question
What is the effect of a cut in price when demand is inelastic?
A. No effect on total revenue
B. A decrease in total revenue
C. An increase in total revenue
D. A change in total revenue by an amount equal to the cut in price
A. No effect on total revenue
B. A decrease in total revenue
C. An increase in total revenue
D. A change in total revenue by an amount equal to the cut in price
answer
B
question
How is the responsiveness of the quantity demanded to a change in price measured?
A. By dividing the percentage change in the product's price by the percentage change in the quantity demanded of a product
B. By dividing the percentage change in the quantity demanded of a product by the percentage change in the product's price
C. By multiplying the percentage change in the product's price by the percentage change in the quantity demanded of a product
D. By multiplying the percentage change in the quantity demanded of a product by the percentage change in the product's price
A. By dividing the percentage change in the product's price by the percentage change in the quantity demanded of a product
B. By dividing the percentage change in the quantity demanded of a product by the percentage change in the product's price
C. By multiplying the percentage change in the product's price by the percentage change in the quantity demanded of a product
D. By multiplying the percentage change in the quantity demanded of a product by the percentage change in the product's price
answer
B
question
Brett buys a new cell phone for $100. He receives consumer surplus of $80 from the purchase. How much does Brett value his cell phone?
A. $180
B. $100
C. $80
D. $20
A. $180
B. $100
C. $80
D. $20
answer
A
question
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The figure above represents the demand and supply in the market for gasoline. What is the after-tax revenue per gallon received by producers?
A. $0.20
B. $0.40
C. $0.60
D. $2.20
The figure above represents the demand and supply in the market for gasoline. What is the after-tax revenue per gallon received by producers?
A. $0.20
B. $0.40
C. $0.60
D. $2.20
answer
D
question
Which term refers to a legally established minimum price that firms may charge?
A. Price Ceiling
B. A Subsidy
C. Price Floor
D. A Tarrif
A. Price Ceiling
B. A Subsidy
C. Price Floor
D. A Tarrif
answer
C
question
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What portion of the unit tax is paid by producers?
A. $0.20
B. $0.40
C. $0.60
D. $2.20
What portion of the unit tax is paid by producers?
A. $0.20
B. $0.40
C. $0.60
D. $2.20
answer
A
question
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What is the quantity sold after the imposition of the tax?
A. 30 billion gallons per year
B. 32.5 billion gallons per year
C. 35 billion gallons per year
D. Cannot be determined from the information provided
What is the quantity sold after the imposition of the tax?
A. 30 billion gallons per year
B. 32.5 billion gallons per year
C. 35 billion gallons per year
D. Cannot be determined from the information provided
answer
A
question
Willingness to pay measures
A. The maximum price a buyer is willing to pay for a product minus the amount the buyer actually pays for it
B. The amount a seller actually receives for a good minus the minimum amount the seller is willing to accept for the good
C. The maximum price that a buyer is willing to pay for a good
D. The maximum price a buyer is willing to pay minus the minimum price a seller is willing to accept
A. The maximum price a buyer is willing to pay for a product minus the amount the buyer actually pays for it
B. The amount a seller actually receives for a good minus the minimum amount the seller is willing to accept for the good
C. The maximum price that a buyer is willing to pay for a good
D. The maximum price a buyer is willing to pay minus the minimum price a seller is willing to accept
answer
C
question
Which of the following statements is not true?
A. Consumer surplus measures the difference between the highest price a consumer is willing to pay for a product and the price she actually pays
B. Marginal benefit is the additional benefit to a consumer from consuming one or more unit of a product
C. Consumer surplus measures the net benefit to consumer from participating in the market
D. Producer surplus measures the total benefit received by producers from participating in a market
A. Consumer surplus measures the difference between the highest price a consumer is willing to pay for a product and the price she actually pays
B. Marginal benefit is the additional benefit to a consumer from consuming one or more unit of a product
C. Consumer surplus measures the net benefit to consumer from participating in the market
D. Producer surplus measures the total benefit received by producers from participating in a market
answer
D
question
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What portion of the unit tax is paid by consumers?
A. $0.20
B. $0.40
C. $0.60
D. $2.80
What portion of the unit tax is paid by consumers?
