C h a p t e r
4
ELASTICITY
Topic: Calculating Elasticity
Skill: Conceptual
Price Elasticity of Demand
4)
Topic: The Price Elasticity of Demand
Skill: Conceptual
1) The slope of a demand curve depends on
A) the units used to measure price and the units
used to measure quantity.
B) the units used to measure price but not the units
used to measure quantity.
C) the units used to measure quantity but not the
units used to measure price.
D) neither the units used to measure price nor the
units used to measure quantity.
A)
B)
C)
D)
When the quantity of coal is measured in kilograms instead of pounds, the demand for coal becomes
more elastic.
less elastic.
neither more nor less elastic.
undefined.
Answer: C
Topic: Calculating Elasticity
Skill: Recognition
5) The price elasticity of demand equals
A) the change in the price divided by the change in
quantity demanded.
B) the change in the quantity demanded divided by
the change in price.
C) the percentage change in the price divided by
the percentage change in the quantity demanded.
D) the percentage change in the quantity demanded
divided by the percentage change in the price.
Answer: A
Topic: The Price Elasticity of Demand
Skill: Conceptual
2) The price elasticity of demand depends on
A) the units used to measure price and the units
used to measure quantity.
B) the units used to measure price but not the units
used to measure quantity.
C) the units used to measure quantity but not the
units used to measure price.
D) neither the units used to measure price nor the
units used to measure quantity.
Answer: D
Topic: Calculating Elasticity
Skill: Analytical
Answer: D
6)
Topic: The Price Elasticity of Demand
Skill: Recognition
3) The price elasticity of demand measures
A) how often the price of a good changes.
B) the slope of a budget curve.
C) how sensitive the quantity demanded is to
changes in demand.
D) the responsiveness of the quantity demanded to
changes in price.
A)
B)
C)
D)
If a rightward shift of the supply curve leads to a 6
percent decrease in the price and a 5 percent increase in the quantity demanded, the price elasticity of demand is
0.30.
0.60.
0.83.
1.20.
Answer: C
Answer: D
135
136
CHAPTER 4
Topic: Calculating Elasticity
Skill: Analytical
Topic: Calculating Elasticity
Skill: Analytical
7)
11) A fall in the price of cabbage from $10.50 to
$9.50 per bushel increases the quantity demanded
from 18,800 to 21,200 bushels. The price elasticity of demand is
A) 0.80.
B) 1.20.
C) 1.25.
D) 8.00.
A)
B)
C)
D)
A 10 percent increase in the quantity of spinach
demanded results from a 20 percent decline in its
price. The price elasticity of demand for spinach
is
0.5.
2.0.
10.0.
20.0.
Answer: A
Answer: B
Topic: Calculating Elasticity
Skill: Analytical
Topic: Calculating Elasticity
Skill: Analytical
8)
12) Suppose that the quantity of root beer demanded
declines from 103,000 gallons per week to 97,000
gallons per week as a consequence of a 10 percent
increase in the price of root beer. The price elasticity of demand is
A) 0.60.
B) 1.40.
C) 1.66.
D) 6.00.
A)
B)
C)
D)
A 20 percent increase in the quantity of pizza
demanded results from a 10 percent decline in its
price. The price elasticity of demand for pizza is
0.5.
2.0.
10.0.
20.0.
Answer: B
Topic: Calculating Elasticity
Skill: Analytical
9)
A)
B)
C)
D)
Suppose a rise in the price of peaches from $5.50
to $6.50 per bushel decreases the quantity demanded from 12,500 to 11,500 bushels. The
price elasticity of demand is
0.5.
1.0.
2.0.
1000.0.
Answer: A
Topic: Calculating Elasticity
Skill: Analytical
10) A fall in the price of lemons from $10.50 to
$9.50 per bushel increases the quantity demanded
from 19,200 to 20,800 bushels. The price elasticity of demand is
A) 0.80.
B) 1.20.
C) 1.25.
D) 8.00.
Answer: A
Answer: A
Topic: Calculating Elasticity
Skill: Analytical
13) The price elasticity of demand is 5.0 if a 10 percent increase in the price results in a ____ decrease in the quantity demanded.
A) 2 percent
B) 5 percent
C) 10 percent
D) 50 percent
Answer: D
Topic: Calculating Elasticity
Skill: Analytical
14) A shift of the supply curve of oil raises the price of
oil from $9.50 a barrel to $10.50 a barrel and reduces the quantity demanded from 41 million to
39 million barrels a day. The price elasticity of
demand for oil is
A) 2 million barrels a day per dollar.
B) $1 per 2 million barrels a day.
C) 0.5.
D) 2.0.
Answer: C
ELASTICITY
Topic: Calculating Elasticity
Skill: Analytical
15) Suppose the price elasticity of demand for oil is
0.1. In order to lower the price of oil by 20 percent, the quantity of oil supplied must be increased by
A) 200 percent.
B) 20 percent.
C) 2 percent.
D) 0.2 percent.
Answer: C
Topic: Calculating Elasticity
Skill: Analytical*
16) The price elasticity of demand for cigarettes is
0.4. If government wants to reduce smoking by
10 percent, by how much should it raise the price
of cigarettes?
A) By 10 percent.
B) By 20 percent.
C) By 25 percent.
D) By 50 percent.
Answer: C
Topic: Calculating Elasticity
Skill: Analytical*
17) Teenagers have a higher price elasticity of demand
for cigarettes than do adults. Suppose the price
elasticity of teenager’s demand for cigarettes is
0.8, the price elasticity of adult’s demand for cigarettes is 0.8. If the government imposes a tax on
cigarettes that raises the price by 10 percent, by
how much will it reduce teenage smoking?
A) By 5 percent
B) By 10 percent
C) By 15 percent
D) By 20 percent
Answer: D
137
Price
(dollars per bushel)
8
7
6
5
4
3
Quantity demanded
(bushels)
2,000
4,000
6,000
8,000
10,000
12,000
Topic: Calculating Elasticity
Skill: Analytical
18) The table above gives the demand schedule for
snow peas. The price elasticity of demand between $6.00 and $7.00 per bushel is
A) 1.0.
B) 2.0.
C) 2.6.
D) 5.0.
Answer: C
Topic: Total Revenue and Elasticity
Skill: Analytical
19) The table above gives the demand schedule for
snow peas. If the price of snow peas falls from
$4.00 to $3.00 a bushel, total revenue will
A) increase because demand is elastic in this range.
B) decrease because demand is elastic in this range.
C) increase because demand is inelastic in this
range.
D) decrease because demand is inelastic in this
range.
Answer: D
Topic: Elasticity Along a Straight-Line Demand
Curve
Skill: Analytical
20) The table above gives the demand schedule for
snow peas. The demand curve for snow peas is a
straight line and so the elasticity of demand is
A) 1 at all prices.
B) the same at all prices but not 1.
C) higher at higher prices.
D) lower at higher prices.
Answer: C
138
A
B
C
D
E
CHAPTER 4
Price
(dollars per bushel)
10
8
6
4
2
Quantity demanded
(bushels)
0
4
8
12
16
Topic: Calculating Elasticity
Skill: Analytical
21) The table above gives the demand schedule for
peas. As you move from point A to point B, the
price elasticity of demand equals
A) 0.11.
B) 0.50.
C) 0.22.
D) 9.09.
Answer: D
Topic: Calculating Elasticity
Skill: Analytical
22) The table above gives the demand schedule for
peas. As you move from point C to point D, the
price elasticity of demand is
A) elastic.
B) unit elastic.
C) 0.75.
D) 3.00.
Answer: B
Topic: Calculating Elasticity
Skill: Conceptual
23) The table above gives the demand schedule for
peas. Which of the following statements correctly
describes the price elasticity of demand?
A) The price elasticity of demand is larger at point
A than at point B.
B) The price elasticity of demand is larger at point
D than at point A.
C) The price elasticity of demand is constant because the slope is constant.
D) The price elasticity of demand increases moving
from point A to point B to point C to point D
to point E.
Answer: A
Topic: Inelastic and Elastic Demand
Skill: Recognition
24) If demand is price elastic,
A) a 1 percent decrease in the price leads to an increase in the quantity demanded that exceeds 1
percent.
B) a 1 percent increase in the price leads to an increase in the quantity demanded that exceeds 1
percent.
C) a 1 percent decrease in the price leads to a decrease in the quantity demanded that is less than
1 percent.
D) the price is very sensitive to any shift of the supply curve.
