Question 1

Which of the following statements is true?

Accepted Answer

A)   In general, if a product has few substitutes it will have an elastic demand.
B)   The more time that passes the more inelastic the demand for a product becomes.
C)   The demand curve for a necessity is more elastic than the demand curve for a luxury.
D)   The more narrowly we define a market, the more elastic the demand for a product will be.E) A) and D)
F) B) and D)

Question 2

For a given demand curve, will there be a greater loss of economic efficiency from a binding price floor when supply is elastic or inelastic? Illustrate your answer with a demand and supply graph. In your graph you must show two supply curves, one elastic and the other inelastic.

Accepted Answer

See the figure above. S_A is the elastic ...

Question 3

The demand for most farm products is relatively inelastic. A drought that reduces the supply of farm products will also cause farm revenues to fall.

Accepted Answer

A) True 
 B)False

Question 4

Cross-price elasticity of demand is calculated as the

Accepted Answer

A)   percentage change in quantity demanded divided by percentage change in price of a good.
B)   percentage change in quantity demanded of one good divided by percentage change in price of a different good.
C)   percentage change in quantity sold divided by percentage change in buyers' incomes.
D)   percentage change in quantity supplied divided by percentage change in price of a good.E) C) and D)
F) None of the above

Question 5

If a 5 percent increase in income leads to a 10 percent decrease in quantity demanded for a product, this product is

Accepted Answer

A)   an income elastic good.
B)   an inferior good.
C)   a necessity.
D)   a luxury good.E) A) and B)
F) None of the above

Question 6

If the percentage change in the quantity of teapots demanded is greater than the percentage change in the price of teapots, then

Accepted Answer

A)   the price elasticity of demand for teapots is greater than 1 in absolute value.
B)   the demand for teapots is unit elastic.
C)   the price elasticity of demand for teapots is equal to zero.
D)   the price elasticity of demand for teapots is less than 1 in absolute value.E) A) and D)
F) All of the above

Question 7

Figure 6-10 
-Refer to Figure 6-10. A perfectly inelastic supply curve is shown in

Accepted Answer

A)   Panel A.
B)   Panel B.
C)   Panel C.
D)   Panel D.E) A) and C)
F) A) and B)

Question 8

A linear downward-sloping demand curve has price elasticities (in absolute values)  that

Accepted Answer

A)   increase as price decreases.
B)   remain constant along the demand curve.
C)   decrease as price decreases.
D)   are greater than or equal to 1.E) B) and D)
F) All of the above

Question 9

Studies show that the income elasticity of demand for wine is approximately five. What does this mean?

Accepted Answer

A)   A 1 percent decrease in the price of wine leads to a 5 percent increase in wine consumption.
B)   A 1 percent increase in income leads to a 5 percent increase in wine consumption.
C)   A 5 percent increase in income leads to a 1 percent increase in wine consumption.
D)   Wine is a relatively elastic good.E) C) and D)
F) B) and C)

Question 10

If the cross-price elasticity of demand between beer and wine is 0.31, then beer and wine are

Accepted Answer

A)   complements.
B)   price-inelastic goods.
C)   substitutes.
D)   necessities.E) A) and B)
F) None of the above

Question 11

When the price of Starbucks coffee increased by 8 percent, the quantity demanded of Peet's coffee increased by 10 percent. Calculate the cross-price elasticity of demand between Starbucks coffee and Peet's coffee. What is the relationship between the two products?

Accepted Answer

The cross price elas...

Question 12

The paradox of American farming is

Accepted Answer

A)   the demand for imported luxury food products has risen as the demand for domestic food products has fallen.
B)   the demand for food has risen as the number of people who pursue farming as a career has fallen.
C)   food has become cheaper and more abundant as the number of farms has decreased.
D)   the amount of food produced has increased as the average farm size has fallen.E) None of the above
F) A) and B)

Question 13

Explain the economic concept of price elasticity of supply. How is price elasticity of supply calculated?

Accepted Answer

Price elasticity of supply refers to the...