A. $0.20
B. $0.40
C. $0.60
D. $2.80
answer
B
question
The government proposes a tax on halogen light bulbs. Sellers will bear the entire burden of the tax if the
A. Supply curve is horizontal
B. Demand curve is vertical
C. Demand curve is horizontal
D. Demand curve is downward sloping and the supply curve is upward sloping
A. Supply curve is horizontal
B. Demand curve is vertical
C. Demand curve is horizontal
D. Demand curve is downward sloping and the supply curve is upward sloping
answer
C
question
When the marginal benefit equals the marginal cost of the last unit sold in a competitive market
A. The net benefit of consumers is equal to the net benefit of producers
B. An economically efficient level of output is produced
C. Producer surplus is equal to consumer surplus
D. Total benefit is equal to total cost
A. The net benefit of consumers is equal to the net benefit of producers
B. An economically efficient level of output is produced
C. Producer surplus is equal to consumer surplus
D. Total benefit is equal to total cost
answer
B
question
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If a minimum wage of $9.50 an hour is mandated, what is the quantity of labor hired?
A. 40,000
B. 570,000
C. 610,000
D. 1,180,000
If a minimum wage of $9.50 an hour is mandated, what is the quantity of labor hired?
A. 40,000
B. 570,000
C. 610,000
D. 1,180,000
answer
B
question
If, in a competitive market, marginal benefit is less than marginal cost,
A. The net benefit to consumers from participating in the market is less than the net benefit to producers
B. The government must force producers to raise prices in order to achieve economic efficiency
C. The actual quantity is greater than the equilibrium quantity
D. The actual quantity is less than the equilibrium quantity
A. The net benefit to consumers from participating in the market is less than the net benefit to producers
B. The government must force producers to raise prices in order to achieve economic efficiency
C. The actual quantity is greater than the equilibrium quantity
D. The actual quantity is less than the equilibrium quantity
answer
C
question
Suppose that in Canada the government places a $1,500 tax on the buyers of new snowmobiles. After the purchase of a new snowmobile, a buyer must pay the government $1,500. How would the imposition of the tax on buyers be illustrated in a graph?
A. The tax will shift the supply curve to the left by $1,500
B. The tax will shift the demand curve to the right by $1,500
C. The tax will shift both the demand and supply curve to the right by $1,500
D. The tax will shift the demand curve to the left by $1,500
A. The tax will shift the supply curve to the left by $1,500
B. The tax will shift the demand curve to the right by $1,500
C. The tax will shift both the demand and supply curve to the right by $1,500
D. The tax will shift the demand curve to the left by $1,500
answer
D
question
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The graph above represents the supply and demand in the market for soy beans. If the equilibrium price is $7.00 and the market price is $9.00 then the consumer surplus is __________, producer surplus is ___________, and deadweight loss is ___________
A. A+B, D, C+E
B. A, B+D, C+E
C. A, D+E, B+C
D. A+B, D+E, C
The graph above represents the supply and demand in the market for soy beans. If the equilibrium price is $7.00 and the market price is $9.00 then the consumer surplus is __________, producer surplus is ___________, and deadweight loss is ___________
A. A+B, D, C+E
B. A, B+D, C+E
C. A, D+E, B+C
D. A+B, D+E, C
answer
B
question
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What is the value of the excess burden of the tax?
A. $0.5 billion
B. $1 billion
C. $1.5 billion
D. $3 billion
What is the value of the excess burden of the tax?
A. $0.5 billion
B. $1 billion
C. $1.5 billion
D. $3 billion
answer
C
question
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What is the area that represents producer surplus after the imposition of the price floor
A. A+B+E
B. B+E
C. B+E+F
D. B+C+D+E
What is the area that represents producer surplus after the imposition of the price floor
A. A+B+E
B. B+E
C. B+E+F
D. B+C+D+E
answer
B
question
In a city with rent-controlled apartments, all of the following are true except
A. Apartments usually offer rates lower than the market rate
B. Apartments are often in shorter supply than they would be without rent control
C. It usually takes more time to find an apartment that it would without rent control
D. Landlords have an incentive to rent more apartments than they would without rent control
A. Apartments usually offer rates lower than the market rate
B. Apartments are often in shorter supply than they would be without rent control
C. It usually takes more time to find an apartment that it would without rent control
D. Landlords have an incentive to rent more apartments than they would without rent control
answer
D
question
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How much is the government tax on each gallon of gasoline?
A. $0.20
B. $0.40
C. $0.60
D. $2.80
How much is the government tax on each gallon of gasoline?
A. $0.20
B. $0.40
C. $0.60
D. $2.80
answer
C
question
The government proposes a tax on imported champagne. Buyers will bear the entire burden of the tax if the
A. Supply curve is vertical
B. Demand curve is vertical
C. Demand curve is horizontal
D. Demand curve is downward sloping and the supply curve is upward sloping
A. Supply curve is vertical
B. Demand curve is vertical
C. Demand curve is horizontal
D. Demand curve is downward sloping and the supply curve is upward sloping
answer
B
question
When a competitive equilibrium is achieved in a market
A. All individuals are better off than they would be if a price ceiling/floor was imposed by the government
B. The total net benefit to society is maximized
C. The total benefits to consumers are equal to the benefits to producers
D. Economic surplus equals the deadweight loss
A. All individuals are better off than they would be if a price ceiling/floor was imposed by the government
B. The total net benefit to society is maximized
C. The total benefits to consumers are equal to the benefits to producers
D. Economic surplus equals the deadweight loss
answer
B
question
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Which of the following statements best describes the impact of the tax?