Answer: A
Topic: Inelastic and Elastic Demand
Skill: Conceptual
25)
A)
B)
C)
D)
The price elasticity of demand can range between
zero and one.
negative infinity and infinity.
zero and infinity.
negative one and one.
Answer: C
Topic: Inelastic and Elastic Demand
Skill: Recognition
26) Demand is perfectly inelastic when
A) shifts in the supply curve results in no change in
price.
B) the good in question has perfect substitutes.
C) shifts of the supply curve results in no change in
quantity demanded.
D) shifts of the supply curve results in no change in
the total revenue from sales.
Answer: C
Topic: Inelastic and Elastic Demand
Skill: Recognition
27) If the price elasticity is between 0 and 1, demand
is
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly elastic.
Answer: B
ELASTICITY
139
Topic: Inelastic and Elastic Demand
Skill: Recognition
Topic: Inelastic and Elastic Demand
Skill: Analytical
28) Demand is inelastic if
A) a large change in quantity demanded results in a
small change in price.
B) the quantity demanded is very responsive to
changes in price.
C) the price elasticity of demand is less than 1.
D) the price elasticity of demand is greater than 1.
32) The demand for movies is unit elastic if
A) a 5 percent decrease in the price leads to an infinite increase in the quantity demanded.
B) a 5 percent increase in the price leads to a 5 percent decrease in the quantity demanded.
C) any increase in the price leads to a 1 percent decrease in the quantity demanded.
D) a 5 percent increase in the price leads to a 5 percent increase in total revenue.
Answer: C
Topic: Inelastic and Elastic Demand
Skill: Recognition
29) A good with a vertical demand curve has a demand with
A) unit elasticity.
B) infinite elasticity.
C) zero elasticity.
D) varying elasticity.
Answer: C
Topic: Inelastic and Elastic Demand
Skill: Conceptual
30) When the price elasticity of demand for a good
equals
A) 0, the demand curve is vertical.
B) 0, the demand curve is horizontal.
C) 1, the demand curve is vertical.
D) 1, the demand curve is horizontal.
Answer: A
Topic: Inelastic and Elastic Demand
Skill: Analytical
31) A straight-line demand curve along which the
price elasticity of demand equals 0 is one that
A) forms a 45 degree angle with the vertical axis.
B) forms a 60 degree angle with the horizontal axis.
C) is vertical.
D) is horizontal.
Answer: C
Answer: B
Topic: Inelastic and Elastic Demand
Skill: Analytical
33) Unit elastic demand
A) means that the ratio of a change in the quantity
demanded to a change in the price equals 1.
B) means that the ratio of a percentage change in
the quantity demanded to a percentage change
in the price equals 1.
C) will be vertical.
D) will be horizontal.
Answer: B
Topic: Inelastic and Elastic Demand
Skill: Conceptual
34) A good with a horizontal demand curve has a
demand
A) with an income elasticity of demand of 0.
B) with a price elasticity of demand of 0.
C) with a price elasticity of demand of infinity.
D) for which there are no substitute.
Answer: C
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CHAPTER 4
Topic: Inelastic and Elastic Demand
Skill: Recognition
Topic: Inelastic and Elastic Demand
Skill: Analytical
35) The demand curve in the figure above illustrates
the demand for a product with
A) zero price elasticity of demand at all prices.
B) infinite price elasticity of demand.
C) unit price elasticity of demand at all prices.
D) a price elasticity of demand that is different at all
prices.
Answer: A
36) In the above figure, which demand curve illustrates perfectly elastic demand?
A) G
B) H
C) I
D) J
Answer: D
ELASTICITY
141
Topic: Inelastic and Elastic Demand
Skill: Analytical
Topic: Inelastic and Elastic Demand
Skill: Analytical
37) The demand curve in the figure above illustrates a
product whose demand has a price elasticity of
demand equal to
A) zero at all prices.
B) infinity.
C) one at all prices.
D) a different amount at different prices.
38) The demand curve in the figure above illustrates
the demand for a product with
A) zero price elasticity of demand at all prices.
B) infinite price elasticity of demand.
C) unit price elasticity of demand at all prices.
D) a price elasticity of demand that is different at all
prices.
Answer: B
Answer: C
Topic: Elasticity Along a Straight-Line Demand
Curve
Skill: Analytical
39) On a linear demand curve that intersects both
axes,
A) the elasticity exceeds 1.00 at all prices.
B) the elasticity is less than 1.00 at all prices.
C) the elasticity equals 1.00 at all prices.
D) the elasticity decreases as the price falls and
quantity increases.
Answer: D
Topic: Elasticity Along a Straight-Line Demand
Curve
Skill: Analytical
40) On a straight-line downward-sloping demand
curve, the maximum elasticity of demand occurs
A) at its vertical intercept.
B) at its midpoint.
C) at its horizontal intercept.
D) where it intersects the supply curve.
Answer: A
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CHAPTER 4
Topic: Elasticity Along a Straight-Line Demand
Curve
Skill: Analytical
Topic: Elasticity Along a Straight-Line Demand
Curve
Skill: Conceptual
41) A straight-line demand curve with negative slope
intersects the horizontal axis at 100 tons per week.
At the midpoint on the demand curve (corresponding to 50 tons per week) the price elasticity
of demand is
A) 0.
B) 0.5.
C) 1.0.
D) greater than 1.0.
45) The elasticity of demand along a straight line,
negatively sloped, demand curve is
A) always equal to 1.0.
B) infinite.
C) changes continuously moving along the demand
curve.
D) equal to 0.
Answer: C
Topic: Elasticity Along a Straight-Line Demand
Curve
Skill: Recognition
42) Which of the following statements is FALSE?
A) A good with a vertical demand curve has a perfectly inelastic demand.
B) A good with a straight line, downward sloping
demand curve has a demand whose elasticity is
constant.
C) A good with a horizontal demand curve has a
perfectly elastic demand.
D) All of the above statements are false.
Answer: B
Topic: Elasticity Along a Straight-Line Demand
Curve
Skill: Conceptual*
43) Along a straight-line demand curve, as the price
falls the
A) demand becomes more elastic.
B) demand becomes less elastic.
C) elasticity of demand is constant.
D) demand is always unitary elastic.
Answer: B
Topic: Elasticity Along a Straight-Line Demand
Curve
Skill: Analytical
44) The price elasticity of demand ____ in value
when moving downward along a ___ line demand
curve.
A) falls; straight
B) rises; curved
C) falls, curved
D) rises; straight
Answer: A
Answer: C
Topic: Elasticity Along a Straight-Line Demand
Curve
Skill: Conceptual
46) If the demand curve for a good is a downward
sloping straight line, the demand for the good will
be more price elastic the higher is the
A) price of the good.
B) price of substitutes.
C) income of consumers.
D) income elasticity of demand for that good.
Answer: A
Topic: Elasticity Along a Straight-Line Demand
Curve
Skill: Analytical
47) If the demand curve for a good is a downward
sloping straight line, then at which of the following prices is demand most elastic?
A) $1/unit
B) $2/unit
C) $3/unit
D) It is impossible to determine at which price the
demand will be most elastic without more information.
Answer: C
ELASTICITY
143
Topic: Elasticity Along a Straight-Line Demand
Curve
Skill: Analytical
50) The figure above illustrates a linear demand curve.
In the range from $8 to $6,
A) the demand is price elastic.
B) the demand is unit elastic.
C) the demand is price inelastic.
D) more information is needed to determine if the
demand is price elastic, unit elastic, or inelastic.
Answer: A
Topic: Elasticity Along a Straight-Line Demand
Curve
Skill: Analytical
Topic: Elasticity Along a Straight-Line Demand
Curve
Skill: Analytical
48) The figure above illustrates a linear demand curve.
By comparing the price elasticity in the $2 to $4
price range with the elasticity in the $8 to $10
range, you can conclude that the elasticity is
A) greater in the $8 to $10 range.
B) greater in the $2 to $4 range.
C) the same in both price ranges.
D) greater in the $8 to $10 range when the price
rises but greater in the $2 to $4 range when the
price falls.
Answer: A
Topic: Elasticity Along a Straight-Line Demand
Curve
Skill: Analytical
49) The figure above illustrates a linear demand curve.
If the price falls from $8 to $6,
A) total revenue will increase.
B) total revenue will decrease.
C) total revenue will remain unchanged.
D) the quantity demanded will increase by less than
20 percent.
Answer: A
51) The figure above illustrates a linear demand curve.
