Question 1

The demand for a cup of coffee is ______________ than is the demand for a dinner at a fancy restaurant because _________________.

Accepted Answer

A)   more price elastic; a cup of coffee requires a smaller portion of one's income.
B)   less price elastic; a cup of coffee requires a smaller portion of one's income.
C)   less price elastic; a cup of coffee is more of a luxury.
D)   more price elastic; a cup of coffee is more of a luxury.

Question 2

Assuming elasticity of demand is reported as an absolute value, a price elasticity of demand of 0.4 indicates an:

Accepted Answer

A)   elastic demand, meaning the percentage change in quantity demanded will be greater than the percentage change in price.
B)   inelastic demand, meaning the percentage change in quantity demanded will be greater than the percentage change in price.
C)   elastic demand, meaning the percentage change in quantity demanded will be less than the percentage change in price.
D)   inelastic demand, meaning the percentage change in quantity demanded will be less than the percentage change in price.

Question 3

Price elasticity is a measure of how

Accepted Answer

A)   much a market responds to a change in market conditions.
B)   much consumers or producers respond to a change in market price.
C)   quickly consumers or producers respond to a change in market price.
D)   quickly a market will respond to a change in market conditions.

Question 4

Suppose when the price of mascara is $12, the quantity demanded is 450, and when the price is $8, the quantity demanded is 550. Using the mid-point method, the price elasticity of demand is:

Accepted Answer

A)   -0.5
B)   -2.0
C)   -55
D)   -180

Question 5

A price increase will cause an increase in total revenue when:

Accepted Answer

A)   the price effect outweighs the quantity effect.
B)   the quantity effect outweighs the price effect.
C)   demand is perfectly elastic.
D)   demand is unit elastic.

Question 6

The demand for a movie ticket is probably _________________ than is the demand for a Broadway show ticket because ______________.

Accepted Answer

A)   less price elastic; a movie ticket requires a smaller portion of one's income.
B)   more price elastic; a movie ticket requires a smaller portion of one's income.
C)   less price elastic; a movie ticket has fewer available substitutes.
D)   more price elastic; a movie ticket has fewer available substitutes.

Question 7

The price elasticity of demand for eggs is 0.27. Thus, 0.27 is the:

Accepted Answer

A)   percentage change in the quantity demanded of eggs when the price of eggs increases by one percent.
B)   size of the shift in the demand for eggs when the price of eggs changes by one percent.
C)   size of the percentage change in the quantity supplied of eggs when the demand for eggs changes due to a price change.
D)   percentage change in the price of eggs when the quantity demanded of eggs increases by one percent.

Question 8

The price elasticity of demand for business air travel is .80 and the price elasticity of demand for leisure air travel is 1.60. Therefore, the demand for leisure air travel

Accepted Answer

A)   is less elastic than the demand for business travel.
B)   is inelastic.
C)   is more elastic than the demand for business travel.
D)   is unrelated to consumers' incomes.

Question 9

Gasoline and motel rooms are complements for many consumers. When the price of gasoline declines, consumers take longer vacations and rent more motel rooms. Therefore, the cross price elasticity between gasoline and motel rooms is

Accepted Answer

A)   positive.
B)   negative.
C)   less than one because neither is a luxury.
D)   more than one because both are luxuries.

Question 10

When a good has many close substitutes available, it is likely to be:

Accepted Answer

A)   less price elastic than are goods without close substitutes available.
B)   more price elastic than are goods with many complement goods available.
C)   less price elastic than are goods with many complement goods available.
D)   more price elastic than are goods without close substitutes available.

Question 11

Cross-price elasticity refers to:

Accepted Answer

A)   how much the quantity demanded of one good changes in response to a change in the price of a different good.
B)   how much the quantity demanded of one good changes in response to a change in its price.
C)   the magnitude of the shift in demand for a good in response to a change in its price.
D)   how much the quantity demanded of a good changes in response to a change in consumers' incomes.

Question 12

An increase in price:

Accepted Answer

A)   cannot cause a quantity effect.
B)   cannot cause a price effect.
C)   causes a decrease in revenue resulting from selling fewer units and a simultaneous increase in revenue resulting from receiving a higher price.
D)   causes an increase in quantity demanded.

Question 13

The cross-price elasticity of demand for peanut butter and jelly is likely:

Accepted Answer

A)   a positive number.
B)   a very high positive number.
C)   a negative number.
D)   less than one.