A. The consumer will bear a smaller share of the tax burden if the demand curve is D0
B. The consumer's share of the tax burden is the same whether the demand curve is D0 or D1
C. The consumer will bear the smaller share of the tax burden if the demand curve is D1
D. The consumer will bear the entire burden of the tax if the demand curve is D1 and the producer will bear the endure burden of the tax if the demand curve is D0
Which of the following statements best describes the impact of the tax?
A. The consumer will bear a smaller share of the tax burden if the demand curve is D0
B. The consumer's share of the tax burden is the same whether the demand curve is D0 or D1
C. The consumer will bear the smaller share of the tax burden if the demand curve is D1
D. The consumer will bear the entire burden of the tax if the demand curve is D1 and the producer will bear the endure burden of the tax if the demand curve is D0
answer
A
question
Which of the following is not a consequence of minimum wage laws?
A. Low skill workers are hurt because minimum wage reduces the number of jobs providing low skilled workers with training
B. Employers will be reluctant to offer low-skill workers jobs with training
C. Producers have an incentive to offer workers non-wage benefits, such as heath care benefits and convenient working hours rather than a higher wage
D. Some workers benefit when the minimum wage is increased
A. Low skill workers are hurt because minimum wage reduces the number of jobs providing low skilled workers with training
B. Employers will be reluctant to offer low-skill workers jobs with training
C. Producers have an incentive to offer workers non-wage benefits, such as heath care benefits and convenient working hours rather than a higher wage
D. Some workers benefit when the minimum wage is increased
answer
C
question
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If market price is $1, what is the consumer surplus of the third burrito?
A. $0
B. $0.50
C. $1.00
D. $1.50
If market price is $1, what is the consumer surplus of the third burrito?
A. $0
B. $0.50
C. $1.00
D. $1.50
answer
B
question
Economists have shown that the burden of a tax is the same whether the tax is collected from the buyer or the seller. Why, then, are gasoline and cigarette taxes imposed on sellers?
A. Sellers are more honest than buyers
B. The demand for both gasoline and cigarettes is very elastic
C. The Equal Protection Clause of the Constitution prohibits the government from imposing taxes like these on buyers
D. It is more difficult for buyers to keep tract of their purchases, and for the government to verify that the right amount of tax revenue is collected
A. Sellers are more honest than buyers
B. The demand for both gasoline and cigarettes is very elastic
C. The Equal Protection Clause of the Constitution prohibits the government from imposing taxes like these on buyers
D. It is more difficult for buyers to keep tract of their purchases, and for the government to verify that the right amount of tax revenue is collected
answer
D
question
________ refers to the reduction in economic surplus resulting from not being in competitive equilibrium
A. Marginal Cost
B. Producer Atrophy
C. Deadweight Loss
D. Economic Shortage
A. Marginal Cost
B. Producer Atrophy
C. Deadweight Loss
D. Economic Shortage
answer
C
question
In cities with rent controls, the actual rents paid can be higher than the legal maximum. One explanation for this is
A. Rent control laws are so complicated that landlords and tenants may not be aware of what the legal price is
B. Landlords are allowed to charge more than the legal maximum on some apartments so long as they charge less on others
C. Because there is a shortage of apartments, tenants often are willing to pay rents higher than the law allows
D. The legal penalty landlords face for charging more than the legal maximum rent is less than the revenue earned by charging tenants more than the maximum rent
A. Rent control laws are so complicated that landlords and tenants may not be aware of what the legal price is
B. Landlords are allowed to charge more than the legal maximum on some apartments so long as they charge less on others
C. Because there is a shortage of apartments, tenants often are willing to pay rents higher than the law allows
D. The legal penalty landlords face for charging more than the legal maximum rent is less than the revenue earned by charging tenants more than the maximum rent
answer
C
question
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The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18.What is the value of producer surplus at a price of $18?
A. $240
B. $300
C. $340
D. $720
The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18.What is the value of producer surplus at a price of $18?
A. $240
B. $300
C. $340
D. $720
answer
A
question
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The figure above represents the market for iced tea. Assume that this is a competitive market. Which of the following is true?