If the price falls from $6 to $4,
A) total revenue will increase.
B) total revenue will decrease.
C) total revenue will remain unchanged.
D) quantity demanded will increase by more than
100 percent.
Answer: C
Topic: Elasticity Along a Straight-Line Demand
Curve
Skill: Analytical
52) The figure above illustrates a linear demand curve.
In the price range from $8 to $6, demand is ____
and in the price range $4 to $2, demand is ____.
A) elastic; elastic
B) elastic; inelastic
C) inelastic; elastic
D) inelastic; inelastic
Answer: B
Topic: Elasticity Along a Straight-Line Demand
Curve
Skill: Analytical
53) The figure above illustrates a linear demand curve.
If the price rises from $6 to $8 demand is ____
and if the price falls from $8 to $6 demand is
____.
A) elastic; elastic
B) elastic; inelastic
C) inelastic; elastic
D) inelastic; inelastic
Answer: A
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CHAPTER 4
Topic: Total Revenue and Elasticity
Skill: Conceptual
56) Demand is inelastic if
A) large shifts of the supply curve lead to only small
changes in price.
B) the good in question has close substitutes.
C) a leftward shift of the supply curve raises the total revenue.
D) the smaller angle between the vertical axis and
the demand curve is less than 45 degrees.
Answer: C
Topic: Total Revenue and Elasticity
Skill: Recognition
Topic: Elasticity Along a Straight-Line Demand
Curve
Skill: Analytical
54) The demand curve in the figure above illustrates
the demand for a product with
A) zero price elasticity of demand at all prices.
B) infinite price elasticity of demand.
C) unit price elasticity of demand at all prices.
D) a price elasticity of demand that is different at all
prices.
Answer: D
Topic: Elasticity Along a Straight-Line Demand
Curve
Skill: Analytical
55) A straight-line demand curve with negative slope
intersects the horizontal axis at 200 tons per week.
The point on the demand curve at which the
price elasticity of demand is 1 corresponds to a
quantity demanded
A) of 0 tons.
B) of 100 tons.
C) of 200 tons.
D) that would be negative if a negative quantity
demanded were possible.
Answer: B
57) Demand is unit elastic when
A) the slope of the demand curve is –1.
B) a shift of the supply curve leads to no change in
price.
C) a shift of the supply curve leads to an equal shift
of the demand curve.
D) a change in the price of the product leads to no
change in the total revenue.
Answer: D
Topic: Total Revenue and Elasticity
Skill: Analytical
58)
A)
B)
C)
D)
Producers’ total revenue will decrease if
income increases and the good is a normal good.
the price rises and demand is elastic.
the price rises and demand is inelastic.
income falls and the good is an inferior good.
Answer: B
Topic: Total Revenue and Elasticity
Skill: Analytical
59) Producers’ total revenue will increase if
A) income increases and the good is an inferior
good.
B) the price rises and demand is elastic.
C) the price rises and demand is inelastic.
D) income falls and the good is a normal good.
Answer: C
ELASTICITY
145
Topic: Total Revenue and Elasticity
Skill: Analytical
Topic: Total Revenue and Elasticity
Skill: Analytical
60) If the demand for a good is unit elastic,
A) a 5 percent increase in price results in a 5 percent increase in total revenue.
B) a 5 percent increase in price results in a 5 percent decrease in total revenue.
C) a 5 percent increase in price does not change total revenue.
D) the demand curve is a straight line with slope of
–1.
64) A leftward shift of the supply curve of cookies
raises the price of a cookie from 10 cents to 20
cents and decreases the quantity demanded from
700,000 to 500,000. You can conclude that
A) the demand for cookies is elastic.
B) the demand for cookies is inelastic.
C) the supply of cookies is elastic.
D) the supply of cookies is inelastic.
Answer: C
Topic: Total Revenue and Elasticity
Skill: Analytical*
61) If OPEC cuts oil production to increase the total
revenue, they know that the demand for oil in the
global market is
A) perfectly elastic
B) unit elastic
C) elastic
D) inelastic
Answer: D
Topic: Total Revenue and Elasticity
Skill: Analytical
62) A shift of the supply curve of oil raises the price
from $10 a barrel to $30 a barrel and reduces the
quantity demanded from 40 million to 23 million
barrels a day. You can conclude that the
A) demand for oil is elastic.
B) demand for oil is inelastic.
C) supply of oil is elastic.
D) supply of oil is inelastic.
Answer: B
Topic: Total Revenue and Elasticity
Skill: Analytical
63) A shift of the supply curve of oil raises the price
from $10 a barrel to $15 a barrel and reduces the
quantity demanded from 40 million to 15 million
barrels a day. You can conclude that the
A) demand for oil is elastic.
B) demand for oil is inelastic.
C) supply of oil is elastic.
D) supply of oil is inelastic.
Answer: A
Answer: B
Topic: Total Revenue and Elasticity
Skill: Analytical
65) The demand for a good is elastic if
A) an increase in its price results in an increase in
total revenue.
B) a decrease in its price results in a decrease in total revenue.
C) an increase in its price results in a decrease in total revenue.
D) the good is a necessity.
Answer: C
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CHAPTER 4
Topic: Your Expenditure and Elasticity
Skill: Analytical
68) As the price of camcorders fell during the 1990s,
the amount of money spent on this good increased, that is, consumers’ total expenditures on
camcorders increased. This fact suggests that the
demand for camcorders
A) must have shifted leftward.
B) must be upward sloping.
C) is elastic.
D) is inelastic.
Answer: C
Topic: Your Expenditure and Elasticity
Skill: Analytical
Topic: Total Revenue and Elasticity
Skill: Analytical
66) The figure above represents the behavior of total
revenue as price falls along a straight-line demand
curve. What is the price elasticity of demand if total revenue is given by point f?
A) Demand is inelastic.
B) Demand is unit elastic.
C) Demand is elastic.
D) It is impossible to determine.
Answer: C
Topic: Total Revenue and Elasticity
Skill: Analytical
67) The figure above represents the behavior of total
revenue as price falls along a straight-line demand
curve. Unit elasticity of demand occurs at
A) point g.
B) point h.
C) point i.
D) point j.
Answer: B
69) Assuming that your demand for gasoline is inelastic, when the price of gasoline falls, which of the
following is most likely to occur?
A) Your demand curve for gasoline will shift leftward.
B) Your demand curve for gasoline will shift rightward.
C) Your total expenditure on gasoline will increase.
D) Your total expenditure on gasoline will decrease.
Answer: D
Topic: Your Expenditure and Elasticity
Skill: Analytical
70) Starting at the top of a straight-line downward
sloping demand curve, as the price rises, total expenditures will
A) initially increase and then decrease.
B) initially decrease and then increase.
C) increase along the entire demand curve.
D) decrease along the entire demand curve.
Answer: A
Topic: Your Expenditure and Elasticity
Skill: Analytical
71) If a price decrease results in your expenditure on a
good decreasing, your demand must be
A) inelastic.
B) elastic.
C) unit.
D) linear.
Answer: A
ELASTICITY
Topic: Your Expenditure and Elasticity
Skill: Conceptual
72) An increase in subway fares in New York City will
boost your expenditures on subway rides if
A) the supply of subway rides is elastic.
B) the supply of subway rides is inelastic.
C) your demand for subway rides is elastic.
D) your demand for subway rides is inelastic.
Answer: D
Topic: Factors That Influence the Price Elasticity
of Demand
Skill: Analytical
73) The more substitutes available for a good or service,
A) the larger is its price elasticity of demand.
B) the smaller is its income elasticity of demand.
C) the smaller is its price elasticity of demand.
D) the larger is its income elasticity of demand.
Answer: A
Topic: Factors That Influence the Price Elasticity
of Demand
Skill: Analytical
74) Of the following, demand is likely to be the least
elastic for
A) Ford automobiles.
B) Toyota automobiles.
C) compact disc players.
D) toothpicks.
Answer: D
Topic: Factors That Influence the Price Elasticity
of Demand
Skill: Analytical
75) Of the following, demand is likely to be the least
elastic for
A) diamonds.
B) insulin for diabetics.
C) iceberg lettuce.
D) pink grapefruit.
Answer: B
Topic: Factors That Influence the Price Elasticity
of Demand
Skill: Analytical
76)
A)
B)
C)
D)
The demand for food is most elastic in countries
with low income levels.
with intermediate income levels.
with high income levels.
that are highly urbanized.
