Deck 2: Elasticities

Question 1

An increase in price will cause a firm's total revenue to increase if demand is price elastic.

Answer 1

False

Question 2

Exhibit
The elasticity in the vicinity of five different points along a demand curve varies as follows:
$\begin{array}{lccccc} \text { Point }& A & B & C & D & E \\\text { Elasticity} & 1.25 & 0.3 & 1.0 & 0.2 & 2.1\end{array}$

-Refer to Exhibit. At which of these points would a price increase be accompanied by an increase in total revenue?

A)B and D
B)A and E
C)A, C, and E
D)A and D

Answer 2

B and D

Question 3

Exhibit
The elasticity in the vicinity of five different points along a demand curve varies as follows:
$\begin{array}{lccccc} \text { Point }& A & B & C & D & E \\\text { Elasticity} & 1.25 & 0.3 & 1.0 & 0.2 & 2.1\end{array}$

-Refer to Exhibit. At which of these points would sellers of a product want to increase price to increase their total revenue?

A)B and D
B)A and E
C)A, C, and E
D)A and D

Answer 3

B and D

Question 4

Exhibit
The elasticity in the vicinity of five different points along a demand curve varies as follows:
$\begin{array}{lccccc} \text { Point }& A & B & C & D & E \\\text { Elasticity} & 1.25 & 0.3 & 1.0 & 0.2 & 2.1\end{array}$

-Refer to Exhibit. In the vicinity of which of these points would a price decrease be accompanied by an increase in total revenue?

A)B and D
B)A and E
C)A and D
D)B, C, and D

Question 5

Exhibit
The elasticity in the vicinity of five different points along a demand curve varies as follows:
$\begin{array}{lccccc} \text { Point }& A & B & C & D & E \\\text { Elasticity} & 1.25 & 0.3 & 1.0 & 0.2 & 2.1\end{array}$

-Refer to Exhibit. In the vicinity of which of these points would sellers of a product want to decrease the price to increase their total revenue?

A)B and D
B)A and E
C)A and D
D)B, C, and D

Question 6

Exhibit
The elasticity in the vicinity of five different points along a demand curve varies as follows:
$\begin{array}{lccccc} \text { Point }& A & B & C & D & E \\\text { Elasticity} & 1.25 & 0.3 & 1.0 & 0.2 & 2.1\end{array}$

-Refer to Exhibit. In the vicinity of which of these points would sellers find that their total revenue remained essentially unchanged as they changed their price?

A)B and D
B)A and E
C)C
D)None of the above. That could never happen.

Question 7

If an increase in prices increases total revenue for a product in the short run, in the long run, it will:

A)Increase total revenue by more.
B)Increase total revenue by less.
C)Decrease total revenue.
D)Either b. or c. could result in the long run.

Question 8

If a decrease in prices increases total revenue for a product in the short run, in the long run, it will:

A)Increase total revenue by more.
B)Increase total revenue by less.
C)Decrease total revenue.
D)Either b. or c. could result in the long run.

Question 9

The price of a new toy increases from $5 to $7 and the quantity demanded decreases from 12,000 to 6,000 per month as a result. Based on this information, the price elasticity of demand (in absolute terms) is estimated to be equal to:

A)0.5, indicating relatively elastic demand.
B)0.5, indicating relatively inelastic demand.
C)2.0, indicating relatively elastic demand.
D)2.0, indicating relatively inelastic demand.

Question 10

For a given change in demand:

A)Quantity will change relatively more in the long run than the short run.
B)Quantity will change relatively more in the short run than the long run.
C)Price will change relatively more in the long run than the short run.
D)Both b. and c. are true.

Question 11

For a given change in demand:

A)The quantity exchanged will change relatively more in the long run than the short run.
B)The quantity exchanged will change relatively more in the short run than the long run.
C)The market price will change relatively more in the short run than the long run.
D)Both a. and c. are true.

Question 12

If the elasticity of demand for a good is greater than the government expected:

A)Consumers will bear more of the burden of the tax than the government expected.
B)Producers will bear more of the burden of the tax than the government expected.
C)The tax will raise less revenue than the government expected.
D)Both b. and c. are true.

Question 13

If the elasticity of supply for a good is greater than the government expected:

A)Consumers will bear more of the burden of the tax than the government expected.
B)Producers will bear more of the burden of the tax than the government expected.
C)The tax will raise more revenue than the government expected.
D)Both a. and c. are true.

Question 14

If the elasticity of supply for a good is greater than the government expected:

A)Consumers will bear more of the burden of the tax than the government expected.
B)Producers will bear more of the burden of the tax than the government expected.
C)The tax will raise less revenue than the government expected.
D)Both a. and c. are true.

Question 15

The definition of cross-elasticity of demand with regard to two products X and Y is:

A)the percentage change in the quantity of X demanded divided by the percentage change in the quantity of Y demanded.
B)the percentage change in the price of Y divided by the percentage change in the quantity of X demanded.
C)the percentage change in the price of Y divided by the percentage change in the price of X.
D)the percentage change in the demand of one good (good X) divided by the percentage change in the price of another good (good Y).

Question 16

The income elasticities of Products A and B and their cross-price elasticities with respect to Product C are as follows:??Income ElasticityCross-Price ElasticityProduct A+1.7-0.6Product B-0.8+0.9From this information, one can conclude that:

A)Product A is inferior, Product B is normal, Product A is a complement to Product C, and Product B is a substitute for Product C.
B)Product A is normal, Product B is inferior, Product A is a complement to Product C, and Product B is a substitute for Product C.
C)Product A is normal, Product B is inferior, Product A is a substitute for Product C, and Product B is a complement to Product C.
D)Product A is inferior, Product B is normal, Product A is a substitute for Product C, and Product B is a complement to Product C.

Question 17

The income elasticities of Products A and B and their cross price elasticities with respect to Product C are as follows:??Income ElasticityCross Price ElasticityProduct A-2.1+2.5Product B+0.6-0.75From this information, one can conclude that:

A)Product A is normal, Product B is inferior, Product A is a complement to Product C, and Product B is a substitute for Product C.
B)Product A is normal, Product B is inferior, Product A is a substitute for Product C, and Product B is a complement to Product C.
C)Product A is inferior, Product B is normal, Product A is a substitute for Product C, and Product B is a complement to Product C.
D)Product A is inferior, Product B is normal, Product A is a complement to Product C, and Product B is a substitute for Product C.

Question 18

If the income elasticity of demand for good A was 3.9 and the income elasticity of demand for B was 0.2:

A)Both good A and good B are normal.
B)Both good A and good B are inferior.
C)Good A is normal and good B is inferior.
D)Good A is inferior and good B is normal.