A. If the price of iced tea is $3 the output will be economically efficient but there will be a deadweight loss
B. If the price of iced tea is $3 consumers will purchase more than the economically efficient output
C. Both 10,000 and 30,000 are economically inefficient rates of output
D. If the price of iced tea is $3 producers will sell 30,000 units of iced tea but this output will be economically inefficient
The figure above represents the market for iced tea. Assume that this is a competitive market. Which of the following is true?
A. If the price of iced tea is $3 the output will be economically efficient but there will be a deadweight loss
B. If the price of iced tea is $3 consumers will purchase more than the economically efficient output
C. Both 10,000 and 30,000 are economically inefficient rates of output
D. If the price of iced tea is $3 producers will sell 30,000 units of iced tea but this output will be economically inefficient
answer
C
question
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What is the total tax revenue collected by the government?
A. $1.2 billion
B. $0.6 billion
C. $1.8 billion
D. $72 billion
What is the total tax revenue collected by the government?
A. $1.2 billion
B. $0.6 billion
C. $1.8 billion
D. $72 billion
answer
C
question
Sarah spends 2% of her weekly budget on chewing gum, and she spends 50% of her weekly budget on books. All else equal, we would expect her demand for chewing gum to be
A. More elastic than he demand for books
B. Unit elastic
C. Less elastic than her demand for books
D. Elastic
A. More elastic than he demand for books
B. Unit elastic
C. Less elastic than her demand for books
D. Elastic
answer
C
question
If you know the value for price elasticity of demand, which which of the following can you compute?
A. The price elasticity of supply
B. The responsiveness of the quantity supplied of a good to changes in its price
C. The effect of a price change on the quantity demanded
D. All of the answers are correct
A. The price elasticity of supply
B. The responsiveness of the quantity supplied of a good to changes in its price
C. The effect of a price change on the quantity demanded
D. All of the answers are correct
answer
C
question
Which of the following statements about the slope and the price elasticity of demand is correct?
A. The slope is calculated using changes in quantity and price, whereas elasticity is calculated using percent changes
B. The slope is calculated using percentage changes in quantity and price, whereas elasticity is calculated using simple numerical changes
C. Both the slope and elasticity must be calculated using percentage changes
D. Neither the slope nor the value of elasticity can be calculated using simple numerical changes
A. The slope is calculated using changes in quantity and price, whereas elasticity is calculated using percent changes
B. The slope is calculated using percentage changes in quantity and price, whereas elasticity is calculated using simple numerical changes
C. Both the slope and elasticity must be calculated using percentage changes
D. Neither the slope nor the value of elasticity can be calculated using simple numerical changes
answer
A
question
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Refer to the graph above which shows two potential demand curves in the market for photocopies at a printing company. When price falls from $30 to $20, demand is ________ between points A and C on D2 and demand is ________ between points A and B on D1.
A. Elastic; Inelastic
B. Inelastic; Inelastic
C. Inelastic; Elastic
D. Elastic; Inelastic
Refer to the graph above which shows two potential demand curves in the market for photocopies at a printing company. When price falls from $30 to $20, demand is ________ between points A and C on D2 and demand is ________ between points A and B on D1.
A. Elastic; Inelastic
B. Inelastic; Inelastic
C. Inelastic; Elastic
D. Elastic; Inelastic
answer
C
question
What do economists use the concept of elasticity for?
A. All of the above
B. To measure how one economic variable responds to changes in another economic variable
C. To explain how producers respond to consumers' needs
D. To define the slope of supply and demand curves
A. All of the above
B. To measure how one economic variable responds to changes in another economic variable
C. To explain how producers respond to consumers' needs
D. To define the slope of supply and demand curves
answer
B
question
Who benefits from the concept of elasticity?
A. Policymakers
B. Both business managers and policymakers
C. Neither business managers nor policymakers; only economists benefit from it
D. Business managers
A. Policymakers
B. Both business managers and policymakers
C. Neither business managers nor policymakers; only economists benefit from it
D. Business managers
answer
B
question
How do economists avoid confusion over units in the computation of elasticity?
A. By using the same numbers as the value of the slope of the curve
B. By using aggregate values rather than single values
C. By using percentage changes rather than simple differences
D. By using index numbers rather than whole numbers
A. By using the same numbers as the value of the slope of the curve
B. By using aggregate values rather than single values
C. By using percentage changes rather than simple differences
D. By using index numbers rather than whole numbers
answer
C
question
Which of the following measures is more sensitive to the units chosen for quantity and price?