Question 14

Between 1950 and 2017 the productivity of wheat farmers in the United States more than doubled. This means that

Accepted Answer

A)   the amount of land and other resources devoted to wheat production more than doubled.
B)   the incomes of wheat farmers more than doubled.
C)   the total amount of wheat produced more than doubled.
D)   the amount of wheat produced by the average farmer more than doubled.E) None of the above
F) A) and B)

Question 15

Economists have estimated that the cross-price elasticity of demand between beer and spirits is -0.50, the income elasticity for spirits is 1.21 and the income elasticity for wine is 5.03. These elasticities mean that beer and spirits are ________, and spirits and wine are ________.

Accepted Answer

A)   complements; luxuries
B)   normal goods; luxuries
C)   complements; substitutes
D)   substitutes; luxuriesE) A) and C)
F) A) and B)

Question 16

In recent years, the prices of new domestically produced cars have been falling. Suppose consumers respond by reducing their demand for used cars and mass transport services such as bus travel. This information suggests that the cross-price elasticity between new cars and used cars, and the cross-price elasticity between new cars and bus travel, are negative.

Accepted Answer

A) True 
 B)False

Question 17

Assume that the demand curve for sunblock is linear and downward sloping. Which of the following statements about the slope of the demand curve for sunblock and the price elasticity of demand for sunblock are true?

Accepted Answer

A)   The slope and the price elasticity of demand are constant at all points along the demand curve for sunblock.
B)   The slope is constant, but the price elasticity of demand is not constant at all points along the demand curve for sunblock.
C)   The slope is not constant, but the price elasticity of demand is constant at all points along the demand curve for sunblock.
D)   The slope of the demand curve for sunblock is constant and equal to zero; demand is perfectly inelastic.E) A) and D)
F) A) and C)

Question 18

When there are few substitutes available for a good, demand tends to be relatively inelastic.

Accepted Answer

A) True 
 B)False

Question 19

Suppose you are considering buying stock in the stock market, and your objective is to maximize your net worth. Furthermore, your study of the market reveals that the economy will be slowing down over the next several months. Under these conditions, it would be best to purchase stock in companies that produce

Accepted Answer

A)   normal goods.
B)   luxury goods.
C)   inferior goods.
D)   price elastic goods.E) A) and B)
F) All of the above

Question 20

Which of the following explains why a firm would be interested in knowing the price elasticity of demand for a good it sells?

Accepted Answer

A)   The price elasticity of demand can be used to determine the impact of changes in income on quantity sold.
B)   Knowing the price elasticity of demand allows the firm to determine how the cost of producing additional units of the good will change.
C)   Knowing the price elasticity of demand allows the firm to calculate how changes in the price of the good will affect the firm's total profit.
D)   The price elasticity of demand allows the firm to calculate how changes in the price of the good will affect the firm's total revenue.E) C) and D)
F) A) and C)

Exam 6: Elasticity: the Responsiveness of Demand and Supply

Economists have estimated that the cross-price elasticity of demand between beer and spirits is -0.50, the income elasticity for spirits is 1.21 and the income elasticity for wine is 5.03. These elasticities mean that beer and spirits are , and spirits and wine are .

Correct Answer
verified

Which of the following statements is true?

Correct Answer
verified

Correct Answer
verified

When there are few substitutes available for a good, demand tends to be relatively inelastic.

Correct Answer
verified

The paradox of American farming is

Correct Answer
verified

The demand for most farm products is relatively inelastic. A drought that reduces the supply of farm products will also cause farm revenues to fall.

Correct Answer
verified

Between 1950 and 2017 the productivity of wheat farmers in the United States more than doubled. This means that

Correct Answer
verified

When the price of Starbucks coffee increased by 8 percent, the quantity demanded of Peet's coffee increased by 10 percent. Calculate the cross-price elasticity of demand between Starbucks coffee and Peet's coffee. What is the relationship between the two products?

Correct Answer
verified
The cross price elas...
View Answer

If the percentage change in the quantity of teapots demanded is greater than the percentage change in the price of teapots, then

Correct Answer
verified

If a 5 percent increase in income leads to a 10 percent decrease in quantity demanded for a product, this product is

Correct Answer
verified

If the cross-price elasticity of demand between beer and wine is 0.31, then beer and wine are

Correct Answer
verified

Correct Answer
verified

Explain the economic concept of price elasticity of supply. How is price elasticity of supply calculated?