Answer: A
147
Topic: Factors That Influence the Price Elasticity
of Demand
Skill: Conceptual
77) The demand for Honda Accords is
A) probably inelastic but more elastic than the demand for automobiles.
B) probably elastic and more elastic than the demand for automobiles.
C) probably inelastic and less elastic than the demand for automobiles.
D) probably elastic but less elastic than the demand
for automobiles.
Answer: B
Topic: Factors That Influence the Price Elasticity
of Demand
Skill: Conceptual
78) The route from Dallas to Mexico City is served by
more than one airline. The demand for tickets
from American Airlines for that route is probably
A) inelastic but more elastic than the demand for
all tickets for that route.
B) elastic and more elastic than the demand for all
tickets for that route.
C) inelastic and less elastic than the demand for all
tickets for that route.
D) elastic but less elastic than the demand for all
tickets for that route.
Answer: B
Topic: Factors That Influence the Price Elasticity
of Demand
Skill: Conceptual
79) The elasticity of demand for Gateway computers
is probably
A) inelastic and smaller than the elasticity of demand for computers overall.
B) elastic and smaller than the elasticity of demand
for computers overall.
C) inelastic but larger than the elasticity of demand
for computers overall.
D) elastic and larger than the elasticity of demand
for computers overall.
Answer: D
148
CHAPTER 4
Topic: Factors That Influence the Price Elasticity
of Demand
Skill: Conceptual
80) Aglets are the metal or plastic tips on shoelaces
that make it easier to lace your shoes. The demand for aglets is probably
A) inelastic.
B) unit elastic.
C) elastic but not perfectly elastic.
D) perfectly elastic.
Answer: A
More Elasticities of Demand
Topic: Cross Elasticity of Demand
Skill: Recognition
81) The cross elasticity of demand measures the responsiveness of the quantity demanded of a particular good to changes in the prices of
A) its substitutes and its complements.
B) its substitutes but not its complements.
C) its complements but not its substitutes.
D) neither its substitutes nor its complements.
Answer: A
Topic: Cross Elasticity of Demand
Skill: Recognition
82)
A)
B)
C)
D)
If goods are complements, definitely their
cross elasticities are positive.
income elasticities are positive.
income elasticities are negative.
cross elasticities are negative.
Answer: D
Topic: Cross Elasticity of Demand
Skill: Analytical
83) If a rise in the price of good 1 decreases the quantity of good 2 demanded,
A) the cross elasticity of demand is negative.
B) the cross elasticity of demand is positive.
C) good 1 is an inferior good.
D) good 2 is an inferior good.
Answer: A
Topic: Cross Elasticity of Demand
Skill: Recognition
84) The cross elasticity of demand between apples and
oranges is defined as
A) the percentage change in the quantity of apples
demanded divided by the percentage change in
the price of oranges.
B) the price elasticity of demand for apples divided
by the price elasticity of demand for oranges.
C) the percentage change in the quantity of apples
demanded divided by the percentage change in
the quantity of oranges demanded.
D) the change in the quantity of apples demanded
divided by the change in the quantity of oranges
demanded.
Answer: A
Topic: Cross Elasticity of Demand
Skill: Conceptual
85) If the cross elasticity of demand between goods A
and B is positive,
A) the demands for A and B are both price elastic.
B) the demands for A and B are both price inelastic.
C) A and B are complements.
D) A and B are substitutes.
Answer: D
Topic: Cross Elasticity of Demand
Skill: Conceptual
86) If the cross elasticity of demand between goods A
and B is negative,
A) the demands for A and B are both price elastic.
B) the demands for A and B are both price inelastic.
C) A and B are complements.
D) A and B are substitutes.
Answer: C
Topic: Cross Elasticity of Demand
Skill: Conceptual
87) The greater the substitutability between Northwest timber and Southeast timber, the ____ is the
cross elasticity of demand between timber from
the two regions and the ____ is the elasticity of
demand for Northwest timber.
A) smaller; smaller
B) smaller; larger
C) larger; smaller
D) larger; larger
Answer: D
ELASTICITY
149
Topic: Cross Elasticity of Demand
Skill: Conceptual
Topic: Cross Elasticity of Demand
Skill: Analytical
88) If goods A and B are complements,
A) the cross elasticity of demand between A and B
is negative.
B) the cross elasticity of demand between A and B
is positive.
C) their income elasticities of demand are both
greater than 1.
D) their income elasticities of demand are both less
than 1.
92) A rise in the price of good A will shift the
A) demand curve for good B rightward if the cross
elasticity of demand between A and B is negative.
B) demand curve for good B rightward if the cross
elasticity of demand between A and B is positive.
C) supply curve of good B rightward if the cross
elasticity of demand between A and B is negative.
D) supply curve of good B rightward if the cross
elasticity of demand between A and B is positive.
Answer: A
Topic: Cross Elasticity of Demand
Skill: Analytical
89) If a rise in the price of good B increases the quantity demanded of good A,
A) A and B are substitutes.
B) A and B are complements.
C) A is a substitute for B, but B is a complement to
A.
D) B is a substitute for A, but A is a complement to
B.
Answer: A
Topic: Cross Elasticity of Demand
Skill: Analytical
90) If a fall in the price of good A increases the quantity demanded of good B,
A) A and B are substitutes.
B) A and B are complements.
C) A is a substitute for B, but B is a complement to
A.
D) B is a substitute for A, but A is a complement to
B.
Answer: B
Topic: Cross Elasticity of Demand
Skill: Analytical
91) The cross elasticity of demand between CocaCola and Pepsi-Cola is
A) positive, that is, Coke and Pepsi are complements.
B) positive, that is, Coke and Pepsi are substitutes.
C) negative, that is, Coke and Pepsi are complements.
D) negative, that is, Coke and Pepsi are substitutes.
Answer: B
Answer: B
Topic: Income Elasticity of Demand
Skill: Recognition
93) The income elasticity of demand is the percentage
change in
A) the price divided by the percentage change in
income.
B) the quantity demanded divided by the percentage change in income.
C) income divided by the percentage change in
quantity demanded.
D) income divided by the percentage change in
price.
Answer: B
Topic: Income Elasticity of Demand
Skill: Recognition
94) Demand is income elastic if
A) a large percentage increase in income will result
in a small percentage increase in quantity demanded.
B) a small percentage increase in income will result
in a large percentage increase in quantity demanded.
C) an increase in income will not affect the quantity demanded.
D) the good in question has close substitutes.
Answer: B
150
CHAPTER 4
Topic: Income Elasticity of Demand
Skill: Recognition
Topic: Income Elasticity of Demand
Skill: Analytical
95)
A)
B)
C)
D)
100) Deb’s income has just risen from $950 per week
to $1,050 per week. As a result, she decides to increase the number of movies she attends each
month by 5 percent. Her demand for movies is
A) represented by a vertical line.
B) represented by a horizontal line.
C) income elastic.
D) income inelastic.
The income elasticity of demand is largest for
food.
clothing.
shelter.
luxuries.
Answer: D
Topic: Income Elasticity of Demand
Skill: Recognition
96) To say that turnips are inferior goods means that
the income elasticity
A) is definitely greater than 1.
B) is definitely between 0 and 1.
C) is positive but could be greater than or less then
(or equal to) 1.
D) is negative.
Answer: D
Topic: Income Elasticity of Demand
Skill: Conceptual
97) An increase in Abigail’s income decreases her demand for cassette tapes. For her, cassette tapes are
A) a normal good.
B) an inferior good.
C) a complement to any good.
D) a substitute good.
Answer: B
Topic: Income Elasticity of Demand
Skill: Recognition
98) Goods whose income elasticities are negative are
called
A) normal goods.
B) superior goods.
C) inferior goods.
D) complements.
Answer: C
Topic: Income Elasticity of Demand
Skill: Analytical
99) A 10 percent increase in income has caused a 5
percent decrease in the quantity demanded. The
income elasticity is
A) 0.5.
B) –0.5.
C) 2.0.
D) –2.0.
Answer: B
Answer: D
Topic: Income Elasticity of Demand
Skill: Analytical
101) Fred’s income has just risen from $940 per week
to $1,060 per week. As a result, he decides to purchase 9 percent more steak per week. The income
elasticity of Fred’s demand for steak is
A) 0.75.
B) 0.90.
C) 1.00.
D) 1.33.