A. Cross-price elasticity
B. Price elasticity of demand
C. Price elasticity of supply
D. The slope of a demand or supply curve
A. Cross-price elasticity
B. Price elasticity of demand
C. Price elasticity of supply
D. The slope of a demand or supply curve
answer
D
question
When percentage change in quantity demanded is greater than the percentage change in price, which of the following is true?
A. There are few substitutes for the good in question
B. The price elasticity of demand will be greater than 1 in absolute value
C. All of the above is true
D. Demand is inelastic
A. There are few substitutes for the good in question
B. The price elasticity of demand will be greater than 1 in absolute value
C. All of the above is true
D. Demand is inelastic
answer
B
question
When demand is elastic, how will an increase in price affect total revenue?
A. Total revenue will fall
B. Total revenue may rise or fall, but the effect will depend on the size of the price change
C. Total revenue will rise
D. Total revenue will be unaffected by the change in price
A. Total revenue will fall
B. Total revenue may rise or fall, but the effect will depend on the size of the price change
C. Total revenue will rise
D. Total revenue will be unaffected by the change in price
answer
A
question
What is total revenue?
A. All of the answers are correct
B. An amount calculated by multiplying price per unit by the number of units sold
C. An amount that increases when price increases if demand is inelastic
D. The total amount of funds a firm receives from selling a good or service
A. All of the answers are correct
B. An amount calculated by multiplying price per unit by the number of units sold
C. An amount that increases when price increases if demand is inelastic
D. The total amount of funds a firm receives from selling a good or service
answer
A
question
Which of the following would occur when calculating price elasticity between two points on a demand curve if we are not using the midpoint formula?
A. The value of elasticity we would get would be the same whether we apply it to price increase or to price decrease
B. The values we would get would be the same if the demand curve is downward sloping
C. We would get a different value for price increases than for price decreases
D. The values would coincide with the value of the slope of the demand curve
A. The value of elasticity we would get would be the same whether we apply it to price increase or to price decrease
B. The values we would get would be the same if the demand curve is downward sloping
C. We would get a different value for price increases than for price decreases
D. The values would coincide with the value of the slope of the demand curve
answer
C
question
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If you start at point A on D1, what is the percentage change in quantity demanded when price falls from $30 to $20? Use the midpoint formula to calculate this percentage change.
A. Quantity demanded rises by 55%
B. Quantity demanded rises by 22%
C. Quantity demanded falls by 40%
D. Quantity demanded rises by 4%
If you start at point A on D1, what is the percentage change in quantity demanded when price falls from $30 to $20? Use the midpoint formula to calculate this percentage change.
A. Quantity demanded rises by 55%
B. Quantity demanded rises by 22%
C. Quantity demanded falls by 40%
D. Quantity demanded rises by 4%
answer
A
question
If demand is perfectly elastic, then what is the impact of an increase in price?
A. A very small change in quantity demanded
B. A decrease in quantity demanded to zero
C. A change in quantity demanded exactly equal to the change in price
D. No change in quantity demanded
A. A very small change in quantity demanded
B. A decrease in quantity demanded to zero
C. A change in quantity demanded exactly equal to the change in price
D. No change in quantity demanded
answer
B
question
When the percentage change in quantity demanded is greater than the percentage change in price, which of the following is true?
A. All of the answers are true
B. Demand is inelastic
C. The price elasticity of demand will be greater than 1 in absolute value
D. There are few substitutes for the good in question
A. All of the answers are true
B. Demand is inelastic
C. The price elasticity of demand will be greater than 1 in absolute value
D. There are few substitutes for the good in question
answer
C
question
The price elasticity of demand for a particular brand of raisin bran is, in absolute value,
A. The same as the price elasticity of demand for all breakfast cereals
B. Smaller than the price elasticity of demand for all types of breakfast cereals
C. Neither larger nor smaller than the price elasticity of demand for any other type of cereal
D. Larger than the price elasticity of demand for all breakfast cereals
A. The same as the price elasticity of demand for all breakfast cereals
B. Smaller than the price elasticity of demand for all types of breakfast cereals
C. Neither larger nor smaller than the price elasticity of demand for any other type of cereal
D. Larger than the price elasticity of demand for all breakfast cereals
answer
D
question
Which of the following is true about the value of price elasticity of demand?
A. The value is always negative
B. The value is always positive
C. The value may be positive or negative depending on the value of the slope of the demand curve
D. The value is positive when the slope is negative and negative when the slope is positive
A. The value is always negative
B. The value is always positive
C. The value may be positive or negative depending on the value of the slope of the demand curve
D. The value is positive when the slope is negative and negative when the slope is positive
answer
A
question
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What happens to price elasticity as we move down the demand curve?
