Question 1

Suppose you are given the following data on demand for a product. The price elasticity of demand when price decreases from $9 to $7 is:

Accepted Answer

A)   0.63.
B)   1.16.
C)   1.60.
D)   2.27.E) A) and B)
F) All of the above

Question 2

Which of the following consumer goods and services is most like to suffer declining sales during a recession?

Accepted Answer

A)   haircuts.
B)   ground beef.
C)   toothpaste.
D)   restaurant meals.E) A) and B)
F) C) and D)

Question 3

The government is most likely to block a proposed merger between two companies when:

Accepted Answer

A)   the cross-elasticity between the companies' products is positive and large.
B)   the cross-elasticity between the companies' products is negative and large.
C)   the income elasticity of the companies' products is positive.
D)   the income elasticity of the companies' products is negative.E) A) and B)
F) None of the above

Question 4

If a union argues that a price cut will boost revenues of the firm and management argues that the opposite is true, then the price elasticity of demand is:

Accepted Answer

A)   unit-elastic from the union's perspective and unit-inelastic from management's perspective.
B)   perfectly inelastic from the union's perspective and perfectly elastic from management's perspective.
C)   elastic from the union's perspective; inelastic from management's perspective.
D)   inelastic from the union's perspective; elastic from management's perspective.E) All of the above
F) A) and C)

Question 5

Refer to the graph above. Over the $5-$6 range, the elasticity of supply using the midpoints formula is:

Accepted Answer

A)   0.22.
B)   0.88.
C)   1.00.
D)   1.22.E) B) and D)
F) A) and B)

Question 6

- Refer to the figure above. What is the price elasticity of supply between points A and B above?

Accepted Answer

A)   -1
B)   1/3
C)   1
D)   2E) B) and D)
F) All of the above

Question 7

-  Refer to the figure above. The elasticity of supply for a product will be 2 when:

Accepted Answer

A)   a 1 percent decrease in the price causes a 0.2 percent decrease in quantity supplied.
B)   a 2 percent decrease in price causes a 1 percent decrease in quantity supplied.
C)   a 1 percent decrease in price causes a 2 percent decrease in quantity supplied.
D)   a 2 percent decrease in price causes a 2 percent decrease in quantity supplied.E) None of the above
F) A) and B)

Question 8

3 to P4. In this price range, demand is relatively: A)  inelastic because the loss in total revenue (areas E + F + G)  is greater than the gain in total revenue (area A) . B)  elastic because the loss in total revenue (areas E + F + G)  is greater than the gain in total revenue (area A) . C)  elastic because the loss in total revenue (area A)  is greater than the gain in total revenue (areas E + F + G) . D)  inelastic because the loss in total revenue (area A)  is greater than the gain in total revenue (areas E + F + G) ." class="answers-bank-image d-inline" rel="preload" >
- Refer to the graph above and assume that the areas of the boxes are the same. Consider a situation where price increases from P3 to P4. In this price range, demand is relatively:

Accepted Answer

A)   inelastic because the loss in total revenue (areas E + F + G)  is greater than the gain in total revenue (area 
A)  .
B)   elastic because the loss in total revenue (areas E + F + G)  is greater than the gain in total revenue (area 
A)  .
C)   elastic because the loss in total revenue (area 
A)   is greater than the gain in total revenue (areas E + F + G) .
D)   inelastic because the loss in total revenue (area 
A)   is greater than the gain in total revenue (areas E + F + G) .E) A) and D)
F) A) and C)

Question 9

Refer to the figure above. Over the $5-$6 range, the elasticity of demand using the midpoint formula is:

Accepted Answer

A)   0.22.
B)   0.88.
C)   1.00.
D)   1.16.E) B) and D)
F) B) and C)

Question 10

2 to P1. In this price range, demand is relatively: A)  inelastic because the loss in total revenue (areas D + G + I + J)  is greater than the gain in total revenue (areas C + F + H) . B)  elastic because the loss in total revenue (areas C + F + H)  is greater than the gain in total revenue (area J) . C)  elastic because the loss in total revenue (area J)  is less than the gain in total revenue (areas C + F + H) . D)  inelastic because the gain in total revenue (area J)  is less than the loss in total revenue (areas C + F + H) ." class="answers-bank-image d-inline" rel="preload" > 
- Refer to the graph above and assume that the areas of the boxes are the same. Consider a situation where price decreases from P2 to P1. In this price range, demand is relatively:

Accepted Answer

A)   inelastic because the loss in total revenue (areas D + G + I + J)  is greater than the gain in total revenue (areas C + F + H) .
B)   elastic because the loss in total revenue (areas C + F + H)  is greater than the gain in total revenue (area J) .
C)   elastic because the loss in total revenue (area J)  is less than the gain in total revenue (areas C + F + H) .
D)   inelastic because the gain in total revenue (area J)  is less than the loss in total revenue (areas C + F + H) .E) B) and C)
F) A) and C)

Question 11

Those who support legalizing the sale and use of cocaine and heroin argue that:

Accepted Answer

A)   demand is highly inelastic, so legalization would reduce expenditures on drugs and reduce street crime.
B)   demand is highly elastic because there are so many substitutes for these drugs.
C)   addict demand is inelastic, but the demand by occasional users is elastic.
D)   addict demand is elastic, but the demand by occasional users is inelastic.E) All of the above
F) A) and D) A

Question 12

Those who oppose the legalization of cocaine and heroin argue that:

Accepted Answer

A)   demand is inelastic for both addicts and occasional users.
B)   demand is highly elastic for both addicts and occasional users.
C)   addict demand is inelastic, but the demand by occasional users is elastic.
D)   addict demand is elastic, but the demand by occasional users is inelastic.E) B) and D)
F) None of the above

Question 13

-Refer to the table above. Starting at a $1 price, at what price range does demand become elastic?