Answer: A
Topic: Income Elasticity of Demand
Skill: Analytical
102) Joan’s income has just risen from $940 per week
to $1,060 per week. As a result, she decides to
purchase 12 percent more lettuce per week. The
income elasticity of Joan’s demand for lettuce is
A) 0.75.
B) 0.90.
C) 1.00.
D) 1.33.
Answer: C
Topic: Income Elasticity of Demand
Skill: Analytical
103) A 10 percent increase in income causes the quantity of orange juice demanded to increase from
19,200 to 20,800 gallons. The income elasticity
of demand for orange juice is
A) 0.5.
B) 0.8.
C) 1.0.
D) 1.2.
Answer: B
ELASTICITY
151
Topic: Income Elasticity of Demand
Skill: Analytical
Topic: Cross Elasticity of Demand
Skill: Analytical
104) A 10 percent increase in income causes the quantity of apple juice demanded to increase from
18,800 to 21,200 gallons. The income elasticity
of demand for apple juice is
A) 0.5.
B) 0.8.
C) 1.0.
D) 1.2.
106) The increase in the demand for widgets, shown in
the figure above, is caused by a decrease in the
price of McBoover devices. Therefore,
A) widgets and McBoover devices are substitutes.
B) widgets and McBoover devices are complements.
C) widgets are a normal good.
D) McBoover devices are a normal good.
Answer: D
Answer: B
Topic: Cross Elasticity of Demand
Skill: Analytical
107) The increase in the demand for widgets, shown in
the figure above, is caused by an increase in the
price of McBoover devices from $9 to $11.
Therefore, the cross-price elasticity for these two
products is
A) –2.0.
B) –0.5.
C) 0.5.
D) 2.0.
Answer: D
Topic: Cross Elasticity of Demand
Skill: Analytical
Topic: Cross Elasticity of Demand
Skill: Analytical
105) The increase in the demand for widgets, shown in
the figure above, is caused by an increase in the
price of McBoover devices. Therefore,
A) widgets and McBoover devices are substitutes.
B) widgets and McBoover devices are complements.
C) widgets are a normal good.
D) McBoover devices are a normal good.
Answer: A
108) The increase in the demand for widgets, shown in
the figure above, is caused by a decrease in the
price of McBoover devices from $11 to $9.
Therefore, the cross-price elasticity for these two
products is
A) –2.0.
B) –0.5.
C) 0.5.
D) 2.0.
Answer: A
Topic: Income Elasticity of Demand
Skill: Analytical
109) The increase in the demand for widgets, shown in
the figure above, is caused by an increase in average incomes. Therefore, widgets
A) are a normal good.
B) are an inferior good.
C) are elastically demanded.
D) are inelastically demanded.
Answer: A
152
CHAPTER 4
Topic: Income Elasticity of Demand
Skill: Analytical
Topic: Calculating the Elasticity of Supply
Skill: Conceptual
110) The increase in the demand for widgets, shown in
the figure above, is caused by an increase in average incomes from $28,500 per year to $31,500
per year. Therefore, the income elasticity of demand for widgets is
A) 1/4.
B) 3/4.
C) 4/3.
D) 4.
114) On most days the price of a rose is $1 and 80
roses are purchased. On Valentine’s Day the demand increases so that the price of a rose rises to
$2 and 320 roses are purchased. Therefore, the
price elasticity of
A) demand for roses is about 1.8.
B) demand for roses is about 0.55.
C) supply of roses is about 1.8.
D) supply of roses is about 0.55.
Answer: D
Answer: C
Topic: Real-World Income Elasticity of Demand
Skill: Conceptual
Topic: Calculating the Elasticity of Supply
Skill: Recognition
111) As income rises, the share of income spent on
food in the United States
A) falls.
B) remains constant at 15 percent.
C) remains constant at 33 percent.
D) rises.
115) Supply is elastic if
A) a 1 percent change in price causes a larger percentage change in quantity supplied.
B) a 1 percent change in price causes a smaller percentage change in quantity supplied.
C) the slope of the supply curve is positive.
D) the good in question is a normal good.
Answer: A
Answer: A
Elasticity of Supply
Topic: Elasticity of Supply
Skill: Recognition
112) The elasticity of supply measures the responsiveness of
A) quantity demanded to changes in supply.
B) quantity supplied to changes in demand.
C) quantity supplied to changes in price.
D) quantity supplied to changes in income.
Topic: Calculating the Elasticity of Supply
Skill: Recognition
116) If a 1 percent decrease in the price of a pound of
oranges results in a smaller percentage decrease in
the quantity supplied,
A) demand is elastic.
B) demand is inelastic.
C) supply is elastic.
D) supply is inelastic.
Answer: C
Answer: D
Topic: Elasticity of Supply
Skill: Recognition
Topic: Calculating the Elasticity of Supply
Skill: Recognition
113) The elasticity of supply measures the sensitivity of
A) supply to changes in costs.
B) quantity supplied to quantity demanded.
C) quantity supplied to a change in price.
D) price to changes in supply.
Answer: C
117) If a 1 percent decrease in the price of a pound of
squash results in a larger percentage decrease in
the quantity supplied,
A) demand is elastic.
B) demand is inelastic.
C) supply is elastic.
D) supply is inelastic.
Answer: C
ELASTICITY
153
Topic: Calculating the Elasticity of Supply
Skill: Analytical
Topic: Calculating the Elasticity of Supply
Skill: Analytical
118) If at a given moment, no matter what the price,
producers cannot change the quantity supplied,
the momentary supply
A) has zero elasticity.
B) has unit elasticity.
C) has infinite elasticity.
D) does not exist.
122) If a 5 percent increase in the price results in a 9
percent increase in quantity supplied, the elasticity of supply is
A) 0.30.
B) 0.55.
C) 1.20.
D) 1.80.
Answer: A
Answer: D
Topic: Calculating the Elasticity of Supply
Skill: Analytical
Topic: Calculating the Elasticity of Supply
Skill: Analytical
119) If a rise in the price of oranges from $7 to $9 a
bushel, caused by a shift of the demand curve, increases the quantity of bushels supplied from
4,500 to 5,500 bushels, the
A) supply of oranges is elastic.
B) supply of oranges is inelastic.
C) demand for oranges is elastic.
D) demand for oranges is inelastic.
123) If a 5 percent increase in price results in a 3 percent increase in the quantity supplied, the elasticity of supply is
A) 0.30.
B) 0.60.
C) 1.20.
D) 1.66.
Answer: B
Topic: Calculating the Elasticity of Supply
Skill: Analytical
120) If a shift in the demand curve that raises the price
of oranges from $7 to $9 a bushel increases the
quantity of oranges supplied from 4,000 bushels
to 6,000 bushels, the
A) supply of oranges is elastic.
B) supply of oranges is inelastic.
C) demand for oranges is elastic.
D) demand for oranges is inelastic.
Answer: A
Topic: Calculating the Elasticity of Supply
Skill: Analytical
121) A rise in the price of cabbage from $14 to $18 per
bushel, caused by a shift of the demand curve, increases the quantity supplied from 4,000 to 6,000
bushels. The elasticity of supply is
A) 0.6.
B) 0.8.
C) 1.0.
D) 1.6.
Answer: D
Answer: B
Topic: Inelastic and Elastic Supply
Skill: Conceptual
124) A vertical supply curve indicates an elasticity of
supply that equals
A) 0.
B) 1.
C) infinity.
D) –1.
Answer: A
Topic: Inelastic and Elastic Supply
Skill: Recognition
125) A horizontal supply curve indicates an elasticity of
supply that equals
A) 0.
B) 1.
C) infinity.
D) –1.
Answer: C
154
CHAPTER 4
Topic: Factors That Influence the Elasticity of
Supply
Skill: Recognition
129) Which of the following leads a good to have a
high elasticity of supply?
I. The good that must be produced using unique
resources.
II. The good that is produced using commonly
available resources.
A) I only
B) II only
C) I and II
D) Neither I nor II.
Answer: B
Topic: Elasticity of Supply
Skill: Recognition
126) In the above figure, the price elasticity of supply
at any given quantity is
A) highest along S1, next highest along S2, and
lowest along S3.
B) highest along S3, next highest along S2, and
lowest along S1.
C) equal to zero on each of the three supply curves.
D) equal to one on each of the three supply curves.
Answer: D
Topic: Elasticity of Supply
Skill: Conceptual
127) The elasticity of supply for paintings by Monet is
A) perfectly elastic.
B) perfectly inelastic.
C) unit elastic.
D) inelastic.