A. It remains the same
B. It rises
C. It rises up to the midpoint, and then it falls
D. It falls
What happens to price elasticity as we move down the demand curve?
A. It remains the same
B. It rises
C. It rises up to the midpoint, and then it falls
D. It falls
answer
D
question
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What happens to total revenue as we move down the demand curve?
A. It remains the same
B. It rises up to the midpoint, and then it falls
C. It falls
D. It rises
What happens to total revenue as we move down the demand curve?
A. It remains the same
B. It rises up to the midpoint, and then it falls
C. It falls
D. It rises
answer
D
question
Which of the following is the most important determinant of price elasticity of demand?
A. The availability of substitutes
B. The difference between necessities and luxuries
C. The passage of time
D. The definition of the market
A. The availability of substitutes
B. The difference between necessities and luxuries
C. The passage of time
D. The definition of the market
answer
A
question
In general, the price elasticity of demand for a good will be _________ elastic the___________ the share of the good in the average consumer's budget.
A. More; smaller
B. Less; larger
C. Unit; larger
D. Less; smaller
A. More; smaller
B. Less; larger
C. Unit; larger
D. Less; smaller
answer
D
question
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Between points A and B on D1, what is the price elasticity of demand?
A. -0.83
B. -1.2
C. -1.4
D. -12
Between points A and B on D1, what is the price elasticity of demand?
A. -0.83
B. -1.2
C. -1.4
D. -12
answer
C
question
What happens when the quantity demanded is very responsive to changes in price?
A. The percentage change in quantity demanded will be unrelated to the percentage change in price
B. The percentage change in quantity demanded will be less than the percentage change in price
C. The percentage change in quantity demanded will be greater than the percentage change in price
D. The percentage change in quantity demanded will be equal to the percentage change in price
A. The percentage change in quantity demanded will be unrelated to the percentage change in price
B. The percentage change in quantity demanded will be less than the percentage change in price
C. The percentage change in quantity demanded will be greater than the percentage change in price
D. The percentage change in quantity demanded will be equal to the percentage change in price
answer
C
question
If we find that the price elasticity of demand for hamburgers is -1.3 while the price elasticity of demand for textbooks is -0.6, which of the following can we say is true?
A. Consumers like hamburgers more than they like textbooks
B. The law of demand is violated in both the market for hamburgers and the market for textbooks
C. The demand for hamburgers is more elastic than the demand for textbooks
D. A 10% increase in the price of hamburgers will result in a 13% increase in the quantity of hamburgers demanded
A. Consumers like hamburgers more than they like textbooks
B. The law of demand is violated in both the market for hamburgers and the market for textbooks
C. The demand for hamburgers is more elastic than the demand for textbooks
D. A 10% increase in the price of hamburgers will result in a 13% increase in the quantity of hamburgers demanded
answer
C
question
Which of the following is true if quantity demanded is not very responsive to price?
A. The price elasticity of demand will be less than 1 in absolute value
B. The percentage change in quantity demanded will be less than the percentage change in price
C. All of the answers are true
D. Demand is inelastic
A. The price elasticity of demand will be less than 1 in absolute value
B. The percentage change in quantity demanded will be less than the percentage change in price
C. All of the answers are true
D. Demand is inelastic
answer
C
question
If a 20% increase in the price of red bull energy drinks results in a decrease in the quantity demanded of 25%, the price elasticity of demand is
A. -0.8
B. -1.25
C. -20
D. -25
A. -0.8
B. -1.25
C. -20
D. -25
answer
B
question
Which of the following does the midpoint formula use to compute elasticity?
A. The differences between initial and final prices and quantities
B. The product of the initial and final prices and quantities
C. The sums of the initial and final prices and quantities
D. The averages of the initial and final quantity and the initial and final price
A. The differences between initial and final prices and quantities
B. The product of the initial and final prices and quantities
C. The sums of the initial and final prices and quantities
D. The averages of the initial and final quantity and the initial and final price
answer
D
question
When quantity demanded is completely unresponsive to price, what is the value of price elasticity of demand?
A. Zero
B. 1
C. A negative number
D. A number between zero and 1
A. Zero
B. 1
C. A negative number
D. A number between zero and 1
answer
A
question
Which of the following is a true statement?
A. All of the answers are true
B. The demand curve for a luxury is more elastic than the demand curve for a necessity
C. The more time that passes, the more elastic the demand for a product becomes
D. The more substitutes available for a product, the greater the price elasticity of demand
A. All of the answers are true
B. The demand curve for a luxury is more elastic than the demand curve for a necessity
C. The more time that passes, the more elastic the demand for a product becomes
D. The more substitutes available for a product, the greater the price elasticity of demand
answer
A
question
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In which of the two graphs does a price decrease lead to an increase in total revenue?