Accepted Answer

A)   $1-2
B)   $2-3
C)   $3-4
D)   $4-5E) All of the above
F) C) and D)

Question 14

Refer to the above graph. When the quantity of product X sold increases from 8,000 to 10,000, the price elasticity of demand for product X over that range is:

Accepted Answer

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

Question 15

Augi sells 300 cat toys each month when the price is $5 per toy. When Augi lowered the price to $4, she sold 400 toys. The price elasticity of demand over the $4 to $5 range is approximately:

Accepted Answer

A)   0.78 and elastic.
B)   1.29 and elastic.
C)   0.78 and inelastic.
D)   1.29 and inelastic.E) A) and B)
F) A) and C)

Question 16

-Refer to the above data. What is the price elasticity of demand over the range of $8 to $10?

Accepted Answer

A)   0.11
B)   0.47
C)   1.93
D)   1.43E) A) and B)
F) A) and C)

Question 17

- Refer to the above data. What is the elasticity of demand between the prices of $4 and $3?

Accepted Answer

A)   0.2
B)   0.5
C)   1
D)   2E) C) and D)
F) B) and C) C

Question 18

-Refer to the above data. What is the elasticity of demand between the prices of $3 and $2?

Accepted Answer

A)   0.22
B)   0.40
C)   0.56
D)   1.22E) A) and B)
F) All of the above

Question 19

In some markets consumers may buy many different brands of a product. Which of the statements below best represents a situation where demand for a particular brand would be very elastic?

Accepted Answer

A)   "The different brands are almost identical so I always buy the cheapest."
B)   "I use so little of that product that when I do buy it, I don't pay much attention to the price."
C)   "The brand I buy is so superior to other available brands that I hardly consider the others."
D)   "I pinch pennies in buying other products, but like most people I feel I owe it to myself to get the best brand of this product."E) C) and D)
F) All of the above

Question 20

- Refer to the above data. Over which price range is the price elasticity of demand elastic?

Accepted Answer

A)   $4-$6
B)   $6-$8
C)   $10-$12
D)   $12-$14E) A) and D)
F) All of the above

Exam 4: Elasticity of Demand and Supply

Suppose you are given the following data on demand for a product. The price elasticity of demand when price decreases from $9 to $7 is:

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Which of the following consumer goods and services is most like to suffer declining sales during a recession?

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The government is most likely to block a proposed merger between two companies when:

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If a union argues that a price cut will boost revenues of the firm and management argues that the opposite is true, then the price elasticity of demand is:

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Refer to the graph above. Over the $5-$6 range, the elasticity of supply using the midpoints formula is:

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- Refer to the figure above. What is the price elasticity of supply between points A and B above?

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- Refer to the figure above. The elasticity of supply for a product will be 2 when:

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- Refer to the graph above and assume that the areas of the boxes are the same. Consider a situation where price increases from P3 to P4. In this price range, demand is relatively:

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Refer to the figure above. Over the $5-$6 range, the elasticity of demand using the midpoint formula is:

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- Refer to the graph above and assume that the areas of the boxes are the same. Consider a situation where price decreases from P2 to P1. In this price range, demand is relatively:

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Those who support legalizing the sale and use of cocaine and heroin argue that:

Correct AnswerverifiedA

Those who oppose the legalization of cocaine and heroin argue that:

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-Refer to the table above. Starting at a $1 price, at what price range does demand become elastic?

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Refer to the above graph. When the quantity of product X sold increases from 8,000 to 10,000, the price elasticity of demand for product X over that range is:

Correct AnswerverifiedC

Augi sells 300 cat toys each month when the price is $5 per toy. When Augi lowered the price to $4, she sold 400 toys. The price elasticity of demand over the $4 to $5 range is approximately:

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-Refer to the above data. What is the price elasticity of demand over the range of $8 to $10?

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- Refer to the above data. What is the elasticity of demand between the prices of $4 and $3?

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-Refer to the above data. What is the elasticity of demand between the prices of $3 and $2?

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In some markets consumers may buy many different brands of a product. Which of the statements below best represents a situation where demand for a particular brand would be very elastic?

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- Refer to the above data. Over which price range is the price elasticity of demand elastic?

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- Refer to the graph above and assume that the areas of the boxes are the same. Consider a situation where price increases from P₃ to P₄. In this price range, demand is relatively:

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- Refer to the graph above and assume that the areas of the boxes are the same. Consider a situation where price decreases from P₂ to P₁. In this price range, demand is relatively:

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C

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