Answer: B
Topic: Elasticity of Supply
Skill: Recognition
128) If the elasticity of supply of a good is zero, then its
A) supply curve is vertical.
B) supply curve is horizontal.
C) demand curve must be vertical.
D) supply curve is positively sloped.
Answer: A
Topic: Factors That Influence the Elasticity of
Supply
Skill: Recognition
130) The elasticity of supply is
A) positive and more elastic in the long run.
B) positive and more elastic in the short run.
C) negative and more elastic in the long run.
D) negative and more elastic in the short run.
Answer: A
Topic: Factors That Influence the Elasticity of
Supply
Skill: Recognition
131) If a good is produced using inputs for which there
are no substitutes, the good’s
A) elasticity of supply is likely to be small.
B) elasticity of supply is likely to be large.
C) elasticity of demand will be small.
D) elasticity of demand will be large.
Answer: A
Topic: Factors That Influence the Elasticity of
Supply
Skill: Recognition
132) A determinant of the price elasticity of supply is
A) the extent to which consumers like the quality
of the good.
B) the extent to which the demand for the good is
relatively elastic.
C) the extent to which the good has many consumer substitutes.
D) the extent to which production of the good uses
commonly available resources.
Answer: D
ELASTICITY
Topic: Factors That Influence the Elasticity of
Supply
Skill: Conceptual
133) A given change in demand will yield a larger
change in the quantity supplied
A) the more elastic is supply.
B) the longer the time frame under consideration.
C) the more plentiful are the resources necessary to
produce the good of interest.
D) All of the above answers are correct.
155
Topic: Study Guide Question, Calculating Elasticity
Skill: Analytical
137) The quantity of new cars increases by 10 percent.
If the price elasticity of demand for new cars is
1.25, the price of new cars will fall by
A) 2.5 percent.
B) 8 percent.
C) 10 percent.
D) 12.5 percent.
Answer: B
Answer: D
Topic: Factors That Influence the Elasticity of
Supply
Skill: Recognition
134) The elasticity of the momentary supply curve for
any good
A) is necessarily equal to zero.
B) is necessarily equal to one.
C) is necessarily equal to positive infinity.
D) None of the above answers is correct.
Topic: Study Guide Question, Inelastic and Elastic
Demand
Skill: Conceptual*
138) Along a perfectly vertical demand curve, the price
elasticity of demand
A) equals 0.
B) is greater than 0 but less than 1.0.
C) equals 1.0.
D) is negative.
Answer: A
Answer: D
Topic: Factors That Influence the Elasticity of
Supply
Skill: Recognition
135) The momentary supply curve is ____ than the
____ supply curve.
A) less elastic; long-run
B) flatter; short-run
C) more elastic; long-run
D) None of the above answers is correct.
Topic: Study Guide Question, Inelastic and Elastic
Demand
Skill: Conceptual*
139) Perfectly elastic demand is represented by a demand curve that
A) is vertical.
B) is horizontal.
C) has a 45° slope.
D) is a rectangular hyperbola.
Answer: B
Answer: A
Study Guide Questions
Topic: Study Guide Question, Calculating Elasticity
Skill: Analytical
136) Suppose a 10 percent increase in the price of textbooks decreases the quantity demanded by 20
percent. The elasticity of demand for textbooks is
A) 0.2.
B) 2.0.
C) 5.0.
D) 10.0.
Answer: B
Topic: Study Guide Question, Total Revenue and
Elasticity
Skill: Analytical
140) If the price elasticity of demand for a product
equals 1, as its price rises the
A) quantity demanded increases.
B) total revenue increases.
C) quantity demanded does not change.
D) total revenue does not change.
Answer: D
156
CHAPTER 4
Topic: Study Guide Question, Factors That
Influence the Elasticity of Demand
Skill: Recognition
Topic: Study Guide Question, Elasticity Along a
Straight-Line Demand Curve
Skill: Conceptual
141) A product is likely to have a price elasticity of
demand that exceeds 1 when
A) its price falls.
B) the percentage of income spent on it decreases.
C) it is a necessity.
D) it has close substitutes.
145) Moving up (to the left) along a linear demand
curve, the price elasticity of demand
A) decreases.
B) does not change.
C) increases.
D) at first increases and then decreases.
Answer: D
Answer: C
Topic: Study Guide Question, Factors That
Influence the Elasticity of Demand
Skill: Recognition*
Topic: Study Guide Question, Total Revenue and
Elasticity
Skill: Conceptual*
142) The demand for a good is more price inelastic if
A) its price is higher.
B) the percentage of income spent on it is larger.
C) it is a luxury good.
D) it has no close substitutes.
146) If the price elasticity of demand equals 1.0, then
as the price falls the
A) quantity demanded decreases.
B) total revenue falls.
C) quantity demanded does not change.
D) total revenue does not change.
Answer: D
Topic: Study Guide Question, Factors That
Influence the Elasticity of Demand
Skill: Recognition
143) Which of the following is likely to have the smallest price elasticity of demand?
A) An automobile
B) A new automobile
C) A new Ford automobile
D) A new Ford Mustang
Answer: A
Topic: Study Guide Question, Elastic Demand
Skill: Conceptual*
144) Business people often speak about price elasticity
without actually using the term. Which statement
describes a good with an elastic demand?
A) “A price cut won’t help me. It won’t increase my
sales, and I’ll just get less money for each unit.”
B) “I don’t think a price cut will help my bottom
line any. Sure, I’ll sell a bit more, but I’ll more
than lose because the price will be lower.”
C) “My customers are real shoppers. After I cut my
prices just a few cents below those my competitors charge, customers have been flocking to my
store and sales are booming.”
D) “The economic expansion has done wonders for
my sales. With more people back at work, my
sales are taking off!”
Answer: C
Answer: D
Topic: Study Guide Question, Total Revenue and
Elasticity
Skill: Conceptual
147) A rise in the price of a product lowers the total
revenue from the product if the
A) income elasticity of demand exceeds 1.
B) good is an inferior product.
C) demand for the product is inelastic.
D) demand for the product is elastic.
Answer: D
Topic: Study Guide Question, Total Revenue and
Elasticity
Skill: Conceptual*
148) By reviewing its sales records, IBM economists
discover that when it lowers the price of its personal computers, the total revenue IBM obtains
from the sale of its personal computers rises.
Hence
A) supply of IBM personal computers is elastic.
B) demand for IBM personal computers is elastic.
C) supply of IBM personal computers is inelastic.
D) demand for IBM personal computers is inelastic.
Answer: B
ELASTICITY
157
Topic: Study Guide Question, Total Revenue and
Elasticity
Skill: Analytical
Topic: Study Guide Question, Cross Elasticity of
Demand
Skill: Analytical
149) If a 4 percent rise in the price of peanut butter
lowers the total revenue received by the producers
of peanut butter by 4 percent, the demand for
peanut butter
A) is elastic.
B) is inelastic.
C) is unit elastic.
D) has an elasticity of 2.0.
153) A fall in the price of X from $12 to $8 causes an
increase in the quantity of Y demanded from 900
to 1,100 units. What is the cross elasticity of demand between X and Y?
A) 0.5.
B) –0.5.
C) 2.
D) –2.
Answer: A
Answer: B
Topic: Study Guide Question, Total Revenue and
Elasticity
Skill: Analytical*
Topic: Study Guide Question, Income Elasticity of
Demand
Skill: Analytical
150) When the price of a hot dog rises 10 percent,
your expenditure on hot dogs increases. Hence, it
is certain that
A) hot dogs are a normal good for you.
B) hot dogs are an inferior good for you.
C) your demand for hot dogs is elastic.
D) your demand for hot dogs is inelastic.
154) A 10 percent decrease in income decreases the
quantity demanded of compact discs by 3 percent. The income elasticity of demand for compact discs is
A) –0.3.
B) 0.3.
C) 3.3.
D) 10.0.
Answer: D
Topic: Study Guide Question, Cross Elasticity of
Demand
Skill: Conceptual*
151) For which of the following pairs of goods is the
cross elasticity of demand positive?
A) Tennis balls and tennis rackets
B) Videotapes and laundry detergent
C) Airline trips and textbooks
D) Beef and chicken
Answer: B
Topic: Study Guide Question, Income Elasticity of
Demand
Skill: Conceptual*
155) All normal goods have
A) income elasticities of demand greater than 1.0.
B) price elasticities of demand greater than 1.0.
C) negative price elasticities of demand.
D) positive income elasticities of demand.