A. In the graph on the right
B. In the graph on the left
C. In both graphs
D. In neither graph
In which of the two graphs does a price decrease lead to an increase in total revenue?
A. In the graph on the right
B. In the graph on the left
C. In both graphs
D. In neither graph
answer
A
question
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When price is $6, demand is
A. Unit elastic
B. Inelastic
C. Cannot be determined from the graph
D. Elastic
When price is $6, demand is
A. Unit elastic
B. Inelastic
C. Cannot be determined from the graph
D. Elastic
answer
D
question
If a 20% increase in the price of Red Bull energy drinks results in a decrease in the quantity demanded of 25%, we say demand for Red Bull is ______________ in this range.
A. Unit elastic
B. Vertical
C. Inelastic
D. Elastic
A. Unit elastic
B. Vertical
C. Inelastic
D. Elastic
answer
D
question
When demand is inelastic, what is the relationship between price and total revenue?
A. They move in the same direction
B. They always remain unchanged
C. They are entirely unrelated
D. They move in opposite directions
A. They move in the same direction
B. They always remain unchanged
C. They are entirely unrelated
D. They move in opposite directions
answer
A
question
When is a change in price exactly offset by a proportional change in quantity demanded, leaving revenue unaffected?
A. When demand is inelastic
B. When demand is elastic
C. When demand is unit elastic
D. Never
A. When demand is inelastic
B. When demand is elastic
C. When demand is unit elastic
D. Never
answer
C
question
Which of the following is a true statement?
A. The fewer substitutes available for a product, the greater the price elasticity of demand
B. The demand curve for a luxury is less elastic than the demand curve for a necessity
C. The more narrowly defined a product is, the larger the price elasticity of demand
D. The more time that passes, the more inelastic the demand for a product becomes
A. The fewer substitutes available for a product, the greater the price elasticity of demand
B. The demand curve for a luxury is less elastic than the demand curve for a necessity
C. The more narrowly defined a product is, the larger the price elasticity of demand
D. The more time that passes, the more inelastic the demand for a product becomes
answer
C
question
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When an increase in the quantity demanded is not large enough to make up for a decrease in price, total revenue falls. Which graph is more applicable to this statement?
A. The graph on the left
B. Both graphs
C. The graph on the right
D. Neither graph
When an increase in the quantity demanded is not large enough to make up for a decrease in price, total revenue falls. Which graph is more applicable to this statement?
A. The graph on the left
B. Both graphs
C. The graph on the right
D. Neither graph
answer
A
question
What name is given to the responsiveness of the quantity supplied of a good to a change in its price?
A. Price elasticity of demand
B. Cross-price elasticity
C. Income elasticity
D. Price elasticity of supply
A. Price elasticity of demand
B. Cross-price elasticity
C. Income elasticity
D. Price elasticity of supply
answer
D
question
What id true about quantity demanded is a good is considered a necessity?
A. It is unrelated to changes in income
B. It is not very responsive to changes in income
C. It is very responsive to changes in income
D. It is always the same regardless of price changes
A. It is unrelated to changes in income
B. It is not very responsive to changes in income
C. It is very responsive to changes in income
D. It is always the same regardless of price changes
answer
B
question
If the income elasticity of SUVs is greater than 1, what is the good considered?
A. A substitute good
B. An inferior good
C. A luxury
D. A necessity
A. A substitute good
B. An inferior good
C. A luxury
D. A necessity
answer
C
question
if the quantity demanded of a good increases as income increases, then that good must be which of the following?
A. A normal good
B. A luxury
C. An inferior good
D. A necessity
A. A normal good
B. A luxury
C. An inferior good
D. A necessity
answer
A
question
Suppose that an innovation in harvesting technology increases the supply of corn. Corn farmers will experience an increase in total revenue when
A. The supply of corn is inelastic
B. The supply of corn is elastic
C. The demand for corn is elastic
D. The demand for corn is inelastic
A. The supply of corn is inelastic
B. The supply of corn is elastic
C. The demand for corn is elastic
D. The demand for corn is inelastic
answer
C
question
What is the cross-price elasticity of demand for two products that are unrelated?
A. Zero
B. Infinite
C. 1
D. Negative
A. Zero
B. Infinite
C. 1
D. Negative
answer
A
question
The median income in the US increased from $30,000 in 1970s to $45,000 in 1990s. Suppose during the same time, wine consumption increased from roughly 200,000 to 500,000 bottles per year. Using the midpoint formula determine which of the following statements is correct.
