suppose the cross-price elasticity of demand between hot dogs and mustard is -2.00. This implies that a 20 percent increase in the price of hot dogs will cause the quantity of mustard purchased to

Correct AnswerverifiedShow Answer

If the cross-price elasticity of demand for two goods is negative, then the two goods are complements.

Correct AnswerverifiedShow Answer

Suppose goods A and B are substitutes for each other. We would expect the cross-price elasticity between these two goods to be

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If demand is price inelastic, then

Correct AnswerverifiedShow Answer

In the case of perfectly inelastic demand,

Correct AnswerverifiedShow Answer

If the demand for textbooks is inelastic, then a decrease in the price of textbooks will

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements about the consumers' responses to rising gasoline prices is correct?

Correct AnswerverifiedShow Answer

If the price elasticity of demand for a good is 1.2, then a 3 percent decrease in price results in a

Correct AnswerverifiedShow Answer

Figure 5-12 -Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point X and point Y is

Correct AnswerverifiedShow Answer

Suppose a market has the demand function Qd=20-0.5P. At what price will total revenue be maximized?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose demand is given by the equation: At what price will total revenue be maximized?

Correct AnswerverifiedTotal revenue will be maximize...View AnswerShow Answer

Figure 5-12 -Refer to Figure 5-12. If the price decreased from $36 to $12, total revenue would

Correct AnswerverifiedShow Answer

Suppose the price of natural gas, a typical fuel for heating homes, rises in January in Alaska. Would you expect the price elasticity of demand for natural gas to more inelastic immediately after the price increase or at some point in the future?

Correct AnswerverifiedThe price elasticity...View AnswerShow Answer

If the price elasticity of demand for a good is 2.0, then a 10 percent increase in price results in a

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Total revenue will be maximize...
View Answer

Correct Answer
verified

Correct Answer
verified
The price elasticity...
View Answer

Correct Answer
verified