Answer: D
Answer: D
Topic: Study Guide Question, Cross Elasticity of
Demand
Skill: Analytical
Topic: Study Guide Question, Elasticity of Supply
Skill: Analytical*
152) A 10 percent decrease in the price of a Pepsi decreases the demand for a Coca-Cola by 50 percent. The cross elasticity of demand between a
Pepsi and Coca-Cola is
A) 50.
B) 10.
C) 5.
D) 0.20.
Answer: C
156) Suppose that the price elasticity of supply for oil
is 0.1. Then, if the price of oil rises by 20 percent,
the quantity of oil supplied will increase
A) by 200 percent.
B) by 20 percent.
C) by 2 percent.
D) by 0.2 percent.
Answer: C
158
Topic: Study Guide Question, Elasticity of Supply
Skill: Analytical*
CHAPTER 4
MyEconLab Questions
157) When the price of a CD is $13 per CD,
39,000,000 CDs per year are supplied. When the
price is $15 per CD, 41,000,000 CDs per year
are supplied. What is the elasticity of supply for
CDs?
A) 2.86
B) 0.35
C) 0.14
D) 0.05
Answer: B
Topic: Study Guide Question, Elasticity of Supply
Skill: Conceptual*
158) If the long-run supply of rice is perfectly elastic,
then
A) as people’s incomes rise, the quantity of rice
supplied decreases.
B) as the price of corn falls, the quantity of rice demanded decreases.
C) in the long run, a large rise in the price of rice
causes no change in the quantity of rice supplied.
D) in the long run, an increase in the demand for
rice leaves the price of rice unchanged.
Answer: D
Topic: Study Guide Question, Elasticity of Supply
Skill: Conceptual*
159) The elasticity of supply does NOT depend on
A) resource substitution possibilities.
B) the fraction of income spent on the product.
C) the time elapsed since the price change.
D) None of the above because all of the factors
listed affect the elasticity of supply.
Answer: B
Topic: Parallel MyEconLab Questions
Skill: Analytical
160) In the figure above, when the price of a disk is $B,
total revenue is shown in the graph by area
A) BCF0.
B) AGF0.
C) FCDE.
D) ADE0.
Answer: A
ELASTICITY
159
Topic: Parallel MyEconLab Questions, Elastic and
Inelastic Demand
Skill: Analytical
Topic: Parallel MyEconLab Questions, Elastic and
Inelastic Demand
Skill: Analytical
161) The above figure illustrates the demand curve for
a good. The good has
A) no substitutes.
B) only one substitute.
C) only a few substitutes.
D) many substitutes.
162) The elasticity of demand along the demand curve
shown in the above figure is constant and equal to
1. Thus,
A) area 0BCF equals area 0AGF.
B) area 0BCF equals area FGDE.
C) area 0BCF equals area 0ADE.
D) area ABCG equals area 0AGF.
Answer: A
Answer: C
160
CHAPTER 4
Topic: Inelastic and Elastic Demand
Level 1: Definitions and Concepts
165) When the percentage change in quantity demanded is less than the percentage change in
price, the demand for the good is ____.
A) inelastic
B) unit elastic
C) perfectly inelastic
D) elastic
Answer: A
Topic: Inelastic and Elastic Demand
Level 1: Definitions and Concepts
Topic: Parallel MyEconLab Questions, Elasticity
On Straight-Line Demand Curve
Skill: Analytical
163) The above figure shows a linear (straight-line)
demand curve. Start at point A and then moving
to point B and then point C, the price elasticity of
demand
A) increases.
B) decreases.
C) increases and then decreases.
D) decreases and then increases.
Answer: B
MyEconLab Questions
Topic: The Price Elasticity of Demand
Level 1: Definitions and Concepts
164) The price elasticity of demand is equal to the
____ in the ____ divided by the ____ in the
____.
A) percentage change; price; percentage change;
quantity demanded
B) change; price; change; quantity demanded
C) percentage change; quantity demanded; percentage change; price
D) change; quantity demanded; change; price
Answer: C
166) When the demand for a good is perfectly elastic,
____.
A) total revenue is as large as possible
B) the demand curve for the good is vertical
C) the price elasticity of demand is infinite
D) the price elasticity of demand is zero
Answer: C
Topic: Inelastic and Elastic Demand
Level 1: Definitions and Concepts
167) If the demand for a good is elastic, the price elasticity of demand is ____.
A) greater than 1
B) equal to 1
C) between 0 and 1
D) less than zero
Answer: A
Topic: Inelastic and Elastic Demand
Level 1: Definitions and Concepts
168) If the demand for a good is perfectly elastic, the
price elasticity of demand is ____ and the demand curve is ____.
A) infinite; vertical
B) zero; vertical
C) zero; horizontal
D) infinite; horizontal
Answer: D
ELASTICITY
Topic: Elasticity Along a Straight-Line Demand
Curve
Level 1: Definitions and Concepts
169) The demand for bus rides is a downward-sloping
straight line demand curve. The price elasticity of
demand for bus rides ____.
A) increases as the price of a bus ride falls
B) decreases as the price of a bus ride falls
C) is the same no matter what the price of a bus
ride
D) decreases as the price of a bus ride rises
Answer: B
Topic: Total Revenue and Elasticity
Level 1: Definitions and Concepts
170) When the supply of a good increases, the price of
the good ____ and total revenue from the sale of
the good ____.
A) falls; can either increase or decrease
B) falls; always increases
C) falls; always decreases
D) rises; can either increase or decrease
Answer: A
Topic: Total Revenue and Elasticity
Level 1: Definitions and Concepts
171) When the demand for a good is inelastic and its
price increases, the total revenue from the sale of
the good will ____.
A) increase
B) decrease initially and then increase
C) decrease
D) not change
161
Topic: Income Elasticity of Demand
Level 1: Definitions and Concepts
173) Bus rides and canned soup are inferior goods, so
the ____ elasticity of demand is ____.
A) cross; positive
B) income; positive
C) income; negative
D) cross; negative
Answer: C
Topic: Total Revenue and Elasticity
Level 2: Using Definitions and Concepts
174) The price of a bus ride decreases, and the total
revenue of the bus company decreases. The demand for bus rides is ____.
A) perfectly elastic
B) inelastic
C) unit elastic
D) elastic but not necessarily perfectly elastic
Answer: B
Topic: Inelastic and Elastic Demand
Level 2: Using Definitions and Concepts
175) Marvin loves chocolate truffles. As the price of a
chocolate truffle increases from $1 to $2 to $3,
Marvin continues to buy a dozen chocolate truffles every week. Marvin’s demand for chocolate
truffles is ____.
A) elastic
B) unit elastic
C) illustrated by a horizontal demand curve
D) perfectly inelastic
Answer: D
Answer: A
Topic: Cross Elasticity of Demand
Level 1: Definitions and Concepts
172) Toothpaste and toothbrushes are complements, so
the ____ elasticity of demand is ____.
A) cross; positive
B) income; negative
C) cross; negative
D) income; positive
Answer: C
Topic: Calculating Elasticity
Level 2: Using Definitions and Concepts
176) Dan sells newspapers. Dan says that a 4 percent
increase in the price of a newspaper will decrease
the quantity of newspapers demanded by 8 percent. According to Dan, the demand for newspapers is ____.
A) inelastic
B) unit elastic
C) perfectly elastic
D) elastic
Answer: D
162
CHAPTER 4
Topic: Total Revenue and Elasticity
Level 2: Using Definitions and Concepts
Topic: Income Elasticity of Demand
Level 2: Using Definitions and Concepts
177) When demand is ____, a decrease in price ____
total revenue.
A) elastic; decreases
B) inelastic; decreases
C) unit elastic; increases
D) elastic; does not change
181) Of the following goods, the North American demand for ____ has the largest income elasticity of
demand.
A) compact cars
B) newspapers
C) Mediterranean cruises
D) rice
Answer: B
Topic: Factors That Influence the Price Elasticity
of Demand
Level 2: Using Definitions and Concepts
178) Webster Dictionaries and Oxford Dictionaries are
almost perfect substitutes. The price elasticity of
demand for Webster Dictionaries ____.
A) is 1
B) depends on the complements for dictionaries
C) is almost infinity
D) is almost zero
Answer: C
Topic: Cross Elasticity of Demand
Level 2: Using Definitions and Concepts
179) Blue pens and black pens are close substitutes.
The cross elasticity of demand for black pens with
respect to the price of blue pens is ____.
