Question 1

An increase in the price of tickets to a popular sporting event will increase total revenue if

Accepted Answer

A)   there are many substitutes for this form of entertainment.
B)   the ticket is considered to be a luxury.
C)   the buyers of the tickets are fanatic about the event.
D)   the fans are price conscious.E) All of the above
F) B) and C)

Question 2

Suppose the price elasticity coefficients of demand are 1.43, 0.67, 1.11, and 0.29 for products W, X, Y, and Z, respectively. A 1 percent decrease in price will increase total revenue in the cases of

Accepted Answer

A)   W and Y.
B)   Y and Z.
C)   X and Z.
D)   Z and W.E) B) and C)
F) A) and D)

Question 3

Generally speaking, the demand for luxury goods is more price elastic than is the demand for necessities.

Accepted Answer

A) True 
 B)False

Question 4

If the demand for a product increases proportionately faster than the increase in consumers' incomes, then the income elasticity of demand for the product is

Accepted Answer

A)   zero.
B)   greater than zero.
C)   less than zero.
D)   equal to 1.E) A) and D)
F) All of the above

Question 5

(Last Word)  Microsoft charges a substantially lower price for a software upgrade than for the initial purchase of the software. This implies that Microsoft views the demand curve for the software upgrade to be

Accepted Answer

A)   more elastic than the demand for the original software.
B)   upsloping rather than downsloping.
C)   less elastic than the demand for the original software.
D)   of less value than the original software.E) C) and D)
F) A) and D)

Question 6

The demand for a product is inelastic with respect to price if

Accepted Answer

A)   consumers are largely unresponsive to a per unit price change.
B)   the elasticity coefficient is greater than 1.
C)   a drop in price is accompanied by a decrease in the quantity demanded.
D)   a drop in price is accompanied by an increase in the quantity demanded.E) None of the above
F) A) and D)

Question 7

The supply curve of antique reproductions is

Accepted Answer

A)   relatively elastic.
B)   relatively inelastic.
C)   perfectly inelastic.
D)   unit elastic.E) A) and D)
F) C) and D)

Question 8

The price elasticity of demand increases with the length of the period considered because

Accepted Answer

A)   consumers' incomes will increase over time.
B)   the demand curve will shift outward as time passes.
C)   all prices will increase over time.
D)   consumers will be better able to find substitutes.E) A) and D)
F) B) and C)

Question 9

The greater the ease of shifting resources from product X to product Y in the production process, the greater is the elasticity of supply of product Y.

Accepted Answer

A) True 
 B)False

Question 10

The law of supply indicates that the price-elasticity of supply coefficient would have a negative sign.

Accepted Answer

A) True 
 B)False

Question 11

If the coefficient of income elasticity of demand is positive, the product is an inferior good.

Accepted Answer

A) True 
 B)False

Question 12

If sellers could price-discriminate and charge two different prices to two different groups of buyers in order to increase revenues, then the sellers would charge

Accepted Answer

A)   a higher price to the buyers whose demand is elastic.
B)   a higher price to the buyers whose demand is inelastic.
C)   a higher price to the buyers whose demand is unit-elastic.
D)   the same price, actually, because price-discrimination will result in lower revenues.E) A) and B)
F) C) and D)

Question 13

If price and total revenue vary in opposite directions, demand is

Accepted Answer

A)   perfectly inelastic.
B)   perfectly elastic.
C)   relatively inelastic.
D)   relatively elastic.E) A) and B)
F) A) and C)

Question 14

Most goods can be classified as normal goods rather than inferior goods. The definition of a normal good suggests that

Accepted Answer

A)   the income elasticity of demand for the good is negative.
B)   the price elasticity of demand for the good is negative.
C)   the income elasticity for the good is greater than 0.
D)   the cross elasticity of demand for the good is positive.E) A) and B)
F) A) and C)

Question 15

If the percentage change in quantity demanded is less than the percentage change in price, then demand is said to be elastic.

Accepted Answer

A) True 
 B)False

Question 16

Economists distinguish among the immediate market period, the short run, and the long run by noting that

Accepted Answer

A)   supply is most elastic in the short run and least elastic in the immediate market period.
B)   demand is most elastic in the short run, and least elastic in the long run.
C)   supply is most elastic in the long run and least elastic in the immediate market period.
D)   supply is most elastic in the short run and least elastic in the long run.E) A) and B)
F) A) and C)

Question 17

Antiques tend to have highly inelastic supply curves.

Accepted Answer

A) True 
 B)False

Question 18

The supply curve of a one-of-a-kind original painting is

Accepted Answer

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

Question 19

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

Question 20

If a 10 percent increase in the price of one good results in no change in the quantity demanded of another good, then it can be concluded that the two goods are

Accepted Answer

A)   complementary goods.
B)   substitute goods.
C)   independent goods.
D)   normal goods.E) B) and D)
F) B) and C)

Exam 6: Elasticity

If sellers could price-discriminate and charge two different prices to two different groups of buyers in order to increase revenues, then the sellers would charge

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose the price elasticity coefficients of demand are 1.43, 0.67, 1.11, and 0.29 for products W, X, Y, and Z, respectively. A 1 percent decrease in price will increase total revenue in the cases of

Correct AnswerverifiedShow Answer

An increase in the price of tickets to a popular sporting event will increase total revenue if

Correct AnswerverifiedShow Answer

If the percentage change in quantity demanded is less than the percentage change in price, then demand is said to be elastic.

Correct AnswerverifiedShow Answer

The supply curve of a one-of-a-kind original painting is

Correct AnswerverifiedShow Answer

Antiques tend to have highly inelastic supply curves.

Correct AnswerverifiedShow Answer

(Last Word) Microsoft charges a substantially lower price for a software upgrade than for the initial purchase of the software. This implies that Microsoft views the demand curve for the software upgrade to be

Correct AnswerverifiedShow Answer

The law of supply indicates that the price-elasticity of supply coefficient would have a negative sign.

Correct AnswerverifiedShow Answer

The demand for a product is inelastic with respect to price if

Correct AnswerverifiedShow Answer

The supply curve of antique reproductions is

Correct AnswerverifiedShow Answer

The greater the ease of shifting resources from product X to product Y in the production process, the greater is the elasticity of supply of product Y.

Correct AnswerverifiedShow Answer

If price and total revenue vary in opposite directions, demand is

Correct AnswerverifiedShow Answer

If the demand for a product increases proportionately faster than the increase in consumers' incomes, then the income elasticity of demand for the product is

Correct AnswerverifiedShow Answer

If the coefficient of income elasticity of demand is positive, the product is an inferior good.

Correct AnswerverifiedShow Answer

Generally speaking, the demand for luxury goods is more price elastic than is the demand for necessities.

Correct AnswerverifiedShow Answer

Economists distinguish among the immediate market period, the short run, and the long run by noting that

Correct AnswerverifiedShow Answer

The price elasticity of demand increases with the length of the period considered because

Correct AnswerverifiedShow Answer

Most goods can be classified as normal goods rather than inferior goods. The definition of a normal good suggests that

Correct AnswerverifiedShow Answer

If a 10 percent increase in the price of one good results in no change in the quantity demanded of another good, then it can be concluded that the two goods are

Correct AnswerverifiedShow Answer

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