Correct Answer
verified
Price elasticity of supply refers to the...
View Answer

Cross-price elasticity of demand is calculated as the

Correct Answer
verified

Studies show that the income elasticity of demand for wine is approximately five. What does this mean?

Correct Answer
verified

Which of the following explains why a firm would be interested in knowing the price elasticity of demand for a good it sells?

Correct Answer
verified

Assume that the demand curve for sunblock is linear and downward sloping. Which of the following statements about the slope of the demand curve for sunblock and the price elasticity of demand for sunblock are true?

Correct Answer
verified

A linear downward-sloping demand curve has price elasticities (in absolute values) that

Correct Answer
verified

For a given demand curve, will there be a greater loss of economic efficiency from a binding price floor when supply is elastic or inelastic? Illustrate your answer with a demand and supply graph. In your graph you must show two supply curves, one elastic and the other inelastic.

Correct Answer
verified
See the figure above. S_A is the elastic ...
View Answer

Figure 6-10 -Refer to Figure 6-10. A perfectly inelastic supply curve is shown in

Correct Answer
verified

Exam 6: Elasticity: the Responsiveness of Demand and Supply

Economists have estimated that the cross-price elasticity of demand between beer and spirits is -0.50, the income elasticity for spirits is 1.21 and the income elasticity for wine is 5.03. These elasticities mean that beer and spirits are ________, and spirits and wine are ________.

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When there are few substitutes available for a good, demand tends to be relatively inelastic.

Correct AnswerverifiedShow Answer

The paradox of American farming is

Correct AnswerverifiedShow Answer

The demand for most farm products is relatively inelastic. A drought that reduces the supply of farm products will also cause farm revenues to fall.

Correct AnswerverifiedShow Answer

Between 1950 and 2017 the productivity of wheat farmers in the United States more than doubled. This means that

Correct AnswerverifiedShow Answer

When the price of Starbucks coffee increased by 8 percent, the quantity demanded of Peet's coffee increased by 10 percent. Calculate the cross-price elasticity of demand between Starbucks coffee and Peet's coffee. What is the relationship between the two products?

Correct AnswerverifiedThe cross price elas...View AnswerShow Answer

If the percentage change in the quantity of teapots demanded is greater than the percentage change in the price of teapots, then

Correct AnswerverifiedShow Answer

If a 5 percent increase in income leads to a 10 percent decrease in quantity demanded for a product, this product is

Correct AnswerverifiedShow Answer

If the cross-price elasticity of demand between beer and wine is 0.31, then beer and wine are

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Explain the economic concept of price elasticity of supply. How is price elasticity of supply calculated?

Correct AnswerverifiedPrice elasticity of supply refers to the...View AnswerShow Answer

Cross-price elasticity of demand is calculated as the

Correct AnswerverifiedShow Answer

Studies show that the income elasticity of demand for wine is approximately five. What does this mean?

Correct AnswerverifiedShow Answer

Which of the following explains why a firm would be interested in knowing the price elasticity of demand for a good it sells?

Correct AnswerverifiedShow Answer

Assume that the demand curve for sunblock is linear and downward sloping. Which of the following statements about the slope of the demand curve for sunblock and the price elasticity of demand for sunblock are true?

Correct AnswerverifiedShow Answer

A linear downward-sloping demand curve has price elasticities (in absolute values) that

Correct AnswerverifiedShow Answer

For a given demand curve, will there be a greater loss of economic efficiency from a binding price floor when supply is elastic or inelastic? Illustrate your answer with a demand and supply graph. In your graph you must show two supply curves, one elastic and the other inelastic.

Correct Answerverified See the figure above. SA is the elastic ...View AnswerShow Answer

Figure 6-10 -Refer to Figure 6-10. A perfectly inelastic supply curve is shown in

Correct AnswerverifiedShow Answer

Economists have estimated that the cross-price elasticity of demand between beer and spirits is -0.50, the income elasticity for spirits is 1.21 and the income elasticity for wine is 5.03. These elasticities mean that beer and spirits are , and spirits and wine are .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The cross price elas...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Price elasticity of supply refers to the...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
See the figure above. S_A is the elastic ...
View Answer

Correct Answer
verified