A) positive
B) negative
C) equal to 1
D) zero
Answer: A
Topic: Cross Elasticity of Demand
Level 2: Using Definitions and Concepts
180) If the cross elasticity of demand between goods X
and Y is positive and between goods X and Z is
negative, then X and Y are ____ and X and Z are
____.
A) price inelastic; complements
B) complements; substitutes
C) substitutes; complements
D) price inelastic; income elastic
Answer: C
Answer: C
Topic: Income Elasticity of Demand
Level 2: Using Definitions and Concepts
182) As Mary’s income increases by 20 percent, her
demand for tickets to National Hockey League
games increases by 10 percent. Mary’s demand for
tickets is income ____; for Mary, hockey tickets
are ____ good.
A) elastic; a normal
B) inelastic; a normal
C) elastic; an inferior
D) inelastic; an inferior
Answer: B
Topic: Inelastic and Elastic Supply
Level 2: Using Definitions and Concepts
183) The supply of lettuce in the short run will be
____ than the supply in the long run and ____
than the supply today.
A) more elastic; less elastic
B) more elastic; more elastic
C) less elastic; more elastic
D) less elastic; less elastic
Answer: C
ELASTICITY
Topic: Calculating Elasticity
Level 3: Calculations and Predictions
184) The figure shows the demand curve for popsicles.
The price elasticity of demand when the price of a
popsicle increases from $0.30 to $0.50 is ____.
A) 0
B) 1
C) 1/2
D) 2
Answer: B
163
Topic: Elasticity Along a Straight-Line Demand
Curve
Level 3: Calculations and Predictions
185) The figure illustrates Anne’s demand for books.
At ____ a book, Anne's demand for books is inelastic.
A) all prices between $15 and $30
B) all prices between $10 and $15
C) all prices between $10 and $20
D) all prices below $30
Answer: B
Topic: Factors That Influence the Price Elasticity
of Demand
Level 3: Calculations and Predictions
186) Pizza Hut pizza has more close substitutes than
does food. The price elasticity of demand for
Pizza Hut pizza is ____ the price elasticity of demand for food.
A) not comparable to
B) greater than
C) less than
D) the same as
Answer: B
164
CHAPTER 4
Topic: Cross Elasticity of Demand
Level 3: Calculations and Predictions
190) Donuts and coffee are complements. When the
price of a donut increases, the demand for coffee
____ and the cross elasticity of demand for coffee
with respect to the price of a donut is ____.
A) decreases; negative
B) increases; negative
C) increases; positive
D) decreases; positive
Answer: A
Topic: Income Elasticity of Demand
Level 3: Calculations and Predictions
Topic: Total Revenue and Elasticity
Level 3: Calculations and Predictions
187) The figure illustrates the demand for eggs. At
what price will egg sellers maximize their total
revenue?
A) above $0.75 a dozen
B) $0.75 a dozen
C) less than $0.75 a dozen
D) $1.50 a dozen
Answer: B
Topic: Calculating Elasticity
Level 3: Calculations and Predictions
188) The price elasticity of demand for videos is 2. If
the price of a video increased by 2 percent, the
quantity demanded will ____.
A) decrease by 2 percent
B) not change
C) decrease by 4 percent
D) decrease by 1 percent
Answer: C
Topic: Total Revenue and Elasticity
Level 3: Calculations and Predictions
189) Sara’s Strawberry Market maximizes its total revenue by selling strawberries for $1.25 a basket. At a
price of $1.25, you predict that ____
A) the demand for strawberries is inelastic
B) Sara’s sells most of the strawberries that she
grows
C) the demand for strawberries is elastic
D) the demand for strawberries is unit elastic
Answer: D
191) If when income increases by 2 percent and the
price does not change, the quantity of airplane
travel demanded increases by 6 percent, then the
income elasticity of demand of airplane travel is
____.
A) 0.33
B) 0
C) negative
D) 3.00
Answer: D
ELASTICITY
165
Topic: Income Elasticity of Demand
Level 3: Calculations and Predictions
192) The figure shows the relationship between
Moira’s income and the quantity of macaroni that
she demands. When income is less than $350 per
month, macaroni ____.
A) is an inferior good
B) is a normal good
C) has many substitutes
D) has negative income elasticity
Answer: B
Price
(dollars per dozen)
30
50
194) The figure illustrates the demand for hamburgers.
When the price is $1.00 a hamburger, the elasticity of demand is ____ and a 1 percent increase in
the price will ____ the quantity of hamburgers
demanded by ____ percent.
A) 1.00; decrease; 0.40
B) 0.40; decrease; 0.40
C) 2.50; increase; 2.50
D) 5.00; decrease; 5.00
Answer: B
Quantity supplied
(dozens per day)
8
12
Topic: Calculating the Elasticity of Supply
Level 3: Calculations and Predictions
193) The table gives some data on the supply of roses
in a small town. When the price rises from $15 a
dozen to $25 a dozen, the elasticity of supply is
____.
A) 1.25
B) 5.00
C) 0.20
D) 0.80
Answer: D
Topic: Calculating Elasticity
Level 4: Advanced Calculations and Predictions
Topic: Calculating Elasticity
Level 4: Advanced Calculations and Predictions
195) A decrease in the supply of sugar increases the
price of sugar from $1.00 a packet to $1.25 a
packet. The quantity decreases from 100 packets a
day to 80 packets a day. The price elasticity of
demand of sugar is ____.
A) 0.75
B) 0.5
C) 1.0
D) 1.25
Answer: C
166
Topic: Factors That Influence the Price Elasticity
of Demand
Level 4: Advanced Calculations and Predictions
196) Suppose that taxation accountants increase the
price for their service by 20 percent. The shortrun demand for their service is less elastic than the
long-run demand because in the long run consumers will ____.
A) spend less on this service
B) experience an increase in income
C) try to avoid paying their income tax
D) find other ways to calculate the income tax they
must pay
CHAPTER 4
Topic: Total Revenue and Elasticity
Level 4: Advanced Calculations and Predictions
198) When the price of a Caesar salad is $5.00, the
demand for Caesar salads is elastic, and when the
price is $4.00, the demand is inelastic. If Mike’s
Roadside Restaurant cuts the price from $5.00 to
$4.00, its total revenue from Caesar salads ____.
A) will increase
B) will decrease
C) will remain the same
D) might increase, decrease, or remain the same
Answer: D
Answer: D
Topic: Total Revenue and Elasticity
Level 4: Advanced Calculations and Predictions
Topic: Total Revenue and Elasticity
Level 4: Advanced Calculations and Predictions
197) The figure illustrates the demand for magazines.
Newsagents will maximize their total revenue
when they ____.
A) sell 375 magazines a day
B) sell as many magazines as they can
C) charge $2.50 a magazine
D) sell 750 magazines a day
Answer: A
199) The figure illustrates the demand for peanuts. If
the price falls from $12 to $9 a bag, total revenue
will ____, but if the price rises from $3 to $6 a
bag, total revenue will ____.
A) increase; decrease
B) increase; increase
C) decrease; increase
D) decrease; decrease
Answer: B
ELASTICITY
167
Topic: Cross Elasticity of Demand
Level 4: Advanced Calculations and Predictions
Topic: Income Elasticity of Demand
Level 4: Advanced Calculations and Predictions
200) If tea and coffee are substitutes, the cross elasticity
of coffee with respect to the price of tea will be
____ and an increase in the price of tea will ____
the demand for coffee.
A) positive; increase
B) negative; decrease
C) negative; increase
D) positive; decrease
202) The income elasticity of demand of vacations is 5.
If incomes increase by 3 percent next year, the
quantity of vacations demanded at today's price
will increase by ____ percent.
A) 3
B) 5/3
C) 15
D) 5
Answer: A
Answer: C
Topic: Cross Elasticity of Demand
Level 4: Advanced Calculations and Predictions
Topic: Calculating the Elasticity of Supply
Level 4: Advanced Calculations and Predictions
201) If a 5 percent increase in the price of good A leads
to a 4 percent decrease in the demand for good B,
then ____.
A) the goods are substitutes
B) only one good is a normal good
C) the goods are complements
D) both goods are normal goods
203) If a 5 percent change in the price of a good leads
to a 10 percent change in the quantity supplied,
then the supply of the good is ____ and the elasticity of supply is ____.
A) inelastic; 0.5
B) inelastic; 2.0
C) elastic; 0.5
D) elastic; 2.0
Answer: C
Answer: D