Question 14

Considering the concept of cross-price elasticity, if two goods are substitutes:

Accepted Answer

A)   an increase in the price of one causes a decrease in the demand for the other.
B)   a decrease in the price of one causes an increase in the demand of the other.
C)   an increase in the price of one causes an increase in the demand for the other.
D)   the cross-price elasticity is negative.

Question 15

The response in quantity demanded to a price increase in subway rides:

Accepted Answer

A)   will be more elastic in six weeks than in six months.
B)   will be less elastic in six weeks than in six months.
C)   will be the same over that time period.
D)   is unpredictable without more information.

Question 16

The demand for a subway ride is probably ___________________ than is the demand for a car because ___________________.

Accepted Answer

A)   less price elastic; a subway ride requires a smaller portion of one's income
B)   more price elastic; a subway ride requires a smaller portion of one's income
C)   less price elastic; people will take a longer time to adjust to the change in the price of a subway ride
D)   more price elastic; people will take a longer time to adjust to the change in the price of a subway ride.

Question 17

When price was 10, quantity demanded was 50. When price decreased to 8, quantity demanded increased to 60. Therefore, when price decreased, total revenue

Accepted Answer

A)   decreased from 500 to 480, indicating that demand is inelastic.
B)   decreased from 500 to 480, indicating that demand is elastic.
C)   increased from 480 to 500, indicating that demand is inelastic.
D)   increased from 480 to 500, indicating that demand is elastic.

Question 18

A rare coin dealer is likely to have a _______________ price elasticity of supply than does a coffee shop due to ____________________.

Accepted Answer

A)   more elastic; the availability of inputs
B)   less elastic; the availability of inputs
C)   more elastic; a longer adjustment time
D)   more elastic; a shorter adjustment time

Question 19

If a one percent change in the price of oil causes a 0.02 percent change in the quantity demanded of oil, then 0.02 is the

Accepted Answer

A)   price elasticity of demand.
B)   price elasticity of supply.
C)   cross-price elasticity of demand.
D)   income elasticity of demand.

Question 20

Suppose when the price of pizza goes from $8 to $12 per pie, production increases from 2,500 pies to 4,000 pies per month. Using the mid-point method, the percentage change in price is:

Accepted Answer

A)   40 percent
B)   46 percent
C)   1.31
D)   0.35

Exam 4: Elasticity

Price elasticity is a measure of how

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If a one percent change in the price of oil causes a 0.02 percent change in the quantity demanded of oil, then 0.02 is the

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Gasoline and motel rooms are complements for many consumers. When the price of gasoline declines, consumers take longer vacations and rent more motel rooms. Therefore, the cross price elasticity between gasoline and motel rooms is

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Suppose when the price of mascara is $12, the quantity demanded is 450, and when the price is $8, the quantity demanded is 550. Using the mid-point method, the price elasticity of demand is:

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When price was 10, quantity demanded was 50. When price decreased to 8, quantity demanded increased to 60. Therefore, when price decreased, total revenue

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A rare coin dealer is likely to have a _______________ price elasticity of supply than does a coffee shop due to ____________________.

Correct AnswerverifiedShow Answer

Suppose when the price of pizza goes from $8 to $12 per pie, production increases from 2,500 pies to 4,000 pies per month. Using the mid-point method, the percentage change in price is:

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The demand for a cup of coffee is ______________ than is the demand for a dinner at a fancy restaurant because _________________.

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When a good has many close substitutes available, it is likely to be:

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The price elasticity of demand for eggs is 0.27. Thus, 0.27 is the:

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The demand for a subway ride is probably ___________________ than is the demand for a car because ___________________.

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Assuming elasticity of demand is reported as an absolute value, a price elasticity of demand of 0.4 indicates an:

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The response in quantity demanded to a price increase in subway rides:

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Considering the concept of cross-price elasticity, if two goods are substitutes:

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Cross-price elasticity refers to:

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An increase in price:

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The price elasticity of demand for business air travel is .80 and the price elasticity of demand for leisure air travel is 1.60. Therefore, the demand for leisure air travel

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A price increase will cause an increase in total revenue when:

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The demand for a movie ticket is probably _________________ than is the demand for a Broadway show ticket because ______________.

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The cross-price elasticity of demand for peanut butter and jelly is likely:

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A rare coin dealer is likely to have a _ price elasticity of supply than does a coffee shop due to ______.

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The demand for a cup of coffee is than is the demand for a dinner at a fancy restaurant because ___.

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The demand for a subway ride is probably _ than is the demand for a car because _.

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The demand for a movie ticket is probably ___ than is the demand for a Broadway show ticket because .

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