A. The income elasticity of demand is 2.14. This implies that wine is a normal good and a luxury
B. The income elasticity of demand is -2.14. This implies that wine is an inferior good
C. The income elasticity of demand is 0.47. This implies that wine is a normal good and a necessity
D. The income elasticity of demand is 2.14. This implies that wine is a normal good and a necessity
A. The income elasticity of demand is 2.14. This implies that wine is a normal good and a luxury
B. The income elasticity of demand is -2.14. This implies that wine is an inferior good
C. The income elasticity of demand is 0.47. This implies that wine is a normal good and a necessity
D. The income elasticity of demand is 2.14. This implies that wine is a normal good and a necessity
answer
A
question
If Amazon.com raises its prices by 10 percent and, as a result, the quantity of books demanded on Barnesandnoble.com increases by 35 percent, what do consumers consider the two web sites to be?
A. Unrelated
B. Close compliments
C. Identical
D. Close substitutes
A. Unrelated
B. Close compliments
C. Identical
D. Close substitutes
answer
D
question
An increase in the price of a substitute for iPads will lead to __________ in quantity demanded of iPads, so the cross-price elasticity of demand will be _________.
A. An increase; negative
B. An increase; positive
C. A decrease; negative
D. A decrease; positive
A. An increase; negative
B. An increase; positive
C. A decrease; negative
D. A decrease; positive
answer
B
question
When demand increases, equilibrium price will rise _______ when supply is ______ elastic
A. More; less
B. Less; less
C. None of the above. Supply elasticity does not affect the impact of a shift in demand on the equilibrium price
D. More; more
A. More; less
B. Less; less
C. None of the above. Supply elasticity does not affect the impact of a shift in demand on the equilibrium price
D. More; more
answer
A
question
Which of the following is true about what happens to the quantity demanded of an inferior good?
A. It falls when income increases
B. It does not change with changes in income
C. It rises when income rises
D. It does not change with changes in price
A. It falls when income increases
B. It does not change with changes in income
C. It rises when income rises
D. It does not change with changes in price
answer
A
question
The income elasticity for peanut butter is -3. This defines peanut butter as what type of good?
A. An inferior good
B. A good that is a compliment of jelly
C. A good with elastic demand
D. A necessity
A. An inferior good
B. A good that is a compliment of jelly
C. A good with elastic demand
D. A necessity
answer
A
question
An increase in the price of a complement for DVDs will lead to _________ in the quantity demanded of DVDs, so the cross-price elasticity of demand will be _________.
A. An increase; positive
B. An increase; negative
C. A decrease; negative
D. A decrease; positive
A. An increase; positive
B. An increase; negative
C. A decrease; negative
D. A decrease; positive
answer
C
question
What is the formula for profit
answer
Profit = Total Revenue - Total Cost
question
What is the formula for price elasticity of demand?
answer
Ed = Percentage change in quantity demanded / percentage change in price
Midpoint formula = Q2 - Q1 / (Q1+Q2/2) divided by P2 - P1 / (P1 + P2 / 2)
Midpoint formula = Q2 - Q1 / (Q1+Q2/2) divided by P2 - P1 / (P1 + P2 / 2)
question
What is the effect on total revenue if price elasticity is
1. Greater than 1 (elastic)
2. Less than one (inelastic)
3. Equal to 1 (unit elastic)
1. Greater than 1 (elastic)
2. Less than one (inelastic)
3. Equal to 1 (unit elastic)
answer
Total revenue
1. Revenue falls
2. Revenue rises
3. Revenue remains unchanged
1. Revenue falls
2. Revenue rises
3. Revenue remains unchanged
question
What is the formula for cross-price elasticity of demand?
answer
Cross-Price Elasticity of demand = percent change in quantity demanded of one good / percent change in price of another good
question
What happens to the value of cross-price elasticity if the products are:
1. Substitutes
2. Compliments
3. Unrelated
1. Substitutes
2. Compliments
3. Unrelated
answer
Value:
1. Positive
2. Negative
3. Zero
1. Positive
2. Negative
3. Zero
question
What is the formula for income elasticity of demand?
answer
Income elasticity = percentage change in quantity demanded / percentage change in income
question
What happens to the value of income elasticity if the products are:
1. Normal and necessity
2. Normal and luxury
3. Inferior
1. Normal and necessity
2. Normal and luxury
3. Inferior
answer
Value:
1. Positive but less than 1
2. Positive but greater than 1
3. Negative
1. Positive but less than 1
2. Positive but greater than 1
3. Negative
question
What is the formula for price elasticity of supply?
answer
Price elasticity of supply = percentage change in quantity supplied / percentage change in price
question
How do you calculate percentage change?
answer
(final value - original value) / original value)x 100
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